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May 2013 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

To Plant... or Not to Plant?

May 31, 2013

Chip Flory

From The Editor

May 31, 2013

Hello Pro Farmer Members!

It's May 31. Do you know where your seedcorn is?

Unfortunately for many growers in the western Corn Belt, the seedcorn is still in the bag. Or, if you've got water sitting in fields or trenches cut by the last downpour, you might be happy that seed is still in the bag.

Regardless, many western Belt growers - and some in Illinois - now have a choice to make. But don't feel like you have to make the decision right now. There are many misunderstandings of the Prevented-Plant option on crop insurance, but I do know you do not have to make your decision within 72 hours of the final plant date on your policy. Basically what happens is your coverage is reduced by 1 percentage point per day for the first 25 days after the final plant date. At any time in that period you can decide to plant corn at reduced coverage; to plant beans (with full insurance coverage up to the final planting date for beans) or to file a Prevented-Plant claim. And even after you file the Prevented Plant claim, that claim can be erased by planting a crop (either the insured crop or an alternative crop).

Simple enough, right?

Well... no it's not simple. Economics come into play on this decision. Gary Schnitkey at the University of Illinois provided an example of the economic decision-making process. Be sure to check it out.

In this week's newsletter, we drop our corn planting expectations to 95 million acres. We present that with a lot of confidence in the newsletter, but it's still a moving target. And it depends on if USDA was right back in March when it estimated your corn-planting intentions of 97.3 million acres. But we are confident corn acres are being switched to soybeans. And we know many growers that have never filed a Prevented-Plant claim are getting themselves educated on the process. One of the Members called this morning to say, "I feel a lot better about the situation after talking with my agent. I'm comfortable with how the process works... and I don't think there's enough extra revenue in making the switch to beans to make it worthwhile."

Here's an update from a south-central Minnesota Pro Farmer Member: "I have been to prevent-planting meetings and I would guess that right in this area that about 70% of corn has been planted and 5% of beans. West of here and south of Minnesota River it is  higher; East of I35 there a lot who haven't turned a wheel or have planted very little. Nothing will happen here for a week with good weather. We have missed a lot of the big rains but get 2 to 4 tenths every day. I think a lot of corn will go to prevent plant or beans depending on your numbers and the weather."

So... figuring out total corn planted acres will be a tough job this year. We've got USDA's June Acreage Report coming up at the end of the month. Unfortunately because of the survey period, it will still include some planting intentions. But, that will be the number we'll have to work with until at least October.

That's it for now...

I've got to book out of here this afternoon. I coach a high school trap team and the State High School Championship Shoot is taking place right now. My squads shoot later this afternoon... wish us luck!

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

Is beef regaining its 'leading indicator' status?

May 24, 2013

Chip Flory

From The Editor

May 24, 2013

Hello Pro Farmer Members!

Our quick Memorial Day message on the front of this week's newsletter is heartfelt. It's a sincere thank you for the sacrifice made by the families of our fallen Military and anybody that has served this country. And your Pro Farmer staff is sending prayers to the people in Moore, Oklahoma, as they recover from this week's tornado.

We had several "keeper" items in this week's Pro Farmer, but I want to talk further about a couple.

Our feature page was on the current confusing state of the cattle and beef markets. Record-high boxed beef values and contract lows in live cattle futures just don't make sense. We discuss the disconnect in depth, and then jump to what it might mean for the farm and general economies.

Record high beef prices with consumers still buying beef means they've accepted another price increase for beef. It used to be that beef prices and demand were a leading indicator of conditions in the general economy. If consumers were buying beef, and especially high-valued whole-muscle cuts (steak), it was generally a sign the economy was doing okay. OR - that the economy was stagnant, but prices for food, fuel and other items would climb. (In other words, inflation.)

With that in mind, the beef market's confusing "code" it is sending right now could be a little troubling. Consumers are accepting inflated beef prices compared to the raw commodity. If this trend extends into other sectors, it would mean weight on raw commodity prices and higher consumer prices... the start of general economic inflation.

The second "keeper" item in the letter this week was the update on Sea Surface Temps in the eastern Pacific Ocean along the equator. There are no "official" forecasts that La Nina will return this summer, but Iowa State University extension climatologist Elwynn Taylor is never one to wait for an "official" forecast before making one of his own. He sees La Nina returning by mid-June, which would likely be followed by a hotter- and drier-than-normal July and August in the Midwest.

Elwynn is comparing 2013 to the 1947 growing season. I haven't read enough about it or studied that season enough to know if he's wrong or right, but I trust Elwynn enough to take him at his word.

The year in my memory bank that would be a good comparison is 1995. That was the corn crop that launched the summer-1996 corn market rally to then-all-time highs. I'm not predicting new all-time highs, but I am saying we've got a lot to learn about the corn supply over the next four months... and corn demand over the next 18 months.

That's it for now...

I can't begin to tell you all how proud I am of my son Thomas. He graduates high school this weekend and is making plans to make a living (somehow, someway) in the outdoors/shooting industries. He's had quite a ride through life already and his next step into business school and a life supported by the stuff he enjoys so much will be unbelievably exciting! Congratulations T!

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

No 'Magic Formula' for yield (or demand... or price!)

May 17, 2013

Chip Flory

From The Editor

May 17, 2013

Hello Pro Farmer Members!

I never realized how many people were experts at estimating corn yields at this time of the year! I'm not... I try to estimate yields at this time of the year but when I do it, I fully realize I'm likely wrong. Things change... and we've only really got two pieces of a very complicated puzzle right now.

First piece: A chunk of the Corn Belt has plenty of water to get the crop started.

Second piece: Probably one-third of the crop will be planted after even the latest "too-late" dates for corn planting.

Some still stick with May 10 as the "too-late" date... that maximum yield potential can't be hit on corn planted after May 10. In my opinion, genetics have pushed that date back... a bit. Improved management has pushed the date back several days, something I think will be proven again this year. Ahead of last week's rain, most farmers stayed in control and didn't start mudding in corn. A decade ago, the mud would have been flying. Instead, most farmers waited until conditions were at least close to fit before putting seed in the ground.

Soil conditions at planting time help improve germination rates and stand... and the Crop Tour tells us plant populations have helped improve yield more than any other factor in the past 10 years. Again, that's a combination of genetics and management.

I've moved the "too-late" date to May 20 in my analysis. Corn planted before May 20 can reach its maximum yield potential... if conditions are really good for the rest of the plant's life. Corn planted after May 20 probably won't pollinate until late July... which points to a late September black layer. (The plant reaches physiological maturity about 56 days after pollination). That means the crop will still be trying to add yield when days are getting too short to gather all the energy needed.

After the May 10 S&D Report that included USDA's first official yield projection of the year, it was amazing how many "sure-fire" yield models circulated social media. My favorite was this: "Corn planted by May 20 = 100% trendline yield; corn planted May 20 to June 1 = 90% trendline yield."

Whatever...

Some of the best perspective I've seen on the impact of late-planting was delivered this week by Roger Elmore and Elwynn Taylor from Iowa State University's Agronomy Department. We're all familiar with planting dates, analog-year analysis, and Growing Degree Days (GDD), but they used a term that's rarely heard: Stress Degree Days (SDDs). I'm a big-time believer in watching SDD accumulation. Basically, it measures how many days the crop was under stress due to a lack of moisture, high temperatures or a combination of the two.

The best example of SDDs impact on yield (in my opinion) was 1995. That year the crop was planted late due to excess moisture. Conditions after pollination were not good. Moisture stress was minimal in the first few weeks after pollination, but temperatures were hot. Above-normal daytime temps were common that year, but most important were the number of nights in which temps didn't fall below 70 degrees. That limits the plants ability to rest... and that rest break at night is when the plant turns the energy collected during the day into sugar. That sugar is turned into starch... and the more starch you can pack into the kernel the heavier the kernel weighs. Heavier kernels equals more yield.

More evidence of the importance of SDDs came in 2009. Very few SDDs were accumulated in 2009... conditions were generally cooler and wetter than normal after pollination. Plants stayed green very late into the year and kernels just kept gaining weight. Quality of the 2009 crop was poor and it refused to dry down in the field, but there were a lot of bushels! That was the result of a low level of SDDs.

That, however, doesn't mean planting date and soil conditions at planting aren't important. Now is when stand is being established and the number of seeds that successfully germinate will help determine how many ears are making grain later this year. But, what happens after pollination has much more to do with final yield than does planting date.

That's why my bottom line is this: Any yield estimate right now is just a guess. There's no "magic formula" for yields at this time of the year. Anybody that argues yield potential at this time of the year is arguing only for the sake of the argument. You can't even debate yields at this time of the year... there's just not enough information available.

And because there's no way of accurately predicting yield, there's no way of accurately predicting demand for the 2013 corn crop. In May of 2012, USDA predicted a 2012 national average corn yield of 166 bu. per acre and a 2012-13 corn carryover of 1.881 billion bushels. Those estimates were made by some of the smartest guys in the estimating business with access to unbelievable analytical firepower and they missed the yield by 42.6 bu. per acre and they overestimated carryover (as of the May 2013 S&D Report) by 1.122 billion bushels!

Oh... and USDA's May 2012 national average on-farm price prediction for the 2012-13 marketing year was $4.20 to $5.00 ($4.60 midpoint). In the May 2013 S&D Report, the average price estimate for 2012-crop corn is $6.70 to $7.10 ($6.90 midpoint).

Things change, don't they?

That's it for now...

My son Thomas' graduation reception is this weekend. I can't believe how the time has flown. (Please... save the "You're getting old" jokes...)

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

It'll be a bottle-rocket rally without demand

May 03, 2013

Chip Flory

From The Editor

May 3, 2013

Hello Pro Farmer Members!

"Anxious" doesn't really describe how your feeling now, does it? Most of you made the right decision and your seed is sitting safely in the shed and out of the miserable weather. Those of you with seed in the ground that's nestled beneith a blanket of snow will probably have a little more work to do in that field before you get a crop up and growing.

But, there are some areas that saw good planting progress this week. When it was snowing in Iowa and Minnesota, planters were rolling hard in South Dakota. There was also some progress made on the southern and eastern edges of the Corn Belt... but growers there had to pick-and-choose their way to the lightest, most-fit ground.

So, needless to say... we're off to a slow start to the 2013 growing season. With the tight old-crop supply (which translates into the new-crop supply-side cushion), you'd think we'd see a stronger response in new-crop futures than we did this week. But there's a missing ingredient -- demand.

Without a demand surprise... or even just consistent minimal growth in demand... supply-side scares trigger bottle-rocket rallies (quick rally and a small "pop"). A supply-side scare that comes with a demand surprise or consistent strong demand growth is the combination that turns a bear into a bull. That hasn't happened... yet.

On News page 2 of this week's newsletter, I made the point that traditional buyers are coming back to the corn market. Export sales to traditional importers like Mexico and Japan were featured in the old-crop market. If they keep buying, 2012-13 corn exports just might be able to get to 800 million bushels. And just as importantly, China is buying new-crop corn for import in the 2013-14 marketing year. If these buyers continue to show up, that could be the "consistent demand growth" that's needed to turn some bears into bulls.

At this point in the season, it's really hard to say yields are being threatened. Conditions could, after all, turn perfect. Soils could dry out and warm up and planters could be rolling in the heart of the Corn Belt within 10 days. Unfortunately... that's not in the forecast. But if the forecast is right, don't expect a runaway bull market in new-crop corn futures... unless consistent demand comes to the market.

If you're not on Twitter yet, get your account open now. You've got to sort through some tweeters out there to separate the wheat from the chaff, but there is good growing-season information to glean from this social media service. Trust me, it's easy to get started. Just go to www.twitter.com and follow the instructions. Once you're there, search for @ChipFlory. Go to the "Following" button on my twitter page and check out some of the people I'm following to start to build a list. You can do the same by going to @BGrete, @JuliJohnston, @MeghanPedersen, @walstenm and @DavisMichaelsen. Those are your Pro Farmer, LandOwner and Inputs Monitor editors and reporters. It's a good place to start to build your twitter feed. You'll be amazed at some of the tidbits of information you can get in just 140 characters!

If you haven't checked out My Grain Trades on your homepage yet, please do that this weekend. This is an exceptionally valuable tool that will help simplify your marketing efforts in the year ahead. Click here to go to the introductory page. It's a free service for Pro Farmer Members that helps you keep track of your grain sales and figures your profit potential on the fly. Just check it out...

Pro Farmer's Marketing Education Series is also now available. It is what the title suggests... a series of workbooks designed to help you make better marketing decisions. Click on the link to learn more about this new project we're putting together.

That's it for now...

 

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

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