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[NOV. 12, 2002]  URBANA — U.S. policymakers and soybean producers need to wake up to the implications of dramatic changes in supply fundamentals, said a University of Illinois Extension agricultural policy specialist.

"Shifts in crop patterns and production are common, stimulated by economic signals from both the cost and demand side. This is the situation today in the soybean market," said Robert Hauser. "Producers should take advantage of these signals to increase profit; legislators should pay attention to them to improve policies."

Hauser’s article, "The Emperor Has No Clothes; I’m a Lousy Golfer; and Brazil Has Soybeans," can be found in the latest Illinois Rural Policy Digest, available online at http://www.farmdoc.uiuc.edu/
policy/digest/digest.html. [If you need to download Adobe Acrobat reader for the PDF file, click here.]

He believes that a number of factors are driving toward greater production of corn in the United States at the expense of soybeans.

"Anyone who even remotely follows the commodity markets realizes that South America has changed the supply fundamentals in a dramatic way over the past 10 years," he explained. "We need to focus on some of the economic and policy implications of this increase in long-run production capacity."

Between 1970 and 2001, world soybean yield rose by 50 percent, but at the same time soybean production tripled, increasing by 260 percent. And, he noted, the 260 percent increase may be too small, considering that most 2003 production projections for South America are now around 80 million metric tons, compared with the three-year average of 65 million metric tons used in the calculations.

Propelling this dramatic rise in South American soybean production are a number of factors.

"Soybean varieties have been developed that do well in Brazil’s subtropical and tropical climates and soils," he explained. "Soil fertility has been increased successfully. No-till technology allows maintenance of this fertility in areas where it is quickly lost when the soil is turned over and exposed to sunlight.

"The opportunity cost of land in much of South America is very low. And, finally, economic conditions and inflation have stabilized over the past eight years. These factors not only have made it possible for South America, particularly Brazil, to engage in soybean production in a big way, but there are strong signs that the expansion is far from over."

After comparing a number of costs, Hauser concluded that parts of South America have a comparative advantage in growing soybeans over the United States.

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"This idea is not well received by many groups in the United States. But instead of denying this possibility, let’s consider some of the ramifications," he said.

Current market prices are signaling U.S. farmers to move to a crop in which they enjoy a comparative advantage — corn. "Without the soybean loan rate program, this signal would be much stronger," he said.

Hauser said that this does not mean U.S. producers will quit growing soybeans entirely. Both domestic needs and a significant share of the export market will continue to support U.S. soybean production.

"But producers will increasingly consider two-year or three-year continuous corn rotations that will shift aggregate U.S. supply away from soybeans," he said.

Market prices in recent months have reinforced his contention that we are in a new era, said Hauser.

"In August, low yield expectations caused the most bullish U.S. production and carry-out conditions since the mid-1990s, yet the price of soybeans stayed below $6. Not long ago, it was reasonable for producers to expect at least $6 soybeans during ‘normal’ years," he said. "This is now not normal. But this fact is neither good nor bad, unless we ignore it."

Hauser believes that the fundamental supply and demand situation in the world soybean market points to continuing low soybean prices, due to increased South American production and the need for comparative advantage adjustments.

While the United States might have an absolute advantage (lower production and transportation costs) in growing soybeans, its opportunity cost (say, growing 140-bushel corn) is usually much higher than in Brazil, where average yields for non-soybean crops are lower.

Hauser believes that in terms of comparative advantage, U.S. soybean producers are like the fast-typing business executive who nevertheless employs a typist, even though he types slower than the executive. The motivation is to free the executive to do other, more productive things.

"In the case of soybeans, U.S. producers may find themselves in the same situation as the executive, letting South America grow the soybeans because of greater incentives in the United States to produce corn," said Hauser.

[U of I news release]

[NOV. 12, 2002]  Recent and upcoming 4-H events were topics of discussion at the Oct. 28 meeting of the 4-H Federation. Leaders Gene Dennis and Amy Hyde and 11 members met at the Extension office.

The group discussed rescheduling lock-in and movie night. Movie night was set for Nov. 10, and the lock-in will be Jan. 19.

Emily Bakken and Andrew Fulton volunteered to carry the flag for Achievement Night, Nov. 7.

Duane Gieseke and Amanda Davidson volunteered to help with a centennial table.

The group also talked about the wiener roast on Oct. 5, the "Find Out Party" on Oct. 26 and officer training night, which will be Nov. 19.

[Elyse Berger, reporter]

Beef cow nutrition workshop

[NOV. 11, 2002]  Cow-calf producers can obtain feed analysis on their feedstuffs by contacting the Logan County Extension office. Forage sample bags and mailing envelopes are available for sending the forage samples to a forage lab for analysis. There is a small charge from the laboratory for the forage analysis, and a Penn State forage probe will be available to take core samples for mailing to a forage testing lab.

A two-hour workshop will cover the nutritional needs of the cow and the effect of body condition scoring and environmental conditions on reproduction and production. In addition, individual producers can have their rations balanced on the new "Balancer 2000 Computer Program," using the analysis of their individual feedstuffs. These individual sessions will be on an appointment basis and must be made through the Extension office. Dave Seibert, animal systems educator from the East Peoria office, will conduct the educational program and computer ration formulation. Participants should also complete an information worksheet for the Balancer 2000 program to get the most of the workshop.

Preregistration is needed; call 732-8289 by Dec. 12.

Fall-applied herbicides roundtable

George Czapar, Extension educator, will be leading a roundtable discussion concerning fall-applied herbicides for control of winter annuals and how it fits into your traditional herbicide program. Data from university research will be presented, along with an opportunity to share experiences and get answers to questions. Reservations are requested; call 732-8289 by Nov. 18.

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Private pesticide training and testing

2003 will be a big year concerning the number of private pesticide applicators due to be recertified. Certification is needed to purchase and apply restricted-use pesticides on ground you own or operate. This license is not for applicators applying pesticides for hire, on public grounds or church grounds. Those areas require commercial licenses.

Two sessions have been scheduled for the testing season. Enrollment is limited at each session, and reservations may be made by calling the office, 732-8289. Training will begin at 8:30 a.m. at each session, and the testing will begin following the training session.

Session 1:  Dec. 4, at the Extension office; training begins at 8:30 a.m.

Session 2:  Feb. 20, 2003, at the Extension office; training begins at 8:30 a.m.

[John Fulton]

[NOV. 9, 2002]  URBANA — Central Illinois livestock producers will have four opportunities this month to see how others are extending the grazing season to reduce feed cost and to stretch seed supplies in a series of pasture walks sponsored by University of Illinois Extension.

"These pasture walks have been planned to view beef cattle grazing winter annual cereal crops of rye, wheat and oats along with the brassicas of turnips," said Dave Seibert, U of I Extension animal systems educator based in East Peoria. "In addition, stockpiled fescue will be viewed at some of the operations."

The dates and locations are:

•  Nov. 12, 9-11 a.m., Mike and Troy Kitley farm in Clay County.

•  Nov. 14, 9-11 a.m., Bruce Betzold farm, Montgomery County.

•  Nov. 21, 9:30-11:30 a.m., Southside Stock Farm, Greene County.

•  Nov. 21, 1:30-3:30 p.m., Paul and Jason Smith farm, Macoupin County.

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"The beef cattle producers from all four locations will share their experience with fellow producers on what has and has not worked this year with winter annuals and for fall and winter grazing," said Seibert.

For more information on the Kitley and Betzold pasture walks, contact Ed Ballard, U of I Extension animal systems educator based in Effingham, at (217) 347-5126. For the Smith and Southside Stock farm pasture walks, contact Seibert at (309) 694-7501. Preregistration is not required for any of the locations.

[U of I news release]

[NOV. 9, 2002]  URBANA — A number of issues of interest to Illinois sheep producers, including grazing, value-added wool and changes in the state’s scrapie control program, will be on the agenda Dec. 7 at the 2002 Illinois Sheep Industry Day. The event will be in Room 150 of the University of Illinois Animal Sciences Laboratory.

The event is co-sponsored by U of I Extension, the Department of Animal Sciences, and the Illinois Lamb and Wool Producers. The latter organization will have its annual meeting at the conclusion of the Sheep Industry Day program.

The event begins at 9 a.m. and continues until 3 p.m., at which time the Illinois Lamb and Wool Producers will \meet.

Neal Merchen, acting head of the Department of Animal Sciences, will speak on the future of the U of I sheep facilities and programs. Rick Jones, designated epidemiologist for Illinois, will discuss changes in the state’s scrapie program. Dean Oswald, U of I Extension animal systems educator based in Macomb, will provide an update on the value-added wool program. Richard Cobb will introduce Extension’s sheep grazing TeleNet series, and Jay Solomon, an Extension educator in engineering technology based in East Peoria, will discuss the mechanics of grazing.

Cobb will also make a presentation on developing methods and strategies to handle sheep more easily and safely.

There is a $10 per person registration fee, which includes lunch. Those interested in registering, which must be completed by Nov. 29, should contact Cobb at (217) 333-7351 or by e-mail to arcobb@uiuc.edu.

[U of I news release]

Weekly outlook

Soybean price strength
changes marketing strategies

[NOV. 5, 2002]  URBANA — Three weeks ago, when the cash price of soybeans was near the CCC loan rate, the recommended marketing strategy was to store soybeans and place them under loan in order to generate cash flow and provide downside price protection. With rising soybean prices, however, that recommendation has changed.

"Now that the cash price of soybeans is well above the loan rate, the loan price provides less protection from lower prices," said Darrel Good, University of Illinois Extension economist. "So one alternative would be to buy put options, thereby protecting the current price of soybeans stored on the farm. Nearest-the-money March put options, for example, have a premium of about 22 cents. Owning the put options would still allow producers to participate in higher prices but would provide protection from lower futures prices in the form of an increased premium. In addition, producers could collect marketing loan gains, should the price drop below loan value."

Good says another alternative is to sell cash beans at the higher prices now being offered. Then, if you expected higher prices, you could purchase call options to replace the cash inventory.

Several key factors have led to the recent price recovery of soybeans, especially the unchanged U.S. production forecast in the USDA’s October Crop Production Report.

"This report confirmed the need to reduce consumption of U.S. soybeans during the current marketing year. Less-than-ideal weather conditions in some areas of South America have delayed plantings somewhat and raised questions about the potential size of the 2003 harvest. Two consecutive weeks of large export sales of U.S. soybeans were also price supportive," Good said.

For the year, the USDA has projected that the shortfall in U.S. production will play out in the form of reduced exports.

"At 850 million bushels, the projection of exports for the current marketing year is 20.2 percent less than the current estimate of exports during the 2001-02 marketing year. Through the first nine weeks of the 2002-03 marketing year, cumulative export inspections are 15 percent less than during the same period last year, with almost all of the decline being in shipments to the European Union," Good said.

"As of Oct. 24, however, unshipped sales of U.S. soybeans totaled 307 million bushels, only five million (1.6 percent) less than outstanding sales of a year ago. Sales to the European Union are still relatively small, but sales to China and unknown destinations (perhaps China) are 39 percent larger than at this time last year. The recent jump in export sales of U.S. soybeans and the slow start to the South American planting season may be related."

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Most of the recent increase in soybean prices has resulted from higher prices of soybean oil, according to Good.

"On a close-to-close basis, the December 2002 soybean meal futures price increased $5.60 per ton (3.4 percent) from Oct. 9 to Nov. 1. In contrast, the December 2002 soybean oil futures price increased by .0265 cents per pound (13.8 percent). Compared to prices on the same date last year, the average cash price of soybeans in central Illinois on Nov. 1 was 35 percent higher, the average price of soybean meal in central Illinois (rail, 48 percent protein) was 1.8 percent lower, and the average price of soybean oil (crude, central Illinois) was 50 percent higher.

"Soybean oil prices are continuing to recover from the 30-year low established in February 2001 as production of competing oilseeds declines and U.S. and world inventories of soybean oil are being reduced. The expectations of declining consumption of U.S. soybean meal this year, and the resulting smaller crush, should result in further reductions in soybean oil stocks."

The direction of soybean prices over the next few months will be dictated by a combination of the rate of U.S. export sales, the development of the South American crop and the size of the USDA’s November forecast for the U.S. crop.

"Low prices in the face of a smaller U.S. crop were based on the expectation that South America would be able to fill the gap left by the shortfall in U.S. production. While that may still happen, there is less certainty now than a month ago. The size of the shortfall in U.S. production is still uncertain. The USDA will release a new forecast of the size of the U.S. harvest on Nov. 12. There is some expectation that the crop size will be increased in that report. In recent history, the November forecast has been above the October forecast about 65 percent of the time," Good said.

Good emphasizes that there is really no way to predict the exact outcome of these reports.

[U of I news release]

[NOV. 5, 2002]  URBANA — Addressing decision-making challenges in a risky environment is the theme of a University of Illinois Extension workshop to be offered at four locations in December. "Farm Income 2003" will be offered Dec. 10 at Mount Vernon, Dec. 11 at Springfield, Dec. 12 at Rochelle and Dec. 17 at Urbana. The workshops run from 8:30 a.m. to 4 p.m.

"Recent farm income variability, the implementation of a new farm bill, an uncertain economic outlook and continued competition in the world market provide significant challenges for farm and farm-related business managers," said Darrel Good, U of I Extension marketing specialist who is organizing the workshop.

Good said the workshop will consist of three general sessions — "Illinois Farm Income Situation," "Outlook for Commodity Prices" and "Which America Will Produce Soybeans?" — and four breakout sessions.

"One of the breakout sessions addresses farm land lease options and will provide an overview of trends in farmland leases, issues associated with alternative leases and an evaluation of lease alternatives," said Good.

"The second breakout will address a number of new developments and pressing issues in agricultural policy and law, including elevator failure, genetically engineered crops and impact of the farm bill.

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"The third breakout deals with crop insurance and will help producers make an informed decision on crop insurance.

"The final breakout will address issues such as assessing producer marketing performance and development of successful approaches to marketing grain."

Presenters include Good and U of I colleagues in the Department of Agricultural and Consumer Economics: Dale Lattz, Gary Schnitkey, Robert Hauser, Donald Uchtmann, Bruce Sherrick and Scott Irwin.

Preregistration is $25 per person, and registration at the door is $30, as space permits. The fee covers handout materials, coffee breaks and lunch. Registration can be completed online at http://www.farmdoc.uiuc.edu, or a registration brochure can be obtained from the local U of I Extension office. Questions can be directed to Darrel Good at (217) 333-4716 or
d-good@uiuc.edu.

[U of I news release]

Honors & Awards

Ag Announcements

Olympia FFA Alumni news

[NOV. 8, 2002]  What do a tree, a chain saw and a TV have in common? The Olympia FFA Alumni chapter is selling raffle tickets for these items. The low-priced tickets provide a chance at a 36-inch Zenith color TV, a Stihl Farm Boss chain saw and a 1.5- to 3-inch diameter sunset red maple tree.

The chapter draws in members from McLean, Tazewell, Woodford, DeWitt and Logan counties.

Proceeds from the raffle will help support the agriculture program of the Olympia School District.

The drawing for the items will be Jan. 11, 2003, which is the tentative date for the FFA alumni banquet.

For more information on purchasing a raffle ticket or about the FFA Alumni chapter, contact any member of the chapter or call (309) 379-5911.

[News release]

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