Blogging by the Bushel
With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.

Archive for March, 2012

In every state, county and small town there is always that one farmer who will jump the gun and consistently be the first one to head to fields. The comic below illustrates this point. With Spring coming unusually early this year and temperatures reaching record highs in March, this year will be no exception. In fact there may be corn potentially planted in March, which in most areas is unheard of. Climatologists and meteorologists, and many other people, will remind us all that we could still get severe frosts. After all the average frost free date for Central Illinois is April 14th. Regardless of these warnings, some farmers have and/or may plant early. If farmers choose to plant early, there are crop insurance implications.

Most farmers buy crop insurance for their major crops, such as corn and soybeans, with a sales closing date of March 15. Among its many details, the crop insurance contract specifies an ‘earliest planting date.’ For corn in Ohio, the official RMA earliest planting date is April 6th and April 21st for soybeans. If soils warm up and this warm weather continues, some farmers may want to plant before them.

According to how many policies read if a farmer chooses to plant earlier than the specified earliest planting date for the insured crop in their county, the crop is still insured and losses will be covered, as long as the farmer follows all the remaining contract specifications. However, the farmer gives up eligibility for replant payments that are part of the standard yield protection and revenue protection included in these combo policies. If the warm weather continues, growers will have to weigh the risks and benefits of planting early. For farmers with crop insurance coverage, which is most Ohio farmers, one of the risks of planting early to consider is the loss of replant coverage.

On the other end of the spectrum, many producers are still waiting to plant. They are concerned that a return to normal temperatures –with lows are in the thirties and highs are in the fifties through early April – means that cool periods or even frost could slow growth or kill emerged plants. Not only are they concerned about a return to normal temperatures, but they are also concerned with replant. Low yields this past year in turn have caused a somewhat short seed supply. Should they need to replant, this could mean taking inferior hybrids or even being unable to get enough corn to replant.

It is not clear how early planting will affect yields either. Of 12 trials conducted over the past three years, corn planted in late April has yielded more than corn planted in late March or early April nine times. The average advantage from planting later was about four bushels per acre. After late April, yields tend to decline with further delays.

Of course, planting date responses are notoriously unpredictable. It is not certain that corn planted in mid-March will yield less than corn planted during the second half of April. If the season remains dry, corn planted early may tap more soil water than corn planted late. But growing degree days accumulations are low in March and April in normal years, so unless temperatures stay high, early planting will not necessarily mean early pollination, maturity, or harvest. It probably makes sense to get the fields ready to plant, but to hold off on planting until the calendar turns to April. Unless temperatures remain far above normal, the risk of planting now may well outweigh the likely return. But for those who want to be able to say that they planted corn earlier than ever before – and before their neighbors – 2012 is providing the opportunity.

As expected nothing too exciting came out of the USDA report this morning. Somewhat bullish soybeans, neutral to bullish wheat, while neutral to bearish corn. The market traded higher to mix out of the gates but backed off by midsession.

According to Ag Web the questions being raised early about the report are: How can world soybean production numbers be cut by another 235 million bushels, but the USDA sees no additional demand for US exports? How is Argentine corn production left “unchanged” at 22 million metric tons?  How is Brazil’s corn production raised to 62 million metric tons? How did the USDA increase Argentina’s 2010-11 corn crop by 1.25 million metric tons with no explanation? The highlights are as follows:

       Lowers Brazil bean crop 3.5 million metric tons to 68.5 million  

       Lowers Argentine bean crop 1.5 million metric tons to 46.5 million.

       Lowers World soy stocks to 57.3 million tons vs. 60.28 million last month.   

       Lowers World corn stocks to 124.5 million tons vs. 125.4 million last month.

       Leaves Argentine corn production at 22 million tons the same as last month. 

       Raises Brazil’s corn production by 1 million metric tons to 62 million. 

       World wheat crop raised to 694 million metric tons vs. 692.9 million last month, while stocks drop to 209.6 million vs. 213.1 last month

       US soybean stocks unchanged at 275 million bushels 

       US corn stocks unchanged at 801 million bushels

       US wheat stocks down 20 million to 825 million bushels, on a 25 million bushel increase in exports and a 5 million bushel reduction in food usage.

Regardless of the numbers, there seems to be a little more buzz starting to circulate in the trade in regards to an acreage shift that could be taking place in wheat, corn and soybeans. For years corn was regarded exclusively as a feed grain, while wheat on the other hand was traded at a premium because of its demand for human consumption. Now all of a sudden corn becomes a prominent player in the fuel industry and its economic importance, or should I say “value” seems to be equal or maybe even greater than that of wheat. We have seen this transition take place right before our eyes. No longer can we assume or guarantee that CBOT wheat is going to trade at a premium to CBOT corn.

The “corn vs. soybean” ratio may be the next major shift taking place. Some well respected sources are thinking we may soon see a major adjustment made in the “corn vs. soybean” ratio. In this instance though the argument is being waged that soybeans need to gain in value compared to corn because of soy’s exclusive “protein” qualities. With the world demand for beef increasing, along with a continued push for a higher protein diet there is definitely an argument that can be made defending the importance and premium for soy. In other words, if “protein” becomes King, then corn may soon loose its crown. There is no idea how long a shift of this magnitude could take to play out, but with extremely tight supplies being forecast by many large firms and analyst, I strongly urge you NOT to bet against the “corn vs. soybean” ratio extending out even further in the weeks and months ahead.

If protein demand becomes of primary importance, like some are now betting, the job of the markets will be to encourage more soybean acres here in the US and in South America… You and I both know it will take higher prices in relationship to corn to make this happen.

US wheat continues to remain competitive despite all of the talk about “Black Sea” wheat coming back onto the scene. This was confirmed as US exporters won their third straight Egyptian grain tender, selling Egypt an estimated 60,000 tons of US soft red winter wheat at around $259 a ton. According an online Ag Forum the US price was cheaper than wheat being offered by Ukraine ($277), Canada ($268) and France ($287). The problem moving forward is that “Black Sea” exporters are thought to be coming back online in a more prominent manner and talks of wheat soon being offered at sub $250 per ton are starting to circulate. It will certainly be interesting to see if we can stay competitive as more bushels hit the marketplace.

Let’s also not forget Informa who released its acreage estimates today. They have corn forecasted at 95.51 million compared to prior estimates at 94.7 and 91.9 million. Informa pegged bean acres at 75.1 million compared to 74.6 million. All in all the month of March could prove to be quite interesting.

March 2012 USDA / WASDE Data Included Below:

USDA Grain Carryout 2011/12 (billions of bushels)
  Range of Guesses  
  USDA #s Mar. Guess Low Guess High Guess Feb. USDA #s
Corn 0.801 0.785 0.746 0.825 0.801
Soybeans 0.275 0.260 0.225 0.275 0.275
Wheat 0.825 0.840 0.811 0.898 0.845

 

Global Ending Stock Numbers
  Range of Guesses  
  USDA #s Mar. Guess Low Guess High Guess Feb. USDA #s
Corn 124.5 123.470 122.000 125.00 125.350
Soybeans 57.3 57.760 56.000 59.950 60.280
Wheat 209.58 212.610 210.000 216.000 213.100

 

Main South American Numbers (in million metric tons)
  Range of Guesses  
  USDA #s Mar. Guess Low Guess High Guess Feb. USDA #s
ARG Corn 22 21.250 20.000 22.000 22.000
ARG Soy 46.5 46.825 46.000 48.000 48.000
BRZ Corn 62 60.195 59.000 61.500 61.000
SOY Corn 68.5 69.400 68.000 71.000 72.000

Anna Kaverman – Mercer Landmark

Let’s talk about the weather

Unusual winter? La Nina’s to blame

            Occasionally, I find myself in a conversation with a stranger or an acquaintance, cringing as I catch myself mindlessly talking about the weather.  While in ag circles discussion of the weather bears great importance, in my day-to-day life it is my go-to filler for awkward silences or used to transition into friendly chitchat.  This being said, sitting at my desk in Sherwood, Ohio, writing my blog on March 1st, I am compelled to talk about the weather as Easter in a mere 39 days away and corn planting 45 days (or less) away.

            Yesterday not only was leap day but after getting off to a rainy start, the sun came out and we set a new record high of 68° on February 29th when it should have been snowing.  At the same time other parts of the country were experiencing blizzard conditions, severe storms, and ice. I am sure most of you already know but this is highly abnormal.  Trust me, I’m not complaining.  I don’t have strong feelings on the subject one way or another, but I can see where proponenets of the global warming theory are able to get their data.

            Climate changes aer very often cyclical and predictable in nature and often studied.  Dr. Elwynn Taylor, professor ag meteorology at Iowa State University studies these changes.  In his presentation at the National Grain and Feed Association’s (NGFA) 40th annual country elevator conference, Taylor noted today’s seemingly extraordinary temperatures are nothing more than typical extremes when compared to temperatures of other La Nina years in the 1950’s and 1970’s.

            “It may suddenly shift again when it’s influenced by El Nino,” Taylor notes, referring to the patterns of the North Atlantic Oscillation (NAO), that in conjuntion with El Nino or La Nina, is responsible to 50% of climate variabilit on the Earth. (Source: NASA Earth Observatory).  After reading this maybe I can drop a little scientific data into my weathercentric banner.