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 May, 2014

By: Mike Niederman – Mercer Landmark Agronomist

Many people are concerned about their soybean stands, and with good reason.  The weather has varied greatly between all the areas covered by Mercer Landmark, but many of those areas have had to deal with difficult conditions.  I know in my immediate area there are growers who have not been getting the rain needed to get a stand out of the ground while in other areas there has been an overabundance of rain.

With that being said, it is important to identify what could have caused a poor stand before making any replant decision.  It is also important to get a good estimate of plant population.  There are two methods for estimating stand populations:  counting plants in a row and using the “hula hoop” method.

Table 2.  Plant Population Based on Average Plants Within a Circle

Once the stand evaluation is done it will give you a better idea of whether it would be beneficial to do any replanting or if there are enough established plants in the field to achieve a nice yield.  Contact your local Mercer Landmark Agronomist to get help identifying any poor emergence issues or estimating plant populations.

MAY 27, 2014

By: University News Release

Soybeans might be more profitable than corn now, but that doesn’t mean they will be at harvest time. Here, a look at soybean-to-corn price ratios.

By Gary Schnitkey, University of Illinois

Both corn and soybean prices have fallen since last summer, with corn falling more than soybeans. Because corn prices have fallen more the soybean prices, the soybean-to-corn price ratio has increased, signaling that soybeans have become relatively more profitable than corn. This leads to speculation that corn acres will decrease in 2014, while soybean acres will increase. Acreage shifts may occur. However, high soybean-to-corn prices in the spring do not necessarily signal high soybean-to-corn price ratios at harvest. Therefore, relative returns between corn and soybeans may change.

Spring Soybean-to-Corn Price Ratios

The soybean-to-corn price ratio equals the soybean price divided by the corn price. Higher soybean-to-corn price ratios mean that soybean prices are higher relative to corn prices, which lead to soybeans being relatively more profitable corn. Obviously, lower soybean-to-corn price ratios indicate higher corn returns relative to soybean returns.

Herein, soybean-to-corn price ratios were calculated using projected prices, which are used to set crop insurance guarantees. Projected prices are average of settlement prices of Chicago Mercantile Exchange (CME) contract during the month of February. The December contract is used for corn and the November contract for soybeans. Use of these projected prices provides a good indication of relative prices in the spring prior to planting.

The 2014 projected prices are $4.62 for corn and $11.36 for soybeans, leading to a soybean-to-corn price ratio of 2.46 (11.36/4.62). It is useful to compare the 2.46 ratio to historical ratios to gain a feel whether the 2014 ratio is high or low. Two distinct periods exist between 1972 through 2013 (see Figure 1). Between 1972 through 1998, the soybean-to-corn price ratio averaged 2.40. The 2.46 price ratio for 2014 is above the 1972-1998 average, but would not have been one of the highest ratios during the 1972 -1998 period (see Figure 1). During this period, U.S. soybean acres increased more than corn acres. U.S. corn acres were 67 million acres in 1972 and 80 million in 1998. From 1972 to 1998, corn acres increased 19%. During the same time period soybeans acres increase 53% from 47 million acres in 1972 to 72 million acres in 1998.

Soybean-to-corn price ratio averaged 2.20 during the 1999-2013 time period, considerably below the 2.40 average for the 1972-1998 time period. This lower soybean-to-corn price ratio signaled higher corn returns relative to soybean returns. Partially as a result, U.S. corn acres grew more than U.S. soybean acres. Corn acres increased from 77 million acres in 1999 to 95 million acres in 2013, an increase of 23%. In comparison, soybean acres increased 4%, from 74 million acres in 1999 to 77 million acres in 2013.

The 2014 soybean-to-corn price ratio of 2.46 is high for the 1999-2013 period. Only the 2008 ratio of 2.47 exceeds the 2014 ratio. From 2007 to 2008, U.S. corn acres decreased by 8% while soybean acres increased by 17%. This acreage switch lends support for reductions in corn acres in 2014.

Relationship between Projected and Harvest Soybean-to-Corn Price Ratios

Relative corn and soybean profitability in 2014 will be influenced by how long price ratios persist. In particular, the relationship at harvest will be important in the final determination of relative returns. To see if high or low soybean-to-corn price ratios has historically persisted till harvest, a harvest soybean-to-price ratio was calculated using harvest prices used to determine revenue for crop insurance. Harvest prices are the average settlement prices of October CME futures prices (December contract for corn, November contract for soybeans).

Figure 2 shows a scatter of projected and harvest soybean-to-corn price ratios from 1972 through 2013. Each dot gives a year’s pair. As can be seen in the figure, there is some correlation between projected and harvest soybean-to-corn price ratios (.28 correlation coefficient). Higher harvest price ratios tend to be associated with higher projected ratios; however, there is considerable variability. The solid line in Figure 2 located at 2.46 gives the 2014 projected soybean-to-corn price ratio. As can be seen, a wide range of harvest ratios occur near 2.46, suggests that harvest ratios can vary from projected ratios.

Summary

Acreage decisions will be impacted by relative prices being offered by the market; however, relative prices at harvest could differ from those in the spring. This suggests that farmers switching acres this spring should consider locking in some of the return difference through marketing contracts. It also suggests making acreage changes based strictly on relative prices may not result in the acreage mix that optimizes profits. Longer run rotational and yield considerations should enter into planting decisions.

MAY 27, 2014

By: University News Release

By Cory Walters, University of Nebraska-Lincoln Extension

Recent adverse weather conditions may force some growers who have already planted to replant.

If you believe replanting may in your best interest, check the replant provision in your crop insurance policy and immediately contact your insurance agent to get the paperwork started. [Catastrophic (CAT) and Area (Revenue) protection policy do not have replant provisions.]

The following guidelines, which come from the USDA Risk Management Agency’s Loss Adjustment Standards Handbook, will give you an idea of what to expect from crop insurance for replanting. To qualify for a replanting payment:

  1. The insured crop must be hit with an insured peril (excess moisture, frost, hail, etc…).
  2. Your approved insurance provider must determine that it is practical to replant. (This is why it’s best to contact your insurance agent immediately.)
  3. Acres being replanted must have been initially planted on or after the earliest planting date.
  4. Appraised expected yield must be below 90% of the guarantee yield on acreage intended for replant.
  5. Acreage replanted must be at least the lesser of 20 acres or 20% of the insured planted acreage for the unit.
  6. Approved insurance provider must give consent to replant.

The replanting payment will be equal to the projected price multiplied by a maximum bushel factor. For 2014 corn and soybean projected prices are $4.62 and $11.36, respectively. Maximum bushel factors are eight bushels per acre for corn and three bushels per acre for soybeans.

For example, your insured corn crop was hit with excessive moisture. You planted corn on May 1, which is past the earliest planting date of April 10. Appraised expected yield is now 70 bushels per acre (bpa). Actual production history (APH) is 140 bpa. You insured using a Revenue Protection policy at a 75% coverage level using the projected price of $4.62 per acre. Your yield guarantee would be 105 bpa (140 APH yield x 75% guarantee). Applying Rule 4 from above, 90% of your yield guarantee is 94.5 bpa (105 x 0.9). Your expected yield of 70 bpa is less than 94.5 bpa (90% of guaranteed yield). Consequently, you would receive a replant payment of $36.96/acre (8 bpa x $4.62, the projected price).

From the example we can see that qualifying for a replanting payment hinges on the producer’s yield guarantee. Selection of a lower coverage level implies a lower yield guarantee and a smaller chance of qualifying for a replant payment. However, when extreme events occur it is likely everyone will qualify for a replant payment. If you are unsure whether you may qualify for a replant payment, your first step is to contact your crop insurance agent.

By: Kyle Palmer – Mercer Landmark Agronomist

You have all heard about Palmer Amaranth and how it is slowly spreading eastward. Palmer Amaranth is a very competitive plant that can cause up 78% yield lost in soybeans and up to 91% yield lost in corn. Palmer Amaranth is a dioecious plant, which means there is a male and female plant. Palmer can cross pollinate with the other 75 Amaranth species including both Tall and common Waterhemp which are also dioecious. In our area the common weeds Palmer Amaranth can cross pollinate with are both Waterhemps, Redroot Pigweed, Smooth Pigweed, and Prostrate Pigweed. One female Palmer Amaranth can produce up to 1 million seeds. The seeds are roughly the size of radish seeds which makes them extremely mobile through animal transportation, but it should be noted that seeds have an 80% mortality within three years.  According to research done by Kansas State University for every 25 growing degree days, which is a typical day in July, Palmer Amaranth can grow 2.1 inches.  This is due to Palmer Amaranth having three to four times the photosynthetic rate of corn and soybeans.

Many of the characteristics that help Palmer Amaranth be a successful plant also make the presence of herbicide resistance easy to spread. Palmer Amaranth has been identified to be resistant to ALS inhibitors, photosystem II inhibitors such as atrazine, and glyphosate herbicides. Some plants have been found that are resistant to multiple modes of action.

How to identify Palmer Amaranth

Seeds:

Seedling:

Adult:

Male and Female inflorescences:

Since Palmer Amaranth is an aggressive weed it requires aggressive tactics. First applying a residual herbicide can help control the plant prior to emergence. Once the plant is emerged it is vital to spray as soon as Palmer Amaranth is seen and with multiple herbicides that offer different modes of action to ensure death and spreading of resistant species. Tillage can help bury the small seeds that need sunlight to germinate but extensive tillage can bring seeds back to the surface.

Contact your local Mercer Landmark agronomist for further information and assistance with identifying and controlling Palmer Amaranth and other weeds.

By: Amy Battles – Mercer Landmark agronomist

According to The Weather Channel, Celina, Ohio has received 3.63 inches of rain in the last seven days. This has raised several questions among growers, one being “How long will my corn survive under water?”

“Small seedlings are more susceptible than larger seedlings, however the effect of standing water on germinating seeds is not well known,” according to Roger Elmore, Extension Cropping Systems Agronomist at the University of Nebraska. Some hybrids will be able to withstand more than others, however data has not shown which exact hybrids these are. It is important to keep in mind that a germinating seed requires oxygen to survive, and in flooded soils oxygen levels will become depleted within 48 hours, however on the bright side cool temperatures (mid 60’s or cooler) actually increase the possibility of survival. Refer to the chart below from the University of Nebraska, and as always, walk your fields and contact your local Mercer Landmark Agronomy Sales Rep with questions and concerns regarding a replant decision.

Another issue that has come up recently is alfalfa weevil. The pictures below were near Elgin, Ohio on May 16th.

The photo containing ONLY weevil shows 14 weevils, which came off of the 3 stems shown above. When it comes to controlling weevils, an application of insecticide may be warranted, or an early harvest. See the chart below from the Ohio State University, to determine how to address the issue.

Talk with your local Mercer Landmark Agronomist today about weevil pressure in your alfalfa fields, as well as your concerns regarding corn fields that have been underwater for an extended period of time.

Mike McGinnis

05/15/2014

With the optimum time to plant soybeans either gone or passing soon, many U.S. farmers are rapidly trying to finish corn planting to shift to soybeans.  The race is on to get the crop in before the tail-end of the “ideal” dates goes by in May.

Discuss soybean planting in Marketing Talk.

So, why the wait, when a lot of university research indicates that farmers can gain higher yields by planting early. In recent years, the higher corn market has attracted more acres of that grain compared to soybeans. Plus, farmers justify planting soybeans after corn because delayed planting often reduces yield proportionally more for corn than soybeans.

This year, cold and wet weather has farmers playing catch up on the corn planting season. As of Monday’s USDA Crop, many key corn-producing states were over 70% completed. It’s believed many farmers are finishing on corn this week and are onto soybeans.

For soybeans, the completion rates on planting vary from 20% in Iowa to 36% in Nebraska. Indiana and Illinois farmers were 23% and 26% finished, respectively, with soybean planting, as of Monday’s USDA Crop Progress Report.

So, what are the key dates for optimum soybean planting dates throughout the Midwest? The chart below shows April 1-25 catches most key soybean-producing states. But, it’s the next planting timeframe, May 15-30, that farmers are trying to seed within. And, that may be problematic for eastern Corn Belt farmers, according to Donald Keeney, Senior Ag Meteorologist, MDA Weather Services.

Farmers are turning their attention to the recommended planting dates at the end of the optimum scale; May 20-30, the 10-day weather outlook is of high interest.

Donald Keeney, Senior Ag Meteorologist, MDA Weather Services, says there will be lingering light showers across the central Midwest over the next two days which will slow planting in Indiana and northern Illinois. “However, planting should progress well in Missouri, Illinois, Minnesota and Nebraska, and the eastern Dakotas,” Keeney says.

Drier weather, this weekend, will favor planting in all of the Midwest and northeastern Plains, he says. “There will be some showers move across the region early to mid next week, which will slow planting again. However, amounts will not be all that heavy. So, significant delays are not expected.” Also, drier weather should return later next week and any remaining planting will increase again then, Keeney says.

The map shows the precipitation % normal over the next ten days, showing the generally below normal rains in the area.

On the May 9th USDA WASDE report the USDA gave us their first projection of the new crop corn balance sheet.  Production and ending stocks were surprisingly large compared to trade estimates.  With the USDA currently projecting a 1.726 billion bushel carry over how realistic is it that we reach this number?  Lets break down 3 keys to the balance sheet.

Acreage

For the May 9th report the USDA used the Prospective Plantings report acreage number projections.  This puts corn planted acreage at 91.7 million acres.  With a cold and wet spring causing planting delays in the northern areas it remains questionable whether we will get the intended corn acreage planted or not.  It seems likely that some acreage could be lost in Minnesota, Wisconsin, Michigan and especially North Dakota.  Planting progress is well behind in these areas and although their weather forecast is dryer than it has been all spring the window of opportunity to plant is coming to a close.  Our current estimate is that there will be 600 to 900 thousand acres of corn that will get switched or prevent planted.  However, many analysts were looking for a higher planted acreage number then the USDA’s 91.7 million acres.  Our estimate before we began planting was 92.4 million acres.  If we were to cut this by the 900,000 acres we think could go unplanted it would get us just under the USDA at 91.5 million acres.  So, we do believe the USDA planted acreage number could be fairly accurate as long as the northern areas do get a chance to make some planting progress that the current forecast suggests.

Yield

Other than planted acreage the other key to production is yield.  The USDA is currently using the trend line yield estimate from their Baseline report in Feb.  This trend line national average yield number is 165.3, which would be a new record.  The previous record was set in 2009 at 164.7.  While there are a lot a similarities between this year and 2009 in regards to planting progress and the expected El Nino pattern during the growing season we think it may be too early to expect a record national average yield especially with some corn getting planted late in northern states.  However, if there is acreage lost in some of the historically lesser yielding areas this could give the national average yield number a boost given good weather.  The bottom line here is that we will need to see near ideal weather from here on out to hit the current USDA yield projection.

Total Use (Demand)

Of the many surprises the USDA gave us on their first new crop corn balance sheet the demand side was the strangest for me.  They are currently estimating total usage at 13.385 billion bushels which is a reduction of 250 million bushels from the current marketing year.  It is not often that the USDA lowers demand in a year where we expect lower prices and building stocks.  Typically they offset bigger production with stronger demand.  However, it seems that they believe that there was some pent up demand this year after the record high prices of the last marketing season and that demand will cool down next year.  This could be the case but it is a bit unusual and early to assume this.

So What are the Chances?

The interesting thing here is that the USDA may have given themselves a back door.  With the USDA lowering the old crop corn carry over by 150 million bushels it also lowers the beginning stocks for next year.  So, if the old crop corn ending stocks were to start to go up again, as we think they will, it could fully or at least partially offset small reductions in acreage or yield.  When it comes down to it the USDA may not have had to increase exports 150 million bushels and we feel feed and FSI numbers may be a bit high.  So this may give them a little wiggle room to work with on the production side.  However, with lower acreage numbers and the expectation of a record national average yield there will be a lot of pressure to produce a near perfect crop this year to hit the current USDA projections.  This will mean we would need near perfect weather to do this and so far that has not really been the case.  So, get ready for the weather market it may be a wild one this year.

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent.

Wheat

Here we sit right in the middle of May and farmers in Northern Illinois woke this morning and were greeted by snow showers. Some are getting the impression that they are stuck in a real life version Disney’s Frozen.  As you might expect, it melted almost as fast as it is fell but this has been a strange spring indeed.  The wheat market is stable this morning but after the additional pressure yesterday, I cannot imagine there are too many bulls feeling comfortable with their position at this point.  On their revised estimates yesterday, Informa actually boosted overall wheat acreage 250,000 acres.  Granted, this is not a big shift but it is interesting to note that the majority of the increase was in winter. The weather outlook for much of wheat country looks favorable and with little other news demanding risk premium, i.e., Ukraine, it would appear that for now, the path of least resistance is lower.

Corn

July corn sliced through two key levels of support this week, first at 4.97 ½ and then at 4.90 ¾ and particularly when that second level was violated the gates were opened and we quickly pushed down to a very key level of support at the 4.80 mark.  The question of course now is can we make a stand once again at this level?  I believe the odds are stacking up against it.

The talk in the export trade yesterday was that origin optional corn that is on the books for South Korea and other Asian countries will now most likely come from Brazil.  China, while it has not been a real positive influence on our corn market as of late, is for all intents out of the market for the balance of the year and there is even some discussion that with their large inventories, they could export a little corn.  Harvest in Argentina is running behind schedule and is only estimated to be 30% complete versus last year at 46% but that is more related to a late planting season and will mean that there should be ample quantities available for June and beyond.  The Informa acreage estimate could have been considered a little positive as they actually lowered their corn number by 110,000 acres but that is a pretty insignificant shift and they increased Sorghum acres by 880,000 which of course can be used as a substitute feed grain.

I am afraid, there is not much we can point to right now that would be considered a positive market influence outside of the slow planting pace in Northern States but even there, the forecast for next week looks very favorable.  If we begin to push through the 4.80 level, I suspect that fund long liquidation could step up even more and while that downside could be limited as we move into early summer, it may be a challenge to attract that money back.

Soybeans

The beans bull was hoping for a positive jolt from the April crush figures and while 132.7 million bushels is nothing to sneeze at, it was by no means the kind of ammunition they were looking for.  As such, we did see a pretty solid washout yesterday and while it was not quite severe enough to be called a key reversal, I suspect there are a number of bulls that may not have slept too well last night.  Informa did bump their acreage estimate up 580,000 acreage to 82.07 million, which did not stun anyone but this was at least partially masked over by an announcement of a sale of 120,000 MT of new beans to China.  We all recognize that we still have basically 4 to 5 months before we harvest our next bean crop and acreage by no means assures an adequate crop, but when the record acreage number grows even larger, is would sure seems to help provide a nice cushion. I believe the key line in the sand for July beans right now sits at 14.41 ¾ and if we violate that on a close, our top is confirmed.

Corn planting is 59% complete, now one point ahead of the five year average. Minnesota at 31 points behind and North Dakota at 30 behind are the furthest behind. Illinois is at 25 points ahead and Indiana at 16 points ahead are the furthest ahead. Emergence at 18% is behind the average of 25%.

Soybean planting is 20% complete; the 5-year average is 21%.

National good/excellent rating was down 1 point at 30%. SRW states mostly showed improvement, while HRW states generally declined. Heading was 44% complete compared to the 5-year average of 46%.

By: Ben Stoller – Mercer Landmark Agronomist

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