Blogging by the Bushel
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Archive for October, 2013

With the November 8th USDA report a little more than a week away, many producers and traders alike are asking what if? Not what if the USDA prints a smaller than expected number, but what if they print a number that is beyond anyone’s guesses. Below is an excerpt from a morning wire that I received today. I think it does a good job putting this question into perspective.

What if?

What if on Nov 8, USDA prints a monster number? Early this week, well followed Ag marketer John Roach estimated the corn yield at 171 bushels. Yep… 171. The ‘trend’ for this year would have been 159 had a linear trend chart be used to track corn yields. 171 would be just inside the +1 SD. It would clearly be a record yield, but it would not be as dramatic of a departure from trend as 2004 would have been.

Let’s put some numbers to it…

When USDA last reported to us in September, we were looking at 89.1 MA harvested acres. A 171 yield would portend a final production number of some 15.236 BB. That would translate into some 3.29 BB ending stocks with the current 12.675 demand base! Now, we know that demand would expand with lower prices, and plentiful stocks. We see the highest demand on record is 13.066 BB – which would still leave us with 2.9 BB of end stocks.

A USDA reported yield of that magnitude would crush prices, and drive spreads significantly weaker – irrespective of recent price action.

Making those assumptions, one can conclude that ownership of ATM CZ Puts to mitigate both near term, and 2014 crop flat price risk could be wise. CZ 430 Puts trade about 9 cents; the 440’s would set you back about 14. Cheap way to go through the report a week from tomorrow.

I may be bearish on corn, but this is for all the bulls out there…. Mike McGinnis from agircultre.com gives “3 reasons why corn avoids $3.”

With the U.S. corn market trading in the mid- to low-$4.00-per-bushel range, and projections of an all-time record crop coming out of the fields, the obvious question is whether the market drops into the $3.00 range.

It might, but not for long, says Terry Roggensack, co-owner of The Hightower Report. And he gives not just one, but three, reasons why the corn market will not trade consistently at the $3.00-per-bushel level.

“I think this $3.00 corn talk is crazy,” Roggensack says. “And, I know that not many people are of that opinion. But we think China will buy a lot of U.S. corn.” Generally, the $3.00-per-bushel corn talk revolves around the U.S. ending stocks reaching a 2.0 billion-bushel mark, in this marketing year. Therefore, if the U.S. continues to see demand setback, knowing exports reached their lowest levels this year since 1973, large corn ending stocks will be problematic for corn prices.

However, Roggensack says that it is important to remember that it is not normal for the corn market to go way under the cost of production, especially when global supplies are not sufficient. “For instance, the last time corn traded in the $3.00-per-bushel range, and even in the $2.75 level, the cost of production was “way down there.

CHINA’S APPETITE

To further his point, the Chicago-based research analyst looks toward China’s cotton buying habits as a big reason why the corn market has limited downside. In the last three years, China’s government has been buying cotton from their producers. They import cotton for daily domestic use while storing the cotton produced in-country, he says.

After three years of this process, China has built up 591 days of supply (61% of the world’s cotton), in its Strategic Reserve Fund. Ultimately, the program supports their local farmers while the government accumulates supply. “This is a fact. I’m not making this up,” Roggensack says.

So, what happens if the Asian giant does this same hoarding with its corn supply? It’s well known that China is a net corn importer, producing 215 million tons while using 220 or more million tons annually. A 591-day supply of corn for China would equal 362.8 million tons. With 53.0 million tons on hand now, China would need an additional 308.00 million tons of corn, to reach a 591-day supply of corn, he says.

“That’s 12.12 billion bushels of corn,” Roggensack says. And right now, USDA’s latest estimate shows China importing 7.0 million tons of U.S. corn. And that number was set when corn was trading at $6.00. So, with corn now in the $4.00 range, I wouldn’t be surprised if China buys 40.0 million tons.”

Roggensack adds, “I’m not saying China will import 308 million tons of corn. But they did with cotton.”

The current price of corn favors China importing U.S. corn. “Today, China can buy U.S. corn at a 25% discount compared to its domestic market. This is why I don’t see U.S. corn going to $3.00, because China can buy a lot of corn,” Roggensack says.

CHINA’S U.S. HOLDINGS

Meanwhile, because it is not earning much, China is getting nervous about the amount of holdings of U.S. government treasuries.

“If China moves just 1% of their U.S. Treasury holdings to buy corn, that would equal 2.7 billion bushels of corn,” he says.

COMBINED WORLD STOCKS/USE

The third reason the U.S. corn market will be protected from a $3.00 downside movement involves insufficient world supplies of corn, soybeans, and wheat.

After charting this year’s estimated record world production of corn, soybeans, and wheat, the stocks-to-usage ratios still show the supplies are not going to be sufficient.

Historically, the stocks-to-use ratio reached 39% in the 1980s, when plenty of world combined grain was lying around. In 2010, the combined world stocks/use ratio dropped to 24%, and last year even lower at 19%.

USDA’s latest estimate for 2013-14 combined world grain stocks is 21%.

“That figure could go to 22% or 23%. But the point is that we are only a few points off of the lows,” Roggensack says.

In the end, the Chicago-based researcher is not ruling out a corn market that dips below $4.00 per bushel. “I have $4.22 as a price where we bottom. Maybe we print $3.85, as we price in less ethanol. But I don’t see the $3.00 corn price reasoning,” Roggensack says.

Before dropping to 3 year lows yesterday corn continued to trade in a narrow range right around $4.40. In fact up until yesterday, the December 13′ corn contract has traded between $4.50 and $4.32 the entire month of October. From a technical perspective, an extended period of consolidation along with the past two sessions forming “inside” days on the chart, leads me to believe some type of short-term breakout is nearing. Unfortunately for the bulls it feels like the December 13′ contract will post a $4.20′ish type print (or lower) before we see the contract trade back in the $4.60′s. There is starting to be some talk that even though the basis has been improving in some areas, eventually the final 20-25% of our record US corn crop will have a tough time finding a home on the farm. Basically meaning, even though US producers have invested heavily the past few years in storage, there is still not enough in the northern areas to store it all. Hence the producers might not have much choice but to sell a portion of their final harvested bushels, which could put some pressure on the basis as well as flat-price as harvest gets closer to completion.  My guess is once the wave of producer sell-pressure is digested and the US producer has his remaining bushels securely locked away, we might get that little $0.30 to $0.50 cent short-covering rally I’ve been talking about. From that point forward the bulls are going to need:

#1. A serious South American weather story that not only hurts the full-season corn but also further limits the number of second-crop corn bushels being harvested. Low prices are already taking their toll on some of the South American corn acres, but that won’t be enough to support an extended corn rally, we need a major weather hiccup of some sort, right now that just doesn’t look to be setting up.

#2. We will need some type of unforeseen Chinese demand story to hit the wires. Since they don’t appear to have had any major corn production problems, and most sources are thinking the Chinese are going to harvest a new record crop, it’s hard to imagine a giant jump in imports.  There is some speculation that since the Chinese wheat crop ran into such serious production problems this year, they won’t have the ability to as easily substitute wheat for corn. Therefore the Chinese “MIGHT” be forced to import more corn bushels than the world original had penciled in. Only time will tell. This is certainly NOT something you want to bet the farm on.

By: Clint Muhlenkamp

The double fungicide results are in!

I realize this has been a highly anticipated result, so I won’t drag it out any longer.  There was a 10 bushel increase in the soybeans applied with two passes of fungicide (StrategoYLD®) and a micronutrient foliar (Max-IN® for Beans)!  This wasn’t the 15 bushel increase I projected in an earlier blog, but it’s still a significant difference – especially in terms of ROI.

Assuming soybeans are $12 dollars a bushel, the cost of the product for both applications is approximately four bushel or $48 dollars.  With a response of 10 bushel and you subtract the four bushel for cost of product; you’re still left with a 6 bushel gain.  That’s a $72 per acre boost!

And just think if we would have gotten the August rains that our soybeans love so dearly – we could have seen our bushel increase double!  Although the response wasn’t as big as I projected, the grower still came out smelling like a rose.

So after hearing some of last year’s results of double fungicide trials as well as our local trial in Celina, a two pass of fungicide on soybeans appears to be a wise investment – especially with bean prices north of $10 dollars.

Ask your local Mercer Landmark dealer how to make a two pass fungicide application a part of next year’s game plan!  You’ll be glad you did.

By: Ben Stoller- Mercer Landmark agronomist

The Marestail Menace

With glyphosate resistant marestail becoming an unfortunate reality soybean fields in parts of the Midwest, growers should be aware of its presence and methods of control.

Marestail is an annual-like many other weeds-but can be both a summer or winter annual; therefore, a fall and spring approach may be necessary to realize complete control.  Research indicates mature Marestail plants can produce over 200,000 seeds, with fall emerged plants producing more than spring emerging plants.  Additionally, the U of I indicates fall applied herbicides provide better control of emerged Marestail than spring ‘burndown’ applications.

Dr. Mark Loux with OSU Weed Science and Dr. Bill Johnson with Purdue University Extension Weed Science have co-written an article with recommendations for both fall and spring control.

Fall:

Both scientists recommend a fall application of 2, 4-D as a base herbicide and combining with one of: glyphosate; dicamba (premixes of dicamba and 2, 4-D, such as Brash®), or a lower rate of a residual.  University of Illinois scientists emphasize a sole application of glyphosate on emerged Marestail should not be used, either in autumn or spring.

Spring:

Perhaps most important is remember to save the majority of the residual application for spring (for the most full season control), and to include the residual with the burndown treatment.  U of I researchers also maintain that growers can expect to treat in both seasons for best control.

The links below provide details on Marestail biology, characteristics and management:

http://agcrops.osu.edu/specialists/weeds/marestail/marestailfact09_000.pdf

http://bulletin.ipm.illinois.edu/?p=1749

Please contact your local Mercer Landmark Agronomy Sales Representative for assistance.


This article was recently published by UW-Madison Department of Dairy Science.

Introduction

Predicting dry matter intake (DMI) of dairy heifers is an important part of dairy heifer nutrition programs, but it has been challenging to estimate for a number of reasons. Recently, over 9000 heifer pen dry matter intakes were collected at the Integrated Dairy Research Facility at the University of Wisconsin yielding new inferences to heifer DMI under near commercial rearing conditions. Summary data of the study is presented in Table 1.

DMI as Percent of Body Weight

Dry matter intake of dairy heifers as a percent of body weight for Holstein and Holstein x Jersey crossbred heifers is presented in the Figure 1. The relationship is not a straight line. Dry matter intake of dairy heifers as a % of body weight can be estimated using the equation presented in the Figure 1.

NDF Intake

The heifer DMI study at the University of Wisconsin also made a key yet very simple discovery. Dairy heifers consume a near-constant 1.0 % of the body weight as NDF (Figure 2). This finding is important because heifers consuming low NDF diets (i.e. corn silage) will eat more feed than heifers consuming high NDF diets (straw, mature forages, etc).

Conclusion

Heifer DMI as a percent of body weight decreases as BW increases for dairy heifers, but the relationship is not a straight line. The DMI of dairy heifers is further influenced by dietary NDF concentration. Low NDF diets increase DMI and high NDF diets decrease DMI within any body weight category.

The government’s shutdown is over…and corn and soybean harvest never missed a beat.

The combines are still rolling, and the government is back up a running, at least temporarily. They’re both huge stories in agriculture this week. But what else is happening?

Corn yields continue to surprise many farmers around the Midwest as soybean harvest gets going in major growing states this week. But, the harvest progress is also creating some truck bottlenecks in some spots.

On top of it being the busiest time of the year for many farmers, the federal government shutdown axed all USDA reports, including many on which some markets greatly depend. The October USDA report has been cancelled citing not having been able to engage in the necessary data collection and analysis over the past few weeks. The next scheduled report in November 8th.

The shutdown  hit ranchers in South Dakota the hardest. That’s where a major blizzard hit last weekend, dropping feet of snow and killing thousands of cattle. Now, ranchers are struggling to document losses that they’d ordinarily report to their local FSA offices. Lawmakers are working to restore those services for the affected ranchers.

Weather like that freak snowstorm in the northern Plains is indicative of a unique set of circumstances unfolding this fall: With no clear indication whether we’ll see La Nina or El Nino, it’s a difficult year to get a clear view of how the winter weather will unfold, one expert said this week.

It’s not the weather moving forward, but conditions in the last few months that make this year a good year to avoid much – - if any – - fall tillage, one expert said this week. What are your fall tillage plans?

Though farmers are working hard to get this year’s crops in the bin, it’s never too early to start looking ahead to next year. But, like many things right now, that complicated. “Anticipating acreage for 2014 is complicated by unfinished business with respect to 2013 acreage estimates,” one economist said this week.

A recent report shows a lot of signs point to a slide in farm income levels in the next 2 years.

There is one bright spot in the crop balance sheet moving forward; diesel prices may be on their way down, according to one economist’s recent estimate. So, will you cash in and buy at the low, or stick to your usual buying habits?

Another way to possibly get more bang for your crop buck in the coming year is through the soil benefits you can glean from raising a cover crop.

By: Amy Battles – Mercer Landmark agronomist

As we progress further into harvest season it is time to make some decisions regarding hybrid corn and soybean selection for next year. Allow me to preface this by saying, your sales reps understand that you want to wait until harvest is over to make the final decision, and we completely agree! All orders that are made this time of year can be changed, but we cannot change the amount of discounts available during harvest versus the winter months. Not only are there very hefty pre-pay discounts, but there are also several programs available through Mercer Landmark seed partners that reward you for simply placing a tentative order.

A key word that comes to mind when selecting corn hybrids and soybean varieties for this coming year is CONSISTENCY. I believe Bob Nielsen of Purdue University summarizes it best, “How do you identify consistent performers that will likely perform well for you? The secret lies in looking for trials that evaluate hybrids over multiple locations. Multiple testing locations in a single year represent possible weather patterns your farm may encounter in the future. Weather variability influences hybrid performance more than any other variable, because weather interacts with most of the other yield limiting factors. If a hybrid performs consistently well over many sites (i.e., weather patterns), then it will likely perform well on your farm in the future.”

Another comment we hear a lot, “Well how come seed companies are always coming out with new numbers? I have had really good luck with that number the last 5 years.” The next keyword that comes to my mind is TRUST. Seed companies are NOT going to introduce a new hybrid that does not have an advantage over its replacement. It is the duty of your seed company and your Mercer Landmark Agronomy Sales Rep to study, test, and research the hybrids that we promote. Trust us when we recommend a new number, we aren’t just picking that one because it did well in a plot we saw, we are choosing it for YOU because based on your soil, farming practices, fertility, etc it is a perfect match.

A new tool available this year is YIELDPOP.COM, I am really excited about this website, it is full of third party yield data and can not only be sorted by zip code, but also produces charts showing how each hybrid yields based on soil type, population, and tillage practices. Another website to follow is ANSWERPLOT.COM, showing current yield data from Answer Plots located all over the US, which you can filter down to your zip code as well.

For more information on new corn hybrids, soybean varieties, and discount programs talk with your local Mercer Landmark Agronomy Sales Representative today. There are some exciting new traits, corn hybrids, and soybean varieties on the market this year, and we cannot wait to tell you about them!

By: Jeff Caldwell Multimedia Editor for Agriculture.com and Successful Farming magazine.

Though cattle are still being fed, crops are still being harvested and commodities are still being bought and sold on the global market, a continued lapse in USDA reporting could begin to eat away at data that one economist says will have long-lasting price and market implications.

Some futures market prices, like those for feeder cattle, depend on price reports from different parts of the country, says Kansas State University livestock economist Glynn Tonsor. Without that data being reported by USDA Agricultural Marketing Service offices around the country, it makes it difficult to compile futures based on what’s happening in local markets, either making those former prices something of a leap of faith or causing market players to look to other sources — some of which may not be accurate or may take more time — to glean the same information.

“We’re still going to find a price that makes transactions go forward, but the cost of that price discovery system, at least in the short term, has gone up. Everybody is adjusting to find this information somewhere else, and maybe it’s not as efficient. Not everybody has the same network. Not everybody has access to the same private data sources,” Tonsor says in a university report. “We are definitely building gaps, some of which will not be resolved even if the shutdown ended right now. Every day, every minute that goes by, there is something that is not being captured that won’t be back-filled. Some things that are being captured won’t be back-filled because of computer systems being down. So you have gaps in the data series.”

Ultimately, Tonsor encourages ag stakeholders to place the proper perspective on the shutdown and the information constraints it’s placing on the grain and livestock marketplace through an absence of market report data. Though it’s troublesome now — and if the shutdown lasts too long, it could be troublesome for a ways down the road — it’s important for farmers and ranchers to continue to focus on their main jobs.

“I don’t know how long this will last, but context is important,” Tonsor says. “The sun still came up today. Feeder cattle are being sold. Corn is being harvested. Those kind of physical activities I don’t think are changing. What is changing, at least in the short term until the shutdown is resolved, is how we discover ag prices, how they’re reported, and how people make buy-sell decisions.”

By: Clint Muhlenkamp

“Smart Stax RIB really pays!”  Said an excited St. Henry farmer who prefers to remain anonymous.

This was his reaction following the outcome of a corn side-by-side done in his field.  Products in the side-by-side were Croplan’s 6265 Smart Stax  versus a Croplan Round-Up Ready version.  That is two corn varieties, two different results and a huge difference in terms of return on investment.  Here are the outcomes (including drying and shrink):

Sample Size = 0.7886 of an acre

Croplan 6265SS RIB – total weight = 11,320 lbs. / moisture = 24.4% / final  dry yield = 219.9 bushels

Croplan 6178RR – total weight = 9,100 lbs. / moisture = 21.1% / final dry yield = 186.48 bushels

Smart Stax = 33.42 bushel advantage

What does this mean in terms of dollars?  The sample was pulled from a 96 acre field.  In this example if the grower would have planted the entire field in Round-Up Ready corn with no traits, he would have lost out on approximately $12000 ($5/bu, net after shrink and drying costs).  That’s a difference of $124 per acre!

Smart Stax gives superior insect protection which allows for a higher stand count, healthier plants and larger root mass for increased nutrient uptake.  The results are real and the reasons are simple.  Smart Stax pays!

See your Mercer Landmark salesperson today to get your Smart Stax lined up for 2014.