DowDuPont Merger of Equals

Dow and DuPont today announced the two companies would combine in a merger of equals. DowDuPont, the merged business, will then be split into three independent publicly traded companies; agriculture, material science, and speciality products.

The company's leadership, Andrew Liveris from Dow and Ed Breen from DuPont, say the projected market value of the merger is $30 billion dollars, with about a billion dollars worth of growth synergies achieved by the merger itself. Market capitalization of the new DowDuPont is $130 billion dollars.

Most current shareholders will each own approximately 50 percent of the combined company.



Listen to the closing comments from Ed Breen and Andrew Liveris from the Friday December 10, 2015 Dow Dupont merger announcement.

Link to the full DowDuPont Merger Presentation

U of I Extension Food Safety Training for School Lunch Program

The Illinois State Board of Education has awarded four and half million dollars to University of Illinois Extension. The money will be used to help with the state’s school lunch program. The Board will use Extension to provide foodservice training and education to about 4000 school lunchrooms. Family & Consumer Sciences educators will create and deliver training on child nutrition standards and the cafeteria environment. The $4.5 million, three year effort starts in January with a monthly webinar series. A web training portal will follow in March. Schools interested in training can also contact Extension for onsite customized sessions and technical assistance says University of Illinois’ Jennifer McCaffrey.

CRP 30th Anniversary Sign-up in Progress

This is the 30th anniversary of the CRP. It’s a federal program that assists agricultural producers with the cost of restoring, enhancing and protecting certain grasses, shrubs and trees to improve water quality, prevent soil erosion and reduce loss of wildlife habitat.

As of September 2015, 24.2 million acres were enrolled in CRP. CRP also is protecting more than 170,000 stream miles with riparian forest and grass buffers. That’s enough to go around the world 7 times.

The U.S. Secretary of Agriculture calls CRP one of the most successful conservation programs in the nation’s history saying it has helped farmers, ranchers, conservationists, hunters, fishermen and other outdoor enthusiasts to set aside lands that otherwise might be put into production agriculture.

USDA, for its part, suggests when commodity prices are low, enrolling sensitive, low-quality and marginal lands in CRP can be especially attractive to farmers and ranchers, as it softens the economic hardship for landowners at the same time that it provides ecological benefits.

Contracts on 1.64 million acres of CRP are set to expire on Sept. 30, 2016. Producers with expiring contracts or producers with environmentally sensitive land are encouraged to evaluate their options under CRP. The current enrollment period closes in February.

Ethanol Production & 2016 Corn Consumption Prospects

Commodity traders are generally thinking last week’s EPA RFS rule making will cause more bushels of corn to be turned into ethanol next year. Todd Gleason reports University of Illinois Agricultural Economist Darrel Good is more doubtful.

Let’s start by building a corn for ethanol baseline to see why. The EIA, the U.S. Energy Information Administration, says U.S. production of fuel ethanol in 2014 totaled 14 billion 313 million gallons. That was about a billion gallons more than in 2013, and nearly 400 million gallons more than the record setting year of 2011. So, 14.313 billion gallons of ethanol were produced in 2014. During the first nine months of this year, writes Darrel Good on the Farm Doc Daily website, EIA shows production 3.6 percent larger than during the same 9 months last year. It appears October and November were on that same track, and while December looks to be off a bit, it should leave the yearly consumption at a whooping and record setting 14.745 billion gallons says U of I’s Good.

Quote Summary - Production at that level will require about 5.25 billion bushels of feedstock, mostly corn, for conventional ethanol production in 2015.

So the baseline is big, but let’s start back figuring for 2016 corn usage to make ethanol. U.S. EPA just released biofuels volumes for 2016. Those standards point to conventional ethanol consumption of 14.5 billion gallons for 2016. It’s about a 500 million gallon year-to-year increase says Good, however there is a second related factor. That factor is the blend wall, or how much gasoline is actually consumed in the United States .

Quote Summary - Based on EIA projections, consumption is expected to increase from 139.38 billion gallons in 2015 to 139.96 billion gallons in 2016. That expected increase of 580 million gallons follows an expected increase of 2.9 billion gallons in 2015. The conventional ethanol mandate of 14.5 billion gallons, then, reflects an expected small increase in the E–10 blend wall and a “push” to include larger quantities of higher ethanol blends (E–15 and E–85) in the domestic fuel supply. If the 2016 gasoline consumption forecast is correct, the E–10 blend wall will be 13.996 billion gallons.

Now, since some gasoline is consumed without ethanol and some with higher ethanol blends, the effective E–10 blend wall is actually thought to be 9.9 percent of consumption or 13.856 billion gallons. Here’s the back figure. Subtract from this number imported ethanol, add in a few additional E85 gallons, and total 2016 consumption of conventional ethanol says Darrel Good is not roughly 500 million gallons more than this year, but rather about the same as this year - though that 500 million gallon gap will still have to be filled.

Quote Summary - The difference between the RFS requirement of 14.5 billion gallons and the projected consumption of 13.903 billion gallons (597 million gallons) would have to be met with some combination of retirement of RINs stocks, additional quantities of E–85, or blending of additional quantities of advanced biofuels.

This outcome is very different from the initial reaction that an increase in the implied conventional ethanol requirement from the preliminary to final rule making for 2016 of 500 million gallons would result in a measurable increase in feedstock - corn - consumption.

4 Step Weed Control Plan for Corn or Soybeans

Since the 1960’s farmers have been using herbicides to control weeds. Frankly, herbicide formulations haven’t changed that much and the weeds have managed to find ways to adapt. Todd Gleason has this four step plan from the Univesity of Illinois to control them in corn or soybeans.

Some weeds have become resistant to the herbicides farmers use to control them. Others have lengthened their germination period, emerging later in the season, avoiding early spring control methods. University of Illinois Extension Weed Scientist Aaron Hager has a four step plan farmers can use to maintain a competitive edge in corn or soybeans. It starts by planting into a weed free seedbed.

Quote Summary - It is easy to achieve a weed free seedbed by either replant tillage, burndown herbicide or a combination of those two. Given the challenges of weather and of resistant populations it is advisable not to plant into existing weed populations or any green vegetation without adequate control ahead of time.

Step two in the plan is to select an appropriate residual herbicide. Be sure it provides very good control of the most problematic weed species in a given field. Pay attention to the label, says Hager, and always apply the recommended rate for the spectrum of weeds in the field.

> Quote Summary - The third step is to make timely post emergence applications. Base those on just not the number of calendar days after planting, but rather base those post decision on adequate scouting. So, return to the fields about two weeks after crop emergence. Scout the fields and determine the weed size, crop development stage and make the decision on a timely application of a post herbicide.

The final and fourth step is to go back to the field seven to ten days later and evaluate how well the post emergence herbicide application worked. It may be that another germination of a weed species warrants a second application. This won’t be know without a return trip.

If we fail to go back and look at how well the product performed, or the level of crop injury we see soon after that application, we could have some very significant challenges later in the growing season.

The days of set-it-and-forget weed control have ended. Todays farmers must scout fields for competitive weeds before during and after the growing season.

EPA's RFS Decision will push Biodiesel Usage

The United States Environmental Protection Agency is beginning to comply with the letter of the law as it pertains to biofuels. Todd Gleason reports this could be a boon for biodiesel made from soybeans.

EPA this week announced it would force oil companies to find more ways to use renewable fuels. This is something the oil industry has resisted saying it was too difficult to use much more than the ten percent ethanol blend already found in gasoline. This is called the blend wall and is actually less than the total number of gallons of renewable fuels congress mandated be used in 2016 when it originally wrote the law.

Since not all cars can burn greater than 10 percent ethanol in gasoline, and the amount of gasoline used in the United States is less than the renewable fuels mandate required by law, there is a renewable fuels gap left…something like a billion and half gallons. EPA hasn’t moved to force oil companies, yet, to find a new ways to fill that whole gap, but it closed it up big time and that’ll leave companies scrambling says University of Illinois Agricultural Economist Scott Irwin.

Quote Summary - And so, the really interesting question is what will fill the gap. Will it be higher ethanol blends, E15 or E85 or biodiesel.

There’s an easy answer to this question says Irwin.

Quote Summary - At least for the next couple of years, biodiesel. Soybean oil prices since the low last August are up 25% and soybean prices are up just 3%. And meal has tanked over that same time period. One way or another it is beneficial to ag. Either I’m wrong and you get more ethanol in the form of E85 or you get more biodiesel with soybean oil and other animal fats.

The market is and has been for sometime forecasting the next winner in the biofuels industry and it appears at this point to be biodiesel made mostly from the soybean.

An Early Jump on Computing ARC-CO Payments

Farmers and their bankers can get a jump on just how much income to expect from the ARC County program next fall. Todd Gleason has more on how NASS county yields can be used to anticipate the payments.



Farm income is down dramatically. It means farmers will be going to bankers for production loans this winter. Those loans will be used to plant next season’s crops. The bankers will be looking for every clue they can to help them make solid lending decisions. One source of income they’ll want to calculate comes from the farm programs. However, the ARC County payments won’t be figured until the fall.

It is possible to estimate these payments by substituting NASS county yields for the FSA computed yields says University of Illinois Agricultural Economist Gary Schnitkey, "So, there are likely to be 2015 ARC County payments, but this will depend upon county yield levels. FSA calculates those yields, but not until the autumn of 2016. However, we can use NASS yields to come up with a pretty good estimate of the FSA county yields. NASS will release its yields in February of this year. This will give us a pretty good feel for the 2015 ARC County payments because we’ll have a pretty good ideas of what the FSA county yields will look like."

NASS county yields do vary from the FSA numbers, but not by much. NASS calculates yields by dividing production by harvested acres. These are both numbers the agency collects via a statistical estimate. FSA uses a different calculation. FSA adds to acres the RMA failed acres. Therefore, FSA yields will most always be less than NASS yields. NASS county yields, then, will provide a conservative estimate of the ARC County payment.

Scott Irwin US EPA Nov 30 RFS Reaction

Monday the United States Environmental Protection Agency put forward the rules mandating how much of each type of renewable energy can be used in the nation’s liquid fuel supply. Just a few minutes after the announcement Todd Gleason spoke with University of Illinois Agricultural Economist Scott Irwin about the new numbers.

Scott Irwin believes the U.S. EPA in this rule making is moving swiftly towards the congressional mandated volumes for ethanol and other renewable fuels.

Four Step Weed Control Plan for 2016

Farmers battling herbicide resistant weeds are running out of control options. University of Illinois Extension Weed Scientist Aaron Hager has this four step recommendation. You may read detailed information of his four step weed control plan online.

Farmland Prices and Farm Solvency Then & Now

There are some big differences between the farm crisis of the 1980’s and the current situation in middle America. Then, as now, commodity price had slumped after soaring for a few years. The price of farmland had skyrocketed, too, just like now. However, unlike today interest rates were high and farmers were deep in debt when the price of farmland finally bottomed 42 percent below its high. Gary Schnitkey wanted to know what would happen today in that kind of worst case scenario. So he ran the numbers.

World Health Organization Classifies Red Meat “Probably” Carcinogenic

Monday (October 26, 2015) the World Health Organization suggested it would be good to limit the amount of red and processed meat we consume. There has been quite a firestorm in the media declaring “red meat causes cancer”.

That’s not actually what the W-H-O said in its press release. It actually classified the consumption of red meat as “probably” carcinogenic to humans. Going on to point out that processed meats, things like ham & sausage or hotdogs & corned beef, if eaten every day does increase the chance of getting colorectal cancer by 18%.

Again - red meat, steaks, pork chops and the like, “probably carcinogenic” but the 800 studies reviewed were inconclusive as a whole; processed meat - “carcinogenic”, but you’d need to eat about two ounces of it every day to increase your chance of getting colorectal cancer by 18%.
So, what does W-H-O mean by “probably carcinogenic”? Fortunately the press release, which you can find online, has links to the classifications. Red meat falls into group 2A: The agent is probably carcinogenic to humans.

Here’s the definition verbatim - “This category is used when there is limited evidence of carcinogenicity in humans and sufficient evidence of carcinogenicity in experimental animals. Limited evidence means that a positive association has been observed between exposure to the agent and cancer but that other explanations for the observations (technically termed chance, bias, or confounding) could not be ruled out.”

Processed meats are in Group 1: The agent is carcinogenic to humans. Again here’s the definition: “This category is used when there is sufficient evidence of carcinogenicity in humans. In other words, there is convincing evidence that the agent causes cancer. The evaluation is usually based on epidemiological studies showing development of cancer in exposed humans. Agents can also be classified in Group 1 based on sufficient evidence of carcinogenicity in experimental animals supported by strong evidence in exposed humans that the agent has effects that are important for cancer development.”

W-H-O happens to put asbestos exposure and smoking tobacco into Group 1, however, the processed meat paper work explains this does NOT mean these are all equally dangerous. The classifications describe the strength of the scientific evidence (what the research reports studied say) rather than assessing the risk.

How dangerous is processed meat, then? WHO, in the paperwork, points to estimates by University of Washington’s Global Burden of Disease Project. It is an independent academic research organization that attributes about 34,000 cancer deaths per year worldwide to diets high in processed meat. By comparison the Center for Disease Control estimates 6 million people die from tobacco causes worldwide; 480,000 in the United States from smoking cigarettes. Download Audio

The Regular Climate Pattern of Brazil

They say it is best to keep your friends close and your …let’s go with competitors in the soybean market… even closer. Todd Gleason has this story on how weather patterns in Brazil generally unfold year in and year out.

Don't Bet the Cash Rented Farm on a Loss

It is very difficult to give up a farm, even one that is losing money because the cash rent is too high. Todd Gleason has a few simple guidelines one might follow to help them make that decision.

Africa and Soybean Trials

The nations of Africa have struggled to feed themselves for decades. There are some places, like South Africa, that have successfully adapted some of world’s primary crops. Corn is a good example. Soybeans are also grown in Africa, but they’re not particularly high yielding varieties. Todd Gleason reports soybean breeders from three African institutions have been visiting the United States in hopes of making some improvements.

The Corn Crop is Unlikely to be Overestimated

After the Crop Production report was released last week some of the trade began to discuss the possibility USDA had overestimated the size of the U.S. corn crop. This is not very likely.

USDA’s October 9 Crop Production report forecast the 2015 corn crop at about 13.6 billion bushels. That was down 30 million bushels from September and 660 million bushels smaller than last year.

Commentary following the release of the report suggests some believe the corn crop is even smaller. One of the factors cited as evidence the crop may be smaller than forecast is the strong basis levels in many markets. This seems the make some sense. The argument is that a crop as large as forecast, particularly in the face of a rapid pace of harvest and a large soybean crop, would not support such a strong basis due to the resulting strong demand for storage space. That argument, however, is not completely supported by the current estimates of crop supplies thinks University of Illinois Agricultural Economist Darrel Good.

Basis levels are generally determined by the supply of storage space and an array of factors that determine the demand for storage capacity. Harvest-time basis levels at the point of producer delivery may be receiving some additional support this year from the recent expansion in grain storage capacity. The USDA’s December Grain Stocks report, for example, estimates that permanent storage capacity (on- and off- farm) increased by nearly 550 million bushels from December 1, 2012 to December 1, 2014.

Additional capacity has been added in the past year. Basis levels at the farm may also be receiving support from the lack of widespread transportation delays and the increasing use of delayed pricing contracts. Both of these factors allow for more rapid movement of corn through the marketing channel. Darrel Good says the lack of widespread transportation issues may reflect, in part, the dominance of the domestic corn market relative to exports resulting in a larger portion of the crop moving by truck rather than by rail where delays are more common.

Basis levels are also influenced by the pace of corn consumption. A more rapid pace of consumption, all else equal, tends to strengthen basis in order to make storage less attractive. Domestic ethanol production in September and early October 2015 was nearly five percent larger than that of a year earlier, supporting the domestic demand for corn. Domestic feed demand for corn has also likely been supported by the four percent increase in the hog inventory this fall and the slightly larger number of cattle on feed, dairy cattle, and broiler placements. On the other hand, the pace of export shipments is well below that of last year. The relative pace of consumption in the various segments of the corn market may explain part of the regional differences in basis patterns this year.

Since corn basis levels and patterns are determined by a complex set of supply and demand factors, it seems to be a stretch to conclude generally strong harvest time basis levels this year point to a smaller corn crop than currently forecast writes Good in his Weekly Outlook. It can be found on the Farm Doc Daily website.

He says history is also not on the side of a smaller yield forecast than the 168 bushel forecast of last week. In the 40 years from 1975 through 2014, the USDA yield forecast increased from September to October, as it did this year, in 24 years. The January yield estimate was below the October forecast in only four of those 24 years. While higher corn prices as the marketing year progresses are possible, then, price increases are not likely to be generated by a smaller U.S. production forecast. Instead, Darrel Good says prices will be influenced by the pace of consumption and the development of the South American crop.

Working Capital on the Farm

Low commodity prices are quickly eating into the reserves farmers built up over the last several years. Todd Gleason has more on agriculture’s ‘working capital’.

Joaquin Could be Powered by Midwest Storm

The hurricane bearing down on the east coast of the United States may find new strength from a system in the middle part of the country.

Joaquin is a unique weather system as hurricane’s go. First, it has developed really fast. In less than three days its gone from nothing to really something says meteorologist Mike Tannura from t-Storm weather in Chicago, Illinois.

Quote Summary - This hurricane, at this point, is expected to have sustainable of 140 miles per hour. It would need to get to 155 miles per hour to reach a category five status.

Category five is the highest level possible. The key to it maintaining strength is the eye of the hurricane. If it stays in tact then Joaquin will be dangerous. Even if it doesn’t the system is going to move northward and interact with a different weather system already moving through the Midwest. If the two combine Tannura says a worst case scenario develops for the east coast.

Quote Summary - Then we would end up with a storm system similar to hurricane Sandy back in 2012. Now hurricane Sandy was a major storm. It was really big. We aren’t expecting that big, but something similar where you take a nontropical system in the Midwest and combine it with a tropical system in the Atlantic Ocean and striking somewhere along the east coast from North Carolina to Washington, D.C.

The other scenario has the two remaining independent systems. If this happens then Joaquin would run a parallel line to the east coast, but remain off shore. Either way heavy rains will fall, three to six inches, from South Carolina to New York City. Tannura says we won’t know until tomorrow, or maybe Saturday morning, if the storms will combine.

Limited Pork Expansion

The nation’s hog farmers have done a nice of job of not over reacting to last year’s record profits. They’ve limited their expansion plans and consequently should see a good bottomline again for this year, and maybe next.

For all of 2015, pork supplies are expected to be seven percent higher than in 2014. That year the price of pork averaged $76 mostly because the PED virus wreaked havoc on the industry. This years supplies have been farm more stable and supplies for 2016 should only be about one percent higher than in 2015. Hog prices are expected to average about $51 on a live weight basis for this year. Current projections for 2016 are for a similar average price and it means hog farmers will make money says Purdue Extension Agricultural Economist Chris Hurt.

After the record profits of 2014, there has been concern that the industry would over-expand. At this point that concern has not developed with supply and demand anticipated to be in balance for the coming 12 months. This also serves as a warning to the industry to make sure that further expansion plans remain moderate.

There seem to be growing threats in the future for the meats sector. Those include, says Chris Hurt, the continued expansion of total meat supplies into 2016 and 2017 with a rapid ramp up of poultry and increased beef production.

The large drop in finished cattle prices in recent weeks suggest that retail beef prices could begin to drop this fall and provide added competition for pork. In the longer run, beef supplies will continue to expand for multiple years. Potential weakness of meat and poultry exports is also a concern with slowing world economic growth and a strong U.S. dollar.

A strong dollar makes it more difficult to sell U.S. products overseas as they become higher priced. Speaking of price, feed prices will remain low for the next 9 months due to strong yields for 2014 and 2015 crops and weakened exports. Animal product producers will want to take advantage of harvest price lows this fall states Hurt. However, he thinks longer-term, managers need to remain aware that low feed prices are not guaranteed if weather should turn more adverse in some important growing areas.

Decreasing 2016 Cash Rents on Professionally Managed Farmland

Cash rents on professionally-managed farmland are set to decrease next year. That’s the conclusion of a survey in the state of Illinois.

Original Survey
Schnitkey Article

How to Read the FSA Acreage Dump

Wednesday (September 16, 2015) the Farm Service Agency released a new set of numbers. While these are preliminary figures of acreage and crops, they do offer a hint of things to come in future official USDA estimates.

First, it is really important to understand these numbers are raw and come with no explanation. They are simply a monthly dump of the aggregated acreage figures reported to the FSA by those participating in federal farm programs. Participation requires them to report the number of planted, failed, and prevented plant acres of each program crop. These numbers are updated by FSA from August to January. University of Illinois Agricultural Economist Darrel Good explains how the raw numbers make their way into the official USDA reports.

Quote Summary - NASS, the official estimator of major crops, basis their estimates on surveys of producers with the final estimated based on a very large agricultural survey in December, but they do use what they call administrative data, primarily this FSA data, to tweak their own estimates of planted acres. This is because theirs is based on a sample. They are not doing a census of acreage. Historically there has been a close relationship between the acreage reported to FSA an actual planted acres as reported by NASS. They use those numbers and so by definition they tend to come together at the end of the season.

Remember that’s not until January. So, it makes reading too much into the latest FSA numbers difficult, but it does offer what Darrel Good calls ‘hints’ as to what changes might be coming. USDA NASS will incorporate the FSA figures into the October 9 Crop Production report. However, that will be from an updated set of FSA figures that the public won’t actually see until October 14.

Quote Summary - At this juncture, I think there is a tendency to try and read too much into what the FSA reports are saying in terms of trying to anticipate how NASS is going to change final acreage. Having said that, we do see through September of this year that the difference between the estimated of planted areas by NASS (for soybean) and certified acres reported to FSA so far is a quite large margin. Whether it narrows considerably in October or not is the question. If it doesn’t then there is may be a bit of a clue there that NASS will have to lower its estimated of planted acres of soybeans this year. But again that is just a clue you are trying to read out of the data and we’ll see in October whether that happens or not.

Typically the FSA acreage for soybeans is 1.5 to 2 million acres lower than USDA’s final number. The current FSA figures are off by 4.6 million acres. The October 9 Crop Production report could change, but we won’t know exactly why or if it needs to change more until the FSA report is released five days later.