Iowa Court Decision on Field Tiles | an interview with Jonathan Coppess

The Iowa Supreme Court has ruled drainage districts in the state cannot be sued for the cleanup of nitrates in drinking water. Justice Thomas Waterman authored the majority opinion, writing that policy deciding who pays for nitrate removal is the jurisdiction of Iowa lawmakers. This was a win for the drainage districts says University of Illinois Agricultural Policy Specialist Jonathan Coppess. However, he says the Clean Water Act implications of the suit, about whether or not field tiles are point sources that can be regulated, remains to be addressed.

“So the big question under the Clean Water Act, as I understand it, is the Des Moines Water Works is claiming that the agricultural stormwater exemption under the Clean Water Act does not apply to drainage districts. In this case, because once it comes through the pipes it becomes a point source.” –Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

Again, the decision in the Iowa courts is that only lawmakers in the state can determine who pays for the cleanup of nitrates from drainage districts. It did not address issues related to whether or not field tiles should be subject to regulation under the Clean Water Act.

Is it Time to Sell Some 2017 Soybeans

by Todd Hubbs

January 23, 2017 - Soybean prices increased dramatically over the week ending January 20 on reduced production estimates for the U.S. and increased uncertainty in the prospects for South American soybean production. Old crop soybean cash bid prices in central Illinois ended the week at approximately $10.40. New crop cash bid prices for harvest in central Illinois range between $9.90 and $9.94. The 2016–17 marketing year for soybeans, as it is currently shaping up, has a striking resemblance to 2015–16 marketing year expectations at this time last year. Despite the positive price outcome in 2016, a prudent soybean marketing plan for this year may possess some selling of 2017 soybeans in this price rally.

Currently, soybean production estimates for the United States in 2016 of 4.307 billion bushels is down one percent from the November forecast of 4.36 billion bushels but is still a record level of production. December 1 soybean stocks of 2.895 billion bushels came in 40 million bushels below trade expectations and indicated strong demand. The stocks estimate for the first quarter of the marketing year indicates a disappearance of 1.61 billion bushels. First quarter 2016–17 marketing year estimates of exports and crush came in at 932.5 million bushels and 484.9 million bushels respectively. Both numbers indicated substantial increases from last marketing year.

At this time last year, expectations for an increase in the number of acres planted in soybeans during 2016 and a potential record South American crop set up a scenario of significant downside risk for prices through the marketing year. The USDA forecasted ending stocks of U.S. soybeans at 440 million bushels on January 12, 2016. U.S. exports were forecast to be 153 million bushels less than the previous marketing year. Brazilian and Argentinian production ended up to be 136 million bushels smaller than expected in the January forecast and the substantial increase in planted acres did not materialize. U.S. exports ended the marketing year 245 million bushels higher than projected in January 2016, and ending stocks came in at 197 million bushels. Soybean cash prices reflected these events as the monthly average price for central Illinois increased from $8.64 in the first seven months of the marketing year to $10.26 in the last five months.

Currently, the WASDE report forecasts soybean crush and exports for the U.S. at 1.93 and 2.05 billion bushels respectively. At 420 million bushels, the ending stocks forecast is the largest since the 2006–07 marketing year. Projections of the U.S. 2016–17 marketing year average price place it in a range of $9.00 - $10.00, which positions current harvest cash bid prices in the upper end of this range. Many market observers believe a dramatic increase in soybean acreage will materialize in 2017. Estimates see the possibility of soybean acreage eclipsing corn acreage in 2017 due to the lower cost of production and large price differential currently in place with corn. The January 12 Winter Wheat Seedings report offered some support to this notion. Winter wheat plantings of 32.38 million acres are down 3.75 million acres from the previous year. This is the lowest level of winter wheat planting since 1909, and one could expect some of those acres switching to soybeans.

Forecasts by the USDA of Argentine soybean production currently sit at 2.09 billion bushels for the 2017 crop year. Numerous reports out of Argentina indicate the substantial flooding in the region may reduce production by 100 to 150 million bushels. Argentina soybean export forecasts stayed constant at 330 million bushels while import levels increased by 25.7 million bushels. Alternatively, Brazilian soybean production forecast increased by 73.48 million bushels over the December forecast to 3.79 billion bushels. The expected increase in soybean production levels led to a 40 million bushels increase in the forecast for Brazilian soybean exports. Taken together, USDA forecasts 5.91 billion bushels of soybean production and 2.51 billion bushels of soybeans exports from Brazil and Argentina over the marketing year. Currently, a realization of substantial production losses in Brazil and Argentina are necessary for total production in the two countries to fall to the 5.63 billion bushels seen in 2016.

While possessing similarities to last marketing year, the possibility of a strong downward price movement through 2017 is substantial. Despite strong soybean demand and production issues in South America, the possibility of a large increase in soybean acreage planted and the continuation of excellent soybean yields hang over the rest of this year. The March 31 prospective plantings report will provide the next major indication for soybean acreage for 2017. With so much production uncertainty in the U.S. and South America over the next few months, the current bids for 2017 harvest delivery provide a pricing opportunity for locking in prices high in the expected marketing year average price forecast. If producers are considering increasing soybean acreage in 2017, the current prices offer an opportunity, at a minimum, to price soybeans on the expanded acreage.

USDA January Reports | an interview with Todd Hubbs

University of Illinois commodity grains analysts Todd Hubbs discusses the January 12th USDA reports including Crop Production, Grain Stocks, and WASDE.

New FarmDoc Tool Assesses Performance of Crop Insurance

by Gary Schnitkey
original source FarmDocDaily

A new “Product Performance” section has been added to the 2017 Crop Insurance Decision Tool. By using this section, users can examine per acre premiums and payments from alternative crop insurance products from 1995 to 2015, thereby allowing users to gain a feel for the historical performance of crop insurance products. For corn, users will notice that the 2012 drought had large impacts on crop insurance performance.

User Selections

From the 2017 Crop Insurance Decision Tool, users will select “product performance” from the menu and make the following selections (see Figure 1):

1. State. Any state in the nation can be selected.
2. County. Any county can be selected.
3. Crop. Information is available for corn, soybeans, and wheat.
4. Product. Data are available for Revenue Protection (RP), Yield Protection (YP), RP with the harvest price exclusion (RPwHPE), Area Revenue Protection (ARP), Area Yield Protection (AYP), and ARP with harvest price exclusion (ARPwHPE).
5. Coverage level. Choices are each available coverage level (50 to 85% for RP) and an “all” selection.

Figure 1 shows a Logan County, Illinois example where corn is selected. RP performance will be given for all coverage levels, meaning that data over the 50% to 85% coverage levels are averaged and reported.




Product Performance Output

Figure 2 shows output from selections in Figure 1. All data comes from Summary of Business, which is maintained by the Risk Management Agency (RMA). The 2017 Crop Insurance Decision Tool provides results from 1995 to 2015. Yearly performance rows will be blank if no use of the chosen product occurred during the year.




RP along with YP and RPwHPE came into existence in 2011. As a result, RP performance is reported from 2011 onward. Before 2011, Crop Revenue Coverage (CRC) and Revenue Assurance (RA) plans where in use. RP, CRC, and RA all are revenue insurances that allow guarantees to increase if harvest price is higher than projected price (RA had an option that excluded the guarantee increase, but this option was used rarely). Therefore, CRC and RA performance are reported for years prior to 2011.

The “product performance” section first reports acres insured using the selected combination. RP type products were first introduced in 1997 and 7,916 acres were insured in Logan County (see Figure 2). Use grew to 125,359 acres in 2014, decreasing slightly to 121,619 acres in 2015. RP is now the most used crop insurance product, having over 90% use in many counties (see farmdoc daily, January 4, 2017).

Next, the section reports premiums in three columns: total, subsidy, and farmer-paid premium. The subsidy represents the premium paid by the Federal government as specified by subsidy schedules written into statute. As its name implies, “farmer-paid premium” is paid by the farmer. Farmer-paid premium plus subsidy equals total premium. In Logan County, total premium was $40.56 per acre in 2015 (see Figure 2). Of the total premium, $19.79 per acre was subsidy and $20.77 per acre was farmer-paid premium.

Also given are per acre insurance payments. These are payments to farmers resulting from claims to crop insurance products. In 2015, insurance payments on RP products averaged $32.95 per acre.
The final two columns provide an evaluation of the crop insurance products. Insurance payments minus farmer-paid premium show insurance payments received from the products relative to farmer-paid premium. Positive values mean that insurance payments were larger than farmer-paid premium.

In high payment years, payments minus farmer-paid premium will be positive. For example, insurance payments were high in the 2012 drought year, resulting in payments minus farmer-paid premium of $302.26. In low loss years, payments minus farmer-paid premium will be negative. From 1997 to 2015, negative values occurred 13 out of 19 years. From 1995 to 2015, farmers received an average of $10.38 more in premium than in payments (see Figure 2). From 2006 to 2015, farmers received $22.55 per acre more in payments than they paid in premium (see Figure 2).

The loss ratio equals insurance payments divided by total premiums. In 2015, the loss ratio was .81. Loss ratios less than 1.0 mean that insurance payments were less than total premium. Conversely, loss ratios higher than 1.0 indicate that payments were greater than premium. Over time, RMA’s goal is to maintain a loss ratio near but below 1.0.

Interpretation

Past performance will not be entirely reflective of how the products will perform in the future. RMA makes adjustments to premiums over time. For example, continuing high payments on products will result in increasing premiums and vice versa. Moreover, RMA continually conducts studies of its rating procedures, which can cause premium changes. As a result, current premiums will vary from historical premiums even given identical conditions. As a result, future performance will not match historical performance.

Moreover, values are averages across many farms in a county. In 2015, average RP premium in Logan County were $20.77 per acre. Some farmers paid higher premiums depending on crop insurance choices and historical yields, and vice versa. The average RP payment in 2015 was $32.95 per acre. Again, payments vary across farms in the county. Some farmers did not receive payments in 2015 while other farms received payments much larger than $32.95 per acre.

Importance of 2012 in Illinois

The drought year of 2012 has a large impact on crop insurance performance. In 2012, the loss ratio for RP in Logan County was 5.84, much higher than the .89 average from 2006–2015 (see Figure 2). If 2012, had not occurred, the .89 average loss ratio for the 2006–2015 would have decreased to .46.

Payments minus farmer-paid premium averaged $22.55 per acre from 2006 to 2015. Without 2012 included, payments minus premium averaged -$8.53 per acre.

The drought has similar impacts on many Illinois counties. To illustrate, Panel A of Figure 3 shows average RP loss ratios for corn in each Illinois county for 2006 to 2015. The 2012 drought particularly impacted farms in southern and eastern Illinois, causing many counties to have loss ratios above 1.0. Panel B shows loss ratios for 2006–2015 with 2012 excluded. Without 2012, most counties had loss ratios well below 1.0.




These comparisons point out the importance of “extreme” years on overall crop insurance performance. Severe droughts like 2012 occur in the Midwest occasionally, with much debate concerning their frequency of droughts. The last drought of comparable magnitude to 2012 happened in 1988, 25 years previous to 2012, suggesting infrequent droughts. However, two additional, large yield shortfalls occurred in the 1980s: 1980 and 1983. Three severe events in a decade give a very different perspective on the frequency of droughts than the more recent history of the passing of 25 years. Which represents the future the best is an open question, with a blend of the 1980s experience and the recent more moderate losses likely to be the most appropriate answer.

Summary

The Product Performance section allows users to examine historical performance of crop insurance plans, thereby providing intuitions on the frequency of payments, the size of payments, and the net costs of the plans. While evaluating past performance is useful, future performance will not necessarily match historical performance as RMA is adjusting premiums over time. Moreover, the frequency of large-scale droughts has a large impact on insurance performance. Whether there are 0, 1, or 2 drought years in the next ten will dramatically influence crop insurance performance.

Revenue Protection (RP) Use on Corn in the Midwest

by Gary Schnitkey

Revenue Protection (RP) is the most used crop insurance plan for corn. Over time, RP use has grown to over 90% of corn acres insured in many counties in the corn belt (farmdoc daily, December 13, 2016). As illustrated by maps in this article, farmers in the corn belt typically select 80 and 85% coverage levels when using RP. Detailed statistics on a county basis are available from the “product use” section of the 2017 Crop Insurance Decision Tool). Overall, use suggests farmers prefer revenue insurances that allow guarantees to increase if harvest prices are above projected prices. Use of high coverage levels suggests farmers value protection offered by crop insurance.

RP Use

According to 2016 Summary of Business statistics from the Risk Management Agency (RMA), RP use on corn acres is over 95% in most counties around the western corn-belt. For example, over 95% use predominates in North Dakota, South Dakota, Minnesota, Kansas, Iowa, and Missouri (see Figure 1).




Many counties in Illinois, Indiana, and Ohio have lower RP use than in the western corn-belt (see Figure 1). In these eastern corn-belt counties, higher use of Area Risk Protection (ARP) occurs. RP and ARP are similar in that both are revenue insurances whose guarantees increase if harvest prices are above the projected prices. ARP uses county yields in determining payments while RP uses farm yields. In eastern corn-belt counties, the sum of RP and ARP use often is above 90%.

Two counties illustrate RP and ARP use in the eastern corn-belt. Sangamon County is in west-central Illinois and has 66% of its corn acres insured using RP, 32% using ARP, with the sum of RP and ARP use being 98%. Noble County is in the northeast Indiana. In Noble County, RP use is 43%, ARP use is 51%, and the sum of RP and ARP use is 94%.

Some counties outside the corn belt have more use of Yield Protection (YP) insurance, a yield insurance. For example, higher YP use occurs along the Mississippi River in Mississippi, Arkansas, and Louisiana (see Figure 1). Take Bolivar County, Mississippi as an example. RP is used to insure 71% while YP is used on 29% of the acres. Besides the Mississippi Delta, more use of YP also occurs in:

Counties in the middle part of Michigan, Western New York counties, Texas panhandle counties (see Figure 1). By far, RP is the plan most used to insure corn. In some areas, predominately in the eastern corn belt, ARP has significant use, with RP and ARP being used on over 90% of corn acres. In areas outside the corn belt, RP use often is above 50% of acres, but YP has a higher percentage of acres than in the corn belt.

RP Coverage Levels

In most counties, RP’s coverage levels range from 50% to 85% coverage levels in 5% increment. Figure 2 shows a weighted average coverage level for RP products in 2016. To illustrate weighted average coverage level calculations, suppose a county has 60% RP acres insured using an 80% coverage level and 40% using an 85% coverage level. The weighted average coverage level for this county is 82% (.6 use x .80 coverage level + .4 use x .85 coverage level).




Average coverage levels for RP in corn is over 80% in southern Minnesota, the northern two-thirds of Iowa, Illinois, and Indiana, and western Ohio (see Figure 2). Counties around this core of the corn belt typically have average coverage levels between 75% and 80%. Average coverage levels then decrease to between 70% and 75% the further away from the central core of the corn belt.

County Level Detail

More detail on crop insurance use is available from the 2017 Crop Insurance Decision Tool, a Microsoft Excel spreadsheet available for download from farmdoc. In the “product use” section, users make a state, county, and crop selection. Then, product use details are given.

Figure 3 shows an example of output for corn in Sangamon County, Illinois. In 2016, 197,535 acres of corn were insured. Of the acres insured, 66.3% of acres insured using RP, 32.0% used ARP, and 1.0% used YP. RP with the harvest price exclusion (RPwHPE) and Area Yield Protection (AYP) had much smaller percentages of acres. Within RP use, 47.9% of acres were insured using an 85% coverage level, 14.7% at an 80% coverage level, and 3.7% at lower coverage levels.




Figure 3 shows these use statistics for 2016. Users can change the year to any year from 1995 onward. The product use section of the 2017 Crop Insurance Decision Tool also includes graphs detailing crop insurance use over time.

Commentary

RMA offers different types of insurances including yield insurances, revenue insurances with harvest price exclusion, and revenue insurances with guarantee increase provisions. RP and ARP are both revenue insurances with guarantee increase provisions. High use of RP and ARP suggest that farmers prefer revenue insurances over yield insurances. Moreover, high use suggests that farmers value the guarantee increase associated with RP and ARP.

In the heart of the corn-belt, farmers typically purchase RP at high coverage levels. Weighted average coverage levels are above 80% in the center of the corn-belt, indicating that most acres are insured using either the 80% and 85% coverage levels. High coverage levels suggest that farmers desire risk protection offered by crop insurance.

Prospects for 2017 Ethanol Usage

Ethanol production in the United States ended the year on a record-setting note. It could mean an even bigger number for the corn-based fuel in 2017.

The U.S. ethanol industry ended 2016 on a high note. Ethanol production for the week ending Dec. 30 set a new ethanol production record with an average of 1.043 million barrels per day. The March futures price for corn moved higher last week to close at $3.58 in large part due to strength in the ethanol sector. Ethanol production and exports returned strong numbers over the first quarter of the marketing year. Currently, the World Agricultural Supply and Demand Estimates report forecast for corn consumption for ethanol production is 5.3 billion bushels. According to University of Illinois agricultural economist Todd Hubbs, when taking into account an increase in projected gasoline consumption in 2017 and robust ethanol export levels, the ability to surpass this projection is a strong possibility.

“Domestic ethanol consumption in 2017 will be influenced by domestic gasoline consumption, due to the ethanol blending requirement and the biofuels volume requirement associated with the Renewable Fuels Standard,” Hubbs says. “The EPA final rulemaking for the Renewable Fuels Standard for 2017 was released on Nov. 23 and is discussed in greater detail in the farmdoc daily article posted Nov. 30. In brief, the renewable fuels volume requirement is set at 19.28 billion gallons for 2017, which is up from the 18.11 billion gallons required in 2016.

“The conventional ethanol requirement is set at 15 billion gallons for 2017, 500 million gallons larger than 2016 and equal to the statutory requirement level,” Hubbs says. “If the gasoline consumption forecast used by the EPA is correct, the E10 blend wall will be 14.36 billion gallons in 2017. The EPA believes an ethanol supply of 14.56 billion gallons is reasonably attainable in 2017. Within the 14.56 billion gallons, E15 and E85 blends are expected to be 107 and 204 million gallons respectively. The ability to attain the E15 and E85 blend levels remains to be seen, but the increase in ethanol requirements provides support for greater corn usage in 2017.”

U.S. retail gasoline prices averaged $2.14 per gallon in 2016, which is 12 percent less than the price experienced in 2015 and is the lowest price since 2004. The December Energy Information Agency Short Term Energy Outlook projected an increase in gasoline prices for 2017 to $2.30 per gallon. Despite the projection of higher gasoline prices, gasoline consumption is forecast at 143.60 billion gallons in 2017, which is up from the 142.72 billion gallons consumed in 2016. Ethanol production is forecast to be 1 million barrels per day.

“If the EIA projection is correct, approximately 15.3 billion gallons of ethanol will be produced in 2017,” Hubbs says. “When considering the robust ethanol export trade currently in process, the U.S. ethanol industry is expected to produce a record level of ethanol in 2017.”

Ethanol export numbers are available from U.S. Census trade data for 2016 through November. U.S. exports of ethanol thus far are at 948 million gallons, which is up almost 27 percent from the similar period in 2015.

According to Hubbs, for 2016, the prospect of ethanol exports exceeding 1 billion gallons is not unreasonable.

Canada, China, and Brazil imported approximately 67 percent of the ethanol shipped from the U.S. through November. “The increase in ethanol exports is driven largely by increased volumes sent to China and Brazil,” Hubbs says. “China imported 179 million gallons through November, which far exceeds the 73.8 million gallons imported during the entirety of 2015. Brazil imported 224 million gallons through November, which is almost double from 2015. As we progress into 2017, the increases are expected to persist in Brazil because high sugar prices are expected to decrease ethanol production as mills allocate cane for sugar production in 2017. There is concern that China could raise ethanol tariffs and reduce ethanol imports in 2017 due to a possible trade dispute with the new administration.”

Hubbs says the implications for corn consumption during the 2016–17 marketing year can be seen in the USDA Grain Crushing and Co-Product Production report released on Jan. 3. Grain crushing for fuel alcohol is available through November. For the first three months of the marketing year, 1.34 billion bushels of corn has been processed for ethanol. This is up 3.2 percent from 2015 processing numbers.

“If corn used for ethanol production maintains this pace, 5.37 billion bushels will be processed in the marketing year,” Hubbs says. “Using EIA weekly ethanol production numbers, December ethanol production averaged over 1 million barrels per day. These production levels place corn use for ethanol production in a range of 455 to 460 million bushels for the month if corn use maintains the pace of the three previous months. With a conservative estimate of corn crush in December, total corn consumption for ethanol production through the first third of the marketing year would be above the current WASDE projection.

“Lower corn prices, strong ethanol exports, and greater blending requirements combine to make 2017 appear to be a strong year for corn consumption in ethanol production,” Hubbs concludes. “If the U.S. ethanol industry produced over 1 million barrels per day for the entire year, the ability to blend at requirement levels under an expanded gasoline consumption scenario and meet potential export market demand bodes well for corn use in the sector for 2017.”

Brazil Soybean Update | an interview with Kory Melby

The soybean crop in Brazil looks to be mostly in good condition, however, as you’ll hear in this interview by Todd Gleason some areas are under performing.

Kory Melby, Brazilian Ag Consulting Service - Goiania, Brazil

Tropical Bird Populations to Change | an interview with Jeff Brawn

Jeff Brawn, Animal Biology - University of Illinois College of ACES NRES

The future of the red-capped manakin and other tropical birds in Panama looks bleak. A University of Illinois research project spanning more than three decades and simulating another five decades analyzes how changes in rainfall will affect bird populations. The results show that for 19 of the 20 species included in the study, there may be significantly fewer birds if conditions become dryer.

Two Percent More Pork & Higher Prices

The last USDA Hogs and Pigs report issued in December estimated this year’s supply of pork will be larger than most analysts expect. Todd Gleason has more on how that will happen.

U.S. pork producers, in the last quarter of 2016 set a pigs per litter record,10.63. For the whole of the year, the new annual record is 10.5 pigs per litter. Every sow is having more pigs. Given these numbers, the industry will increase pork output by about three percent this year says Purdue University Extension Agricultural Economist Chris Hurt.

Quote Summary - And that will be to 25.7 billion pounds. This represents a 12 percent increase since 2014 when PED reduced production and contributed to record high hog prices. Pork production will rise by two percent in the first-half of 2017 and by about four percent in the last-half.

What does this mean for the price of hogs? With three percent higher production one might expect annual prices to be lower, however there are additional items to consider

First, retail prices did drop in 2016, but there is opportunity for those prices to come down more. Lower retail prices will stimulate the quantity of pork that consumers purchase. Secondly, USDA expects exports to expand by five percent which will move more of the increased production to foreign customers. Finally, with the addition of new processing capacity, the farm-to-wholesale margins are expected to drop. Lower margins at the processing stage may contribute to stronger bids to hog producers.

Live hog prices are expected to be about $48 in 2017, $2 higher than in 2016. Chris Hurt predicts prices will average $45 in the first quarter, the very-low $50s in the second and the third quarters, and then drop to $43 in the final quarter of 2017. A range of $2 higher or lower would be reasonable for price projections. He expects costs of production are expected to be around $50 on a live weight basis in both 2016 and 2017 based on current feed price expectations.

This means the industry operated at an estimated loss of about $12 per head in 2016 and is expected to have losses that average about $6 per head in 2017. Losses in the first quarter of 2017 are expected to be about $13 dollars per head. Modest profits may return in the second and third quarters. Then with a return to the largest losses of the year in the final quarter maybe around $18 per head.

Because the 2017 outlook is for weak returns the Purdue number cruncher says it is important hog farmers keep further expansion to a minimum. This will be difficult with new processing capacity coming in 2017 as those plants will want to stimulate some added production to fill their lines.

Christmas Tree Selection & Care | an interview with Ron Wolford

extension.illinois.edu/trees

Christmas just isn’t Christmas without a real Christmas tree. The following are a few hints to help you select that perfect tree whether you purchase it from a neighborhood lot or a Christmas tree farm.

• Decide on where you will place the tree. Will it be seen from all sides or will some of it be up against a wall? Be sure to choose a spot away from heat sources, such as TVs, fireplaces, radiators and air ducts. Place the tree clear of doors.
• Measure the height and width of the space you have available in the room where the tree will be placed. There is nothing worse than bringing a tree indoors only to find it’s too tall. Take a tape measure with you to measure your chosen tree and bring a cord to tie your tree to the car.
• Remember that trees sold on retail lots in urban areas may have come from out of state and may have been exposed to drying winds in transit. They may have been cut weeks earlier.Buy trees early before the best trees have been sold and where trees are shaded.Ask the retailer whether his trees are delivered once at the beginning of the season or are they delivered at different times during the selling season.
• Choose a fresh tree. A fresh tree will have a healthy green appearance with few browning needles. Needles should be flexible and not fall off if you run a branch through your hand. Raise the tree a few inches off the ground and drop it on the butt end. Very few green needles should drop off the tree.. It is normal for a few inner brown needles to drop off.
• Remember to choose a tree that fits where it is to be displayed. For example if the tree is displayed in front of a large window, then all four sides should look as good as possible. If the tree is displayed against a wall, then a tree with three good sides would be okay. A tree with two good sides would work well in a corner. The more perfect a tree, the more expensive it is.
• Make sure the handle or base of the tree is straight and 6–8 inches long so it will fit easily into the stand.
• Do a little research on different Christmas tree types. Some Christmas tree varieties will hold needles longer than others.

How to Connect your Site to the Prospective Business | webinar

University of Illinois Extension’s Community and Economic Development team will host a free webinar, Site Selection: How to Connect your Site to the Prospective Business, on Thursday, December 8, 2016 from Noon to 1PM, Central Time.



The webinar, a final in Local Government Education’s fall series on economic development in Illinois, will feature Cheryl Welge, who will be presenting a more detailed discussion of the site selection process. In the previous site selection webinar, we covered the state and technical aspects of Location One and site selection in Illinois. During this upcoming webinar, Cheryl will share her expertise on capacity requirements for site selection from the site selector perspective.

As a senior business development executive in Ameren Corporation’s Economic Development Department, Cheryl serves as the business development contact for a twenty-two county region in western, central and southwestern Illinois. In this role, she implements Ameren’s community and business development programs within Ameren-served communities. Cheryl is a first-line representative responsible for developing, coordinating and implementing Ameren’s proactive business development services to create and sustain revenue growth, support public strategy implementation and help foster positive community stewardship on behalf of Ameren subsidiaries.

Cheryl began her utility career with one of Ameren’s legacy companies – Central Illinois Public Service Company – in 1989. After serving in various support positions within both the Industrial Services and the Customer Expansion & Retention Departments, Cheryl assumed the role of marketing coordinator of the CIPS Marketing Programs Department in 1996 and joined the Ameren Economic Development Department in 1998. In 2013 she assumed her current position as senior business development executive.

Cheryl is a graduate of both Lincoln Land Community College and Southern Illinois University-Edwardsville, having earned a Bachelor of Science, Business Administration, with a major in Marketing. In addition, she graduated from the University of Oklahoma’s Economic Development Institute in April 1999 and became a Business Retention & Expansion International (BREI) certified BR&E Consultant in 2003. Cheryl is a Past Chairman of the Illinois Economic Development Association (formerly known as the Illinois Development Council) and a past recipient of the Distinguished Economic Developer Award.

There is no cost to attend the webinar; however, pre-registration is required. Register online or contact Ken Larimore at larimore@illinois.edu for more information.

• News Release
• Online Registration
• LGE Website
• Facebook Event

2016 Gross Farm Revenue & Income

It looks like this year is going to be better than last year for farmers in central Illinois. Todd Gleason explores how gross income has changed for row croppers in the middle of the prairie state.



The gross revenue for corn is $292 per acre. It is tallied from three income sources. The crop is worth $262. There was a $20 farm safety net payment from the ARC-County program and a $10 crop insurance indemnity. The total, again $292, is lower than last year says University of Illinois Agricultural Economist Gary Schnitkey, “Even though we are putting in a very high yield, we are using 231 bushels to the acre for the corn average - the same as in 2014, revenues will be down for corn in 2016 as compared to 2015”.



Schnitkey calculated the gross revenue figures for the farmdocdaily website.

The soybean figures add up in a similar fashion. The gross revenue is estimated to total $718 per acre. It’s a figure much higher than the 2015 gross says the agricultural economist, “We are including very high soybean yields for 2016. Record-breaking yields, in fact, of 73 bushels to the acre. The price is above $9.50, and this may actually turn out to be low as prices continue to climb. Overall, revenue on soybeans will be up from last year and much higher than total costs. So, our bright spot for the 2016 year will be revenue and income from soybeans”.



All in all, on the highly productive soils of central Illinois, 2016 will go down as a high-yield low-income year. Another year in which farmers just-get-by says Gary Schnitkey.

Quote Summary - Get-by year, but better than it could have been without the high yields. Most farmers will maintain equity, but may see some working capital declines. The declines will be more pronounced on farms working a higher percentage of cash rented land. It is better than 2015, but still not up to sustainable levels for the long-run. We need to see higher returns, particularly for corn prices in the future.

There are a series of graphics detailing 2016 central Illinois row crop farm gross income on the farmdocdaily website.

Illinois Farm Economic Summits

The big story in Illinois agriculture in 2016 continued to be the “margin squeeze” faced by crop producers. This squeeze was brought on by low corn, soybean, and wheat prices and costs of production that are only slowly adjusting to the new price realities. At present prices, further cost of production reductions will be required. Producers and landowners face a series of difficult management challenges as they grapple with how to adjust to the changed environment. Should cash rents be lowered? And if so, by how much? How much relief will be seen through lower fertilizer and seed prices? What are the prospects for grain prices to recover from current depressed levels?

University of Illinois Extension and members of the farmdoc team from the Department of Agricultural and Consumer Economics will be holding a series of five Farm Economics Summit meetings to help producers navigate these difficult times.

LEARN MORE & REGISTER TODAY

Speakers from the farmdoc team at the University of Illinois will explore the farm profitability outlook and management challenges from several perspectives, including the 2017 outlook for prices, farm financial management in tough times, needed changes in farmland leases, updates on the farm program safety net, agricultural credit conditions, and long-term weather and yield trends. The format for the meeting will be fast-paced and allow plenty of time for questions from the audience.

EPA Renewable Fuels Standard Rallies Soybean Oil Prices

Source | Darrel Good, Agricultural Economist - University of Illinois

The price of soybeans rallied about 10 percent from mid-October to mid-November. It came,despite the record sized crop harvested in the United States.

Farmers have been in awe of the soybean market since mid-August. There have been a few reasons for it to rally; a short crop out of South America and a drought constrained supply of palm oil coming from Indonesia for instance. Still, this U.S. soybean crop is big, mighty big in fact. Yet, the price of soybeans has gone higher.

Darrel Good writes about it in this week’s Weekly Outlook. You may read it online at FarmDocDaily.

There are two unusual things about this price rally. Well, one really, but it is driven by the first. The rally has come because the world seems to be short of vegetable oils. Soybean oil is among those. Here’s the important part, soybean oil lead rallies generally do not last. Darrel Good thinks this one might and that it could change the dynamics of the soybean complex. The change is driven by the Renewable Fuels Standard. The RFS did the same thing for the corn market when it began to ramp up ethanol production in the United States more than a decade ago.

The soy complex is made up of three parts; the price of soybeans, the price of soybean meal, and the price of soybean oil. The last two are the products derived from the soybean when it is processed, crushed.

The EPA RFS announcement, made last week, initially resulted in a surge in soybean oil and soybean prices. Increasing soybean oil consumption for mandated advanced biofuels, in this case biodiesel production, this year and beyond may require the domestic soybean crush to be larger than previously thought concludes Darrel Good. He says this could lead to some long-term pricing questions.

Historically, the domestic crush has been driven by soybean meal demand. If it is driven instead by soybean oil demand, this could result in lower soybean meal prices. Soybean meal has a short shelf life. Its price would need to be low enough to for it to be used quickly.

The impact of higher soybean oil prices and lower soybean meal prices on the price of soybeans is difficult to anticipate. However, a “surplus” of soybean meal, says Good, might result in lower soybean meal prices relative to feed grain prices. It could cause the soybean meal to corn price ratio that has ranged from 2.55 to 3.2 in recent years to decline. The historical range is 2.0 to 2.5.

Could Soybean Stocks Grow to 580 Million

Depending upon how you do the numbers there could be an enormous supply of soybeans in the U.S. by the time the fall of 2018 rolls around.

The large soybean crop in the United States hasn’t, yet, pummeled prices in Chicago. However, farmers are a bit worried the hammer blow will be struck. For now, much of the focus is on the potential size of the 2017 South American crops and the implications for demand for U.S. grown soybeans. Increasingly, however focus will shift to 2017 production prospects here in the United States.

The over-riding question is whether surpluses and low prices will persist for another year. Although University of Illinois Agricultural Economist Darrel Good says it is a bit early to speculate on supply and consumption prospects for the 2017–18 marketing year, he thinks some scenarios can be considered.

For soybeans, there is a general expectation that U.S. producers will increase acreage in the year ahead. An increase of about five million acres, to 88 million harvested acres, seems to be a common expectation right now. The extremely high soybean yields of the past three years raise some questions about a potential increase in the trend yield. However, if the 2017 U.S. average soybean yield is near our calculated linear trend value of 47.5 bushels and acreage is increased as expected, the 2017 crop would total 4.18 billion bushels, 181 million bushels less than the 2016 harvest. If soybean consumption during the 2017–18 marketing year remained at the elevated level of 4.108 billion bushels projected for the current year, stocks would grow by about 100 million bushels.

So, at the end of the 2017–18 marketing year there could be 580 million bushels of soybeans left in the supply category as ending stocks. The upshot writes Good in his Weekly Outlook is that with a trend yield of 47.5 bushels and a constant level of consumption, any increase of more than 2.85 million acres next spring would result in some further growth in year ending stocks.

Quote Summary - On the other hand, a five million acre increase in soybean area along with a constant level of consumption means that an average yield of less than 46.3 bushels would result in some increase in marketing year ending stocks.

There are obviously multiple potential acreage, yield, consumption, and ending stocks scenarios for the 2017–18 U.S. soybean marketing year. The most likely scenarios tend to favor a modest to large increase in marketing year ending stocks of soybeans. However, the soybean market is apparently not convinced that stocks will continue to grow next year, with the January 2018 futures price only $0.06 lower than the January 2017 price.

The soybean market, concludes Good, then appears to be reflecting some production risk. He thinks this perceived risk may stem from current drought conditions in the southeastern United States and/or uncertainty about potential impacts if a La Niña episode unfolds in South America.

US Corn Ethanol Market | an interview with Carl Zulauf

Ethanol was a factor in both the price run-up that began in 2006 and the price run-down that began in 2013. Tepid growth replaced explosive growth. The question for the future is, “What is ethanol’s organic growth rate (growth without government policy stimulus)?” Recent history suggests growth will continue in the corn ethanol market, but it likely will be notably lower than the growth in yields. Thus, upward pressure on corn prices is less likely.

Corn Ethanol in Historical Perspective
US Department of Agriculture data on US corn processed into US ethanol begin with the 1980 crop. It is reported monthly in the World Agricultural Supply and Demand Estimates. Corn processed into ethanol grew at an average annual rate of 6% between 1985 and 2000, exploded to a 24% annual growth rate between 2000 and 2010, then slowed to 1% per year after 2010 Ethanol Growth vs. Yield Growth. The explosive growth in the first decade of this Century largely coincides with the impact of government policies. These policies first led to the use of ethanol as an oxygenate additive in gasoline, then to the use of ethanol as a substitute for gasoline and by extension oil The latter was accomplished through mandates on market size enacted by Congress in 2005 and 2007.

Figure 1 | Corn for Ethanol

Return to Equity for Processing Corn into Ethanol
Since January 2005, Iowa State University has issued a monthly report on the costs and returns to processing corn into ethanol. The report is based on (1) a model plant created using best available information and (2) current prices for corn, ethanol, natural gas, and distillers dried grain. Among the measures calculated is a return on equity. Figure 2 reports the average of monthly returns to equity by crop year. Even though growth in the ethanol market slowed dramatically after 2010, average return on equity remained positive for the 2011–2015 crop years (13%). As expected, return on equity was higher for the 2005–2010 crop years (30%). For additional discussion of the return to processing corn into ethanol, see Irwin, 2016.

Figure 2 | Iowa State Ethanol Plant Model Returns

Ethanol Growth vs. Yield Growth
A measure of growth in demand (growth in corn processed into ethanol expressed as a percent of corn production) is compared with a measure of growth in supply (growth in US corn yield). To illustrate the calculation of these measures, 3.71 billion bushels of corn was processed into ethanol in the 2008 crop year, 0.66 billion bushels more than processed in the 2007 crop year. US production of corn in 2007 was 13.04 billion bushels. The growth in corn processed into ethanol was +5.1% of 2007 corn production (0.66/13.04). US yield of corn per planted acre was 151 bushels in 2008 vs. 149 bushels in 2007. Rate of growth was +1.3% [(151/149) - 1]. These two measures were calculated for each crop year.

Yield growth strongly exceeded the growth in corn used to produce ethanol relative to corn production before 2000 and after 2010 (see Figure 3). The two measures increased at about the same rate (2%) between 2000 and 2005. Between 2005 and 2010, growth in corn used to produce ethanol relative to production strongly exceeded growth in corn yields. Not only did corn processed into ethanol increase dramatically during the latter period, but the growth in corn yields was also abnormally low. Reinforcing these bullish price factors was China’s rapidly growing demand for soybeans (see Zulauf, 2016).

Figure 3 | Ethanol Growth v Yield Growth

Summary Observations

• From the perspective of 2016, expansion of the US corn ethanol market was largely squeezed into the 10 years from 2000 to 2010 (83% of the expansion occurred in these years).
• The squeeze was largely driven by US policy decisions.
• At the same time that policy was strongly pushing demand, growth in corn yields suddenly slowed, with a likely explanation being a multiple year period of suboptimal growing conditions.
• However, the increase in demand for corn ethanol spurred by policy would have exceeded the growth in yield even during the high yield growth period of 1980 to 2000.
• The result was not just an increase in corn price but an explosive increase in corn price.
• This price increase increasingly looks unsustainable as yield growth returns to a path closer to history and ethanol growth returns to a level more consistent with long term organic growth due to market incentives, not policy factors.
• If the preceding point holds, agriculture will need to make painful adjustments as it enters a world that will likely look more like 1980–2000 than 2005–2010.
• Nothing in the historical review suggests that the corn ethanol market would not have developed. The continuing positive return to equity since 2010 suggests the market is sustainable. In particular, ethanol appears to have carved out a role as a competitive source of octane for gasoline, which is translating into a growth in exports of ethanol. For additional discussion of this topic, see Irwin and Good, 2016. But, annual organic growth is slower and unlikely to exceed the growth in yields.
• This 35 year story does however raise caution about using policy to expand markets.
• In particular, the design of such policy needs to respect the underlying private market, including attributes such as sustainable non-publically subsidized growth; role of competing demand components, such as livestock in the case of ethanol; and the scope and magnitude for supply growth to be uncertain and how this uncertainty may interact with policy induced demand growth.
• Interesting, important, but probably unanswerable questions are what would be the current state of the corn ethanol market and by extension corn prices if government policy had not intervened and more narrowly if the 2007 mandate had not been enacted. The answers to these questions may tell us more about the future of corn and other field crop prices than any other set of questions.

Watch the Feed Usage Number for Corn

Last week, when USDA raised the sized of the U.S. corn crop, there was a collective gasp in farm country. Prices are already very low, and an even bigger crop wasn’t expected. All attention now has turned to how this mammoth supply will be used in hopes consumption can chew through the mountain of corn.

U.S. farmers are harvesting their largest corn crop on record at some 15.2 billion bushels. It’s the western corn belt that really came through this year with big yields. The November USDA Crop Production report shows that even in the last month those yields got bigger. Up 3 bushel to the acre in Nebraska and South Dakota. 4 bushels higher in Minnesota. And a 17 bushel to the acre increase in North Dakota that came about once farmers (the only real source for yields in that state) took a look at the yield monitors in their combines.

The increased yield for the corn crop creates a scenario says University of Illinois Agricultural Economist Todd Hubbs where the ending stocks to use ratio is 16.4 percent under current consumption projections. That’s a level, he notes, that has not been seen since the 2005/06 marketing year. And while the corn for export and ethanol numbers seem sound, the feed and residual number has Hubbs concerned.

Quote Summary - They’ve had the feed and residual use projection at 5.65 billion bushels for the few reports. It’s a big number. It is 10 percent up over last year and, with the increased livestock numbers we’ve seen, it sounds reasonable. However, when you consider the mitagating factors surround feed usage; the unseasonably warm fall; a large corn crush for ethanol which increases the availability of distillers grains; DDG’s that may not be shipped overseas because of China’s recent import restrictions; and you see lots of alternative sources for feed rather than corn. Even though there are strong livestock inventory numbers, the mitigating factors want to make you give feed a good look as we move through the marketing year.

Think of it this way. There are a lot of corn acres and lot ethanol plants west of the Mississippi River - Iowa, Nebraska, and Minnesota are three of the top five corn producing states in the nation. There are also a lot of wheat acres, and a lot of cattle, and a lot of hogs, and more than a few poultry operations. Those birds and animals eat a lot of feed, but the ranchers and farmers make decisions based on economics. Clearly it has been cheaper to leave cattle on pasture this warmer than average fall, and it may be cheaper to feed wheat and DDG’s rather than corn. We won’t really know the impact until the Grain Stocks report is released January 12 says Todd Hubbs.

Quote Summary - The grain stocks report is the only way to back out how much corn for feed is being used. We know how much corn is being crushed for ethanol. There is a pretty good figure on how much of it is being exported. The Grain Stocks let us back figure a calculation for feed usage over the first quarter of the marketing year. So, on January 12th of 2017 the report will come out giving us the December 1 stocks report. This will give us an indication of just how strong feed us is.

So, while a deserved focus has been placed on corn exports, foreign production, and corn used for ethanol, a major portion of each corn crop is fed to livestock. Given the large projected increase for feed and residual usage this marketing year, monitoring those projections will be really important to price discovery.

Trump | Now what for U.S. Corn Exports

Tom Sleight, CEO of the United States Grains Council discusses the future of U.S. grain exports under a Donald Trump administration.
 

Crop Insurance Payments - an interview with Gary Schnitkey

Harvest prices used to determine crop insurance payments for corn and soybean policies in the Midwest are based on Chicago Mercantile Exchange (CME Group) futures settlement prices during the month of October. The 2016 harvest price for corn is $3.49 per bushel. This is 10% lower than the $3.86 projected price set in February. The soybean harvest price is $9.75 per bushel. That’s 10% higher than the $8.85 projected price. For the most part it means crop insurance payments to farmers will be relatively low says University of Illinois Agricultural Economist Gary Schnitkey.

Assessing the Potential for Higher Corn Prices

The odds are against four dollar cash corn this year and next, at least for any extended period of time.

The monthly average cash price paid to farmers in the United States for their corn has been less than $4.00 a bushel for 27 consecutive months. It’s likely to stay that way well into 2017, too, says University of Illinois Agricultural Economist Darrel Good unless something changes, “Some combination of a reduction in corn supplies and increased consumption will be required in order for prices to move above $4.00 per bushel for an extended time.”

On the supply side, or how much corn is around, USDA’s next Crop Production report is due November 9th. It will contain a new forecast of the size of the 2016 U.S. corn crop. Previous history of yield forecast changes in November in years when the forecast declined in September and again in October as was the case this year, says Darrel Good, show very mixed results with 5 moving lower, 1 unchanged, and 4 of the ten getting bigger. The trade is leaning toward a smaller corn yield this time around. So, not a lot of supply side help expected from the USDA reports on this fall’s crop. That make the southern hemisphere pivotal.

Brazilian production declined from 3.35 billion bushels in 2015 to 2.64 billion bushels in 2016 due to late season drought. Early season USDA projections are for production in 2017 to rebound to 3.29 billion bushels. In addition, Argentina is expected to expand corn area due to reductions in export taxes.

It is too early in the South American growing season to assess yield potential, but production well below early projections would be required to push corn prices higher says Good in his Weekly Outlook on the Farm Doc Daily website. He also thinks a more likely source of a reduction in corn supply may be reduced corn acreage in the United States next year.

Darrel Good - Assuming a three million acre reduction in harvested acreage and consumption during the 2017–18 marketing year near the 14.525 billion bushels projected for this year, the 2017 average yield would need to be below 173 bushels in order for year-ending stocks to be reduced from the 2.32 billion bushels projected for the current year. Under the acreage and consumption assumptions made here, a yield near trend value of 169 bushels would result in year-ending stocks of about 1.99 billion bushels.

There are lot of supply side ifs in that statement. Maybe then demand for corn could be the key to higher prices. The good news here is that U.S. corn exports are up, but that’s based upon last year’s poor corn crop out of Brazil. It doesn’t appear feed usage will increase either, thinks Good, and while the ethanol grind has be increasing, USDA has already penciled in an extra 100 million bushels of usage.

It appears unlikely thinks Darrel Good that higher corn prices will be generated by a large reduction in the estimated size of the 2016 U.S. crop or stronger than projected demand for that corn. That leaves a smaller than expected South American crop or a much smaller U.S. crop in 2017 as the potential sources of higher prices. If South American production increases as projected, a large decline in U.S. acreage and/or a 2017 yield below trend value may be required to push the average corn price above $4.00 during the 2017–18 marketing year.