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Farm Bill Falls Flat
For Another Week
Both the U.S. House and Senate passed a one-week
extension of current farm law last Thursday. President Bush signed the
seven-day extension on Friday, despite his earlier request for Congress
to give up trying to pass a more expensive farm bill this year and to
pass a one- or two-year extension of the current farm bill instead.
This now marks the fifth extension to the farm bill since it was set to
expire in September. Yet, even with continual extensions of the current
law, “it’s hard to conclude that this farm bill is late,” says
Carl Zulauf, an Ohio State University economist. “President Bush
didn’t sign the 2002 Farm Bill until May 13.”
A new farm bill may come soon. “There appears to be a significant
force that wants a new farm bill -- not just an extension,” says
Zulauf. “Right now, the two leading options are either a two-year
extension of the current farm bill or a new farm bill.”
The sticking point on passing new legislation revolves around how to pay
for $10 billion in increased spending. “The administration doesn’t
want to see taxes raised to fund the new farm bill,” says Zulauf.
“It’s adamant that little if any revenue for the farm bill could be
characterized as new taxes.”
Settling the dispute over funding is still “a tremendous
roadblock,” points out Kent Olson, a University of Minnesota
economist. “I think there is an increasing chance that they will just
extend the previous farm bill for one or two more years,” he says.
Even if an agreement on spending can be reached, however, much would
remain the same for corn and soybean growers, says Olson. “In both the
House and Senate versions of the new farm bill, the main core of the
commodity programs are essentially the same as the current program,”
says Olson. “However, both versions would also provide new options for
revenue protection that, for some growers, could be better than just
price protection.”
If a new law passes, farmers will need to think through how any changes
could benefit them, says Zulauf. “Both the House and Senate versions
have provisions that could impact corn and soybean farmers, and those
provisions will not all be in Title One,” he emphasizes.
To read more articles on the farm bill from Corn & Soybean Digest
sister publications, click here: deltafarmpress.com/topstory/bill-initiatives-0425/
or here: deltafarmpress.com/farmbill/bill-extension-0424/.
To read recent statements from President Bush about the farm bill, click
here: www.whitehouse.gov/news/releases/2008.
To read a recent press release from Sen. Larry Craig (R-ID) on the
likelihood of extending the current farm bill, click here: craig.senate.gov/releases/pr042408a.cfm.
By John Pocock
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Investment Funds: Are They Corn-Market
Villains?
Speculators, index fund managers and commercial
hedgers were recently cast as potential scoundrels responsible for
current grain futures market instability, according to Ed Usset, a
Corn & Soybean Digest columnist and University of Minnesota grain
marketing specialist. The accusations occurred at an April 22
agricultural forum hosted by the Commodity Futures Trading Commission
(CFTC).
“This was a public forum, intended to discuss a number of issues
concerning grain market stability that are interrelated,” says Usset.
“The whole idea of the forum was to get input from various parties in
the industry in order to lay out the concerns and gather opinions about
what, if anything, should be done.”
However, the forum played out “like a bad soap opera with several
subplots,” says Usset. “If there is an overriding story, it’s that
there is a concern, which is yet unproven, that the fast growth and
presence of massive investment and index funds are somehow mucking up
the works so that the grain markets are not working as they should
be.”
Forum participants voiced several important concerns about
current grain market volatility, says Usset. “First, there’s the
concern over the lack of convergence in the corn and soybean markets,”
he says. “Convergence means that cash and futures markets should be
close to the same price at the delivery point during the delivery month.
However, there have been puzzling instances in recent years when cash
prices for corn, soybeans and wheat have been lower than futures prices
at expiration.”
Second, there are worries about the lack of willingness by grain buyers
to offer forward contracts out beyond a few months. “This reluctance
by the industry speaks to both the lack of convergence and the lack of
confidence about knowing what the prices will be,” says Usset. “The
current uncertainties and market volatility make this kind of activity
much more risky now than in previous years.”
Third, there are suspicions that large investment funds are creating
artificially high prices. “With the massive growth in the grain
commodity markets, there are concerns that hedge funds and index funds
have affected convergence,” says Usset. “So, the worry is that these
investment funds and are contributing to the difficulties that country
grain elevators and farmers are having in managing the risk involved in
making margin calls for futures contracts.”
However, the forum ended with inadequate proof being presented that this
is indeed the case, adds Usset. As a result, participants failed to
agree on what concrete steps the industry needs to take in order to
prevent further grain market volatility, he says.
To read more about the CFTC ag forum, click here: www.cftc.gov/newsroom/cftcevents/2008.
To read a press release from the National Corn Growers Association about
the forum, click here: www.ncga.com/news.
By John Pocock
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Turbulent
Markets Require Federal Oversight, Greater
Transparency
Highly volatile conditions have affected the cash and
futures markets where farmers and ranchers sell their grains, oilseeds,
cotton and livestock. Federal regulators must keep a close eye on the
situation, engage as needed and be ready to consider reform measures,
according to American Farm Bureau Federation President Bob Stallman.
Stallman presented the views of farmers and ranchers nationwide when he
addressed the Commodity Futures Trading Commission (CFTC) last week in a
forum designed to hear from a range of individuals representing
organizations interested in the success and stability of agricultural
markets.
Sky-high futures prices at the Chicago Mercantile Exchange and other
trading hotspots are at the center of media attention these days, and
Americans may think all farmers are bringing home the proverbial bacon,
but that’s not necessarily the case, according to Stallman.
The futures price and the actual spot, or cash, price paid for a
commodity usually come close to each other at the end of a futures
contract. Historically, this gap has amounted to a few cents per bushel
or pound, but lately for some products that gap has been measured in
dollars per bushel.
To continue reading this article about futures contracts and market
volatility, click here: www.fb.org.
Source: American Farm Bureau
Federation
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Corn Prices
To Stay High, Even Without Ethanol Mandates
In the short-term, relaxing government mandates for
ethanol use will do little to lower corn prices, write Iowa State
University (ISU) economists, Bruce Babcock and Lihong Lu McPhail, in
their recently published article, “The Outlook for Corn Prices in the
2008 Marketing Year.” For now, the answer to higher corn prices is
increased corn production, they report.
“The existence of ethanol plants should keep corn prices high for the
next year or two even under lower ethanol subsidies,” write the
researchers. “As other countries respond to high crop prices with
expanded production, we should expect to see a greater decline in corn
prices over time.”
To read their entire report on the outlook for 2008 corn prices, click
here: www.card.iastate.edu/iowa_ag_review.
By John Pocock
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Corn Planting Lags 13% Behind Five-Year
Average
Last week’s USDA National Agricultural Summary
(April 14-20) pegged corn planting at 4% complete, 13% behind the
nation’s five-year average.
“Significant delays were evident in Illinois, Kansas, Kentucky,
Missouri, North Carolina and Tennessee,” reports the summary. “When
compared with the five-year average planting pace, all states were at or
behind except Pennsylvania, where planting progress was ahead of usual
by 4 [percentage] points.”
The summary also states that rain delays “held seedings in Missouri
and Tennessee [to] 49 and 47 [percentage] points behind the normal
planting pace, respectfully.”
The next USDA Weather -- Crop Summary comes out Tuesday at noon EST and
can be viewed at the following Web link: usda.mannlib.cornell.edu/MannUsda.
Today’s USDA crop progress report can be viewed after 4 p.m. EST, by
clicking here: usda.mannlib.cornell.edu.
To read a related article on corn planting progress from Richard Brock,
click here: cornandsoybeandigest.com/corn/news/0422-corn-planting-progress/.
By John Pocock
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Placing
Fertilizer With Seed Requires Care
As spring planting begins to pick up pace, some
agricultural producers may consider placing fertilizer with the seed
during planting. That can be a good practice, but only if done with
great care, cautions Kansas State (K-State) University´s Dave Mengel.
"All fertilizers are salts, so [they] can cause germination problems if
too much is placed with the seed," says Mengel, a soils scientist with
K-State Research and Extension. "Too much fertilizer may inhibit
germination completely, which results in a stand loss."
In other instances, too much fertilizer placed with the seed may simply
delay germination, or it may result in weak seedlings with poorly
developed root systems, he explains. Either way, the affected seedlings
will be at a competitive disadvantage, and a loss of yield potential
could result.
Mengel advises keeping several points in mind when evaluating
seed-placed fertilizer:
- The potential for injury is greater in sandy and/or dry soils.
- Nitrogen (N) and potassium (K) are the fertilizer components
responsible for seedling injury. For corn, the maximum rate to place
with seed is 6-8 lbs./acre N plus K. For grain sorghum, reduce that rate
25-30%. Place no fertilizer with soybean or sunflower seeds.
- Some fertilizers should never be applied with seed. Do not apply
ammonium thiosulfate by itself in direct contact with the seed. Don´t
place urea-containing fertilizers with seed.
Further details are available on K-State´s Extension agronomy Web site:
www.agronomy.ksu.edu/ (click
on Extension; Agronomy e-Updates; e-Update 4/17/08).
Source: K-State Research and Extension
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Spring
Planting Jitters
Like the start of a big race, or the beginning of a
championship game, farmers in Minnesota and Iowa are anxiously awaiting
the initiation of full-scale fieldwork.
Very cool temperatures have existed during most of April, which has
caused some farm operators to become a bit concerned with delays in the
initiation of corn planting. Soil conditions have remained too cold for
ideal planting conditions during most of April. Rainfall and wet snow in
some areas of Minnesota and Iowa during early and mid-April has also
kept most fields too wet to begin spring fieldwork.
Once the fields dry out, the soil should be very fit for planting -- if
we get a little warmer weather. To continue reading this article about
the spring planting outlook and some environmental facts about U.S.
agriculture, click here: cornandsoybeandigest.com/corn/news/0422-spring-planting/.
By Kent Thiesse, MinnStar Bank
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Prioritizing When Planting Is Delayed
With only 1% of the Illinois corn crop planted as of
April 20, it is clear that we are off to a slow start in 2008. That does
not automatically mean that planting itself will be late -- at least as
measured by the date when 50% is planted. But progress is picking up
only moderately so far this week, and many areas will see little or no
activity the rest of the week. It's small comfort, but the whole Corn
Belt is off to a slow planting start, with little done anywhere. That's
been helping the price some. And corn that has been planted early into
cool soils has not benefited much from that up to now.
The fact that temperatures are now much warmer than they have been
before this week is very helpful in getting soils dried out. Warm soils
lose water much faster than cool soils, and once soils are warmed up
they will tend to retain that heat and then dry out faster following
rainfall. Cold fronts will still bring rain that can drop soil
temperatures quickly, but we should start to see less saturated soil and
faster drying from now on. According to the Illinois Water Survey, soil
temperatures at the 4-inch depth under bare soil are now reaching about
70° as a daily maximum -- a favorable development.
As producers have pulled planters out to tinker with them, taken
delivery on seed and lined up fertilizer supplies, questions come up
about what to do first when it's finally dry enough to get started. To
continue reading this article about how to prioritize when planting is
delayed, click here: www.ipm.uiuc.edu/bulletin/article.php?id=911.
By Emerson Nafziger, University of Illinois
Extension
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Corn Market
Outlook
How much corn will farmers plant this spring? The
relative corn/soybean prices for the 2008 growing season have changed
dramatically back in favor of corn since the March 31 prospective
planting and stocks reports. But given the weather, will producers be
able to comply with the market and plant enough corn?
As discussed in the last issue after the stocks report, but confirmed by
the USDA in their April supply/demand update, producers will even need
to keep more in corn than the prospective planting report would suggest,
because we will have less left over from this marketing year. It appears
we will feed 200 million more bushels than was previously projected in
2007-2008. Both the stocks report (showing more disappearance) and the
hogs and pigs report (showing more hogs than expected) lead to this
conclusion.
To continuer reading Hilker’s outlook on corn, click here: www.msu.edu/user/hilker/outlook.htm#corn.
By Jim Hilker, Michigan State
University
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Study Confirms Ethanol Saves Money For
Missouri Motorists
A study released last week confirms Missouri drivers
are saving money at the pump thanks to ethanol. The research results
were announced at a press conference in the state capitol and concluded
that drivers in Missouri are expected to save an average of 9.8¢/gal.
due to the 10% ethanol standard that went into effect Jan. 1, 2008.
According to the Energy Information Administration (EIA), Missouri
drivers used over 2.9 billion gallons of gasoline in 2007. Nearly a dime
a gallon difference using ethanol-blended fuels translates to statewide
savings of more than $285 million dollars in 2008. The study, "Impact of
Ethanol on Retail Gasoline Prices in Missouri," was conducted by John
Urbanchuk with the economic consulting service LECG and paid for by the
Missouri Corn Merchandising Council.
"With petroleum industry profits of $123 billion and fuel prices spiking
40% in the last four months, the pain at the pump is getting intense,"
says Jayne Glosemeyer, Missouri Corn Merchandising Council chairwoman
and farmer from Marthasville, MO. "The implementation of the Missouri
renewable fuel standard, blending the state's gasoline with 10% ethanol,
is the one thing helping to ease the pain. It is keeping money in
consumers' pockets and keeping dollars here at home."
To continue reading this article on how ethanol is saving money for
motorists in Missouri, click here: www.mocorn.org/news/2008/NewsRelease-042108EthanolSavings.htm.
To view the LECG study in its entirety, click here: www.mocorn.org/news.
Source: Missouri Corn Growers
Association
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New Study
Shows Efficient Ethanol Industry Improving Already Green
Footprint
A just-released analysis by Argonne National
Laboratory (ANL) provides further evidence of the rapidly evolving
nature of the American ethanol industry. According to Argonne, ethanol
facilities are dramatically more efficient today than they were just
five years ago.
The Argonne analysis compares ethanol industry data from 2001-2006. In
2001, U.S. ethanol production was 1.77 billion gallons. In 2006, U.S.
ethanol production was 4.9 billion gallons, an increase of 276%. During
this period of production growth, the Argonne analysis shows significant
improvement for ethanol’s already green footprint. In the past five
years, according to the analysis:
- Water consumption -- down 26.6%
- Grid electricity use -- down 15.7%
- Total energy use -- down 21.8%
“America’s ethanol industry has come a long way in a few short
years, as has the efficiency and productivity of the corn farmers who
provide the raw materials for this dynamic industry. There continues to
be a lot of outdated or just plain wrong information circulating
regarding the ethanol production chain, so this is a welcome study,”
says Art Bunting, Illinois Corn Growers Association (ICGA) president.
To continue reading this article about ethanol’s environmental
improvements, click here: www.ilcorn.org/news/html/4-21-08.html.
To read the ANL’s full report, click here: www.ethanolrfa.org.
Source: Illinois Corn Growers
Association
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Global
Economic Forecast
For the readers of this column who are invested in the
red-hot grain industry, let’s go up to 100,000 ft. and explore an
overview of the global economic forecast. The International Monetary
Fund (IMF) recently came out with some predictions.
U.S. economic growth is predicted to be 0.5% in 2008, down from 2.2% in
2007. Depending upon converging negative events such as oil prices,
unemployment and consumer spending, do not be surprised if this
prediction is on the high side.
To continue reading this article about the health of the global economy
and the potential for recession, click here: cornandsoybeandigest.com/ag-issues/news/0422-global-economic-forecast/.
By Dave Kohl, Corn & Soybean Digest
Trends Editor
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Statement by Secretary Schafer On Colombia
'Tariff Ticker'
The Bush Administration launched a ‘tariff ticker’
tool last week for Americans to see just how much money is being paid to
Colombia in tariffs for our products going into their country, while the
Colombian products arrive on our shores duty free.
President Bush sent Congress legislation to implement the Colombia Free
Trade Agreement (FTA). The House is delaying a vote to implement the
agreement.
Since the Colombia FTA was signed, nearly $1 billion in tariffs have
been assessed to U.S. products being exported to Colombia. In the
meantime, Colombian exports have come into the U.S. duty free.
With the agreement in place, tariffs on more than 70% of U.S.
agricultural products destined to Colombia will be immediately
eliminated. To learn more about tariffs paid on American exports to
Colombia since the November 2006 agreement signing, please go to www.trade.gov or www.usda.gov. To view the tariff ticker,
click here: www.usda.gov/wps.
Source: USDA
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A Note From The
Corn E-Digest Editor: Rain Delay
Blues
Rains continue to delay corn planting in much of the
Corn Belt, raising anxiety levels among farmers, traders and consumers.
While some farmers wonder if the rains will ever end long enough to
plant, others wonder if farmers are capable of planting all the corn
that the market is expecting.
If you have a comment about how rain delays are limiting or not limiting
your planting options, please write to me (John Pocock) at: jpocock@csdigest.com. Just let me
know your name, where you farm, why you’re either optimistic or
pessimistic about your 2008 corn crop and whether or not I have
permission to use your comment in a future Corn E-Digest
newsletter.
As always, you’re welcome to write to me if you have a comment on any
topic related to corn production or if you have concerns or questions
about this issue.
I look forward to hearing from you. Remember, think warmth and sunshine
-- and thanks for your readership!
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