Wednesday June 13 Ag News

2012 National Beef Quality Audit Expected to Assist Producers in Improving Profitability

The checkoff-funded National Beef Quality Audit, conducted every five years since 1991, assesses progress the industry makes on a variety of production issues that ultimately affect consumer demand for beef. Keith Belk, Colorado State University, has been involved in the development of this year’s audit and says some changes have been made in the way in which data is collected and what kind of data is included in the study.

Belk says, “We attempted to change Phase One around this year, and Phase Two actually, to collect a bit more data that was maybe more modern using some of the technologies that are now available to us. In Phase One, we designed a survey where we used a software that allowed us to dynamically route questions based on the answers that respondents gave to various questions. And in Phase Two for the first time, have been able to collect a ton of data that resulted from the use of instruments and instrument grading systems. So there’s been a lot more information available this round of the National Beef Quality Audit than ever before.”

The amount of information collected via the Quality Audit can seem daunting, but Belk believes that the data disseminated will directly benefit all cattle producers. He says, "For the first time we’ve been able to quantify responses to gut reactions about quality issues and things that affect purchasing decisions in the industry. You know, anytime you can quantify the impact that various attributes have on purchasing decisions, that always will benefit the industry in terms of things that they can manage to improve profitability. So I’m certain that this audit will provide information that’s useful to all cattle producers.”

Belk says he’s been involved with the National Beef Quality Audit since 1991 and though it continues to evolve and change, the research has never deviated from its original intent of improving producer profitability.   Belk concludes, “It’s an evolutionary process trying to collect data and trying to benchmark the state of the industry, and so every time we do one of these, we learn something that we can apply to the next audit. But it hasn’t lost its grassroots, its main original purpose of trying to quantify the things the industry could do to improve the profitability by improving the value of beef at consumption levels. So, that’s always been a primary goal of the audit and I think that’s still on target.”

The results from the 2011 National Beef Quality Audit will be released at the upcoming Summer Cattle Industry Conference in July.



No-Till and Cover Crop Field Day June 20 Near Manning, IA

Iowa Learning Farms will host a field day at the Barry Kusel farm near Manning, Iowa, on June 20, beginning at 6 p.m. The field day will focus on no-till conservation farming and cover crop management for optimum results.

Carroll County farmer Barry Kusel started no-tilling in the early 1980s to reduce erosion on their highly erodible loess soils. He now uses no-till on all of his farmland. Recently, he added a winter rye cover crop to his rotation to further reduce erosion and to improve the soil organic matter levels. Kusel will share his insights about successfully transitioning to no-till and using cover crops with field day attendees.

ISU Extension and Outreach Field Agronomist Mark Licht will teach about soil profile characteristics from a soil root pit dug specifically for the field day. Other ISU Extension and Outreach and agency experts will be on-hand to answer no-till and cover crop management questions.

The field day includes a complimentary evening meal. The event is free and the public is invited to attend. The field day site is located one mile north of Highway 141 and one mile west of county road M-68 (Delta Ave.); at the corner of East St. (Concord Ave.) and 300th St. (E-57), northeast of Manning.



Volatility and Uncertainty Causing Record Farmland Sales Volumes

Market forces and strong commodity prices continue to create record demand and sales activity for farmland, but there are several unknowns that could impact the coming year, according to Farmers National Company, the nation’s leading agricultural services company. This uncertainty is creating strong sell-side interest and buy-side activity, leading to record levels of land changing hands for Farmers National Company. 

“Although across the Midwest the inventory of land for sale is still really tight, Farmers National Company is experiencing increased sales activity. The demand continues to be very strong with increasing prices even at current levels,” said Lee Vermeer, AFM, ALC, vice president of real estate operations at Farmers National Company. “Sales volume at Farmers National Company is up 40 percent compared to 2011, setting a record pace. We are projecting that the remainder of 2012 will see continued interest from landowners regarding potential land sales.”

Farmers National Company sold $600 million of farmland in the past 12 months, with $350 million of that in past six months. This equates to 800+ farm sales during that time period, Vermeer said.

A balance of positive and negative market pressures, along with many uncertainties, is driving current market activity. The positive news for land owners is that demand for grain from world markets remains strong and there is still a limited supply of land, boosting land prices. In addition to that for land owners, returns have been strong over last year even though input costs have increased. 

The uncertainty comes from unpredictability in Europe, potential for inflation, and the looming possibility of tax law changes that would increase capital gains taxes. Also, a good growing season could lead to record production levels and lower commodity prices reducing land profitability. These and other potential changes could slow the land market slightly, according to Vermeer.

“I believe that sales activity will remain strong until some of the market uncertainties become known,” said Vermeer. “People still see land as a safe, tangible investment and are willing to keep their money there over the long-term.”

High auction activity continues to help boost land prices with Farmers National Company conducting nearly 160 in the past six months alone. However, according to Vermeer, he is still seeing some landowners selling well below the market, leaving thousands of dollars on the table because they are not adequately exposing their property to the market. 

“In a competitive real estate market like we are in, the only way to take full advantage of it is to allow the market to work for you,” said Vermeer. “Full exposure to the market is the only way to know you received the full value available.”

Iowa and Minnesota
Demand for quality land continues to be very strong in the North Central Region including Iowa, Missouri, Minnesota and South Dakota, according to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota. Auction numbers in this region are up over 2011, leading to top sales prices for sellers.

“Farmers National Company has completed 49 auctions in this area during the first four months of 2012, compared to 20 auctions during the same period last year,” said Kain. “Demand is still outpacing the number of properties available, and quality is definitely king.”

“The bulk of buyers are still farmers,” said Kain. “However, despite continued strong land activity, higher cash rents and input costs are narrowing farmer profits. Only a quarter of purchases in the beginning of the year have gone to investors.”

In Iowa, top quality land is selling at over $10,500 per acre, Minnesota values are reaching $8,000 per acre, and values in eastern South Dakota have reached $7,000.

Colorado, Kansas, South Dakota, Central/Western Nebraska and Wyoming
The western region of the farm belt has experienced record volume land sales in the past year, according to JD Maxson, area sales manager for Farmers National Company in Colorado, Kansas, South Dakota, central/western Nebraska and Wyoming.

“Demand continues to outpace farmland coming on the market as sellers are reluctant to sell,” said Maxson. “On the flip side, some sellers are capitalizing on hot market demand to get top dollar.”
Huge increases in value are fueling the velocity of the current farmland market, according to Maxson. In addition, uncertainty of the market and economic factors is keeping the market active.

“Historically low interest rates are driving land buyers to enhance their portfolios and hedge against inflation,” said Maxson. “Sales are being driven by the lack of available alternative financial sources, as well as the uncertainty in the financial markets.”

Prices in these regions are ranging from $5,000 to $10,000 per acre for high quality tillable acres, with location, soils and topography dictating price.



Western Iowa Dairy Farm Tour, Free Breakfast June 16

There will be food, fun and activities for everyone at the 5th Annual June Dairy Month open house hosted by Western Iowa Dairy Alliance. The event will include a dairy farm tour and free breakfast from 8 to 11:30 a.m. on June 16. Parking and food will be on the grounds of Agropur cheese plant, 332 Division St., Hull, Iowa. Transportation will be provided to neighboring Donsons Farms for the dairy farm tour and kids' activities.

The June Dairy Month Celebration is hosted by Western Iowa Dairy Alliance and Midwest Dairy Association, and sponsored by Sioux County Pork Producers, Sioux County Cattlemen, Iowa Egg Council, and Northwest Iowa Sheep Producers.

Guests can complete a self-guided tour of Donsons Farms, including opportunities to see where cows are milked, where they are housed and fed, and learn about the role of milk and dairy products in a healthy diet. Following the tour, guests will enjoy a free meal of breakfast sandwiches, hash browns, yogurt and milk. A video "virtual tour" of the Agropur cheese plant will also be available.

A special guest at this year's event will be KC Wolf, the mascot of the Kansas City Chiefs football team. KC will be attending to help spread the word about "Fuel Up to Play 60," an in-school program that encourages kids to choose nutrient-rich foods first, and get out and play at least 60 minutes every day. The program was founded by the National Dairy Council and the NFL, in cooperation with the USDA.

"We're excited to host this year's open house to let the public see firsthand how milk is produced and where the dairy products they purchase get their start," said Kevin Boote of Donsons Farms. "Our family is just one of many in western Iowa that work hard every day to care for our cows and land and produce a wholesome supply of milk for consumers."

Donsons Farms is owned and operated by Kevin Boote and Terry Boote. They milk 140 cows twice a day and raise calves and heifers on their farm just outside of Hull. They also raise corn, soybeans, oats and alfalfa. The farm has been operated by the Boote family since 1960.

A special children's activities area will feature a sheep shearing demonstration hosted by Northwest Iowa Sheep Producers, a straw bale maze and other hands-on activities. Children can help complete a coloring mural and learn more about Fuel Up to Play 60.

"We're excited to expand this year's event to also include information about beef, egg, pork and sheep production in western Iowa," said Jason Brockshus, Sibley dairy farmer and president of WIDA. "Livestock and poultry production is an important part of our economy and farmers play significant roles in our communities."

June Dairy Month is a great opportunity to celebrate the efforts of Iowa's dairy farmers as they deliver a wholesome and nutritious supply of milk and dairy products and make a significant contribution to the state's economy and rural communities. According to an Iowa State University analysis, each dairy cow represents $23,445 in economic activity, and the dairy industry creates 22,000 jobs across the state. There are more than 1,700 dairy farms in the state, and about 98 percent of the state's farms are family-owned. To view the report and learn more about Iowa dairy farming, visit www.iowadairy.org.

Milk provides a unique package of nine essential nutrients, and dairy foods are a substantial contributor of many nutrients that are important for good health. Dairy's importance in building strong bones and maintaining a healthy weight has been reaffirmed in the Surgeon General's Report on Bone Health, the 2010 Dietary Guidelines for Americans, and MyPlate. All recommend eating three servings of low-fat or fat-free milk, cheese or yogurt daily for optimum health.

For more information about the open house, visit www.wiadairy.com or contact 712-441-5308 or info@wiadairy.com.



Weekly Ethanol Stocks Down, Production Up

Domestic ethanol inventories were drawn down 522,000 barrels (bbl), or 2.5%, to 20.66 million bbl during the week-ended June 8, falling for the second straight week, according to data from the Energy Information Administration released Wednesday.

Despite the drawdown, total ethanol supply now stands 4.7% above the level seen a year ago.

Meantime, ethanol production from domestic plants ramped up for the second straight week. Production rose 16,000 barrels per day (bpd), or 1.8%, to 920,000 bpd last week while output is running 4.6% higher than a year ago.

Implied demand, as measured by refiner and blender net inputs, rose 50,000 bpd, or 6.1%, to 866,000 bpd for the week-ended June 8 from the prior week while up 4.7% from the year-ago level.

Elsewhere, the EIA reported that implied demand for motor gasoline rebounded last week after falling in the prior week, surging 482,000 bpd to 9.13 million bpd for the week-ended June 8. Four-week average gasoline demand at 8.8 million bpd was down 4.5% from a year ago.



EIA: US Ethanol Production Seen Flat at 910,000 Bpd in 2012

The Energy Information Administration said in its Short-Term Energy Outlook for June it expects fuel ethanol production in the United States to remain steady from 2011 through 2012, averaging about 910,000 barrels per day (bpd) and increasing only slightly to 920,000 bpd in 2013.  This forecast assumes that gasoline blended with 15% ethanol by volume or E15 does not yet reach the market in significant volumes.  Consequently, U.S. ethanol production is projected to exceed the volume that can easily be used in the U.S. liquid fuels pool, so the nation will continue to be a net exporter of ethanol over the next two years.

EIA estimates that biodiesel production in 2011 averaged about 63,000 bpd or 971 million gallons of total annual production. Forecasted U.S. biodiesel production averages 70,000 bpd in 2012 and 75,000 bpd in 2013.



Slight Changes Seen in Fertilizer Prices

Retail fertilizer prices tracked by DTN for the first week of June 2012 continue to remain fairly steady.  Five of the eight major fertilizers slipped lower compared to a month earlier, but none were down significantly. DAP had an average price of $632 per ton, MAP $684/ton, potash $656/ton, urea $752/ton and 10-34-0 $758/ton.  Urea was lower in price for the first time in 15 weeks. The last time the nitrogen fertilizer price dipped compared to the previous month was the last week of February.

Three fertilizers had higher retail prices compared to the first week of May, but again these price moves higher were fairly slim. Anhydrous had an average price of $776/ton, UAN28 $431/ton, and UAN32 $486/ton.

On a price per pound of nitrogen basis, the average urea price was at $0.82/lb.N, anhydrous $0.47/lb.N, UAN28 $0.77/lb.N and UAN32 $0.76/lb.N.

Three of the eight major fertilizers are still showing double-digit increases in price compared to one year earlier. Leading the way higher is urea. The nitrogen fertilizer is 47% higher compared to last year while both UAN28 and UAN32 are now 12% more expensive.  Two fertilizers have seen just slight price increases compared to a year earlier. Potash is 9% higher while anhydrous is now 4% more expensive.  The three remaining fertilizers are now actually lower compared to June 2011. 10-34-0 is now 8% lower, DAP is 7% less expensive and MAP has decreased 3% in price.



Pacific Warming to Continue; El Nino Possible

Climate models suggest an El Nino event in the Pacific--which is usually associated with drier-than-average weather in eastern Australia in spring--remains a possibility in spring, Australia's Bureau of Meteorology said Tuesday.

The computer-based models suggest the Pacific Ocean will continue to warm in the coming months, with conditions likely to approach, or possibly exceed, El Nino thresholds during late winter to early spring, the bureau said in a weekly tropical climate note.

The bureau's Southern Oscillation Index measured -7.8 in the 30 days ended June 10, falling from -0.7 in the 30 days ended June 3 and compared with -2.7 for May, all measures within neutral values. Sustained SOI values of below -8.0 might indicate an El Nino event and above +8.0 might indicate its opposite, a La Nina.

A dry spring through eastern Australia could limit the production of winter crops, including wheat, barley and canola.



Firm demand and project delays keep fertilizer markets tight

The International Fertilizer Industry Association (IFA) released to the public today its Medium-Term Fertilizer Outlook 2012-2016. This report shows that demand for fertilizer is steadily increasing in response to supportive agricultural market fundamentals, while expansion of supply is still delayed because of schedule slippages for about half of projects.

On the demand side, tight market conditions for maize and oilseeds provide strong incentives for farmers to increase productivity and optimize their return. In this connection, world fertilizer demand is seen as up by 2.8% in 2011/12, and by another 2.5% in 2012/13, to reach 181 million tonnes (Mt) of nutrients (nitrogen, phosphate and potassium). When compared to 2007/08 – the last campaign before the economic downturn – world fertilizer demand is anticipated to have fully recovered by 2012/13, including for potash. During this five-year period, South Asia alone is forecast to account for approximately 60% of the net increase in global demand.

“In the next five years, reduced inventories and strong crop prices are expected to persist in the agricultural commodity markets because of the need to supply the fast-rising food, feed, fibre and bioenergy markets. This is anticipated to stimulate fertilizer demand, but high crop price volatility could result in significant year-on-year variations,” says Patrick Heffer, Director of the IFA’s Agriculture Service. World demand is projected to reach 193 Mt by 2016/17, corresponding to a compound annual growth rate of 2.1% over the average of the 2009/10 to 2011/12 campaigns. Average annual growth is seen as stronger for potash (+3.7% per year) than for phosphates (+2.3%) and nitrogen (+1.5%) because the nitrogen and phosphate markets have recovered faster than the potash market, and because there is an urgent need to rebalance fertilization to the benefit of potash in several developing countries.

Contrary to historical trends, Asia’s weight in regard to global growth is progressively declining, while Latin America is seen as reinforcing its position as an engine of future expansion. Demand is anticipated to rise firmly in Eastern Europe and Central Asia, as well as in Africa. In volume terms, East Asia, South Asia and Latin America together would account for three-quarters of the increase in world demand during the next five years. The outlook for world fertilizer demand remains subject to major uncertainties, especially the evolution of the world economy.

On the supply side, global total nutrient sales for all uses reached 221 Mt nutrients in 2011, increasing 4% compared with 2010, due to firm demand in the fertilizer sector and a gradual recovery in the industrial segments. World total nutrient sales in the fertilizer and industrial sectors in 2016 are forecast to grow at an average annual rate of 1.8%, to 245 Mt nutrients in 2016.

“The fertilizer sector will soon reap the benefit of massive investments in new capacity,” states Michel Prud’homme, Director of IFA’s Production and International Trade Service. Close to 250 new fertilizer plants are projected to come on stream over the next five years, corresponding to a total investment in excess of US$90 billion. However, about half these projects have faced delays of 6 to 18 months. Schedule slippages have slowed down the projected growth of capacity and have led to more balanced market conditions in the short term, while lowering the levels of potential surpluses in the near term.

Global nitrogen capacity is projected to expand 17-25% compared with 2011, leading to large potential surpluses by 2015. Phosphoric acid and phosphate fertilizer capacity would expand by 20%, but global phosphate demand is projected to grow at similar rates, thus absorbing most of the projected incremental supply. In the potash segment, world capacity may increase by 42% while demand expands by 14%; however, most potash projects suffer from delays, slowing down the emergence of massive surpluses in the short to the medium term.

In the near term, trade prospects appear strong for most products. Between 2011 and 2016, global trade would expand by 15-20% for seaborne ammonia, potash and processed phosphates. Sulphur trade may increase 20-25%, due to strong demand projected in the fertilizer sector and in ore leaching operations. Urea exports may grow by an overall 15-30%, depending on India’s import demand and capacity developments.



Public Trust is a Terrible Thing to Waste
Daryll E. Ray, University of Tennessee Agricultural Policy Analysis Center

When it comes to public policy support and trust, the most important asset that farmers have going for them is credibility with the general public. Evidence of this support can be seen in the historical bipartisanship that has characterized the passage of farm bill legislation, despite the fact that farmers now account for less than 2 percent of the US population. It can be seen in the outpouring of gifts to the annual Farm Aid concerts featuring Willie Nelson and other artists.

This degree of public support has been built up over many years, beginning at a time when one-third of the US population earned a living by farming. When the mortgage crisis hit farmers in the 1980s, people understood. As prices fell in the late 1990s, farmers could count on Congress to vote for Emergency Payments because of widespread public support of family farmers and their stewardship of the land.

As many have discovered, trust that has been built up over generations can be lost in a moment.

As farmers look at the proposals for the 2012/2013 farm bill, it would be well to keep the idea of public trust in mind. The public understands the vagaries of weather and the impact of long periods of low prices on farm stability and the stability of their food supply.

But let the public think that they have been taken for a ride and that trust may disappear.

Support over time for Direct Payments has declined as more and more voters discovered that these payments continue to be paid during periods of high prices and record farm incomes, even as other programs are cut.

We have raised questions about revenue insurance that provides payments even when farm income is well north of the cost of production. This is particularly troubling because when prices fall over a period of years, revenue insurance provides little protection just when farmers need it the most. Safety-net appeals under such conditions do not work. Why would the public want to subsidize crop insurance premiums that provide funds when they are not needed and leave farmers at risk when help is needed the most?

A just released study suggests that this criticism applies equally to the shallow-loss programs being considered as a replacement for Direct Payments. According to a working paper by Vincent Smith, Bruce Babcock, and Barry Goodwin titled “Field of Schemes: The Taxpayer and Economic Welfare Costs of Shallow-Loss Farming Programs,” “shallow-loss programs are costly.

The shallow-loss programs they studied “would provide farmers who produce crops like corn, soybeans, and wheat with subsidies when current-year revenues for that crop fall below about 90 percent of their average levels over the previous five years.” The shallow-loss program as approved by the Senate Agriculture Committee would allow farmers to choose between county yields and individual farm yields.

The cost of the program will depend on the collective price and yield experience of farmers during the tenure of the bill. If prices stay “high” and yields remain near trend levels, the cost of a shallow-loss program could be minimal. But Smith, Babcock and Goodwin show that under price and yield variations that are well within agriculture’s experience over the last quarter century “these programs could cost the taxpayer as much as or more than the direct payments program they would replace, averaging as much as $8 to $14 billion a year over the next five years.”

In addition, Smith, Babcock, and Goodwin argue that “shallow-loss programs based on individual farm yields are not only expensive, but also very likely to induce wasteful, economically inefficient farming practices because of the extreme incentives they generate for moral hazard behaviors”—farmers would engage in actions and take risks that in the absence of insurance they would avoid.

They also believe that “Shallow-loss programs amount to a new entitlement: Payments would be automatically triggered by revenue shortfalls and would be linked to average revenues over the past five years. So, when prices and yields increase, payment triggers will also increase, creating a new, partially disguised entitlement program that locks farmers into near-record incomes at the taxpayer’s expense.”

All this brings us back to the issue we began this column with: public trust. Chances are good that Congress will include a shallow-loss program in the 2012/2013 Farm Bill. The question is, is the combination of features of existing publicly subsidized revenue insurance products and the proposed shallow-loss program in the best interest of farmers?

Our answer is a double “NO.” Aside from farm-level yield disasters, the combination does not protect farmers when they need protection the most—when prices are low for multiple years of time. In addition, it erodes public trust by providing massive payments when other programs are being cut and farmers need them the least.