Negative Returns & Down Pressure on Cash Rents

Original Article

Todd Gleason talks with University of Illinois ag economist Gary Schnitkey about cash rents. As it stands today farmers on highly productive land in central Illinois are likely to loose about $70 for every cash rented acre planted to corn.




by Gary Schnitkey
Univeristy of Illinois

Surveys conducted by the Chicago Fed and the Illinois Society of Professional Farm Managers and Rural Appraisers indicate that 2015 cash rents have decreased between $20 and $25 per acre from 2014 levels. If these reductions occur, the majority of farmers still will have negative returns from cash rent farmland given current corn and soybean price levels. At a $3.75 per bushel corn price and a $9.50 soybean price, cash rents need to decrease from 2014 averages by around $70 per acre before farmer return is zero. Even given mid-$4.00 prices for corn, farmers will not have positive returns given cash rents at 2014 averages.

Operator and Land Returns

Table 1 shows estimates of 2015 operator and land returns. Operator and land returns represent the returns that can be split between the landowner and farmer. If operator and land returns are $300 per acre and cash rent is $250 per acre, the farmer will have a $50 per acre return. Operator and land returns are based on revenues, yields, and costs shown in the 2015 Crop Budgets and are averaged over the corn and soybean crops.

Operator and land returns are given for four different regions: Central Illinois with high-productivity farmland (Central-High), Northern Illinois (North), Central Illinois with low productivity farmland (Central-Low) and Southern (South) Illinois. In Table 1, regions are arrayed from the highest yielding on the left (Central-High) to the lowest yield region on the right (South). Operator and land returns decrease with lower yields. Even though these are Illinois specific regions, returns shown in Table 1 are generalizable to a wider geographical area.

There are five price scenarios in Table 1. The first is a $3.75 per bushel corn price and $9.50 per bushel soybean price, slightly above current bids for delivery of 2015 grain. These prices are used to determine crop revenue given the expected yields for each region. For example, the expected yields for the Central-High region are 198 bushels per acre for corn and 57 bushels for soybeans (see Table 1). Gross revenue also include ARC/PLC and crop insurance payments, both of which decrease with higher prices.

At a $3.75 corn price and a $9.50 soybean price, the operator and land return for the Central-High region is $226 per acre (see Table 1). The average cash rent in 2014 is $293 per acre, implying a farmer loss of $67 per acre ($226 operator and land return - $293 cash rent). Other regions have similar levels of loss: -$77 per acre for the North region ($188 operator and land return - $265 cash rent), -$73 in the Central-Low region ($170 operator and land return - $243 cash rent), and -$71 in the South region ($92 operator and land return - $163 cash rent). Note that $20 to $25 per acre decreases in 2015 cash rents do not lead to positive farmer returns given that cash rents started at average levels.

Longer-Run Price Levels

Current price levels may be below long-run prices. Previous analyses (farmdoc daily, February 27, 2013) suggest that longer run prices may be around $4.60 per bushel for corn and $10.60 for soybeans. Obviously these higher prices will result in higher operator and land returns, as is illustrated in Table 1. Take the $4.50 corn price and $11.00 soybean price. These prices give $298 per acre of operator and land return in the Central-High region. Note that the $298 operator and land return is near the 2014 cash rent of $293 per acre. At this price level, the operator and land returns for all regions are near the average 2014 cash rent levels. The nearness suggests that cash rents would need to decline if long-run prices are in the $4.50 per bushel range for corn and $11.00 per bushel range for soybeans. In the past several years, increases in cash rents likely overshot levels supported by long-run prices.

Note that the above analysis is based on non-land costs remaining at current levels of roughly $600 per acre for corn and $370 per acre for soybeans. These cost levels are at historically high levels (farmdoc daily, March 29, 2011). Decreases in fertilizer, seed, and chemical costs could reduce the need for decreases in cash rents.

Setting 2016 Cash Rents

Table 1 can be used to gain a feel for the relative size of downward pressures placed on cash rents in 2016. Given that costs do not change, operator and land returns shown in Table 1 will be accurate for 2016.

Expected 2016 commodity prices during the fall of 2015 will have a bearing on pressures place on cash rents. If corn and soybean prices respectively remain near $3.75 and $9.50 per bushel, cash rents will need to decrease by around $70 per acre from 2014 average levels before farmer returns are near zero. Obviously larger decreases would be needed before farmer returns become positive. Pressures will be reduced with higher price expectations. Take the price scenario having respective corn and soybeans prices of $4.25 and $10.50 per bushel. Under this scenario, rents would have to be decreased by $19 to $37 per acre, depending on region, from 2014 average levels to have farmer returns at $0 per acre. For farmers to have positive expected returns without cash rent of non-land costs, corn and soybean prices respectively need to be in the high-$4.00 and mid-$11.00 range.

Summary

Given current price levels, avenge cash rents levels need to decrease by over $70 per acre for farmers to have returns near zero. Continued pressures on cash rents will occur in 2016 unless significant increases in prices occur from their current levels. Unless non-land costs decrease, prices must be in the high $4.00 range before downward pressures are not placed on average cash rents.

Central & Northern IL Black Cutworm by Memorial Day

The black cutworm may do damage in central and northern Illinois corn fields over the Memorial Day weekend. Farmers should begin scouting soon because not all Bt corn hybrids offer adequate protection.

University of Illinois entomologist are estimating, based on black cutworm moth flights, that farmers might find the overnight work of the moth’s larval stage offspring beginning in late May. The larvae can cut a corn plant off. Farmers should scout for early feeding damage this week and next says University of Illinois Extension Entomologist Mike Gray.

Quote Summary - Growers should look for early signs of black cutworm activity. There will be small pin hole sized areas on leaves. These have been removed by very small caterpillars in the one to three instar stage. Once the caterpillars reach the fourth larval instar stage they can begin to cut plants.

Based on some heat unit calculations U of I entomologists project cutting dates will begin in Ford County (May 24), Mercer County (May 25), Lee County (May 31), Whiteside County (June 1), and Henry County (June 3) Illinois. Plants in the one to four leaf stage are most susceptible to cutting. It is important to note that not all Bt corn hybrids adequately protect against the black cutworm.

Marketing Advice from Darrel Good

Now that USDA has released its first official look at the balance sheet for new crop corn and soybeans, farmers are under the gun to make some marketing decisions. The easy ones are related to what’s left to sell from last year.

This week USDA estimated the average cash price farmers will receive for the coming corn crop will be fifteen cents less than last year at $3.50 a bushel. It makes the decision to sell what’s left from last year’s crop pretty easy thinks University of Illinois Ag Economist Darrel Good.

Quote Summary - I think you just give it up, meter it out, and let it go.

Pretty much the same advice goes for old crop soybean sales.

Quote Summary - There is no opportunity at this juncture, beyond a summer weather problem, for prices to recover.

Sell old crop corn and soybeans at your discretion, but probably sooner rather than later. However, Darrel Good is much more cautious as it relates to new crop sales.

Quote Summary - Prices are low enough, certainly below the crop insurance price, and I’d bide my time on new crop corn.

He’d do pretty much the same for soybeans.

Quote Summary - Probably in the same category. You are seeing prices right down at the $9.00 level for harvest delivery, about what USDA expects for the year ahead. There is probably no urgency to get aggressive at these levels.

Again, that’s sell the old crop and stand to the sidelines on the new crop. You may read Darrel Good’s thoughts on the commodity markets each Monday afternoon on the Farm Doc Daily website.

USDA WASE May 2015 Numbers

University of Illinois Ag Economist John Newton discusses the May 2015 World Agricultural Supply and Demand Estimate report numbers for new and old crop corn and soybeans.

First Day First Field

USDA describes Pat Whalen as a new and beginning farmer. I think he's just having fun planting his first farm field ever.

More Red Meat Available Per Person this Year

The supply of meat in the United States is on the upswing this year. It had fallen off by about twenty pounds per person between 2007 and 2014, but now it’s making a come back says Purdue Extension Agricultural Economist Chris Hurt.

Quote Summary - USDA estimates are that per capita meat availability could surge by nearly nine pounds this year. Chicken and turkey lead the way with over five pounds of increase and pork adds an impressive increase of near four pounds per person. This means that the meat industry in one year has restored about 45 percent of the lost meat availability from 2007 to 2014.

This calculation does not include any reduced availability due to the Avian Influenza outbreak. It is likely to reduce total poultry (chicken and turkey) meat production in 2015.

RFS Matters for Biodiesel

The United States Environmental Protection Agency now says it will not update the Renewable Fuel Standard mandates until November. This year’s RFS, no matter when it is released, is really important to the biodiesel industry.


More often than not when the federal government’s Renewable Fuel Standard is discussed people are thinking about corn based ethanol or other feedstocks that can produce ethanol. However, when U.S. EPA finally releases the RFS mandates it may be the biodiesel industry that pays the most attention says University of Illinois Ag Economist Scott Irwin.
Irwin :36 …to find out what happens.

Quote Summary - The industry for which the RFS is really a life or death matter is biodiesel. Because if the EPA would choose to go back to the RFS statutory level mandates, at least for a few years in the short run, it would launch - likely - the biggest boom in biodiesel’s history. But, if they choose to stay on the path of the proposals from 2013 it would cut the knees out from under the industry. The biodiesel industry is waiting on the edge to find out what happens.

This edge made the industry unhappy with the federal government earlier this year when it opened the door for biodiesel imported from Argentina to qualify as an advanced biofuel under the U.S. RFS mandates. Scott Irwin sees this move far more favorably the industry.
Irwin :41 …outside the United States to fill the mandates.

Quote Summary - I favor the position that EPA is likely to move the mandate levels back up near or to the statutory levels this year, or at least by 2016. This would necessitate a tremendous boom in biodiesel production. It would be more than current U.S. production capacity. So, one view of the Argentine biodiesel announcement is that it is a precursor of the statutory requirements and related documentation of enough registered biodiesel both inside and outside the United States to fill the mandates.

It may be, then, that the January announcement allowing Argentine biodiesel to qualify as an advanced biofuel in the United States sets the stage for U.S. EPA to follow the letter of the law as written by congress. It is not possible to do so without additional gallons of advanced fuel from some source.

Poultry Research & the University of Illinois Campus

Illinois is not known as a key chicken production state. Regardless of this fact, the state’s Land Grant university is a primary player in the poultry industry. Todd Gleason has this review of ILLINOIS’ applied research prowess and its relationship to the state’s agricultural feed production history.

Farmers in the Prairie State raise corn and soybeans and they do it really well. These crops are used to feed animals and birds; chickens. Lots of chickens, but most of them are reared in other states. Much of the feed comes from Illinois and so does the research that supports the nation’s poultry industry says Ken Koelkebeck (coal-keg-beck) from the University of Illinois.

Quote Summary - One of the first things we did was to develop a specific line that allowed the color sexing of baby chicks. This was very important because it made it easy to do research. We had two breeds, back in the 1950’s, when crossed together that produced chicks that came out color sexed males or females.

All the female chicks are brown and all the male chicks are yellow. It is really hard to tell the sex of the chick otherwise. The research breed is maintained and used on campus still today.

Quote Summary - It has been very important over the last thirty or forty years. We’ve developed nutritional programs like the non-feed withdrawl molting program. The industry, after ten years of research at ILLINOIS, has adopted it as the standard method for molting laying hens. This happened starting January 1, 2006.

Today more than eighty-five percent of the commercial egg laying operations molt their hens using the University of Illinois developed method. The history of the specialized research breed along with the powerhouse production of poultry feed stocks in the state, corn and soybeans, continue to converge to make the Urbana Champaign campus one of the top five poultry research universities.

Cost of Diesel & the Farm

The price of diesel has dropped and this should be helpful to U.S. farmers.



U.S. farmers struggling to find ways to cut cost will find the price of diesel fuel somewhat comforting. It is one of their larger input costs for the production of a row crops like corn or soybeans. This year that fuel cost will be sharply lower says University of Illinois Ag Economist Gary Schnitkey.

Quote Summary - Since 2011 on through 2014 diesel fuel prices have average about $3.50 per gallon. Today’s cost is about a 36% decline. It is a significant decline in the cost of diesel fuel from the last four years.

Here’s how that costs translates directly to the farm. Last year fuel cost Illinois farmers, on average, $24 per acre of corn production. A 36% drop puts that estimated cost this year at $15 per acre. It’s a nine dollar savings, but certainly not enough to really ease the coming income woes of the American corn farmer comments Schnitkey.

Quote Summary - The total cost to raise an acre of corn is about $600. So, the fuel savings is a relatively small portion of the total cost of producing corn, and for that matter soybeans in the state.

Schnitkey thinks producers should certainly consider taking advantage of the diesel fuel prices today. The other two items of note related to energy costs concern drying corn in the fall and nitrogen fertilizer. The ag economist thinks drying costs should be much lower this fall. As for the cost of nitrogen fertilizer - and this would be for next year - well he says…

Quote Summary - Patients, relative to nitrogen fertilizer and buying it, might be a good thing. Because maybe someday that will come down.

The cost of nitrogen fertilizer this year is actually higher than it was last year. Its primary creation cost is for natural gas.

Beef Industry Continues Lower Production Trend

The beef industry stands alone in 2015 in its continued reduction in supplies available to consumers.

2014, by contrast, was a special year for the animal production industry. It set record high farm level prices for cattle, hogs, broilers, turkeys, milk and eggs. 2015 should see much lower annualized prices after the surprisingly fast expansion of the poultry, pork and dairy industries. Beef stands alone in the continuation toward lower production. This does not necessarily mean the price of beef will remain record high. Live cattle futures are suggesting a return to a more normal seasonal price pattern this year. This would mean that while beef cattle have so far traded higher than last year, that pattern would end now says Purdue University Extension Ag Economist Chris Hurt.

Hurt :26 …a couple of dollars lower than 2014.

Quote Summary - The futures tone stays weak through summer with prices falling to the middle $140s by the end of summer and then rallying to the low $150s toward the end of the year. With prices so far this year and futures estimates for the remainder of the year, finished steers would average $153, a couple of dollars lower than 2014.

That’s Chris Hurt’s view, however, USDA has a different take. Agency forecasters in the April 9 WASDE (wahz-dee) report took a much more bullish path with $163.50 at the mid-point of their annual estimated range. Also of note is that USDA analysts increased the potential range of prices as the year progresses. One reason to increase a price forecast range is because of greater uncertainty says Hurt.

Hurt :19 …with annual prices near last year’s $155.

Quote Summary - My judgement is that ultimate prices may be somewhere between these two. Current high $150s prices could drop to the very low $150s by late summer and recover to the mid-$150s by the end of the year, with annual prices near last year’s $155.

One thing seems certain, explains Chris Hurt in his May 4th article on the farmdocdaily website 2014 was an extraordinary year for the animal industries. So comparing this year’s prices to last year’s prices may bring inherent dangers. The beef industry, he says, is the only one which will not increase production this year and therefore has a reasonable chance of seeing annual price averages near 2014 levels.

Black Cutworm Early Season Threat to Corn

Corn farmers should pay attention to the spring migration of the black cutworm. The moths wing their way into the Midwest every year.

The black cutworm rides the southerlies north into the Corn Belt. The female moths look for farm fields lush and green mostly with weeds. Winter annuals are the favored nesting ground says University of Illinois Extension Entomologist Mike Gray.

Quote Summary - They go into those fields and lay eggs. They lay eggs on those weeds. Eventually, once the fields are planted with corn, many of the surviving black cutworm larvae will move off the weed hosts onto corn seedlings. Corn fields in the one-to-four-leaf stage are very susceptible to cutting.

If those cuts are made below the growing point of the corn plant, then it dies. Most of the cutting, says Mike Gray, takes place over night or occasionally on a very overcast dark cloudy day.

Quote Summary - Growers are encouraged to look for early signs of black cutworm activity. This would be small pin hole areas on leaves that have been removed by the caterpillars in their one to three instar stage. Once they caterpillar reaches the fourth larval instar stage it can begin to cut plants.

Many insecticides can be used as rescue treatments if needed to combat the black cutworm. Most Bt corn is also capable of protecting the crop, but not in equal measure.

Quote Summary - Not all Bt hybrids offer the same level of protection when it comes to black cutworms. Some are quite good, but finding that trait can be confusing. I encourage growers to use the Handy Bt Trait table put out annually by Michigan State University. Search Google for “Handy Bt Trait Table ”. It is very informative and identifies if the hybrid chosen offers black cutworm protection.

If the hybrid chosen does not protect against the black cutworm, then the farmer will clearly, urges Gray, need to pay much more attention to the lifecycle of the insect and potentially gear-up for rescue treatments as needed.

2015 Gross Revenues for Corn Using RP85% + ARC Co

A University of Illinois Ag Economist has back figured how the new farm program would have performed over the last 40 growing seasons when coupled to crop insurance. The calculations can be used as a guidepost to 2015 farm incomes.



The exercise coupled RP crop insurance at the 85% level to the ARC County farm program to see how it would have supplemented farm income on a highly productive central Illinois farm located in Logan County. The numbers were run for crop years starting in 1975 all the way through 2014 says Gary Schnitkey. He’s an ag economist at the University of Illinois and explains, to begin with, how this combination would have handled the years farmer are most likely to remember; 1980, 83, 88, and 2012.

Quote Summary - So those are the drought years, and while in 1988 we didn’t have the crop insurance products we do now, we can figure what income would have looked like if a producer had purchased RP at the 85% level and took ARC County. Those years would not be bad from a gross revenue stand point. Crop revenues would be low, but crop insurance and ARC County payments would bring those back so that if, for instance 2015 looked like 1988 or 2012, the gross income would be at the top end of our distribution over the 40 year period.

Yields and prices in each of the 40 years are calculated using 2015 projections, but the actual year offsets. 2012, then. would show a lower actual price (because this years crop insurance price is lower than 2012’s) but a higher actual yield. Essentially you pick a year, adjust for 2015, and calculate the gross income.

The middle point (where the distribution is not quite evenly split above and below but close) is $828 per acre. The low revenue year forecasts correlate mostly with trend yields and lower corn prices. So, with a somewhat normal growing season that has below average prices. That could be caused by large residual supplies, big carryouts, or by poor demand.

Quote Summary - Poorer demand or something along that lines. Those types of years will be the ones that cause low revenues in 2015.

The ten middle years of the set project 2015 gross revenues from $825 to $831 per acre for corn. They were each characterized by harvest prices and yields relatively close to expected levels - the February crop insurance price and trend yield. Those years include 1984, 1990, 1991, 1996, 2002, and 2009.

Link to original FarmDocDaily article

Corn Market Expects Large Supply & Weak Demand

The price of corn is as low as it has been since last fall. It reflects the large size of last year’s crop, and surprisingly little concern about this year’s crop.

December corn futures in Chicago, at the time of this writing, were priced in the low $3.80’s. That’s about twenty cents better than the contract low set last fall, but still not nearly strong enough to reflect the $4.25 season’s average cash price the University of Illinois ag economists are using in their supply and demand table for the coming year. Darrel Good sums it up this way.

Quote Summary - Current prices appear to reflect minimum production risk and surprisingly weak demand prospects.

Let’s take that statement apart. We’ll start with price. The price of old crop corn, while at the lowest level since last October at the futures exchange in Chicago, isn’t nearly so cheap in the country. Last fall corn for July delivery in central Illinois was priced 70 cents under the July contract. It is 14 under now. Here’s what that, in relative terms, means. The cash price for the same delivery time, at this point, could be as much as 70 cents better today than it was last fall. The supply and demand of corn have changed since last fall, too. However, looking forward Darrel Good says the current price of corn reflects expectations for a combination of prolonged demand weakness and another year of ample supplies.

Quote Summary - Expectations for demand weakness center on the ethanol and export markets. It is generally argued that plateauing domestic ethanol consumption, a stronger dollar that could favor ethanol imports and discourages exports, and low crude oil prices will limit the price of ethanol and the demand for corn. Similarly, abundant world grain supplies and a stronger dollar are expected to create a weak demand environment for U.S. corn in the world market. In contrast, domestic feed demand for corn should be supported by ongoing expansion in livestock and poultry numbers, even with some loss of poultry numbers to bird flu.

The combination of expanding livestock numbers and low corn prices, writes Good in his FarmDacDaily website posting of April 27th, should generate a high level of consumption. That’s demand. Supply will be largely dependent on the number of acres of corn farmers plant this spring, and weather this summer. We’ll no more June 30th when USDA releases the Planted Acreage report. Here’s how those numbers have changed from March to June since 1996.

Quote Summary - From 1996 (the beginning of the freedom to farm era) through 2014, the final estimate of planted acreage of corn exceeded the March intentions estimate in seven years and was less than the March estimate in 12 years. In most years, the difference was within the range of sampling error, estimated at one to three percent. The exception was 2007 when actual planted acres exceeded intentions by nearly 3.1 million acres.

There is already a lot of discussion again this year about the direction and magnitude of the difference between actual and intended acreage of corn. Chances are, says Darrel Good, the difference will not substantially alter production expectations.

All else equal, the larger percentage of the crop that is planted in a timely fashion the higher the U.S. average yield potential. However, all else is rarely equal Good claims, with the magnitude of yield ultimately determined by summer weather. Unless an unusually large or small percentage of the crop is planted late this year, yield expectations should continue to focus on trend value in the range of 164 to 165 bushels. The USDA will report an expected yield in the May 12 WASDE figures. That yield expectation is based on a weather adjusted trend model that reflects expected planting progress at mid-May.

As for current prices, these appear to reflect minimum production risk and surprisingly weak demand prospects.

Protect Backyard Chickens from Avian Flu

More people than you might think are keeping chickens in their backyards. These birds, just as those grown commercially, are at risk to the H5N2 Avian Influenza virus. Todd Gleason has more on why and what keepers of backyard flocks can do to protect their birds.



Turkeys and chickens along the Mississippi River flyway in the Midwest are at risk to catching the flu every year. This year a new highly contagious version of the virus called H5N2 has developed. It’s nasty and a bird killer. This is why the U.S. government is taking so much care to control its spread. The farm manager of the University of Illinois’ poultry research facilities, Chet Utterback, says commercial flocks aren’t the only birds at risk.

Quote Summary - I would encourage everyone, whether you have two chickens or twenty chickens or two-hundred chickens, or two-hundred-thousand chickens or two-million chickens to be very, very diligent in staying away from areas where there are Canadian geese nesting, where there are any water fowl what-so-ever.

Migratory birds of all types stop along their routes at water sources. It doesn’t matter much how busy the area is, if there is a pond there are likely to be at least few Canadian Geese around. They could be carrying the flu, and it could be the H5N2 version and you could walk right through it… though that, to this point, wouldn’t be a problem for your personal health… it could be a load of problem for your birds.

Quote Summary - The biggest thing people need to be aware of is how many viruses are there. According to a microbiologist at Penn State involved with the outbreak in 2006, in one gram positive sample of manure from a wild waterfowl, about the size of a dime, there can be more than one-million flu viruses with the potential to affect other birds.

The point is bio-security measures need to be taken to protect backyard flocks as well as commercially raised birds. It’s a big word, but in this case simply means not wearing the same clothes or shoes into the coop that you might have just been wearing at the shopping center, or the pond, or any place wild waterfowl gather.

Will Soybean Consumption Reach USDA Projection

Last year U.S. farmers harvested a record sized soybean crop. The price of soybeans plummeted, but not yet as far as the most negative nellies expected. There is a glimmer in some of the USDA numbers that might explain why.



This glimmer won’t raise the current cash price of soybeans. There are plenty of them around, and that’s not going to change writes University of Illinois Ag Economist Darrel Good in his April 20th Weekly Outlook. You can find it online at the Farm Doc Daily website.

It could lend a supportive hand, however, to the price of new crop soybeans. Frankly this isn’t very clear, but here is the short version. If USDA has consumption of soybeans for this year right, and the uncertainty in the March 1 stocks on hand for soybeans has correctly hinted at a smaller harvested crop last fall, then a correction would be due in the September 30th release of the Grain Stocks report. This happened last year says Darrel Good.

Quote Summary - September 1, 2014 stocks were 38 million bushels smaller than expected just three weeks before the release of the stocks report. The level of uncertainty this year is magnified by the March 1, 2015 stocks estimate that hinted that the 2014 crop may have been overestimated.

How much of an over estimate remains to be seen. It’s a glimmer of hope for the price of new crop soybeans. A glimmer that depends greatly on the pace of old crop soybean consumption. About 45 percent of the soybeans raised in the United States are exported. So we’ll focus only on that number. USDA in the April estimates said this marketing year 1.79 billion bushels of soybeans would be shipped out of the country. The total export commitments have already reached this number says Good.

Quote Summary - However, some current outstanding sales may be cancelled and it is typical for some sales to be carried into the next marketing year. Additional net sales of about 60 million bushels are probably needed if exports are to reach the USDA projection for the year.

So the export number looks safe as does the domestic crush figure. USDA could adjust either of these going forward in the monthly reports, but today this looks unlikely. It leaves the quarterly grain stocks number as the tipping point. There are two more of those reports remaining for the old crop - June and September. Even when those numbers come out, it isn’t clear how USDA will use them until the following WASDE or supply and demand table is released. So it will be October before any glimmer could be truly identified.

RFS Matters for Biodiesel

Soon the United States Environmental Protection Agency should release its annual update to the Renewable Fuel Standard mandates. This year’s RFS is really important to the biodiesel industry.

More often than not when the federal government’s Renewable Fuel Standard is discussed people are thinking about corn based ethanol or other feedstocks that can produce ethanol. However, when U.S. EPA finally releases the RFS mandates - supposedly sometime this month - it may be the biodiesel industry that pays the most attention.

Quote - The industry for which the RFS is really a life or death matter is biodiesel.

That’s University of Illinois Ag Economist Scott Irwin. Biodiesel, by-the-way, is mostly produced from soybean oil.

Quote Summary - Because if the EPA would choose to go back to the RFS statutory level mandates, at least for a few years in the short run, it would launch - likely - the biggest boom in biodiesel’s history. But, if they choose to stay on the path of the proposals from 2013 it would cut the knees out from under the industry. The biodiesel industry is waiting on the edge to find out what happens.

This edge made the industry unhappy with the federal government earlier this year when it opened the door for biodiesel imported from Argentina to qualify as an advanced biofuel under the U.S. RFS mandates. Scott Irwin sees this move far more favorably the industry.

Quote Summary - I favor the position that EPA is likely to move the mandate levels back up near or to the statutory levels this year, or at least by 2016. This would necessitate a tremendous boom in biodiesel production. It would be more than current U.S. production capacity. So, one view of the Argentine biodiesel announcement is that it is a precursor of the statutory requirements and related documentation of enough registered biodiesel both inside and outside the United States to fill the mandates.

It may be, then, that the January announcement allowing Argentine biodiesel to qualify as an advanced biofuel in the United States sets the stage for U.S. EPA to follow the letter of the law as written by congress. It is not possible to do so without additional gallons of advanced fuel from some source.

2014 Loss Experience for Revenue Protection Products

by Gary Schnitkey

Most of the 2014 insurance payments on COMBO products have been entered into Risk Management Agency’s Summary of Business, allowing us to calculate loss performance for individual products accurately. This article describes loss performance for Revenue Protection (RP), a revenue insurance plan used to insure most acres in the United States.



Corn, soybeans, and wheat had loss ratios of 1.04, .54, and 1.12, respectively. Loss ratios were above 1.0 in many counties of Iowa and Minnesota for corn and soybeans. Counties in the southern Great Plains had loss ratios above 1.0 for wheat. In Illinois, RP loss ratios were .40 for corn and .24 for soybeans.

Corn

In 2014, RP was used to insure 69.9 million acres of corn in the United States, representing 88% of total acres insured with crop insurance. Total premium on RP products was $3,350 million and total crop insurance payments were $3,484 million, giving a loss ratio of 1.04 ($3,484 in losses divided by $3,350 in total premium). A loss ratio above 1.0 means that insurance payments exceeded premiums. Over time, average loss ratios should equal near 1.0. On a per insured acre, insurance payments equaled $49.86 per acre (see Table 1).

Loss experience varied tremendously across states. For the eleven states with the most insured acres, RP’s loss rate was the highest for Minnesota at 3.01 and the lowest for Missouri at .11 (see Table 1). Iowa had a loss ratio of 2.21 while Illinois had a .40 loss ratio.

For Midwest states, the 2014 projected price was $4.62 per bushel while the harvest price was $3.49 per bushel. The harvest price was 75% of the projected price, meaning that coverage levels of 80% and 85% would have crop insurance prices if the actual yield did not exceed the guarantee yield. While much of the country had above average corn yields, there were areas of the country where yields were at or below guarantee yields. These areas included northern and central Iowa, Minnesota, and Wisconsin. As a result, RP products had high loss ratios in these areas, as illustrated in Figure 1 which shows RP loss ratio by county (see Figure 1). In most other areas of the country, loss ratios were well below 1.0. As one would expect, loss ratios were higher in areas with lower relative yields.

Soybeans

In 2014, RP was used to insure 65.2 million acres of soybeans in the United States, representing 88% of total acres insured with crop insurance. Total premiums were $2,092 million and total payments were $1,126 million (see Table 2). Total payments were far less than total premiums resulting in a loss ratio of .54. Since 2008, loss ratios for soybeans across all policies have not exceeded 1.00. On a per insured acre basis, insurance payments equaled $17.27 per acre.

Loss experience for soybeans had less range than those for corn. For the eleven states with the most insured acres, RP’s loss ratio was the highest for Minnesota at 1.25 and the lowest for South Dakota at .18. Iowa had a loss ratio of 1.07 while Illinois has a .24 loss ratio.

For Midwest states, the 2014 projected price was $11.36 per bushel while the harvest price was $9.65 per bushel. The harvest price was 85% of the projected price. Even at an 85% coverage level, farmers had to have actual yields below guarantee yields before insurance payments were made.
Most counties across the United States had loss ratios well below 1 (see Figure 2). Areas with loss ratios above 1.00 included counties in northern and central Iowa, Minnesota, northern Wisconsin, and some counties in Michigan, and New York.

Wheat

In 2014, RP was used to insured 40.8 million acres of wheat, representing 85% of total acres insured with crop insurance. Total premiums were $1,330 million and total payments were $1,490. The loss ratio was 1.12 and payments averaged $36.60 per insured acre.

Figure 3 shows a map of county loss ratios for wheat RP polices. As can be seen, many counties in Texas, Oklahoma, and Kansas had loss ratios above 1.00. Many farms in this area had low yields. Other areas of payments occurred in Washington, Wisconsin, Illinois, and along the Mississippi Delta. Large areas with low loss ratios include Montana, North Dakota, South Dakota, Virginia, North Carolina, and South Carolina.

Summary

Lower prices for corn and soybeans resulted in RP payments for corn and soybeans. These payments were made in northern and central Iowa and Minnesota. Because of above average yields, loss ratios were low in most of Illinois, Indiana, and Ohio.

LINK to FarmDocDaily Article: 2014 Loss Experience for Revenue Protection on Corn, Soybeans, and Wheat

More Hogs than Expected

The USDA March Hogs and Pigs report did little to help explain why numbers were high, other than to simply admit that hog inventory counts from previous surveys were too low.



Pork supplies in the first quarter of 2015 were expected to rise one percent. In reality, first quarter pork production was up five percent. This is because they were 4.5 percent more hogs that weighed about a half percent more than their year earlier counterparts. More hogs at heavier weights has pushed prices down says Chris Hurt, and that’s not the end of it.

Quote Summary - There is an even more price depressing force coming to the market as the number of hogs coming to market in the most recent four weeks has remarkably been ten percent higher than year-ago levels. Higher than expected current numbers may mean that the breeding herd expansion is larger than USDA surveys have indicated and/or that PED death losses were smaller than producers reported to USDA.

If there has been an undercount of animals, the possibility remains says Chris Hurt for higher market numbers than anticipated for the rest of the year.

As a result of the higher actual marketings in the first quarter, USDA revised last summer’s pig crop upward by nearly three percent. As always, “the proof is in the pudding” meaning that if actual winter slaughter is higher than accounted for by last summer’s pig crop, last summer’s pig crop has to be revised upward. USDA did this by increasing the estimated number of farrowings. Hurt has been wondering, based on USDA’s numbers, if the breeding herd has been expanded.

While USDA raised the size of last summer’s farrowings, the size of the breeding herd was not increased. This still leaves unanswered the question of whether the breeding herd is actually higher, which would indicate that the breeding herd has expanded more rapidly than indicated by USDA survey numbers. If the breeding herd has expanded more rapidly than future animal numbers may also be higher than indicated by the USDA counts.

More pigs coming to market in the first quarter than expected must have come from a larger breeding herd thinks Hurt. He says current marketing numbers have been averaging ten percent higher. If the marketing herd is larger, then marketing numbers could continue to surprise the market on the high side and hog prices will stay depressed.

April WASDE Big for Corn

The March 31 USDA reports resolved some questions for the corn market, but left a couple of items hanging. The April 9 supply and demand tables will give the report some true balance.



Most traders saw last week’s USDA reports as a bad sign for the price of corn. The acreage figure was on the high end of trade expectations and the grain stocks number appears to show a slower than estimated pace of consumption. University of Illinois Ag Economist Darrel Good has a different take.

Quote Summary - Taken at face value the corn stocks number implies less feed and residual usage during the first half of the marketing year than the trade expected. It is about 69 percent of USDA’s projection for the year, 5.3 billion bushels. Over the last four years the first half feed use has been 74 percent and if the market assumes the actual uses is factually 74 percent then the 5.3 billion is not reachable.

However, Darrel Good goes on, if you look at the history prior to the past four years, which he considers anomalous, first half feed usage averaged something between 65 and 68 percent - not 74 percent .

Quote Summary - If we are on that path this year, then 5.3 billion bushels is still reachable, and we might do even more given the expansion in livestock numbers. Broiler numbers are up 3 to 4 percent. The winter pig crop is 7 percent larger than last year. It mens core feed demand should be very robust the last half of the marketing year.

Clearly says the ILLINOIS ag economist the market did not interpret USDA’s Grain Stocks report in this fashion. It, he says, likely expects the April 9 WASDE estimates to show a lower feed usage number and consequently an increase in the year ending stocks for corn.

Quote Summary - Personally, I wouldn’t be surprised if the WASDE number is a bit lower in the April report. They may come down 100 million bushels on the feed and residual use projection and put all of that into the projected year ending stocks number. I think that is the way the market is leaning. Unfortunately, we won’t get another real read on that until we get the June Grain Stocks report three months from now.

Between now and then the trade will mostly forget about old crop corn feed usage as it concentrates more energy on divining how the 2015 corn harvest will affect the price of corn.

The Footprint of Chinese Demand for U.S. Soybeans

One out of every four bushels of soybeans harvested by U.S. farmers last fall, if the trend continues, will be shipped to China.



Two University of Illinois agricultural economists have measured the footprint of Chinese demand for soybeans. John Newton, along with Todd Kuethe (keeth-ee), say this one nation takes 13 bushels from every acre of soybeans produced in the United States.

Quote Summary - The Chinese are bringing in more than a billion bushels of soybeans a year from the United States. That’s more than the states of Illinois and Iowa produced combined. Their total needs from around the world amount to more than 60 million acres. Twenty-one million of those come from the U.S. This is more soybean acres than can be found in Illinois, Iowa, and Michigan. The Chinese have a very large footprint in the U.S. soybean market.

Large today, but twenty years ago China imported just 18 million bushels of soybeans from the United States, or 2 percent of U.S. soybean exports. Demand from this one nation grew from that meager amount to more than a billion bushels, 65 percent of the exports, because of double digit growth in its economy. This growth has slowed, and for some it is now a caution sign…but not for John Newton, yet.

Quote Summary - The world bank is projecting the Chinese economy is going to grow at about 6.9 to 7.4 percent through 2017. This is greater than the United States. Their economy is still growing at a significant rate. They have just plateaued some in recent years. So, you look at the growth rate in the Chinese economy as one indicator. Another indicator is crushing margins in China. Part of the reason they’ve increased their consumption of U.S. soybeans is because they’ve increased crushing capacity in mainland China. So long as their crushing margins are favorable it is still possible to bring U.S. soybeans to China and crush them.

These projections support China maintaining soybean consumption at or above current levels.

---

Darrel Good on the March 31 Reports

USDA Extends Farm Bill Sign Up One Week

The United States Department of Agriculture has extended the farm bill sign up period, again. A month ago USDA opted to allow the two farm bill deadlines to be consolidated into one ending date. It was scheduled to close Tuesday March 31st.

The sign up period has been extended a full week says U.S. Secretary of Agriculture Tom Vilsack. The deadline is now April 7th.

The secretary reports 98 percent of farm land owners have updated information needed to calculate payments made under the new farm programs, but only 90 percent of the farms are enrolled.

Those farms not enrolled by the deadline will receive no 2014 crop year payments and the farm will default to the Price Loss Coverage enrollment option for the 2015 through 2018 crop years.
Sign up can be completed at local Farm Service Agency offices.

Winter Feeding & the Cow Calf Operation

Winter nutrition for the cow calf operation is key. It may be the best opportunity to positively affect real income.

This was the message heard during the annual Beef & Beyond conference. It was clear and concise. The winter feeding program at a cow calf operation separates profitable farms from less profitable operations. It depends a lot on stored feed says University of Illinois Beef Cattle Specialist Dan Shike.

Quote Summary - How much stored feed are they having to purchase and what is their winter feeding program. We would like to graze as many days as we can, but if we can’t graze we have to feed them something. What’s the least cost approach.

Least cost only works if the cows meet acceptable performance standards. These are to maintain appropriate body condition, to calve once a year, and to wean off as heavy a calf as possible, but there’s more.

Quote Summary - We’ve not given much consideration in the past to the fetus. We’ve focused on the cow. We’ve focused on the calf that is nursing on her, but she’s also been bred and has a developing fetus inside of her. So, the nutrition management of the cow impacts the development of the fetus. There is plenty of data from human epidemiological studies and other animal models that maternal nutrition, or nutrition during gestation, has lifelong impacts on the progeny.

The results with beef cattle are mixed in this area of study and varies from region to region mostly as it relates to available forages. This seems obvious, but the clear message is if the cows are in poor body condition and not being fed enough there is a great deal of risk to hurting the calf. Under winter feedlot conditions this means the properly managed cow produces a calf which eventually yields better marbling. Heifer calves kept for breeding benefit from good nutrition in the womb, too. They weigh more, mature earlier, and have better conception rates.

Quote Summary - All these benefits come later in life at a year or two of age. It was set when the fetus was 3 to 4 months of age during mid-to-late gestation. All because the cow was in good body condition. A condition score of 5 or 6. On the flip side, a short term restriction in nutrition of a cow already in good condition isn’t particularly harmful. If the cow is already thin, say a body condition score of 4 or less, you should anticipate you’re restricting the fetus. If she is in good condition, even if her nutrition is restricted, the cow will mobilize body reserves to supply the appropriate nutrients to the fetus.

The body condition score runs from one to nine with scores of five or six considered optimum. Scores of eight or nine are too fat, scores below four are too thin.

The Final Days of the USDA Report Data

Tuesday the Department of Agriculture will release one of its most anticipated reports of the year. It began collecting data from farmers at the beginning of this month. The crop acreage data is compiled, encrypted and transferred to Washington, D.C.

USDA contacts more than 80,000 farmers across the United States in March. It asks them a series of questions. One in the series is about which crops and how many acres of each they expect to plant this season. The agency sends all those farmers a letter to do this. Those not responding get a phone call, and then if they still don’t respond receive a face-to-face visit. The collection was completed Wednesday March 18th. Last Friday the Illinois and Missouri National Agricultural Statistics Service staffs, if the schedule went as Mark Schleusener expected, should have been reviewing the information.

Quote Summary - The last few days before publication there is an analysis period. Friday morning we are going to look at a balance sheet. We’ll add up all the corn, soybeans, wheat, hay, etcetera, and CRP. In Illinois the total is pretty constant across years with the mix of crop acres changing from one year to the next. So, we’ll make estimates on acreage in each, add them up, and compare it to previous years to see if the sum of the parts makes sense. We’ll do that Friday morning and then submit our estimates in an encrypted file to our Washington, D.C. headquarters. There will be more analysis done under secure conditions and the report comes out March 31.

This analysis is done by National Agricultural Statistic Service staff. Schleusener says the staff is primarily gifted in two area; statistics and agriculture. And he says the sum of those two qualifications is what’s required to do a good job for NASS. Schleusener serves at the NASS Illinois State Statistician.

Quote Summary - So, we are looking at what the number shows. What comes out of the computer, and how that compares to previous surveys and other factors. For instance, this balance sheet approach is a way to make sure we don’t go off-the-rails by being a little bit too high on each crop and a lot too high overall. The balance sheet makes sure we don’t go in that direction.

It gives the analysts a chance to see errors before the Prospective Plantings figures are reported up the chain or out the door. The Prospective Plantings report will be released in Washington, D.C. at noon eastern time Tuesday March 31, 2015.

Soybean Stocks Overshadowed by Prospective Plantings

March 31st traders and farmers are likely to pay a great deal more attention to the number of soybean acres USDA expects will be planted this season than the number of soybean bushels left in the United States. However, the stocks figure may hold some surprises.

Last December the United States Department of Agriculture reported a surprisingly low Grain Stocks number for soybeans. The agency counts up available bushels of most crops once a quarter; in December, March, June, and September. University of Illinois Ag Economist Darrel Good says the December 1 soybean stocks number implied a record large residual use of soybeans during the first quarter (September-November) of the 2014–15 marketing year.

Quote Summary - Some have explained this low figure by suggesting a larger number of bushels of soybean were in transport on December 1 than in previous years. This explanation was apparently favored by the market and caused March 2015 soybean futures to close 36 cents lower on the day of the surprisingly small estimate. Another possible explanation is that the size of the 2014 soybean crops has been overestimated.

This argument might be supported by higher than expected soybean prices this year given the estimated size of the surplus projected to be generated by the large 2014 crop. In addition, basis levels have been generally strong for most of the year. Basis is the difference between the price of a futures contract in Chicago and the local cash bid.

USDA’s March 1, 2015 estimate of soybean stocks may add some clarity to this debate writes Darrel Good in his Weekly Outlook posted to the Farm Doc Daily website. Expectations for the magnitude of March 1 stocks are based on the estimate of December 1 stocks, imports during the quarter, and estimates of soybean consumption during the quarter.

If the size of the 2014 soybean crop has been accurately estimated, the March 1 stocks estimate should imply a large negative seed and residual use during the second quarter of the 2014–15 marketing year. That was the case in previous years of very large implied residual use during the first quarter of the marketing year. Seed and residual use during the second quarter of the marketing year, for example, was estimated at –38 million bushels last year, –22 million bushels in 2012–13 and –42 million bushels in 2009–10. A reasonable expectation this year might be near –90 million bushels. A March 1 stocks estimate near 1.41 billion bushels, then, would be consistent with the estimated size of the 2014 crop and known use of soybeans through February.

Given this, if the USDA’s Grain Stocks report shows something substantially different than 1.41 billion bushels on hand, then it should renew the debate over the size of last fall’s soybean harvest. Such a debate, however, would not be resolved for another six months. The USDA’s estimate of the crop size is frequently revised, but not until the release of the September 1 stocks estimate. It comes on September 30th this year.

Good says, historically, implied seed and residual use of soybeans during the first half of the marketing year has not been a good predictor of the size or direction of any subsequent change in the estimated size of the crop.

The March 31 Grain Stocks Report

The reports USDA releases March 31 will set the tone of agricultural trade for three months in Chicago.



Once every quarter the National Agricultural Statistics Service takes a census of the available bushels of corn, soybeans, and wheat. It is called the Grain Stocks report. It is not exactly a survey, but rather more of an actual accounting, in his case of what’s stored in Illinois, says NASS State Statistician Mark Schleusener, “…to measure the whole supply of grains and oilseeds USDA NASS does on farm surveys. Those are done with producers to find out what they have in their grain storage bins. Off farm storage tallies bushels in the mills and the elevators using a census as of March 1. All commercial storage facilities are contacted”.

Nationwide more than 9000 commercial storage facilities are contacted for the census side of the Grain Stocks report. The survey side - that done with farmers - is sent to more than 80,000 producers with an 80 percent response rate. The goal is to get a very accurate accounting of the bushels available for use.

Where the bushels are stored changes across the season. December 1 it is stored on farm. Through the winter months these bushels slowly move to the elevators and mills and eventually, in the case of corn, the bushels are shipped down the river for export, or fed to livestock, or turned into ethanol. The bushels are used.

If you add what’s used to what’s left - the Grain Stocks number - the sum should be the total available supply for the year. However, tracking the middle usage number for corn - bushels fed to livestock - isn’t possible. That’s why USDA calls this number Feed & Residual. This season it is supposed to be 5.3 billion bushels. The question is how much of that 5.3 billion has already been consumed. There in lies the guess says University of Illinois Ag Economist Darrel Good.

Quote Summary - If the most recent pattern is being followed this year and USDA’s 5.3 billion bushel usage for the year is correct, then use for the first half the year should total 3.9 billion bushels with 1.7 of that used in the second quarter. If that is the case, the total use during the second quarter would have been 3.75 billion bushel and leave March 1 stocks at 7.45 billion.

On-the-other-hand, if the usage pattern is more like it was prior to 2010, there could be another 200 or 300 million bushels of corn accounted for in the Grain Stocks figure because it hasn’t yet been consumed. It will still be consistent with a 5.3 billion bushel usage figure for the year.

The Grain Stocks report for corn has a wide range then of acceptable figures from around 7.4 to 7.7 billion bushels. It makes the Grain Stocks number not so important, and puts a great deal more weight on the Prospective Plantings report to be released on the same date, March 31.

How Much Would a Corn Acre in 2015 Make

The ag economists at ILLINOIS have done an interesting exercise to see how much an acre of corn might gross in 2015. Or maybe it might be better explained as what would happen in 2015 if this year was like 1979.



Or what if it were like 2012, or 1983, or 1995, or just pick a year. The idea is to give farmers some hard data on how variable gross revenue from a corn acre is over time by moving that time into 2015. So that’s what U of I ag economists Gary Schnitkey did.

He wanted to look and see what gross revenues would be like for 2015 considering crop revenue, crop insurance, government payments, and price risk. The goal was to know under what conditions would a corn acre produce higher gross revenues this year?

The question then is, “In 2015 what would revenue be like this year if a year like 1972 happened?”.

"When we looked at it, 50% of the revenues were above and 50% of the revenues were below $825 per acre."

Schnitkey put those all into a table on the Farm Doc Daily website from 1972 to 2014. It shows how much of gross revenue would come from price x yield, crop insurance, and government payments.

At $825 most $300 an acre cash rented farms in central Illinois would lose money. Over the span of the years this would happen about 75% of the time and a big yield does not solve the problem - it takes higher prices from some other force. You may read the “Gross Revenues in 2015” article on the Farm Doc Daily website.

How USDA NASS Counts Acres

USDA has just wrapped up its survey of more than 80,000 U.S. farmers. The agency uses the information to develop the March 31st acreage forecast.

In the spring USDA’s National Agricultural Statistics Service division contacts farmers in hopes of learning how much of each crop they expect to plant. The agency contacts farmers across the United States. Corn and soybean farmers are of particular interest. This year more than 4000 Kansas farmers were tapped, along with around 3700 in Nebraska and about 3000 in each of the Dakotas, Iowa, and Illinois. Another 2000 farmers each were contacted in Indiana and Ohio.

Quote Summary - Our goal is to make sure we are measuring small, medium, and large farms. So, we use what’s called a stratified sample.

That’s NASS Illinois State Statistician Mark Schleusener.

Quote Summary - That is a fancy way of saying for the biggest farms, we are going to talk to all of them; for the large, but not biggest we will talk with one out of three of those and for the medium, maybe one out of ten; and for the smaller farms we might measure one out of twenty-five of those.

Each farmer surveyed is asked how many acres they operate. How much of that land they intend to plant to corn or soybeans, and how much might already be in wheat. They’re also asked about oats, sorghum, and hay. The response rate goal, and usually achievement, is an amazing eighty percent.

Quote Summary - Yes, our goal is an 80% response rate on all surveys and we use several methods of data collection. Every producer in the sample receives a letter with a planting intentions questionnaire. The letter also has instructions for reporting to a secure internet website. These are both inexpensive ways of gathering data. The people that do not respond will be called. If this doesn’t work then someone will make a farm visit for a face to face. Both these methods are more effective, in general, but also are more expensive.

The biggest problem NASS faces when taking the acreage survey is that farmers usually haven’t yet made all their planting decisions. The agency knows this and is satisfied with best estimates. The individual reports are confidential by law and the data collected is exempt from legal processes.

The data can be aggregated at the county, state, and national level. Computers flag any large acreage changes at the individual level so that an analyst can check for a data entry error or make a follow up call. The state statisticians review the total number of crop acres for any major changes - total crop acres generally remain constant - and then submit the estimates in an encrypted file to USDA NASS in Washington, D.C. There more analysis is done and the final report is produced for release March 31.

Cold Weather Maintenance Diets for Dairy Calves

Feeding a heifer dairy calf properly during cold weather can mean up to 1500 extra pounds of milk during her first lactation period. Todd Gleason has more on the increased cold weather maintenance diet that results in such a gain.

You can get more milk from a cow if you treat it right as a calf says University of Illinois Dairy Specialist Phil Cardoso. This is especially the case if those calves are fed a proper maintenance diet during periods of cooler (not necessarily cold) weather when they are very young.

Quote Summary - The maintenance diet supplies all the energy needed for the development of the immune system, for growth, and for the calf to live. There is a thermal neutral zone in which the calves nutritional needs are flat, outside of this zone it needs more energy to generate more heat the winter or to cool down in the summer. During the winter the calf needs to generate energy to heat themselves.

The temperature at which additional feed is needed to keep the calf operating at a maintenance level for growth isn’t so low. It starts at 59 degrees fahrenheit. To this end ILLINOIS uses a simple table to guide dairy farmers in how much extra milk replacer a young calf would need when it is cold stressed. The table has temperatures on one side of the graph and the calf’s weight on the other.

The supplemental energy is provided by the standard 20 percent fat / 20 percent crude protein milk replacer. An example of how the table works would be to find the weight of the calf, say 110 pounds, and the temperature outside. If it is 50 degrees the calf needs four quarts of milk replacer. If it is colder, 41 degrees, it would take 4.26 quarts.

The colder it gets the more milk replacer the calf needs in its regular maintenance diet, at least if the goal is to achieve an extra 1500 pounds of milk once the calf becomes a cow. Those wanting to view the easy to use University of Illinois dairy calf maintenance diet table will find it on the Dairy Focus website.

The Next Mile Post for Soybeans & the Crush

Farmers and the trade are very concerned the price of soybeans will fade over the next six months.

There are a couple of mile posts indicators most will be watching as it relates to the production of soybeans. University of Illinois Ag Economist John Newton says the next one up is the Prospective Plantings report due March 31st from the United States of Department of Agriculture.

Quote Summary - The Prospective Plantings report is a big one. It will give us an idea of how many acres of soybeans U.S. farmers expect to sow this spring. I’m also going to continue to watch the domestic soybean crush and U.S. soybean exports. The nation is on pace to export a record volume this year and USDA maintains this number will increase next year. This would be back to back record soybean export years and certainly worth monitoring. Can the world consume soybeans and the current level? If this is possible, then that should provide some price floor, even some positive price pressure from where we are today.

Exports are reported weekly by USDA and starting in August the ag department will begin reporting the soybean crush totals monthly. The agency is picking up and tweaking a discontinued Census Bureau report.

Quote Summary - The monthly numbers will aid the trade in monitoring the pace of the domestic soybean crush. Another item to keep in mind is the importance of the RFS (Renewable Fuel Standards). It may, at some point, cause soybeans to be crushed for oil. This would have implications for soybean meal and soybean meal prices and this may offset corn fed in the residual balance sheets. These are all things to watch. Some are long run and some are short run; the pace of consumption and soybean crush being the two short run things I’m watching.

You may read more from the University of Illinois ag economists on the Farm Doc Daily website. A new article is posted there each business day of the year.

Soybeans + Numbers

Those listening to the markets every day know there is a big difference between the number of acres the trade thinks will be planted to soybeans and the number of acres USDA is so far projecting. These aren’t as far apart as you might think and there may even be some positive wiggle room in them.



The trade has long thought U.S. farmers will plant about 86 million acres of soybeans. USDA thinks they’ll plant 83 and half million. Because USDA is using

Pork's Boom & Bust Price Pattern

Markets can take your breath away and the hog market over the past year has left many breathless says one Purdue University ag economist.



A year-ago in March, the new PED virus was

Estimated 2014 ARC County Payments

Farmers throughout the nation are deciding which of the new farm programs to take. Another piece of that puzzle was put into place when USDA released the county wide corn and soybean yields late last month. These can be used to estimate some of the 2014 farm program payments.



County wide yields as calculated by USDA's National Agricultural Statistics Service along with the estimated season's average cash price - the marketing year average - can be used to forward figure 2014 ARC County payments. It is possible therefore to know

Farm Bill Sign Up Extended

USDA has extended the deadline to update base acres and yields under the new farm bill until March 31st. The original deadline for landowners to make initial decisions related to the new farm safety net was Friday February 27, 2015.

U.S. Secretary of Agriculture Tom Vilsack made the announcement saying it is an important decision for producers, because the programs provide financial protection against unexpected changes in the marketplace.

The Secretary says USDA is working to ensure landowners and farmers have the time, the information, and opportunity to review their data, and to visit the Farm Service Agency to make solid informed farm bill decisions.

If no changes are made to yield history or base acres by March 31, 2015, the farm’s current yield and base will be used. A program choice of ARC or PLC coverage also must be made by that same date or there will be no 2014 payments for the farm and the farm will default to PLC coverage through the 2018 crop year.

2015 USDA Agricultural Outlook Forum

Last week the United States Department of Agriculture presented its view of the commodity markets.



Thursday USDA Acting Chief Economist Robert Johansson made a presentation on the current agricultural landscape during the 2015 USDA Agricultural Outlook Forum. Interestingly, he set the tone by showing how commodity prices have been trending downward for more than 60 years.

Yield Exclusion and Crop Insurance

When farmers go to their federal crop insurance agents in March they may have a new decision to make. The new Yield Exclusion option may allow some producers to increase their covered yields.

U.S. Soybean Production Prospects for 2015

There are lot of soybeans in the world. Last fall U.S. farmers harvested a record crop, and their counterparts in South America are doing the same right now.

Farm Program Sign Up Deadlines & Decision Aids

Farm Program Sign Up Deadlines & Decision Aids
Jonathan Coppess, Ag Law & Policy Specialist - University of Illinois

Time is running out for landowners and farmers to decide what to do about the new farm programs. They have until the end of February to make the first two decisions, and must make a final choice by March 31st. Todd Gleason reports on the decision aids available on the University of Illinois Farm Doc Daily website.

FarmDocDaily is hosted by the ag economists…
2:51

FarmDocDaily is hosted by the ag economist at a the U of I, including Ag Policy Specialist Jonathan Coppess. The home page includes a link to something called the Farm Bill Toolbox. There you’ll find decision tools, and a brand new link under Resources named Farm Program Decision Guide.

Coppess :18 …it is all right there.

Quote Summary - It is just a PDF file available on the website. It is something to take home with you, to go to your landlord with, to sit down with your brothers and dad over family discussions with about what your are going to do (about the farm program). It is all right there.

Right there in an easy to download, print out, and use file. It in includes the deadlines - February 27th to make the first two decisions about payment yields and base acre allocation, and March 31st for the final program choice. All of which must be recorded at the local F-S-A office, the Farm Service Agency. The first two decisions, the ones due Feb 27th, should be pretty easy for row crop farmers. Take the highest yields and use the base acre allocation with the most corn acres.

Coppess :25 …if landowners aren’t getting in there soon.

Quote Summary - There is no reason to delay those decisions because the program choice follows on March 31st. It is the one where farmers will want to know a little more about the 2014 county yields. Still, the payment yields and base acre decisions should be made now, otherwise, there will be some long lines at the FSA office if landowners don’t get to the office soon.

The county yields, as released by USDA NASS this month, will help determine how much the ARC County payment will be for last fall’s crop. Once those are released, it will be easier to compare ARC County to the other two farm programs, ARC Individual and PLC.

Coppess :47 …in order to trigger a payment.

Quote Summary - The county yields will determine the ARC County payment. The final number won’t be calculated until the Market Year Average Price is released next fall. Still, it will be the indicator used to calculate and trigger the 2014 ARC County payments.

Knowing the approximate 2014 ARC County payment should help farmers make a final farm program choice. It is important to remember the choice is a five year decision not a one year commitment. The online Farm Bill ToolBox walks producers through seven steps in hopes they’ll make an informed choice.

Finer Ground Corn More Digestible

Finer Ground Corn More Digestible
Hans Stein, Swine Nutritionist - University of Illinois

An animal nutritionist at the University of Illinois has quantified the importance of particle size in ground feed for hogs.




Grinding corn to finer particle sizes can increase its feed efficiency by up to five percent says Hans Stein.

They don’t gain any more, but they eat less to gain the same. Pigs adjust their energy intake. It means there is more available energy in corn when it is ground finer. The pigs eat less, the feed conversion is improved, and it takes fewer pounds of feed to produce a market weight hog.

Stein is a swine nutritionist at the University of Illinois. He investigated the affect of different particle sizes of ground corn when fed to pigs. The corn was ground to 800, 600, 400, and 300 microns.

We discovered amino acid and phosphorous digestibility does not change with particle size. Pigs are very efficient in digesting those nutrients, but when it came to starch we found a linear increase in digestibility as we reduced the particle size of corn. The highest digestibility was with the lowest particle size of corn.

This is because more starch is digested in the pig’s small intestine, causing more glucose to be absorbed and therefore increasing the amount of available energy.

The energy in the corn grain increased as we reduced particle size. A pig will get more energy out of one pound of corn if it is ground to 300 microns instead of 800 microns.

This is were the savings come in to play. The feed conversion rate improves by about one-point-two percent for every 100 micron reduction in particle size, saving seven pounds of corn to finish a pig.

Or producers wanting to formulate diets to a prescribed amount of energy could reduce fat in the ration. Fat is usually used to add more energy, but corn ground to a smaller particle size could replace it. The pigs should perform the same using corn ground to a smaller particle size.

There are a couple of negatives to the smaller grind. The feed doesn’t flow nearly so well and there is an increased risk of stomach ulcers. The ILLINOIS nutritionist says hog producers should try smaller grinds over time, ratcheting down a hundred microns every couple of months. Rations with higher fiber contents will be most successful at the lower particle sizes.

Crude Oil Jumps Off the Lows

Crude Oil Jumps Off the Lows
Harry Cooney, Growmark Energies Specialist - Bloomington, Illinois

The price of crude oil has rallied off it’s lows. Todd Gleason has more on the reasons why.

The cost of a barrel of crude oil has dropped… 1:51

The cost of a barrel of crude oil has dropped dramatically since last June. Back then the price was more the $100 per barrel. It dropped to nearly $44 a barrel earlier this year and has now begun to make a sharp turn higher. There are series of reasons for the rally says Bloomington based energies specialist for Growmark Harry Cooney.

Quote Summary - There has been a steelworkers strike at some of the refineries. This has caused some concerned. The rig counts have also declined. This number indicates how many oil wells are operational and the trade, which focuses on future supply, thinks the supply may peak out and then start to decline.

However, it is important to remember says Harry Cooney crude oil started its price decline at around $107.00 a barrel. It is very unlikely the oil rig count contraction taking place now will greatly constrain supply. Still Cooney has been advising end users, like farmers that purchase gasoline and diesel in bulk, to lock in the price of their 2015 needs.

Quote Summary - The end users see these values, values they haven’t seen for four or five years, as an opportunity to lock in the price of fuel even though they’re above the recent lows. The price of fuel, unlike other inputs on the farm, has decreased more rapidly in percentage terms.

Nitrogen fertilizer, for instance, has yet to drop in price.

Beef Expansion Is Underway

Beef Expansion Is Underway
Chris Hurt, Extension Ag Economist - Purdue University

The nation’s cattle producers are expanding the herd and they’re doing it at a somewhat faster rate than had been anticipated.

USDA, in the semi-annual update of cattle numbers, calculates the total number of cattle and calves has increased by a bit more than one percent. It is the first increase in the cattle inventory since 2007. The industry suffered high feed prices and poor pasture conditions in the Southern Plains over the intervening years. 2014 provided a series of reasons to change course says Purdue University Extension Ag Economist Chris Hurt.

Quote Summary - There were multiple incentives to expand in 2014. These were led by record high cattle prices, with finished cattle averaging near $155 per live hundredweight and Oklahoma 500–550 pound steer calves averaging $250 per hundred. The other part of the incentive was more abundant feed due to a retreating drought in the Central and Southern Plains that restored range conditions and to favorable feed crop production in 2013 and 2014 which lowered corn and protein feed costs.

The most significant expansion is underway in the beef herd where beef cow numbers are up two percent from year-ago levels. The number of beef heifers being held back to enter the breeding herd is up four percent. Significantly, the number of those retained heifers that will calve this year is up seven percent. This means 61 percent of the beef heifers that have been retained to enter the breeding herd were already bred at the start of this year. The 2014 beef cow herd expansion, thinks Hurt, is likely the beginning of a multi-year increase.

Quote Summary - It is common for the beef herd to be in expansion for four to six years. With 2014 registering as the first year of expansion, expansion could continue through most of this decade. If so, peak beef production on this cycle would not be expected until early in the next decade.

Beef supplies, however for this year, will not change much. This might lead one to anticipate prices to be near the $155 finished cattle price of 2014. However, 2014 was an exceptional year, and meat prices in general this year may be lower explains Chris Hurt. Currently, futures markets are heavily discounting cash cattle prices, suggesting 2015 average finished cattle prices in the higher $140’s. However, he expects finished cattle prices to average $150 to $157 in 2015, with prices in early spring in upper $150s and the lower $160’s and then to fall to near $150 in summer and then to end the year in the mid-$150s.