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Weekly outlook

Soybean prices

[JUNE 10, 2003]  URBANA -- Using options to manage summer price risk in soybeans is one alternative producers could consider, as there is potential for much lower prices should a favorable growing season unfold, said a University of Illinois Extension marketing specialist.

"Option premiums, however, are relatively large," said Darrel Good. "In addition, ownership of options does not eliminate the soybean pricing decision. That is, even if prices move higher, producers with options will eventually have to decide when to price soybeans. Another approach is to spread sales during the summer growing season to at least capture the average price on a portion of the crop."

Good's comments came as he reviewed the soybean market, which may be affected by increasing concerns over 2003 growing season weather.

Soybean prices have declined modestly from the highs in mid-May but remain more than $1 higher than prices of a year ago. Higher prices have persisted even as some market fundamentals have turned a little more negative.


"The pace of U.S. exports, for example, has slowed enough that it now appears that shipments for the year will be near the current USDA projection," said Good. "The USDA projection will be reached with an average of 4.5 million bushels of exports per week for the last three months of the marketing year. Shipments for the week that ended May 29 were reported at 3.4 million bushels."

In addition to the slower export pace, the pace of the domestic crush is such that the cumulative crush for the year could be five million to 10 million bushels less than the current USDA projection. The cumulative crush for May through August needs to be about 5.5 percent less than that of a year ago for the marketing year total to reach the USDA projection of 1.615 billion bushels.

For the period January through April 2003, the crush was 7 percent less than during the same period last year. A continuation of that pace would result in a crush of 1.607 billion bushels. The large inverses in both the soybean meal and soybean oil markets discourage end users from accumulating inventories and provide incentive to delay purchases as much as possible until the new crop year.

Good noted that South America has just harvested a record soybean crop, and early indications suggest another significant increase in acreage for harvest in 2004. China has reportedly expanded soybean acreage in 2003. In addition, some delays in unloading soybeans in China are reported as a result of a slowdown in paperwork to approve receipt of GMO soybeans.

"While far from a perfect planting season, it appears that most of the 2003 U.S. crop will be planted in a timely fashion," said Good. "As of June 1, the USDA reported that 74 percent of the crop had been planted, compared to 67 percent planted on the same date last year and only 3 percent points behind the five-year average planning pace.


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"On a statewide basis, delays were most significant in Indiana, Kentucky, Louisiana, North Carolina and Tennessee. Emergence and early growth of the crop were also delayed by early season weather conditions, but most agree that yield potential has not yet been significantly reduced."

Indications that the rate of consumption of U.S. soybeans has been reduced sufficiently and that the 2003 crop is not in serious trouble resulted in July futures slipping nearly 50 cents from the extreme high of $6.58 on May 20 to a low of $6.10 on Tuesday and Wednesday of last week. November 2003 futures declined about 35 cents during the same period. Those declines, however, were followed by a late-week price rally. The rally appeared to be the result of renewed weather and crop concerns.

"Reports that dry weather in parts of China might result in a smaller soybean crop in 2003 than in 2002, even with increased acreage, keeps the demand story alive," said Good. "A production decline would presumably keep Chinese imports at a very high level for another year. In addition, and perhaps more importantly, concerns about summer weather prospects in the United States intensified.


"Discussion of the developing La Nina weather pattern and the potential impact on summer weather conditions moved closer to the front page. Finally, predictions of the infamous 'ridge of high pressure' began to surface last week. Some began calling for such a ridge to develop by midmonth, bringing dry conditions to important growing areas. With U.S. stocks at such a low level, anything less than a trend yield for the 2003 crop means that supplies could remain very tight for another year."

A weather market and resulting higher prices have larger implications for pricing new crop than pricing old crop soybeans, since the majority of the 2002 crop soybeans have already been sold.

"Assuming that weather and crop concerns persist, what are reasonable price targets for November 2003 futures?" Good said. "Potential price strength obviously depends on timing, severity and duration of crop-threatening weather. Spring and/or summer weather rallies over the past six years have pushed November futures to a high ranging from $5.91 in 2002 to $7.50 in 1997.

"It is interesting to note that the contract highs were lower every year from 1996 through 2002."

[University of Illinois news release]

Tornado damage to crops

[JUNE 9, 2003]  With several tornadoes going through the county about a week ago, it is certainly easy to see the destruction. Many people have lost their homes, others have lost property, some have lost portions of crops, but luckily no one was hurt seriously. After the cleanup of outbuildings and homes, the attention turned to assessment of crop fields.

Cornfields were the most obviously damaged. Corn was much larger, and now there is a large bare (or soil-blown) area through fields where tornadoes were on the ground. The field assessments I made showed about 25 percent of the cornfields needing some replanting done. This was because those fields mostly had corn that was broken below the growing point. The other 75 percent of the fields were probably good enough to leave them. Of course there was some yield loss due to lost plants and missing leaves, but the penalty for late planting would about equal a stand of 14,000 plants left from the earlier planting. Most fields had at least that many plants.

Some recent research has shown that there may be a little more yield loss than charts show, but there certainly isn't a guarantee on replanting either. Miraculously the plants had already begun to regrow within three days.

Soybeans were a completely different situation. Many soybeans that were above ground were completely cut off. When cut low, soybeans are dead. There is really nothing left to regrow. With the late planting, there was a saving grace. That was that many beans were still below the soil surface and therefore protected. My estimates were that a third of soybean fields needed some replanting done.


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[Tornado-damaged corn]


When the big picture is in, crop damage was minimal. I estimated about a quarter of a million dollars in crop damage. When we start looking at well over a hundred million dollars worth of crops grown annually in the county, it isn't an overall large percentage. It is however very significant to producers in the tornado paths. Crop losses of any kind make a rather meager income even less. Replant costs approach $50 per acre. Also, in the case of cornfields, there were herbicides applied already, which prohibited switching to soybeans that wouldn't be affected as much by late planting.

The damage to ornamentals was also very large. If you need assistance with evaluating fields or ornamentals after the storms, you may contact me at the Extension office for assistance. The number is 732-8289 or e-mail fultonj@mail.aces.uiuc.edu.

Cost of operations

With about three years passing, there is a revised set of operation cost charts available. These costs are often referred to as "custom rates." These charts may be accessed at the U of I farmdoc website at http://www.farmdoc.uiuc.edu/manage/

[John Fulton]


Organic farm tour

[JUNE 5, 2003]  URBANA -- A tour of several organic farms in Woodford County will take place from 9 a.m. to noon on Monday, July 14. Terra Brockman, president of The Land Connection Foundation, and other local farmers will host the tour, which will visit successful, diverse, organic farms.

"One farm grows 450 varieties of vegetables on 10 acres," said Brockman, "and probably makes more money than on 1,000 acres of conventional corn and soybeans. Another farm we'll visit has 500 certified organic acres of cropland and pastureland. They raise beef, hogs, dairy cows, chickens, turkeys, sheep and geese, as well as organic grains in a seven-year rotation, and some fruits and veggies. In between, we'll stop and visit a new organic farm that's in the process of transitioning to organic grain production." Brockman said that there will be tastings at each farm and refreshments at noon.

There are six tours being offered this summer through the University of Illinois Agroecology/Sustainable Agriculture Program. The first tour took place in June and visited ethnic grocery stores in Chicago. "Sustainable agriculture includes alternative farming practices like organic, but it's also about ways to provide an adequate and dependable farm income," said Deborah Cavanaugh-Grant, a U of I research specialist who is coordinating the tours.

On Tuesday, Aug.12, community-supported agriculture will be the topic, with a tour of Angelica Organics in Caledonia.

Tuesday, Aug. 19, a tour will visit Tanglefoot Farm in Simpson to learn about prawn farming.


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On Wednesday, Sept. 10, the topic will be agritourism, with a visit to Hardy's Reindeer Ranch in Rantoul. The tour will include a hayride and lunch served in the style of the grand Old West.

The final tour is scheduled for Wednesday, Oct. 29, to Pike's Hunting Club in Marion, where the topic will be waterfowl fee hunting.

A registration form is available online at http://web.aces.uiuc.edu/asap/index.html or by contacting Cavanaugh-Grant.

For additional information contact Deborah Cavanaugh-Grant at (217) 968-5512 or cvnghgrn@uiuc.edu.

A small fee will be charged for each tour. Registration at least one week in advance is required.

The tours are sponsored by the Agroecology/Sustainable Agriculture Program in the College of Agricultural, Consumer and Environmental Sciences at the University of Illinois, the North Central Region Sustainable Agriculture Research and Education Professional Development Program, and the Illinois Small Farm Task Force.

[University of Illinois press release]


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