March 28, 2017

American Soybean Association Message for Congress

The president of the American Soybean Association was in Washington, D.C. Tuesday. Ron Moore, an Illinois farmer - along with his counterparts from many agricultural commodity organizations, testified at a House ag subcommittee hearing. Moore says there are a few items on the top of the farm bill agenda for the ASA.


March 27, 2017

Corn Prices Moving Forward | an interview with Todd Hubbs

May corn futures’ prices tumbled to the lowest price level since December during the week ending March 24. Large crop estimates from around the world placed downward pressure on the corn market despite some positive domestic consumption numbers in exports and corn used for ethanol. Still, Todd Hubbs from the University of Illinois is hopeful there could be some support left in the corn market over time.

read full article on farmdocDaily


March 26, 2017

Historical Planted Acre Changes for Corn and Soybeans | an interview with Gray Schnitkey

Friday, March 31, 2017, USDA will release the Prospective Plantings report. The survey of U.S. farmers will estimate how many acres of corn and soybeans will be sown this spring. University of Illinois Agricultural Economist Gary Schnitkey talks with Todd Gleason about the historical changes in planted acres.



by Gary Schnitkey
see farmdocDaily post

At its annual Agricultural Outlook Conference in February, USDA projected that planted acres of corn would decrease from 94.0 million acres in 2016 to 90.0 million in 2017, a decrease of 4 million planted acres. At the same time, soybean acres are projected to increase from 83.4 million acres in 2016 to 88.0 million in 2017, an increase of by 4.6 million acres. Herein, we evaluate historical changes in acres across counties, thereby providing perspective on where likely 2017 acreage changes may occur.

U.S. Planted Acres

In 2016, planted acres to corn in the United States was 94.0 million acres (see Figure 1). This acreage level was the third highest number of planted acres since 2000, only being exceeded by 2012 (97.3 million acres) and 2013 (95.4 million acres). The 2017 projection of 90 million acres would be a 4.0 million acre decrease from the 2016 level. Plantings of 90.0 million acres would be about the same level as occurred in 2014 (90.5 million acres) and would be below the average planting for the last ten years.



In 2016, planted acres to soybeans was 83.4 million acres, the highest amount ever planted in the United States. Before 2014, planted acres to soybeans never exceeded 80 million acres (see Figure 1). Planted acres exceeded 80 million acres in each year since 2014: 83.2 million acres in 2014, 82.6 million in 2015, and 83.4 million in 2016.

In the following maps, acreage changes from 2011 to 2016 will be shown. In 2011, U.S. corn acres were 91.9 million, 1.9 million acres higher than in 2016. Reversing the corn acre increases during this five year period would go part way to reaching the decreases projected for 2017. The soybean acreage increase from 2011 to 2016 of 8.4 million represents twice the change projected from 2016 to 2017.
Corn Acre Changes

Figure 2 shows a map color coded to give changes in acres from 2011 to 2016. Counties colored blue had increases in acres, counties coded in orange had decreases in acres. Those counties that are yellow had essentially the same acres in 2016 as they did in 2011.



Several areas had pronounced increases. In particular, the northern Great Plains had sizeable increases. Between 2011 and 2016, North Dakota increased acres by 1.2 million, South Dakota by .4 million, and Minnesota by .4 million. Another area of sizable increase was Texas, with the planting .9 million more acres in 2016 than in 2011. Counties along the Mississippi River, especially in Arkansas, increased acres as well.

There were areas of notable decreases as well. Sizable decreases in corn acres occurred in Illinois. Between 2011 and 2016, planted acres in decreased by 1.0 million in Illinois. Indiana and Iowa had modest decreases as well.

Soybean Acre Changes

Figure 3 shows a map with planted acre changes for soybeans. Similar to corn, soybean acres increased in the upper Great Plans. Planted acres increased by 2.0 million acres in North Dakota, 1.1 million acres in South Dakota, and .5 million acres in Minnesota.



Other areas of significant increase were Illinois with a 1.1 million acres increase in planted soybeans. Planted acres also increased along the Mississippi River, parts of Kentucky and Tennessee, as well as areas in North and South Carolina.

Perspective on Changes for 2017

Areas with large acreage changes in the past likely will contribute in a significant way to acre changes from 2016 to 2017. These areas include the upper Great Plans, Texas, and the corn belt.

It seems conceivable that total corn and soybean acres could continue to increase in the upper Great Plains in 2017. Much of the acreage increases of corn and soybeans between 2011 and 2016 came from acres previously planted to wheat. In 2017, wheat acres could continue to decrease, leading to increases in corn and soybean acres. Whether corn acres will decrease while soybean acres increase in this region is an open question. One event that could lead to acre decreases is higher incidence of prevented planting. Prevented plantings were low in 2016, leaving open the possibility of increases in prevented planting acres in 2017.

Texas could see acreage shifts away from corn. Cotton prices look favorable, and an increase in cotton acres could contribute to fewer acres in corn.

Illinois and the corn belt in general could see shifts from corn to soybeans. Returns from crop budget suggest soybeans will be more profitable than corn (farmdoc daily, December 6, 2016), suggesting a shift is possible.

While budgets suggest the possibility, acre shifts have been slow in coming. Perhaps the most likely area where a shift will occur is where corn acres exceed soybean acres by a considerable margin. Corn acres divided by soybean acres exceed 1.0 in many counties in southern Minnesota, Iowa, northern and central Illinois, and western Indiana (see Figure 4). Bringing these areas back closer to a 50% corn - 5% soybean rotation, indicated by 1.0 corn divided soybean value, could increase profits suggesting that switches are possible.



Summary

Areas that experienced large acre changes in the past likely will be the ones where acres changes occur in 2017. This suggests focus on the upper Great Plains, Texas, and Illinois and the corn belt more generally. Continued corn and soybean acreage increases in the upper Great Plains seem reasonable to expect, except if prevented planting acres increase significantly. Texas could experience reduced corn acres. Budgets suggest switches to more soybeans from corn in the Midwest, although this is the case in previous years. Further indications of planting attentions will be received with the release of NASS’s Prospective Plantings report on March 31.


March 20, 2017

Anticipating the March 1 Soybean Stocks Estimate

USDA, at the end of this month, will let us know how much of the nation’s soybean crop there is left in the bin. It “should” be a fairly uneventful number.

by Todd Hubbs
read full farmdocDaily article

On March 31, the USDA will release the quarterly Grain Stocks report, with estimates of crop inventories as of March 1, and the annual Prospective Plantings report. For soybeans, the stocks estimate is typically overshadowed by the estimate of planting intentions. Usually, the quarterly stocks estimates for corn garners more interest because these reports reveal the pace of feed and residual use which is a large component of total corn consumption. The March 1 soybean stocks estimate this year may not provide much new information despite recent growth in marketing year ending stocks and concerns about the size of the South American crop… continue reading the full article by clicking here.

Generally, Todd Hubbs says it is pretty easy to figure out how many soybeans have been consumed. There is a regular reporting system for how many bushels are exported and one for how many are crushed. That second report, the crush, calculates how many soybeans are crushed in the United States into its two components. These are soybean meal and soybean oil. Hubbs, an agricultural economist at the University of Illinois, says the reports make it easy enough to calculate disappearance, consumption, usage, whatever you want to call, and consequently come up with a number that approximates how many bushels are left to use. Hubbs’ March 1 grain stocks figure for soybeans is 1.68 billion bushels. Here’s the math he used to get there.

Quote Summary - Exports for the first quarter were 932 million bushels. For the second quarter, I have them pegged at about 721 million bushels. I have the second quarter crush at 491 million bushels. This brings the total crush for the first half of the marketing year to 976 million bushels. We’ve been crushing a really good rate, but we have a lot of soybeans. So, with USDA raising ending stocks to 435 million, if that number holds and we don’t drive those numbers down, and if the March 1 stocks number is 1.68 billion, it means the last half of the marketing year we are going to have to consume about 1.23 billion bushels.

Hubbs thinks that is a reasonable number. It depends, though, he says mostly on what happens in the export market through August.



March 17, 2017

On the Value of Ethanol in the Gasoline Blend

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There has been much debate and much written about the likely costs and benefits of including ethanol in the domestic gasoline supply. Costs and benefits fall into two major categories–environmental and economic (e.g., Stock, 2015). One economic consideration is the potential impact on domestic gasoline prices from augmenting the gasoline supply with biofuels. A second economic consideration, and one that has received the most attention, is the cost of ethanol relative to petroleum-based fuel. What has been missing from the analysis of the value of ethanol in the gasoline blend is an estimate of the net value of ethanol based on: i) an energy penalty relative to gasoline; and ii) an octane premium based on the lower price of ethanol relative to petroleum sources of octane.

This farmdocDaily article provides an analysis of that net value since January 2007.


March 16, 2017

Building Extension 3.0


Kim Kidwell, Dean of the College of ACES - University of Illinois

Extension personnel facilitate the translation of many of the fantastic discoveries made at land-grant universities to people around the world. Oftentimes, this is the only way that this valuable information reaches people so they can make good decisions that improve the qualities of their lives. Kim Kidwell, Dean of the University of Illinois College of ACES, believes Extension embodies the essence of the land-grant mission because this is where transformation happens. She discusses, with Todd Gleason, how the future of Extension in the state of Illinois can provide the basis through which the discovery process can continue to help change people’s lives.

Read more from College of ACES Dean Kim Kidwell’s blog post here.


March 15, 2017

2016 Corn and Soybean Yields in Perspective


read the full article

The National Agricultural Statistical Service (NASS) recently released 2016 county yields for both corn and soybeans. In this article, maps are produced showing actual 2016 yields minus 2016 trend yields. Examination of these maps shows areas of above trend and below trend yields for 2016. Areas of above trend yields will have higher 2016 incomes relative to those areas with below trend yields.


Individual county trend yields are calculated using data from 1972 through 2016. A linear line is fit through these yields using ordinary least squares. The 2016 trend yields were based on these linearly fit relationships.

The following maps report actual minus trend yields. By calculating trend yields, the inherent productivity of the farmland is taken into consideration, and actual yields are stated relative to that productivity.






Schnitkey reports those areas with above trend yields will have relatively higher incomes than those areas with below trend yields. In 2016, lower grain farm incomes will be more pronounced in the eastern corn belt and particularly in Indiana and Ohio.


March 13, 2017

Big South American Crops Pressure Price | an interview with Todd Hubbs

by Todd Hubbs
read the full article

Corn and soybean harvest future prices moved sharply lower after the release of the USDA March World Agricultural Supply and Demand Estimates report on March 9. December corn futures closed on March 10 at $3.87 per bushel, while November soybean futures moved down to close at $10.00 per bushel. Both prices closed at the lowest levels since late January. When combining the production forecasts for South America with projected changes in domestic use, the competition in export markets looks to be particularly tough for the next few months.


March 01, 2017

Hog Prices Outperform Expectations

There’s some good news for a change in the pork industry. Todd Gleason has more on the better prices with Purdue Extension Economist Chris Hurt.

Pork producers are pleased to see prices higher than earlier expectations.

This comes after a really tough year, says Purdue’s Chris Hurt, that bottomed out in November with prices dropping to about $32 for a hundredweight. That’s like paying 32 cents a pound for your pork chop and your bacon - at least at the wholesale price. Now things are way better says the ag economist. Recently live prices have reached the mid-$50 and have pulled the industry out of deep losses into profitability.

The leading reason for the better on farm price is actually lower pork prices at the grocery store. The “law of demand” says people will buy more when prices are lower, and retail pork prices… have been lower say Chris Hurt, “Retail pork prices peaked in 2014 because of reduced supplies due to the PED virus and have generally been falling since 2015. In the final quarter of 2016, retail pork prices dropped 26 cents per pound from the same period one year earlier. The downward movement continued in January of this year with retail pork prices down 22 cents per pound from one year earlier.”

An additional issue contributing to the extremely low prices for pork producers last fall was the small portion of the retail dollar getting back to producers. Another way of saying this is that the margins for the processors and retailers remained substantially higher than normal. As a result, the portion of the retail pork dollar that got back to the producer dropped to 17.5 percent. This was lower than the previous record low of 18.4 percent in the financially tragic final quarter of 1998. As for the rest of 2017, Hurt thinks there is room for even lower retail prices and a higher percentage of that price getting back to the hog producer.

Probably the biggest opportunity for hog producers is the advent of new processing capacity coming on line in the last half of 2017. The added competition for hogs will likely reduce the farm-to-wholesale margins with much of that reduction bid into higher hog prices. In 2016, for example, USDA reported the farm-to-wholesale margin as 70 cents per retail pound compared to 58 cents in 2015. Export demand remains a positive for the 2017 hog price outlook as well. USDA expects a four percent increase in exports with little change in imports.

Pork supplies are not the reason for higher hog prices in 2017. So far this year, pork production has been about three percent higher than for the same period last year.

Live hog prices are now expected to average near $51 for 2017, up from $46 in 2016. Live prices are expected to average in the very high $40s in the first quarter, then move to the low-to-mid $50s in the second and third quarters, and then finish the final quarter in the mid $40s.

Total costs of production for 2017 are expected to be near $50 per live hundredweight, similar to the annual forecast price of hogs. If so, this means pork producers will recover full costs of production in 2017. Losses in the first and fourth quarter would be offset by profits in the second and third quarter.

There has been an overall improvement in prospects for animal and animal product prices since last fall. That is true for beef, pork, and milk markets. The source of that improvement may well be related to the general improvement in the anticipated economic growth rates for the U.S.-think of the stock market increases since the election. These increases are largely based on anticipated policy that will stimulate the economy, including tax cuts, infrastructure spending, and reduced regulations.

Markets for animal products remain vulnerable to at least three outcomes that could differ from current optimism: 1) The anticipated economic stimulus is not implemented, 2) The strength of the U.S. dollar slows agricultural export sales from anticipated levels, and 3) The U.S. moves in a direction of more protectionism that increases trade barriers and reduces our agricultural export sales potential.

Each industry is trying to figure out what the new administration means for them. Agriculture incomes are importantly influenced by the domestic economy, by the global economy, by exchange rates, and by trade. Agriculture, like other industries, must take a “wait and see” attitude.


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