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Articles from 2004 In August


Corn+Soybean Digest

September 2004

Bears likely to dominate cotton market for 2004/05

The good news from the 2004 cotton crop is that U.S. growers may qualify for the maximum government payment. The bad news is that they’ll need every penny of it if they expect to see anything like a profit from what is shaping up to be a record-breaking crop worldwide.

“The latest USDA estimate puts world cotton production at 106.5 million bales,” said Gary Adams, National Cotton Council vice president of economics and policy analysis.

Adams, who offered an economic outlook at the National Cotton Council’s mid-year meeting recently in Asheville, N. C., said world production could be up 12 million bales over last year and 8 million more than the 1998 record crop.

“The foreign crop could top 86 million bales,” Adams said. That includes a projected 30-million bale crop from China, 12.75 million bales from India, 8.75 million from Pakistan, 6 million from Brazil and 2.3 million bales from Australia. The U.S. crop is estimated to top 20 million bales.

Much of that increase comes from expanded acreage, which is up 8 percent (outside the Untied States). “China acreage is up 13 percent over 2003,” Adams said. India expanded acreage by 6 percent; Pakistan is up 3 percent and Brazil added 2 percent.

But analysts also expect good yields to play a role. “The foreign yield will come in above the ten-year threshold,” Adams said. “USDA’s 106.5 million-bale estimate depends on optimistic conditions through harvest. But 102 million bales or less is unlikely without a significant surprise.”

Adams said the U.S. cotton crop increase comes primarily from excellent growing conditions. “Overall, U.S. acreage rose only about 3 percent,” he said. “But crop conditions show significant improvement over the same time last year. Some 70 percent of the U.S. crop is rated good to excellent, a record level, and most regions (in the U.S. cotton belt) are expected to do well.”

He said Louisiana ratings are the lowest, showing 24 percent of the crop in poor and very poor condition because of heavy rains early in the growing season. But California rates 25 percent of the crop good and 75 percent excellent.

“A lot of the Texas crop rates good to excellent as well,” Adams said.

Most of the cotton acreage expansion comes from foreign producers. “The Untied States produces about 19 percent of the world’s cotton and that has not changed much in the last ten years. China and Brazil, however, have a lot of potential to expand. For the last three years China has accounted for 26 percent of the world’s cotton crop.”

Complicating the supply issue is decreasing demand worldwide. Demand outside the United States shows signs of losing more ground to manmade fibers. Adams said in 1984 cotton enjoyed a significant advantage over polyester globally with 84 million bales of cotton versus 59 million for synthetic fibers. “In 2003, the balance shifted and for 2004 cotton demand should reach 100 million bales versus 108 million bales for polyester. “That’s a concern and limits growth potential for cotton.”

In the United States, cotton continues to increase its market share over synthetics. “That’s a result of promotion and advertising,” Adams said.

But overall cotton consumption is in decline this year. Adams said through May, U.S. retail consumption of cotton products was roughly 500,000 bales below the same time last year.

“Imports of cotton textile products are roughly the same as last year. Exports are slightly higher and mill use is lower,” Adams said.

Total U.S. retail consumption for the year is estimated at 20.6 million bales, down from 21.2 million in 2003. Imports are estimated at 19.5 million bales. Major importers include NAFTA and Caribbean Basin countries, from where imports have declined to 27 percent for 2004 to date. China accounts for 15 percent of imports with Pakistan at 13 percent.

“China’s share has doubled since their entry into the WTO,” Adams said. “I expect these recent trends to grow with elimination of quotas (on Jan. 1).”

U.S. mill use continues to decline. Expected use for 2004 is 5.9 million bales, down from 6.3 million in 2003, which was 1 million bales less than the previous year. “That decline has been consistent for the last five years or longer,” Adams said. He said mill use could fall as low as 5.7 million bales.

China mill use growth rate has grown from about 20 percent in 1998 to 34 percent for 2004, “as U.S. and European union use declines. The U.S. export figure and the Chinese import figure produce a near mirror image,” Adams said.

The U.S. raw cotton export market has grown, hitting a record 13.8 million bales for the 2003 marketing year. China topped the buyer list with 5 million bales, followed by Mexico, normally the biggest U.S. customer, at 1.8 million bales. A foreign production gap contributed to the record U.S. export numbers. Estimates for 2004 export fall below that record, likely 12 million bales for the 2004/05 marketing year. That figure should hold “if we see a rebuilding of stocks in other countries,” Adams said. “If not, this could be optimistic and we could see potential for exports in the 10.5-million to 11-million bale range.”

Adams said lack of the Step 2 program, currently not in effect, also could hurt U.S. cotton export potential.

“Estimated world trade likely will decline in 2004,” Adams said, “and from 65 percent to 70 percent of the U.S. crop will be available for export as raw fiber. It will be more difficult to export that much raw fiber if we see a 105 to106-million-bale crop. That big a crop poses a significant challenge for U.S. exports.”

That much cotton will stimulate recovery of stock by the end of the marketing year. World ending stocks would be just under 40 million bales, 6 million above 2003, if the current USDA crop estimate holds.

Downward pressure on price is likely as well. Since last fall, the A Index fell by 30 cents a pound. “The A Index recently traded in the low to mid 50s, followed by some recovery. But as more stocks build we anticipate a more bearish picture than we did in 2003,” Adams said.

He said the counter cyclical payment for the 2003 crop likely will average 3.2 cents a pound when the final payment is made in October.

“Cotton prices this year will be below the loan rate and farmers can expect the maximum counter cyclical payment, 13.73 cents, unless a significant surprise with production occurs before harvest. But there is still a long way to go before the crop is out of the field.”

e-mail: rsmith@primediabusiness.com

Corn+Soybean Digest

The Road Warrior of Agriculture

Convergence 2005 to 2010

In my travels and seminars lately I have had the opportunity to listen and observe other speakers and their conversations. What is interesting is that you can feel four forces that will impact the United States’ farm and rural landscape between 2005 and 2010.

  • First will be the WTO factor. Whether you feel that the initial stages of the elimination of farm subsidies worldwide may be a dream or not, it will be a force to be reckoned with. These conversations and actions will be taking place in discussion of the next Farm Bill in the U.S. If we have large deficits and depending on our legislators and government leaders at the time, we could see a U. S. and world farm structure with less direct support.
  • Second will be the new set of congressmen and government leaders who will have a different, less traditional view of agriculture and rural America. This will definitely impact the agricultural landscape, emphasizing an environmental and green orientation.
  • Third will be China, with its vision to become the world’s economic leader by 2050. China was the world’s economic leader for more than 1,000 years. In the early 1800s, China generated 33% of the world’s economy. Contrast this to the U.S., which peaked at 27% in the 1950s. Concerning relations with China, it could be a boom for agriculture or a bust depending upon the enterprises with which you are involved and the needs of the Asian community.
  • Fourth will be the emergence of alternative agricultural products in the U.S., such as ethanol, biodiesel and specialized products and services that meet domestic customers’ needs. There appears to be a new group of producers that are positioning themselves to take advantage of this new niche.


Competition with South America

  • Our transportation infrastructure in the Midwest is in need of upgrading if we are to compete against South America.
  • South America, because of its infrastructure challenges, will start producing more livestock, such as hogs and poultry.


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

Brock Online Notes

WTO Rejects U.S. Appeal On CWB

The World Trade Organization's (WTO) top trade court on Monday rejected a U.S. appeal of an earlier ruling that cleared the export policies of the Canadian Wheat Board (CWB), sources told Reuters News Service.

The WTO's Appellate Body upheld a panel ruling made last April that the CWB’s exclusive right to buy and sell western Canadian grain for export, and its right to set the initial price, did not break world trade rules.

In the earlier verdict, the WTO judges also backed a U.S. challenge to parts of Canada's grain-import policy. Neither side appealed that part of the decision.

The North Dakota Wheat Commission, which spearheaded the trade action against Canada, vowed to continue pushing for international rule changes to revise the wheat board's marketing practices.

"Obviously we're frustrated that the appellate body upheld the original decision on this. But at the same time we're not willing to give up the fight," said Jim Peterson, marketing director for the Bismarck, ND-based wheat organization.

The commission also will press for timely implementation of changes in Canada's grain-handling and shipping policies required by the original WTO panel ruling, he said.

Under that ruling Ottawa must change rules that prohibit the mixing of eastern and western grain for export sales and modify its rail revenue cap. A spokesman for the U.S. Trade Representative’s Office said the U.S. will continue pushing for the elimination of the wheat board's monopoly powers and other reforms in the world trade talks.

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.

Corn+Soybean Digest

Thiesse's Thoughts

First CSP Contract
The first-ever “ceremonial” contract for the new Conservation Security Program (CSP) was recently signed by Jim Moseley, U.S. Deputy Secretary of Agriculture, at the Jim and Peggy Pahl Farm, west of Vernon Center, MN. The first-ever CSP sign-up was available in 18 watersheds nationwide, including the Blue Earth River watershed in South Central Minnesota. Nationally, more than 2,200 farm operators have signed up for the initial CSP Program, which will involve approximately 1.9 million acres with CSP crop management. Under the CSP Program, farm operators receive annual per acre payments on crop acres that are farmed according to specified conservation practices that reduce soil erosion and enhance water quality. In 2005 and 2006, USDA plans to expand the number of watersheds and producers that are eligible for CSP enrollment. For more details on the CSP program, producers should contact their county NRCS office.

Continued Cool Temperatures
The much cooler than normal weather pattern this summer has continued into August, though temperatures in the past week have been somewhat warmer than in early August. A 90-year record low temperature of 37 degrees was set on August 21 at the U of M Research and Outreach Center at Waseca, Minnesota. Of course, that is the morning that minor to severe frost damage occurred across many areas in the Northern Corn Belt. The previous record low temperature on August 21 at Waseca was 41 degrees in 1925. As of August 26, the accumulated growing degree units (GDU’s) at Waseca since May 1 stood at 1753 GDU’s, which is lower than the very cool Summers of 1992 and 1993. The GDU accumulation at Waseca is currently 13 percent below normal for late August. Many areas of Central and Northern Minnesota are 20-30 percent behind normal on GDU accumulation for late August. In much of Minnesota, there is a need to average 20-25 GDU’s per day in September, without a killing frost, for the 100-105 day corn to reach maturity. The normal average GDU accumulation per day in September is 10 GDU. Not a good scenario in most of Minnesota, Northern Iowa, Wisconsin, and the Dakotas!

Frost Damage Information
Farm operators that have incurred frost damage to their crops should contact their crop insurance agent to report the loss. Most likely, the final crop loss will not be determined until the entire field or farm has been harvested. Growers with CRC and RA insurance policies should be aware that the yield threshold where indemnity payments begin has probably increased, due to the reduction in market prices in corn and soybeans since the March 15 sign-up deadline for crop insurance.

The University of Minnesota Extension Service has a Web site to assist crop producers with decisions related to the frost damage to crops. The Web site is at: www.extension.umn.edu/frostdamage.

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

Farm Lease Forms Available From MWPS

Sample farm lease forms are available at no charge from MidWest Plan Service, a regional publishing service for land grant universities. SDSU Extension Farm Financial Management Specialist Burton Pflueger said separate leases are available for cash leases, crop share leases, irrigated cropland, pastures, and farm buildings. They discuss issues such as rental rates, cropping programs, repairs and maintenance, and government programs.

Fall is a good time for reviewing farm leases and examining and discussing various lease provisions before new leases are written or agreed upon, Pflueger says. Putting all the lease provisions in writing will help avoid disagreements later, as well as provide documentation for income and estate tax treatments.

All of the leases were developed by Extension farm management specialists in the north central region. Visit the MWPS Web site at http://www.mwpshq.org/ for more information. Click on the button labeled "Free Materials" to find the lease forms.

For each lease form a bulletin that explains how to arrive at a fair and workable lease agreement is available for a cost of $4. Topics include how to set a fair cash rental rate, developing a flexible rental agreement, and other provisions to include.

Publications can also be ordered by calling 800-562-3618 or writing to MWPS, 122 Davidson Hall, Iowa State University, Ames, IA 50011-3080.

Corn+Soybean Digest

Illinois Farmland Values Up

A new USDA study reveals that the average value of Illinois farm real estate was at its highest level in history in 2004, said a University of Illinois Extension farm management specialist.

"The average farm real estate value for Illinois in 2004 was $2,610/acre, the highest on record," says Dale Lattz. "This includes the value of all land and buildings."

The information came from the USDA's National Agricultural Statistics Service which releases every year an estimated average of farm real estate values and cash rents by states. The estimates are based on surveys of farmers from selected geographical areas.

"These surveys follow strict statistical guidelines," says Lattz. "Estimated values may be revised the following year based on additional information. Revisions may also be made based on data from the five-year Census of Agriculture."

Lattz noted that values released in 2004 included downward revisions for the 1999 through 2003 time period based on the 2002 Census of Agriculture data.

"The 2004 Illinois farm real estate value figure was 7.4% higher than the 2003 revised average of $2,430/acre," he says. "The 2004 percentage increase was the highest since a 7.6% increase in 1998."

In Illinois, farm real estate values have show a year over year increase every year since 1988, or 17 consecutive years.

"Since 2000, farm real estate values in Illinois have increased 15%," he says.

In the years since 1970, average farm real estate values have declined only five times as compared to the previous year. Those years were 1982, 1983, 1985, 1986 and 1987.

"There have been three years when farm real estate values increased over 20% –1974, 1976 and 1977," Lattz adds. "The largest increase was in 1977 when values rose 37.3%."

A steady upward increase in farm real estate values has been the pattern since 1995.

"The largest increase during that time was a 9% increase recorded in 1995," he says. "The smallest was a 1.3% increase in 2001."

Driving the steady rise in value, Lattz says have been low interest rates, low returns on alternative investments, and continued use of farmland for developmental purposes.

"These factors seem to have a bigger influence on farmland values than the actual earnings from farm land," he says.

A full copy of the report is available online at farmdoc at: http://www.farmdoc.uiuc.edu/manage/newsletters/fefo04_13/fefo04_13.html.

Corn+Soybean Digest

Guidelines For Handling Corn Damaged By Frost Prior To Grain Maturity

This past weekend widespread frost occurred in northern Wisconsin roughly north of a line between Hudson and Green Bay with scattered pockets south of this line in the central sands area. Corn plant damage ranged from no leaves killed to all leaves killed completely to the ground, with most fields having a few top leaves killed. Because of the late planting dates and cool growing season that has occurred this year, corn development in affected fields range from V10 to R3 (slightly taller than knee high to early dough stage).

For fields that only had light frost damage, it is too early to harvest. Growing conditions may improve during September allowing the crop to mature and produce reasonable grain and silage yields.

Corn is killed when temperatures are near 32 F for a few hours, and when temperatures are near 28 F for a few minutes. A damaging frost can occur when temperatures are slightly above 32 F and conditions are optimum for rapid heat loss from the leaves to the atmosphere, i.e. clear skies, low humidity, no wind. At temperatures between 32 to 40 F, damage may be quite variable and strongly influenced by small variations in slope or terrain that affect air drainage and thermal radiation, creating small frost pockets. Field edges, low lying areas, and the top leaves on the plant are at greatest risk. Greener corn has more frost resistance than yellowing corn.

Symptoms of frost damage will start to show up about 1-2 days after a frost. Frost symptoms are water soaked leaves that eventually turn brown. Because it is difficult to distinguish living from dead tissue immediately after a frost event, the assessment should be delayed 5-7 days.

Yield Impact

Yield losses are negligible if frost occurs when grain moisture is below 35%. Yield loss is directly proportional to the stage of maturity and the amount of leaf tissue killed. Those who will be advising growers about the likelihood of frost damage and its impact on yield should get ready by consulting the National Corn Handbook NCH-1 "Assessing Hail Damage to Corn". This publication has charts used by the National Crop Insurance Association for assessing yield loss due to defoliation. Knowing how to recognize frost damage and assess probable loss is important for decision making. For example, corn that was defoliated 20% at the milk stage would have 3% yield loss.

The stem on a corn plant is a temporary storage organ for material that eventually moves into the kernels. Grain yield will continue to increase about 7-20% after a light frost that only kills the leaves as long as the stem is not killed.

Moisture drydown

Corn silage should be harvested at the appropriate moisture content for the type of silo in which it will be stored. If corn is frosted prior to 50% kernel milk, the moisture content of corn may be too high to be properly ensiled. However, during the drydown period, dry matter yield will decrease due to leaf loss, plant lodging and ear droppage. Thus, a trade-off exists between moisture and yield.

For corn silage frosted prior to the dent stage, the moisture content will be too high for successful ensiling. The silage crop should be allowed to dry in the field for several days and moisture content should be monitored. For corn frosted during the dent stage, harvest should begin quickly to prevent yield loss as damaged leaves are shed or break off the plant.

Since mold can occur on the ears before the desired moisture level is reached, harvest may have to begin immediately. To help control problems with excess moisture, wet silage can be mixed either with ground grain, straw, or chopped hay to reduce the overall moisture of the stored silage, The rule of thumb is about 30 pounds of dry material per ton of silage will be needed to reduce silage moisture one percentage unit.

Grain quality impact

Late season frost damage can affect grain quality and is directly proportional to the stage of maturity and leaf tissue killed. Severe impacts on grain quality can occur at mid-dough, while moderate impacts are seen at the dent stage. By the time the kernel has reached half milk line only minor impacts will occur to grain quality. Differences among hybrids, overall plant vigor at the time of frost and subsequent temperatures will all affect final grain quality.

Other considerations

Growers should monitor stalk rot of severely defoliated plants which have a good-sized ear. Photosynthate will be mobilized towards the ear rather than the stalk. This could weaken the stalk and encourage stalk rot development. These fields may need to be harvested early to avoid standability problems.

Corn+Soybean Digest

Use of Renewable Energy Up 3% Percent In 2003

Consumption of renewable energy increased 3% in 2003, with ethanol usage constituting a significant portion of that increase, according to the U.S. Department of Energy’s recently released “Renewable Energy Trends 2003” report.

According to the report, ethanol use in the transportation sector increased from 156 trillion British thermal units (Btu) in 2002 to 220 trillion Btu in 2003, a 41% increase.

The increase in ethanol usage was attributed to its primary use as an oxygenate additive in reformulated gasoline and its replacement of MTBE, which until recently was the primary oxygenate additive.

MTBE has been shown to contaminate groundwater, and the report noted MTBE consumption has declined from 313 trillion Btu in 2001 to 225 trillion Btu in 2003.

The report also provides an overview and historical data for trends in renewable energy from 1999 to 2002, including revisions and preliminary data for 2003. To read the report, click here.