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Corn+Soybean Digest

E85 Powers Full-Size Pickups

The Chevrolet Silverado and the GMC Sierra are the industry's first full-size pickup trucks to be available with the option to operate on ethanol (E85) fuel.

General Motors' first 50 orders for the E85 Silverado came from Monsanto Company.

“Operating field vehicles with E85 demonstrates Monsanto's ongoing commitment to the American farmer and renewable energy sources,” says Ross Bushnell, Monsanto's director of U.S. marketing.

For more information on GM's portfolio of alternative fuel vehicles, visit gmaltfuel.com. The Web site includes information on vehicles, dealerships and refueling sites.

Corn+Soybean Digest

Shuffling The Multi-Peril Deck

Kisslinger, who grows soybeans, sorghum and wheat near Glen Elder, KS, wasn't alone in 2001. Many farmers evaluated their crop insurance programs and adjusted coverage levels or even switched policies following a re-structured subsidy system.

The Agricultural Risk Protection Act of 2000 (ARPA) makes revenue insurance much more affordable for producers. Last year marked the first time that all federally backed insurance programs, including revenue insurance plans, received the same percentage premium subsidy.

In the past, the subsidy only applied to the yield portion of a revenue insurance plan. This plan covers loss in crop value due to a change in market price during the insurance period, in addition to perils that cause loss of yield.

Tim Witt, deputy administrator for the Risk Management Agency (RMA), says the increase in subsidy had two effects: “In most crop programs, we saw people buy higher coverage levels than in the past. People moved from 65% to 70-75% (coverage), and a number to 80-85%. The second change we noticed was an increase in participation in the revenue products.”

Jim Baldonado, owner of the Home Agency in Elwood, NE, agrees with Witt's assessment. “In my area of south-central Nebraska, it cost $22.25/acre to insure a crop at the 85% level (of Crop Revenue Coverage or CRC) on 160 APH (actual production history) of irrigated corn. A year ago the same coverage cost $25.25. The bottom line is the changes meant more coverage for the money.”

CRC found quick success among available revenue insurance plans when introduced several years ago. It was also the favorite insurance product in 2001. In fact, 83% of farmers who said in an online Soybean Digest survey that they purchased revenue insurance actually purchased CRC in 2001.

Steve Ackerman, a soybean and corn farmer near Gothenburg, NE, has used CRC for two years because of its broad coverage. He says it works well with his marketing objectives, too.

“CRC allows you to price up to your guarantee and know that your production risk will be covered,” Ackerman says. As a result, this year he was able to use cash forward contracts to lock in better prices for the bulk of his crops.

He reviews his insurance yearly and looked closely at his options in 2001. In the end, he stuck with CRC at 80% coverage, but switched from an enhanced product called “CRC plus” to save some premium. He also realized a cost savings because of the subsidy increase.

Regularly reviewing insurance plans is important. Changes occur frequently, not only at the national level, but also at the state level. In a future issue of Soybean Digest, we'll list what plans are available in each state. There are even substantial differences in what types of insurance are available in neighboring states.

It's also important to conduct an annual review, according to RMA sources. Unless the contract is canceled, it is normally automatically renewed the next year. In the end, producers may not receive the best insurance plans for their money. That's simply because they didn't evaluate all plans and coverage levels available to them.

Government, Industry Investigate Insurance Against Terrorism

The threat of terrorism has never been so apparent as in recent months. Industries from energy generation to water treatment plants are examining how they should prepare in case of an unspeakable attack.

The nation's food supply also could be a target, and USDA's Risk Management Agency (RMA) is reviewing its options. According to RMA Deputy Administrator Tim Witt, current insurance programs would not cover losses resulting from acts of terrorism. “Statutorily, we're only able to cover natural causes of loss,” he says.

The topic is being discussed, however, and Witt says RMA is looking at soliciting bids to facilitate a feasibility analysis for covering losses due to terrorism.

“A lot of the commercial lines are looking at this issue and the potential for some form of government involvement. If out of that process we could add it (insurance against terrorism), we'd have to consider what the rate impacts would be,” Witt says.

However, to add this type of coverage, Congressional legislative authorization would be required. Then private companies or contractors would be contacted for proposals, he says.

Gene Grimsley, senior vice president of marketing for American Agrisurance, says his company hasn't extensively looked at the issue of covering losses due to terrorism. But it would review its options should a government-backed option arise. “If one of those opportunities would come available and we felt we had the expertise, we would certainly look at it.”
by Tim McKim

Corn+Soybean Digest

TPA Gets One-Vote Victory From House

The Trade Promotion Authority passed by one vote in the U.S. House of Representatives at presstime in early December.

“The House action, if followed by quick Senate passage, will strengthen our ability to open new markets and tear down trade barriers that hurt U.S. farmers and ranchers,” says Ag Secretary Ann Veneman.

Corn+Soybean Digest

Grains Council Refines Web Site

The U.S. Grains Council has redesigned its Web site to provide up-to-date information about U.S. barley, corn and sorghum. The site, www.grains.org, also tells how the Council works to develop grain markets around the world.

“The U.S. Grains Council continues to evolve to meet the needs of its members and international customers. The new site will further those efforts by providing an information portal for our many stakeholders throughout the world,” says Council President Ken Hobbie.

Corn+Soybean Digest

GM Crop Area Expands In 2001

The amount of ground planted to transgenic, or genetically modified (GM), crops reached nearly 125 million acres by the end of 2001.

Growth in the use of GM crops increased more than 10% in 2001 compared with that in 2000. And it increased 30-fold since 1996, when the first commercial GM crops were grown.

That's all according to a not-yet-released global survey by Clive James, chairman of the International Service for the Acquisition of Agri-biotech Applications (ISAAA). ISAAA will release the 2001 Global Review of GM Crops later this year. E-mail questions to knowledge.center@isaaa.org.

Corn+Soybean Digest

Crop Insurance Protects Gross $/Acre

Crop insurance is an integral part of risk management plans we put together for all our clients. Some farmers in irrigated areas, or in areas that seldom have weather-driven losses, have problems justifying the premium when they rarely collect on the insurance. However, being creative can make crop insurance a valuable risk management tool, even when a crop loss is unlikely.

Crop insurance can be used to protect gross dollars per acre in a marketing plan by allowing you to make forward sales. As you may recall, we key in on gross dollars per acre needed to make all payments, including paying operating, living and depreciation costs plus a $50/acre profit. In many areas, this is about $350-375/acre.

Unless you line everything up and have a farm sale, you'll grow a corn crop in 2002, 2003 and beyond. You may not know the exact acres, but you have a base of owned and rented land that allows you to estimate within 75% of the actual bushels you will produce.

Our clients have taken the opportunity to sell 2002 and 2003 corn on the Chicago Board of Trade. They'll sell 2004 corn futures when those contracts come on the Board soon.

Some buyers want to make commitments that far out, so why not take advantage of the sales opportunity? If the price meets your goals, you can guarantee the bushels of production with insurance.

Here's how you can structure a plan. A 24-year analysis of December corn futures shows that a contract high is put in shortly after it comes on the Board and is seldom exceeded. Often, December corn trades above $2.60. If you sell 75% of your actual production history with futures contracts, at or above $2.60 (we recommend selling 25% at three different time intervals), you can sell the last 25% of your crop at loan rate when you harvest and still meet your gross dollars per acre goal. (See table below.)

Over the last 24 years, there were only five years where the harvest price was higher than $2.60. Even with weather scares, those early highs are seldom taken out.

A backup plan would be to add calls or long futures to open the topside in those years, or just set tight and be satisfied with your price. The only years that wouldn't have worked are 1986 and 1987, when contract highs were $2.12 and $2.16.

Using this system, average sales for the 22 years when the December futures price hit $2.60 or better would have yielded a $2.76 Board price. The actual Board high averaged $3.10 for those years and the low $2.17. Our research shows there's a higher probability in certain months to make sales in the top 20% of the price range.

If you use 75% crop revenue coverage insurance, coupled with forward selling of your crop several years out, you can protect needed gross dollars per acre. Taking a marketing plan to your lender with bushels and price guaranteed to meet your gross dollars per acre looks much better when you're planning to expand.


Moe Russell is president of Russell Consulting Group, Panora, IA. Russell previously spent 26 years with Farm Credit Services as a division president. For more risk management tips, check his Web site (www.russellconsulting.net) or call toll-free 877-333-6135.

Corn+Soybean Digest

Seasonal Odds Have Changed

During the 1980's through 1995, the seasonal price pattern (SPP) for soybean prices was predictable and fairly reliable. The normal SPP called for a harvest low during the North American soybean harvest in September-October, with a high coming in April-May of the following year.

The monthly CBOT soybean chart (below) shows that harvest lows were often below $5/bu with a better than 70% chance that soybean futures would trade above $7 by the next summer. The exception to this rule came in 1996, when soybean prices were around $7/bu during harvest. The harvest period, also known as the counter-seasonal high, was followed by a seasonal low in the February-May time period the next year.

What happened to the old pattern of storing soybeans from the harvest low for four to six months until the marketplace paid you a much higher price? The answer is to look south — all the way to South America.

Production in South America has increased from 20% to 30% of the U.S. soybean crop total to the point where total production is now 80-90% of our domestic crop. Odds are very good that, in 2002 or 2003, South America's total will exceed the U.S. soybean crop. As a result, storing soybeans for six months will be holding into the South American harvest low.

This increase in South American production is a long-term fundamental change. Look for these three key changes to develop:

  • Timing: The old SPP used to look like an inverted V with low prices in September-October followed by a high in April-May and the next low again at harvest.

    Now, the pattern is likely to look like an M. The usual harvest low is followed by a December-January high, an April-May low, a July-August high and then a September-October low again. It is a forecast like last year's — herky-jerky.

  • Magnitude: The soybean market used to have at least a $3 price range each year. Quite often, $4.50 soybean prices in fall would open the door for $7.50 soybean prices by next spring. With greater production out of South America, look for a $1.50-2 annual price range. Soybean futures at $4 will be followed by a high in the $5.50-6 price range.

  • Front-end rallies: Some bad weather in summer and the forecast for additional production problems rallied the entire soybean futures market, with new crop bids often leading the charge higher.

Now, with another supply of soybeans always likely to be available in six months, the front-end (nearby futures) market will usually lead the rally. In a good demand-driven market, your cash bid is often higher than the bid that's out three to five months later.

Take advantage of the fast nine- to 20-day rallies. The old three- to four-month gradual rallies are history.

How do you adapt your farm marketing to the new marketing pattern?

  • First, set realistic goals that include a marketing plan calling for sales to start at $5 and be wrapped up by $5.50. This approach has a good chance of being executed. A plan calling for the first sale at $7 is an old dream.

  • Second, make more sales of 10-20%. The old habit of one or two large sales is too dangerous and does not fit with the new global fundamentals.

  • Third, think $/acre, not $/bu. With higher yield potential and growing South American competition, growers who turn their soybeans into cash early often also generate the most dollars.


Alan Kluis is president of NorthStar Commodity Investment Co. If you have marketing questions or want more information, write: NorthStar, 1000 Piper Jaffray Plaza, 444 Cedar Ave., St. Paul, MN 55101; call: 800-345-7692 or e-mail: aginvestor@agmotion.com.

Corn+Soybean Digest

Conservation Legacy Awards Regional Winners Stewards

Whether it's meeting the challenges of soil and water conservation or wildlife preservation, the four regional winners featured here are standouts. They're innovative and creative producers who recognize the value of good conservation for their own operations and the communities in which they farm and live.

As Bart Ruth, ASA president, puts it: “Finding profitable environmental solutions is critical to surviving and thriving in today's farm economy. And that's just what these producers have done.”

In addition, says Gary Margheim, special assistant at the Natural Resources Conservation Service, “This program is another step forward for private lands conservation.”

The four regional winners and spouses/guests will receive all-expense-paid trips to the Commodity Classic convention, Feb. 21-23 in Nashville, TN. An overall winner from this select group, who will also receive a plaque and yard sign, will then be announced during the convention's ASA awards dinner on Feb. 21.

Representatives from the soybean industry, government agencies and environmental groups make up the selection committee for the awards program, sponsored by Monsanto.

Western Region Cedar Ridge Farms, Ashland, NE

When it comes to conservation, Jerry and Bobbie Newsham have been on top of it — for a long time. Located in eastern Nebraska, the Newshams have constructed over 44 miles of tile outlet terraces on their 3,000 acres of highly erodible land. In some cases, old non-parallel and parallel terraces have been converted to tile outlets. Today, only two miles of conventional terraces remain.

In addition, 56 acres, or 5.8 miles, of 80'-wide CRP buffer strips have been established. Vegetation on those strips collects sediments and pollutants and also provides wildlife habitat.

To complement the buffer strip efforts, the Newshams have implemented no-till practices since 1985. Today, no-till represents 100% of their row-crop acres.

The Newshams annually plant 500-700 acres of winter wheat along with their corn-soybean rotation. Besides trapping snow for water conservation during winter, Jerry says wheat provides a financial incentive many growers overlook.

Planting wheat also allows them to apply manure from a local feedlot to reduce commercial fertilizer inputs. In addition, wheat rotation provides habitat for birds and helps control problem weeds from a corn-soybean rotation.

Recently, the Newshams have used their farming operation as a local pesticide container collection site, recycling 2,995 pesticide containers. Containers were then chipped on the farm for recycling purposes.

Bobbie sums up their conservation philosophy: “We only have one earth, so we better take care of what we have.”

Northeastern Region Watkins Farm, Kenton, OH

Watkins Farm, established in the late 1800s, is operated by Mark Watkins and family. In addition to the 3,100 acres of a mostly corn-soybean rotation that he, his brother and father manage, the two brothers and a partner also finish over 30,000 market hogs a year.

The Watkins have used Natural Resource Conservation Resource guidelines in locating water wells and have been diligent to protect them from surface runoff as well as pesticide and manure contamination. They've also plugged and capped many abandoned water wells.

They've installed manure containment structures at three hog production sites that provide one year's storage, allowing nutrients to be applied and used more efficiently.

The farm has moved to 90% no-till soybeans, with 30% no-till corn. The remainder is minimum-tilled. The Watkins plan to increase no-till corn acres to 75% in the next two years. “This approach reduces soil erosion and input costs while maintaining productivity,” says Watkins.

The farm also uses GPS mapping and grid soil sampling to better manage manure and commercial fertilizer usage. “We've used split application for our corn nitrogen program to reduce applied nitrogen below 1 lb/bu,” Watkins says.

Buffer strips along creek banks and grass waterways have been added to many parts of the farm. Also, over 100 acres of woodlands have been left intact to provide wildlife habitat. Planted windbreaks surround hog production units to reduce off-site odor and to improve the farm's appearance.

The Watkins have hosted an environmental assurance program with the help of Ohio State University (OSU) and the Ohio Pork Producers, and have held an OSU manure management field day.

“For us, conservation is important for the long-term productivity of the farm,” Watkins says.

Midwestern Region SanMarBo Farms, Inc., Tracy, MN

Sandy and Peg Ludeman seem to thrive on practicing conservation. Sandy's father and grandfather actually had conservation plans drawn up for SanMarBo Farms over 50 years ago. For generations, the family mantra has been: “Learn it, understand it, believe it, teach it and pass it on.”

A walk around the 2,730-acre Minnesota farm shows a farm pond dug by Sandy's father in 1958, one of the first in Lyon county. You'll also find two larger water retention projects built in 2000. There's even a small wildlife pond, dug by Sandy's son with a skidsteer as part of a 4-H wildlife project in the early '90s.

The Ludemans have planted over 2,000 trees and shrubs on their three farmsteads. In 1997, over 650 trees were planted around their Saratoga Pork operation, which produces 15,000 market hogs a year. Two years ago, they added 4,000' of living snowfence.

Five water impoundment structures have been built, three used for livestock watering and two for wildlife ponds. The largest was stocked twice by the DNR with bluegill and smallmouth bass.

“We had decent summer and ice fishing, but the floods of 1993 took the fish out,” Sandy says.

Turkeys have re-established in existing stands of older trees. Deer, pheasant, red-tailed hawks, blue herons, mallards and wood ducks use the ponds.

The Ludemans have practiced minimum tillage since the 1960s. Today, corn acres are disk-chiseled in fall. In spring, they're passed over once with the field cultivator/chemical application prior to planting. Soybean ground is untouched in fall. In spring, it's field-cultivated once, then planted. Manure from the hog operation is tested (30-25-35) and applied to about 400 corn acres each fall.

SanMarBo Farms has hosted delegations from over 20 countries. “We hope our conservation efforts are an example to others of good stewardship and encourage others to do the same,” says Sandy.

Southern Region Heads Planting Co., Leland, MS

Southern region winner Marc Curtis says when it comes to conservation: “What we have in this life is ours only while we're here. When we're gone, the land should be left in better condition than when we got it.”

Curtis plans to live up to his own expectations by paying special attention to conservation and by providing leadership to others.

For example, of his 2,500 acres of farmland in Leland, MS, 80% is surface-irrigated. On one 1,300-acre farm, there's only a 3' elevation change. That restricts drainage and limits production, especially during the more than 50” of annual rainfall that mostly comes in winter.

“We begin slowing down water by keeping the ground covered with either residue or natural vegetation after harvest,” says Curtis.

He's also built raised pads around irrigated field edges with drainpipes through them to slow water flow and prevent head cutting. Many fields are kept flooded all winter, which allows sediment to settle, keeps stream flows down and provides habitat.

“We try to irrigate in the most efficient manner possible,” Curtis explains. “We're now developing a plan to implement reuse of tailwater.”

Curtis is also experimenting with grid sampling and precision application of nutrients.

Bulk fertilizer is no longer stored on the farm. During application season, the local retailer places a poly tank in each field to be fertilized. Whenever possible, water is trailered to the field and chemicals are mixed directly into the sprayer.

Curtis has also left many small, wooded plots of low-lying, non-productive land scattered around the farm to produce wildlife habitat.

Corn+Soybean Digest

Survey Finds Split Perceptions Of Rural America

The romanticism and the realism of rural life were both in evidence in a recent study of rural, suburban and urban residents' perceptions of rural America. The study is one of a series to be done on rural America by the W.K. Kellogg Foundation.

The in-depth, qualitative study, conducted in eight diverse regions across the country by Greenberg Quinlan Rosner Research Inc., found that:

  • Rural life represents traditional American values, but is behind the times.

  • Rural life is more relaxed and slower than city life, but harder and more grueling.

  • Rural life is friendly, but intolerant of outsiders and difference.

  • Rural life is richer in community life, but epitomized by individuals struggling independently to make ends meet.

“Overall we found that respondents hold overwhelmingly positive views of rural life,” says Anna Greenberg, vice president of Greenberg Quinlan Rosner.

“But respondents' admiration of rural Americans and romanticization of rural life is tempered by their understanding that rural Americans face serious economic hardships and threats to their way of life,” she says.

Lack of financial resources and other opportunities topped respondents' lists of problems facing rural America. The most common response to the question “What problems do you think rural America faces?” was lack of money and poverty (19%), overdevelopment/sprawl (17%), price of crops (14%), droughts/weather (11%) and lack of opportunities (11%). Almost half, 46%, of rural respondents indicated they have considered moving, primarily because of low pay and sparse opportunities for advancement.

Corn+Soybean Digest

BIG Bush's Year

In his first year in office, President Bush gave American farmers much of what they wanted. The farm sector scored big wins on estate tax, international trade and environmental regulation.

The Bush administration also brought a new framework to the farm policy debate, creating principles to guide future farm policy decisions. This contrasts with the typical process of passing a by-the-seat-of-the-pants relief package each year dealing with the latest emergency to hit the farm sector.

Basically, the Bush administration asked, “What does the American farm sector need to be prosperous?” says David Orden, professor of agricultural and applied economics at Virginia Tech, and lead author of the book Policy Reform in American Agriculture.

The Bush-lead principles were released in September as a 120-page document entitled Food and Agricultural Policy: Taking Stock for the New Century. Among other things, the principles call for more open foreign markets, an upgraded ag infrastructure and new safety net features that won't encourage farmers to overproduce and impact commodity prices.

The guidelines also call for sensible limits on farm spending. “They're not just opening the feed bucket and saying, ‘we'll spend money just to spend money,’ ” Orden says.

While this philosophy could impact farm programs for years to come, Bush delivered some concrete victories for the farm sector his first year in office.

One of the biggest came in foreign trade, when Bush-administration efforts paved the way for expanded global trade talks by the World Trade Organization (WTO). The administration pushed hard to jump-start the talks, even though it was heavily involved in military action in Afghanistan in the wake of the tragedies on Sept. 11.

The American Farm Bureau Federation hailed the talks as a key step in boosting the global prospects for U.S. farmers. “We can begin to tackle the barriers to trade that block our entry into foreign markets and create unfair advantages for our competitors,” notes Federation President Bob Stallman in a prepared statement.

Nonetheless, there remains a fly in the ointment that could sour hopes for increased ag trade. Congress failed to give Bush authority to negotiate tamper-proof trade agreements. Unless he's given such authority, Congress could alter his already-negotiated trade deals, and foreign governments are unlikely to conclude major agreements with the U.S. under those conditions.

“Other countries won't bargain if they think Congress will change the deal after the fact,” says Orden.

The trade talks are considered vital not only to U.S. agriculture, but also to a revival of the worldwide economy, now in a slump. “The world needs a little nudge to get the world economy going,” says Luther Tweeten, retired ag economist at Ohio State University. “Nothing, in my judgment, would help more than a trade agreement.”

And a revival of the economies of our foreign trading partners ultimately helps decide how much they spend on American farm products and other U.S. goods. “Everybody sinks or swims together,” Tweeten adds.

Farmers also scored a long-sought victory in the Bush tax plan, which phases out estate tax and cuts taxes across the board. The estate tax phase-out is especially helpful to large family farms, which were hit hardest by the tax. “It will allow the transfer of the farm from one generation to the next without a tax burden,” says Barry Flinchbaugh, Kansas State University ag economist.

The Bush administration's opposition to the Kyoto Treaty, focusing on climate change issues, was another positive impact on ag in 2001. That effort kept the U.S. from joining the accord, which specified that the U.S. must cut emissions of so-called greenhouse gases 7% below 1990 levels. If implemented, the requirement could have led to new ag regulations on the use of fossil fuels and fertilizers, required changes in cultivation practices and restricted production of some crops and livestock.

The production of ethanol likely will get a boost from the administration's refusal to exempt California from a mandate to reformulate gasoline to minimize environmental impacts, too.

But the future may not be quite as bright for other pro-farm programs. Costs stemming from the Sept. 11 attack and the ongoing war on terrorism may soak up funds that might otherwise have flowed to agriculture. These costs include $15 billion in aid and loan guarantees to the airline industry, the cost of military action in Afghanistan and aid to rebuild New York City and Washington, D.C.

Funds also will be needed for efforts to prevent biological terrorism, or agroterrorism, aimed at the farm sector. Virginia Tech's Orden says the Bush administration was moving on the bioterrorism issue even before Sept. 11. But because of the attacks, “I think there will be more money spent and more done in that area. You've got to appropriate money for additional inspectors, additional lab work and other costs. But it could divert money from other agricultural programs,” he notes.