USFR Weekly Recap - May 26-27, 2012

May 26, 2012 09:43 AM
 

 

 

THIS WEEK ON U.S. FARM REPORT

EPISODE # 2024
MAY 26-27, 2012

 

JOHN’S OPEN:

Hello and welcome to US Farm Report, I’m John Phipps. It has been interesting to watch the adjustment across the industry to expanded trading hours. For instance AG media have quietly ditched the before the bell predictions. Many of us are checking our smartphones at new times. Elevators are struggling to decide how and when bids are calculated. Consider if the USDA decides to delay reports until that brief window when the markets close in the afternoon. It would mean a blockbuster, game changing crop production report would begin trading at the same time as happy hour. What's wrong with that picture?

 

HEADLINES:

For the first time this season USDA is now releasing its harvesting update for the winter wheat crop. Some states have made substantial gains. 3% is now harvested; normally at this time it is just a hash mark in this column. Oklahoma was at 14% harvested as of Monday. And in Kansas winter wheat harvest is underway. That's one of the earliest starts in memory according to the Kansas Wheat Commission. Unfortunately the lack of rain in recent weeks has taken a toll. The condition rating dropped 9 points in one week, 43% is good to excellent, down from 52%. In Oklahoma it's also canola harvest. Yields seem to range from 15 to 50 bushels to the acre with most fields about 40%. Compared to last year the crop had good moisture levels this year. There is been an uptick in the number of acres planted this year. Harvest spread out this year. It's over loaded for a couple of the custom harvesters; for the most part we seem to be working through it. We will probably wrap up the first week of June. It's very high value crop. Almost double the price of wheat. That is 40-bushel canola almost worth as much as an 80-bushel wheat crop. He estimates there are about 200,000 acres of canola planted with most of the acres in Oklahoma. The big story is condition of corn. In the western Corn Belt the crop rates are in the low 80s and in North Dakota 88% of their corn is called good to excellent. In other news, Monsanto is expanding beyond its core business of seeds and trait technology. The company announced it’s reached an agreement to purchase “Precision Planting” an Illinois company that develops after-market planter add-ons. Precision Planting was founded in 1993. The USDA has cleared two California dairies under quarantine after last month's find of BSE in one cow. The AG department completed their investigation at the dairy. USDA says feed records show the facilities were following regulations and both are in compliance. They also found the progeny of the positive cow. The one living offspring was euthanized, it tested negative for BSE. Other birth siblings of the positive cow have also been traced and ruled out as threats.

 

CROP WATCH:

In Sevier County Tennessee a farmer says all of his crops are well established and hay is fully mature. They have had two and a quarter inches of rain in May. So things are looking good. We heard from a farmer in Norfolk County, Ontario who says corn planted on April 30th is now at 5 leaf stage. It’s starting to get dry out there. He said it's especially noticeable with his first hay cutting where yields were poor. In Steuben County, New York, a farmer told AgWeb that they have about 900 acres of corn in and some has emerged. They just started putting in soybeans last week. They also do about 400 acres of potatoes.

 

ROUNDTABLE:

Round table guests, we have Bill Biedermann and Chip Nellinger. Bill I will go to you because you know you were looking at the numbers. I won't ask what were the close things because we don't know when the market closes anymore. A little confusing, basically corn was down about 39-cents, for the last six days of trading, it's down 64-cents. Many beans were down about 23- cents. They were down 67-cents. It was a pretty negative week. Cattle was lower. The big thing was the dollar. It was up a dollar. $1.10 and did a huge reversal. We went from $73 to almost 82, 82 and a half. All those prices, price change --macro, a lot of that had to do with the weather, other things. I guess that's the thing, looking they know what prices down. Why? Well, crops are green and growing so that scares the little guy but the funds have turned to like an adjustment phase. Yeah. You are in trouble no question about that at this point in time. You think Greece will go under? I think they probably, they have basically. They are under; it's just whether they leave the Euro. That's the big fear. You know that drove some of the fund selling, that European influence. They had 17 year highs on bond years. They probably will leave the Euro. Yeah. That whole European thing will drive the dollar, drive the funds low. If we don't get that or if it's disappointing for the market you could really see the adjustment lower in the market's mind on yielding, both corn and beans and that reaction higher. Now to the important weather week. As we mentioned rain will be coming when you came over from Peoria and --dry weather all the way but water covering a lot of Minnesota. Yeah, 4 or 5 inch rains, we were getting pictures on Friday at whole farms just being flooded out. It seems like where it rains it's pouring and just two mile away it's dry. If we miss this rain there will be a lot of crop stress. Yeah some concern and good because we planted corn early no question about that. That means it'll move up the tasselling and that critical good weather situation. If we don't have that rain we can really get refused yields. You think we will have 166-bushel this is year? I think that's a very high bar to start the year and some of that early planting was mitigated because of some of the replant that's happened and now it seems like this dry weather has corn just sitting there, coming up. That's what it's designed to do. We are looking at a 163 kind of yield. We are more of a 1-7 carry over. It'll take a large yield deduction to turn it into a big bull market. We want to be in a bull market and the reality is it'll take like a 150 yield to turn the fundamentals to the kind of bull market we like to be. And you are talking mainly corn. Wheat is up at--why? We had a phone call on Monday from a large farmer in kansas. He said we thought we would be getting 50-bushel yields and it's around 30. That's a huge difference. You couldn't tell there was crop damage. That's part of it and then the dry weather took a big toll. Chip we will talk to you just a bit about where do you think we will go with the crop this year because everybody would like to get more. We have had a big down what will it take to get a bull market out of it? We talked before the break about the assumption going in of such high yields, record in corn, 166 tying a record in beans at 44. It seems like we set that bar so high that any little weather scare that we have, and we may be in the start of one right now the market goes its assumptions lower on yield and that creates the price rally. It would take some sustained damage on corn and bean yields to create that next big bull move but that doesn't mean we won't see pricing opportunities and rallies along the way as the market gets concerned about yield potential. . And what we grow here in the United States based on what you are saying there. We haven't said that much about South America. They still wouldn't be doing that hot right now with the corn and beans. Right. And that's a big part it, Russia, China and South American production, seems like kind of problems popping up and --a lot of different major growing areas and it's not just about us. What's a producer going to have to do to be able to say protect himself. Say they have been doing it. There are things to be able to do at this point in time. Well, what we did this week because of the risk of the weather is we encouraged producers to buy calls and I was talking to a banker and he agreed, he said that for the most part this year farmers are the least sold out ahead. About 10% of what they have. The larger producers are probably more around 40%, 50%. Our producers that we work with are more into the 60s% level. We have all of the revenue -- if it --went to whatever price on corn that --on dry weather that we have protections. Having that upside ensured a little bit will be good. If you aren't sold I think you better hope for dry weather to get sold. You are kind of negative on the corn price because it looks like you will --some people thought even with only 163. Unless China has a bad crop situation. The soybeans however could be more volatile. They are down to about 1 it is 1 billion they were up at about 1.6 billion. They have 200 million. They still have a lot of beans. The situation if we have a poor crop or around the world that will cause a rally. The situation is that we are still looking at what's going on around the world as well as and we were talking about before we came down stairs to get the business here that actually corn is --we can buy corn in Brazil, cheaper particularly for the East Coast. Yeah. And yet on soybeans it's the opposite. Right now, you know Brazil has been selling corn aggressively. The gulf market broke 25-cents this last week. Based on? The fact that Brazil is out stealing our customers like Japan. They are our number one customer. About 60-cents a bushel cheaper to start the week with the calculations. We narrowed that gap now so it’s getting more toward the even keel. Here is the significance of this whole story. We never heard about Brazil competing with the markets before, not in corn and suddenly we are truly in-100% in a world market and still don't know when the markets will open or close. Exactly, a lot of confusion but the world market as Bill mentioned that --set up the longer hours and we need to get that set in stone so we know what's what. When is the open, the close and what we will settle it? We can call the broker. Thank you both for being here.

 

JOHN’S WORLD:

My goodness the grain industry has certainly gotten our collective shorts in a knot over the expanded trading hours at major exchanges. It has been a whole week and while the world hasn't ground to a halt we are struggling with what the change means. I realize the new schedule will require adjustments by farmers and the industry but some of the warnings being offered are way over blown in my opinion. Most of these dire predictions center on the possible release of USDA reports while trading is going on. The concern is it'll make markets even more volatile. First off, how can we tell? We have been dealing with unprecedented swings since grain prices took off in 2007. Aren't these the same reports traders have been carping about being inaccurate and untimely? The really lame complaint is that our industry needs a timeout to digest the numbers because our reports are so complex. Really? Have you gone through the monthly employment reports or housing starts or the average corporate earnings statement. Somehow other people manage to trade whopping sums of money while analyzing those on the fly. Claiming we can't trade while reports released simply confirms an image of our industry as the slow readers of the market. If we can't master this trivial learning challenge I’m sure people can and they will be happy to do it for us. For a modest fee. Let us know what you think. Send e-mails to mailbag at USFarmReport.com or call to leave us a voicemail.

 

JOHN’S OPEN 2ND HALF:

Hello and welcome to US Farm Report. Memorial Day has slowly become a more important event for me. This has led me to read more history. Something I would never have predicted. This in turn helps me organize and correct versions of what I think happened. On this day set aside for remembering I think it’s helpful to keep in mind that memory is one of the worst possible record systems. Our brains constantly edit our recollections. They are designed to store lessons and patterns. What they do best is comfort, guide and inspire. I hope that is what you experience this Memorial Day.

 

HEADLINES:

If beef is on the menu this Memorial Day you can expect to pay more and the price increase doesn't seem to be easing anytime soon. Improving pasture conditions is causing ranchers to hold onto their cattle to help rebuild their herds. Derrell Peel of Oklahoma State University says they expect a 3% drop in beef production this year and next. This year maybe really the start of heifer retention and herd rebuilding. That’s going to further squeeze supplies. So, by the end of the year and on into next year, probably the year after that, we will see even tighter supplies. So the very tightest supplies are well ahead of us. There will be a strong support for prices, they will happen in 2013 or later depending on how it plays out over the next two years. He said the question still remains about demand and how people will respond to the higher prices at the store. And if you are planning to complete your BBQ meal with fresh fruit many areas can expect to see higher prices on those items mouthwatering items as well. Unusually warm temperatures this spring propelled fruit trees to blossom early and then a cold snap in April hurt the early fruit in several top states like Michigan. Michigan ranks third in annual apple production. States still assessing the damage but it varies from not only on the  farm, but the tree variety. There has been a lot of damage done to this area. But before people decide to go to a different location to find their fruit they should call their grower and find out what his crop is because everybody has a different situation. He still has most of his fruit crop for retail this spring and summer. New York which is the number two apple producing state lost quite a bit in the western half of the state. Producers lost from 20 to 80% of their crop. He is a milk lover, veteran farmer and young at heart. But this weekend this 68-year-old is more than just a farmer, he is the 2012 Indy 500 Milk Man. Each year an Indiana farmer is picked to serve up a bottle of milk to the winner. This year it's Dave Forgey of Logansport Indiana. Dressed in his Sunday’s best he will represent milk from head to toe. The unique part of his job is being able to put a national spotlight on milk. My goal is strictly promoting milk and I won't take anything else of my thoughts or ideas out to this. But promote the concept of milk, that drink of milk, at the Indy 500 that winners drink milk and the promotion we have done with all of that. The bottle they drink and sometimes pour over their head says winners drink milk. Forgey says he is treated like royalty before the race when he is featured in the annual Indy parade. He even gets a police escort down the track.

 

SPIRIT OF THE HEARTLAND:

Like most producers Texas farmers will give you the shirts off their backs or in this case, the produce off their land. They are reaching out to help neighbors in need through a partnership with the state's food bank network. Amanda Hill has the details in this report from the Texas Farm Bureau. 30 years ago food banks pounds out enter respective of what they got. Today we are part of let’s pick healthy options program. We are about getting nutritional food into the community. The Texas Food Bank network is also a member of the Feeding American Initiative. The goal is to provide healthy food for needy families. They hope to increase the donations by one billion pounds in the next five-years, a goal that requires a shift in the normal view of food banks, it's not only possible but happening. Last year over 25% of what we distributed was produce. Our goal is to get it to 50%. If we get the right products out it makes a big difference. There are key parts of the chose healthy options program receiving the highest marks for value, quality and freshness. That's where Texas farmers and ranchers step in. They have joined the Texas Department of Agriculture. The program called Texans feeding Texans encourages farmers and ranchers to donate produce to the local food bank. Since it started in 2002, they have donated 35 million pounds in fresh produce to Texans in need. Think any small business wants to support the community they are in and we do that by donating egg that are --the wrong size or we just had excess that we donate to the food bank pretty regularly and we think it helps a lot of people and we are happy to do it. Just five minutes away is an Egg Form Co owned and operated by Jay Soy Jones. For the last two years they have collected extra eggs to donate. Once a week the food bank picks them up. He views it as an opportunity to give back to his community and improve overall health. I talked to the guy at the facility and they say the eggs go quickly over the nonperishable can stuff probably what people are used to getting. To be able to provide a fresh food is good. I hope people enjoy it. With the Texas Farm Bureau. I’m Amanda Hill. The Capitol Area Food Bank of Texas provides food to 19 food banks.

 

ROBOTIC SPIDER FARMERS:

Farm technology is changing at a rapid pace. And it appears my role as “Grain Cart Operator” could soon be limited. National Reporter Tyne Morgan shows us why concepts companies are introducing today, are providing a glimpse into the future.

 

TRACTOR TALES:

It looks like we have an unauthorized John Deere Tractor this week. While visiting the Pacific Northwest, we met a collector who put together a tractor John Deere might be proud of. The Deere Model L-A was built during World War II. While some of the parts are not original, this 2 cylinder was painted with the industrial yellow John Deere used. Don’t forget you can find Tractor Tales online at USFarmReport.com or on Facebook. The segments can also be downloaded as podcasts from I-Tunes.

 

COUNTRY CHURCH SALUTE:

Today’s Country Church salute goes to Sacred Heart Polonia Catholic Church in Custer, Wisconsin. Sacred Heart’s long history begins in 1864. Wisconsin’s Northern Forests had been harvested by Loggers. The Government was selling land for a dollar an acre. German and Polish Immigrants were homesteading and started St. Martin’s Parish. According to Church history, there were some ethnic divisions. So 44 Polish families asked the Diocese for a new parish, which was granted. By 1895, the Sacred Heart congregation numbered about 4,000. But as several new parishes were built, the parish decreased. The present church was built in 1934. It has about 500 families. Our thanks to Robert Glizinski for sharing the history.

 

MAILBAG:

Time now for our weekly look inside the Farm Report Mailbag. Dennis Parker in Sparta, Tennessee raises a timely question. “I have observed, as have family and friends, that there is a 2 to 3 mile/gallon benefit, to not using gas with Ethanol. At current prices that is several dollars.” Thanks for emailing Dennis. E10 mileage drag is controversial. But here are a few facts you can use to help inform your decision. Since Ethanol had about 34% less energy per gallon than gasoline, you would expect a 10% blend. Which is the current mandate, to deliver 3-4% less mileage. This is exactly what the Department of Energy has found. So if you are getting say 25 miles per gallon switching to premium could get you up around 26. One important caveat: as they say, your results may vary. My guess is as more of us use a mileage App. Or buy cars with on-board mileage calculators, more of us will keep score. Easier mileage tracking may be the trigger for reviving this debate. Whether it is worth it to switch depends on prices, or course. If premium is less than 4% higher you might save a few cents. In my area it’s about 10 cents or 2.5%, so it does save a little for me. But the latest wrinkle in this flap is the current push by Ethanol backers to allow an increase in the blend to 15%. Automakers are pushing back, claiming engine damage, but that evidence is flimsy at best. I think what will stop E15 in its tracks is the likely 6% mileage penalty. Smartphones do more than just play Angry Birds.

 

YAMAHA:

And finally this morning we made you wait to find out who won the brand new Yamaha Rhino 700. But the wait is over. The winner is John York of Fulton, Missouri. Fulton is located just outside the city of Columbia. And we can only imagine how happy he is to win the Side-by-Side. Congratulations to John York, the winner of the Yamaha Rhino 700. An our thanks to all of you for entering.

 

As always, we want to hear from you, send comments to mailbag@usfarmreport.com or leave us a voice mail at 800-792-4329.

 

 

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