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"Extremely dry soil conditions in some
producing areas have the market's attention," said Darrel Good.
"Timely spring and summer precipitation will be required to quiet
the drought concerns. With prospects for small year-ending stocks,
another year of sub-par yields would require some rationing of the
2003 crop.
"For now, it appears that March futures
may test the early January high near $2.45 and perhaps the late
November highs near $2.50. While it is a little early to be too
concerned about the 2003 growing season, a continuation of dry
weather into March could propel December 2003 futures back to last
September's high, near $2.60."
Good's comments came as he reviewed
recent corn prices. The average cash price of corn in central
Illinois hit a marketing year (post-harvest) low of $2.22 on Jan.
14. Price weakness was associated with the USDA reports showing a
very slow rate of feed and residual use of corn during the first
quarter of the 2002-03 marketing year. The average spot cash price
increased to $2.335 on Feb. 7. The average central Illinois basis
has strengthened since mid-January but is still a little weaker than
during early January. December 2003 futures have also moved slightly
higher, returning to the highs of early January.
"The gradual recovery in corn prices
has been associated with a continuation of the high rate of domestic
processing use of corn, hopes for a higher rate of exports and early
concerns about dry weather impacting the 2003 crop," said Good.
"Domestic processing use of corn for ethanol production continues at
a record pace, and processing capacity is scheduled to expand. Many
believe that the USDA will increase the forecast of use for the
current marketing year."
Good noted that hopes for an improved
export pace are primarily based on indications that Chinese sales
will slow during the second half of the 2002-03 marketing year,
resulting in increased demand for U.S. corn.
Through the first 22 weeks of the
marketing year, U.S. corn exports have been disappointing, although
there are some differences among the various sources of export
estimates. The USDA's "Export Inspection" report shows cumulative
inspections of 631 million bushels as of Jan. 30, compared with 703
million on the same date last year (down 10 percent). The USDA's
"Export Sales" report showed cumulative exports on the same date at
667 million bushels, compared with 694 million on the same date last
year (down 4 percent).
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"The Census Bureau estimate of exports
from September 2002 through November 2002 showed shipments of 400
million bushels, down 11 percent from the same period last year but
32 million larger than indicated by the USDA's ‘Export Inspection’
report and 20 million above that indicated by the USDA's ‘Export
Sales’ report," said Good.
Unshipped export sales as of Jan. 30,
which provide some perspective on potential future shipments, were
reported at 207 million bushels, compared with 313 million on the
same date last year. Compared with the export program of a year ago,
sales and shipments of U.S. corn are down sharply for Taiwan, South
Korea and Egypt. Large increases have been registered for Canada and
Mexico. For Canada, larger purchases of U.S. corn have been the
result of drought-reduced production. For Mexico, the increased
purchases of U.S. corn have been mostly offset by smaller purchases
of grain sorghum.
"The rate of U.S. corn exports will
have to increase substantially between now and the end of August to
reach the 1.85 billion bushels projected by the USDA," said Good.
"Using the figures from the ‘Export Sales’ report, shipments will
have to increase from an average of 30.7 million bushels per week
during the final 22 weeks of the year to 38.9 bushels during the
remaining 30 weeks.
"That is about the same magnitude of
increase experienced last year. It would be encouraging to see the
weekly export sales numbers increase."
In the larger picture, Good added, the
prospective size of the 2003 U.S. corn crop will be the most
important price factor over the next several months. Most analysts
appear to expect an increase in U.S. corn acreage in 2003.
"One private source has projected a
2.7-million-acre expansion, on top of the 3.3-million-acre increase
in 2002," said Good. "The projected increase would put U.S. corn
acreage at 81.7 million, the most since 1982 and 1.6 million above
the largest acreage since acreage reduction programs were eliminated
in 1996.
"The
2.5-million-acre increase in winter wheat seedings, high prices for
spring wheat and higher cotton prices suggest that the increase in
corn acreage could be more modest. However, even with no increase in
area planted to corn, area harvested for grain in 2003 would be
about 2.7 million acres larger than harvested in 2002 if a favorable
growing season is experienced. It seems likely, then, that harvested
acreage of corn for grain could be up by 3.5 to 4.0 million in 2003.
The USDA will release a ‘Prospective Plantings’ report on March 31."
[University
of Illinois news release]
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The first workshop, "Color in the Garden," is scheduled from 1 to 3
p.m. on Feb. 26 at the local Extension office. Reservations are
needed by Feb. 21, and you may call 732-8289 to make your
reservation. There is no cost for the program.
The second workshop is
"Environmentally Friendly Gardening," which is scheduled for March
10 at the Extension office. The workshop will be from 7 to 9 p.m.
Reservations are needed by March 6 and may be made by calling the
office.
Pesticide
applicator clinic
The last Logan County clinic for private pesticide applicators is
scheduled for Thursday, Feb. 20, at the Extension office. The clinic
will begin at 8:30 a.m. with the training session. The Illinois
Department of Agriculture will give the exam at the conclusion of
the training session.
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Certification is needed for individuals purchasing and applying
restricted-use pesticides on ground that they own or operate. Most
of the rootworm insecticides and other pyrethroid insecticides are
restricted use, as are all atrazine herbicides.
Study guides are available at the office for $5 each. The guides are
an excellent way to do some studying at home prior to attending the
training session.
Preregistration is
required for the clinic, as enrollment is limited. Reservations are
taken on a first-come, first-served basis. For producers who miss
this session, attendance at another county or testing in Springfield
will be required.
[John
Fulton]
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As the Southern Hemisphere crop takes
shape, marketing specialist
Darrel Good says the market will shift its focus to the stocks of
U.S. crops, which are expected to be adequate, but small, going into
the 2003 harvest season. The relatively small inventories mean that
the size of the 2003 crops will have very important price
implications. He says the dominant market factors will revolve
around soil moisture and crop acreage.
The National Weather Service
notes extensive dryness in many crop areas, including the Ohio
Valley and Great Lakes region. Darrel Good says a weakening El Nino
means a dry February and a wetter-than-normal March and April. But
Darrel says spring and summer moisture will have a greater impact on
crops than will current moisture levels.
Regarding acreage,
the USDA will report intentions on March 31, based on a March 1
survey. Darrel Good says a number of factors will influence cropland
acreage and the mix of that acreage by crop in 2003. These include
the extent of weather damage to winter wheat, relative prices of
spring-planted crops and spring weather conditions.
Until planting time,
July corn futures have found support at
$2.35. Darrel says the early January high just above $2.50 may be
difficult to penetrate prior to spring. Volatility is likely from
March forward, as spring and summer weather conditions unfold. The
soybean market remains inverted, with March futures supported at
$5.44 and July supported near $5.35, because of the high rate of
export sales. March beans have a strong $5.85 ceiling.
If corn prices seem a bit low,
(ending ratio of stocks to usage is 10 percent) Kansas State
marketing specialist Bill Tierney says they are well below the
average for the last 27 years. He contends market factors over the
last seven to eight years have had a depressing effect on corn
prices. But he says the steepness of the "price response" curve
implies that any significant improvement in fundamentals could
trigger a dramatic and large upward "correction" in prices.
To market corn,
Tierney recommends an options strategy
of the simultaneous purchase of a put option and the sale of an
out-of the-money call option. A $2.40 December put cost 18 cents per
bushel, while a $2.70 call cost 9 cents per bushel. For the net cost
of 9 cents (plus commission) a producer could put a floor under the
price of corn while leaving open the potential to capture an
additional 30 cents per bushel if the market rallies to $2.70.
Tierney warns you about a possible margin call and using crop
revenue coverage insurance; see
www.agecon.ksu.edu/risk/current.pdf.
[Click
here to download the Adobe Acrobat reader.]
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To increase your revenue,
consider custom fieldwork for landowners or other farmers without a
full line of production equipment. The primary issue is what fee
should be charged. The Farmdoc website provides comprehensive
machinery operation costs; see
http://www.farmdoc.uiuc.edu/manage/
machinery/field_operations.asp. Don't forget to add on 15
percent to 20 percent for your return to labor and management,
otherwise known as "profit."
How does your operation compare
with other similar operations? Don't just compare your crops to your
neighbor's crops, but compare your farm business to other similar
farms throughout the state. You can do that with a new tool on the Farmdoc website; go to
http://www.farmdoc.uiuc.edu/
finance/benchmarks.asp. (Use with Internet Explorer).
The Farmdoc benchmarks
available so far are farm type (grain, swine, beef, dairy),
debt-to-asset level, tillable acres, total assets, net worth, value
of farm production, tenure level, farmer age, level of return on
farm assets, net farm income and (for hog farms) the value of the
farm. These comparison classifications are available for the past 10
years.
Will a threat to the food supply
originate on your farm? The Illinois Terrorism Task Force has
identified seven ways that might happen: human threats, biological,
chemical, nuclear or radiological, explosive, incendiary, and cyber.
And the group says it can respond to an alert within an hour. But
the question is: "Who and what will sound the alarm?"
A potential food terrorism alert
may be sounded in two ways. If somebody tries to introduce soybean
rust into the soybean production system, one of the first protectors
might be the producer who sees something happening in the fields, or
it could be through satellite remote sensing picking up something
odd going on in a field. The task force is just now in the
discussion stage of a network that would collect and distribute
data.
If you have a concentrated animal
feedlot, you'll want to
attend Extension's March 11 conference in Bloomington. Topics
include good neighbor policies, water runoff, federal assistance
funds, manure management and specie breakout sessions. Call (800)
345-6087 to preregister ($35) or send e-mail to Dr. Ted Funk at
funkt@uiuc.edu for info.
Details are
still uncertain, but
Congress is moving toward a disaster assistance bill for
agriculture, which would provide a payment equal to 42.25 percent of
2002 direct payments if a disaster threshold is met. Those levels
are still up for debate by the conference committee. The Senate
reconsidered a plan that would give money to all farmers, a
veritable public relations nightmare.
[Stu
Ellis, University of Illinois Extension,
Macon County]
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Scholarship winners will be chosen
based on their commitment to agriculture as a future career,
academic performance, involvement in extracurricular activities,
financial need and work experience. The committee is particularly
interested in candidates who will return to the Logan County area to
pursue their careers.
Applications are available from the
Lincoln/Logan County Chamber of Commerce -- (217) 735-2385;
303 S. Kickapoo St., Lincoln, IL 62656 -- or at any high school in
Logan County.
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Completed
applications are due to the Lincoln/Logan County Chamber office in
Lincoln by Friday, Feb. 28. Applications will be reviewed soon
afterward, and winners will be notified of their award. Winners will
be recognized at the Logan County Ag Day breakfast on Wednesday,
March 19.
[News release]
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