February 18, 2018

WILLAg Newsletter | February 18, 2018

February 18, 2018

The CME Group commodity markets are closed Monday in observance of President’s Day.

Last week I ignored the markets, mostly. My wife and I took some time to visit Savannah, Georgia. However, we still managed to find a way to incorporate corn & soybeans into our lives. I can remember taking a vacation in the late 1970’s with mom and dad to Estes Park in the Rocky Mountains. We went the long way through Iowa that summer so dad could get a look at the corn crop.

Naturally, there isn’t a corn crop to look at the United States right now so Claranne and I did the next best thing. We stopped in Kentucky where bourbon is made from corn, and then spent about an hour looking for a sign commemorating the place where the soybean was first introduced into North America. That is outside of Savannah. Both are chronicled here.

Don’t forget to buy your ticket for the All Day Ag Outlook. It is Tuesday, March 6, 2018. The markets are getting more interesting, and so are the agricultural politics. Each has a direct impact on your back pocket. We’ll take both up at the Beef House in Covington, Indiana.

Thanks!
Todd

Todd E. Gleason, WILLAg.org
University of Illinois Extension
(217) 333–9797 or tgleason@illinois.edu

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Crop Insurance & USDA’s Agricultural Outlook Forum

There are just seven more trading days left in the crop insurance price setting month of February. As of Friday, February 16 the December corn futures contract trading at the CME Group in Chicago has averaged $3.95 for corn. This compares to last year’s February average of $3.96. The November soybean contract is currently averaging $10.09. Last year it was $10.19. The September Hard Red Spring wheat trading in Minneapolis is currently averaging $6.32. This is the biggest departure from 2017. It is about 70 cents a bushel above last year’s price of $5.65.




use this youtube portal to watch the 2018 Agricultural Outlook Live

from USDA’s website | The Agricultural Outlook Forum (AOF), now in its 94th year, is the USDA’s largest annual meeting. This year’s Forum is titled The Roots of Prosperity. Along with the plenary panel discussion, attendees will choose from 30 sessions with more than 80 speakers and be able to visit a host of agriculture-related exhibits.

AOF is a platform facilitating conversation among those in the agricultural community, including producers, processors, policy-makers, government officials, and both foreign and domestic non-government organizations, on key agricultural issues and topics.

USDA’s Risk Management Agency (RMA) will lead a panel discussion titled “Crop Insurance in the U.S. and Abroad” in the Agricultural Policies Here and Abroad track that will be held Friday, February 23, 2018, at 10 a.m. EST.

Moderator
-Thomas Zacharias, President, National Crop Insurance Services

Panel
- Federal Crop Insurance Following the 2014 Farm Bill - Dr. Kent Lanclos, RMA
- Crop Insurance: A Producer Perspective - Chalmers Carr III, President & CEO, Titan Farms
- The International Market for Agricultural Insurance - Dr. Lysa Porth, Assistant Professor / Chair,
Ag Risk Management & Insurance, University of Minnesota

To obtain more information and register, visit the 2018 Agricultural Outlook Forum website.
View the full AOF Agenda.





Frankfort, Kentucky - Todd and Claranne Gleason took the Buffalo Trace Hard Hat tour to learn how bourbon is made. Grains, mostly corn some rye and wheat, are ground and the alcohol distilled from the mash. After distillation, the mash is dried (distillers dried grains & solubles - DDGS). This is sold and fed to animals.

The alcohol is stored in white oak barrels which have been charred on the inside. Temperature changes in the warehouse cause the alcohol to move in and out of the wood giving the bourbon its amber color.

The longer it is warehoused the smoother the taste. There is, for example, a big difference in the taste of Buffalo Trace bourbon, aged 8 years, and its Eagle Rare brand, aged 10 years. The only difference in the two barrels of bourbon is the age, but not the ingredient mix or distillation process.

Barrels stored lower in the warehouse and towards the center produce higher quality bourbon. This is because the temperature swings are slower than on the outer edges of the warehouse.





Pre-register and find full details of the upcoming Strategic Farm Marketing winter meetings at www.sfarmmarketing.com. Meetings run through mid-February. Be sure to check the full schedule online for a program near you.




Erected by the Georgia Historical Society, the Georgia/Florida Soybean Association, and the Georgia Agricultural Commodity Commission for Soybeans

Marker Text: In 1764, Samuel Bowen, a former seaman employed by the East India Company, brought soybeans (Chinese vetch) to the Georgia colony from China via London. Not having land available to sow seeds, Bowen asked Henry Yonge, the Surveyor-General of Georgia, to plant what is believed to be the first North American soybean crop in the spring of 1765. Yonge’s property,
Orangedale, was located nearby on Skidaway Island. Bowen’s successful cultivation led to a 1769 patent for the production of soy sauce for exportation to England. Soybeans in Georgia were soon eclipsed by other crops, and not widely cultivated in North America until the late 19th century. But since the 1940s, soybeans have become one of the most widely grown and lucrative cash crops in the United States.



The following is a history of the soybean as recounted by University of Illinois emeritus plant geneticist Ted Hymowitz. Over the years videographer Steve Parker and I nicknamed him “The Wild Soybean Hunter”. Hymowitz scoured Asia and Australia for wild relatives of the soybean. He found them, and brought them back to the University of Illinois for inclusion in the USDA Soybean Germplasm Collection.

Today these wild soybeans are used in the University of Illinois soybean breeding program to capture favorable alleles for yield that were lost during domestication. College of Agricultural, Consumer and Environmental Sciences researchers are also mapping traits from wild soybean that were involved in domestication or that have significantly different phenotypes from soybean.

The first written record of the soybean dates to the 11th century BC. The plant originated in the wilds of modern day Laos, Cambodia and Viet Nam. From these points it spread first to China in the north says University of Illinois Plant Geneticist Ted Hymowitz. This is where Chinese farmers adapted glycine soja or the wild annual soybean for cultivation.

It was a small black seeded wild annual. The Chinese selected for just two traits. The wild glycine soja trails and climbs. The Chinese made it an upright plant. They also selected for larger seed size. Those two traits mark the only differences between the first domesticated soybean and its wild ancestor. It happened about 3000 years ago.

It wasn’t until the twentieth century that the next real evolution of the soybean occurred. With the mechanization of agricultural processors, farmers and soybean breeders quickly realized a third trait had to be added to the soybean. It shattered at maturity and this was bad. Farmers needed to be able to harvest soybeans without having them pop out of the pod before they could be put into a machine. The trait was found in a soybean called CNS for Clemson non-shattering and was incorporated into all commercially grown varieties of the crop says Hymowitz.

So, domestication of the soybean started about 3000 years ago. The first written record comes from the 11th century Before Christ. The bean is derived from a wild annual called glycine soja that looks a bit like a morning glory… it’s a viney plant that climbs and trails and produces small black seeds. It can still be found today. This plant was domesticated by Chinese farmers who made it stand-upright and increased the seed size. And then, in the twentieth century, U-S farmers added a third trait. They bred the soybean so it wouldn’t shatter at harvest.

It wasn’t until the 1960’s and 70’s that the soybean as a crop really began to take off in the United States. This is about 200 years after it first arrived in America. The journey here from China was a long one.

In 1758 Samuel Bowen signed on as sailor for the East India Company with a ship called the Pitt. He was an Englishman. The ship sailed to India, and then on to Hong Kong. From there, says Plant Geneticist Ted Hymowitz, Samuel Bowen signed off the Pitt and onto a ship called the Success. Hymowitz and a friend spent two years tracking Mr. Bowen’s movements by researching the University of Illinois library. The Success, says Hymowitz, sailed north from Hong Kong to Tein Sein, China. It was not supposed to be in these waters and was likely scuttled by the Chinese. Samuel Bowen was imprisoned for four years.

He was eventually released and made his way back to the American colonies, in this case to Savannah, Georgia. Bowen brought with him a bag of soybeans. It was 1764.  Mr. Bowen was something of an entrepreneur. In 1767 he was issued a royal patent for soy-sauce. He’d acquired some property in Georgia, and was growing and pressing soybeans into soy-sauce on a farm he called Grenich. The sauce was grown for export to England. Bowen also pressed the soybean for oil.

Despite his death in 1777, Bowen managed to leave a legacy. The first recorded evidence of the soybean in the United States belongs to him. The minutes from a 1765 meeting of the Philadelphia Society for the Promotion of Agriculture acknowledges the receipt of 6 bottles of soy and seeds of Chinese vetch from Samuel Bowen. This is one story of how the soybean arrived in North America. There are others and Ted Hymowitz harbors one of them, but they cannot be proven.

So, it is a ship called the Success, Chinese imprisonment, and Samuel Bowen that are credited with the introduction of the soybean to North America in 1764. One-Hundred-Sixty-five years later two Americans set off for Asia to hunt down more types of soybean.

Just as the Great Depression was taking hold in the United States, the U-S government sent plant scientists to Japan, Korea, and northeast China on a mission. It was February 18, 1929, when Howard Dorsett of Carlinville, Illinois and Bill Morse a native of Lowville, New York set out from the states for east-Asia. The United States Department of Agriculture dispatched the two and their families on a mission to collect accessions, different types, of the soybean.

In the late 1920’s it was apparent the soybean was about to become a very important crop in the US. USDA wanted as many different versions of this Asian native as possible. Dorsett and Morse were both plant scientist. By April of 1929, they and their families had settled in Tokyo. Over the next two years the men…primarily Morse, because Dorsett fell ill with double pneumonia, collected exactly 4,451 different accessions of the soybean.

These were soybeans, says University of Illinois Plant Geneticist Ted Hymowitz, grown throughout east-Asian by native farmers. All but about 800 of the original accessions have been lost. In the 1930’s there was no germplasm repository, and Hymowitz says the seeds were probed, and if found useless, thrown away.

What happened with the collection in the 1950’s says Hymowitz was unexpected, yet predictable. He says when you collect a diverse set of materials, in this case lots of different types of soybeans, you do not know the value of the collection until something in it becomes useful.

In the 1950’s one of the accessions collected by Dorsett and Morse, a soybean called PI 88788 was found to be resistant to the soybean cyst nematode. The cyst nematode was and remains a major pest problem for U.S. farmers. The resistance found in PI 88788 is now incorporated, says Hymowitz, in 95% of the hybrids grown in the United States.

Hymowitz believes the material collected by Dorsett and Morse will become more valuable over time because it was collected before modern soybean varieties were developed. This is because we do not know what pathogens, diseases, may inflict the soybean in the future. It, therefore, is important to maintain the diversity of the remaining Dorsett and Morse accessions. Those accessions are housed at the University of Illinois in the Soybean Germplasm Collection.



All Day Ag Outlook

The annual WILLAg All Day Outlook is just a month away. Please plan to join us at the Beef House in Covington, Indiana Tuesday, March 6, 2018. Our line up is stellar this year. Check out the agenda below and buy your tickets today. The $30 price tag includes Beef House coffee and rolls in the morning and an always worth-the-wait lunch. Come met our analysts and bring your questions! We’ll open our doors at 8am central / 9am eastern time.

buy tickets online today

Beef House
16501 Indiana 63
Covington, Indiana 47932

Agriculatural Weather Outlook
* Eric Snodgrass, Meteorologist - Agrible, Inc.

Cash Grain Panel
* Aaron Curtis, MIDCO - Bloomington, Illinois
* Todd Hubbs, University of Illinois * Brian Stark, The Andersons - Champaign, Illinois
* Chuck Shelby, Risk Management Commodities - Lafayette, Indiana

Dicamba Unfiltered
* Aaron Hager, Extension Weed Scientist - University of Illinois

Soybean Panel
* Ellen Dearden, AgReview - Morton, Illinois
* Bill Gentry, Risk Management Commodities - Lafayette, Indiana
* Pete Manhart, Bates Commodities - Normal, Illinois
* Bill Mayer, Strategic Farm Marketing - Champaign, Illinois

How Grain Marketing is Changing
Block Trades, Variable Rate Storage, & the Tax Law
* Curt Strubhar, Advance Trading | Alliance Director Grain & Feed Association of Illinois

Corn Panel
* Curt Kimmel, Bates Commodities - Normal, Illinois
* Wayne Nelson, L&M Commodities - New Market, Indiana
* Mike Zuzolo, Global Commodity Analytics & Consulting - Atchison, Kansas
* Dan Zwicker, Zwicker Consulting - Waco, Texas





The Illinois Performance Tested Bull Sale has been a leader in introducing Illinois seedstock breeders and commercial cow-calf producers to the latest evaluation technologies and practices. The sale has offered some of the best genetics based on performance standards utilized by the beef industry. During the past 49 years 4,690 bulls have sold through the sale for over $8.5 million. This year’s sale is set for Thursday, February 22 on the Illinois State Fair Grounds in Springfield, though it is possible to bid remotely.



Soil & Water Management Webinar for Certified Crop Advisors
earn 4.5 hard to get Soil & Water Management CEU’s

Certified Crop Advisors in the state of Illinois looking for the hard to get Soil and Water Management credits should registered today for a University of Ilinois Extension Webinar. The soil and water management webinar will be held February 20 at locations around the state. Crop Advisors can earn 4.5 CEU’s, or Continuing Education Units, by attending. The cost is $45 and includes lunch and snack. The program runs from 9 to 2 Tuesday, February 20th. Check with your local Illinois Extension office for complete details.


February 12, 2018

Illinois Performance Tested Bull Sale



The Illinois Performance Tested Bull Sale has been a leader in introducing Illinois seedstock breeders and commercial cow-calf producers to the latest evaluation technologies and practices. The sale has offered some of the best genetics based on performance standards utilized by the beef industry. During the past 49 years 4,690 bulls have sold through the sale for over $8.5 million. This year’s sale is set for Thursday, February 22 on the Illinois State Fair Grounds in Springfield, though it is possible to bid remotely.


University of Illinois Extension Beef Specialist Travis Meteer helps coordinate the auction and benchmark bulls.


February 12, 2018

Limiting Per Farm Crop Insurance Payments



read the original farmdocDaily article

Farm Sizes Impacted by a $40,000 Crop Insurance Premium Support Limit
by Gary Schnitkey, Jonathan Coppess, Nick Paulson, & Carl Zulauf

Proposals have been made to limit the amount of Federally-paid crop insurance premiums on a per farm basis. A $40,000 limit was proposed in the last farm bill and the 2016 Trump budget included this limit as well. The sizes of corn and soybean farms that reach a $40,000 limit are examined for two counties in Illinois: a low risk county (McLean County) and a higher risk county (Saline County). For the low risk county, the farm size impacted by the limit is near 3,000 acres, not a particularly large farm. In the higher risk county, the farm size impacted by the limit is near 1,000 acres, a farm size that is relatively small by commercial grain farm standards. The 3,000 and 1,000 acre benchmarks assume 100% of share in crop production on farmland. Use of share rent agreement increases proportionally the acres necessary to reach the limit.

Background

The Federal government subsidizes a portion of the total premium of Federal crop insurance policies and this premium support represents a large portion of total Federal outlays associated with crop insurance. An often-made proposal has been to limit Federal premium support on a per farm basis. A crop insurance subsidy limit has some precedence in that commodity title programs have had limits throughout history (see farmdoc daily, March 24, 2017). Except for peanuts, program crop payments under the 2014 Farm Bill are limited to $125,000 per individual (farmdoc daily, August 21, 2014). Limits generally arise from equity concerns about individuals receiving too large benefits from the government. An often-discussed limit on crop insurance subsidies is $40,000 per farm. Once a farm reaches the $40,000 limit, all remaining premium would be paid entirely by the farmer. The remainder of this article shows farm sizes at which the $40,000 limit is reached.

Low Risk County

Table 1 reports farmer-paid, Federally-paid, and total premiums associated with a Revenue Protection (RP) policy for corn sold in McLean County, Illinois. McLean is a county in central Illinois that would generally be viewed as having low risk. These premiums are calculated using 2018 rates, a $3.96 projected price and a .19 volatility. The $3.96 projected price and .19 volatility are 2017 values. The values for 2018 will be known at the end of February. Premiums in Table 1 are for a 100 acre enterprise unit given a trend adjusted yield of 190 bushels per acre. RP is by far the most popular product sold for corn. In 2017, 95.2 percent of the acres in McLean County were insured using RP (Summary of Business data from the Risk Management Agency). Additionally, the most popular coverage level is 85%, which was used to insure 62.5% of the corn acres in McLean County.



The total premium for the 85% coverage level RP policy is $33.57 per acre. This total premium is set by the Risk Management Agency (RMA). RMA sets premiums so that expected payments (indemnities) over time from a policy will approximately equal total premium. In other words, the expected payment for the 85% coverage level is $33.57 per acre. In central Illinois, these payments will not occur every year. Rather, most years will have no payments or small payments. There will be a number of years with larger payments. Very occasionally, there will be a drought year like 2012 when large insurance payments will occur. Over that variety of possible years, RMA estimates that the total payment for these policies will be $33.57 per acre.

Farmers do not pay the total premium. The Federal government pays a portion of the premium as a means to encourage crop insurance use. The proportion of total premium paid by the Federal government varies by coverage level. For enterprise units, the proportion paid by the Federal government is 80% for 70% and lower coverage levels, 77% for 75% coverage levels, 68% for 80% coverage levels, and 53% for 85% coverage levels (see farmdoc daily, May 5, 2016 for rates on other insurance units). In Table 1, the portion of total premium paid by the Federal government for the 85% coverage level is $17.79 per acre. The $17.79 per acre value equals the 53% of the premium paid by the government at an 85% coverage level times the total premium of $33.57. The farmer then pays the remainder, or $15.78 ($33.57 total premium - $17.79 Federally-paid premium).

It is important to realize that the Federally-paid portion of the premium does not flow directly to the farmer. The final destination of the Federally-paid portion is influenced by a complex set of factors that include losses of crop insurance policies in a state relative to premium, decisions made by private crop insurance companies, and a “standard reinsurance agreement” that controls how losses are shared between the private crop insurance companies and the Federal government. The final destination of the Federally-paid portion could be to farmers as crop insurance indemnity payments when losses are experienced, to private crop insurance companies as underwriting gains, or it could be retained by the Federal government.

The Federally paid portion of the premium is the focus of proposals to limit premium support, such as the $40,000 limit. This limit would restrict Federally-paid premium to $40,000 per farm. If a farm in McLean County, Illinois only insured corn, the $40,000 limit would be reached with 2,247 acres at an 85% coverage level (2,247 = $40,000 limit / $17.79 Federally-paid premium). A further analysis of limits will be shown for a blended corn and soybean acres below.

Higher Risk County

McLean County, Illinois would generally be viewed as a relatively low production risk area. The $40,000 limit will be reached at a much lower acreage level in a higher risk area because per acre premiums are higher in these higher risk areas. To illustrate, corn premiums are also shown for Saline County, Illinois for a farm with a trend adjusted yield of 152 bushels per acre (see Table 2). Saline County is located in southern Illinois and is a riskier region than central Illinois.



Note that total premiums are much higher for Saline County. The total premium for an 85% coverage level policy is $98.62 per acre (see Table 2). This $98.62 premium compares to a $33.67 premium in McLean County. The 85% premium in Saline County is almost three times that of McLean County. Because it’s a higher total premium, the Federal-paid portion of the premium is higher. At an 85% coverage level, $52.27 per acre are Federally-paid. At an 85% coverage level, the $40,000 limit would be reached at 765 acres.

In practice, most Saline County farmers do not purchase crop insurance at an 85% coverage level. The most used coverage level in Saline County is the 75% coverage level. In 2017, 56.5% of the corn acres were insured using RP at the 75% coverage level. The 75% coverage level has a $16.05 farmer-paid premium and a $53.73 Federally-paid portion of the premium (see Table 2). Note that the Federally-paid premium is about the same at the 75% level ($53.73 per acre) compared to the 85% level ($52.27 per acre). While total premium is lower at the 75% level, the Federally-paid portion of the premium is higher at the 75% level as compared to the 85% level (77% at 75% versus 53% at an 85% coverage level). The higher percentage offsets the lower premium. At a 75% coverage level, the $40,000 limit is reached at 744 acres.

Premium Limits and Farm Size

Most farmer grow and insure both corn and soybeans. Soybean crops typically have lower risk than corn, resulting in lower premiums for soybeans. Those lower premiums will then impact acres required to hit the $40,000 limit. Table 3 shows Federally-paid premium for a blended acre of 50% corn and 50% soybeans, a fairly common crop rotation in Illinois. Corn premiums are those provided in Tables 1 and 2. Soybean premiums are shown in the Appendix Tables 1 and 2.



For the McLean County case, the most popular coverage option is 85%, and the $40,000 limit is reached at 2,813 acres. By way of comparison, average farm size in Illinois is 359 acres. The 359 acres include many farms that are small and receive a majority of their income from off-farm sources. The average grain farm size enrolled in Illinois Farm Business Farm Management is about 1,300 acres, representing a size that is closer to receiving more of their income from on-farm sources. There are many farms over 1,300 acres and a 2,813 acre would not be viewed as a particularly large farm.
For Saline County, the most popular coverage level is 75% and the $40,000 limit is reached at 992 acres. The 992 acres is below the average size for commercial grain farms in Illinois.

The above comparisons are based on farmers having a 100% share in the farmland. Under share rent situations, farmers would receive a portion of the crop and only insure a portion of the acreage. For example, a 50–50 share-rent arrangement would result in a 50% share in the crop. In this case, premiums costs (and resulting payments) to the farmer would be cut in half. If all farmland was 50–50 share rented, the values in table 3 would double. However, all farmland is not share rented on most farms. According to Illinois Farm Business Farm Management summaries, 46% of the farmland was share-rented in central Illinois and 37% was share rented in southern Illinois. Even after these considerations, farm sizes reaching those limits would not represent extremely large farms. Moreover, the proportion of land controlled under cash rent agreements tends to be greater on larger farms in IL, and there will be farms that have no share rented acres. Thus, the acreage limits listed in those tables would impact some farms.

Summary and Observations

A $40,000 limit has the potential to impact many commercially-sized farms. The impacts will be larger in higher risk areas. Central Illinois is one of the lower risk areas of the United State. Hence, the acreage limits to reach the $40,000 limit will be higher in central Illinois than in many other areas of the country.

The exact nature of the $40,000 per farm limit is unknown. The limit could apply to an individual as it does in the case of commodity programs. Or there could be some entity definition. In either case, farms nearing limits could evaluate ways of restructuring the operation so as to avoid limits.

$40,000 limit would set into play a complex set of insurance decisions for those farms reaching the limit. Those farms reaching the limit likely would lower coverage levels and move to different plans of insurance. These changes would reduce the risk protection offered to those farms. Movements to share rent are possible as well.


February 12, 2018

Soil & Water Management Webinar for Certified Crop Advisors

earn 4.5 hard to get Soil & Water Management CEU’s

Certified Crop Advisors in the state of Illinois looking for the hard to get Soil and Water Management credits should register today for a University of Ilinois Extension Webinar. The soil and water management webinar will be held February 20 at locations around the state. Crop Advisors can earn 4.5 CEU’s, or Continuing Education Units, by attending. The cost is $45 and includes lunch and snack. The program runs from 9 to 2 Tuesday, February 20th. Check with your local Illinois Extension office for complete details.


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