Showing posts from October, 2018


October 31, 2018
  • Market Facilitation Payments Program a Go for December
  • How will the 2019 Acreage Mix Change
  • Unwinding New Era Crop Acreage and Prices

Register for the Farm Assets Conference today. The cost is just $40 and includes the price of parking and your noon meal. Come to learn more about how large corporations like Anheuser Busch and McDonald’s are reaching all the way through the supply chain to tap farmers on the shoulder looking for production practices and seed characteristics which meet their needs. It is likely to change how commodity crops are marketed over the next decade. The CME Group, ADM, Cargill, Bunge, and Louis Dreyfus are already preparing for this eventuality. However, might it be possible the middleman in the system will become a distribution system rather than the marketing arm? We’ll explore these concepts during the 2018 Farm Assets Conference.

Register Online today or by calling 800–898–1065

Click here to see the full agenda or scroll to the bottom of this letter. The conference will be held Tuesday, November 20th in Normal, Illinois.

Market Facilitation Payments Program a Go for December

During a Champaign County, Illinois listening session U.S. Secretary of Agriculture Sonny Perdue confirmed the second round of Market Facilitation Program payments for farmers will be coming in December.

U.S. Secretary of Agriculture Sonny Perdue last week told farmers at an event in Champaign County, Illinois that it was likely the second round of MFP payments would come in December. USDA confirmed that in a press release Monday. USDA says those payments are expected, but not yet fully confirmed, to fill out the full amount off compensation producers will receive for markets lost to China as a result of the Trump Administration’s trade battle. This would push the soybean payment to $1.65 per bushel and the corn payment to $0.01. Half of that amount for each commodity has already been approved and distributed (if actual 2019 production numbers have been turned into FSA).

Secretary Perdue says his agency unsuccessfully looked for ways to vary the payments from region to region across the nation based on the impact of Chinese imposed tariffs. There had been some speculation, for instance, farmers in the Dakota’s might end up with bigger payments because soybean exports out the PNW to China have stopped.

The Secretary also made it very clear farmers should not expect another Market Facilitation Program next year. He says this season the trade battle was imposed on them after their planting decisions had been made and so Washington felt obligated to set that right. There will be no such obligation for the 2019 growing season. He puts it in trade terms saying the United States became too dependent on China as a soybean market and that it must “diversify”.

Consequently, U.S. farmers will need to diversify their operations and crop acreage mixes in order to avoid the market disruptions caused by the rebalancing of trade.

How will the 2019 Acreage Mix Change

Those decisions to diversify are driven largely by price and crop rotation. University of Illinois Agricultural Economist Todd Hubbs has done some calculations as it relates to corn and soybeans. He expects, based on price today, U.S. farmers will plant 91.1 million acres of corn in 2019 and 85.7 million acres of soybeans.

Here’s how Todd Hubbs sees that playing out across the nation for corn, soybeans, cotton, and wheat, “We are going to see some wheat acreage expansion. Particularly spring wheat because those prices are relatively strong. Maybe some cotton acreage expansion. We aren’t talking tens-of-millions of acres. Some of the small grains might also see some expansion. So places in the south and the western corn belt may shift back to their more traditional crops.”

Hubbs’ calls this an unwinding of the “new era” crop acreage. His forecast, like USDA’s 2019 planting season advice, does not include a resumption of trade with China.

Since the middle of the last decade agricultural economist, farmers, and policy makers have talked about a new era of agricultural prices at a higher plateau. That era may or may not be coming to an end.

Unwinding New Era Crop Acreage and Prices

The last ten years have seen the build out of the ethanol infrastructure in the United States and the push for red meat production in China. The first caused U.S. farmers to raise more corn to grind for ethanol. The second pushed the expansion of soybean acreage to feed hogs in China. Both drove prices higher and caused acreage to change here and around the planet. That era may coming to an end says University of Illinois Agricultural Economist Todd Hubbs, “I mean we talk about the new era prices. It lead to a new era of acreage allotments. I think we may be at the start of unwinding this build of corn and soybean acreage.”

There are two reasons for the unwinding.

First, the federal legislation which drove the increase in corn acreage has capped out. It actually did that in 2015. Now the Trump Administration is calling to open up the whole gasoline supply to 15% ethanol blends rather than 10%. Because the infrastructure is not in place for that to happen and seems highly unlikely to be built out by a resistant oil industry, it won’t move the dial on corn usage enough to really matter say the ag economists at Illinois. Driving the price of corn higher based on new domestic ethanol demand is probably over.

Second is the trade war with China. This one nation had consumed more than 30% of the U.S. soybean crop. It has essentially shut that gate in a struggle with the United States to determine which nation is likely to be the world’s number one economic superpower in the future. China wants to do it with a combination of capitalism and a planned economy under Communism. The United States uses Democracy and capitalism. The distinction is important because it may give China the upper hand in the short-run. It can simply choose without political ramifications how to organize resources. Those choices are right now reallocating acreage in the United States because farmers are making next year’s cropping decisions today. It’s exactly what the U.S. Secretary of Agriculture last week said they should do, “So the market will equilibrate over a period of time and farmers will look at the market and make their marketing and planting decisions the way they always do.”

What farmers do is to make their planting decisions based on crop rotation needs and price. The price of soybeans won’t be high on that list for next year says Hubbs, “It really does change the allotment. What do we rotate with? If we keep expanding corn acreage and continue to see these unbelievable yields across the country. We may have knocked ourselves out of prices in that new era. Or at least we are going to be pegged in the low end of the range of that new era of prices for the foreseeable future.”

Sponsor the Farm Assets Conference

There are several ways to sponsor the 2018 Farm Assets Conference. Booth spaces are available as are reserved tables. Check out the complete details here or contact Jill Clements at Illinois Public Media (217) 333–7300.

2018 Farm Assets Conference

call 1–800–898–1065 or online at BUY TICKETS NOW | $40 each

Marriott Hotel and Conference Center
201 Broadway Avenue
Normal, Illinois 61761

The noon meal is included. Parking is free in the deck next to the Marriott. There are a large number of vendors available for you to talk with prior to and during the breaks. Come and check out the whole of the event.

8:00 am | Illinois Corn Growers Association Annual Meeting

9:30 am | Farm Assets Registration Desk Opens

10:30am | The Supply Chain Wants You - premiums & contracts
- Angie Slaughter, Vice President Procurement - Anheuser-Busch InBev
- Rickette Collins, Sr. Director Global Supply Chain - McDonald’s Corporation
- Ken Dallmier, President and COO - Clarkson Grain Company
- Brad Allen, AgriEdge Specialist - Syngenta

Noon | Lunch

1:00pm | Agriculture at Research Park
- Laura Weisskopf Bleill, Associate Director, University of Illinois Research Park

1:15pm | Trade, Tariffs, Grain Flow and the Farm Economy
- Gary Schnitkey, University of Illinois
- Jonathan Coppess, University of Illinois
- Bruce Sherrick, ILLINOIS TIAA Center for Farmland Research

2:15pm | Break

2:30pm | WILLAg Commodity Marketing Panel
- Pete Manhart, Bates Commodities
- Bill Mayer, Strategic Farm Marketing
- Merrill Crowley, Midwest Market Solutions
- Wayne Nelson, L and M Commodities
- Todd Hubbs, University of Illinois

Media Registration | Members of the press should contact Lindsay Mitchell (309) 557–3257 at the Illinois Corn Growers Association to register for the Farm Assets Conference.

Corn and Soybean Acreage Prospects for 2019

As US farmers finish the fall harvest, considerable speculation will occur over the next few months about the acreage decisions they’ll make for 2019. Todd Gleason discusses how current market conditions support an acreage increase next year for corn and a reduction for soybeans with University of Illinois agricultural economist Todd Hubbs.

farmdocDaily article
by Todd Hubbs, University of Illinois

Prospects for 2019 crop acreage levels begin with expectations about planted acreage for principal crops. In 2018, acreage planted in principal field crops expanded to 322 million acres, up 2.9 million acres from the previous year. A large share of increased acreage came from an expansion of spring wheat acreage by 2.18 million acres, cotton acreage by 1.4 million acres, and hay acreage by 1.28 million acres. Corn and soybean acreage decreased by 1.03 and .997 million acres respectively. Illinois increased planted acreage by 188,000 acres like most of the primary Corn Belt states. A significant exception came in South Dakota which lowered acreage by 343,000 acres, driven mostly by lower corn acreage. In conjunction with the increase in principal crop planted acreage, prevent plant acreage is small thus far in 2018. The Farm Service Agency reports 1.88 million acres of prevented plantings as of October 1, down from 2.59 and 3.4 million acres in 2016 and 2017 respectively.

As we move into 2019, the prospects of large adjustments to crop acreage increasingly focuses on soybean acreage. Acreage adjustments in many major growing areas may be in the form of crop adjustments instead of acreage losses. The current price environment across principal crops points to constant or modest changes in total planted acreage in 2019 and holds the potential for less overall soybean and corn acres.

Since the inception of the Renewable Fuels Standard and growth in Chinese soybean imports, a noticeable shift in principal crop acreage created increases in corn and soybean acreage at the expense of wheat and small grains. Corn and soybean acreage increased from 158.3 million acres in 2006 to 178.3 in 2018 with a peak acreage of 180.3 million in 2017. Over the same period, wheat acreage declined from 57.3 million acres to 47.8 million projected in 2018. The low for wheat acres came in 2017 at 46.02 million acres. Similarly, small grain acres fell from 18 million acres to 14.88 million with a low of 14.5 in 2017. These acreage adjustments stand out when analyzing the data from the three western Corn Belt states of North Dakota, South Dakota, and Kansas.

In 2006, the states mentioned above planted 20.54 million acres of corn and soybeans. Since that year, corn and soybean acreage grew by over eleven million acres with a peak year of 32.52 million acres in 2017. In 2018, 31.15 million acres of corn and soybeans were planted in those states. Conversely, wheat acres contracted dramatically in those states continuing a long run trend. In 2006, the three states planted 21.9 million acres of wheat. Since that year, wheat acreage fell by over four million acres with a low year of 16.2 million acres in 2017. In 2018, 17.3 million wheat acres were planted in those states.

Narrowing profitability margins appear to be shifting away from the expansion of corn and soybean acreage and back to wheat, small grains, and cotton in many areas. Current projections by industry analysts place 2019 corn acreage in a range from 90 to 93.7 million acres. Soybean acreage projections come in between 82.3 and 87.5 million acres. In essence, if the current margins continue, we may be at the beginning stages of unwinding the acreage shifts seen over the last decade. In 2018, corn and soybean acreage in total reversed a three-year trend of increased planted acres. While soybean and corn acreage decreased in 2018, many crops saw planted acreage increases. In particular, spring wheat, cotton, barley, rye, oats, and hay recorded increases. In the main corn producing states during 2018, Missouri, Michigan, Nebraska, and Ohio increased corn acreage over 2017 planting decisions. None of those states increased corn acreage by more than 100,000 acres. Decreases in soybean planted acreage came from North Dakota, Kansas, Arkansas, Minnesota, and Missouri. As we move into 2019, corn and soybean acreage shifts depend on the evolution of corn and soybean prices between now and planting.

Expectations about corn and soybean acreage will continue to evolve. Preliminary surveys of farmer’s planting intentions indicate an intention to decrease soybean acreage and increase corn acreage. Using current market prices, projections for corn and soybean acreage place 2019 corn acreage at 91.1 million acres and soybean acreage at 85.7 million acres. Data availability on acreage begins with the USDA’s Winter Wheat Seedings report in January to be followed by the March Prospective Plantings report.

Take a Good Hard Look at Selling Soybeans

The price of soybeans rallied out of the October USDA Crop Production report. This is because it showed fewer acres of the crop would be harvested this season. University of Illinois analyst Todd Hubbs thinks the upside potential is limited, “I don’t know if this thing is sustainable. It doesn’t feel that way to me. Moving through the rest of the harvest year and towards the start of 2019, I think we are going to have to see some kind of production issues in the South American crop or if China breaks and doesn’t hold out completely on taking U.S. soybeans before we see a sustained upward movement. I think the upside potential is limited.”

Limited because, even if this year’s crop is hurt some by the poor harvest conditions so far it will remain a record breaker. Right now USDA has it at 4.7 billion bushels. There are plenty of soybeans in the world. That makes it a buyers market and price is going to depend a whole lot upon how many U.S soybeans can be exported says Hubbs, “Basically it doesn’t look like other importers are picking up the loss of the Chinese market like we would like them to.”

When you look at last year and the huge amount of exports Brazil did in the second-half of the marketing year, and even the strength in the latter quarter of the U.S. marketing year, you can see tariff action picking up in forward buying and movement of soybeans thinks the U of I number cruncher. So far in this marketing year we haven’t seen much Chinese movement. In the last export inspections report about 5 million bushels went to China. Still, they seem to be sitting it out and not buying soybean from the United States. This is happening even though the price of U.S. soybeans, when compared to the price of Brazilian soybeans delivered to China, are very competitive.

It all brings Hubbs back to that word “limited”. He sees the upside price potential in soybeans as limited by an enormous supply in the United States and around the world, “If you are thinking about marketing soybeans, I’d take a good hard look at the price we are seeing right now because ending stocks are set at 88 5 million bushels for the 2018/19 marketing year and barring some kind of uptick in exports from the U.S. that may be the low end of reasonable projections depending on what the crop ends up doing here in the U.S.”

You may read more about commodity marketing from Todd Hubbs on the farmdocDaily website.

A Good Year for Pumpkins

This year’s pumpkin crop is the best in the last two decades. That means there will be plenty of jack-o-lanterns for Halloween and lots of pie filling for Thanksgiving.

When the pumpkin crop in Illinois is big that means the whole nation can celebrate fall says Mohammad Babadoost from the Univeristy of Illinois, “We are number one in both of them, jack-o-lantern and processing pumpkins. Far, far ahead of any other state.”

More than 90% of the pumpkin pie filling sold in the United States comes from two processing plants located near Peoria, Illinois. This year the pumpkins feeding into those plants are yielding a record breaking 27 tons per acre. The average is about 23. This is pretty amazing given that a plant disease nearly wiped out the whole industry in the state a couple of decades ago.

Babadoost is naturally proud of his University of Illinois work to salvage the industry from the disease and he continues to work with farmers today to provide them crop production and protection advice. He says pumpkins are a high value crop that work well into a row crop rotation, “Very well. In fact pumpkin rotated with corn or even soybean is a very good crop rotation program.”

Even better, pumpkins can provide two sources of income should the farm want to diversity into a little agro-tourism.

Reviewing Prices and Market Facilitation Payments

read farmdocDaily article

As the trade conflict with China continues, prices for many agricultural commodities remain relatively low. Illinois corn and soybean prices dipped to new lows in September, coinciding with the latest rounds of tariffs.

The difference between selling an entire crop at spring forward bid prices compared to the September average cash prices makes a substantial difference in income on an average central Illinois grain farm.

University of Illinois Agricultural Economist Gary Schnitkey reviews how this plays out on a 1700 acre corn and soybean farm in Illinois this year, and what the prospects look like for next year.

Trump Admin Still Has Some Biofuels Work to Do

Last Tuesday President Donald Trump made a campaign trip to Council Bluffs, Iowa. There he told a very excited crowd his administration would be backing corn farmers and ethanol.

The President leaned into the mic and gave corn farmers a little insider news they’ve been clamoring to hear since U.S. EPA pronounced gasoline blended with 15 percent ethanol would be ok to use in all cars made since 2001, “We are a little bit early. I shouldn’t say it now, but we are going with E15 year-round.”

Mr. Trump is a little early. Today E15 can be used about 9 months out of the year in much of the nation. During those other three months, the summer months, it has been prohibited. U.S. EPA will need to write some rules about how to make the year-round use happen. Those will need to be approved, and clearly the oil industry will mount court challenges.

If all goes well more corn will be used to make ethanol for E15, but it won’t make a difference in the balance sheets for corn says University of Illinois Agricultural Economist Scott Irwin, “Not for this year and I am confident not for next year.”

So the E15 announcement, while a long run win for corn ethanol, rings a little hollow. The Administration’s other big farm country biofuels problem is EPA’s use of the Small Refinery Exemptions or SRE. The good news here, says Illinois’ Irwin, is that ethanol usage has been holding strong despite EPA letting some refineries out of the mandate to produce gasoline blended with a home grown fuel like ethanol made from corn.

However, there is a problem with oil pressed from soybeans to make biodiesel says Irwin, “And the total amount of biodiesel, because of the Small Refinery Exemptions, has probably gone down at least 10 percent. So, there has been real demand destruction from the Small Refinery Exemptions, but it is in biodiesel and not ethanol.”

US EPA has through November to announce its final decisions related to the volume of biofuels it will require in the nation’s gasoline supply in 2019. It may or may not include some guidance on how it expects to use the Small Refinery Exemptions going forward. So far, it has said it will make no comment on that point.

Expected E15 Announcement No Big Deal

President Trump at his Council Bluffs, Iowa rally Tuesday is expected to announce a waiver to allow year-round use of gasoline blended with 15% ethanol (E15). Todd Gleason reports it may make little difference in how much corn is used to make ethanol.

2019 Illinois Crop Budgets are Dismal

The numbers look bad for Illinois grain farmers next year.

That’s the only conclusion Gary Schnitkey can draw when he puts the costs up against the incomes for corn and soybeans in 2019. Schnitkey, an ag economist at the Univesity of Illinois, says fuel and fertilizer costs are expected to go up. Prices aren’t and that’s the dismal part says Schnitkey, “Probably the one thing that has changed relative to recent years is that corn is expected to be more profitable than soybeans. Again, that is largely due to our use of $3.60 for a 2019 corn price and $8.50 for soybeans. This switches the profitability around. That’s driven by trade concerns, particularly with China and what that has done to commodity prices.”

Here’s an example of the bottom line for next year’s budget. A northern Illinois farmer might expect to have $174 to split between the farmer and the landowner for corn and $143 for soybeans. This return is considerably below the cost of cash rent and roughly, says Schnitkey, near the 2005 returns.