CMEG Crop Management Extension Group

Field Crop News

Website Address: http://fcn.agronomy.psu.edu/

December 13, 2006    Vol. 06:28

IN THIS ISSUE:

Weather Outlook — Paul Knight

No return to cold weather is expected for about a week. The mild conditions will be tempered by clouds and passing showers on Wednesday and there will likely be a chilly morning on the weekend, otherwise expect daytime temperatures to average 5 to 15 degrees above seasonal levels (north=40’s, south=50’s to low 60’s) for the next 5 to 7 days. Record warmth is possible on a couple of days early next week. Precipitation will be sparse with only the northwest expected to measure near normal rainfall. An intrusion of cold air is expected in the days leading up to Christmas, but it should retreat rather quickly. There are indications that the first month of winter (mid—Dec to mid—Jan) will be characterized by very mild spells interrupted by cold snaps, but the mild weather should dominate. There are also signals that below average precipitation will be the rule for much of Pennsylvania during this next month. It is still possible that the majority of January will turn very cold, but odds are diminishing as El Nino stays strong.

Ethanol Could Push Corn to Record Highs — Greg Roth, Grain Management, Crop & Soil Sciences

12-06-06: In testimony before a Senate environment committee, USDA chief economist Keith Collins said that with ethanol prices at the plant of $2.25/gal., a dry mill plant could pay up to about $5/bu. of corn and still cover operating costs.

“The all—time record—high season—average corn price is $3.24/bu. and corn prices have exceeded $3/bu. in only three other years. In other words, with continued strong gasoline and ethanol prices over the next several years, corn prices will not discourage ethanol expansion unless corn prices increase to well beyond previous record—high levels.” He added that corn prices could set new record highs over the next 5 to 6 years.

In 2000, about 6% of U.S. corn production was used for ethanol, about 14% in 2005, 20% in 2006, and for the first time, in the 2006-07 marketing year, corn used in ethanol is expected to equal the amount of corn exported. But ethanol production could rise well above current levels.

Collins said that ethanol production capacity could increase to 8.5 billion gallons by 2008–09 and more than 10 billion gallons by 2010 if many of the new plants planned are built. That compares with 1.6 billion gallons of ethanol in 2000, and 5 billion in 2006.

Today, more than 100 ethanol plants operate in 20 states, with 42 ethanol plants under construction and another seven are expanding, according to the Renewable Fuels Association. When that construction and expansion are completed, ethanol capacity in the United States will be 7.7 billion gallons per year.

Another implication is that “ethanol plants will likely be able to bid corn away from other users over a wide range of corn prices,” Collins said. He added that ethanol production is exceeding most analysts’ expectations, including USDA projections. USDA will release a new analysis this winter.

In further sobering news for egg producers, Collins told the senators that corn stocks are likely to be increasingly tight and corn prices high, “so the corn sector will be highly vulnerable to market disruptions — ethanol plants and other users will be operating in a much riskier environment than what we have today. Market disruptions are likely not only from supply disruptions due to natural causes, but also from market participants such as China, which as witnessed in energy markets, can be a big demand—side factor. A systemic natural disaster, such as drought, could cause dramatic corn price increases under this tight environment.”

Despite this outlook, markets do work, Collins said, and corn yields since 2004 have exceeded the long—term trend based on 1980–83 data. If these yield increases reflect a faster pace of improved seed varieties and adoption, trend corn yields could well exceed 155 bushels by 2010. Each 5 bushel increase in yield above the current trend would be the equivalent of adding around 2.5 million acres to corn plantings, enough to produce an additional 1 billion gallons of ethanol.

WATT Egg Industry Insider — December 2006

The Post—Harvest Marketing Challenge — Andrew Frankenfield, Montgomery County Extension

The average farm earns 20–30 cents per bushel, including government payments. If we can generate just 10 cents more per bushel we would increase net income by 33–50%!

Are there seasonal price patterns after harvest? Yes, but it depends. Corn cash prices tend to rise from harvest to late spring however, future prices are typically flat after harvest. So why does the cash price tend to rise until late spring? As corn that is piled on the ground at the mills is used up and their bins are near empty, they want the corn that is in your bin. Increasing basis is a strong signal to sell. The higher the prices are at harvest, the greater the risk of decline in the months ahead.

How can I better manage post harvest cash price risk while assuring myself a reasonable gain on grain held in storage? You can do that by selling the carry. Carry is the difference between delivery months. Carry speaks directly to a critical question in grain marketing: to store or not to store? A carry that exceeds the cost of storage is how the market tells us that it wants grain in the future more than it wants it now. Ways to sell the carry include, cash forward contract, a basis contract and selling futures directly.

The best way to know for you if that price in the spring is enough for your operation is to know your cost of storage. There are two costs to storage, in and out cost and variable cost for the farm that has existing storage. In and out costs are around 8 cents per bushel for corn and wheat and 11 cents for soybeans. This includes: operating and repairing equipment, labor, trucking, insurance and marketing. In and out costs are the same if the grain is store for a day or a year. Variable costs are shrink, quality deterioration and interest expense. Interest expense is the largest variable cost of storage. You could sell the grain at harvest and pay off your banker and stop the interest expense or you could buy a CD and get paid interest.

Why do we store grain? Is it to defer marketing or pricing, to defer taxes, for drying purposes or to speed up harvest? If you run it through your drier and store it until you can deliver it in the fall, then you have a harvest expense, however if you could haul it to the mill but chose to store it in the bin, then you have a storage cost.

Can you hold grain too long in storage? Yes. Seasonal price tendencies indicate cash prices of corn and soybeans tend to drop from summer to harvest. If we incur storage costs and expect to recover them in a down cash market — we are likely to be disappointed. Subtracting storage costs from our per bushel selling price gives us a better handle on returns to our marketing efforts.

Current Market Scenario December 12th cash corn price is around $3.75. Looking out into the spring and early summer corn can be contracted for around $4.00 – $4.15 depending on the month. December 2007 corn is around $3.75.

December 12th cash soybean price is around $6.20. Looking out into the spring and early summer soybeans can be contracted for around $6.40 – $6.75 depending on the month. November 2007 soybeans are around $6.75.

It may be a good time to haul or price some of that grain sitting in the bin.

Adapted from material available from Winning the Game, Center for Farm Financial Management, University of Minnesota

“Winning the Game” — Real—Life Marketing Decisions, Tom Murphy, Lycoming County Extension

To help farmers put together a winning grain—marketing game plan, Penn State Cooperative Extension collaborating with ag industry, will be offering several workshops in the state designed to enhance farmers’ grain marketing skills. This course focuses on pre—harvest crop marketing decisions and offers practical, easy—to—execute advice to help farmers secure a good average price for their crop.

Developed by the University of Minnesota Center for Farm Financial Management, this workshop simulates real—life grain—marketing decisions, enabling farmers to practice marketing without the risk of losing actual money. During the 3 1/2–hour program, participants put their marketing acumen to work, making grain—marketing decisions based on actual market information.

In “Winning the Game — pre—harvest marketing,” participants get a greater handle on seasonal corn, soybean, and wheat prices, develop a better understanding of marketing tools, and write an easy—to—follow grain—marketing plan for their farm. As part of the workshop, participants simulate a year of grain—marketing decisions, choosing whether to purchase crop insurance and forward contract their grain. They see the results of their decisions, not just for one year, but also against 15 years of actual market prices.

Currently planned sessions:

Armstrong Co. on Thursday, January 18, 2007
9:30 am to 3:00 pm @ Sandy Kaye’s Restaurant, Shelocta, PA
Contact Kevin Fry for details 724–548–3447

York Co on Thursday, February 8, 2007
9:30 am to 3:00 pm @ the Lions Pride (Great American Saloon), Red Lion, PA
Contact John Rowehl for details 717–240–6500

Northumberland Co. on Tuesday February 21, 2007
9:30 am to 3:00 pm Location to be announced
Contact Tom Murphy for details 570–433–3040

Program registration materials will be sent to interested growers shortly. If you have not received them within two weeks of the scheduled date, please contact the person listed above.

Spring Small Grain Performance Information — Greg Roth, Grain Crop Management, Crop & Soil Science

This week I received my report of spring grain variety performance from Dr. Mark Sorrels. The report contains performance information on red and white winter wheat, spring oats, spring barley and spring wheat. It is available on—line at http://smallgrains.cit.cornell.edu/testing.html. I use this report to provide some guidance on spring grain variety performance, since we have not been testing these crops. Also, it provides a guide on expected yields from these spring crops. For example, spring barley yields this year averaged 3843 kg/hectare in their tests. (Multiply kg/ha data by 0.893 to get pounds/acre and then divide by 48 lbs/bu to get bushels per acre). This translates into a very respectable 71.5 bushels/acre for spring barley, but considerably lower than what we would expect with winter barley. Over the last two years, spring barley has averaged 54.7 bushels/acre, so this was a relatively good year for this crop. Spring wheat yields in the Cornell tests this year averaged 2085 kg/ha or about 31.0 bushels per acre. For comparison, their soft red winter wheat yields average 4807 kg/ha or 60.8 bushels/acre, nearly twice as high as the spring wheat yields. Spring oat yields averaged 3792 kg/ha, similar to the spring barley, or about 105 bushels/acre. Rodeo and Blaze continue to perform near the top of the spring oat tests.

Preliminary Results of Soybean Loss Study — Ron Hoover, On—Farm Research Coordinator, Crop & Soil Science

During the 2006 growing season, twelve county—based extension educators located across the state participated in a soybean loss study. The intent was to learn when and to what extent soybean plants are lost from stands. Educators and growers calibrated drills and planters and then flagged areas in the field for sequential plant counts. Plant counts were made during three stages of soybean development: early vegetative, early reproductive, and leaf drop at maturity.

Not all data have been summarized at this time, but analyses thus far indicate that most loss occurred between planting and early emergence. Loss at this time is running in the range of ten to 35 percent. Plant loss after early emergence counts have been taken was usually low, with losses often measuring only a few percent (where loss is expressed as a percentage of plants missing since the previous plant counting, not as a percentage of seed planted.) What is causing this loss?

Interestingly, few participants have reported that they saw emerged, dying seedlings during the early emergence counts. That is, losses had occurred before seedling emergence. Three possible explanations for poor emergence include: seed that simply did not germinate, seed of low vigor that did not emerge fast enough to stay ahead of disease or insect pests, or seed that did germinate and emerge at a rapid rate but were still overtaken by disease or insects before they emerged.

A lot of recent discussion among soybean producers and the seed industry has centered on the debate of planting treated soybean seed. Only a few preliminary studies have been conducted in Pennsylvania by Penn State researchers. More work needs to be conducted to better understand the situation and to then develop sound recommendations. Ohio State entomologist Dr. Ron Hammond recently shared findings from some Midwest soybean seed treatment studies. While the insecticide—only treatments have shown mixed economic returns, the data from seed treatments that included a fungicide have shown consistent positive economic returns.

The full results of the current loss study will be presented in a future Field Crop News. Additional plant loss and seed treatment studies are being planned for 2007.

Certified Crop Advisor Study Sessions Planned for January — Jan Pruss, Senior Instructor, Crop Management Program

The next Pennsylvania and International Certified Crop Adviser Exams are scheduled for February 2, 2007. The registration period for these exams ends December 15, 2006. Exams will also be given on August 3, 2007. If you are planning to take the exams in 2007, be sure to attend the CCA Study Sessions scheduled for January 18 and 19, at Penn State University. The topics covered on January 18 are Grain Crop Management, Weed Management, IPM/Insect Management, and Nutrient Management; topics covered on January 19 are Disease Management, Pesticide Regulations, Soil and Water Management, and Forage Crop Management. The January 18 study sessions, held in Room 205 of the Agricultural Sciences and Industries Building (ASI), will begin at 8:45 a.m. and end at 5:10 p.m. The January 19 sessions will be held in Room 205 ASI Building and begin and end at 8:30 a.m. and 3:35 p.m., respectively. To register for the CCA Study Sessions contact Lisa Crytser at 865–2543 (lac8@psu.edu). There is a $15 registration fee.

There have been positive increases in the numbers of people taking and passing the Pennsylvania Exam since 2005 when Pennsylvania’s CCA Exam Study Guide was revised and the Study Sessions, conducted by faculty and staff within the Penn State Crop Management Extension Group, were re—established. If you’ve been thinking about becoming certified, do it in 2007. To learn more about the CCA program go to the CCA website at http://cca.psu.edu.

Contributors: Dept. Crop & Soil Science: Sjoerd Duiker, Greg Roth, and Ron Hoover. Extension Educators: Kevin Fry (Armstrong), Andrew Frankenfield (Montgomery), Duane Miller (Schuylkill), and Tom Murphy (Lycoming)

Editor: Kevin Fry

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