Thursday July 8 Ag News

 Webinar with Dr. David Kohl on business, financial IQ for ag producers part of new UNL series

The new Center for Agricultural Profitability at the University of Nebraska-Lincoln will present a webinar on the importance of business management skills for agricultural producers in the 21st century with Dr. David Kohl, professor emeritus at Virginia Tech, at noon July 15.  

The webinar will focus on preparing for business decisions that benefit an operation over time. Kohl will highlight the importance of understanding what it takes to have a high business IQ, knowing key performance indicators, being aware of trends and utilizing benchmarking.  

“Economic volatility has resulted from weather, trade, supply and market chain issues, consumer trends, geopolitics and even black swans, which will be a fact of life for the 2020s,” Kohl said. “Managing what’s controllable and managing around the uncontrollable, while thinking globally and brining it down to the business level, will be imperative.”

Kohl spent 25 years as a professor in the Department of Agricultural and Applied Economics at Virginia Tech. A renowned speaker in the agricultural industry, his decades of experience navigating many economic cycles have contributed to his knowledge of agricultural financial management.  

“We’re looking forward to Dr. Kohl’s practical tools, tips and takeaways that always provide a proactive approach to the art and science of managing ag business, especially in the coming decade,” said Dr. Larry Van Tassell, director of the Center for Agricultural Profitability.

The webinar is presented as part of the center’s weekly webinar series, held every Thursday. It is a continuation of the long-running series by the Extension Farm and Ranch Management team, which is now housed in the center.  

The new interdisciplinary center opened June 28 to support informed economic decision-making in agriculture through research, extension and education. For more about the center, and to register for the July 15 webinar, visit https://cap.unl.edu.



WHEAT STRAW USE VALUES
– Todd Whitney, NE Extension Educator

Wheat straw marketing may provide added value for wheat growers following grain harvest. Response to drought & tight forage supplies have increased demand for straw and baled forages. Current hay markets are posting average large round straw bale values of $58 per bale with large square bales pegging $64 each. Small wheat straw bales are also selling strong. Despite these price trends, is selling wheat straw from your fields a good decision for your farm?

Your first consideration is whether you have equipment available to windrow and bale wheat straw? Combines, which use wheat head strippers or forage choppers, may not allow straw windrowing. Secondly, do both the short-term and long-term opportunity costs of exporting nutrients and carbon away from your fields make financial sense?

Usually baling wheat straw windrows behind combines will leave about half the residue in the remaining 6-12” standing stubble, so the baled wheat straw will only remove about 1-2 tons of straw per acre with nutrient content of 12 pounds nitrogen; 3 ½ pounds phosphorus; and 25 pounds potassium per ton of residue removed, the potential nutrient removal value will range from $15 to $30 per acre for successive crops. Secondary and micronutrients may also be removed with the straw, but their value will be low.

A final consideration might be the organic carbon losses through straw removal. Unlike nutrients, which might be easily replaced through commercial fertilizers, carbon replacement may be more challenging. Adding manures and cover crops can replace straw nutrient and carbon removal and likely improve soil organic matter content; water infiltration and soil water holding capacity plus reducing soil erosion.

For long-term best management focus on maintaining soil organic matter by rotating straw harvested fields and applying manure for carbon replacement.



This Week's Drought Summary - July 8, 2021
droughtmonitor.unl.edu

Another week of hot, dry weather in the Pacific Northwest, Northern Rockies, Northern Plains, and Upper Midwest led to the expansion of drought conditions. Meanwhile, monsoon thunderstorms brought wet weather to eastern New Mexico and West Texas resulted in large one-category improvements. Showers and thunderstorms associated with a slowly moving cold front helped improve conditions in the Great Lakes region and eastern U.S. Drought expanded in parts of the Mid-Atlantic that missed out on the heaviest rain.

Midwest
Wet weather continued this week over much of the lower Midwest, leaving that part of the region drought-free with pockets of abnormal dryness (D0). Across the northern tier, drought expanded in Minnesota and Iowa as high temperatures of 6 to 9 degrees above normal, combined with little or below normal rainfall, dried out soils and stressed vegetation. Rainfall deficits of 4 to 10 inches are present over the last 90 days.

High Plains
Another hot, dry week across the northern tier of the region, coupled with isolated showers, brought a mix of degradations and improvements. Drought expanded in parts of Wyoming, North Dakota, South Dakota, and Nebraska that missed out on the heaviest rainfall. Soils remain dry with USDA reporting that 92% of South Dakota and 76% of North Dakota’s topsoil moisture is short to very short, leading to limited hay production and stunted crop growth. Land enrolled in the Conservation Program has been opened to haying and grazing in some areas and producers are needing to monitor toxicity levels in hay and water supplies. Drought conditions improved in parts of Wyoming and eastern Nebraska, as showers over the last two weeks helped erase rainfall deficits, improve streamflow, and replenish soil moisture. In North Dakota, rainfall is finally helping to chip away at the long-term drought that has plagued the state since fall of 2020.

Looking Ahead
The National Weather Service Weather Prediction Center forecast for the remainder of the week (July 8 -13) shows tropical storm conditions and rainfall from Elsa will continue across parts of Florida and into the Southeast. Other areas expecting excessive rainfall include the Texas coast, Midwest, and Northeast. In the West, the hot weather will continue with daytime highs well into the 90s and lower 100s. Moving into next week, the Climate Prediction Center six-to-10 day outlook (valid July 13-17) favors above normal temperatures across much of Alaska, the West, northern Plains and Northeast. Below normal temperatures are most likely across the Southern Plains. Below normal precipitation is expected across Alaska, the Northwest, Northern Plains, and Florida while above normal precipitation is favored along a band stretching from the Southwest, across the Midwest, and into the Northeast.



CHS Reports $273.6 Million in Fiscal 2021 Third-Quarter Net Income

CHS Inc., the nation’s leading agribusiness cooperative, today released results for its fiscal third quarter ended May 31, 2021. The company reported net income of $273.6 million compared to $97.6 million in the third quarter of fiscal year 2020, an increase of 180.2%. Significant year-over-year earnings growth in all business segments – Energy, Ag and Nitrogen Production – and Corporate and Other businesses each contributed to the increase.

Reflecting strong company performance, the CHS Board of Directors has approved $50 million in additional equity redemptions to member cooperatives and individual owners since the December 2020 CHS Annual Meeting. The increase is incremental to $33 million in approved equity redemptions announced at the 2020 annual meeting, for a total of $83 million in planned owner equity redemptions in fiscal 2021. A distribution of $30 million in cash patronage was also made to owners in early calendar 2021, based on business transacted with CHS in fiscal 2020.

“Robust performance across CHS resulted in a very strong third quarter,” said Jay Debertin, president and CEO of CHS Inc. “Strong global demand in agricultural markets and the hard work we have been doing to gain efficiencies across our supply chain led to higher volumes in nearly every business area, significantly improving our Ag segment earnings compared to the prior year’s third quarter.

“We also are seeing increasing momentum in pandemic recovery as restrictions ease and vaccination efforts progress, which has had a favorable impact on our Energy segment results and overall performance.”

Fiscal 2021 third-quarter highlights
    Revenues of $10.9 billion grew 50.9% from $7.2 billion in the third quarter of fiscal 2020.
    Earnings were up by more than 40% across all business segments (and Corporate and Other businesses) compared to both the second quarter of fiscal 2021 and the third quarter of the previous fiscal year.

Energy segment results
    Improved refined fuels margins resulted in fiscal 2021 third quarter margin gains, as did the absence of a $42.0 million noncash charge to reduce refined fuels inventories to their market value that impacted the prior year’s third quarter, but did not reoccur in the third quarter of fiscal 2021.
    Improved margins in the company’s refined fuels business were partially offset by significantly higher prices of renewable energy credits that had a negative impact on margins of approximately $82.0 million, less favorable pricing on heavy Canadian crude oil and lower propane margins due to the reversal of hedging gains recognized during the prior year.
    Overall, revenues increased by 24.2% and earnings increased by $59.6 million over the fiscal 2021 second quarter, reflecting volume and margin recovery from the effects of the pandemic.

Ag segment results
    Strong global demand drove commodity prices higher, and improved trade relations between the United States and foreign trade partners led to continued higher volumes for grain and oilseed, which significantly improved Ag segment earnings compared to the prior year’s third quarter.
    Higher overall margins were partially offset by mark-to-market losses for certain processing and food ingredients products, which the company expects to reverse over time.
    Lower volumes of feed and farm supplies were partially offset by increased volumes for agronomy products, stemming from stronger demand due to favorable weather conditions, compared with the previous year’s third quarter.

Other focus areas
    Nitrogen Production segment earnings increased in the quarter due to higher income attributed to increased sale prices of urea and urea ammonium nitrate.
    Favorable market conditions for edible oils and a recovery in sales volumes compared to earlier in the pandemic drove significantly increased income through the company’s investment in Ventura Foods, LLC.
    Focused cost-reduction initiatives, launched in fiscal 2021, continued to gain traction in reducing year-to-date marketing, general and administrative expenses.
    The company began to bring employees back to its global offices in full or hybrid capacities as pandemic restrictions lifted. The costs of these activities are not expected to be material.

For the nine months ended May 31, 2021, CHS reported net income of $305.0 million versus $401.0 million for the same period in fiscal 2020.

“We are encouraged by overall improvements in the global economy and the positive traction we’re gaining at CHS with initiatives focused on working more efficiently and effectively throughout the enterprise,” said Debertin. “We are optimistic conditions will continue to improve over the next 12 months. The resilience of our employees and their commitment to our owners and customers has been inspiring and we look forward to the future and continued shared success.”



Managing for Pinkeye

Anyone who has experienced dust blowing in their eyes, knows how uncomfortable that can be. In much the same way, cattle's eyes can be irritated by dust, tall grass, sunlight and flies. In some cases that will cause them to develop pinkeye, said Kansas State Beef Cattle Institute veterinarians on a recent Cattle Chat podcast.

"Cattle with pinkeye often will blink more than normal, and their eyes tear up and appear inflamed," said Brad White, BCI director and veterinarian. "This is a painful condition and, if left untreated, can cause impaired vision."

Pinkeye, also known as infectious bovine keratoconjunctivitis, is an infectious disease that peaks in the summer, according to White, who added that calves are more susceptible to this condition than adult cattle. One of the main vectors of the disease is face flies, White said.

The other fly that is common with cattle in the summer is horn flies. White said that face flies are larger in size and fly on and off the animal's face, while horn flies are smaller and tend to stay on the calf's body and move with the animal.

"To keep the face flies away, you need to get the insecticide near the calf's face frequently with either an ear tag or wipes," veterinarian Bob Larson said.

Veterinarian Brian Lubbers added that pinkeye is hard to prevent and should be approached with a whole herd protocol.

"Because the face flies move around from one calf to another, it can easily spread in the herd," Lubbers said.

If pinkeye does appear, Lubbers said there are treatment options.

"There are a couple of antimicrobials labeled for pinkeye that work pretty effectively," he said.

White added if those treatments don't clear up pinkeye quickly, then it is time to investigate further with a veterinarian.

White said: "If untreated, pinkeye can progress really rapidly. The earlier we catch it and treat it, the better the outcome will be for the animal."



U.S. Soy Exports Reach Record Level
Scott Gerlt, American Soybean Assoc. Economist

First quarter U.S. soybean exports reached a record level in 2021 in terms of volume, surpassing the previous record set in 2014. That year remains the only one to have exceeded the first quarter 2021 soybean export value. Strong Chinese demand due to a hog herd recovering from African Swine Fever continued after China had already bought most of Brazil’s soybean supply. As weather delayed Brazil’s 2021 harvest, the U.S. remained the main exporter with soybean supplies. However, as the U.S. supplies are now running thin, exports have fallen below the five year average.

Although outstanding sales are not the best measure of next year’s exports, the new marketing year sales for the 2021 crop at this point in the year are at their highest level since 2012. The USDA is expecting 2021/22 soybean exports to be down from the current marketing year due to tighter beginning stocks and strong domestic crush margins that incentive more of the beans to stay home. Weather throughout the growing season will play a large role in the actual outcome.

Editor's Note:  According to USDA Foreign Ag Service....
In the first quarter of 2021, U.S. soybean exports reached the second-highest value ever at $7.7 billion, nearly double the same period last year.



Weekly Ethanol Production for 7/2/2021

According to EIA data analyzed by the Renewable Fuels Association for the week ending July 2, ethanol production increased by 8,000 barrels per day (b/d), or 0.9%, to 1.067 million b/d, equivalent to 44.81 million gallons daily. Production was 16.7% above the same week last year, which was affected by the pandemic, and 1.9% higher than the same week in 2019. However, the four-week average ethanol production volume ticked down 0.1% to 1.049 million b/d, equivalent to an annualized rate of 16.08 billion gallons (bg).

Ethanol stocks tightened for the first time in six weeks, declining 2.0% to 21.1 million barrels. Stocks were 2.6% above the year-ago level but 8.1% below the same week in 2019. Inventories declined across all regions except the West Coast (PADD 5).

The volume of gasoline supplied to the U.S. market, a measure of implied demand, leapt 9.5% to a record high of 10.04 million b/d (153.96 bg annualized). Gasoline demand was 14.6% above a year ago and 3.0% greater than the same week in 2019.

Refiner/blender net inputs of ethanol rose 1.2% to 949,000 b/d, the highest level since Aug. 2019 and equivalent to 14.55 bg annualized. Net inputs were 11.6% above a year ago and 0.6% higher than the same week in 2019.

There were zero imports of ethanol recorded after 23,000 b/d hit the books the prior week. (Weekly export data for ethanol is not reported simultaneously; the latest export data is as of May 2021.)



 West Africa Technical Workshop Promotes Ethanol Blending In Nigeria And Ghana

The U.S. Grains Council (USGC) conducted a forum with key industry importers and stakeholders from West Africa last month, with a high concentration of participants from Nigeria and Ghana.

The virtual workshop, held on June 22, 2021, addressed the ethanol supply chain and its distribution from a U.S. perspective and discussed the substantial benefits in emissions reduction of ethanol-blended fuels.

Speakers, including Ramy H. Taieb, USGC regional director for the Middle East and Africa, discussed technical issues including vehicle compatibility, infrastructure and blending needs.

“West Africa is a region with a growing gasoline market and E10 is a starting point for existing policies in Nigeria and Ghana,” said Taieb. “This workshop is part of the Council’s technical workshop webinar series to sustain and engage efforts in order to support increased global use of ethanol in the region.”

The Middle East, Africa and Europe accounted for 14 percent of U.S. ethanol exports in the first nine months of the 2020/2021 marketing year, totaling 149 million gallons (52.8 million in corn bushel equivalent). Imported ethanol was used for both fuel and industrial purposes. Top markets included 35 million gallons (12.4 million in corn bushel equivalent) to the Netherlands, 30 million gallons to Nigeria (10.6 million in corn bushel equivalent), 11 million gallons (3.9 million in corn bushel equivalent) to the United Kingdom and 25 million gallons (8.9 million in corn bushel equivalent) to the Arabian Peninsula (mainly from Saudi Arabia and Turkey).

The Council’s regional office in Tunis, Tunisia actively operates programs on developing or expanding ethanol use in many markets, including the European Union. These efforts focus on increasing the value of ethanol in the region, especially as individual countries work to meet commitments to reduce greenhouse gas (GHG) emissions under the Paris Agreement.

Ethanol provides a pathway by reducing the carbon intensity of transportation fuels. According to the U.S. Department of Agriculture (USDA), corn ethanol will reduce GHG emissions by 50 percent by 2022 compared to conventional gasoline.

Following this workshop, the Council plans to continue offering regional workshops to address technical needs and foster partnership building.



CoBank Quarterly: Change is Coming for U.S. Food and Agricultural Businesses   

The widely anticipated summer economic boom is well underway and U.S. consumers are spending on services again. Jobs are abundantly available, but workers are scarce as the labor market is healing more slowly than most economists expected. According to a new Quarterly report from CoBank’s Knowledge Exchange, labor challenges felt during the pandemic and continuing today will incentivize businesses throughout the food supply chain to rapidly increase automation within their operations.

“The most significant and lasting impact from COVID will be an acceleration in automation,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “And it will affect the entire supply chain from field to grocery and restaurants. It won’t be an overnight transformation, but much larger investments in technology now will lead to a much more automated supply chain over the next few years.”

Commodity price inflation has been a boon to many ag producers over the past year. But increases in raw material and transportation costs, combined with higher wages, are causing retailers to push those higher costs on to consumers. U.S. consumers have benefited from very low food inflation for much of the past decade, but higher prices are a near certainty for the next year.

Grocers and restaurants are anxious to learn what and how consumers will want to eat in the new equilibrium. The coming adjustments will look quite different for each segment of the food supply chain. But the acceleration in change will be meaningful, and strategic steps to build more resilient businesses are coming sooner than previously believed.

Grains, Farm Supply & Biofuels
Grain prices entered a new phase of extreme price volatility in the second quarter of 2021. Corn, soybean and wheat prices climbed to a 9-year peak before shifts in non-commercial, speculative buying activity pulled prices down as fears of runaway inflation subsided. Elevated price volatility will continue in the months ahead as mixed weather forecasts and moisture deficits threaten yields during critical stages of the current growing season. Export demand for U.S. grains remains strong.

Farm supply cooperatives enjoyed a strong spring agronomy season, as rising grain prices gave U.S. crop farmers confidence to increase input spending. Fertilizer supplies remain plentiful in North America and retailers that bought extra inventory early in 2020 should be able to re-sell at attractive margins. Fertilizer prices were up 17% in Q2 and are within 10% of 2012 peak prices. Retail inventories of crop protection products are currently full, although sourcing agrochemicals from Asia could become a near-term challenge that would impact the entire U.S. grain complex.

The U.S. fuel ethanol sector outperformed expectations during the past quarter and appears well positioned for the second half of 2021. Overall economic growth and seasonal driving demand pushed up fuel ethanol production and operating margins in Q2. The regulatory and policy environment remains dynamic, however, and it’s unclear where biofuels, fossil fuels and electric-powered vehicles will fit in under a final infrastructure package.

Animal Protein & Dairy
Meat and poultry prices hit record highs in mid-May as food service and retail grocery pipelines were primed for post-COVID consumer activity and summer celebrations. Food service sales reached pre-COVID levels in April, hitting an all-time monthly high of $75.3 billion. More illuminating, however, is that overall retail grocery sales growth is up 7.3% from a year ago and 15.3% from 2019, providing evidence of longer-term changes in consumer behavior.

Chicken industry margins have markedly improved from the worst of 2020 and profitability should remain strong through the end of 2021. However, the well-publicized issues with chicken breeding stock changes in the past couple of years have limited short-term expansion potential.

Pork has been one of the highest rising commodities in 2021, with lean hog futures topping out at $122 in mid-June. Strong consumer demand for meat, tight supplies of competing meats and declining pork production in the second half of the year are all tailwinds for pork prices for the remainder of 2021. However, Chinese pork prices have dropped 65% since the beginning of the year, signaling a significant reduction of U.S. pork exports to China in the second half of the year.

Despite beef prices being at or near record highs, cattle ranchers and feeders are currently facing limited national slaughter capacity, high feed costs and the liquidation pressures of exceptional drought hitting the western U.S. With packer margins reportedly hitting $1,000/head earlier in the year, it is not surprising that producer organizations have pressured Congress to intervene. The national beef herd is already in contraction due to weak cow-calf profitability going back as far as 2015.

Milk production in the U.S. continues to chart record highs despite the surge in feed costs and hot temperatures. In May, milk production topped 19.85 million pounds for the first time, with daily output up 4.6% year-over-year. Exports of U.S dairy products—currently at record highs—continue to be the key release valve amid the supply surge. However, the risk of a stronger U.S. dollar could threaten the export pace in the months ahead.

Cotton, Rice & Specialty Crops
U.S. cotton prices remained strong in Q2, as Chinese demand continued unabated following steady purchases earlier in the marketing year. Total U.S. cotton shipments are running 9% ahead of last year, drawing down U.S. inventories. Global shipping delays and logistical disruptions have delayed some cotton purchases around the world.

The loss of Iraq as an export market for U.S. rice has been a major blow for the U.S., which now faces limited alternative exporting options amid abundant global supply. Rice’s slower export pace continues to be a depressing factor in prices. Concern over significant rice crop losses across the U.S. Delta and Southeast due to historic flooding drove a sharp recovery in rough rice futures late last quarter.

The U.S. sugarbeet crop is expected to deliver strong yields this fall following nearly ideal planting conditions that allowed for strong crop establishment. Domestic sugar deliveries are improving, but sugar demand for use in food and beverages remains uncertain as the economy recovers in the months ahead.

The historic drought conditions in the Western U.S. intensified last quarter with water allocations to some agricultural irrigators cut to zero in California. Growers are adjusting by fallowing crop acreage and allocating scarce water to permanent plantings rather than field crops. Prices for fruits and vegetables are rising for consumers, but not necessarily for growers. Rising transportation and warehousing costs have been noted as the key drivers for rising produce prices.

Power, Water & Communications
Over the past quarter, the Biden administration has outlined ambitious plans to aid rural Americans returning to the post-COVID workforce. The administration envisions the American Jobs Plan bringing new employment opportunities to rural communities via infrastructure investments. Those investments include $20 billion for rebuilding rural water infrastructure and supporting rural electric cooperatives as they invest in clean-energy transition.

The Biden administration has also established bipartisan support for $65 billion in broadband funding. Coupled with existing programs, that would bring total federal broadband funding to approximately $100 billion.

Merger and acquisition activity in the communications industry remains robust, with rural cable operators gaining tremendous interest from strategic buyers and investors. Deployments of Citizens Broadband Radio Service (CBRS) networks are starting to ramp up across the nation, including among the 75 organizations that received licenses to serve rural areas.

Read The Quarterly. Each CoBank Quarterly provides updates and an outlook for the Macro Economy and U.S. Agricultural Markets; Grains, Biofuels and Farm Supply; Animal Protein; Dairy; Specialty Crops; Other Crops and Rural Infrastructure Industries.