Most of the drama of the current drought has been centered on the corn crop and rightly so. We’ll know in just a few days what the maximum is going to be, and stunted, brown plants make compelling video. But as more than a few of our marketing experts are trying to tell us, it's the soy crop that could be the true catastrophe. Demand is unrelenting, and unlike corn, we can't just shut down ethanol plants to free up feed supplies. Perversely, curtailing Ethanol could actually increase soy demand by decreasing the DDG supplies. Nor can we substitute wheat. This summer’s commodity fireworks show will have at least two acts, so don't leave early.
The rapid and continuing decline of major crops in the corn belt are now showing up in the USDA supply ledger. The USDA lowered its US corn yield production by 20 bushels to the acre after six straight weeks of crop decline. USDA now set the average yield at 146 bushels to the acre. Production estimates were lowered by 1.8 billion bushels from last month. There was huge uncertainty about what the USDA would do but I think if one took a poll of where you would like to see the USDA come out, I think 146 is probably in that range. Maybe a few bushels high that on some level there was a bit of a sigh of relief that the USDA is at least in the market's perception playing it safe on this report. Ending stocks for 2012/13 are projected at 1.2 billion bushels, down 698 million from last month's projection. The USDA projects soybean production at just over 3 billion bushels. The harvested acreage is 2.3 million acres higher than the June projection. The soybean yield took a hit down 3 ½ bushels to 40 ½. The USDA slightly lowered its winter wheat productions forecast by 1%, compared to its June forecast. The AG department set production at 1.6 billion bushels. The yield is forecast at 47.7 bushels an acre, up about half a bushel from last month. The 2012 Farm Bill is moving onto its next step. The House AG committee approved its version this week. Direct and countercyclical payments along with the acre program would disappear. The committee rejected an amendment that would have eliminated supply management from the dairy price support. Committee leaders say it will save 3 ½ billion dollars for each of the next 10 years. Most of those savings come at the expense of the Food Stamp program. Further progress is uncertain, as speaker Boehner weighs the political consequences of bringing it to the floor. Meanwhile the USDA announced a package of changes that could deliver faster disaster assistance to farmers and ranchers. One change speeds up the timeframe of disaster declarations from his office. As a result about a third of the country more than 1000 counties received that designation. Most of those counties are in the Southwest US. The Secretary also lowered interest rates on emergency loans by a point and a half. USDA also lowered the penalty to farmers who use CRP lands in 2012 by 15%.
Crop Watch stars in Jersey County Illinois, a farmer told us his March planted corn will do about 100 bushels but anything planted after April 20th will be 10 bushels. His fields are knee-high, tasseled and rolled up like a cigarette. In Montana, the NASS office says more than half of the winter wheat crop is good to excellent. Just 15% of summer rangelands are in good to excellent shape. Due to dry, windy conditions.
At the roundtable today, we have Jim Bower and it Chip Nellinger. I would like you to give us a summary of how the market closed on Friday. I thought the market reacted reasonably well. Beans were up about $0.23, or didn't fare quite as well come up about a nickel. We've got about nine, and certainly both the corn and soybean markets have been quite dynamic this week. And I will tell you that all these years that I have been trading and in this business, this has been a very active week. And we have a night session now and there's a lot of activity and pay attention. But the industry has moved toward that. Mostly the weather looks or was it the report doesn't this market going sky-high? That huge drop from the USDA on corn acreage, it's unquestionable that you have to cut it but, but I think this month, it's where do they go by the January report. But it can also be the upper 120's before is said and done. So, I think it's just too hot and too long. Even areas that have gotten better rings as we are out walking those fields, the yields are slipping on a daily basis. While we may have less corn because our corn prices will go up but how high can we go until they start seriously Russian in the supply? Well, that's the question. That's a function of the market, to get high enough to start rationing that the amount. So that's unknown and I think probably we are already in the process going to demand down on the corn better than we have on beans. I think we need to put an eight on the corn. We have such a good crop and the yield will be fair, and now they don't have it. Let's look at what happened in 2002. In 2002 with the soybean crop, the final yield with 36.5 BPA. Right now we are at 40.6. If you look at the crossbreeding compared to the crop ratings in 2002, our overall crop ratings are actually lower. When you take that into consideration, that tells me that the final yield in the us can move lower. Particularly at this pattern doesn't change quickly. And at that number would have to rush out probably at least another 150 million bushels of US soybeans because we will be the woman is the player from basically fall through April. This market, if the weather pattern continues to be as a process that has been, and we drop to bushels, to me, the Russian process will be very severe. And I would call that a protein shortage phenomenon happening right now and that's evident by the world market, not just the US market. While we only say, do what China does and not as they say. They have a big export sales number to them, again this morning it was another 150,000 tons. When we come back, this is such a big thing that we are going to talk about that I’m going to talk to you about what a producer can do to protect whatever profit may have been there before they found out they didn't have the crop this year. We will return with more US Farm Report in just a moment. I said we would ask questions about what a producer needs to do at this time company and each producer is individual and has a different set of situations, and we know that. But what should a producer too? I think there are a couple big things. First and foremost, don't get down. It's unbelievably hard. I think a really important thing, do it now, double-check coverage’s and double-check the social security numbers and names are right on them and that you have the harvest item. Crop insurance --it's not going to make everyone whole, but it will not help with yield reductions. The crop is dragging the prices higher. Start looking at what inputs are doing out there and keep a close eye. I'm not saying get a super aggressive yet, but every bump higher that the 12 takes, that will drag the 13 higher as well. We will lock in profit for them, absolutely. I think --of course I was in the 1980's situation and I think we are not quite as bad overall as 1988 overall. But I think you could probably get worse. Keep in mind in 1988 we had a bigger reserve particularly with corn and the demand has doubled since that time. I think corn has pretty much been the market leader but I start to shift our thought processes and strategies towards the soy context. I think it will be the leader up or down. And that's monitoring the news every day. If it's the same size, if it's smaller, keep on buying. We have had an unbelievably high degree of success at least so far. There is risk, and we have been underwriting the put options on both corn and soybeans as the market goes up, stripping those premiums off and that has been a good strategy. The other thing is, if the market gets to the point where we could sell my daughter calls and the producer knows he has the yield, that's an indirect way of hedging the crop off. Our staff at power trading as much focused towards learning and underwriting options depending on the situation on a daily basis. This really doesn't fit into this show but everyone out there wants to know how hot the prices are going to get. I know you don't want to get the numbers. In this type of market, try to stay away from looking at the price. Watch the open markets and if china keeps on buying, they don't make a whole lot of mistakes when they are trading. I watch that every day to see which position they are taking. Is impossible to give numbers but I agree with Jim that I think the corn market has been doing a good job in digesting what is out there. We are probably further along in digesting the dryness and yield loss and corn that we are indeed because as Jim mentioned, two or three weeks and that being yield will keep dropping. So at this stage beans probably have more upside potential than corn but it really is impossible to put a number out there. Al, what we are both saying essentially is, the market has to get to a level high enough and long enough to put the supply and demand people back into the context. Until the market feels comfortable with that, it will probably keep adding premiums. But the situation was soybeans, it could be a disaster if we don't get copious rains coming in to fulfill the soybean situation because they are in desperate me a brain. Thank you both for being here. I'm sorry we don't have more time. We will be back in just a moment.
I have been reluctant to pile on with additional bad news for farmers, but what we have been gnawing our fingernails hoping for rain or gnashing our teeth while Congress fiddles with the Farm Bill, one of the most appalling financial scandals in history continues to unfold. If you are just tuning in to this debacle, let me give you some backstory. Libor, the London interbank offered rate is a benchmark used around the world to peg rates on loans, mortgages, pension funds, mutual funds, bonds, etc. In fact about $800 trillion worth of assets are affected. Over 10 times the world GDP. The number is determined by polling a handful of large banks who report what they think the going rate is, not what they actually paid. It's like doing a crop reports by asking 25 farmers what their yield will be. I think we can guess which way they would fade the numbers. We now know bankers have been routinely whispering among themselves to fudge the Libor. Mostly they reported lower figures of their own banks would appear healthier during the financial panic or sometimes just to cover a recent trade. This in turn decreased your 401K or savings rate. It’s the mother of all financial scams and reinforces a conclusion I had reached a few years ago. It is now foolish to link your money in any way to Wall Street and expect a square deal. Maybe the old bumper sticker is true. Give a man a gun and he can rob a bank, give a man a bank and he can rob the world. Let us know what you think. Send emails to email@example.com.
Hello and welcome to US Farm Report. Economists Malcolm Gladwell achieved instant fame with his book “Tipping Point” which develops the idea of how trends don’t gradually shift but brake suddenly in a new direction. It seems an apt way of looking at current crops, think. The point of no return is passing in cornfields across the Midwest. Pollination was unsuccessful or the plant reserves are depleted, for examples. Which begs the question: how many acres are past the tipping point and will be abandoned? So while the market focus may center on bushels per acre, more observers are beginning to question the acre number. Bottom line, we probably won't know the exact size of this crop until next August, if then.
The Department of Agriculture has declared its largest agriculture disaster ever as a result of the persistent drought and other calamities. More than a thousand counties in 26 states received the disaster declaration this week. Most of the area is in the southwest, which is in its second drought year. It also extends in the southern areas of the corn belt. Most of the corn belt was left off the list. The Midwest has been under severe drought conditions for several weeks, leading to a decline in the nation’s biggest crop - corn. A third of the nation's corn crop is rated as poor to very poor condition. In Indiana it is 60%. This week USDA reduced its forecast for the national average yield by 20 bushels, down to 146 bushels an acre. The USDA has not made such a drastic revisions of the 1988 drought. While crops struggle, so is the nation’s pasture and range. 50% of the lower 48’s grazing land is now called poor or very poor and only 21% is good or excellent. The southern plains spent most of last year in record heat and drought. Conditions are slightly better this year but the summer is now burning off any improvements. We have had 13-60 days right in a row of triple digits and the wind is blowing hard and it's hard to find a place that's not sunburnt and cracked. My pastors are maintaining relatively well but a lot of people who don't have topsoil are struggling. Mcpeak says so far his cows look good. But in some states where corn crops and pasturing is faltering farmers are selling portions of their beef herds. Many of the country’s largest shell egg producers are following new rules. The FDA’s new egg safety rule went into effect on July 9th.And it sounds like there's work to do. According to the FDA, in 2011 inspectors found safety violations on roughly 40% of farms. A lot dealt with failure of having a written safety plan. Only about 3% were serious enough to require any agency action. The new egg safety rule is designed to prevent salmonella poisoning.
HARVEST OF BEAUTY:
The winter wheat harvest has nearly wrapped up across the US for month’s harvesters worked their way north following a ripening crop from the fields of Texas nearly to Canada. It’s a harvest unique in its speed, impact on community and its beauty. Clinton Griffiths takes us along from the Oklahoma Texas border to central Kansas, as farmers in the southern plains cut wheat this 2012 season. The wheat crop showed up dressed for harvest. That's ahead of schedule. They are usually starting right now and hoping to be finished by tomorrow, two weeks early. That pushed maturity along and poor farmers like Jimmy it was hot and dry conditions that make them think they may not get a crop that all this year. We had over 100 days of 100- degree weather. Last year was a complete disaster. We did our best about 1100 acres of wheat out of 1500. Mike Rosen of Weaver Brothers Grain company is satisfied. Business is good. We are probably looking at around 845 or 426-bushel average. Today is our 30th wedding anniversary. What else would you rather be doing? Did he do anything special?He vacuumed out my combine and cleaned the windows. This will be better than we've had in the last 15 years. And by all accounts, as harvest is one for the record books. We have the perfect amount of rain at the perfect time. We didn't get too much or too little, just like irrigated we basically. With yields coming in anywhere from 50-70 bushels to the acre and a test with tipping the scales, complaints are few and far between. The fifth-generation farmers get the team rounded up and gets them started near their farm in Chase Kansas. We weren't really sure where it was and where it wasn't. A massive half mile wide enough EF4 tornado took a pass to his farm. The grain bins impacted the house. Baltimore combines were inside show the public totals, so the machine shows were either completely removed around them or, in one case, one of the machines, the building had collapsed on top of the machine. Now as the harvest rolls on, he's dodging debris, round bales and equipment. A constant reminder of the light he had in how easily it could be disassembled.
Earlier this month our nation celebrated its independence. For Baxter Black, a celebration of freedom is an everyday affair. We were watching the history channel at grandma’s house and it was a story about a navy ship being attacked in 1945. Stories that never made the paper but we're remembered only by those brave souls who talk titled in the ways next to a burning ship 3 miles above the seafloor. It was one of those moments where my son and I were engrossed. We said, isn't it funny that the only person in this house who really understands what we're watching is asleep in his chair? Grandpa, Kansas farm boy and Junior Petty Officer, three years three months and 21 days on a cruise ship in the Pacific Ocean, now asleep in his chair at 90 years old. He doesn't have a scrapbook of his service and when the subject of the war comes up, his lighthearted response is, I saved the world. That's his joke. But it comes and goes quickly and his opportunity to ponder the answer disappears which is unfortunate because he and countless thousands of others did save the world. And anyone who doubts that Germany and Japan had intentions of conquering us all is deluding themselves. Ever have slavery or good and evil that so clearly defined. By the time he reluctantly joined the forces in 1942, it was not so clear. Elected leaders made decisions of enormous consequence and put the war, peace, conflict resolution into motion. Korea, Soviet Union, Lebanon, Somalia, Afghanistan, Iraq, North Korea, Iran and China. Elected leaders ride into battle, on the backs of men like grandpa Tommy, who are lucky, come home to the welcoming arms of a single country. Political leaders are honored on Presidents ‘ Day, but grandpa Tommy is honored on what day, July 4th, December 7th, Memorial Day, and I guess every day I draw a breath. I'm proud and I will tell him that I’m thankful he saved the world, as soon as he wakes up. I'm Baxter Black from out there.
We are checking out a 1986 Ford classic. The owner says that if he had to part ways it would have to go to someone who would take care of it, but he says he's not ready to hand it over just yet. This is a ‘46 Ford that I’ve had for 20 plus years. It's done a lot of work and I restored about 20 some years ago. It's a very dependable tractor. I played this one up, new tires and a paint job. This one, I do a lot of mowing with this one. It has been in parades and goes to the tractor shows with the rest of them. It's a great tractor and for the age of it is nice. Everyone has a memory of their dad or relatives of one of them. Eventually, probably quite soon, it will be sold. I have too many to take care of. I'm getting to the age where it's time for something to go. I'd like to keep it forever. These trackers are 60 plus years already, they run great and at and they will be good to have many more years. Don't forget, you can find tractor tales online at Usfarmreport.com or on Facebook.
Today’s country church salute goes to Midway Presbyterian Church in Sedalia, Ohio.The congregation is celebrating its 150th anniversary but its roots go further back than that. In 1855, the Presbyterian Church gave Reverend CW Finley the charge to open a mission church in that part of Ohio. He traveled the worship circuit from town to town. In June of 1862, a new Presbyterian church was approved for the community of Midway, now known as Sedalia. A church building was erected and used until 1953 when it was replaced by a new and current building. Our thanks to church member Julie Wilson for sharing the news of Midway Presbyterian Church.
Time now to hear from you at the old Farm Report mailbag. Eric Lang has an interesting angle on the new abundance of natural gas in the US. “I think it's possible that the speed of change from coal to natural gas for electricity could also be seen in the change of gasoline to compressed natural gas for automobiles.” Eric, I’ve been following the concept of using compressed natural gas or CNG for the last few years and one big issue is the huge size of the tanks needed, but personally, I think that the bigger hurdle will be my wife, Jan. She does not enjoy filling her cars tank with gasoline. For those couples who share a vehicle, many males notice how the car is always on empty when it's their turn to drive. You look at the apparatus and a learning curve needed to fill those CNG tanks and I think the popular acceptance will be really slow. Some experiments are being done with liquefied natural gas at extremely low temps. The only successful vehicles today are tanker trucks that transport LNG from terminals. It's likewise a technological headache and an expensive infrastructure investment. Finally, as natural gas displaces oil for heating and some industrial feedstock’s, oil prices could soften making the economics of CNG doubtful as well. In short, I think compressed natural gas can work as a transportation fuel but it still came complete with petroleum.