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 July, 2016

After a disappointing year of corn returns, grain elevators eye their options

By: Diana Klemme – Courtesy of Feed and Grain Magazine

“Corn is King” — at least in most states. The United States has raised 126 billion bushels of corn in the last 10 years; soybean and wheat production together total just 54 billion bushels. There are only a few major states where corn production falls short of wheat or soybeans: Montana, North Dakota, Oklahoma and Washington among them. Merchandisers and managers in most states consider corn their bread and butter and count on good returns each year from storage and drying revenue, along with basis appreciation. But returns on corn have been disappointing for many elevators this year, despite the 13.6B bushel crop.

Basis has been relatively flat in many markets for months, and shows negative returns since winter in some markets where production was largest. Many elevators have held onto hedged corn, waiting for basis to rise. After all, in years where supplies are plentiful, the market should pay a respectable carry! Maybe it should, but that doesn’t always happen. Then the flood of farm selling in April added to the long basis positions. Ethanol plants and other end users weakened their basis in response. Now, in May, managers are eying the calendar and debating whether corn basis will weaken or strengthen this summer. But with the clock ticking, waiting for basis to rise cuts your available shipping window, even while farmers have more corn to sell.

Here’s a recap of published spot corn bids for five markets on four scattered dates since early April. The markets include three ethanol plants, one river market, and one feedlot market. Two of the markets are in the West Corn Belt or Plains and the other three are in the East. I converted all bids to July futures using the May/July corn spread on the selected date(s).

The table shows that, so far, waiting since early April has produced minimal returns — if any. Some markets do show forward summer bids that are above interest costs; others do not. The best plan, in my view, is to get ahead of your competition; put offers in front of buyers and be ready to negotiate, whether or not you like the values. Even if basis does heat up later in the summer, many elevators would not be able to ship enough, fast enough, to clear out ownership before harvest arrives.

Summer basis will be influenced in part by each area’s March 1 corn stocks and projected Sept 1 carry-out stocks relative to other areas. The U.S. corn carryout this summer will be around 1.8 billion bushels, the largest since 2004 crop. March 1 (2016) corn stocks were 7.81 billion bushels, the largest since the CCC days back in the 1980’s, although not significantly larger than year-ago stocks. The additional bushels aren’t distributed evenly, however.

Corn production was hurt in areas east of the Mississippi River, while Western areas saw some record yields, which is reflected in the stocks. Although corn stocks are down this year in Eastern states, they’re still far above where March stocks were in 2013 after the short crop of 2012. This year Illinois, Indiana and Ohio alone had 650M bushels more corn on hand March 1 than three years ago. And several Eastern markets have brought corn trains in this year from the North Plains on special rail rates to bolster supplies. Other Eastern buyers were aggressive early on with strong summer (2016) bids that likely attracted a lot of forward purchases. There will be plenty of corn to go around this summer — even in the East — which doesn’t bode well for basis.

Takeaways from 2015 crop

Maybe your 2015 crop corn P&L isn’t terrific; that happens sometimes. After all, no one can force basis to rise, and the market doesn’t owe you a profit. The challenge then is to protect every possible cent of what is available.

Mike, the country elevator manager at a Corn Belt location, asked himself that question. “My corn P&L doesn’t look good so far, and I don’t see the summer getting better. What could I have done differently?”

Our answer to Mike would vary by market. One task is to always monitor forward basis values as closely as spot bids. Be sure you don’t automatically pass up selling and locking in good cash carries, assuming basis will be always be higher later.

Another area that can make a big difference is futures spreads. Every extra cent you can lock in on a futures carry is an extra cent for your P&L. The interest cost to hold corn is barely over 1½¢/ month; anything a futures spread pays above that helps defray other out-of-pocket costs or goes to the bottom line. Learn how to calculate Financial Full Carry on futures spreads, which is the theoretical maximum. Map out your merchandising plan before harvest and identify which futures spreads will be important to that plan. December/March is a key spread for most elevators; few firms can sell and ship before December all the corn they buy at harvest. Winter purchases typically make March/May important as well, to give merchandisers time to continue to liquidate ownership.

Chart 1 shows three key corn spreads from 2015 crop. They show that the best carries for each spread occurred well before the delivery month arrived. The biggest carry on Dec15/March16 corn came in September of 2015, for example. Waiting until after harvest to “roll” short corn hedges was costly; nearly 8 cents of the carry had vanished by November. Setting March16/May16 in December of 2015 wasn’t the highest that carry traded, but at almost 7¢ it was close. May16/ July16 also hit its highest value in December of 2015, before narrowing 3 to 4¢. (Note: May/July collapsed on expiration day on 5/13/16 — far beyond the point hedgers needed to have rolled out of May futures.)

Chart 2 shows corn spread values for 2016 crop. None of them are especially attractive — barely 50% of Full Carry at their highest values so far. (Full carry on Dec16/March17 corn is about 17.3¢/bushel as of mid-May). Huge fund trading is impacting spreads in ag markets these days, where activity is typically concentrated in the first three to four futures months. (89% of all open corn futures contracts are in the first three months as of late May 2016.) At times, then, spreads can temporarily move contrary to market fundamentals, narrowing in the face of big stocks and another big crop, for example.

There is no crystal ball that will tell Mike or anyone else what day a spread will reach its highest carry or what that carry will be. Timing can vary year to year. But spreads are critical to a successful merchandising program, especially for “King Corn” where volumes are so large and clearing inventories takes months. Identify your holding costs, set spread objectives early, and have spread orders working. You might use Dec16/March17 at 11¢ carry as your starting objective, but review that weekly; circumstances change. Be willing to act when opportunity knocks.

By~ Jeff Prickett

July is peak season for potato leafhopper on Alfalfa. With the dry weather this summer, potato leafhopper populations have quickly increased. Every field of alfalfa I have scouted this past week has been at economic thresholds for leafhopper populations and corrective action has been warranted. I would encourage all our alfalfa growers to be vigilantly scouting their alfalfa fields for leafhopper pressure every 1-2 weeks – especially on new alfalfa stands.

Scouting methods and economic thresholds:

1) Perform 10 pendulum net sweeps in 3 to 5 areas of a field (dry and calm conditions).

2) Count the nymph and adult leafhoppers from each of the separate sweeps of 10.

3) Average the leafhopper counts from the 3 to 5 areas that have been swept.

4) If the leafhopper count is equal to or higher than the plant height in inches, corrective action is     needed (example: 8” alfalfa has 8 or more leafhoppers per 10 sweeps, corrective action is needed).

Corrective actions:

1) Cut the alfalfa if it is at boot stage.

2) If alfalfa cutting is 7-14 days out, consider applying an insecticide such as Bathroid XL or Grizzly Too.

2) If recently cut, allow the alfalfa 7-10 days of regrowth and spray an insecticide such as Bathroid XL or Grizzly Too.

3) Be cautious of Pre-Harvest Intervals on applied insecticides (see label)

Other considerations:

1) For new or environmentally stressed alfalfa stands, consider adding a foliar nutritional such a Max-In ZMB along with Ascend plant growth regulator for increased plant vigor and regrowth.

2) If you have any questions regarding your alfalfa crop, please feel free to reach out to any of our Mercer Landmark Agronomy Staff for consultation and advice. We are here to help!

SOYBEANS FALL ON WET WEATHER OUTLOOK; MONEY MANAGERS CUT BETS ON HIGHER PRICES.

By: Tony Dreibus- AG Web

1. SOYBEANS DROP OVERNIGHT ON FORECASTS FOR COOL, RAINY WEATHER

Soybean futures declined overnight on speculation that the hot, dry weather forecast this week won’t be as bad as previously expected.

The outlook for the Midwest shows western areas cooler in the next six to 10 days, while rainfall in central and northwestern parts of the region will see rain showers that could improve soil moisture for corn and beans, said Donald Keeney, a senior agricultural meteorologist at MDA Information Services.

Still, dry weather will hit southwestern and far eastern areas of the Corn Belt, the forecaster said.

2. CORN, BEANS LOSE LUSTER FOR INVESTORS AS WET WEATHER IMPROVES PROSPECTS

Corn is no longer the belle of the ball, as speculative investors last week held more bets on a price decline than a price increase.

Speculators in the week that ended on July 12 were net-short 5,886 corn contracts, the first time in almost three months they held more short positions than long, the Commodity Futures Trading Commission said in a report on Friday.

Money managers also cut bets on higher soybean prices to the lowest level since April 11, CFTC data show. Speculators lowered bets on higher soybean prices to 128,813 contracts, down from 142,037 a week earlier, the agency said.

The change of heart about corn and beans comes as the weather looks nonthreatening in the Midwest. Traders and investors have been betting for weeks that hot, dry weather would curb production in the U.S., but so far that hasn’t happened. Rounds of stormy, wet weather have kept soil moisture up and prospects mostly positive.

As much as six times the normal amount of precipitation has fallen in much of the Corn Belt in the past two weeks, according to the National Weather Service.

3. THUNDERSTORMS IN SOUTHWESTERN IOWA CAUSING FLOODING; HEAT ADVISORIES IN EFFECT

Excessive rainfall in the southwestern quarter of Iowa have led to several flood watches and warnings in the area, according to the National Weather Service.

As much as 3 to 4 inches of rainfall have fallen already in the region, which increases the risk of floods along the Missouri River and its tributaries. Also at risk are counties in parts of extreme northern Missouri.

Along with the flooding, the area, along with much of northern Missouri, is under a heat advisory. Temperatures are expected to be close to 100˚F. with heat indexes topping 110˚F. Working outside is not advised.

Hot weather is forecast for much of South Dakota, Minnesota, and northern Iowa, where heat advisories are in effect.

Here are the key numbers from Tuesday’s World Agricultural Supply and Demand Estimates from USDA.

Corn: While production may be up by 110 million bushels in 2016/17, according to USDA, so are exports and usage. The agency projects old-crop ending stocks at 1.7 billion bushels, which is slightly below the average trade expectation of 1.806 billion. USDA’s new-crop ending stocks estimate of 2.081 billion bushels also proved to be lower than the average trade forecast of 2.205 billion bushels.

Soybeans: Despite record acreage, a rise in exports and crush are keeping soybean supplies where the trade expects. USDA projects new-crop soybean ending stocks of 290 million bushels, which is just slightly more than the average trade guess of 287 million bushels. Old-crop ending stocks are projected at 350 million bushels, which is slightly less than the average trade guess of 352 million bushels.

Wheat: While wheat exports were raised to 925 million bushels, the highest in three years, wheat stocks continue to climb. USDA projects ending wheat stocks of 1.105 billion bushels, the highest level since the 1988/89 crop year. However, that was slightly less than the trade’s expectation of 1.107 billion bushels.

By~Rick Mollenkopf

Now is a great time to pull samples from those just harvested wheat fields.

Lots of growers have had great yields which in turn have lowered fertility levels.

Mercer Landmark’s “YIELDMARK” precision ag system looks at your soils in a very in-depth way. In two acre grids or zone management grids.

We have the flexibility to tailor your fertility needs on your farm for N-P-K  plus micronutrients.

Micronutrients many times get over looked and yet they can be applied anytime spring,

summer , or fall.  Micronutrient levels can be measured with soil tests or, as is more common these

days, with tissue samples of the growing plant for the needs at the time plants use them more readily.

Some common micronutrients corn, soybeans, and wheat use are:

  1. Zinc – Helps with root development and leaf and vascular growth with seed formation
  2. Boron – Aids production of sugar and carbohydrates
  3. Copper – very important for reproduction growth
  4. Manganese –  Helps breakdown carbohydrates and Nitrogen metabolism
  5. Iron – Helps the formation of chlorophyll and to carry oxygen through the plant

There are many more micronutrients that plants use but which ones do you need in addition to N-P-K?

For these answers call any of your Mercer Landmark agronomy sales team and they will be glad to work with you and your agronomic needs.

By~ Steve Heckler

When considering to post spray soybeans, you should look at weed size instead of the canopy of the soybeans. Every inch of weed height is robbing yield from your field and the bigger the weed is, the harder it is to kill. One weed in soybeans we don’t think about to much is volunteer corn.Volunteer corn competes heavily with soybeans for water, nutrients and sunlight.

University studies show that 2 to 4 corn plants per 100 square feet can cause a 10% yield loss. If that is not reason enough to target this weed, volunteer corn roots provide a food source for corn rootworm larvae. Remove the food source and simultaneously eliminate any future eggs they might lay in soybean fields and reduce the risk of developing corn rootworm trait resistance.

Any questions please contact your local Mercer Landmark branch.