Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States

Sitemap


Articles from 2005 In May


Corn+Soybean Digest

U.S. Supreme Court Rules That Beef Checkoff Program Is Constitutional

By a vote of 6-3, the U.S. Supreme Court upheld the Beef Promotion and Research Act of 1985, overturning lower court decisions by the U.S. Court of Appeals for the 8th Circuit and the U.S. District Court for Montana, which ruled the measure unconstitutional. "I am extremely pleased that the U.S. Supreme Court overturned the lower courts' decisions and ruled in favor of the Beef Checkoff Program," says Agriculture Secretary Mike Johanns. "This is certainly a win for the many producers who recognize the power of pooled resources. As this administration has always contended, USDA regards such programs, when properly administered, as effective tools for market enhancement."

As a result of this decision, the Beef Checkoff Program will continue without interruption. USDA is reviewing this decision to determine its implications for other first amendment challenges to checkoff programs.

Under the Beef Promotion and Research Act of 1985, the Cattlemen's Beef Promotion and Research Board develops budgets and awards contracts to carry out a coordinated program designed to strengthen the position of beef in the marketplace. One such contract resulted in the highly recognizable "Beef - It's What's for Dinner" campaign.

The mandatory program is funded by an assessment of $1/head collected each time cattle are sold. All producers owning and marketing cattle, regardless of the size of their operation or the value of their cattle, must pay the assessment. A comparable assessment is collected on all imported cattle, beef and beef products.

USDA's Agricultural Marketing Service monitors operation of the board.

Corn+Soybean Digest

Ag land values have doubled since 1998

Agricultural land values/acre in South Dakota jumped 20.3% from 2004 to 2005, and have doubled in the past seven years.

South Dakota State University (SDSU) economist Larry Janssen says those are among the chief points SDSU's latest farm real estate survey reveals.

Since 1991, SDSU has gathered the data by surveying ag lenders, Farm Service Agency officials, rural appraisers, assessors, realtors, professional farm managers and Extension agricultural educators.

Janssen authored the report with the help of SDSU graduate research assistant Erik Gerlach and SDSU Extension Farm Financial Management Specialist Burton Pflueger. The report is available online at an SDSU Web site, agbiopubs.sdstate.edu/articles/C270.pdf.

Janssen says federal farm programs, favorable farm mortgage interest rates through late 2004 and low inflation rates are among the factors that make investors see ag land as a good investment. Other contributing factors are crop insurance programs, and better varieties and technologies to increase yields.

This year's 20.3% increase is up from a 17.1% increase in agricultural land values from 2003 to 2004. It is the largest annual increase Janssen has seen since the survey began in 1991.

"The only major surprise was that it went up as much as it did," says Janssen. "I'd anticipated maybe a double-digit increase. I had not anticipated a 20% increase. You have to go back into the late 1970s to find anything similar in terms of percentage rates of increase. Cropland and rangeland values/acre have doubled since 1998. That's only seven years."

Janssen adds that cropland and rangeland values/acre have nearly tripled since 1991.

Average values of non-irrigated cropland vary from $1,659/acre in east-central South Dakota to $871/acre in the central region and $316/acre in the northwest part of the state.

Average rangeland values vary from $844/acre in the southeast to $185/acre in the northwest.

Average cash rental rates/acre of cropland in 2005 vary from $87.20 in the southeast region to $22.90 in the northwest. Average rangeland/pasture rents vary from $40-41/acre in the southeast region to $9.75/acre in the northwest region.

Janssen adds that the average value of non-irrigated cropland in 2005 exceeds $2,000/acre and average cash rental rates exceed $100/acre in two clusters of counties in eastern South Dakota: Minnehaha-Moody, and Clay-Lincoln-Turner-Union.

"Those are the highest average land values and cash rental rates reported in the past 15 years of the SDSU Farm Real Estate Market Survey," Janssen says.

Corn+Soybean Digest

2004 Production Costs

Illinois corn and soybean producers spent more per acre to grow their crops in 2004 than the previous year, according to a University of Illinois (U of I) Extension study.

"Costs per acre to produce corn were higher in all different geographic regions in Illinois compared to 2003," says Dale Lattz, U of I Extension farm management specialist. "Across the state, total costs per acre to produce corn increased 6-9%. The main reason was higher costs per acre for fertilizer, seed and fuel.

"Like corn, total costs per acre to produce soybeans increased in all the state's geographic areas over the 2003 figures,” says Lattz. “Costs increased $17/acre in northern Illinois, $13/acre in central Illinois areas with higher-rated soils and $17/acre in areas with lower-rated soils, and $16/acre in southern Illinois. Seed, fuel and the price for land were some of the costs that increased."

Lattz based his study on farm business records kept by farmers enrolled in the Illinois Farm Business Farm Management Association. The samples included only farms that had no livestock and had more than 260 acres of productive and nearly level soils in each area of the state.

In 2004, the total of all economic costs per acre for growing corn averaged $444 in northern Illinois, $434 in central Illinois areas with high soil ratings, $411 in areas with low ratings and $374 in southern Illinois. Soybean costs per acre were $349, $343, $319 and $289 respectively.

"Costs are lower in southern Illinois primarily because of lower land costs," says Lattz.

The total of all economic costs per bushel in the different sections of the state ranged from $2.20 to $2.40 for corn and from $5.78 to $6.71 for soybeans. Variations in this cost were related to weather, yields and land quality.

"Costs per bushel of corn in 2004 were slightly higher for northern and central Illinois and lower for southern Illinois as compared to 2003," says Lattz. "Costs were lower in southern Illinois due to a significant increase in yield in 2004 compared to 2003.

"Production costs per bushel of soybean decreased significantly in all areas of the state compared to 2003. Costs per bushel decreased due to substantially higher yields."

The entire report is available online at Extension's farmdoc Web site at: www.farmdoc.uiuc.edu/manage/newsletters/fefo05_09/fefo05_09.html.

Corn+Soybean Digest

USDA Forecasts Still Accurate But Leaves Room For Improvement

A study of the USDA's corn and soybean production forecasts over a 34-year period concludes that such projections "perform reasonably well in generating crop production forecast for corn and soybeans." Still, the study, done at the University of Illinois (U of I) at Urbana-Champaign, finds room for improvement.

"In particular, the USDA may want to consider expanding the scope of the subjective yield surveys to incorporate a wider range of market and industry participants," says Darrel Good, U of I Extension marketing specialist and professor of agricultural and consumer economics, who co-authored the study with his colleague, Scott Irwin.

The complete study may be read online at: www.farmdoc.uiuc.edu/agmas/reports/05_03/AgMAS05_03.html on Extension's farmdoc Web site. Good and Irwin undertook the study based on comments from producers and others that suggested an ongoing misunderstanding of the USDA's methodology for arriving at corn and soybean production forecasts. They compared the USDA's forecasts to private forecasts and the final estimates at the end of each crop year.

"We want to improve the understanding of USDA crop forecasting methods, performance and market impact," explains Good.

For corn and soybeans, the USDA releases production forecasts in August, September, October and November, with final estimates published in January. These forecasts are generated by a highly sophisticated and well-documented procedure that includes estimates of planted and harvested acreage and two types of yield indications, a farmer-reported survey and objective measurements.

"Our review of the USDA's forecasting procedures and methodology confirmed the objectivity and consistency of the forecasting process over time," says Good.

The researchers also compared the USDA's forecasts to those produced by private sources over the 1970-2004 period.

"On average, USDA corn production forecasts were more accurate than private market forecasts during this period," says Good. "One exception was the August forecast in the most recent time period, 1985-2004. Since the mid-1980s, private market forecasts have been more accurate by an average of 0.5 percentage points in absolute terms, not an inconsequential difference. This reflects a sharp improvement in August private sector forecast accuracy relative to the USDA over the last three decades."

The forecasting comparisons for soybeans were somewhat sensitive to the measure of forecast accuracy considered, Good notes.

"One measure showed that private market forecasts were more accurate than USDA forecasts for August regardless of the time period considered. Another measure showed just the opposite," he says. "As the growing season progresses, the difference in the results across the two measures of forecast accuracy diminished, with USDA forecast errors in soybeans about equal to or smaller than private market errors for September, October and November."

In terms of market impact, USDA corn production forecasts had the largest impact on corn futures prices in August and recent price reactions have been somewhat larger than historical reactions. Similar to corn, USDA soybean production forecasts had the largest impact on soybean futures prices in August with recent price reactions appearing somewhat larger than in the past.

"Overall, the forecasting performance of the USDA in 2004 relative to the private market was quite strong in corn, with the USDA providing more accurate forecasts of corn production in 2004 each month except September," Good notes. "The forecasting performance of the USDA in 2004 relative to the private market was, at best, mixed in soybeans, with USDA forecasts being less accurate than private forecasts each month except October."

Corn+Soybean Digest

The Road Warrior of Agriculture

Update on Consumer Debt

Yes, the real estate bubble in farmland and urban and suburban real estate is alive and well, fueled by low interest rates and now speculation. More purchasers of real estate are opting for variable rate financing (36% nationwide) as well as debt on consumer credit and credit cards.

A 1% increase in interest rates equates to a $286/month decline in after-tax household earnings, or a 5% decline in monthly disposable income for households. Twenty-two percent of homes in the hot markets are being purchased for speculative purposes. Many potential buyers who can least afford homes are purchasing on variable rate terms to qualify. You can see an F-5 economic storm on the horizon if certain events come about.

Speaking of consumer debt, the average American has eight credit cards. Thirty-eight percent pay those cards in full each month, while 24% make only the minimum payment. The typical family has slightly more than $8,000 in credit card debt.

Concerning credit scores, only 2% of Americans know their credit score. The average credit score is 677, with the Northern and Middle Atlantic states having about a 20-point higher score than the Southern Plains and Southern states. Make sure you are part of the 2% that knows your score!

War Story
Lenders from Florida were telling me that if you purchase a condo or apartment, you must occupy it. The locals are using this to prevent too much speculation in the area. Lenders from the Southeast whose customers are receiving the tobacco buyout monies indicate many are investing in second homes and beachfront property. Have they not heard that we are moving into an active 30-year cycle for hurricanes?

My e-mail address is:sullylab@vt.edu

Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.

To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.

This online exclusive is brought to you by The Corn and Soybean Digest

Corn+Soybean Digest

Thiesse’s Thoughts

CCP UPDATE

The continued strength in the soybean market has almost made it certain that the advance counter-cyclical payment (CCP) that producers received last fall on the 2004 soybean crop will be required to be repaid after October 1, 2005.

Soybean producers were eligible to receive an advance CCP of $0.091/bushel in October, 2004, and another $0.091/bushel in February, 2005, on soybeans produced in 2004. This was based on a projected national average soybean price of $5.10/bushel on the 2004 soybean crop at both times, and an estimated total CCP of $0.26/bushel. The maximum total CCP is $0.36/bushel. Based on the latest USDA report on May 12, 2005, the USDA estimated national average soybean price for the 2004-2005 crop marketing year has been adjusted to $5.65/bushel. This would mean that no CCP would be earned on the 2004 soybean crop, and any advance payments that were disbursed would need to be refunded. Soybean producers should remember to adjust their estimated 2005 cash flow projections and farm income projections to reflect the amount of the 2004 soybean CCP payment refunds. For most soybean producers, the CCP payment refund is probably between $6 and $8/soybean base acre that was enrolled in the 2004 DCP farm program.

Based on the May 12 USDA report, which include estimated national average prices for corn and soybeans in the current marketing year, it appears that USDA has increased the projected national average corn price for the 2004-2005 marketing year to $2.05/bushel. In October 2004, and again in February, 2005, USDA estimated at national average corn price of $1.95/bushel for the 2004 marketing year. This resulted in USDA projecting the maximum total CCP for the 2004 corn crop of $0.40/bushel. An advance payment of 35% of the estimated amount, or $0.14/bushel, was available to eligible corn producers in late October, 2004, and another $0.14/bushel in February 2005.

Some producers have chose to delay receiving the advance CCP payment until the end of the crop marketing year on August 31, 2005. Based on the current USDA projections, it appears likely that the entire $0.28/bushel advance CCP payment will be earned on the 2004 corn crop, and can either be retained by producers that received it as an advance payment, or will be paid as part of a final 2004 corn CCP payment in October, 2005. If corn prices are weak into the summer months, it is possible that additional CCP could be earned on the 2004 corn crop and paid in October, 2005. The maximum CCP payment for the 2004 corn crop is $0.40/bushel, so producers that already received the $0.28 advance payment could potentially earn another $0.12/bushel.

Counter-cyclical payments for corn and soybeans are based on the national average price for that commodity during the crop marketing year, which is from September 1 in the year of harvest through August 31 the following year. The crop marketing year for wheat and other small grains is June 1 in the year of harvest through May 31 the following year. The monthly average grain prices for each commodity are weighted for the volume sold each month to determine the final 12-month national average price for that commodity. For example 80% of the corn and 87% of the soybeans are typically marketed nationwide by the end of May, which makes it less likely for big changes in corn and soybean CCP’s to occur after June 1.

Editors note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.

Corn+Soybean Digest

Brock's Online Notes

April Soy Crush Below Expectations

The April soybean crush came in well above a year earlier, but below trade expectations, according to Thursday morning’s monthly Census Bureau Fats and Oils Crush Report.

The Census Bureau also revised its estimate of the March crush downward, along with March 31 processor stocks of soymeal. Soyoil stocks were revised upward.

The Bureau pegged the March U.S. soybean crush at 139.4 million bushels, vs. 112.5 million a year earlier. Trade estimates averaged 141.7 million bushels in a range from 140 million to 142.7 million.

The March crush was revised to 148.5 million bushels, from a previous estimate of 149.7 million.

The Census Bureau pegged April 30 processor soymeal stocks at 307,781 short tons, versus a revised 247,953 tons at the end of March, and 338,615 a year earlier. Stocks were in line with trade expectations, which averaged 316,000 tons.

April 31 processor soyoil stocks were pegged at 1.784 billion pounds, vs. 1.811 billion a month earlier and 1.643 billion a year earlier. Stocks were well below trade expectations, which averaged 1.864 billion pounds.

The Census Bureau report showed April 30 processor stocks of soybeans were very tight at only 70.9 million bushels, down from 88.8 million a month earlier and 114.8 million a year earlier.

The tight processor stocks are a major reason cash soybean bids have been strong this month. However, processors have only been struggling to find soybeans because of farmer reluctance to sell the large stocks they have been holding in storage.

That may be changing as this week’s price rally and fast planting progress appear to be bringing more soybeans out of storage. Central Illinois processor basis bids widened 4-7 cents on Wednesday’s futures rally.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.

Column: ‘Speak softly and throw away the stick’

After months of what was seen as indecision by U.S. manufacturers, the Bush administration has suggested China revalue its currency to help save itself from its own irrational exuberance.

In a report on exchange rates and trade, the Treasury Department said China cannot continue its policy of fixing the yuan at roughly $8.28 without being accused of unfairly manipulating its exchange rate.

The report appears to be a response to legislation requiring the administration to impose sanctions if China does not alter its exchange rates within six months.

“It is widely accepted that China is now ready and should move without delay in a manner and magnitude that is sufficiently reflective of underlying market conditions,” the Treasury report said.

“China’s rigid currency regime has become highly distortionary,” said Treasury Secretary John Snow. “It poses risks to the health of the Chinese economy, such as sowing the seeds for excess liquidity creation, asset price inflation, large speculative capital flows and overinvestment.”

U.S. textile manufacturers say China’s exchange rate policy – coupled with its low wage rates and export tax rebates – gives China’s garment makers a 38- to 40-percent price advantage on goods it ships to the United States.

But economists note Treasury officials cannot do much arm-twisting because China’s profits from those sales are being returned to this country to fund the debt incurred by the administration’s tax cuts and lack of meaningful reductions in government spending.

China purchased $200 billion in U.S. securities in 2004 and could buy an estimated $300 billion in 2005, helping keep interest rates relatively low since the Treasury does not have to bid up rates to keep money flowing into T-bills.

China has become a two-edged sword for the U.S. economy. “The U.S. consumer is being saved by cheap imports from China,” said one economist. “Everything is much cheaper because of China’s prices and that is cushioning the blow of higher energy costs and steel prices in this country. “Meanwhile, U.S. interest rates are kept low, which helps prevent the U.S. economy from going into a prolonged slump.”

Bruce Scherr, president and chief executive officer of Informa Economics (formerly known as the Sparks Companies), says it’s not clear what might happen if China could be persuaded to revalue the Yuan or allow it to float freely.

“In an odd way, it might be a real positive for China and the Asian countries that supply much of the raw materials needed to fuel its economic boom,” said Scherr, speaking to the Mid-South Chapter of the National Agri-Marketing Association. “It might make the Chinese economy even stronger and create a stronger Asia.”

He and others believe tough talk may have little impact. “Jawboning doesn’t work,” says Scherr. “Allowing markets to take their natural course does. We have to learn to work with China. The Chinese won’t be browbeaten into doing things that are not in their interest. They are going to be an integral part of our future.”

e-mail: flaws@primediabusiness.com

House Appropriations Committee releases agriculture spending bill

Conservation programs that already have suffered $3.8 billion in cuts since the 2002 farm bill were hit again today as the House Appropriation Committee released its FY06 Agriculture Appropriations Bill.

The total amount by which all conservation programs were cut has not yet been released, but programs designed to protect working lands were cut by $495 million below their authorized levels.

“Seventy five percent of farmers who apply for funding from conservation funding are turned away from receiving funds they need to practice good stewardship on their land – practices that benefit everyone,” said Ralph Grossi, president of American Farmland Trust. “Cutting these programs means dirtier water, less habitat for wildlife and less farmland for future generations.”

Among the hardest hit was the Farm and Ranch Land Protection Program (FRPP), which has now been cut by $90 million since passage of the 2002 farm bill. America is losing 3,000 acres of farm and ranch land every day, and is losing the most productive land the fastest. In its first three years, the Farm and Ranch Land Protection Program protected over 300,000 acres of the country’s best agricultural lands.

“FRPP is a good deal for American taxpayers,” said Grossi. “Historically, this program has leveraged state and local funding for farmland protection at a rate of three dollars for every federal dollar invested. Land prices are on the rise – it makes sense to invest taxpayer dollars now.”

The public and most farmers support stewardship-based farm policies that encourage more diverse farming systems, reduce economic and environmental risks and produce a broader array of public benefits.

Public opinion surveys conducted by American Farmland Trust indicate that 85 percent of voters expect and are willing to pay farmers for those benefits, and at least 65 percent of urban-edge landowners would welcome such payments.