Blogging by the Bushel
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Archive for April, 2015

I’ve been asked a lot lately “What should I do with my un priced grain?” This article written helps to shed some light on this million dollar question.

By Amy Sage, Executive Account Representative, The Andersons

As more and more farmers across the Midwest are working ground, applying nitrogen, and planting corn, one of the most frequently asked questions we are getting is “what should I do with my old corn and should I hang onto it?” In order to make that decision, let’s look at historical market activity and what we know about our situation today. Historically, the nearby July option month is extremely volatile which, needless to say, can be very good or very bad for the farmer (see the charts below). The past 8 years have included some extreme circumstances, including Chinese demand, ethanol, and a record drought.

Today, the US is coming off of record production and sitting on plenty of old corn. There is a shift in acreage from corn to beans anticipated for the 2015 crop. Those numbers are factored into the current trade. With that information, July 15 corn has been trading within a 30-cent window ($3.75 – $4.05) since mid-January and a 20-cent range ($3.77 – $3.97) since the Mar 31 report.

It will be difficult to see any type of weather rally this early in the game so we are likely going to be subject to outside influences along with planting progress updates. The market will not seriously react to planting delays until late May. We cannot and should not rule out the possibility of some type of weather-related price rally at that point in time. The difficulty is farmer selling pressure will likely limit any bounce in old crop corn prices based on that outcome. The March 31 stocks report was a stark reminder growers are holding onto a higher percentage of old crop corn than usual for this time of year.

The positive effect from the lack of farmer selling 2014 crop is that basis levels have continued to improve throughout the year despite the large crop size. This basis improvement will likely come to an end as soon as we see the trigger being pulled on cash corn. Long story short, there is limited upside in old corn even with a weather rally this summer.

By: Jeff Keller

The calendar shows we are heading toward the end of April and most grain farmers are getting their equipment ready if they have not done so already. As we keep watching the weather forecast let’s also be watching some other things around the farm.

Grain Markets: They are not the most attractive right now so if you have some stored on the farm watch it closely.  Temperature changes can affect the grain, especially in higher moisture corn. Pulling some grain out of the bin is the best thing to do, if at all possible.

Safety equipment: We can never be too safe.  After servicing the equipment, go over it again to put on guards and shields. Take the time to fix lights and keep SMV signs on the back of everything being hauled down the road. Make sure other people can see you by having plenty of lights on the equipment and using them.

Work smarter, not harder: Look around at your farm and at your equipment to think of ways to help your body. Maybe this is putting extra steps on equipment to climb into it or having an extra set of tools in the tractors instead of the do-it-all vise grips. Even add rock boxes on tillage equipment instead of watching them roll around in the cab for the next two days. Having platforms on the planter for seed is another time saver to keep extra ready to dump in.

This is some food for thought for tomorrow when you are working on getting that pot of coffee drank and looking at the wet spots in the fields.

PEGGY HALL & GLEN ARNOLD, OSU EXTENSION

Ohio’s legislature passed a bill intended to control algae production in Lake Erie and its western basin. The law will regulate manure and fertilizer applications in the watersheds of the western basin of Lake Erie. The effective date of this new law is June 21, 2015.

The final bill contains the following provisions:

Fertilizer Application Restrictions In The Western Basin

For applications of fertilizer in the western basin, a person may not apply fertilizer, defined as nitrogen or phosphorous, under these conditions:

On snow-covered or frozen soil, or

When the top two inches of soil are saturated from precipitation, or

In a granular form when the local weather forecast for the application area contains greater than a 50% chance of precipitation exceeding one inch in a twelve-hour period, unless the fertilizer is injected into the ground, incorporated within 24 hours of surface application or applied onto a growing crop.

Small and medium operations may apply for a temporary exemption from the restrictions, as explained below.   The ODA will have authority to investigate complaints of potential violations and to assess penalties for violations, which may not exceed $10,000 for each violation.

Manure Application Restrictions In The Western Basin

A person may not surface apply manure in the western basin under any of the following circumstances:

On snow-covered or frozen soil;

When the top two inches of soil are saturated from precipitation;

When the local weather forecast for the application area contains greater than a 50% chance of precipitation exceeding one-half inch in a 24 hour period, unless the manure is injected into the ground, incorporated within 24 hours of surface application, applied onto a growing crop, or if in the event of an emergency, the chief of the division of soil and water resources or the chief’s designee provides written consent and the manure application is made in accordance with procedures established in the United States department of agriculture natural resources conservation service practice standard code 590 prepared for this state.

Small and medium operations may apply for a temporary exemption from the restrictions, as explained below. The ODA will have authority to investigate complaints of potential violations and to assess penalties for violations, which may not exceed $10,000 for each violation.

Exemptions For Small And Medium Operations:

Small and medium agricultural operations may apply for a temporary exemption from the law’s restrictions on fertilizer and manure applications. The chief of the division of soil and water resources may grant an exemption of up to one year for a medium agricultural operation and up to two years for a small operation, if the operation is working toward compliance. An exempted operation may request technical assistance to reach compliance, and will not be subject to civil penalties for violations.   The law defines small and medium agricultural operations in the same way as the Livestock Environmental Permitting program, based on the number of livestock according to species. ORC 1511(D)

Certification Requirements For Persons Using Manure From Confined Animal Feeding Facilities:

To utilize manure from a concentrated animal feeding facility that is regulated under ODA’s Division of Livestock Environmental Permitting, a person must hold either a Certified Livestock Manager license or certification under Ohio’s new fertilizer applicator certification program. The provision pertains only if applying the manure for agricultural production on more than 50 acres. This language closes the proclaimed “loophole” that allowed persons to receive and apply manure from a livestock facility without being subject to the same regulations as the facility. ORC 903.40

Implementation Review:

The final version of the legislation requires a review three years after the law’s effective date by the appropriate House and Senate committees, who must assess the results of implementing the new measures and issue a report of their findings and recommendations for revisions or repeal to the Governor.

Source: Ohio State University Extension C.O.R.N. Newsletter

Still Debating Whether You Will Plant Corn or Soybeans? So is the Trade.

If you were hoping Thursday’s USDA numbers would offer a clear signal to plant either corn or beans, you weren’t alone. But between the changeable spring weather and sideways trading patterns in the market, there are still many unknowns for producers and the trade alike.

“The question is going to be, are farmers going to look at $4 corn on the board, subtract their basis and say, ‘Well, I’m not going to plant corn, I’m going to plant beans,’” asked Chris Robinson of Top Third Ag Marketing in a post-report CME webinar. “Because with beans with on the board at $9.50, most guys can still make money. But sub-$4 corn for some producers—it’s a no-win.”

At the same time, soybeans are surrounded by downside price risk.

In South America, Brazil and Argentina again are expected to produce big harvests—94.5 million metric tons for Brazil and 57 million metric tons for Argentina. “There is going to be some big offers of soybeans coming out of South America as we go through the harvest season down there, and I expect them to pound on the market, especially when you have moves in the dollar like we had [Thursday],” said Jack Scoville of The PRICE Futures Group, who also participated in the online discussion.

Closer to home, a rainy spring may cause Delta farmers revise their planting expectations. “Their stop date to switch from corn to beans is probably tax day—April 15,” said Robinson. “If they can’t plant corn, they’re going to plant more beans. That’s another bearish weight, potentially, on soybeans in a market that’s full of bearish news.”

As a result, many farmers appear to be taking a second look at corn, despite its higher cost of production.

“I was surprised by how much corn some of my producers were thinking about planting,” Scoville said. “They’re trying to play the contrarian card. They thought there would be so many soybeans getting planted that they could plant corn and maybe see the price of corn go up… Maybe it will work out for them if this rain keeps up.”

It could also backfire. “A lot of guys are planting corn anyway,” agreed Robinson, who referenced a University of Illinois farmdoc Daily piece which suggested that farmers might plant approximately 90 million acres of corn this year. “They said that if farmers have their way, they generally want to plant corn. So, at the end of the day, even if they’re thinking about switching to beans, the corn’s going to get planted.”

That possibility concerns him. “Hopefully they don’t run into a situation where they create such a huge supply that they hurt themselves,” Robinson said.

Regardless of what a farmer chooses to plant this spring, both Robinson and Scoville emphasized the importance of having realistic price expectations and being ready to respond to market moves.

“If you’re a producer, this is the type of market where you ‘SOS’– sell on strength,” Robinson explained. “Don’t be afraid to get some sales done, because this could be a bad year to sit and do nothing and just hope for higher prices.”

Scoville agreed. “Don’t look for the top dollar this year,” he said.

That will require a shift in mindset for many producers. In 2008 and 2009, “your best marketing plan was to grow it and store it and wait. Last year that was the first year in a long time that it caught up to [producers],” Robinson said. “They waited for the rally, and the rally never came … Make sure you’ve got a plan to deal with the possibility of low prices.”

USDA’s adjustments were in the right direction, based on pre-report estimates, but the market traded lower in all the crops.

The increase in U.S. corn ending stocks was actually 30 million less than the average trade estimate based on Bloomberg’s survey of analysts, but it was still up 50 million bushels. The main reason behind the hike: The March Grain Stocks report implied poorer usage than USDA had portrayed in its March WASDE report, where it had pumped up the feed/residual category—an unusual move in that report, according to Alan Brugler of Brugler Marketing and Management. “That increase was reversed today.”

Global stocks also bounced higher—by more than 3 MMT—after USDA cut them sharply last month. On balance, this report suggests livestock operations do not need to worry about feed supplies. USDA seemingly agrees, having raised its estimates for beef production by 150 million pounds, to 24.24 billion. That’s still below last year’s total and the market can certainly absorb the added tonnage. Interestingly, the increase is expected in the second half of the year—debatable given a smaller cattle herd and presumably some heifer retention as better moisture has encouraged herd rebuilding in some areas. The only conclusion to be drawn is that USDA expects heavier weights.

Pork production also rose from the March report, from 21.12 billion pounds to 24.24 billion, with production outstripping last year in every quarter. Broiler production was left unchanged from March, at 3.8% and turkey was trimmed from 6.075 to 6.025 billion pounds, possibly due to bird flu losses. That’s still 4.7% over last year.

Jerry Gulke of the Gulke Group adds that it is important July wheat futures remain above $5/bu. or wheat will be competing with corn in the feed bunk. “Tomorrow’s trade is probably more important than what we saw today. That $5 level needs to hold on the weekly close or wheat charts will be in trouble.”

The wheat balance sheet also saw some tweaks, but nothing terribly exciting—and stocks actually tightened compared with last year and the average trade guess. Contrary to global corn and bean ending stocks, those for wheat tightened slightly, to a 27.5% stocks/use ratio, says Brugler. At 197.21 MMT, “that’s still adequate.”

The soybean balance sheet saw quite a few adjustments, including 6 million more bushels of seed use, reflecting record planting intentions, and a 14-million bushel increase in residual use. Given the strong dollar especially  against the Brazilian real, the 5 million bump in imports is not unexpected. A remaining question is whether USDA’s export figure, left unchanged at 1.79 billion, is too high, too low, or just right.

More worrisome for beans is the record loose soybean stocks in the global arena, at nearly 31%. Given that Brazilian beans are priced below US Gulf beans all the way out to October, this bodes ill for 2015 exports and prices.

The news wasn’t good for cotton, either, as ending stocks bumped up to 4.4 million—not on changes to use but on higher yield estimates (806 lb./acre instead of 795) and production, now pegged at 16.3 million bales, up from 16.08. No changes to sue led to the increase of 200,000 bales. World cotton carryout bumped higher as well, to 110.09 million.

By: Mike Niederman

To have a healthy corn crop all season long with strong yields in the fall it all starts from the beginning.  I want to cover a few reminders for this upcoming planting season, especially with all the rain we have been having.

Avoid tillage unless the field has the proper soil conditions.  You’re not doing yourself any favors by compacting the fields in order to get acres prepared earlier.  Instead you will just end up decreasing the yield potential of those fields.  When it comes time to plant, pay more attention to field conditions than the calendar.  If you’re planting into cool, wet soils, you’re risking losing yield and money on a very expensive investment.

Adjust seeding depth according to soil condition.  At earlier times when soils are not drying out as quickly, plant at 1.5 inches.  When soils start warming up and drying faster you should increase seeding depth to 2 inches or more.  If you are not equipped with a variable rate planter then I would at least recommend that you vary seed rates from field to field.  Everyone has those fields that always yield well for them while other fields fail to reach those numbers.  Increase your rates in those fields with higher potential to make sure you’re getting the most out of your investment.

Talk with your local Mercer Landmark Agronomist to learn appropriate seeding rates for your specific hybrids.

By: Kevin McNew and Cody Bills

It seems like it was yesterday when the USDA released its last monthly report on March 31st.  Now another monthly WASDE report is slated to be released tomorrow April 9th at noon. So what can we expect from this report?

The average analyst expectations for the WASDE report according to a Reuters poll of 20 analysts is as follows. The average guess among the analysts polled for wheat ending stocks is 692 million bushels, up one million bushels from the March report. Corn ending stocks are expected to be reported at 1.854 billion bushels up from 1.777 billion bushels reported in the March WASDE report. Soybean ending stocks are expected to come in around 370 million bushels which would be a decline of 15 million bushels from the March report.

Traders will also be following South American production which is wrapping up harvest in many areas. Argentina corn production is expected to be revised slightly higher than in March to 23.90 million metric tons from 23.50. Argentina soybean production is also expected to increase to 57.23 million metric tons from 56 last month. Brazil production is expected to be revised slightly lower than March with corn production expected to decline to 74.82 million metric tons from 75.00 in March. Soybean production is also expected to decline to 94.18 million metric tons from 94.5 in March.

Across the Midwest rains will be keeping producers out of the fields through the end of the week. Precipitation will be focused on the northwestern part of the Midwest early on and shift to the central and southeastern part by weeks end. Rains will continue to halt planting along the Mississippi river delta.

By: Kyle Imwalle

With the weather getting nicer out, it is time to start getting those fields ready for planting.  One of the best things you can do for your field no matter what kind of tilling practices you use is burn down.

Timing is key to spring burn down, you want enough time to allow the herbicides to work but not too much time where the residuals start to lose some of their powers and weeds may start to reappear.  Planting into fields with newly emerged weeds may cause issues with crop emergence.  Ideally burn down should be sprayed 1-2 weeks before planting to allow for weed decomposition.

Like everything else in the crop world weather plays a huge part. The efficacy of herbicides can be reduced with cold temperatures.  When nighttime temperatures are above 40 degrees is when applying herbicides work the best.  Applying herbicides in cooler temperatures may greatly reduce the control of biennial and perennial weeds.  Herbicide activity may slow or delay development of plant uptake.  If weeds do survive the initial burn down weeds may become hardened to future herbicide applications.  Add Ammonium Sulfate to help enhance absorption and bind hard water ions.

A common tank mix for both corn and soybean burn down is Roundup and 2,4-D.  Another chemical you can add is dicamba. With these and other burn down mixes pay close attention to the plant back restrictions.  Rain fall may push the plant back date even farther then the label suggests.

Talk with your local Mercer Landmark Agronomist today creating an herbicide program to help maximize your burn down potential.

While we cannot call it turn-around Tuesday, how about wild and wooly Wednesday?  The markets quickly got over any disappointment they may have experienced concerning the USDA reports and forged back higher led by fund buying.  Wednesday the funds purchased 7,000 corn, 9,000 beans and 6,000 wheat.  While this was likely a combination of short-covering as well as positioning for possible seasonal issues, it would seem to re-enforce ideas that it is too early in the growing season and we had too little risk premium in prices to expect much of a down swing.

It’s important to note that corn will most likely score and outside week lower after making a new weekly high pre-report before closing below last week’s low. This indicates momentum has swung and is normally followed by lower trade over an extended time frame. For example, the last time December corn completed an outside week lower was after the USDA’s January crop report. In the following month after the report, the market slipped another 30 cents and has not seen that week’s high of $4.40 since.

Seeing this is the last trading day of the week and an extended weekend ahead, I have to suspect volumes will be reduced. Funds came into this week short, particularly in beans and wheat so we could be open for additional covering but once again, I would not expect anything outside of recent ranges.  Looking out to next week, the focus should shift towards weather and while the slow pace in the south remains a concern, I do not see anything that should generate major excitement.

Have a Blessed Easter