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"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]
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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/
machinery/cost_estimates.html.
[John
Fulton]
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"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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