USFR Weekly Recap - December 17-18, 2011

December 19, 2011 08:06 AM

DECEMBER 17-18, 2011

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. One of the stranger consequences of the turmoil in the European Union has been the slow realization by investors and Americans in general that the old U.S. of A. economy isn't doing quite as horribly in comparison. Sure growth is slow, but it's positive, pretty steady and show many signs of picking up. Unemployment levels stink, but also are trending down. As one economist phrased it, America is losing the ugliest economy contest. Thanks to our amazing adaptability, the U.S. - not China - could lead the way to a global recovery. Perhaps our motto should be: "The United States of America - we'll think of something." Time now for the's Al Pell.

MF GLOBAL: Thanks John. A hearing before the Senate Ag Committee puts a personal face on the MF Global meltdown. Members of the Senate Ag Committee heard from farmers, a co-op manager and a grain elevator operator who are all feeling the impact of the MF Global meltdown. Producers and agri-businesses are in a cash bind because they depended on MF Global to handle their futures trading business. A Minnesota farmer who testified says he has about $200,000 tied up with MF Global. The committee also heard from the top three executives of MF Global, including former Senator and CEO John Corzine. Corzine and the others say they have no idea what happened to more than a billion dollars in client money, which was supposed to be separate - and protected - from company funds.

POULTRY BIZ: A new report shows change is required if the poultry industry is to build a stable future. Rabobank says the chicken sector will continue to face higher and more volatile feed input costs. It also says the U.S. Poultry Industry must address rapid globalization, requiring U.S. companies to develop new products for export markets. Rabobank says it believes those who survive and thrive in the future will be those who recognize that the operating environment has changed forever.

PORK EXPORTS: October was a strong month for u-s pork exports. The U.S. Meat Export Federation says pork exports set a new all-time monthly value record at 574 million dollars. That's up 41% from last year. Those monthly figures pushed the yearly total to a new high of nearly five billion dollars...and there are still two months to go.

COTTON: The Ag Department is now pegging cotton production at 15.8 million bales this year...that's down 3% from November and 13% from a year ago. Yield is 771 pounds an acre, down 41 pounds from last year. That's the lowest since 2003. USDA says extreme drought conditions reduced yields considerably this season.

CROP WATCH: Thanks Al. Crop watch this week begins in the southwest where cotton harvest continues. In Arizona, cotton harvesting is 75% complete which is slightly behind last year and below the 5-year average of 84% complete. The state's "NASS" office says alfalfa conditions are mostly fair to good. Harvesting is active on about half of the acreage across Arizona. In Ohio very little progress was made last week to finish the corn harvest. It's sitting at 82%. Most farmers are now waiting for the ground to freeze to wrap things up.

ROUND TABLE: Roundtable guests this week we have Brian Basting and Sue Martin from Ag and Investment Services. I'll ask you each, I no you both have foreign groups making presentations, but the other thing is, your ears are working and I'd like to know what those producers and questions they are asking. I'll start with you first Brian. The preholiday meetings we have done, the persistent question is, obviously the price direction, how much lower can the markets go. Producers are wary of what happened for example in the wheat market when they made the highest in the summer and traded below all year and they don't want to see the same thing happen with corn. The other thing is, they're interested in what's going on around the world. Well, and it's pretty much the similar thing, will we get any lift in these markets and where do we make ourselves for this next year, how do we go about it. The other thing, I do think that the world situation is concerning and I hate to say this but I have a lot of questions about the MF Global situation. I'm finding out and about and attend to all the Midwest and I'm finding out about the people that were affected and that has a big impact on agriculture. We’ll stay with MF Global for a little bit not because it was the company or anything but what it did, everything was not as us images. Is that the feeling? That is probably true. One question an individual asked me when I was down in Kansas was, “How do I get my banker to trust me or allow me to be able to how they had to count again to trust my segregated funds are saved?” And I think that's it. Despite feeling and of course bankers are going to be very queasy. In any industry, it has lots of bad name for our industry, and, there are lots and lots of money, and, you just have to deal with them and the good side of this is this will force tighter scrutiny of clearing firms. It's just going down to the chained to the brokerage but is going to create some very tight scrutiny and they will have to change the policies and I think we will see that happen. But the bottom line, it will be better in the end after we fix it. I think regulators closely examine will happen and what can be done in the future. We can't put that behind us, but, a lot of producers are concerned about that but a lot of them don't know how much will we are going to go. What do you tell them about that? Is the great question, and I'm raising that you will live with producers. And it may not have been as short of the crop if you want to typify if, for example, the 1988 crop was the devastating crop. But historically many times, but every time, but many times short crops have a long tail. But what we witnessed this week was the short crop in Kansas and Oklahoma, and I’ve completed itself. If you look at the charts for wheat, and compared the activity thus far in corn and soybeans, it's not apples to apples but the trend is disturbing in the standpoint that potential is certainly fair for lower values. I agree with Brian. I do think that with the potential of South American weather, we do need to get some stabilization in the next six months of the European situation, that might add some alternate them, but I see the year ahead where, getting to December 2012, we look back and say, January was our high for the year, I think we have regularly dipped down, get into our summer where we are very dry, and corn and beans is tight and we have to have production in South America and the U.S. When we come back with more U.S. Farm Report, we'll talk more about what's been produced around the world and who is doing it. Roundtable guests this week, talking about who is producing what around the world. If we have the discussion off- camera and both of you are involved in what's going on in South America at this point in time because I understand the corn is pollinating and looking good and you particularly were talking about how quickly they will harvest soybeans this year? The indication is out that they could be exported from Brazil as early as January and aggressively exporting beans as early as February. That's the month ahead of normal, maybe 45 days ahead of normal because the crosscut pitted earlier and it's progressing well. That could change between now and harvest but certainly they have the potential to displace and I would say they could displace U.S. beans fast. I know you have studied that quite a bit, what will that do to our prices? While it's varied it up for our prices. I don't believe our lows are in on the beans, I think we are in the temporary time telling pace, but doesn't support far but it gives us much of the lift, producers probably want to look at selling some do no better beans and of course moving some old crops. The other problem we have is, once we get past the turn of the year, in all likelihood lead his credits have gone away, so that's been good for soybeans to crush for soya oil, we have to see how profitable that stays as to whether that demand stays aggressive. Basis levels may also soften because a lot of the ethanol plants pulled in their contracts for January and March with the thought that they would be able to do something better, and in all likelihood, spring and late winter --you get more negative as you head toward spring. We'll have the talk of acres as you head towards February and I think I will leave the negative tone. So, I don't think it's super long-lived, but we've been working with this timeline on the logo of these echoes all the way back to the lows of September 2006. I don't think that will hold. We've been flirting with it and now we are getting about --I would tell producers, take advantage of this opportunity. We had producers on the phone earlier today and we were talking about that, and he said, with $5 corn and $13 beans, it's not that hard to decide for me what to do. But you are saying that good deed price may not be there and the $5 could be there or not. I think it's important that the producers put the floor under the old crops. Then turn the focus to new crop, because there's an old saying, occurred in the hand is worth two in the bush. We know today that November soybeans are about $11 and we don't know what that price will be six months from now much less six weeks from now so I think the point of floor underneath you. You mentioned anchors, and they boosted the corn acres but they cut back on the bean acres? Devastated. I think traders thought we would still increase the acres along with corn acres, just maybe not as much, so we would have like 1.501.76 million acres and instead they cut back 1.5 billion. The one thing that I think we have to keep in mind is, if we go into next year and we have this fight on eight euros, we have to remember that we have 1.6 million CRP acres coming out and we also have what access they said, 1.6 million acres of protected plant. We have to have room to be flexible here to put acres and if we need two. I think would producers look at what is profitable, corn will dollar a lot faster per acre than dean's world. Okay. And in seconds, the work for producers? Take advantage of your opportunities, defender you are crop and boys under get worse under your prices.

JOHN’S WORLD: Since many of us are slightly bummed by the commodity price slide that we knew outside money in our markets could cause, but still pretended we could avoid, I thought I would share some unexpected upbeat news to brighten your holiday. Consider this fact that would have been unthinkable a few years ago: the U.S. no longer imports most of its oil. After peaking in 2005 at 60%, we now import 46%. The biggest reason is demand also peaked in 2005. But thanks to steadily improving mileage in new vehicles, and unfortunately, a brutal economic slowdown, we are just not using as much oil. Now add in a robust increase of 18% in domestic production. While new drilling is a factor the big boost is in getting more oil from our old fields onshore. The rapidly growing production in North Dakota has made it our fourth largest domestic source. And in fairness, I must add ethanol has helped, although it is a small component and still economically questionable. Even more encouraging is how our imports continue to shift away from the Persian Gulf. Less than 8% of our oil now comes from the Mideast with more than three times that from the western hemisphere, mostly Canada. Add in the enormous increase in natural gas production from shale beds, and our energy outlook is much improved from just a few years ago. Of course, demand will recover with the economy, but between new efficiencies, new production technology, and new energy sources, things are looking up.

Hello and welcome to U.S. Farm Report, I'm John Phipps. As usual, I did most of my Christmas shopping on-line. Apparently I am not alone as internet sales boomed this year. But clicking is still not the preferred method. For example, there are the Black Friday Legions - a group I find slightly scary to tell the truth. If you can get up at o-dark-thirty to stand in line at a box store, I don't think you are managing Thanksgiving feasting correctly. While I know there is a powerful social aspect to this activity, it looks to me like going bowling would accomplish the same thing. At any rate, I hope your shopping season was efficient, rewarding, and economically appropriate. Ho-ho-ho. Let's head to the news desk and Al Pell...

LAND VALUES: Thanks John. A just released report highlights how valuable farmland can be, especially when it's tied to corn and soybeans. Iowa State University just released its annual survey of real-estate transactions conducted in 2011. It shows the value of "overall" agricultural land in Iowa surged 32% to an average of about 6,7000 dollars an acre. For comparison, the previous high - set last year - was just over five thousand dollars an acre. When talking about high quality land in Iowa, it rose 34% to just under $8,200 an acre. The county with the most valuable land is O'Brien County which pegs the scale at $9,500 an acre. Duffy says this is the highest percentage increase recorded by the survey, which has been around since 1941. He says the land values go hand-in-hand with higher farm incomes. Duffy says about three-quarters of the Iowa farmland was purchased by farmers.

EQUIPMENT SALES: Because of those improving income levels, farmers are also buying equipment. The Association of Equipment Manufacturers says sales of all tractors in the U.S. for November 2011 were up 5% compared to the same month last year. Larger two wheel drive tractors are up 16%. Four wheel drive tractors are up 20% for the month. For the year 2011, sales of larger two-wheel drives are up a half point. While four-wheel-drive tractors are up 6% for the year.

MY PLATE: It appears very few people come anywhere close to fulfilling the government's recommendation on how to eat healthy every day. As you might remember, USDA changed the federal dietary guidelines from a pyramid to a plate. They devised a graphic interpretation to help folks eat a more balanced diet. Their new guidelines include healthier oils, increasing whole grains, vegetable and dairy consumption. But according to new data from the NPD group - which tracks eating trends - very few people come close to resembling USDA's "my plate". The research firm says for the average consumer, two percent of their days - about seven days a year - do they achieve the USDA dietary guidelines.

TREE BIZ: Christmas is just a week away. For folks who enjoy the scent of a real Christmas tree, they'll often wait until this weekend to get the freshest tree possible. The National Christmas Tree association says approximately 30 million real Christmas trees are purchased annually in the U.S., and they are grown on some 15,000 farms. We stopped by "Dulls Christmas Tree Farm" near Indianapolis. In addition to the 25 acres of trees, the family also grows corn and soybeans. Those crops struggled a bit this year because of the wet spring and very dry summer. Their other cash crop - Christmas trees - can overcome some of those challenges.

HEARTLAND: There's a craftsman in the Ozarks who really enjoys the holiday season. With chainsaw in hand, he's gone way beyond cutting fancy firewood. Steve grant from affiliate KY-3 in Springfield, Missouri has his story. You can check out more of Jason's work online by visiting We'll post a link on our home page for easy access.

BAXTER BLACK: With Christmas just one weekend away, Baxter Black is filled with the holiday spirit - and as always, has quite a story to tell. He joins us now from his Arizona ranch. Baxter will join us again in two weeks...until then, check out his work online at When we come back, Tractor Tales and our Country Church Salute...please stay with us.

TRACTOR TALES: Al rejoins us now. What's on tap for Tractor Tales this week?
John, we've got a collector with a little workhorse. This Cub may be small but it's had its share of work on the farm. We talked to the owner at an event hosted by mecum auctions in Walworth Wisconsin. 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.

CHURCH SALUTE: Our first country church salute goes to St. Matthew Lutheran Church in James Creek, Pennsylvania. The roots of this church date back to 1794 when John Michael garner and his wife settled in the area. Services were held in their home until 1805. The first church building was built in 1840 with native red stone. It became known as 'the old stone church". Members decided to build a new church in a more central spot and selected the Borough of Marklesburg. That building was dedicated in 1871. The current pastor is Rick Klotz. Our second salute goes to the First Congregational Church of Geneseo, Illinois. It was founded 175 years ago. The history of the town and church are interwoven. Geneseo was founded in 1836 by five families from Geneseo, New York. The pioneers were abolitionists. Their town became a station of the "Underground Railroad" which provided shelter to runaway slaves. The current pastor is Bruce Berghold. 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....We had a viewer who thinks our report of record farm income doesn't tell the whole story: "You reported 2011 gross farm income is expected to reach an all-time high. Please soon report that farm expenses are also at an all-time high. The high price of inputs is just another way of keeping the farmer 'down on the farm'." Bert Livingston Fremont, Ohio. Bert, our report correctly stated net farm income had exceeded 100 billion dollars for the first time. Of course, net farm income is what is left over after paying expenses, such as inputs. Your reaction is not unfamiliar, however. Many farmers are strangely upset with losing our victim status. The image of poor farmers coaxed a lot of subsidies from congress. But the idea we aren't making money - and lots of it - because inputs are high is simply not what the numbers show. For example, the number one culprit when we talk about inputs is fertilizer. But if you price the same application rate in bushels of corn, rather than dollars, we are slightly below average for the last few years. Farmers seem to be looking for ways to avoid looking like winners, but that is going to be a tough case to make when two farmers push a land auction to $20,000 an acre in Iowa. Bottom line, we'll need another way to make America feel sorry for us. Strong demand from farmers is pushing input prices up. But for most farmers, we're anything but down on our farms.


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