Thirteen agricultural economists put together short papers describing issues that will surface during the writing of the next farm bill. For each issue, the author describes the “policy setting” and details “farm bill issues” that likely will arise during negotiations. Each issue then has a “what to watch for” summary. These papers, along with an overview, are presented in an article posted to the farmdocDaily website.
USDA NASS will release the first corn and soybean Crop Production Report of the season Thursday, August 10th, 2017. Todd Gleason talks with USDA NASS State Statistician Mark Schleusener about how the information is collected and calculated.
Darrel Good - If we relied entirely on the crop conditions model, today’s ratings would point to of 167.2, with soybeans at 47.7."If we relied entirely on the crop conditions model", says Good, "today’s ratings would point to of 167.2, with soybeans at 47.7. Again, I’m not sure I would ever rely one-hundred-percent on crop conditions as a way to form crop expectations, but as one component it does give you a good barometer or where we are."
In the three years this added up to 2.24 billion gallons of ethanol equivalents at play in the cuts that have now been basically declared illegal.It would take about 800 million bushels of corn to make that much ethanol. However, because there are two parts to the RFS relating to ethanol, it’s not likely corn based ethanol will be the big winner when it comes to making up the lost gallons thinks Scott Irwin, “Because of the E–10 blend wall I think, ultimately, the beneficiary of this will be biodiesel or more broadly speaking biomass based diesel. It has been filling the gaps in the E–10 blend wall in the ethanol mandate for a number of years and I don’t see why that would change dramatically with this rule making.”
Because of the E–10 blend wall I think, ultimately, the beneficiary of this will be biodiesel…The back fill will require about one-point-five billion gallons of biodiesel. It would use about 11 billion pounds of feed stock. The number one feed stock is soybean oil.
Each day the weather changes and just as often, it seems, so has the direction of corn prices. Todd Hubbs from the University of Illinois was of the opinion a couple of weeks ago that corn market had a some upside potential. It did, but now, maybe it doesn’t. This has him thinking about the number of acres of corn in the United States, the impact of the weather on yield, and how the market might react August 10th when the United States Department of Agriculture releases the first corn crop production report of the season, "We talk about increased corn acreage and maybe a yield loss below trend. Is that seven bushels to the acre, five bushels, or two bushels. It is really hard at this point to say, but I am looking at, out of my little model, 168 bushel national yield.
Still it is hard to say what USDA is going to put out on August 10th. Hubbs says he is looking forward to seeing what they say about yields. If the market is pricing in 164/165 bushels to the acre for yield corn and USDA releases a 168/169 yield, then Hubbs says the price moves won’t be good.
Here’s the upshot for Hubbs. He does not think the amount of corn left over from last year is particular oppressive to the market place. It’s big, but not enough to really weigh heavily on price. So, if this year’s corn crop isn’t near average there will be upside price potential, “I’m not as high on corn prices as I was before, but I think there is still a possibility. I see the seasonal average farm price for 17/18 corn in that $3.80 to $3.85 range with some runs.”
I see the seasonal average farm price for 17/18 corn in that $3.80 to $3.85 range with some runs - Todd Hubbs
You may read more from University of Illinois Agricultural Economist most Monday’s on the farmdocDaily website.
by Scott Irwin & Darrel Good, Agricultural Economists
University of Illinois
read full blog post
Implications
We analyzed the magnitude of the “push” in production and consumption of biofuels implied by the proposed rulemaking for the Renewable Fuels Standard (RFS) for 2018 released last week. We find that the proposed standard for 2018 implies a measurable push in the consumption of conventional ethanol since the mandate exceeds expected domestic consumption. The magnitude of that gap is estimated at 640 million gallons for 2018, compared to the estimate for a record large gap in 2017 of 738 million gallons. The gap ranged from 260 to 457 million gallons in 2014–2016. The advanced biofuels mandate is estimated at 684 million gallons in 2018, compared to the estimate of 900 million gallons in 2017 and the actual gap of 438 million gallons in 2016. Our analysis of the proposed rulemaking for 2018 implies:
(1) The EPA under the new Administration is “staying the course” on the implied conventional ethanol mandate with that mandate at the statutory level of 15 billion gallons. If that policy continues and the rate of increase in domestic gasoline consumption does not accelerate more rapidly, there will continue to be a notable conventional ethanol gap beyond 2018.
(2) The push in advance biofuels production and consumption remains large, but is smaller than in 2017 as both the total biofuels mandate dropped and the mandate for undifferentiated advanced biofuels declined marginally. However, the minimum undifferentiated mandate will increase by statute in 2019 to 4.5 billion gallons. So, even though the biodiesel mandate is proposed to stay constant at 2.1 billion gallons for 2019, the total advanced mandate gap could jump another 260 million gallons (4.5 –4.24 billion gallons).
(3) The relatively large conventional ethanol gap implied for 2017 and 2018 suggests that the current discount in the price of D6 (ethanol) RINs relative to D4 (biomass-based diesel) RINs will continue to narrow towards equality (e.g., farmdoc daily, December 4, 2015).
(4) Biomass-based diesel is likely to remain the “marginal gallon” for filling both the conventional and advanced mandate gaps. This means relatively large levels of biodiesel production will continue to be required which in turn will require large levels of fats and oils feedstock.
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| mid-south farmers learned to raise better soybeans in the mid-1990's |
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| see D.Good / T.Hubbs video above |
ACES Marketing and Communications: Tell us a little about your background.USDA’s release of the Quarterly Grain Stocks report on June 30 will provide an estimate of corn stocks in storage as of June 1, 2017. Since many of the consumption categories for corn can be derived from data provided during the marketing year, this estimate provides the ability to calculate the magnitude of feed and residual use of corn during the third quarter. The calculation offers the basis for evaluating the probable feed and residual use during the entire marketing year and imparts information on the potential size of ending stocks.
While the information imparted by the June Acreage report released on the same day will likely eclipse the Quarterly Grain Stocks report, the estimated corn stocks have important implications for the current marketing year.
The supply of corn available during the first half of the 2016–17 marketing year is the base for estimating June 1 stocks. Corn stocks at the beginning of the quarter were estimated at 8616 million bushels in the March Grain Stocks report. Currently, the Census Bureau estimates for corn imports are only available through April. In the first half of the marketing year, corn imports totaled 26 million bushels. Imports for the third quarter might have been around 12 million bushels. By combining imports with the beginning stocks, total available supply for the second quarter comes in at 8628 million bushels.
An estimate of corn exports for the third quarter is based on the cumulative weekly export inspections estimate available for the entire quarter. Cumulative marketing year export inspections through May totaled approximately 1738 million bushels. During the first eight months of the marketing year, total Census Bureau corn exports were greater than cumulative export inspections by 45 million bushels. Assuming the margin is maintained through May, corn exports through three quarters of the year equaled 1783 million bushels. Since exports in the first half of the marketing year totaled 1095 million bushels, the estimate for third quarter corn exports equals 688 million bushels.
The Grain Crushing and Co-Products Production report released on June 1 estimated corn used for ethanol and co-product production during March and April of 2017 at 893 million bushels. Weekly estimates of ethanol production provided by the Energy Information Administration indicates ethanol production increased by 5.5 percent in May 2017 from the preceding year. By calculating the amount of corn used to produce ethanol from these May numbers, corn used for ethanol production in May was approximately 449 million bushels. Total use for the quarter is estimated at 1342 million bushels.
Corn used to produce other food and industrial products during the 2016–17 marketing year is projected at 1470 million bushels by the USDA. Using historical corn use data, typically around 75 percent of the final marketing year food and industrial products use occurs in the first three quarters of the marketing year. If this historical pattern holds and the USDA projection is correct, corn use for the first three quarters of the marketing year totaled 1102 million bushels. Corn use during the first half equaled 689 million bushels which set the third quarter use estimate at 413 million bushels.
The current USDA projection for feed and residual use sits at 5500 million bushels. The historical pattern of feed and residual use in corn may provide some indication of the third quarter use. For the five previous marketing years, use during the first three quarters of the marketing year ranged from 90.5 – 94.2 percent of the marketing year total with an average of 91.6 percent. Third quarter feed and residual use ranged from 15 to 21 percent of the total use over this time span. For this analysis, the 91.6 percent average during the first three quarters of the previous five marketing years is used to calculate expected feed and residual use during the third quarter. If the USDA projection is correct, feed and residual use during the first three quarters of the 2016–17 marketing year totaled 5038 million bushels. Feed and residual use equaled 3797 million bushels in the first half. Therefore, the third quarter estimate totals 1241 million bushels.
By adding the estimates for exports and domestic uses, the total use of corn during the third quarter is estimated at 3684 million bushels. The total use estimate for the third quarter places June 1 corn stocks at 4944 million bushels. At this level, June 1 stocks come in 222 million bushels larger than the estimated 2016 June 1 corn stocks.
A June 1 corn stocks estimate that supports the USDA projection of 5500 million bushels of feed and residual use during the 2016–17 marketing year is considered neutral for corn prices. An estimate of corn stocks that deviates more than 100 to 150 million bushels from market expectations would provide an indication of changes in domestic feed and residual and alter expectations for ending stocks. This analysis indicates an estimate near 4944 million bushels should not change expectations that feed and residual use is on track to meet the marketing year projection.
The Dudley Smith research farm in Illinois is tiled and wired. Todd Gleason has more on how the University of Illinois is doing nitrogen loss research near Pana.
Farmers gathered this week for a peek at the nitrogen loss control methods installed in Christian County. It’s a farm that rolls just a bit, but is pretty typical for the area other than the pastures on a portion of it. They came to hear from Laura Christianson. She’s a University of Illinois Crop Scientist, “At the Dudley Smith farm we have a wood chip bioreactor installed. A wood chip bioreactor is a little mini water treatment plant to clean nitrate out of tile drainage. The thing that makes the Dudley Smith bioreactor different is that is has baffles inside it. So, rather than the water just running straight through the wood chips, like most bioreactors, this bioreactor has baffles in it to make the water move in more of an S shape to improve how much nitrate is taken out of the drainage water”.
Early indications are the baffle is working as hoped. Wood chip bioreactors, even without the baffles, can remove between 20 and 40 percent of the annual nitrate load from a tile line. It’s technology farmers are interested in seeing and hopefully, says Christianson, deploying, “I think farmers are interested in wood chip bioreactors because it is something they can do that doesn’t impact their production practices. It is an edge of field practice, so you can keep on in the field however you are comfortable, but this catches that nitrate at the edge of the field before it goes down stream”.
A bioreactor is pretty simple to build. Use a backhoe to make a trench near the end of the tile, put a plastic liner in the trench, fill it with wood chips, be sure to have control structures on the inlet and outlet, and cover it with dirt. The chips will need to be replaced about every 10 years.
There are just two items that make the difference between a top third farm and an average farm. This University of Illinois study was on a small set in McLean County. This was done to limit the influences of weather and a few other factors. Gary Schnitkey says he wanted to know why some farms made more than others. Turns out, the answer is pretty simple say the ag economist, “What we found were distinct cost differences between the two groups. This was a $45 per acre difference between the average group and the high return group. The $45 came primarily in two items; machinery depreciation and interest cost.”
The more profitable farms tended to have lower machinery and non-land interest cost. The two are related.
If you buy more machinery, you have more depreciation and likely more interest costs. Other differences included storage costs, with high profit farms storing less at elevators and their cost of hired labor was lower, too. Over all, these farms usually had lower costs, but these are the cost groups that stood out.
A couple of notes. The most profitable farms expanded acreage at a faster pace than those in the average group. They also had higher average yields for soybeans and did a better job of marketing soybean.
Research from the University of Illinois is helping to determine the quality of protein in wheat middlings and red dog. Both are co-products of the wheat milling process. Each can be fed to pigs and other livestock.
There is information about the digestibility of crude protein in some wheat co-products produced in Canada and China, says University of Illinois Animal Scientist Hans Stein, but only very limited information about the nutritional value of wheat middlings and red dog produced in the United States.
Stein and U of I researcher Gloria Casas fed wheat middlings from 8 different states and red dog from Iowa to growing pigs. Despite the variety in the wheat middlings sources the concentration of crude protein were generally consistent. However, they did find some variation in the digestibility of the amino acids.
The red dog contained slightly less crude protein than wheat middlings.
Stein says the results of this study provide guidance to producers who hope to incorporate wheat co-products into diets fed to pigs. The paper appears in the June 2017 issue of the Journal of Animal Science. The National Pork Board provided funding for the study.
Farmers are turning to an old technology this year to control weeds in their fields. Here’s what they can expect from a new, old-product.
Dicamba has been around for about half-a-century. It is a corn herbicide, but soybeans have been modified to tolerate it. This was done because so many weeds have modified themselves to resist being killed by glyphosate, commonly known as Round-Up. The primary problem, says University of Illinois Extension Weed Scientist Aaron Hager, is waterhemp, “it, has never been excellent on any of the pigweed species. It can be good. It can be very good, but it is not excellent. It is not as consistent.”
This inconsistency makes the timing of dicamba applications extremely important. Without a doubt, says Hager, most post applied herbicides are going to do a better job of controlling a full suite of weeds in a field when the weeds are less than three to four inches in size, “Certainly, with something like dicamba and waterhemp, our recommendation to farmers is to treat very, very small weeds, but to go back in about 10 to 14 days and to scout those treated fields. Look to see what the efficacy has been. Sometimes we can twist up these pigweed plants, but that doesn’t mean they will necessarily be completely controlled.”
Look to see what the efficacy has been. Sometimes we can twist up these pigweed plants, but that doesn’t mean they will necessarily be completely controlled.
It is possible for the weeds to recover, flower, and produce seed. And that, says Aaron Hager, is something to avoid.
Last week USDA released its first national corn condition rating of the season. The crop, as you’ll hear, wasn’t in great shape. While it doesn’t mean much at this time of year, there is a relationship between the first crop condition rating and the end of the season yield.
The weekly Crop Progress report is mostly the work of Extension and FSA employees, at the least the data collection part. They report local crop conditions to state USDA offices, mostly on Monday morning, who in-turn tally those numbers and pass them along to Washington, D.C. for compilation and release on Monday afternoon. Work at the University of Illinois shows a strong relationship between the end-of-season crop condition ratings and crop yield, however, agricultural economist Scott Irwin says that doesn’t hold so well for the rest of the season, “but, of course, what you really want to know is how soon do they become really predictive of final yields. Our analysis says they become pretty useful about mid-July for corn and not until about mid-August in soybeans”.
The first corn rating of the season, released just after Memorial Day, wasn’t good. the crop had been cold and wet. It showed up, or in this case didn’t show up, in the good and excellent categories USDA NASS uses. Those are the two grades the U of I economist say correlate. The math works like this; the first corn condition rating was 65% good or excellent, minus 8 points for the average drop to the end of the season rating, which brings you to 57% and then you plug that into the relationship the U of I presented in the article says Irwin, “and you end up with 164.3, basically on that set of calculations. It is an intriguing and pretty low number. Clearly that is not where the market is at and it is just one model, one exercise. Certainly, it is something to keep your eye on”.
“and you end up with 164.3”
If you do, in about mid-July you can use the math in the farmdocDaily article to forward calculate the national average yield for corn; mid-August for soybean.
That $25,000 isn’t enough to cover all the family living withdrawals and capital purchase expenses needed for a family farm of this size. Seventy to eighty-thousand dollars is needed to be sustainable in the long run.It is a projection that wasn’t quite so low earlier in the year. Then, like today, Schnitkey was using an average cash sales price of $3.70 a bushel in the Illinois crop budget for corn. What has caused the University of Illinois forecast to come down is the decline in soybean prices. Earlier in the year it was $9.70 for price, but now it has come down and Schnitkey is using $9.00 in the 2017 soybean crop budget. Even this is above the current fall delivery price at about $8.85 in central Illinois.
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| University of Illinois 2017 Projected Crop Budgets |
It is time for farmers to control weeds in their corn fields. However, the cool, wet start to the growing season makes it doubly important to read and follow herbicide labels.
The post-emergence herbicide labels they’ll be following usually allow applications to be made at various growth stages says University of Illinois Extension Weed Scientist Aaron Hager. He says it is really important to read the label, making sure to get the height, or the stage, maybe both, of the crop correct.
This is because most all of the products for corn have a growth stage listed on the label beyond which applications, at least broadcast applications, should not be made. It is usually either plant height - measured at the highest arch of the uppermost leaf at least 50% out of the whorl - or a leaf number. Hager says if both are listed, then it is important to use the more restrictive of the two, For example, because of some of the weather conditions we’ve had across a large part of the state this year we may have corn plants which are older than their height would suggest. Using the leaf collar method is typically a better way to stage the development of the corn plant. If you can do both the height and the counting, the leaf collar method is the better method to determine the stage of the corn plant."
Using the leaf collar method is typically a better way to stage the development of the corn plant. - Aaron Hager, University of Illinois
Corn plants under stress conditions may be more prone to injury from post-emergence herbicides. On that note, Hager says farmers should be sure to consult the product label when selecting spray additives. Many labels suggest changing from one type of additive to another when the corn crop is stressed. Also, trying to save a trip across the field by applying a post-emergence corn herbicide with liquid nitrogen as the carrier is not advisable. The U of I weed scientist says while applying high rates of UAN by itself can cause corn injury, adding a post-emergence herbicide can make it worse.
Despite the wet weather many think may be causing nitrogen fertilizer to get away from corn plants, it is still far too early to make that decision.
While it seems likely some nitrogen fertilizer has moved out of the upper soil as a result of rainfall this year University of Illinois Agronomist Emerson Nafziger says if soils dry out, the torrential rains stop, the sun shines, and the weather gets warmer things should be all good, “The crop is going to tell us this. If by the middle of June some of the crop has really greened up nicely and some has not, then we might need to think about those that haven’t and determine if enough nitrogen is missing to cause this to take place. My suspicion is we will not see very much of that at all. If we are warm and dry and with sunshine for a week, I think the crop is going to look good in almost every field.”
My suspicion is we will not see very much of that at all. If we are warm and dry and with sunshine for a week, I think the crop is going to look good in almost every field. - Emerson Nafziger
One indication the topsoil hasn’t been stripped clean of nitrogen is the good recovery of green leaf color. Nafziger says, as soils dry out, root systems start to expand and the color will change. He explains the corn crop at this point looks like it does not because of lack of N, but due to cool temperatures and abundant rainfall. While it is premature to revise nitrogen management based on what has happened so far, Nafziger cautions it cannot be ruled out, “I would be very reluctant now to make a decision that we need to go put more nitrogen on, especially if we’ve already put the full amount on. If we still need to side-dress and we add 10, or 15, or 20 pounds I don’t have a problem with that. But I think it is premature to decide so much of the nitrogen is gone that we put out there that we need to go back and plan to put more on at this point.”
The good news is there is still time to make such decisions. The corn crop takes up barely one pound of N per acre for every inch of growth it makes up to about knee-high.
Nitrogen deficiency develops over time, and Nafziger says it is almost always more related to current soil moisture than to the amount nitrogen in the soil. So, if fields aren’t extra wet or extra dry over the next month, this season could still turn out to be much more typical than many now expect.
The White House has released a new budget proposal, and it’s not good news for the Supplemental Nutrition Assistance Plan, commonly known as food stamps or Link in Illinois. The plan calls for a $193 billion, or 25 percent, cut to the program that currently serves 42 million Americans. Craig Gundersen, professor in the Department of Agricultural and Consumer Economics at the University of Illinois, has been studying SNAP and its effects on food insecurity for years.
“SNAP is a great program. It is the key component of the social safety net against food insecurity,” Gundersen says.
Given the success of SNAP, Gundersen emphasizes that efforts to cut the size of the program will lead to dramatic increases in food insecurity.
Food insecurity and SNAP were the topics of a recent podcast and Twitter chat with Gundersen.
According to Gundersen, food insecurity is a major contributor to negative health outcomes in the United States. These range from depression and malnutrition to behavioral problems for children in school. Given this, it is not surprising that food insecurity also leads to substantially higher health care costs. “Because SNAP leads to greater food security, the program also brings down health care costs,” he says.
Overall, Gundersen says he can’t think of a more successful government program than SNAP. The research indicates that the program is associated with higher nutrient intake, reductions in poverty, and reductions in infant mortality. But it does more than that.
“One of the key advantages to SNAP is that it gives dignity to recipients,” he says. “They can purchase what they think is best for their families. Restricting that is demeaning and stigmatizing to poor people.”
This week the Trump Administration released its FY18 budget. It includes harsh cuts to agricultural entitlement programs. Todd Gleason discusses the plan with University of Illinois Agricultural Policy Specialist Jonathan Coppess.
There is a rule of thumb for marketing that says “Consider the crop year normal until that is no longer the case.” Yesterday’s USDA Weekly Crop Progress report - despite the rainy weather - tells us the nation’s farmers are on pace this season. They’ve planted 84% of the corn crop and 53% of the soybeans. For University of Illinois Agricultural Economist Todd Hubbs this suggests, at a minimum, farmers need to really think about making new crop soybean sales prior to the USDA’s June 30th Acreage Report.
Hubbs writes about commodity prices each week for the University of Illinois. Those articles are posted to the farmdocDaily website each Monday.
The hard red winter wheat crop in Kansas has been under serious stress this spring. It’s been frozen, covered with snow, drown, and riddled with disease. Still, as Todd Gleason discovers, it may not be as bad off as conditions suggest.
Farmer don’t worry too much about a few very young yellow corn plants in their fields. They do get concerned when every plant is yellow. The problem, in this case, isn’t the wet weather says University of Illinois Agronomist Emerson Nafziger.
The Wheat Quality Tour has predicted a very good Kansas crop. However, as you’ll hear, the numbers produced are likely only good for the day they were released. Todd Gleason has more on how the hard red winter wheat crop may deteriorate.
Todd Gleason talks with Illinois Natural History Survey Entomologist Kelly Estes about insect pests of corn in the state.
