USFR Weekly Recap - March 10-11, 2012

March 12, 2012 04:30 AM
 

THIS WEEK ON U.S. FARM REPORT
EPISODE #2013
MARCH 10-11, 2012

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. While most farmers were puzzling about the Friday world supply numbers, there was an even bigger report. After a long slog, job creation in the U.S. seems to be gaining steam. For me the most interesting stat was the number that didn't change - the unemployment number at 8.3%. That was strangely good news because it indicates some discouraged workers are starting to look for jobs again. Unemployment depresses demand for farm products, especially proteins. More people working also means increased tax revenue which is good news for the deficit. So after you've given up trying to figure out the WASDE numbers, celebrate the job report. Time now for the headlines.....here's Tyne Morgan.

SUPPLY DEMAND REPORT: Thank you John and hello everyone. The USDA world supply demand numbers released Friday had a few surprises. The Brazilian corn crop was tweaked upward by 1 million tonnes. Most analysts expected a small drop. Meanwhile Brazilian soy production was cut more than expected. For U.S. numbers only wheat carryover for 2011-12 changed, dropping 20 million bushels on increased feeding and exports. Here are the world ending stock numbers: corn 124.5 million tonnes, down 800,00o from February; soy 57.3 million tonnes, down 3 million. And wheat 209 million, down 16.5. In all, it was another head-scratcher for analysts whose expectations were for more damage to the South American corn crop and less to soybean numbers.

FAPRI: New economic data from the Food and Agricultural Policy Research Institute - or FAPRI - shows net farm income declining this year. FAPRI presented its annual baseline report to congress on Monday. The economists project net farm income will hit 95 billion in 2012. That's down 3 billion from a year-ago. The group says given normal weather, a bigger U.S. corn crop could lead to lower prices this fall. FAPRI projects planted corn acres at 93.5 million acres, short of USDA's most recent projection of 94 million. It says a return to a normal yield would result in an average cash price of $4.81 a bushel down from $5.96 for the current year.

KANSAS WATER: Water is one of the most limiting factors in agriculture today. Two laws were signed this week that will help Kansas farmers conserve water in the Ogallala aquifer. One measure dismisses the state's "use it or lose it" water policy, which was put into place in 1945. The policy pushed some Kansas farmers to use water for irrigation, even when they didn't need it, just so they wouldn't lose their water rights. The other gives water rights holders more flexibility in how they use their water.

CROP WATCH: Crop watch this week is a two-state swing, beginning in the Sunflower State. In Kansas, the drought monitor shows the southwestern part of the state is under extreme drought. The southern half is very dry. The northern half is in better shape. In Washington County, Mississippi a grower says they had 60 degrees and a little wind on Tuesday. He says it was a great day to start the 2012 crop year.

ROUNDTABLE: We are headed way north this week for our marketing roundtable. It's been the generally mild winter in North Dakota. The national weather service in Grand Forks said it had 27 inches of snow which is half of last year's totals. CHS Act Services held its annual industry day in Grand Forks and that's where our team of experts gathered. Farm Director Al Pell led the discussion. We have eight real interesting groups of producers that are watching and we also have Mike North with First Capital Ag, Jim Bower with Bower Trading and Andy Schissler from Roach Ag Marketing. And the first thing I think, and I think it's on everyone's mind, not just here, but that is acreage. What are we going to be planting this year? What do you think we will be planting? Well as you drive around the country there's been a lot of preparations made to put the corn in this fall and winter. We patted very conducive winter season ticket fieldwork done and look at the 24 million acres and I think we will go with that. I would agree with that. I think we see pretty strong corn acres. I think beans have made our run of it as of late and it's working into the probability. I think we might have been north of 94 million acres already and that leads me to want to take it back some. But I think if the spring goes well you could see above that in the group, Jim crop report. I was talking to you earlier about soybeans and the fact that they will be a short carry out. We'll be into that 94 million? That the market has been saying to Mr. and Mrs. producer for the last few months, not just saying, but screaming. Listen, take a look at me. We will reward you if we plan is acreage. You're taking too many acres out of corn, you've taken too many acres, or should have come out of rice, oats, cotton and hay and the sweeping market is basically desperate, looking out for the 2012 and 2013 carry out to get more acres in place before the pointers go. And they don't have much time to do that but certainly the table for soybeans versus the table for corn project it is much more in favor of soybeans. So we have to be careful that they don't plan to soybean acres this year. We have any crop report coming out --actually, the crop report has come out. How effective are crop reports? We have been watching this for some time ago. Andy, I know you have an opinion about crop reports on how they come up with that information. I think they do their surveys and stuff like that and they are as accurate as they can be with that kind of recording. But there are better ways to do it. I work in the insurance industry and we certify our yield and acres. There are better ways to do as far as the stock situation and up the whole mystery of the deal. The stock reports. And that will be visiting here. How much are we feeding, and I think it's very hard. We see these limit up and limits on moves because they're at it this way with you that way on every report. If I was to venture to guess, I would say this next report would be bullish on the stocks. I think the cattle prices have been high enough that you could see of friendly stocks report. Do you think this will be another good year for producers? If you look at where profitability is that, there is money to be made. It's not gigantic but it's profitable. And they'd look at the cyclical way of agriculture, I believe it will be of good year. Couple years ago we said it would be very good and even last year we couldn't get anything planted. The rain came and now it's dry. I think last year was an easy year to market. Everybody was good, everybody was the hotshot. Everyone bragged about what they did. I think this year, 2012, will be much more difficult to analyze the market and analyze it correctly, because the situation is much different today from the price standpoint than it was. Get your giddy up the little bit and be ready for a lot more volatility and movement, and you better have your input costs covered before you get stretched out because I think this year will be tougher on marketing. So what you're saying is, we need to get right on top of it right now? When we come back we will talk about China and the U.S. Farm Bill. One of the questions of our audience that came before earlier needs to be discussed by our group today, and that's what's happening between Israel and our brand and how that will affect basically agriculture prices. I was listening to an interview by Warren Buffet two or three weeks ago on one of the major networks and he said something that I thought was very important. And that was, what would change the marketplace that we have seen over the past couple of years? And his response was immediately, it's not really the bank going under or that the structure of the United States, it's eight major nuclear incident, biological warfare or chemical incidents. That's something that changes the political aspects throughout the world. So that's Israel and Iran and of course if you listen to the news yesterday, it has intensified. That could be what we call the Black Swan Event. It comes out of nowhere, kind of like 9/11. Some of these structural situations that come out of Europe and they slammed the market really quick. I hope the situation doesn't turn into something escalating, but if they do take preemptive attack and Iran retaliates, oil would probably shoot immediately to $200 or $250. It is a dangerous situation. I would not take it lightly. It may work through but it certainly escalated intensity yesterday. That certainly brought up another issue and that's what's happened to China. The economy is not growing as much, what do you think? I think that's an understatement, but the economy is not growing as much there. What I've seen in the past six months, the retail sales are lower than what is being put out. The crude oil price has been high over the past year and when everything you do has been created with crude oil, then your material prices are just too high. They are very interested in having that inflation go over there and burn the mouth of the market and send jobs back this way. It's kind of working to certain extent. I've seen probability that has just been zapped. And to say that their GDP has been positive, that might even be of stretch with the way things are going right now. I think things are very tough over there, and I saw the same stuff about six months ahead in 08 before the market got weird. These are two world issues that are affecting us. What will happen to the farm bill? Well ultimately became off of a really good year and, as we go into the discussion about how to cut our spending and balance our budget and solve our debt issues, they are looking for any place that they can find savings. Fortunately because of agriculture's good year we are of prime target. And you saw things trying to get slipped into the budget repair bill, but the super committee was trying to put together in august of 2007. Basically as we go forward, I would expect there will be a lot the trimming of the payments. But your voices need to be heard. You need to be talking to your representatives and bringing them actual material that they can act on and telling them along in the process. And I believe they will be trimming the programs. I pretty much agree with mike's comments, but as you know there's a lot of cost- cutting now especially with the election coming up. Election years are always very dangerous to trade going into the election, and I've been taught this over 40 years ago. As soon as that election is over they have a free hand in there and at the very dangerous time in the market. 10 or 15 seconds to get some suggestions. I think you need to price of going into the summer. I don't think you can trust anything. We are and as uncertain territory as we have ever been. You have to do that but you have to take action now to make it any good year because there's plenty of things that we talked about that could destroy that. We will be back with more U.S. Farm Report in just in moment.

JOHN’S WORLD: One of the annual rites of spring on our farm is to take old, unused equipment to the local consignment sale run by a young farmers organization. Often it's just easier than hauling stuff to the salvage yard. Lately we've been surprised, and sometimes shocked, by the prices buyers paid for machinery we estimated as worthless. This year we climbed to the back of the old shed and drug out a tool I had not used for I don't know how long. But despite the proof we don't need this implement, I'm struggling with the decision to haul it away. The tool in question is an IH 720 5-18 moldboard plow.  If there is any bit of technology left on my farm that ties me back to my ancestors it would be the moldboard plow. Being able to turn the heavy, wet sod of Illinois was a breakthrough that made John Deere famous and my part of the globe fertile. This innovation goes all the way back to the fabled deep plow that was the key to productive agriculture, and hence economic growth, in northern Europe in the early middle ages.
The plow is woven into the mystique and vernacular of our profession. Am I really a farmer if I don't own a plow? Then I realized I had been through this experience before. Deep in my desk drawer is my engineer's slide rule, which I cannot throw away. It seems for too many of us it's hard to tell where the tool ends and the man begins. 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. We are all captive to our recent past. What occurred yesterday affects our thinking more than events last year. So it is that many farmers, myself included, are more anxious than usual about weather patterns this year. And let's face it - there seem to be some good reasons for this nervousness. The non-winter many of us saw, the lack of rain for months in the western Corn Belt, and freakishly powerful storms don't reassure much. I think it is likely this mindset will prompt unique growing strategies this year. Our profession has just become more unpredictable, I think. That oughta calm down the markets... Let's get started with the headlines and Tyne Morgan...

MEAT CONSUMPTION: Thank you John. And hello everyone. Consumers are not only paying more at the pump this year, but also at the grocery store. This is causing Americans to eat less meat. MU Extension economist Ron Plain projects meat prices to hit record levels in 2012. He says this creates a price tag on meat that's too much for some consumers to bear. As Americans look to cut corners in their budget, a house and car payment is not negotiable, but what they buy at the grocery store is. According to USDA, U.S. meat consumption this year will drop 12.2% compared to five years ago with the biggest hit being to beef consumption. Plain says tight supplies is to blame for the higher prices. Plain says with higher corn prices, more farmers are enticed to convert pasture land into corn acres, which also attributes to higher meat prices.

FOOD COSTS USB: Government regulations on U.S. farmers could cost you in the wallet. The United Soybean Board presented research on what it calls excessive regulations on agriculture. USB says current and proposed regulations could raise U.S. livestock and poultry production costs by as much as 25%. The Soybean Board says those increases would mean consumers pay nearly 17-billion dollars more a year for meat, milk and eggs. For eggs alone, USB says, requiring cage-free housing for laying hens would increase the cost from a $1.68 to $2.10 more per dozen. That would be a total cost of 2.6 billion dollars to U.S. consumers. Last year, egg-producers in Ohio agreed to phase in enriched cages in response to activist and customer demand.

FOOD RECALLS ON TWITTER: If you want the latest on food recalls in your state, just log on to Twitter. The USDA announced it's turning to social media to give consumers the latest information. The department says it plans to create a new Twitter account for each state. On their feed, they'll post consumer alerts about recalls of meat, poultry and processed egg products. So far, USDA has created accounts for 8 states, including Texas and New Jersey. It says this provides another way to provide consumers with critical information fast.

HEARTLAND LEGACY FAMILY: Spirit of the Heartland this week takes us to Pomeroy, Washington - home to the Dye family. Their farm was once the largest blue-grass seed producer in the country. But after an un-timely death, the family sold the business. Now the next generation is creating its own legacy. The farm is focused mainly on wheat production...but as Clinton Griffiths tells us, these farming parents haven't forgotten about raising quality kids. The dyes say the girls are too young to work in the operation now. But their succession plan will create an option for the girls to farm if they want to.

BAXTER BLACK: Lots of animals roam Baxter Black's place in Arizona...including a cat with an attitude. Baxter tells us why...Baxter joins us again in two weeks...until then, check out his work online at www.baxterblack.com.

TRACTOR TALES: Welcome back...Tractor Tales this week comes to us from the Buckeye State. As Charles Friend tells us, he has quite a history with this classic Silver King Tractor. You can find Tractor Tales online at www.usfarmreport.com and on Facebook. You can also download the segments as podcasts from iTunes.

CHURCH SALUTE: And now to today's Country Church Salute, which goes to Calvary United Methodist Church in Albion, Pennsylvania. The church is celebrating its centennial. It was originally a church of the United Brethren in Christ until the 1940's.  Since then several churches have come together to create what is now Calvary United. Pastor Mel Bendig says the congregation has dwindled over the years. In the 1970's, there were 120 members. It's now 35. But he says that small number gives the church a "family feeling" to it. He says the church still supports numerous outreach ministries. 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 commentary a few weeks ago about how higher efficiency is easing the impact of fuel prices on my farm brought this response from a farm customer: "If fuel prices do not affect the end consumer then why do growers continue to use it for an excuse, among others, for higher prices. Sounds like gouging to me." Travis Bates. Chino Valley, Arizona. Travis, the honest answer is rising fuel costs do provide pricing cover by being a convenient excuse that seems reasonable. But it is important to keep in mind that while my farm is not particularly fuel intensive, many other crops are. Forage, which may be what you are buying is more energy price sensitive, especially delivering bulky products like hay. So the old adage, "your results may vary" applies here. But the more basic answer is all sellers price whatever the market will bear, unless there is enough competition to force them to lower margins to maintain market share. When supplies are low, as is the case for forage in many areas after last year, prices are bid up by desperate buyers. It is unreasonable to expect sellers to keep prices low with that kind of demand. Oddly, this is also the undeniable force propelling fuel prices as well - we complain, but keep buying. Until we find ways to curb consumption - and there are signs we are doing just that - prices will stay high. That's not gouging - it's Econ 101. 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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