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Financial
Concerns Drag Down Corn, Soybean Markets
Corn and soybean prices peaked in late June and early
July, when flooding, late planting, a weak dollar, high crude oil prices
and strong export demand were driving them up, points out Chad Hart,
Iowa State University (ISU) agricultural economist. Since then, several
factors -- especially financial worries -- have been dragging them down.
“We are now seeing concerns about the U.S. economy filter into our ag
commodity markets,” says Hart. “If our economy starts to slow down
significantly, then that will negatively impact economies in the
developing world. Likewise, if there is a slowdown in the global
economy, then that will decrease demand for U.S. grain exports.”
Over the last two years, a weak U.S. dollar and strong growth throughout
the developing world -- especially in China and India -- have fueled
demand for U.S. feed grains, explains Hart. “China’s economy is very
much tied to the U.S. economy,” he points out. “They supply the
consumer goods that are purchased here. If the U.S. slows down its
consumer purchases, China’s economy will slow as well.”
Even with a financial bailout package from Congress, the U.S. may still
be facing a significant economic downturn ahead. If so, the debate will
soon turn to how long the slump will last.
“Some prominent economists are now arguing that it will be a
long-lasting slowdown,” says Hart. “That’s because once financial
markets become tied up, it takes awhile for capital to again loosen up
to fuel more economic growth.”
Crude oil, corn and soybean markets are all reacting negatively to
concerns about U.S. and world economic activity, says Hart. “All the
markets are hypersensitive right now,” he adds. “Investors are still
looking for a safe haven.”
Grain prices have dropped since this summer and will likely
continue to drop in the short term, says Hart. “The USDA’s Oct. 10
report will be the next big update that could affect grain prices,” he
points out. “This year’s report may be more crucial than in past
years, because the market is looking to see how well late-planted corn
and soybeans are coming through. However, right now, no one is expecting
a major adjustment in USDA numbers for corn and soybean production.
We’ve had a pretty good run in weather lately, and in Iowa, harvest is
now getting underway.”
The hope is that most farmers took advantage of good pricing
opportunities during spring and summer, says Hart. “We are likely to
experience more typical pricing patterns this fall than those that
we’ve experienced during the past two harvests,” he predicts.
“This year, prices are dropping as we head into harvest. Closer to the
2009 planting season, prices will likely heat up again as corn and
soybean crops compete for acreage. Stocks are still tight for both
crops, but they’re not as dire as they were estimated to be in
August.”
To read more information on grain markets from ISU, click here: www.extension.iastate.edu/agdm/.
By John Pocock
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Bear-Market
Blues For Corn And Beans
Large bear markets always follow big bull markets,
says Richard Brock, owner and president of Brock Associates, a farm
market advisory firm. “The bigger the bull market, the bigger the
bear,” he cautions.
The good news is that the current bear market for corn and soybeans may
be nearing the bottom, says Brock. The bad news is that “farm incomes
are going to drop significantly in 2009,” he adds. “To think that
corn might go back to $6/bu. and soybeans back to $13/bu. anytime soon
is unrealistic.”
Corn prices may be insufficient for farmers to reach breakeven when
increased input prices are factored in, he points out. “We will go
from riches to rags in the grain-farming industry this year,” predicts
Brock. “Short term, the market will bottom out for both corn and
soybeans fairly soon. The reality is that we don’t have a shortage of
either corn or soybeans right now. An optimistic price rally would be
$5.50/bu. for December corn and $11.50/bu. for November beans.”
In addition to a greater-than-expected supply of corn and soybeans right
now, the problems in the U.S. financial industry are “going to impact
corn and soybean farmers more than they might think,” he says. “The
real impact on U.S. agriculture will be a worldwide softening in the
global economy. Steel, crude oil, grain commodities -- it is all going
to be deflationary for a while.”
The recent run-up in the housing market is not much different
than what happened during the run-up in the farmland market during the
mid-1980s, says Brock. “The current financial problem started when we
deregulated banks and brokerages, so that they could both do the same
thing,” he explains. “They created derivatives with huge debt loads.
Since then, we’ve had three major financial disasters.”
The first disaster occurred in December 2001, when Enron filed for
bankruptcy, he says. The second disaster is the recent failure of the
mortgage industry and the third disaster is the failure of the U.S.
Commodity Futures Trading Commission (CFTC) to regulate the index funds
that have caused a separation between cash and futures markets for corn
and soybeans, Brock adds.
“Long term, I’m not sure that the corn futures market is going to
survive,” says Brock. “To add insult to injury, we’ve got a lot
more corn and soybeans on hand than the market once thought we had, and
grain export demand is likely to shrink if the U.S. and global economy
softens.”
For more information from Brock Associates, click here: www.brockreport.com/.
By John Pocock
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Purdue
Expert Shares Tips For Figuring Cash Rents
With prices and input costs fluctuating, people need
to review their lease arrangements and adjust for the year ahead, says
Craig Dobbins, a Purdue University Extension agricultural economist.
“Determining a fixed cash rent in the current environment is a
difficult task and will likely require multiple discussions between
landlords and tenants,” says Dobbins, who specializes in farm leases
and business arrangements. “It's a matter of being able to put
yourself in the other's shoes and understanding the kinds of costs and
risks that are being taken by all parties involved.
“As long as people keep communicating with each other, they will
eventually find a number that is agreeable and equitable,” adds
Dobbins. “You just have to keep talking and try to understand the
other person's perspective. However an agreement is not reached in all
cases, and the land sometimes changes hands.”
Many factors influence the amount of cash rent that is paid, says
Dobbins. To read what these factors are and the different methods used
to determine cash rent, click here: www.agriculture.purdue.edu/aganswers/story.asp?storyID=5059.
View USDA’s annual survey of cash rents for the state of Indiana in a
PDF file at: usda.mannlib.cornell.edu/usda.
Purdue's department of agricultural economics also conducts an annual
land values and cash rents survey, which is available at: www.agecon.purdue.edu.
Source: Purdue University Extension
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Remember Safety When Harvesting Downed
Corn
With windblown corn in various conditions, from
leaning stalks to plants on the ground, harvesting may be a challenge
this fall. But in the haste to salvage crop losses, the one thing
farmers should not forget is safety.
“Safety will be an issue this fall,” says Randall Reeder, an Ohio
State University (OSU) Extension agricultural engineer. “Because of
downed corn, harvest will drag on longer than usual, the header will
plug more often and operator stress and frustration will be higher.
Under these conditions, it is more important than ever to emphasize
safety in and around equipment.”
The main issues farmers will be facing in harvesting downed corn include
slower operating speeds, more frequent header plugging and more rocks
picked up by the header, says Reeder. When harvesting downed corn, more
corn stalks will likely go through the combine along with the grain,
which will slow grain separation and contribute to more grain being
thrown out the back of the equipment than normal, he adds.
To continue reading this article on what to expect when harvesting
downed corn and tips on how to safely cope with its challenges, click
here: www.ag.ohio-state.edu/~news/story.php?id=4839.
For more advice on harvesting downed corn, including links to other Web
sites, log on to OSU Extension's Agronomic Crops Team Web site at agcrops.osu.edu.
Source: Ohio State University
Extension
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Costly Drying Season
Forecast
The stage is set for wet grain this fall. Cool early
season growing conditions in many areas of the Midwest retarded
development of corn plants or necessitated replants. The later planting
dates also created varying maturities in the fields. Those conditions
mean more grain from the Corn Belt will need to be dried.
Producers marketing grain directly to an ethanol plant may have
additional challenges with higher-moisture corn. “If producers have
corn at 19-20% moisture in the field, they may have to dry it down,”
explains Charles Hurburgh, professor of agricultural engineering at Iowa
State University. “Any producer who has contracts they fill
immediately will have to ensure they have grain-drying capacity lined up
in case it is needed.”
Tempered with the possible need for grain drying is the improvement in
corn genetics. Burl Shuler, vice president of sales and administration
for GSI, says, “The corn genetics are definitely better, and the corn
seems to do a better job of drying in the field than it did 10 years
ago. But as late as this crop has gone in, harvest may be delayed and
producers will be in a big hurry to get corn out of the field. There
will be a need for drying and conditioning of all types that we haven't
seen in three or four years.”
This additional drying will come at significant cost. “To drop corn
one point of moisture used to cost 2.5-2.75¢/bu.” Hurburgh says. “I
would expect that number to at least double, simply reflecting the
increase in natural gas prices.”
To continue reading about the need for drying grain this fall and tips
to reduce cost, click here: farmindustrynews.com/farm-equipment/0904_drying_season_hurburgh/.
By Mark Moore
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Feed Demand Growing In China, Acreage
Maxed
Higher corn yields are expected in China for 2008
compared to 2007, with production estimated at 153.54 million metric
tons (6 billion bushels), says Cary Sifferath, U.S. Grains Council
senior director in China. Sifferath and Charles Ring of the Texas Corn
Producers Board recently toured corn fields in the northeastern
provinces of Heilongjiang and Jilin, China.
Their mission was to assess the corn crop and formulate an estimate of
this year’s harvest. The tour consisted of four groups of
agriculturists evaluating nearly 300 cornfields.
“Our number this year shows a 1.13% increase over the government’s
number last year, which was 151.86 million tons (6 billion bushels),”
says Sifferath says. “It seems there will be better yield numbers this
year although there were spots of drought, wind and hail damage in some
areas.” Sifferath says the national average yield for all provinces is
5.28 tons/hectare (84 bu./acre) with Jilin province showing the highest
yield the tour saw in terms of production at 111 bu./acre.
Despite the improved yield numbers in 2008, there seems to be little
sign that China will begin exporting corn anytime soon, as the
government has been trying to control food inflation. “The government
has virtually shut down exports of corn, wheat and rice,” says
Sifferath. “Other than a few sales trying to go through, there are no
real exports going on at all.” He also says feed demand in China is
increasing with more corn going into the country’s swine industry,
among others.
For more information from the U.S. Grains Council, click here: www.grains.org/index.ww.
Source: U.S. Grains Council
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Energy
Balance Of Corn-Based Ethanol Even More Favorable Than Early
Estimates
Using current data to examine the energy balance of
corn ethanol, when looking at both corn production and the ethanol
conversion process, it is clear that ethanol production is at the
favorable end of the measurement, says Alan Tiemann of the Nebraska Corn
Board. Tiemann is a corn grower from Seward.
“Several recent studies have made this abundantly clear,” he says,
“including one at the University of Nebraska.”
Earlier studies that examined ethanol’s energy balance sheet were
based on “backward looking data,” says Ken Cassman, director of the
Nebraska Center for Energy Sciences Research. “These studies looked at
older technologies with regard to energy use in corn production, the
biorefinery and coproduct use,” he points out. “Recent research
conducted at the University of Nebraska clearly shows that estimates for
the energy balance of corn-based ethanol are much more favorable -- in
fact, two to three times more favorable than previous estimates.”
It is important to understand that ethanol has a substantial net
positive direct energy balance -- that 1.5-1.6 more units of energy are
derived from ethanol than are used to produce it, says Cassman, who is
also a Heuermann professor of agronomy at the university. “Using dated
information simply doesn’t work in a world where the technology and
efficiency of corn and ethanol production are rapidly improving over the
years,” he adds. “Moreover, if the goal is to reduce dependence on
imported oil, we estimate that 13 gal. of ethanol are produced for every
gallon of petroleum used in the production life cycle for corn
ethanol.”
The research using current data also shows that the greenhouse gas
emission reductions are also more favorable than previous estimates when
compared directly to corn and ethanol production, points out Tiemann.
Compared to just five years ago, ethanol plants produce 15% more ethanol
from a bushel of corn and use about 20% less energy in the process, he
says. At the same time, corn growers are more efficient, producing more
corn per acre and using less energy to do so.
“We must also remember all the useful coproducts that come from
ethanol production,” says Tiemann. “The most important is distillers
grains, a nutritious animal feed. Distillers grains have value, and they
can’t be ignored when calculating the energy balance of corn-based
ethanol production.”
For more information from the Nebraska Corn Board, click here: www.nebraskacorn.org/index.htm.
Source: Nebraska Corn Board
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Moving To E15 Would Save Motorists 18
Cents/Gal.
With the energy department stating recently that 5% of
the nation’s refining capacity is still shut down due to hurricanes
Gustav and Ike, the American Coalition for Ethanol (ACE) reminds leaders
that there is an alternative to waiting for more gasoline imports:
increasing the ethanol content per gallon of gas.
“Ethanol production continues to increase while the rest of the fuel
industry struggles to find enough supply. Instead of waiting for other
countries to ship us gasoline, why not look right here at home for a
solution?” says Brian Jennings, executive vice president of ACE.
“The government should temporarily allow the ethanol content in
gasoline for standard vehicles to be raised from 10% to 15%, which will
help refiners and consumers out of this tough spot.”
The national average cost for a gallon of ethanol is a full dollar less
than for gasoline, so blending ethanol into gasoline -- if the savings
are passed on -- should save consumers money at the pump. At a 10%
blend, motorists would save 12¢/gal. At E15 it would be 18¢ and at E20
the savings would be nearly 25¢/gal. Increasing the ethanol content per
gallon would also apply downward pressure to gas prices, as refiners
would have more time to get their facilities back up and running.
“Brazil has used 20-25% ethanol in all vehicles for years now, and
there is no evidence that a short-term increase beyond E10 here will
cause any harm. Instead of waiting for more foreign imports to save the
day, regulators should look at the option of temporarily increasing the
base ethanol blend to 15% to ease supply and price concerns,” Jennings
says.
To continue reading this article on why E15 would help save consumers
money, click here: cornandsoybeandigest.com.
Source: American Coalition for Ethanol
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Ag Engineers:
Production Issues Dragging Down DDGS
An ethanol byproduct suitable for livestock feed could
be easier sold and used if it was more uniform each time it is produced,
according to Klein Ileleji and Richard Stroshine, two Purdue University
agricultural engineers.
Dry distillers' grains with solubles (DDGS), the grain product left over
after ethanol is produced from corn, is often chemically different from
ethanol plant to ethanol plant and, sometimes, even within a plant,
point out Ileleji and Stroshine. Those differences can create shipping,
storage and livestock feeding challenges, they say.
“The big issue with DDGS is the fact that the product is so
variable,” says Ileleji. “Obviously, that can have a huge impact on
the final product and how it is handled.”
DDGS can take on different physical properties from batch to batch
during the ethanol extraction and post-extraction processes, Stroshine
says. “If livestock producers don't have a consistent feed product, it
makes it difficult for them to cost effectively formulate a good feed
that will provide their animals with the nutrition they need,” he
adds.
Ileleji and Stroshine will address DDGS handling and storage issues
during a session of the Integrated Corn Ethanol Coproduct Conference.
The conference takes place from 8:15 a.m. to 4:40 p.m. Nov. 18 at the
Beck Agricultural Center. The center is located at the Purdue Agronomy
Center for Research and Education, seven miles northwest of Purdue's
West Lafayette campus along U.S. 52.
The conference is intended for those in the ethanol industry, livestock
producers and animal nutritionists. Conference registration is free for
those attending at the Beck Agricultural Center, although
preregistration is required. The conference also can be viewed online.
The Internet webinar fee is $20 for members of the American Society of
Animal Science and Purdue Extension county educators, and $30 for all
others.
To preregister for the conference or to view the entire conference
schedule, visit www.conf.purdue.edu/corn. The
site includes a link to the preregistration page for the Webinar. For
additional conference information, contact Radcliffe at 765-496-7718 or
by e-mail at jradclif@.purdue.edu; or Ileleji
at 765-494-1198 or by e-mail at ileleji@purdue.edu.
Source: Purdue University Extension
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Honeywell
Develops Safer Ammonium Nitrate-Based Fertilizer
Honeywell announced recently it has developed a
patented new technology to produce a highly effective, safer ammonium
nitrate-based fertilizer with significantly lower explosive potential.
The new technology has already received SAFETY Act Designation from the
U.S. Department of Homeland Security (DHS) under the Support
Anti-terrorism by Fostering Effective Technologies Act, which was
created to provide incentives, including liability protections, for the
development and deployment of anti-terrorism technologies that can help
mitigate security threats.
“The unique composition of this new fertilizer makes it extremely
difficult to turn it into a weapon,” says Qamar Bhatia, vice president
and general manager of Honeywell Resins & Chemicals, which is one of the
world’s largest producers of ammonium sulfate fertilizer. “Ammonium
nitrate has long been an excellent fertilizer, but this technology makes
it safer.”
Independent tests using guidelines developed with the U.S. government
demonstrated that Honeywell’s new fertilizer is significantly more
difficult to use as an explosive. When mixed with fuel oil -- a common
method of using ammonium nitrate as an explosive -- the new ammonium
sulfate nitrate fertilizer did not detonate.
The new technology fuses ammonium sulfate with ammonium nitrate,
providing both nitrogen and sulfur needed for efficient plant nutrition
as well as enhanced safety, quality and storage characteristics. To read
more about this safer form of ammonium nitrate, click here: blog.cornandsoybeandigest.com/briefingroom.
Source: Honeywell
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Index Funds Should Have To Take Delivery On
Futures Contracts
The National Grain and Feed Association (NGFA) says
forcing managed index and pension funds to take delivery on commodities
such as wheat may be one way to solve the lack of convergence on Chicago
Board of Trade futures contracts.
The NGFA states that it is not yet recommending adoption of the practice
but is establishing its own task force to analyze the concept of
“demand certificates,” under which the maker of delivery could
compel load out of the underlying commodity. Although Chicago Board of
Trade soft red winter wheat futures have been trading at record levels
the last two years, farmers and elevator managers report a weak basis --
the difference between cash and futures prices -- has left them with
cash prices $1-2/bu. below futures prices, particularly at harvest.
This lack of convergence, the narrowing of the gap between cash and
futures, can be partly blamed on the growing influence of speculative
interests -- primarily pension and index funds -- in the futures
markets, NGFA says.
For example, the NGFA notes that index and pension funds controlled
about 60% of CBOT wheat futures contract open interest -- a share that
represents about 1.5 times the size of the entire U.S. soft red winter
wheat crop -- in mid-September. To read more of this article about index
funds and their impact on grain markets, click here: deltafarmpress.com/corn/grain-feed-1001/.
By Forrest Laws, Farm Press Editorial
Staff
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Corn and Soybean Incentive Program
Announced
Syngenta announced its 2009 AgriEdge Corn and Soybean
programs last week that offer growers rewards when they invest in
agronomic solutions that can maximize yield performance.
AgriEdge programs offer incentives for growers who plant NK soybeans
with the Roundup Ready trait and Garst, Golden Harvest or NK corn
hybrids with one or more Agrisure traits, and apply Syngenta Crop
Protection products.
To learn more, corn and soybean growers can download the 2009 AgriEdge
Program Use Guide from the Web at: www.AgriEdge.com.
Source: Syngenta
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McCain,
Obama Respond To AFBF Questionnaire
The American Farm Bureau Federation (AFBF) recently
released the results of its presidential election questionnaire
completed by Sens. John McCain and Barack Obama. In the Q&A document,
both candidates responded to AFBF’s inquiries about farm bill
implementation, renewable fuels, climate change and death taxes, among
other issues.
In the survey, McCain says expanding international trade would be a
central focus of his agricultural policy. He says upholding current
trade commitments, such as the North American Free Trade Agreement,
while working toward ratification of pending agreements with Colombia
and South Korea, would be a priority. McCain also supports Trade
Promotion Authority.
Obama took the opportunity to discuss his commitment to renewable fuels.
He says he has set a goal of having 60 billion gallons of U.S. fuel come
from biofuels by 2022.
When asked about the farm bill, Obama says it was important to implement
the 2008 bill as passed by Congress. McCain, who did not support the
bill, instead focused his answers on expanding foreign markets and
reforming the crop insurance program.
According to the survey, both candidates support creating a greenhouse
gas cap-and-trade program. McCain goes a step further by saying he would
exempt farmers from greenhouse gas caps.
Both candidates pledge to cut the estate tax, with McCain promising a
lower tax rate and higher estate value exemption (15% and $10 million)
than Obama (45% and $7 million). To read more from the AFBF presidential
Q&A, visit the Sept. 22 edition of FBNews at: www.fb.org/newsroom/fbn/2008/FBN_09-22-08.pdf#page=3.
Source: American Farm Bureau
Federation
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A Note From
The Corn E-Digest Editor: 'Lying, Thieving
Politicians'!
In last issue’s Corn E-Digest, I asked
readers to share what their biggest worry might be as harvest season
approaches. The most noteworthy response to my request comes from Robert
Considine, who writes that he owns farmland in northwest Illinois and
operates it on a 50/50 crop share lease. Here’s his comment:
“My biggest worry is what the lying, thieving politicians are going to
do to us. They promoted the big problems in the financial industry and
now they are going to correct them. Look out!”
Maybe you agree with what this reader reports or maybe you don’t. In
either case, I’d like to hear from you about why you agree or disagree
with the above statement and what you think should be done to prevent
problems with the nation’s financial industry from spilling over into
agriculture.
When writing, please let me know your name, where you farm or work, what
your comment is and whether or not I have permission to use your comment
in a future Corn E-Digest newsletter. You can contact me (John
Pocock) at: john.pocock@penton.com.
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. Stay safe, stay
profitable, thanks for your readership -- and farm on!
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