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"A good growing season would likely
result in prices a year from now well below the current level," said
Darrel Good. "However, any threat to next year’s crop could push
prices sharply higher. As a result, some caution should be used in
pricing the 2003 crop.
"Since 1973, December corn futures
contracts have failed to trade above $2.75 on only two occasions:
1986 and 1987. The high for December 2003 futures has been $2.69."
Good’s comments came as he reviewed
corn and soybean marketing strategies.
"As the Midwest corn and soybean
harvest draws near, producers must make decisions about marketing
that portion of the crops not already priced," he said. "Marketing
strategies for individual producers will depend on a number of
factors. These include expectations about potential changes in price
level and basis, percentage of the crop already priced, cost and
availability of storage, and the level of cash prices in relation to
the Commodity Credit Corporation loan rate."
Short-term price expectations likely
depend heavily on expectations about crop size, he noted. Improved
weather conditions during the last half of August have created some
uncertainty about changes in USDA production forecasts next month.
Some private survey results suggest that the corn crop may be
smaller than the USDA’s August forecast. However, the market
remembers the progression of crop forecasts last year, when a
smaller September forecast was followed by larger forecasts in
October.
"For corn, the prospects for a much
smaller crop have resulted in a very different price structure than
existed in recent years," said Good. "First, the harvest basis is
stronger than the basis recently experienced. In central Illinois,
for example, the average harvest basis on Aug. 23 was minus 17
cents. That compares to minus 25 cents last year and the three-year
average of minus 31 cents.
"In addition, the spread in the future
market is much smaller than a year ago. On Aug. 23, July 2003
futures were $0.0725 higher than December 2002 futures. Last year on
the same date, that spread was 21½ cents per bushel. Assuming that
the July basis narrows to minus 10 cents by next summer, the market
in central Illinois is currently offering 14½ cents per bushel to
store corn from harvest to the summer of 2003. Last year, the market
was offering a storage return of about 36 cents per bushel."
For soybeans, the average harvest basis
in central Illinois on Aug. 23 was 20½ cents per bushel. That
compares with 24½ cents per bushel on the same date last year and
the three-year average basis of 28 cents per bushel.
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The July 2003 soybean futures were only
1½ cent higher than November 2002 futures on Aug. 23. Assuming a
July basis of minus 5 cents by next summer, the market is currently
offering 17 cents per bushel to store soybeans from harvest to the
summer of 2003. Last year on the same date, the market was offering
a return of 30½ cents per bushel.
"For both corn and soybeans, the
average return to storage in central Illinois currently offered by
the market is less than the cost to store the crops," said Good.
"The interested-opportunity cost alone of storing corn and soybeans
from Oct. 1, 2002, to July 1, 2003, is about 13½ cents and 27 cents
per bushel, respectively. Storing crops under loan would reduce the
interest of opportunity costs, but unless the price structure
changes, the market is currently not encouraging the storage of
either corn or soybeans this year.
"The failure to offer a return to
storage is not uncommon for soybeans. With the South American
harvest coming next spring, there is no need to encourage storage of
large quantities of soybeans. The lack of storage returns for corn
is a departure from recent experience. Other forms of ownership,
basis contracts or futures contracts, appear to be less expensive
than physical storage of the crops."
In recent years, Good added, the large
"carry" in the corn market, along with low harvest-time prices, have
offered producers the opportunity to establish the loan deficiency
payment at harvest and sell the crop for January delivery. That
process resulted in a net price above the loan rate, even after
paying storage costs.
"That opportunity clearly does not
exist this year," said Good. "It appears that corn prices will
remain above the loan level for much, if not all, of the 2002-03
marketing year so that loan deficiency payments or marketing loan
gains will not likely be available. For soybeans, there may be
periods of time when the cash price drops below the loan rate. The
odds of such declines would increase if the U.S. crop is larger than
the USDA’s August forecasts."
Recent price strength has increased in
pricing a portion of the 2003 crops, particularly corn.
"Prices for
the 2003 soybean crop are generally below the loan rate, so pricing
interest is minimal," said Good. "December 2003 corn futures are
currently trading above $2.50, offering a cash price well above the
loan rate."
[U
of I news release]
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Losses caused by the corn borer are
about 4 percent per borer per plant when the first and second
generation are averaged over the various growth stages of corn. This
simply means that if you find two corn borers in a plant, you have
lost about 8 percent of the yield for that plant, due to the damage
caused by the borer. Losses can be direct, which occurs when plants
break over or ears are dropped, or indirect, when the tunneling in
the plant reduces the flow of nutrients to feed the ear.
[Photo provided by John Fulton]
Central Illinois generally has two
generations per year, but a third generation is not uncommon. Larvae
overwinter in the stalks of last year’s crop, then pupate and emerge
as moths that lay eggs. The rest of the development is the same as
any moth.
Practices of shredding stalks or clean
plowing help reduce the number of moths that will come from a
particular field, but the moths can fly up to six miles. This means
that for shredding or plowing to be effective, all the neighbors for
six miles around a field would have to follow one of these practices
to protect the one field in the middle. In other words, we’ll have
to deal with the borers.
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Tools for dealing with corn borer
include scouting and integrated pest management. Some of the
available tools of integrated pest management include the use of
pesticides and B.t. corn. B.t. corn has had quite a bit of press the
past few years as an environmental problem with monarch butterflies,
but the question that needs to be asked is why monarch butterflies
would be in a cornfield when they feed on milkweeds and not corn.
Oh, well — so much for a public policy speech.
Growers should continue to scout for
corn borer egg masses and apply control measures when economic
thresholds dictate. Newer models for thresholds are based on
economics of control, with crop price, control cost, forecast yield
and control efficacies all applied. The old threshold was one egg
mass per every two plants. The main problem encountered is that the
egg laying gets spread out over a long period as the season wears
on, so it is hard to find the scouting threshold at any one time.
In
September, our office will conduct the annual overwintering survey
of European corn borer. This is done by counting damaged stalks,
counting borers in stalks and assessing the growth stage of the
borers. This will be the 20th continuous survey coming up for Logan
County, and Logan County is one of the few counties in the state
with continuous data. I’ll report the results as we get into the
fall months.
[John
Fulton]
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"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]
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