AgDay Daily Recap - November 19-20, 2011

November 21, 2011 05:19 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #1997
NOVEMBER 19-20, 2011

JOHN’S WORLD: Hello and welcome to U.S. Farm Report, I'm John Phipps. Thanksgiving can be a stressful as well as joyous time for families who gather infrequently. I know I avoid upsetting Jan as much as possible during the week before this home game, when she is occupied with recipes, decorating and bedroom assignments. But it could be even trickier than usual for those supposedly casual family conversations. Politics looks like an obvious unexploded bomb to avoid. And certainly the current blending with religion widens the no-trespassing area. Penn State has even made football a little iffy. But maybe the one topic farmers should avoid is how bad the economy isn't for them. Time now for the headlines.....here's Al Pell.

LAND VALUES: Thanks John. Just when you think the price of prime American farmland can't keep climbing, that's exactly what it does. A report out this week from both the Kansas City and Chicago fed banks show prices climbed a robust 25% in the third quarter. The Chicago region covers all of Iowa, the northern two-thirds of Illinois and Indiana, southern Wisconsin and most of Michigan. The Kansas City region includes Nebraska, which saw an incredible 40% jump. In Iowa values jumped 31%. While the fed doesn't release specific figures, independent analysts say farmland in the Hawkeye state now averages well over $6000 an acre. The ongoing strength of commodity prices and low interest rates have combined to push values higher.

WALSTEN REAX: Walsten says interest rates are low. The forecast appears to indicate those rates will remain low. He says the dominant buyer is farmers, who are taking advantage of the strong commodity prices to invest in land.

EXPORT ASSISTANCE: Also this week, the Ag Department reaches out to commodity groups in an effort to further expand export opportunities for American agriculture. While on a trade mission to Asia, Ag Secretary Tom Vilsack announced his department will fund export promotion activities to the tune of more than 200-million dollars. The funds will be split among some 70 Ag organizations representing just about every commodity grown in the U.S. Ag exports are a bright spot for the American economy with sales expected to top a record high of 137-billion dollars for the 2011 fiscal year.

CROP WATCH: Crop watch this week is a three-state swing beginning in north-east Indiana...Harvest on the Wallheater Farm near Kendalville moved along nicely this month - a nice break following a challenging planting season and a dry, hot summer. Yields - like their soils - varied greatly from field to field. In Louisiana, the sweet potato harvest is nearly done. Crop watchers say about 98% of the crop has been picked...10 points ahead of the normal pace. And in South Carolina, soil moisture continues to be a problem. Every county in the palmetto state remains in at least a moderate drought. As for harvest, 80% of cotton and 90% of peanuts are in for the season.

ROUND TABLE: Roundtable guests this week we have Mike North and Brian Doherty. Mike, give us the summary of what happened this week back every week as an initial week but it's been the very unusual week this week. It's often said that there are two primary emotions that drive the market, fear and greed. I would say in this case it was the former rather than the latter. Fear definitely got the grip on people this week. As more news came out of Europe, we saw Italian bond yields rise to 7% which is somewhat of a point of no return in some cases and it got investors worried about that contagion of issues coming out of Europe for the past six or seven months. To add to that, discussion is now circling around Spain, and potentially now France. It just paints a really concerning picture for anyone that is investing in a marketplace that involves leverage and that is our commodity markets so people are getting out. When you said leverage you are talking about commodity markets? Yes. And we saw the corn market dropped $0.30 this week, with all soybeans go back to the lows that we established in the last break prior to the recent rally, we actually broke through them on Friday. We are seeing about the pullback on cattle and on milk and it's pretty broad-based. Pretty broad-based, all the markets are down this week. What is it doing to your customers and to the producers out there that depend on this market? Because a lot of guys put a lot of corn and a lot of products into the bin waiting for higher prices. What's happening to them? Is it time to rethink? Two or three years ago, a lot of them said, I'm done with storage, it is in the bin and is locked up and I'm not ready to touch it for a while. After spending some time looking at things, that tone changed. And they say, look, I have the chance to sell high-priced commodity. Basis levels are historically high. I have $6 plus corn, and for those with the good corn crop that's a lot of revenue sitting in those things. So I think that mindset that I need to pay contract out some of this corn, I can't let something like this slip. And something is imploding in work that we have no idea how far it will go. Because it is affecting us right now. As Mike mentioned, if the confidence level issue. There is a ton of money on our sidelines for those ready to go into the marketplace and by these tight supply commodities. You used the term tight supply, are we really didn't take the play in your judgment? Absolutely. We have 800 bushels of corn projected to carry out. Anytime you get below a billion, that is a tight supply. And as we saw in 2008, that can change. In 2008 we were projected at 275 million bushels carryout and after the big field hike, we also added another 900 million in terms of lost demand. And when you see this type of concern over the financial conditions of the economy, demand has tendency to retract some and some people don't move in and more hand and mouth type of environment and suddenly you end up with more supply than you thought you had. Let me come at you from a different direction at this period of time, because I have talked to directors and the last three years has been very good for producers producing agriculture products in the United States with the exception of terry. We won't talk about that right now. But that means there's more money and land values are going up this period of time, so where are we going to be in the next year or two? Let me jump in. Anywhere from eight or $10 per bushel. If we step back a little bit in agreement with Mike, we could quickly build carryout. If we could take corn production up to 165 bushels per yields, you could pencil in and carryout jumping up to 2 billion bushels. That's the sub worked at the corn and below the cost of production. We are going to come back and we will be talking more about this on more U.S. Farm Report and just a moment. Our guest this week we have Mike North and Brian Doherty from Stewart Peterson. Bryan were talking earlier about the prices and how they were doing and that sort of thing. I heard you say $4.50 corn and the farmers at one point in time thought that was good. A lot of them are home at $8. But we also talked about how much land prices have increased in the third quarter of this year, 25% on average. Some states a lot higher than that. Everything is relative. The cost of production is $4.50 or $5, not very good price for corn producers. When you look at the market historically, we have attended the bull market years to look out there and see the profit levels that they have the tendency to disappear because input prices rise. They need to be on their toes and as we look ahead we have to look back. What I mean by that, in 2011 we had assured yield ended 2010 2010 the head of short field. When we come back with the big crop in 2012 you go 2 million in a matter of months. Well, absolutely. There is always at drag, time lapse between the rising prices and rising inputs and falling prices and falling inputs, and frankly, we have the perfect setup going into next year to see the massive slope in prices. And would say if you go to 2 bushels and carryout, I hate to say that. Well, exactly. So as I look at the possibilities of prices moving to such the level, I better be sure --if I'm the producer today, I better be sure that I'm doing some marketing and getting some things done to protect myself from such an event. Of the answer should be that you work it out ahead of time. What about the guys that are sitting there twiddling their thumbs waiting for things to help them? What would you recommend for them that they haven't sold anything ahead of them? Don't give the guy that stores $6: hoping for eight so you can sell it at three. I like that ... It's funny. We see guys do this over and over again. We say this is the good time to make profitable sales. Get it sold. We have the great basis. The market is telling us that if we want green now, forget about storing it. This talk about general economy. Do you think we will catch up with Europe and their downfall? That’s a good question. The worry is, we have the repeat of 2008 at unless Greece falters or Italy falters, one domino falls and that the domino effect. You have the panic situation or potential for one. With that being said, banks have a lot of money right now. They are flesh. The U.S. economy is in poor shape but not terrible shape. I think it's more isolated than other parts of the world but that being said it's not the momentum builder. You’re following a problem that took 15 or 20 years to build. You don't solve it overnight. Hopefully with the decisions made now for download prosperity. And that is expecting her commodity prices and will be for a while. We are talking about actual supply of the commodities but capitol for investment is really affected. Absolutely. If you go back over time we've seen response in the stock market, her response in our energy prices, the response in our food prices as money has flowed into the marketplace. And as it contracts, this 10 day contract as well. And, the government finds itself in trouble. Bad choices lead us into it. You see things movable are and that's the rope that would walk right now. If in fact they make some poor choices than we will be in for a really bad economic run for the next four, five or six years. Well I will summarize what you guys were telling me and that is that you need to put it on paper and make it work for you otherwise the proper potential is not there. We will be back with more U.S. Farm Report in just a moment.

JOHN’S WORLD: Much has been made of the allegedly secret process underway in congress to write the next farm bill. By using the super-committee structure to avoid all the hearings and floor debate. This is an accurate description of what is happening, I think, but does it really matter. Farm bills have in my lifetime always been a sausage-making process that in the end were decided by private conversations somewhere with a handful of powerful legislators. Given that Congress has shown little ability to pass even widely popular legislation, it is hardly surprising that end-around working solutions like this one are coming into play. But more importantly I think, farmers who are holding their breath wondering how the next farm bill will affect them may be attending the wrong anxiety. Any farm bill that meets what seem to be fairly strict cost reduction rules will have diminished effect on producers. Does it really matter how devious the process, if the payout is trivial compared to commodity prices and input costs? Then there is the very real possibility the super-committee will be unable to agree on a legislative answer and trigger across the board budget cuts that will change the landscape drastically for farm bill negotiators. So while concentrating on rumors in Washington may be diverting, it appears to me they will also be less than crucial to how I operate my farm. Much of agriculture is simply outgrowing the farm bill. Let us know what you think.... Send emails to mailbag@usfarmreport.com or call and leave us a voice mail.

2ND HALF:
JOHN’S OPEN:
Hello and welcome to U.S. Farm Report, I'm John Phipps. Thanksgiving is a time when food and farm are powerfully linked together. From the traditional feast to the nostalgia for rural life, this holiday more than any other shines a light on our business. While farmers are one of the most visible links in our food chain, the success of our system takes all kinds of labor. As we bask in the spotlight of Thanksgiving it would be good to also grant due credit to all the other players who help turn crops into food. Even a ancient business like farming has become part of a very complex, globe-spanning system. We need to work to make sure we truly represent how it works for all of us. Let's get started with the headlines and Al Pell...

THANKSGIVING DINNER PRICES: Thanks John. It comes as no surprise to any of us who make regular trips to the grocery store - the price of the annual Thanksgiving feast is on the rise. In its annual price check, the American Farm Bureau says the cost of a traditional Thanksgiving dinner will climb about 13% this year. The star of the show - a 16 pound turkey - leads the increase...up about $1.35 a pound from a year ago. In all, the Farm Bureau reports the average cost for a feast that feeds ten will top $49 this year...up nearly six dollars from 2010.

MISSOURI TURKEY FEED: Research is underway to come up with a cheaper source of feed for turkey producers. On average, feed makes up about 70-percent of their cost of production. Scientists at the University of Missouri are developing feed that includes just the right amount of amino acids to maximize turkey growth. The goal is to reduce over-feeding and as a result, reduce costs. "If everybody in the industry does this they're going to save something like 8% on their feed costs, right? And so when you have almost two billion dollars of feed each year you can save 8% there's a potential there for 100 million dollars each year in cost savings to the industry and hopefully that'll be passed on to the consumer in some form."

AQUACULTURE:  A new report from the United Nation's outlines the dramatic growth of aquaculture around the world. The UN says aquaculture provides nearly half of all fish consumed globally...making it the fastest growing source of animal protein around the globe. The report shows global fish production grew more than 60% between 2000 and 2008. The Asian-Pacific region dominates the sector, accounting for 89% of production.

DEERE CAN COMBINE: It was a week to remember at the John Deere pavilion as a full-sized combine is created with the help of more than 300,000 cans of food. The "Can Do" project kicked off last weekend and wrapped up Thursday. The result was a canned food combine that measures 60 feet wide, 80 feet long, 16 feet tall and weighing nearly 170 tons. Deere says it was there way of saluting farmers for their hard work at harvest - and at the same time focusing attention on hunger issues here in the U.S. All the cans of food will be donated to the local food-bank.

OUTDOORS ON THE FARM: It's time now to head "Outdoors on the Farm" with Pro Farmer editor and avid outdoorsman Chip Flory. What's a good hunting segment without a memorable theme song??? We have that covered thanks to Justin Moore...an up-and-coming country music star who joined chip on a hunt at "Timber Ridge Ranch" in northern Michigan. To learn more about Justin Moore - including upcoming appearances - head to www.bigmachinemusic.com. We'll post a link on our homepage for easy access.

BAXTER BLACK: Time now for our bi-weekly visit from Baxter Black. This weekend he offers up "The Coffee Shop Communion". When we come back, al returns with tractor tales and our country church salute...please stay with us.

TRACTOR TALES: Al is back now with tractor tales...what do you have for us this week? John we've got a unique tractor with a memorable color...We're off to Ohio to check out a one-of-a-kind Farmall Cub that was used for promotional purposes...check this out. These tractors were off-set to the left while the driving seat and steering wheel were on the right. The idea was to give farmers a clearer view of their fields.

CHURCH SALUTE: Our country church salute begins in the golden state as we recognize the Shandon United Methodist Church in Shandon, California. The church was started in May of 1891. The first building was destroyed by arson in 1993...but a new sanctuary was quickly rebuilt and dedicated the following year. With 55 members today, it's an active congregation - including a bell choir and two food giveaway's each month. Our thanks to Ellen Schroeder for the information. Our second salute goes to the Crossroads Community Church in Kokomo, Indiana. Founded in the spring of 1846, it is the second oldest congregation in the county. Over the years the church has moved four times. Today it sits on 114 acres and serves a congregation numbering nearly three thousand. The pastor is Jeff Harlow...a former full-time farmer. Our thanks to Raymond Riley for telling us all about his church. 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....Long-time viewer Rock Katschnig is upset about proposed farm labor safety rules for children under 16. These rules would only apply to non-family members. "The proposed laws of restricted activities for young people in agriculture really makes one wonder how removed from the real world are these people!" There has been an outcry from farmers about cumbersome regulations, but let's look at the actual proposed changes. Proposed changes for non-family workers under 16: banned from handling pesticides. 90 hours of training (which can be done on the job) working height lowered from 20 to 6 feet. Banned from working in grain elevators. No iPods/cell phones while operating a motor vehicle. (GPS is allowed). All motor vehicles must have rollover protection. Check our homepage for helpful links. While the height restriction will require some adjustment, statistics on falls back this rule up. Otherwise these seem pretty real world to me. Farmers should consider this as well. Clear safety rules provide employers some legal protection when followed. Ask any farmer who has had an employee injury lawsuit. Or talk to your insurance agent. Farms are the only workplace in America where children are regularly injured and killed, and the casualty rate is not decreasing. Teaching a work ethic does not require an unsafe workplace. These rules simply bring farms closer to standards already in place for children elsewhere. 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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