USFR Weekly Recap - January 28-29, 2012

January 30, 2012 05:16 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #2007
JANUARY 28-29, 2012

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. Producers in corn country have been watching the weather in South America more closely than our own. But just like our part of the world there is a lot a crop area to monitor and rains don't fall everywhere equally. The world continues to operate with leaner supplies of all types of Ag products, making every production hiccup a market mover. Our experts will have more to say on that soon, but many of the farmers I have talked to this winter are still trying to adjust to life without enormous surpluses. While it is good news for prices, it is also making more of us aware of how important every crop everywhere, every year has become. Time now for the headlines.....here's Al Pell.

DAIRY 2011 TOTALS: Thanks John. We begin with word of a record year for U.S. dairy production. According to new numbers from the Ag Department, dairymen milked just over 196 billion pounds in 2011. Overall, production per cow climbed to more than 21,000 pounds...up about 185 pounds per cow. USDA says the total number of dairy cows is up by about 80,000 head, less than 1% from the previous year. Economists say they expect increasing milk production and lower exports to push prices lower in coming months. The all-milk price is forecast in a range of $18.30-$19.10 per hundred.

CATTLE PRICES: Cattle prices hit another record this week...the sixth time in a month futures prices have topped their previous best. Analysts say signs continue to show shrinking inventories. As a result, consumers can expect to pay as much as 5% more for their favorite cuts by the end of the year. Prices rose about 10% in 2011.

OKLAHOMA CANOLA: More winter wheat growers in the southern plains are turning to a rotational crop for weed control. Winter canola acres may reach 200,000 for the first time in that region. Areas in northern Texas, Oklahoma and Kansas are adopting the plant. Because it's a broadleaf wheat farmers have found it useful to combat weed pressure. Since its introduction to the southern plains in 2002 acreage has doubled nearly every year. Agronomists say even in the midst of drought, a few timely rains helped establish this year's crop. Local markets and strong prices are helping persuade producers to give canola a try.

CROP WATCH: Crop watch this week is a three-state swing this week, beginning in Texas. We talked to "Beef Today" editor Kim Watson who lives in San Antonio...she says they got 3.5 inches of rain this week. Kim says it was the kind of rain that helps fill stock ponds and water tanks, which is what a lot of folks need in Texas. She says they are still behind in terms of annual rainfall, but every bit helps. Meanwhile in Kentucky, wheat growers will soon need to scout for two late-season diseases caused by the generally mild winter in the south - - leaf and stripe rust. Phil Needham is who is farm journal's wheat expert says the fungi will over-winter in the Deep South. He expects the rust will show-up earlier this year. And in Saint Lucie County, Florida - that's near Lake Okeechobee - farmers were starting to plant vegetables despite that surface soil moisture was mostly depleted. That part of Florida is categorized as "D0 " - abnormally dry.

ROUND TABLE: Roundtable guests this week at U.S., Farm Report. I want to know what you think about this week's trade and what we should talk about today. We are seeing historically strong cash corn basis levels throughout the west. But concentrated, everywhere including the Gulf of Mexico. Some of the strongest cash basis for other corn we have ever seen. Andy, what do you think we ought to talk about? I think we should talk about the weather of Argentina and changes in crop size there, and then some of the world stocks and things like that. Let's talk about the world situation. We've been talking about Europe for I don't know how long. I'd like to take the week off, because we didn't end in Europe this week. So if we could take over the costs that would be cool. So where are we at what is causing these high prices? Because I guess we need delivery of corn. The pipeline is extremely tight for corn. Producers are very strong holders of corn. Cash flow is not out of concern for most producers, now they had good yields and good prices. Don't need to generate any more cash flow at the moment. It tightened up the cash corn pipeline and as the result, even though we don't have extraordinarily strong demand for exports, there is enough there to talk on very few heads and basis levels are up. I know you have to have some basis points for where they are so where are they running?
I heard 60 or 70 or 80 over was exceptionally strong corn. Some of the processors are at levels not seen in the 15 or 20 years of the domestic part of the Midwest. It varies but is universal across the entire Midwest. And you're nodding your head also? Well for me that tells me that we are probably going to come close to running out of corn. I just think corn stocks will be much less than last year. Either we have the yield wrong or that we are using basic dumbed down levels of demand. I think that this does not show that at all.
Well the government came along with this report and why is it changing now and then coming back at the basis is up and we know there is the shortage in there. If there is the shortage than the government report showed somehow reflected that. So where is the error and who made it in this whole concept? I think there is a lot of moving parts, I think the numbers are too high for that to happen. I don't think that will be what happens. I think it might be trading close. We are talking about guys and export business. Not just feed usage, not just ethanol. If you have any vote leading up to the gulf port and you have to have it shipped, you have to pay what you have to pay. But I think that perhaps underestimated or bought they would improve the first 30 days and it hasn't happened. When we get back we'll talk about corn usage and then about all of the crops here on U.S. Farm Report. Roundtable guests this week Brian Basting and Andy Shissler, and during our break we were talking about corn along with other things. But you gave avery good example. I'd like you to get the example that you have just shared people who came back.
I think a good way to look at it, the producer is holding corn on the farm in eight games. Say you have of fair amount of onboard storage, 100,000 bushels, and the price maybe 650 cash. It's sitting their resting in the bin and what I would encourage you to do is to think about is, that price will be the price today. It might be higher tomorrow but it could be lower tomorrow and we encourage users to manage that risk. It could be a lot lower only from now. Or it could be hype. The key thing is to manage the risk that leave the upside open and protect the downside. You have indicated to your feeling that there is a lot of corn a lot of corn in the den on the farm because agriculture has been pretty good the last few years? I can't say that there hasn't been challenges with some droughts and flooding, but in general a lot of producers have the best balance sheets ever and we are encouraging our customers to defend that balance sheet against the unexpected. Defend it and give yourself the upside but defend the downside. Let's talk about usage of the corn or where it's going. We were talking primarily about exports, but it looks like the cattle in the report we won't have as many cattle this year, and there was some discussion of changing things around there. I think it will continue like this. You have your old crop deal is about to run out, you have your new crop deal, and you use a lot more next year if we produce it. I think the demand for corn states really high that I think a lot of the traders are banking on better weather, having bigger yields and more acres, the situation for the 12 corn is not as bullish as the new corn, and it will get back to the normal exports because you have more to south. And the median is probably the better price for corn. Let's talk about South American weather and it's really affecting our prices. Soybeans and corn. Correct. We have La Nina, and the biggest effect for the corn. We got to be back similar to this year and for me the damage is done in Argentina and parts of Brazil for the corn. The balance sheets are shaking down there and if you thought you were going to get extra comfortable outside of the U.S. for some of this corn supply, it's not going to be easy now. Then he looked over into Russia. Russia indicated they might add eight therefore not ship any at all. It could give us some opportunities to sell corn, is what I think. We might have gotten higher price than you would have gotten the month or two ago. Do you think we will continue to be bullish on corn prices, and tell when? I keep coming back to the notion of protecting the downside risk at these levels. You could certainly go lower, and the week went a lot lower. It's just --corn went up to $8 and it's coming back to little bit here but we could raise the water of the 2012 corn crop if we get better weather this year. We’ll be back with more U.S. Farm Report in just a moment.

JOHN’S WORLD: There was another government report about climate change released a few days ago. Top climate scientists outlined in clear terms the grim consequences on the horizon for people and agriculture. The changes in crop production will be significant. Rice production will likely move north and east to cope with droughts. Corn production will likewise shift northward as seasons, especially winters, get warmer. Total crop production for the nation could decrease even with higher yields. Most alarming are the predictions for municipal water supplies. Cities, many over a million, will face severe water shortages by 2050. At the same time the east coast will struggle with higher sea levels which threaten major industrial areas. Rainfall will be increasingly concentrated in the summer and autumn, with long dry winters and more frequent flooding during growing seasons. The report’s author left no doubt about government need to begin planning to adapt to these changes. Luckily those efforts to adapt won't have to be debated by congress. There won't be many charges of scientific conspiracy or academic fraud. The politics of climate change won't be the driving issue. You see, this report was issued by the Chinese academic community for their national future. It may be the u-s is the only country that sees through the alleged climate change hoax. Or this could be another area like textiles, cars or computers where we will be a follower.

2ND HALF:
JOHN’S OPEN:
Hello and welcome to U.S. Farm Report, I'm John Phipps. The news this year will likely be dominated by political developments as presidential politics capture media attention. But on page two, other big changes could be equally if not more important. The outcome of the European financial crisis remains anyone's guess, for example. The widening impact of oil and natural gas booms in the U.S. is exceeding all predictions. Our moribund construction industry is showing signs of life. The more I think about it, this year appears to offer more surprisingly upbeat possibilities than the last few. We'll try to make sure we share those, just to offset the flood of attack ads. Let's get started with the headlines and Al Pell...

SCHOOL NUTRITION: Thanks John. The nation's school meal program received new marching orders this week...and it could mean more fresh produce in schools nationwide.
The USDA’s final nutrition standard requires schools to increase fruits, vegetables, whole grains and fat-free or low-fat milk. It wants to see less sodium, saturated fat and trans fats. This is the first update to the meals program in 15 years. Schools have until July first to implement the changes.

PLANT HARDINESS: Backyard gardeners listen up...the Ag Department is making changes to its climate zone guide for plants - and it could impact your landscaping decisions. The long-awaited update shows northward warming trends--allowing gardeners in what were traditionally colder climates the option of plant new plant species.
It also zeroed in on cold zones in the nation's mountains. The last update to the map came out in 1990. Horticulturalists say the changes could mean new options at nurseries across the country.

HEN HOUSING: Livestock groups say there will be consequences if congress passes legislation that would require egg producers to use colony housing. This legislation is being pushed by humane society and united egg producers. On Monday four members of congress - two democrats and two republicans - agreed to sponsor legislation that would transition conventional cage housing to "Enriched housing systems" by 2029. The rules would double the space that hens currently have in conventional cages. The agreement would end ballot initiatives supported by the humane society in a number of states.

HEARTLAND: Joel and Sarah Knoebel incorporated their Pennsylvania hog operation in 2008. Along with making it a great place to raise a family, their goal was to establish a sustainable operation - and to be good neighbors. As a result of this mindset, they've received an environmental steward award from the National Pork Board. Cindi Cunningham has their story in this report provided by the Pork Check-Off. To learn more about this award program, head online to www.pork.org. We'll post a link on our home page.

BAXTER BLACK: Welcome back...time now for Baxter Black. This week, Baxter asks Hollywood to get back to its roots when it comes to the classic big screen western. When we come back, Tractor Tales and our Country Church Salute...please stay with us.

TRACTOR TALES: Al rejoins us now with Tractor Tales. What do we have this week?
We're looking at a 1958 John Deere 530. The collector grew-up in Minnesota and farmed until he moved to Arizona. That's where we learned about his love for Deere. Our thanks to the Arizona early gas engine and tractor association. We'll have more from there in the weeks to come. The club is hosting a tractor show next month in Glendale, Arizona. We'll put a link our homepage.

CHURCH SALUTE: Today's Country Church Salute goes to Trinity Lutheran of Van Meter, Iowa. Last fall the congregation celebrated its 125th anniversary. German settlers started the church in 1885 in a little wood-framed building. A brick church was later built and has since been enlarged. Reverend Kenneth Schmidt currently leads the church of 170 members. Church member Irene Koch says she just started watching U.S. Farm Report...and it sounds like she's glad she did. So are we. 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....A viewer offers a suggestion for our roundtables: "I find opposing views much more interesting and informative than two guys that sit and agree with each other. Let ‘em fight! The markets are what they are and it's the negative that bites us." Ed Schmid Minnewaukan, ND. Ed, your remark is interesting because I have also heard more than once a complaint that runs like this: "John, last week you had two market guys on the show who didn't agree. This week you had two more who disagreed and didn't agree with the guys the week before. That doesn't help me much" First off, there is no way we could begin to schedule guaranteed conflicting opinions since we don't know what opinions our experts hold on any given market situation. We are not even sure until that day what questions will be posed. Secondly, I have discovered that focusing on the negative - or being largely defensive in marketing - is not a sure bet any longer. Market volatility is now so much higher that missing one of the unexpected rallies can mean the difference between competing for land or not. The consequences of losing money may be greater, but the windfalls are also much bigger. Finally, I do not subscribe to the current fashion of conflict as entertainment made popular by reality shows. What we will continue to expect from our guests are honest opinions and civil discourse, and we'll leave the smackdowns for the WWF. 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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