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Dairy producers face Aug. 30 deadline

[AUG. 21, 2002]  URBANA — Current low milk prices make it important for Illinois milk producers to not miss the Aug. 30 deadline enrolling for the milk income loss contract, or MILC, under the new farm bill, said a University of Illinois Extension dairy specialist.

"Illinois milk producers need $13 per hundredweight for milk to cover all costs and obtain a fair return, but record-low milk prices — currently under $11 per hundredweight — are killing profit margins," said Mike Hutjens. "At the same time milk prices are down, hay prices are up, corn silage is drought-stressed, and corn prices may reach $3 per bushel.

"From 40 to 50 percent of the cost to produce milk is represented by feed costs."

The MILC program helps make up some of the losses dairy producers face with record-low prices.

"Under the new farm bill, producers have the option of having retroactive MILC payments start either in December 2001 or receive a one-month payment for September 2002," said Hutjens. "The MILC payments begin at 77 cents per hundredweight in December 2001 but are estimated to be close to $1.50 per hundredweight by next month."

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Hutjens said that producers shipping more than 1.3 million pounds of milk per month need to consider the program’s options carefully.

"It is a much easier choice for those producing at or below 2.4 million pounds per month," said Hutjens. "The September-only option is the best."

In 2003, Hutjens noted, producers can tell the USDA if they want the payments to start as of Oct. 1.

[U of I news release]

Weekly outlook

Short price rally

[AUG. 20, 2002]  URBANA — Even with some increase in the size of the crop compared with the August forecast, it appears that U.S. corn and soybean inventories will be reduced during the 2002-03 marketing year, said a University of Illinois Extension marketing specialist.

"Under those circumstances, the strength of demand will be extremely important in determining the post-harvest price pattern," said Darrel Good. "What level of prices will be required to limit consumption to the level of supply? The market will carefully monitor the monthly soybean crush reports, the monthly estimates of processing uses of corn and quarterly USDA stock reports.

"In addition, monthly reports of livestock numbers, cattle on feed and the hog inventory will provide information about potential adjustments in use. In the case of exports, the market has weekly USDA estimates of export sales and export inspections."

Good’s comments came as he reviewed the impact of recent weather changes on market prices. Recent precipitation in some of the drier areas of the Midwest has brought a halt to the week-old rally in corn and soybean prices.

"The market now has to sort out the potential yield impact of the late-season rainfall," said Good. "August precipitation, of course, will result in higher average yields than would have occurred without the rainfall. The question is whether yields will exceed the USDA August forecast.

"The objective yield portion of the August forecast is based on the assumption of normal growing conditions following the collection of data for the August forecast."

Good added that the market remembers the patter of yield forecasts last year, when late-season rainfall also brought some relief to dry areas. For soybeans, the September yield forecast was 0.5 bushel below the August forecast, but the January estimate was 0.9 bushel above the August forecast. For corn, the September forecast was 0.4 bushel below the August forecast, but the January estimate was 4.3 bushels above the August forecast. Contrary to popular belief, the late rains last year appeared to boost corn yields more than soybean yields.

Based on the USDA’s forecast that 71.001 million acres of corn will be harvested for grain in 2002, each bushel change in yield would mean a 71-million-bushel change in production.

"A four-bushel increase in the U.S. average yield this year would change prospects for a very tight supply-and-demand balance to prospects for a more comfortable balance," said Good. "Still, year-ending stocks might not be much above one billion bushels."

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Harvested acreage of soybeans is projected at 72.029 million acres, so that a one-bushel change in yield would alter production by 72 million bushels. A 72-million-bushel increase in production over the August forecast would produce a crop of 2.7 billion bushels.

"A crop of that size would still require a 200-million-bushel reduction in use during the year ahead in order to maintain year-ending stocks above 150 million bushels," said Good.

Currently, the only consumption data available are the weekly USDA export sales reports. Early sales are not a good indicator of actual shipments in the subsequent marketing year, but these sales are examined for clues about buying patterns of individual importing countries. As of Aug. 8, only 90.5 million bushels of soybeans and 86.3 million bushels of corn had been sold for export during the 2002-03 marketing year.

"The last time that consumption of U.S. corn and soybeans had to be restricted was the 1995-96 marketing year," said Good. "Two factors appear to be significantly differed for corn in 2002-03 than in 1995-96. First, the magnitude of the needed cut in consumption was much larger in 1995-96. Use was reduced by 800 million bushels, or 8.6 percent in 1995-96 compared to use in 1994-95. This year, use can be maintained at the level of use during 2001-02 if the crop is at least as large as the August forecast.

"Second, demand does not appear to be as strong currently as it was in 1995-96. High livestock prices and strong world economics meant that adjustments in consumption were not made early in the 1995-96 marketing year and that an extremely high price was eventually required to force the necessary reduction in use. The implication is that, with a trend yield in 2003, price will not have to go nearly as high this year as in 1995-96. The price pattern this year may be more typical of a short crop year, peaking early in the year."

For soybeans, the current situation is different from that of 1995-96 in two significant but contrasting ways, Good noted.

"The use of U.S. soybeans may have to be reduced by more than 200 million bushels this year, compared to a 60-million-bushel reduction in 1995-96," he said. "However, the 2003 South American soybean crop may be double the size of the 1996 crop. Larger South American supplies mean a lower price would be required to make the needed reduction in the consumption of U.S. soybeans."

[U of I news release]

[AUG. 15, 2002]  A weekly publication of University of Illinois Extension, Macon County --

Aug. 12 is the release date for the USDA’s first objective yield estimate of corn and soybean crops. Pending USDA’s latest numbers, other estimates have been published:

1. F.C. Stone: corn at 9.032 B (125.3 b/a) and soybeans at 2.699 B (37.5 b/a)

2. Bill Tierney: corn at 8.69 B (123.2 b/a) and soybeans at 2.573 B (36.5 b/a)

3. Sparks: corn at 8.977 B (125 b/a) and soybeans at 2.677 B (37.2 b/a)

4. Doane: corn at 8.97 B (125.5 b/a) and soybeans at 2.75 B (38.2 b/a)

5. Allendale: corn at 9.114 B (127.9 b/a) and soybeans at 2.752 B (34.77 b/a)

6. USDA July: corn at 9.790 B (135.8 b/a) and soybeans at 2.860 B (39.7 b/a)

Most of the estimators are not expecting USDA to totally agree with them. USDA is expected to slowly ratchet down its estimate, instead of a sudden significant drop.

Volatile prices are common in the summer, says Extension marketing specialist Darrel Good, but he says this year’s daily yo-yo prices are unusual. One reason is the billion bushel range in corn estimates and the 360 million bushel range in soybean estimates. Another reason is the impact 2002 U.S. crop size will have on U.S. and world stocks.

He says price stability will not likely return until the market is comfortable with production prospects, and confidence in crop size may be delayed until the September or October USDA reports. History suggests that prices will peak early this year. Darrel adds that the high may have already occurred, or it could come as late as November, underscoring the difficulty of making pricing decisions. He advocates an averaging pricing strategy.

Yield estimating may be one of the most important activities you can do right now. It may not be fun, but knowing your potential production will enable you to market early and often. The old adage "short crops have long tails" could be the tale of the market this year. It will be much more profitable to forward sell now than take loan levels later.

The wind may have been secondary to problems such as corn rootworm larvae damage, soil compaction that hampered good root development or poor stalk strength. Do some good scouting now to prevent a recurrence next year.

Illinois farmland values have risen steadily in the past five years, according to USDA, which puts the average acre at $2,640, up $510 since 1998. Tillable land is $2,750. Cropland went up 4.4 percent nationally from last year. Values had been increasing more than 5 percent a year, so the rate of increase slowed from previous years, likely due to low commodity prices.

Problems with insects have been serious in some places and minor in others.

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Corn rootworm adults are being found in fields where they were never before seen. Root ratings are being made in 25 central Illinois counties to determine the pressure of corn rootworm larvae.

Corn borers did not materialize in threatening populations as had been expected. Since they require lots of moisture, the later summer drought negated reproduction.

Soybean aphids seem to have been limited in their infestations this year, both in Illinois and the rest of the Midwest. Nevertheless, scouting is still strongly encouraged.
Farm household income

Farm subsidies will be criticized when the public hears average farm household income is at $62,019, compared with $57,045 for all U.S. households. What the public will not hear is that from 1964 to 2000 income from off-farm earnings grew from $10 to $125 billion, while farmers’ net cash income from agriculture sources grew only $36 billion.

Convenience foods just took a new turn at the Illinois Pork Producers. IPPA is promoting "pork chop on a stick," a thick-cut rib chop specially trimmed so that the bone of the chop serves as the stick for the consumer to hold. The only place to find one is at the Illinois State Fair Commodity Pavilion. Sounds like an opportunity to "pig out."

Red ink is increasing for pork producers according to University of Illinois Farm Business Farm Management. Because of higher grain prices, feed costs could increase significantly and are expected to average about $21.75 per hundredweight, with non-feed costs estimated at $17.75 in 2002. Total costs of production would be $39.50 per hundredweight.

Black ink could increase for dairymen according to Mike Hutjens, Extension dairy specialist. He says milk production is up 2 percent, but demand is flat. The base price for milk has dropped $5 per hundredweight, but consumers have yet to see that cut. He said if producers would cut their milk production by 3 percent, their net income would increase $318 each day.

New, beginning and experienced shepherds are invited to attend the U of I Lambing School on Sept. 21. Topics covered include nutrition of the ewe, lambing barn preparation and obstetrics, grafting methods, raising orphan lambs, docking, and identification. Register by the Sept. 2 deadline at: http://sheepnet.outreach.uiuc.edu.

If fee hunting is a prospect for added farm income, plan to attend a Sept. 10 seminar near Pittsfield. You’ll learn management techniques to establish and maintain a successful fee hunting enterprise including information on harvest strategies, habitat development, economics and marketing. For more information about the 9:30 a.m. to noon workshop, call Mike Rahe at (217) 785-5594 or e-mail mrahe@agr.state.il.us.

[Stu Ellis]

[AUG. 14, 2002]  URBANA — Producers interested in determining payments from various alternatives for acre and yield information required by the 2002 farm bill can download a spreadsheet program that will help them in the task. The spreadsheet is located on the University of Illinois farmdoc site, http://www.farmdoc.uiuc.edu/.

"The decision tool is a Microsoft Excel spreadsheet developed by William Edwards at Iowa State University and to which an Illinois database has been added," explained Dale Lattz, U of I Extension farm management specialist, who, along with colleague Gary Schnitkey, developed the Illinois version.

To reach the spreadsheet, click first on "Policy" on the main page and then on "Farm Bill Decision Tool Spreadsheet" under the "2002 Farm Bill" category.

"We’ve updated the tool with new information as better interpretations of the new farm bill have developed," explained Lattz.

Lattz added that producers will be able to see the spreadsheet and use it in a display at the U of I College of Agricultural, Consumer, and Environmental Science’s Agronomy Day, on Aug. 22 at the South Farms.

[U of I news release]

Honors & Awards

[AUG. 19, 2002]  Directors and staff of the Logan County Soil and Water Conservation District were recognized July 28 at the three-day Land & Water Resources Conference at the Crowne Plaza in Springfield. Terry Davis, chairman of the State Soil and Water Advisory Board, presented a plaque to the group in recognition of 50 years of dedicated public service, in the name of soil and water conservation and natural resource enhancement, to the residents of Logan County.

[Photo provided by SWCD]

Pictured are Zane Downing, soil conservationist; Emily Allspach, summer intern; Bill Dickerson, district conservationist; Carolyn Seitzer, administrative coordinator; Steve Bracey, resource conservationist; and directors Mike Boyer of Middletown, Doug Thompson of Atlanta, Doug Martin of Mount Pulaski, Duane Wibben of Hartsburg and Terry David of the state SWCD.

Ag Announcements

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