USFR Weekly Recap - December 3-4, 2011

December 5, 2011 08:39 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #1999
DECEMBER 03-04, 2011

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. The time between Thanksgiving and Christmas is filled with traditional activities. Many, of course, have to do with the holiday season as parties, Christmas shopping, special observances, and family activities fill our schedule. But there are also traditional farm activities as well. Many of them are less exciting. Closing out or perhaps I should say, catching up, the farm accounting is often one big chore. And for many of us it's time for our annual prayer meeting with our lender. I'm actually looking forward to that this year. My banker, on the other hand is looking at low rates and flat loan demand. Somebody is always grumpy. Time now for the headlines.....here's Al Pell.

FARM INCOME: Thanks John. Despite a challenging growing season on many farms, it appears 2011 will be a banner year for American agriculture. In figures released this week, the Ag Department says net farm income will jump nearly 30%. If the forecast is on target, total receipts would top 100-billion-dollars for the first time ever thanks to higher prices for both crops and livestock. For crops, tight carryover and strong demand helped push sales higher. Cash receipts for corn, wheat and cotton are all up at least 30%...with soybeans up nearly 10%. The livestock sector was bolstered by strong overseas demand. Cash receipts for livestock, hogs and dairy are all up more than 20%...with poultry the only sector posting a down year.

2012 PLANTINGS: In the fields, analysts are looking at even bigger crops in 2012. Darrel Good of the University of Illinois is predicting a spike in planted and harvested acres next year. He says its likely drought and flooding will have less of an impact compared to what happened this year. In all, the USDA reports there were nearly 10 million acres of prevented plantings in 2011. Add to it fewer acres of hay and a net drop CRP acreage and its likely more land will end up in row crops in 2012.

CROP INSURANCE: It appears corn and soybean growers could save some money on crop insurance next year. Due to advances in crop technology, USDA’s Risk Management Agency has updated how it sets premiums. As a result, premiums for corn and beans could dip by as much as $3.00 an acre in 2012. Moving forward, the agency says it will begin re-rating wheat, cotton, rice, grain sorghum, potatoes and apples in 2013.

FARM DUST: Legislation aimed at preventing regulation of farm dust is moving forward on Capitol Hill. The Farm Dust Regulation Prevention Act of 2011 made it through committee this week and is now headed to the full house for consideration. The legislation would exempt farm dust from the Clean Air Act unless the EPA can prove it is a significant problem. It also gives local entities the authority to customize regulation based on the needs of their specific area.

CROP WATCH:  In its final crop progress report for the season, USDA says Ohio farmers are still trying to finish corn harvest. As of last weekend, a quarter of the crop was still in the fields. In Fulton County, Indiana a grower says it's been wet - too wet to finish harvest. He says some neighbors are done. Others are not. On the good side, yields are near or slightly above their five year average. From Roane County, Tennessee a grower says they've been getting quite a bit of rain, making it tough to finish fall tillage. He says if they can get a little wind the next few days, he can finish plowing before the next rain.

ROUNDTABLE: Roundtable guests this week we have Gregg Hunt and Mike Hogan, what did you think of the market this week. I think it starts out on Tuesday when we come in here and see the coordinated effort by world banks to support the European Union. That's for starters, and it obviously took the stock market up. But you didn't see much effect in grain. There was pathetic action in court all week and then we started seeing action at the latter part of the week, but funds that were short anything for getting out, any funds that were anything except corn and then the reverse happened. That's the only thing that they are long so they are getting out of that. We saw the same effect after the unemployment report on Friday also. The bond market had predicted down move in the stock market and the move and taking profits in everyone getting the cash and waiting to see what happens next week or week from today on what transpires on the European Union Summit. It seems like that European Union and the outside markets, but other than the basic fundamentals, who is 21 and buying what in terms of grain has affected markets more than anything else. That's really true. When you look at the fundamentals of the grey market themselves, some of the things we have seen come to me and certainly slumped everywhere except for potentially the ethanol business. It looks like they are having roughly record profits at this time I'm there, otherwise it's been quite mum. It's the activity from the outside markets, we heard news from the Blackberry Report that seems to be doing well at this time. The U.S. seems to be the starlet of the U.S. market whereas the European Union still continues to be an absolute mess as well as news out of China that they may not be the most healthy as they have been over the last few years. And you're talking financial health. We are in a world market, no question about that, so it seems like other markets are affecting us more than I remember in the past. The doubts I would connect on is looking at the currency markets in Brazil, they have the worst performing currency in the month of November. That made them more competitive and that's why he'll drive slower. There are the reasons behind act, and that's of course the things that we knew three months ago are being played out in Brazil at this extra soybean, so they marketed that. We are probably getting in the timeframe now to see some more pickup from the Chinese on the side of the business. The vegetable market will be the tightest we have seen since the mid-70s. That's the brighter spot. But as you can see, the meal market, we backed up a lot of meal in Brazil. And that had to move over this timeframe. But I think you hit it on the head here comes the ethanol business, will probably pick out hundred 1 billion-bushel business there even if we lose 100 billion in exports. While we increase the ethanol production more than we ever have. Gas, and with good hog profits, it depends on how well you have your crops set up there, but I would say that's the only bad spot. All in all they’re going to have the great quarter in the amount of usage and corn. But things are moving. And when the Ukraine took those taxes off it was final. That's all that was needed. Now we are canceling corn export sales that were in the unknown destination slot and that's the bad side. Let the guys in the North Carolina area that are going to use the Wilmington Peer, they can take Argentina cheaper than taking it in for the east coast, and because we still have 25% of the corn stuck in the field. It's affecting the base is quite of bit. Gas, and that's where we are. To be one of the key things we want to keep in mind, looking at the outside markets specifically, but the U.S. being what I would consider to be the best of the bunch at this point in time, but does this artificially inflate our dollar? And I could be very tough on the grain producers or livestock producers in this country if I were to all of a sudden inflate rapidly. That’s a subject we will take up when we come back with more U.S. Farm Report in just the moment. Roundtable guests this week, we have Greg Hunt from Archer Financial Services and Mike Hogan from Stewart Peterson. When we left we were talking about the value of the dollar, and you said that was going up and that would hurt agriculture in the United States. Well, if the dollar increases in value that lowers the value of our exports as well as the internal dollar as an effect on commodity price in general. So if the dollar starts to gravitate higher that probably has the downward pressure on prices. It would bring us back to the folks that are mainly watching the show, the producers, that puts them in a bit of a conundrum. If we focus on corn, we've had two years of the short crop. Suddenly we are bringing in the outside markets and that doesn't seem right to certain extent. One thing that they really have to concentrate on is strategy for this upcoming year. When you look across the board you have 2012 corn and beans still at fairly decent prices, not where they were out that you could be talking dollars lower in some of those commodities. Then they have time to move forward with. If we have video that means we will have the good crop next year and lower prices despite the fact that the dollar might be higher. It will be hard to market that, isn't it? Quick. Well we first have to get the 3 million extra acres of corn. Well, we have to get that image. Some are more reasonable, like when no 13 on that. I would say that therein lies the other dilemma. Guys now are buying good dirt and renting it $400 per acre. We had it all up, using 80% insurance, the fuel, everything. It can run you $850 an acre to plant corn. So I am a guy that is looking at corn under by 50 is going to be jumping out of his socks to plant corn. So I think, you have some type of floor at the moment under 12 corn under that scenario. And the thing that I want to talk about quickly --when I do hear negative news about corn, the bottom-line here is, what we have seen here is that end-user got his stop, we got some great export business down below six when this thing ran up half of that report, but now everyone is kind of flushed. So the only thing the corn market could do is go down and try to find some export business which doesn't have it right this second. But, the only grain of seed that didn't make the new low off of that perished September 30th report was older crop corn. Those are still in end is still significant. And when the spreads come in the way they are and grain is obviously flowing right now, there will be another rift here, the ethanol guy will get another batch of corn so we will still see the cycle to war three times for planning, that's the way I have it figured. It sounds like those prices, you don't get the real beautiful picture of what could happen next year. But they have these guys show up in the good way, and short in beans, less than in oil and our record short and weak. You have 25% exposure in the air in the Ukraine that is in very poor condition. It either didn't get planted or sitting on some very dry dirt. There is no snow cover there, whether it is in Russia. So there's another scenario where Ukraine might be our worst enemy right now in the export market but they may wake up on one winter morning and say, we have to cut off now because we just had the winter chill here. That wind will come off of that snow cover in Russia and put an extra bite into that scenario. We have about 20 seconds to tell the farmer what he's going to do. I think they have to reverse the future, so that by the 70 mark, plan for, what if that does break? Whatever reason it might be less planned for it. I think those are the things that farmers want to start looking at very closely. Thank you very much. We will be back with more U.S. Farm Report in just a moment.

JOHN’S WORLD: I hope your Thanksgiving was a good one, and was just the beginning of a joyful holiday season. It was a home game on our farm, as our children and their families, along with some in-laws and extras filled our house. There is a kind of pattern for these events in families. Jan and I occasionally celebrated Thanksgiving alone after we married and moved away, and before having children. Then we were the guests going back home for a while, and after returning to the farm, switched to host status. But then our children grew up and moved away, and once again we were occasionally alone, but soon it became a gathering of adults, even as we hoped for grandchildren. We got our wish. We added 7 humans under the age of 7 this year. And in the process I re-learned something about what children add besides noise and laughter. In the last few days Jan and I have both whined our way through annoying virus colds - hacking and sniffling. It seems we were not alone. Thanks to those little microbe transports we call grandchildren, everyone who attended our get-together discovered the same thing. We all brought a lot more home from the visit than just memories. Life without small children may be more sanitary, but that is a trivial price to pay for what they add to the festivities. Besides, since we will all be together again soon, my theory is we have synchronized our immune systems. So remember as you gaze around your holiday table, not all the guests are visible.

2ND HALF:
JOHN’S OPEN:
Hello and welcome to U.S. Farm Report, I'm John Phipps. There is always some "slippage" shall we say between what we profess to believe and what we do, but this disconnect can really be confusing to the marketplace. One prime example is food. While consumers in surveys will loudly proclaim what they think is important in their food selection decisions, it often doesn't match up with the contents of their shopping basket. Al has one such example in the news. This is one reason why the flood of polling data may not be very helpful economic information. We seem to have less trouble saying one thing and doing another than ever before. Let's get started with the headlines and Al Pell...

BEEF PRICES: Thanks John. With cattlemen down-sizing their herds the past six months, consumers can expect to pay the price in 2012. A new report by BB&T Capital Markets says restaurants face dramatically higher beef costs next year. According to USDA, supermarket beef prices are up nearly 10% this year, and that trend is expected to continue. Analysts say they expect consumers to stick to low cost cuts, like ground beef and hamburgers.

APPLE JUICE: Also this week - the FDA says it will take a second look at arsenic levels in apple juice. This all started earlier this year when the "Dr. Oz" TV show ran an episode showing high levels of arsenic in apple juice. While the FDA was quick to denounce those results, it did explain the difference between organic and inorganic arsenic. Organic is basically harmless while inorganic can be more dangerous at high levels over a prolonged period. The FDA says it's considering setting new rules for the inorganic variety once it collects more information.

SUSTAINABLE FOOD: New research shows the menu - not ingredients - is still the driving force for picking a restaurant. A study just released by min-tell shows a big majority of consumers – 75% - pick restaurants based on menu selections. Less than 10% say they are driven to a restaurant if it features locally grown or sustainable foods.

TREES FOR TROOPS: America's Christmas tree farmers are once again helping to brighten the holiday season for men and women serving in the military. Growers are donating more than 17,000 real Christmas trees this year. It's part of the "trees for troops" program organized by the national Christmas tree association. This week trees were collected, wrapped and shipped to military bases around the globe. The trees are being delivered by Fed-Ex planes and trucks. They will reach 60 bases in 17 countries.

HEARTLAND BECK’S CHOPPERS: An Indiana seed company is celebrating its 75th anniversary in a high-powered way. Beck's Hybrids commissioned a famous motorcycle maker to come-up with two custom choppers. As Wes Mills reports, the machines are memorable on their own...but the driving message behind the bikes maybe even more telling about the company. The Beck's bikes will be on display at various farm shows in the Midwest this winter, including the national farm machinery show in Louisville. The winner of the two-wheeled bike will be announced at commodity classic next March in Nashville.

BAXTER BLACK: What does Baxter Black's mother have in common with his mechanic? He joins us now from his Arizona ranch with the answer. When we come back, it's time for tractor tales and our country church salute...please stay with us.

TRACTOR TALES: Al is back now with tractor tales...John, this week's classic iron comes to us from the land of Lincoln...built from 1956 to 1961 this Minneapolis Moline 335 was a work-horse in its day. Match that with the love of the yellow tractor, and you have a perfect fit for its owner. More than 2,500 of these tractors were built in the five years they were in production. In 1961, you would have paid about 2,500 dollars to have one on your farm.

CHURCH SALUTE: Our first country church salute goes to New Hope Lutheran Church in Adamsville, Ohio. Started in 1811, the church is located in the rolling hills of east central Ohio. This year the congregation is celebrating its bi-centennial with events through-out the year. The church is under the leadership of Pastor Mary Molnar. Congratulations to New Hope Lutheran Church for its 200 years of ministry. Our second salute goes to St. John Lutheran Church in Arlington, Iowa. The church was started in December of 1911. It started 100 years ago with 20 families. It now has nearly 200 families. According to church member Dolores Boehm, St. John is one of four churches in a "geographical parish" called One-in-Faith. The churches are served by two pastors.  Congratulations to St. John Lutheran in Arlington, Iowa. 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....My opposition to the electoral college and unproductive senate rules provoked several responses in defense of the status quo. "Just imagine a political system where simple majorities rule on every issue. Would a group of farm state legislators be able to craft a farm bill?" Joel C. Heinzeroth That's exactly what I am imagining, Joel. Many in agriculture assume they will always be a minority and wish to preserve their disproportionate clout. But what if the minority is your opposition? Until the last few years rules to protect the minority were invoked rarely, but the threat of filibuster is now routine. These rules are not in the constitution, but were made by the senate themselves. As for the electoral college, several wrote in to talk about how it protects rural interests by granting political clout to states, not just population. A few big states like California, Texas, New York, etc., could run rough-shod over smaller states. Only there is little evidence this would occur. We would see it in states like mine - Illinois - where 10 of the 12 million people live in one corner. Yet farmers flourish there without special minority rules to protect them. The greatest danger, I feel, is the growing disconnect between our government and people. The possibility of another president taking office after losing the popular vote would add unneeded fuel to that fire. 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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