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Corn+Soybean Digest

NCGA EXPLORES ETHANOL CO-PRODUCTS

The National Corn Growers Association (NCGA) just received a $175,000 grant from USDA to develop and test a new product from ethanol co-products: protein- and phosphorus-dense livestock feeding blocks.

If they perform well, it's expected to be a good way to export ethanol co-products, according to NCGA.

Corn+Soybean Digest

Weed Fighting Ally

Soybean growers who rely on glyphosate for weed control may improve their results this spring by including a simple but often overlooked weed-fighting ally in their spray tank: ammonium sulfate (AMS).

AMS, a fertilizer ingredient, is labeled as an adjuvant by many manufacturers for use with glyphosate. AMS makes two important contributions to help glyphosate whip weeds, says Bob Herzfeld, adjuvant business manager for Minneapolis-based Agriliance, LLC.

“The ammonium ions act like the point of an arrow to pierce tough weeds such as velvetleaf, lambsquarters, waterhemp and foxtail,” he says. “It helps improve the glyphosate coverage of weed leaf surfaces and plant uptake.”

The sulfate ions, he adds, work to neutralize calcium, iron and magnesium carbonates that may be present in the tank due to hard water, plant matter or dirt. The sulfate ions help prevent carbonates from interacting with glyphosate and compromising weed control.

Growers who pair AMS with glyphosate can expect up to $10/acre return on their investment (ROI), according to Southern Illinois University (SIU) research.

The ROI will vary depending upon the type of weeds present, population levels and form of AMS used, says Bryan Young, SIU weed control specialist. Young manages an online informational tool, Compendium of Herbicide Adjuvants. The site, which is updated annually, details nearly 450 adjuvant entries from 36 companies and is located at www.herbicide-adjuvants.com.

“AMS is cheap insurance,” Young says. “You will almost always see improved performance from pairing it with glyphosate, especially on velvetleaf.”

Pure AMS is available from retailers in a variety of formulations. Costs range between 25-50¢/acre for dry, spray-grade AMS, the cheapest form available. It's used at 8.5 lbs./100 gal. for most conditions or at 17 lbs./100 gal. of carrier when tough weeds, adverse environmental conditions or hard water are present.

Unfortunately, spray-grade AMS is not user friendly. It's sold in hefty 51-lb. sacks that are difficult to handle and store. However, user-friendly options are available. Liquid AMS runs slightly higher in cost at 40¢-$1/acre but is easy to handle, load and mix, making it a good value for the money invested.

Growers who are experiencing breaks in their weed control typically tell Young they plan to boost their glyphosate usage rates from 1 to 1.5 quarts/acre. “I try to show them the benefits of using the same labeled rate of glyphosate they've been using all along by adding AMS to boost weed control and consistency of control,” he says. “It's a cheaper alternative to adding more glyphosate, and they will likely get good results.”

In addition to pure AMS, growers can opt to purchase AMS-replacement products, typically adjuvants that contain AMS along with other value-added products such as defoaming agents and surfactants. AMS-replacement products range widely in their performance and cost $1-2.50/acre.

“You pay for the convenience with a lot of these (AMS replacement) products,” says Mark Loux, extension weed specialist at Ohio State University.

Mike Owen, extension weed specialist for Iowa State University, says including AMS with glyphosate is a standard weed-control practice for Iowa soybean growers. He attributes much of the widespread acceptance of AMS to custom herbicide application practices that predominate in the state.

Loux says the majority of Ohio soybean growers use AMS or a replacement product. “It's particularly good under cool conditions for spring burndown and for fall applications for dandelion control,” he says.

However, in the very most southern soybean producing states, growers don't necessarily reap such benefits from AMS. “They typically have higher humidity, which is good for herbicide activity,” Young explains. He adds that some weed control specialists there are adamant against AMS usage, because they say it promotes corrosive activity in the tank.

“AMS does create skepticism among some growers, because you're basically telling them to add fertilizer to their spray tank,” says Andy Walsh, agronomy department manager for Kettle Lakes Co-op, Random Lake, WI. “We have coached our customers over the years that it's important to the performance of the glyphosate, and I think that's helped our success.”

David Harms adds that some glyphosate formulations available now already include adjuvants and/or surfactants, so growers may not need to add AMS to the tank. “Simply read the label so you know,” advises Harms, a certified professional agronomist for Crop Pro-Tech, based in Bloomington, IL.

Young says, however, that every glyphosate label he's aware of allows for the addition of AMS, regardless of the surfactant load in the glyphosate.

Hard water and water pH are two factors Herzfeld says impact water quality more than many people realize. AMS helps condition water affected by hardness or pH to boost glyphosate performance and minimizes the impact of impurities. Hardness levels vary depending primarily on how much calcium carbonate is dissolved in the water. Other minerals and properties also contribute to water hardness, including magnesium sulfates, chlorides and iron. However, dissolved calcium carbonate is typically considered the major contributing factor causing hard water. Hardness is commonly defined as spray solution water that contains dissolved hardness minerals above 17 grains/gal. (GPG) or 300 ppm.

“We've found that glyphosate performs best when used with water that's not hard,” Herzfeld says.

A measure of acidity in water, pH is a logarithmic scale from zero to 14, with seven being neutral. Below seven, a substance is defined as being acidic, while levels above seven are said to be alkaline.

Herzfeld says glyphosate performs best in water with a pH of about 5.5. Of the 700-plus Midwest water samples Agriliance tested in 2003, Herzfeld reports, “80% of the samples we tested were more than 7.8.”

For a couple of dollars, growers can test their water sources and know how they stack up in hardness and pH, then take corrective steps, if needed. Or they also can send water samples to Agriliance for a free test and recommendations. “It's important to test all your water sources, because they can vary even if they're only a mile apart,” Herzfeld says.

Harms agrees. “Often, you can improve the efficacy of glyphosate by simply correcting the hardness or pH of your water,” he says.

Evaluate Replacement Products

Manufacturers have identified AMS-replacement products as a market opportunity. Some replacement products provide a valuable service to soybean growers and custom applicators, while others do not.

“Sometimes it's difficult to know what's real and what's a joke,” says Bryan Young, Southern Illinois University weed control specialist.

Bob Herzfeld, adjuvant business manager for Minneapolis-based Agriliance LLC, agrees, saying, “A lot of these aren't good AMS-replacement products; or they're used in the wrong water.”

Young encourages growers who opt to use an AMS replacement product to choose carefully.

“Manufacturers don't tend to develop these replacement products based on worst-case scenarios,” he says. “They usually fit typical or average conditions.” He adds that such products also don't usually offer the complete range of benefits traditional AMS provides. “Replacements often only condition the water, and that may be it,” he says.

While not all AMS-replacement products perform well, some do a good job. Andy Walsh, agronomy department manager for Kettle Lakes Co-op, Random Lake, WI, used Alliance on 85% of the acreage he sprayed with glyphosate in 2003. He says its price of $2.50/acre is considerable, considering the cost of spray-grade AMS, but the payoff is worth the investment. “It was a bad year statewide for lambsquarters, but we had no sprayer complaints — zero — on those soybean fields where we sprayed with the Alliance,” he says.

One of Walsh's customers, Gary Held, says his soybean fields averaged 36 bu./acre while most area growers harvested 20-25 bu./acre.

“I work for an area farm equipment company, so I was able to get a good feel for the yields in the area,” he says. The Sheboygan County grower believes his better-than-average yields for a dry year resulted from no competition between weeds and soybeans for what little moisture was available. Held adds, “I had neighbors who cut their costs and therefore cut their yields.”

Walsh encourages soybean growers to buy inputs based on appropriate value and not lowest cost. That includes AMS. To evaluate glyphosate with AMS or an AMS-type replacement product, Walsh says to “give it a difficult job to do — those beans with weeds that are on the edge of the label relative to size. Most products available will handle the easy problems. Give it the tough stuff and then evaluate your results.”

Corn+Soybean Digest

IOWA FARMLAND HIT RECORD PRICE IN 2003

The average value of an acre of farmland in Iowa hit $2,275 last year, the highest figure reported since Iowa State University (ISU) began conducting its annual survey of land values in 1941.

The 2003 average value topped the previous record of $2,147 reported in 1981.

ISU ag economist Mike Duffy conducts the survey. He says that, adjusted for the effect of inflation on the value of the dollar, the 2003 figure is equal to the value of land in the early 1970s, when increasing values began, leading to the 1981 peak.

Duffy also says low interest rates were the major factor in land value increases last year and were mentioned by 48% of those responding to the survey.

Corn+Soybean Digest

YOST APPOINTED TO FSA

Former American Soybean Association and Minnesota Soybean Growers Association president Mike Yost, from Murdock, MN, has been appointed Farm Service Agency (FSA) associate administrator for programs.

According to USDA FSA Administrator Jim Little, Yost will be responsible for supervising and administering farm commodity programs, farm loans, conservation programs and disaster assistance.

Corn+Soybean Digest

Abandon Bean Acres?

Tales of bin-bulging corn crops and pint-sized soybean production were common across much of the Corn Belt this past fall.

With a dramatic difference in yield between the two crops in 2003, more than a few farmers have contemplated abandoning their traditional 50-50 corn-soybean rotations in favor of continuous corn. So says Gary Schnitkey, University of Illinois farm management specialist.

For many Midwestern farms, however, a big switch from soybeans to corn next year won't make economic sense. Schnitkey cites a report he authored, “Projected and Historical Crop Returns: Keep Soybeans in 2004,” as evidence. The complete report, which uses harvest-time futures contracts and five-year average yields to predict next year's crop returns, is on the University of Illinois' Web site at: www.farmdoc.uiuc.edu/manage/newsletters/fefo03_19/fefo03_19.html.

The study found that, for farms in northern Illinois, the most profitable crop returns for 2004 would result from splitting acreage equally between corn and soybeans. For farms in southern Illinois, soybeans would likely produce more profit than corn, and double-cropped wheat and soybeans would offer an “attractive alternative.” Swapping soybean acres for corn would pay its way only in central Illinois, and then the benefit might only be short term.

“The long-term returns for corn are more variable than they are for soybeans,” explains Schnitkey. “It would be very unusual for the same crop conditions that caused the dramatic yield differences between the two crops this year to repeat themselves again next year. That's why you should look at a five-year average.”

However, the tendency toward low soybean yields and high corn yields in 2003 might be more than a one-year phenomenon.

“The trend has been toward an increased gap between corn and soybean yields for several years, and that trend is happening all around the nation,” says Dale Hicks, University of Minnesota extension agronomist. “Soybean yields are down to about one-fourth of corn yields nationally, when normally they are about one-third. In Minnesota and Iowa, the ratio is even greater, about 4.5 to 1.”

More disease and insect pressure is likely fueling decreased soybean yields throughout the Midwest, says Hicks. White mold, soybean cyst nematodes and aphids are all taking an increased toll, while corn insects and diseases have remained fairly stable in the region.

As a result, Hicks sees no problem with more farmers moving away from their normal corn-soybean crop rotation and planting continuous corn, if price and yield considerations warrant it. However, he warns that farmers switching from soybeans to corn following corn typically experience a 15% yield reduction during the first year after the switch.

Farmers who plant more acreage to corn should also be prepared to spend more money on inputs, such as nitrogen and insecticides, and/or new seed technology that controls corn rootworms.

For farmers who want to plant biotech seed to rein in rootworm damage, costs would run between $40-50/bag more than planting conventional seed. That's between $22-25 more per acre.

Illinois' Schnitkey says farmers who decide to plant more corn this year should consider increasing their crop insurance coverage. Or they should think about using pre-harvest hedging to counter an increased risk in corn price and yield variability compared to soybeans. In fact, he adds, 2004 might not be the year to switch to more continuous corn acreage — even in central Illinois — if current soybean prices hold and corn prices drop.

USDA loan rates are also an important consideration when making decisions regarding which crops to plant in 2004, points out William Edwards, Iowa State University extension economist. As a result of the 2002 Farm Bill, the loan rate for soybeans has dropped 26¢/bu. (from $5.26 in previous years to $5). The loan rate for corn is nearly 10¢/bu. higher ($1.98 compared to $1.89) than before.

“The previous loan rate favored soybeans; this one favors corn,” says Edwards. “That in itself will likely move more acres to corn as farmers make decisions based both on production and financial risk.”

Although the national loan rate may favor corn, most soils in Iowa are more comparable to those in northern Illinois than in central Illinois, adds Edwards. Therefore, he says switching more acres to corn in Iowa probably won't result in increased profits in 2004 if Schnitkey's projections for Illinois also ring true for Iowa.

Nationally, the soybean carryover from 2002 is down considerably, and prices have stayed high due to poor U.S. production in 2003, making a switch to corn less economically appealing.

“Normally, we'd look at the soybean price compared to corn being about 2.3-2.5 times the price of soybeans,” says Edwards. “Right now, however, it's about 3-3½ times the price of corn. So, based on what the prices are at the moment, switching more acres to corn from soybeans in 2004 is probably not a good idea.”

However, if soybean prices take a dramatic downward turn during the next few cropping seasons, altering acreage from soybeans to corn might pay quite well, say Edwards and Schnitkey.

Both experts remind farmers that a large switch in acreage should be examined more from a long-term than a short-term perspective.

“Once you begin planting more corn after corn, you'll be committed to doing that for more than one year,” explains Schnitkey.

For more information on the economic considerations and various crop rotations, contact your local farm business farm management association.

Corn+Soybean Digest

Old Challenges, New Opportunities

If you ask a Brazilian farmer how much he paid for a combine, he will likely tell you the value of it in bushels. All right, they don't use bushels as the measurement; Brazilians refer to 132-lb. sacks as the standard. But you get the idea.

The reason for this is that world soybean prices are set in Chicago, in dollars. Over the last 20 years, Brazil has printed at least five distinct currencies that have often changed value. In spite of the fact that the Brazilian real has lasted for nine years now, and inflation is down from more than 2,000% 10 years ago to an estimated 9% this year, old habits die hard. It has traditionally made more sense to quote machinery prices in bags of soybeans.

Take a look at 2003. The U.S. dollar was worth 3.54 Brazilian reals at the beginning of the year. By the end of the year, that exchange rate had fallen to 2.89. While that meant Brazilian farmers got less local money for their beans at a given price, it also meant they paid less for inputs, like phosphate, petroleum and other commodities that, like soybeans, have their prices set in the world market.

The new exchange rate may have reached a near-perfect equilibrium in that calculation, as soybean plantings increased in 2003. This year soybean plantings in Brazil are expected to increase another 13%.

At the same time, Brazilian soybean production will continue to move North and East. The Mato Grosso expansion is yesterday's news. Soybean planting in even newer areas, like Tocantins, Piauí, Roraíma and Bahia, is trending up. Land prices in these new expansion states shot up in 2003. The government of Tocantins state says land prices there have nearly doubled.

The bottleneck to soybean expansion in 2003 was, as always, transportation costs. Inputs coming in and soybeans going out are more expensive because these areas are so remote, served chiefly by hulking 18-wheelers working their way around axle-eating potholes on two-lane highways.

Once the beans get to port, there are often long lines of trucks waiting to unload. In 2003, for example, the line of trucks at the southern port of Paranaguà reached 42 miles. Now, a new state rule about testing for biotech contributed greatly to the delays last year. But there is no question Brazil's ports are not well-equipped to handle its growing soybean export volume.

The Brazilian Agribusiness Association says Brazilian soybean transportation costs are 80% higher than those of the U.S.

While the transportation disadvantage is still a long way from being solved, 2003 saw an effort to begin resolving the problem. Cargill, for example, opened up a new port on the Amazon to export soybeans from these remote areas. The only way to get from the soybean fields to that port is still a dirt road, but the Brazilian government announced plans in 2003 to pave it.

The other way around high costs for shipping beans out is to keep the beans there, shipping out pork and poultry instead. Investors announced plans for a major pork production facility in Mato Grosso in 2003. Others are interested.

A former American Soybean Association staffer and farm kid from West Tennessee, James Thompson lives in Brazil and provides his perspective on agriculture in that country.

Corn+Soybean Digest

Soybean Processing Shifts

The regional distribution of soybean production and processing capacity in the world has shifted dramatically during the last decade, says Peter Goldsmith, agribusiness management specialist at the University of Illinois.

“Since the early 1990s, the U.S. share of world soybean production has declined from about 50% to less than 40%,” Goldsmith says. “During that time, Brazil's share increased to more than 25%, and Argentina's share rose to nearly 15%. Similar changes are under way in the processing sector.”

This shift, he claims, has forced the world's largest soybean processors to remap their global strategies.

“The dominant trend in processing plant location is a shift away from mature markets, such as in the U.S.,” Goldsmith says. “In those markets, the plants tend to be older and smaller, the technology is more dated, farmer suppliers are smaller and regional production is flat. By investing in the new growth areas, companies can employ the latest technologies, improve economies of scale, and have access to a growing supply base.”

Goldsmith points out that this process is already under way in the expanding production areas of Brazil and Argentina.

“The implication is that U.S. processing assets will be increasingly focused on the domestic livestock industry and the growing market for differentiated products, such as isolates, proteins, flours, isoflavones and oils,” he says.

Corn+Soybean Digest

Borrowers May Be In For Sticker Shock

RISKWISE

There are several significant changes in the American economy, and around the world, that could affect interest rates. The devalued dollar, the federal deficit and increasing commodity prices are factors. For farmers, what's really important is the “real” interest rate — the cost of money after stripping out the percentage that compensates investors for inflation.

Today, real rates are extremely low for short-term borrowing and about average for long-term borrowing. The federal funds rate of 1% minus the 2% inflation rate leaves a real federal funds rate of -1%. Historically, this figure runs 3% above the inflation rate. So we could see a 4% rise in short-term rates to get back to normal. Add to that the possibility of increased inflation and it makes rates even higher.

Traditionally, 30-year government bonds are also 3% over the inflation rate. With 30-year bonds at 5.03%, long-term “real” rates are about normal.

How high could rates rise? Brace yourself. Assuming the high productivity growth, real long-term rates needed to stabilize the economy over time would need to be 4.5%. That's according to William Poole, president of the Federal Reserve Bank of St. Louis, in a November interview. Assuming inflation could increase to 2.5%, that would imply a 7% market rate for 30-year Treasuries. Poole's estimates imply a 6% federal funds rate — a 5% increase from current levels.

Add the possibility of higher inflation due to a rising Commodity Research Bureau (CRB) index and the rate increase could be dramatic. Has this happened in the past? In 1993 the real federal funds rate was -0.3%. By 1995 it was 3.3%.

I'm also concerned about market psychology. No one seems concerned about rising rates. I still see many farmers taking the variable-rate option on real estate loans because it's cheaper and they can save money in the short run. That could haunt them in the long run.

The Key To Favorable Rates

Many clients and readers ask how to lock in an operating loan rate for more than one year to take advantage of current low rates.

Most lenders only lock an operating loan rate for up to one year. Here is a debt restructuring option that can reduce interest rate risk on your operating debt.

You might consider terming out a portion of your operating debt for five years and securing it with machinery or land. You can fix it at a favorable rate, now at about 5-6%. This is one way to fix the rate on a portion of your operating debt.

There are caution points if you do this, however.

  1. Make sure there isn't a prepayment penalty on the term loan so, if you have extra cash, you can pay the loan off early.

  2. Keep your remaining operating debt very low and operate on cash for a portion of the year if you can. A good guideline for your operating debt level is your working capital (current assets minus current liabilities) should be greater than 50% of your annual operating expenses, living expenses and payments. It's important that you monitor and stay in control of your financial health. It's not your lender's responsibility to do this.

Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 15 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.

Burndown for corn fast approaching

In corn production, the first weed control applications are termed “burndowns,” meaning almost complete desiccation of the weed species present in a crop field. This early-season weed control before planting offers several benefits including: removal of winter vegetation, proper and rapid crop establishment, efficient fertilizer use during the season and decreased competition from early-season insects such as cutworms.

In Louisiana, it is suggested that burndown herbicide applications be made three to six weeks before planting is anticipated. The reason for this is that it allows winter vegetation to die in addition to reducing the existing insect populations. Herbicide options for burndown applications are numerous, but there are really two compounds, glyphosate and paraquat, that are applied most frequently either alone or in tank-mixes with other compounds.

In a typical two-compound system, glyphosate can be used early to get an initial systemic kill before the contact compound paraquat is applied just prior to planting. Some producers choose to add a broadleaf compound such as 2,4-D with the initial glyphosate application. Several compounds, including Harmony Extra, Goal, Clarity, Valor or Aim in addition to others, can also be used as tank-mix partners. All of these compounds differ in plant-back restrictions, and the compound label needs to be consulted for the exact number of days that planting is restricted after application.

Another suggestion for herbicide selection involves properly identifying the weed species most difficult to control and selecting the appropriate herbicide for its control. More than 20 winter weeds are found in Louisiana cornfields in the spring, with annual ryegrass, geranium species, curly dock, clover, henbit, dandelion and assorted legume cover crops making up most of the weed populations.

After applying the initial burndown application, especially if it is applied several weeks before planting, weeds do have the potential to regrow or new weeds may actually germinate. Another single application of glyphosate or paraquat before planting has been shown to be effective for these situations.

Weeds and insects can jeopardize a good stand of corn if not properly controlled. If fall bed preparation has been successful, a good burndown program should help establish a successful corn crop. I noticed last year that producers were doing a great job with early burndown applications and then rehipping and rolling the rows just before planting. If the weeds are dead, there is no reason to worry about their coming back, and actually planting the crop, instead of reworking the fields, will not only conserve moisture, which is often critical, it will save money through decreased labor, fuel and time.

David Lanclos is the Extension corn and soybean specialist with the LSU AgCenter.

e-mail: dlanclos@agcenter.lsu.edu