USFR Weekly Recap - February 25-26, 2012

February 27, 2012 07:53 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #2011
FEBRUARY 25-26, 2012

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I’m John Phipps. It's doubtful future meat demand in the U.S. will match the consumption rates of the recent past for a variety of reasons. Between demographic shifts, consumer preferences and wider alternatives, domestic demand for protein will likely not fully utilize our ability to produce. Meanwhile, there are new customers around the globe who need more protein and finally have enough income to enter the market. It is clear our Ag future will be powerfully linked to global, not just local demand. One good tool would be a little more education in geography. It's hard to develop a marketing plan for Mozambique, for example, if you have no idea what part of France it's in. Tyne Morgan is here with the headlines.

2012 AG EXPORTS: Thanks John. U.S. Ag exports hit a record 137-billion dollars in 2011...but the outlook for 2012 is not as strong. USDA's latest outlook puts exports at 131-billion this year. The department projects a decline in grain and feed exports, but an increase in livestock exports. It also raised its imports projection. Add it up and the trade surplus is pegged at 24-billion dollars...about half of last year.

SK FTA: It's been years in the making...and now a trade deal between the U.S. and South Korea has a "go" date of March 15th. Negotiations on the Free Trade Agreement with South Korea started more than five years ago. President Obama signed the trade deal back in October. However, it's taken several months to figure out the "fine print" of the deal. When the FTA goes into effect on March 15, almost two-thirds of U.S. exports of agricultural products to Korea will become duty-free, including wheat, corn, soybeans for crushing, cotton and a variety of fruit crops.

MILD WINTER: In the southern plains where cattlemen hope to recover from a year of record drought, the mild winter has brought an early spring. Wheat pastures in many parts of Oklahoma have already started maturing to first hollow stem. That means in order to harvest the crop many cattle will need to find forage elsewhere. But pastures have been good while they lasted.

DERRELL PEEL: Peel thinks much of the winter wheat crop will be used simply for forage and feed for cattle rather than be cut for grain.

CROP WATCH: Crop watch this week examines the impact of a bizarre season of winter weather. We heard from a farmer in Livingston County, Illinois. He says they've had more rain than snow this winter. And soil moisture is adequate. He put down nitrogen ten days ago. Near Alexandria, Louisiana, a grower says they've had 16 inches of rain in February. And because of that, very little or no burn down on corn land has been done. And from New York State, a farmer in Cayuga County says they had three feet of snow this winter. Normally, it's ten feet or better. There's no snow-cover right now and temps have been in the 40's.

ROUND TABLE: Roundtable guests this week, we have Jason Maas from Brock Associates, and Joe Valkavic from Straight Financial. Bring us up-to-date on what the market did on Friday. Friday was kind of choppy trade. Old contract and soybeans ended up firm, of little lower in the session and came back strong. New crop corn has been the big issue lately, really done nothing but kind of weakened over the week. We are not done enough by 50's into the deep corn contract which is not attracted to producers at this point. A lot of the producers down there at the show were asking me about the USDA outlook meeting that was coming up and what that was going to do and if that would make the difference. Give me some information. Sure Thursday and Friday this week, the Act Outlook Forum took place this week which is really an update meeting and what it does is space on the outlook forecasts and they constructed them back in November. But what they do and not form is come up with new balance sheets and that's the first one again until May when the official numbers come out. So was the information positive or negative or did it make any difference at all? Whether it's the acre of the yields were the focus shift to the ground directing that we get back for the acreage support at the end of March, etc. So what is actually affecting the market now? Based on this report you would think there would be some movement somewhere. So what is affecting the market? Outside money, is that involved? I don't think it's so much outside money but there's a lot of variables in the market right now. There are too many unknowns going forward with this new crop and corn soybean association. The numbers are hardly set in stone right now, 94 million acres will be tough to achieve especially when you consider the move that the corn versus soybean spreads have made. I think there is a lot of money out there just waiting. And when you talk about outside money coming in, if you go back to the mf global, volumes have dropped off significantly since then, so there may be pigmented waiting on the sidelines to see what happens next. So an interesting highlight is that the combined forecast for corn and beans of 94 and 75 million acres is not all that different from what was intended to be planted last year. So in absence of the drastic planting acres that happened in corn and soybeans, what the USDA came out with is not all that different. They were talking all crops, not just corn and soybeans. We will plant more acres than we did in 1944 which is the largest number of acres that we ever had planted. That means we will raise some crop somewhere along the line and I would think that would get us into the market. But you are saying that's not really in the market? I think what the USDA came up with an outlook form was largely built into the market. The 94 million-acre figure has been around since last fall. And what form should be considering right now is, what if the acreage is larger? Because as he alluded to, it is very early and it's time to start looking at the what if's in either direction from that. Well, we either need to protect ourselves to keep ticket vintage. And that's probably what producers should do? At this time company of producer has to go off the notion that anything is possible. 94 million is possible, 95 or 96. On the flipside we might have the weather issue or prices have switched things around. So you have to be protected one way or the other whether it's using cash sales for other strategies, I think it's too much on the table this year especially with breakeven as high as they are. When we come back, I'd like to talk to you and get some ideas what could, although we hope doesn't come up into us. One of the more immediate logical things that could happen is the USDA revising some of our South American production forecasts in Brazil and Argentina. Some of those South American agencies in those two countries have already started lowering the USDA in March, the world supply and demand will probably lower those further and probably in the lower scope of trade and the way that commodities flow --that's really what helped set the stage for how many acres we need here. So you are thinking needed assessments will be lowered for Brazil and Argentina? Yes, and that would be the USDA catching up. Now there has been some recharge type things in those countries that have already taken place, but right now that's an assessment of trying to figure out how much damage has been done. You have something that you think about also? South American production estimates continue to be ratcheted down. Every time new estimate comes out, it seems to be lower than the one that preceded it. I think that's an issue and you have to think in your head, where will the markets be? And I think that going forward, I would go for the same thing in my opinion. I don't estimate it to get a lot lower. We take the chunk off the top. Going forward, we have to follow or decide whether to follow the reports. If the USDA would come up with the 95 or 96 million corn acre in March, it will probably be too late to do the marketing. So you have to look forward to say was possible between that report. Well higher or lower, I would encourage producers to shift higher or lower to what you think your producers will do. Don't stop at how high or low the perspective crops might go. Planting is coming up pretty soon and it's time to get to that present so it minimizes risk. And, what you are telling me is, I need to know where I’m going and I need to cover my costs already. There is the minimum % sold that every farmer has that dictates what's the maximum amount of risk that they should be able to take right now. We would say that getting to that 20% sold on new crops and beans would be the minimum ticket to as high as 50 or 60% depending on the risk tolerance and other specific factors. Basically what we are saying, the crops will go down to the basis is very high in the country, and producers have corn and beans that are still being stored out there, and maybe they ought to hang onto little bit and take advantage of the base is? The producer historically has more storage than ever. And from the historical relative standpoint has more cash than they have had endless tears right now, so I guess no one is in the big rush to sell the stuff. We have seen $7 corn and $8 corn, they will either walk in the basis for us all some cash, one way or the other, they will take in some strong cash market. If you date back to early December, a lot of people in industry, market advisors and the commercials all had the short-term outlook. And come mid-January we would start to see this often. So I think in the strong term short-term basis, some would say that farmers might be reluctant to sell, but as long as it has persistent, it's worth reevaluating something that says more about the actual supply. The supply might be shorter than we think it is at this point. Corn made new highs today in the spreads, so I think the market is telling us something. Okay. We will be back with more us farm report in just a moment.

JOHN’S WORLD: It is almost obligatory that I drone on about gasoline prices today, since that is the topic of the moment. But strangely enough, there is much to be optimistic about despite the looming increases. First off, many of us have sung this song before and know well that the world does not end when prices spike. In fact, because of previous run-ups, our consumption patterns are much more flexible. While partly due to the slow economic recovery, innovations such as mandatory fuel standards have helped decrease demand to levels not seen since 1997. Meanwhile, technology and those same high oil prices have encouraged a boom in exploration for domestic sources. Friends from Kansas to southern Illinois have been surprised by so-called lease hounds offering lucrative mineral leases. We now produce most of our own oil, and that stream is only beginning. I do not dispute the economic impact of higher gas prices, but suggest we have more tools to enable us to mitigate them. Shopping on-line has even been cited as a major factor in lower demand. We're using more mass transit, especially new, fancy busses between bigger cities. Even on our farm, we have been blown away by the efficiency of new diesel engines which cover far more acres with fewer gallons. A dollar increase in fuel is not the hit it used to be. Higher gas prices are not good news, but we are better positioned than ever to endure this latest increase.

2ND HALF
JOHN’S OPEN:
Hello and welcome to U.S. Farm Report, I’m John Phipps. We have a story in a moment which I hope might be just the first of many such announcements. Several of our current health scourges, including cancer, may be amenable to control with vaccines. Microbiology is making prodigious advances, encouraged by the lure of mega-profits. Right now it appears some of humankind's biggest medical challenges may be countered by boosting our own immune system, which vaccines do. In fact, it is my dream that my grandchildren will view most forms of cancer the way we do polio or smallpox - a sad affliction of the past.

RAW MILK: Results of a new government study on raw milk will likely upset people who enjoy the un-pasteurized product. The centers for disease control released the results of a 13-year-long review of raw-milk sales. It shows that the majority of all dairy-related illnesses are connected with consuming raw milk. Unlike the milk you buy at your grocery store, raw milk has not been pasteurized. That process kills harmful bacteria such as e- coli and salmonella. Right now 30 of the 50 states allow the sale of raw milk for human consumption. In this new report, the CDC says the rate of outbreaks caused by unpasteurized milk - and products made from it - is 150 times greater than outbreaks linked to pasteurized milk. The study looked at 121 dairy-related disease outbreaks, which caused 4,400 illnesses and three deaths. Of those, 60 percent of the outbreaks were linked to raw milk products. The study also showed that children are more likely to get seriously ill from the bacteria in raw milk.

SALMONELLA VACCINE: Meanwhile researchers say they're getting close to developing a vaccine for salmonella. The food borne disease is responsible for the deaths of hundreds of thousands of people worldwide. According to USDA, salmonella is the most frequent cause of foodborne illnesses. Scientists at University of California-Davis are using mice to develop the vaccination. It's been three years in the making and the researchers think they're on the right track. Salmonella illnesses are often connected to under-cooked meat, poultry and eggs.

EGG RULES: Legislation that would change how egg-laying hens are housed maybe running into a roadblock. Last month, an Oregon lawmaker proposed a bill that would do away with conventional cage systems and move to enriched cages. The law was based on a proposal written by the Humane Society of the United States and united egg producers, a trade association. Two key leaders in congress, Ag Committee Chairman Frank Lucas and Collin Peterson of Minnesota, have resisted moving the bill into committee. Beef and pork producer groups are opposed to the legislation, fearing that the measure would go beyond the egg industry. The man who led the united egg producers through the negotiations with HSUS is an Indiana egg producer. He's been criticized by many livestock groups for sitting down with the humane society and writing this mandate. I talked with Bob Krouse about being in this tough spot.

HEARTLAND: A city kid from halfway around the world is getting the full farm experience here in America. An exchange student from South Korea, the youngster is spending several months in Tennessee. In this report from UT, Chuck Denney heads to the show-ring. Jun plans to return to the U.S. to attend college. He hopes to be an engineer someday.

BAXTER BLACK: Welcome back. With the help of technology, getting lost is easier to avoid than ever before...but that doesn't mean it's impossible. Baxter black joins us from somewhere "out there"...When we come back, Tractor Tales and our Country Church Salute...please stay with us.

TRACTOR TALES: Al Pell joins us now for Tractor Tales. I guess it's not even a tractor? That's right John. We're taking a different path today. But it's still an interesting story. It's a 1913 Detroiter. And it's quite a find. Individual production of these classics was shut-down by the invention of the ford assembly line. From the sunshine state, the owner tells the story. Robert's grandfather owned the car for more than 60 years. That would have earned him a place in the Guinness Book of World Records for owning a single car for the longest period of time. But according to Robert, his grandfather did not want to pay the 200-dollar fee for the entry. Still he was happy, just the same.

CHURCH SALUTE: Today's Country Church Salute goes to the Zion Lutheran Church of Grover, Colorado, which is tucked away in the northeast corner of the state. The first building was constructed in 1917. For a while it served as both a church and a day school. It was replaced in 1951. Church member Randy Peters and his wife Peggy got married in that church in 1969. He says the membership peaked with 150 members, but it's now down to 35 faithful. And although the membership has dwindled, randy says the church still sits proudly on the Colorado prairie. As always we want to learn about your home church as well... Salutes can be sent to the address on the screen. Stay with us - the mailbag is next.

MAILBAG: Time now for our weekly look inside the farm report mailbag...Ardyth Helmer from Belle Fourche, South Dakota, suggests easing safety rules for children on farms is needed in order to instill a work ethic. "Involving children in the farm early on is responsible for instilling in our children a work ethic which is, sadly, not found in the general population today." There is a strong connection between farm chores and the work ethic we are so proud of on farms. However, my sense is once livestock are gone, as on many grain farms, chores as such, disappear. Yet the common age-appropriate tasks that remain, like taking the trash out or mowing the lawn seem to work as well for training. I also disagree that a strong work ethic is missing in our fellow citizens. Farm children who go to college are frequently stunned by the intense study habits of classroom competitors, for example. We have more people working multiple jobs in our economy than ever. Above all, as one sociologist pointed out, the hardest working people in the U.S. are not farmers but single mothers. They are literally never off the job. We often just don't appreciate other less physical forms of work, and so overlook the work ethic in service jobs or management, for examples. Farms don't have a monopoly on instilling a work ethic. It is a function of good parenting and can be found all across America. And good parents train children as safely as possible. 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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