Has Cattle Herd Expansion Ground to a Halt?

Normally, at this time of year, the Cattle industry focuses on information contained in the USDA’s January 1 estimates of the U.S. cattle herd. The inventory report provides a wealth of information to market participants including estimates of the all cattle and calves inventory, and both the beef and dairy cow inventories as well as an estimate of the prior year’s calf crop. This year, however, USDA extended the data collection period because of the government shutdown and the inventory estimates will be provided as of January 31, instead of January 1, with the report scheduled for release on February 28. As a result, we’re left to speculate regarding what information the report might contain.

U.S. cow-calf producers have been expanding the size of their herds since 2014, when the all cattle and calves inventory bottomed out at 88.5 million head. A year ago this time the all cattle and calves inventory stood at 94.4 million head, nearly 7% larger than 4 years earlier. So, what happened to the size of the herd in 2018? Did U.S. producers continue to increase their herds in 2018 or did expansion grind to a halt?

One of the best long-term indicators regarding the expansion or contraction of the cattle herd is the ratio of female slaughter (cows and heifers) to steer slaughter. During expansionary phases female slaughter declines relative to steer slaughter as producers hold back females to expand their herds. When expansion starts to slow or producers shift into herd liquidation, female slaughter increases relative to that of steers. Let’s take a look at the recent data to see if it conforms to this pattern.

In 2013, the most recent year of herd liquidation, female slaughter as a percent of steer slaughter was relatively high at 96%. When expansion got underway female slaughter began falling, declining to 89% in 2014. Female slaughter fell even more sharply the next two years as herd expansion accelerated. For example, in 2015 the ratio was 82% and in 2016 the ratio was 80%. The first sign that the industry’s expansion phase was slowing down appeared in 2017 when the ratio of females to steers in the slaughter mix rose to 86%. What was the ratio in 2018? Based upon USDA’s weekly slaughter estimates, female slaughter as a percentage of steer slaughter rose to about 92% during 2018. The implication is that expansion during 2018 did indeed come to a halt, but it does not look like the industry shifted into a liquidation phase. Instead, the odds appear to be quite high that the size of the nation’s cattle herd remained essentially unchanged during 2018. What does that mean for future beef supplies and prices?

Commercial beef production in the U.S. during 2018 totaled 26.9 billion pounds, about 2.6% more than a year earlier. But per capita beef supplies at 57 pounds were virtually unchanged from 2017, largely because of a small improvement in beef exports combined with a modest decline in beef imports. Commercial beef production appears likely to rise in 2019, but improvements in foreign trade could offset the modest production increase once again, leaving domestic per capita supplies unchanged for the second year in a row.

USDA’s 5-Market average price for fed steers last year was about $117 per cwt. With little change in beef supplies expected this year, fed steer prices are likely to average near their year ago level. Prices for 500-600 pound steers in Kentucky averaged about $154 per cwt. in 2018, up 3% compared to a year earlier when they averaged $149 per cwt. Prices in early 2019 started the year off weaker than 12 months earlier, averaging just $135 per cwt. during January. Widespread losses by cattle feeders during the last half of 2018 weakened feeders’ demand for calves, as did severe winter weather in January, as they attempt to purchase calves and feeders that generate more attractive breakeven prices. Calf prices in Kentucky this upcoming year are expected to average below 2018’s average, but the decline in the annual average is likely to be smaller than what took place in January. Look for Kentucky steer calves to average in the $140s during 2018, assuming no significant crop production problems that would push feed grain prices up substantially this summer and fall.

Source: James Mintert, Farmdocdaily

The Farm Economy Slow Down-Commodity-level Impacts

A few weeks ago we considered the state-level impacts of the farm economy slow down. While net farm income has fallen 42% nationally, the impacts have varied across the country. As many would expect, the Corn Belt and Great Plains states were hard-hit. Based on reader feedback, this week’s post considers the farm economy slow down across commodities.  

Farm Cash Receipts

Figure 1 shows the difference in cash receipts for 2018 compared to the high observation from 2010 and 2018. This measure is one way of considering how significant the farm economy slow down has varied. As we have noted in several posts (here and here), conditions for wheat production has been particularly challenging. Cash receipts in 2018 were 45% lower than the highs observed in 2012. It is worth noting that wheat cash receipts in 2018 are actually 5% higher than the lows reached in 2017.

Corn has also experienced a large decline with cash receipts down one-third from 2012 highs. Outside of crops, livestock producers have also been hard-hit. Cash receipts for cattle and calves (-18%), hogs (-25%) and dairy (-29%) have faced significant declines from 2014 highs.

Perhaps the data-point that stands out the most is soybeans with only a 9% drop in cash receipts from the highs. Keep in mind that these data are cash receipts- or a measure of annual sales. It will take some time for the full impact of the decline in soybean prices in 2018 to work its way into the data. Furthermore, changes in these data are driven by price and quantity. More on that later.

Figure 1. Change in Cash Receipts, 2018 vs. High from 2010-2018. Data Source: USDA’s ERS.

Figure 2 shows annual cash receipts from 2010 to 2018 for select commodities. For corn, soybeans, and wheat, cash receipts peaked in 2012. For livestock, cash receipts peaked later, in 2014.

In recent years, cash receipts have been stable for several commodities. For example, cash receipts for cattle and calves, corn, and wheat have been mostly sideways since 2016. However, two commodities have trended lower in recent years, soybeans and dairy. The continued slide for these commodities makes current financial conditions and 2019 increasingly challenging.

Figure 2. Annual Cash Receipts – Corn, Soybeans, Wheat, Cattle and Calves, Dairy products (Milk). 2010 -2018. Data Source: USDA’s ERS.

Field-Level Impacts

While the data presented in figures 1 and 2 are informative, they are not a perfect measure of farm-level conditions. Specifically, changes in area planted has a large impact on annual cash receipts. Soybean production, for example, has increased by more than 12 million acres over the last nine years. The increased production has masked declining field-level economics.

Table 1 uses USDA data that considers acre-level revenue and returns for corn, soybeans, and wheat. Specifically, the data considered were 2010 to 2017 (2018 data are not yet available). Furthermore, these data are national averages.

The first column shows the difference in per-acre revenue comparing 2017 to the high from 2010 to 2017. Wheat, again, was hardest hit with a 41% decline in per-acre revenue. The acre-level impact for corn and soybeans, however, is much closer than shown in figures 1 and 2. Specifically, corn revenue in 2017 was 26% lower than the earlier high, while soybean revenue was 24% lower.

The middle column shows the change in revenue for 2017 compared to the average per-acre revenue from 2010 to 2013.

Finally, the last column considers the contribution margin. Contribution margin is the difference between revenue and variable costs of production (such as seed, fertilizer, chemicals, etc.). Hired labor, depreciation, and land – to list a few- are not included. Contribution margin is a helpful measure as it shows how much remains to cover fixed, overhead expenses and generate a profit (if sufficient).

For corn, the contribution margin in 2017 was 34% less than the average of 2010 to 2013. As an example, this measure tells us there is now only $64 of contribution margin – to cover fixed expenses and generate a profit – for every $100 of contribution margin there was between 2010 and 2013.

Again, the impacts were most dramatic for wheat with a 44% decline in contribution margin. Soybeans have also shown a significant decline, contracting 22%.

Table 1. Changes in Revenue and Contribution Margin- Corn, Soybeans, Wheat. Data Source: USDA ERS.

Wrapping it up

As we noted in an earlier post, it can be difficult to capture and articulate the impacts of the current farm economy slowdown. In many cases, data that captures farm-level impacts and conditions can be challenging -if not impossible- to capture.

Commodity cash receipts are important and helpful measures. Furthermore, these data are frequently updated.  Cash receipts have captured sharp declines and significant challenges for producers of wheat, corn, cattle and calves, hogs, and dairy. However, recent data have understated the challenges for soybean production, which has increased acres even with significant revenue and contribution margin declines.

Finally, it’s important to keep in mind that producers can, in some cases, pursue alternatives. When conditions in wheat were most severe and bleak, many producers had the option to plant alternatives. This is why wheat production contracted by morethan 9 million acres in two years. Conversely, producers of livestock have very few alternatives they can pursue. An investment in a dairy facility and production isn’t easily switched to hog or cow-calf production. This is to say that, in some cases, producers were able to adjust production to pursue less-bad options. In other cases, producers had limited options when managing the downturn.

Source: David Widmar, Agricultural Economic Insights

Who’s Lonelier – City Slickers or Country Folks?

Social isolation and loneliness are increasingly being recognized as urgent public health threats, with risks to health and mortality as serious as those from obesity or smoking. Some researchers have cautioned that rural residents could be at greater risk for isolation due to the increased distances they must travel to visit their friends and family.

A new University of Minnesota School of Public Health study looked at objective and subjective measures of isolation and loneliness among rural and urban older adults and found that, overall, people in rural areas actually reported less social isolation and more social relationships than urban residents.

The study, led by Assistant Professor Carrie Henning-Smith and co-authored by Associate Professor Katy Kozhimannil and Professor Ira Moscovice, was recently published in The Journal of Rural Health.

Henning-Smith discovered the differences in social isolation among rural and urban residents by reviewing data from the National Social Life, Health, and Aging Project, a survey of 2,439 older adults (age 65 and older) and their spouses or partners. She compared county-level survey data from people living in large cities (metropolitan), small towns (micropolitan), and very rural areas (noncore).

Among those groups of residents, Henning-Smith examined:

  • their reported levels of social support (whether a respondent said they can open up to or rely on family or friends);
  • their number of social relationships (close family and friends, children and grandchildren, marital status);
  • their measured level of loneliness using the three-item UCLA Loneliness Scale, including how often they felt left out, lacked companionship, and felt isolated.

Analysis of the data showed that:

  • rural noncore residents had more living children and grandchildren and were more likely to say they could rely on friends compared to metropolitan residents;
  • rural micropolitan residents were more likely than metropolitan residents to say that they could rely on family;
  • both rural noncore and micropolitan residents were more likely than metropolitan residents to report that they have more than 20 friends;
  • despite having more social relationships, rural noncore residents were also significantly more likely than metropolitan residents to say that they feel left out (one important measure of loneliness) often or some of the time;
  • more than 25 percent of micropolitan and approximately 20 percent of metropolitan and noncore residents reported socializing with others less than once a month;
  • having more education was associated with more loneliness for metropolitan but not micropolitan or noncore residents;
  • being non-Hispanic Black was associated with significantly higher loneliness scores for noncore, but not metropolitan or micropolitan residents;
  • noncore Black residents were four times more likely to be lonely than noncore White residents.

“This study found significant variation by rurality in various measures of social isolation and loneliness,” said Henning-Smith. “It also found variation within types of geography in risks for loneliness. For instance, rural noncore Black residents were more likely to be lonely than noncore White residents. Further, the finding that rural residents have more social relationships, but are still more likely to report feeling left out shows that social isolation needs to be examined across a range of subjective and objective traits and experiences. No one measure can capture the full extent of social participation or isolation.”

Henning-Smith also said there is a critical need for more information on the prevalence and risk factors for being isolated and lonely by geography in order to design targeted, effective interventions, such as community programming, social support groups or volunteer opportunities.

“This study finds that while, on average, rural residents report more social relationships, some rural residents are still at a much higher risk of being lonely. Those disparities should be addressed by policy and public health interventions,” said Henning-Smith. “Further, more relationships alone is not enough to protect rural residents from feeling lonely; more should be done to facilitate meaningful social connections.”

Henning-Smith is the deputy director of the School of Public Health’s Rural Health Research Center and is the lead author on two “policy briefs” providing more information on the topic of rural social isolation (1, 2).

This study was funded by a grant from The Federal Office of Rural Health Policy.

Source: University of Minnesota

The LL-GT27 Soybean – What’s Legal?

We are starting to see the availability of soybean varieties with more than two herbicide resistance traits, which can expand the herbicide options, improve control, and allow multiple site of action tank mixes that reduce the rate of selection for resistance.  One of these is the Enlist soybean, with resistance to glyphosate, glufosinate, and 2,4-D.  As of this writing, full approval for the Enlist soybean is still being held up by the Philippines (because they can apparently).  The other is the LL-GT27 soybean, which has resistance to glyphosate, glufosinate, and isoxaflutole (Balance).  There is no label for use of isoxaflutole on this soybean yet, but it is legal to apply both glyphosate and glufosinate.  In Ohio, as long as neither label prohibits applying a mixture of two herbicides labeled for a specific use, it’s legal to apply the mixture.  So, it’s also legal to apply a mixture of glyphosate and glufosinate to the LL-GT27 soybean. 

There is no label that actually mentions or provides guidance for this mixture, which does not affect legality, but could affect who assumes liability for the recommendation to apply a mixture if that matters to you.  Some seed companies are making the recommendation for POST application of the mix of glyphosate and glufosinate to the LL-GT27 soybean in printed materials.  Our interpretation after discussion with ODA, is that these materials are essentially supplements to labels, and so the seed company would assume some liability for the recommendation.  

Our assumption is that for the POST application of this mixture, the glufosinate is carrying most of the load for the control of ragweeds, marestail, and waterhemp, which generally have resistance to glyphosate.  Glufosinate could use some help on larger giant foxtail, and definitely needs help on several grasses that it’s weak on – barnyardgrass, yellow foxtail, etc.  Many users of LibertyLink soybeans have made it a practice to consistently add a POST grass herbicide such as clethodim.  For the LL-GT27 soybean, one would have the choice of going this route or replacing the clethodim with glyphosate to control grasses or perennial weeds. 

We have had a lot of insightful questions from growers about the wisdom of mixing a systemic and contact herbicide together.  While there’s not much research-based information yet on how well glyphosate and glufosinate work together, there’s probably not much issue with adding a low rate of glyphosate to glufosinate to control grasses.  And we have other examples where contact and systemic herbicides are successfully used together – e.g. Gramoxone + 2,4-D + metribuzin; glyphosate + fomesafen. 

A colleague at Purdue related that the two herbicides require different types of surfactants which creates an interesting dilemma.  Both products contain a full surfactant load though, so a mixture should have plenty of whatever surfactants are being used for sure.  A couple of other things to keep in mind:

– In mixtures of systemic and contact herbicides, it’s important to optimize the application parameters for the contact herbicide.  In this case, it’s especially important to optimize the glufosinate since it’s controlling the glyphosate-resistant broadleaf weeds.  Optimizing glufosinate means higher spray volumes and smaller spray droplets, compared to what is needed for glyphosate alone (which works with almost any spray parameters).  Both herbicides require the addition of AMS.  Keep in mind also that glufosinate requires warm, sunny conditions for maximum activity.  And the activity of both herbicides is reduced in late evening through early morning.

– Sources tell us that, depending upon glyphosate rate, the cost of adding clethodim versus glyphosate to glufosinate is a wash to a slight advantage for glyphosate.  Higher rates of glyphosate will be needed where perennial weeds are the target.  The long-term potential for herbicide resistance could also be considered as part of the cost-benefit analysis here.  Populations of glyphosate-resistant annual grasses have become more prevalent in soybean-growing areas.  Continuous use of glyphosate for control of annual grasses in soybeans can increase the rate of resistance development, especially where glyphosate is used as a primary POST herbicide in corn also.  Paying somewhat more for clethodim in certain years of the rotation may therefore provide long-term weed management benefits compared with use of cheaper glyphosate.

Source: Ohio State University

USDA Payments Provide Boost to Farmer Sentiment in January

The Purdue University/CME Group Ag Economy Barometer rebounded sharply in January to a reading of 143, a 16-point improvement compared to December and the highest Barometer reading since June 2018. The January survey provided the first opportunity to measure farmer sentiment following USDA’s announcement that the second round of Market Facilitation Program(MFP) payments would be made to soybean producers and it was also the first survey taken following passage of the Agricultural Improvement Act of 2018 (2018 Farm Bill), both of which appear to have helped boost farmer sentiment. In particular, total MFP payments (first and second installments, combined) to U.S. soybean farmers were estimated by USDA to be about $7.3 billion, providing a significant revenue boost to most Corn Belt farming operations.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-January 2019.
Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-January 2019.

The jump in the barometer from December to January was driven by increases in both of the barometer’s sub-indices but the biggest improvement was in the Index of Current Conditions, which rose to a reading of 132 from 109 a month earlier. In comparison, the Index of Future Expectations rose to 148 in January, 13 points above its December reading of 135 and its highest value since February 2017. The rise in the Current Conditions Index took it back to just below its June 2018 level.

Figure 2. Indices of Current Conditions and Future Expectations, October 2015-January 2019.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-January 2019.

Producers indicated they were more inclined to view making large investments in their farming operations favorably on the January survey than they did a month earlier. The Large Farm Investment Index rose to 62 in January, 11 points above its December value and the highest reading for the investment index since last June. Although the index was still below a year earlier in January, it has increased substantially over the last several months. The index bottomed out at 42 in September and has risen every month since then, except December when a modest decline occurred.

Figure 3. Large Farm Investment Index, October 2015-January 2019.
Figure 3. Large Farm Investment Index, October 2015-January 2019.

Although producers held a more favorable view of making investments in machinery and buildings in January than in late 2018, that perspective did not seem to carry over into their view of farmland values. When asked for their expectations for farmland values in the upcoming 12 months, producers’ attitude actually weakened slightly compared to November 2018 (the last time farmland value questions were posed) as the percentage expecting higher values declined from 17 to 13 percent and the percentage expecting lower prices drifted down to 21 from 22 percent. Producers longer term view of farmland values also weakened compared to November as the percentage expecting higher values declined 2 points to 48 percent and the percentage expecting lower values rose 4 points to 13 percent.

What’s going to happen with respect to trade negotiations continues to weigh heavily on U.S. farmers’ minds. In January, producers indicated that they were a bit more optimistic about the future for agricultural trade as 63 percent responded that they expect U.S. ag exports to increase over the next 5 years, compared to 59 percent in December. More significantly, the percentage of farmers expecting ag exports to decline over the next five years declined to just 7 percent, the lowest percentage since we first posed this question in May 2017, compared to 26 percent a month earlier.

Figure 4. Over the Next 5 Years, Do You Think Agricultural Exports Are More Likely to Increase, Decrease, or Remain About the Same?, May 2017-January 2019.
Figure 4. Over the Next 5 Years, Do You Think Agricultural Exports Are More Likely to Increase, Decrease, or Remain About the Same?, May 2017-January 2019.

There continues to be a lot of uncertainty regarding a possible shift in acreage between corn and soybeans in 2019. We asked producers that planted soybeans in 2018 what their plans are for 2019. Twenty-five percent of respondents that planted soybeans last year said they plan to reduce their soybean acreage in 2019 while two-thirds (67%) expect no change in their soybean acreage. Among those soybean farmers that expect to reduce soybean acreage, 58 percent of them expect to reduce their soybean acreage by more than 10% whereas the remaining 42 percent expect their acreage decline to be 10% or less.

Figure 5. Planned Change in 2019 Soybean Acreage vs. 2018 by Soybean Farmers That Plan to Reduce their Soybean Acreage, January 2019.
Figure 5. Planned Change in 2019 Soybean Acreage vs. 2018 by Soybean Farmers That Plan to Reduce their Soybean Acreage, January 2019.

Looking ahead to the rest of 2019, producers indicated that 2019 is poised to be a challenging year for many farm operations. A majority of producers (57%) indicated they expect their farms’ operating expenses to increase this year with 38 percent expecting operating expenses to be about the same, both compared to 2018. When asked if they expect livestock and grain prices to increase to levels that will substantially improve their farm’s financial situation in the next year, 70 percent of respondents said no. More specifically, when asked about their soybean price expectations, four out of 10 respondents (43%) said they expect November 2019 soybean futures to fall below $8.50 sometime between mid-January and summer 2019. Looking at their farm’s financial situation, 25 percent of respondents said they expect to have a larger farm operating loan in 2019 than in 2018. Among those expecting to have a larger operating loan, over half (53%) said it was because input costs increased. However, just over one-fourth (27%) said it was because they were carrying over unpaid operating debt from prior years, suggesting that their farm operation is under financial stress.

Wrapping Up

Producer sentiment improved markedly in January compared to a month earlier. Producers view of current conditions and expectations for the future both improved, but the large improvement in farmers’ perspective on current conditions was the biggest driver behind the Ag Economy Barometer’s increase. The boost in revenue provided by USDA’s MFP payments and the passage of the 2018 Farm Bill, both of which took place in December but after the December survey was conducted, were likely responsible for some of the improvement in farmers’ sentiment. The sentiment improvement spilled over into a more optimistic perspective on making large investments in items like machinery and buildings as the Large Farm Investment Index rose 11 points in December to reach its highest level since last June. Although producers looked more favorably upon investing in machinery and buildings, that did not carry over into their views regarding future farmland values which weakened somewhat over both a 12-month and 5-year time horizon.

Looking ahead to plans for 2019, nearly one-fourth of farmers that planted soybeans in 2018 plan to reduce their soybean acreage this year whereas just 8 percent plan to increase their soybean acreage. Among those that plan to reduce acreage, 58 percent plan to reduce their acreage by 10 percent or more. This was a lower percentage than recorded on the November 2018 survey when 69 percent of growers planning to reduce soybean acreage said they expected to reduce soybean acreage by 10 percent or more.

Source: Purdue University

Net Return Prospects for Cattle Finishing in 2019

After averaging $111 per head in 2017, net returns averaged a loss of $45 per head in 2018.  The largest losses occurred in June and July, with losses of $126 and $108, respectively.  Are the prospects for 2019 more positive?  In addition to discussing net return prospects for cattle finishing in 2019, this article discusses trends in feeding cost of gain and the feeder to fed price ratio, key factors influencing changes in net returns.

Several data sources were used to compute net returns.  Average daily gain, feed conversion, days on feed, in weight, out weight, and feeding cost of gain were obtained from monthly issues of the Focus on Feedlots newsletter (here).  Futures prices for corn and seasonal feed conversion rates were used to project feeding cost of gain for the next several months.  Net returns were computed using feeding cost of gain from monthly issues of the Focus on Feedlots newsletter, fed cattle prices and feeder cattle prices reported by the Livestock Marketing Information Center (LMIC) (here), and interest rates from the Federal Reserve Bank of Kansas City.

Figure 1 illustrates monthly feeding cost of gain from January 2009 to December 2018.  Feeding cost of gain averaged $78.10 per cwt. in 2018 ranging from a low of $74.87 in May to a high of $80.31 in December.  Given current corn and alfalfa price projections, feeding cost of gain is expected to range from $79 to $82 during the first 6 months of 2019.  Feeding cost of gain is sensitive to changes in feed conversions, corn prices, and alfalfa prices.  Regression analysis was used to examine the relationship between feeding cost of gain, and feed conversion, corn prices, and alfalfa prices.  Results are as follows: each 0.10 increase in feed conversion increases feeding cost of gain by $1.43 per cwt., each $0.10 per bushel increase in corn prices increases feeding cost of gain by $0.87 per cwt., and each $5 per ton increase in alfalfa prices increases feeding cost of gain by $0.55 per cwt.

The ratio of feeder to fed cattle prices for the last ten years is illustrated in Figure 2.  During the ten-year period, this ratio averaged 1.20.  The feeder to fed price ratio was one standard deviation below (above) this average for 13 (18) months during the ten-year period.  The average net return for the months in which the ratio was below one standard deviation of the average was $159 per head.  In contrast, the average loss for the months in which the ratio was above one standard deviation was $238 per head.  The average ratio for the 18 months with a feeder to fed price ratio that was above one standard deviation of the ten-year average was 1.35.  Given current price projections, the feeder to fed price ratio is not expected to reach these levels.  However, the projected ratio is expected to remain above the ten-year average for most of 2019, with the exception being June.  If these ratios materialize, we would expect at least small losses during these months.  Of course, an unexpected increase in fed cattle prices would create a downward spike in this price ratio and would improve the outlook for net returns.

Monthly steer finishing net returns from January 2009 to December 2018 are presented in Figure 3.  It is important to note that net returns were computed using closeout months rather than placement months.  Net returns averaged $111 per head in 2017 and a negative $45 per head in 2018.  Historical and breakeven prices for the last ten years, as well as projected breakeven prices for 2019 are illustrated in Figure 4.  Breakeven prices in the first quarter of 2019 are expected to range from $124 to $126 per cwt.  Breakeven prices for the rest of the year are expected to be considerably lower than this range.  For the second quarter, breakeven prices are expected to range from $116 to $121 while during the second half of 2019 the expected range drops to $116 to $119 per cwt.  Current fed cattle price projections suggest that breakeven prices during the first half of 2019 will result in average losses of approximately $25 per head.  Turning to the second half of 2019, average losses in the third quarter are expected to be larger than $25 per head while net returns in the fourth quarter are expected to be close to breakeven.

This article discussed recent trends in feeding cost of gain, the feeder to fed price ratio, and cattle finishing net returns.  Average cattle finishing losses in 2018 were $45 per head.  Current breakeven and fed cattle price projections suggest that losses will continue into 2019.  Given the recent stability in feeding cost of gain, net return projections for the next few months are primarily driven by the feeder to fed price ratio.  For net returns to positive in 2019, fed cattle prices will need to approach $125 per cwt. in the first quarter, $120 per cwt. in the second quarter, and $118 per cwt. in the third and fourth quarters of 2019.

References

Focus on Feedlots, Animal Sciences and Industry, Kansas State University, www.asi.k-state.edu/about/newsletters/focus-on-feedlots, accessed March 6, 2019.

Livestock Marketing Information Center, www.lmic.info, accessed March 6, 2019.

Source: Farmdocdaily

An Overview of U.S. Farms From USDA’s Economic Research Service

The U.S. Department of Agriculture’s Economic Research Service (ERS) recently released its annual brochure exploring characteristics of America’s farms.  Today’s update highlights a few of the key findings from the ERS brochure.

In an annual update that provides an overview of U.S. farms (“America’s Diverse Family Farms: 2018 Edition“) ERS Economists Christopher Burns and James M. MacDonald noted that:

  • Eighty-nine percent of farms are small, and these farms accounted for 52 percent of the land operated by farms in 2017.
  • Large-scale family farms accounted for the largest share of production, at 39 percent.
  • Family farms of various types together accounted for 98 percent of farms and 87 percent of production in 2017.
  • Nonfamily farms accounted for the remaining farms (2 percent) and production (13 percent).

“America’s Diverse Family Farms: 2018 Edition,” by Christopher Burns and James M. MacDonald. Economic Information Bulletin No. (EIB-203). USDA-ERS (December 2018).

More narrowly with respect to commodity production, the ERS update indicated that:

  • Large-scale family farms accounted for over two-thirds of dairy production and over half of high-value crops like fruits and vegetables.
  • Midsize and large-scale family farms dominate cotton production (85 percent), with large-scale farms contributing over half of production and midsize farms an additional one-third. Midsize and large-scale family farms both accounted for over one-third of total cash grain/soybean production (for a combined total of 72 percent).

“America’s Diverse Family Farms: 2018 Edition,” by Christopher Burn and James M. MacDonald. Economic Information Bulletin No. (EIB-203). USDA-ERS (December 2018).

Burn and MacDonald also pointed out that, “In 2017, net farm income for the sector declined almost 40 percent from its peak in 2013, though it was only slightly below its 10-year average. Midsize, large, and very large farms had substantial declines in the share of farms with an operating profit margin (OPM) in the green zone between 2013 and 2017. Lower commodity prices worsened the OPM of many midsize, large, and very large farms, especially those that produced field crops (e.g., cornsoybeanswheat) or dairy.”

“America’s Diverse Family Farms: 2018 Edition,” by Christopher Burn and James M. MacDonald. Economic Information Bulletin No. (EIB-203). USDA-ERS (December 2018).

With respect to how farms are legally organized, the ERS update stated that:

The vast majority of family farms (89 percent) are operated as sole proprietorships owned by a single individual or family, and they account for 59 percent of the value of production.

While addressing government payments and crop insurance, Burn and MacDonald indicated that, “Crop commodity program payments are targeted at current or historical production of specific crops and generally reflect acreage in crops historically eligible for support. Seventy-five percent of these payments went to moderate-sales, midsize, and large family farms in 2017, which historically have produced the largest share of program crops; in 2017, they accounted for 79 percent of acres in program crops. Commodity program payments are limited to $125,000 annually per person or legal entity.”

“America’s Diverse Family Farms: 2018 Edition,” by Christopher Burn and James M. MacDonald. Economic Information Bulletin No. (EIB-203). USDA-ERS (December 2018).

Likewise, “Midsize and large family farms together received 68 percent of indemnities while accounting for 59 percent of harvested cropland in 2017.”

“America’s Diverse Family Farms: 2018 Edition,” by Christopher Burn and James M. MacDonald. Economic Information Bulletin No. (EIB-203). USDA-ERS (December 2018).

In summary, the ERS update reminded readers that, “Farming is still overwhelmingly a family business. Ninety-eight percent of U.S. farms are family farms, and they account for 87 percent of farm production.”

Source: Keith Good, Farm Policy News

How Many Soybean Acres Do We Need in 2019?

We have reached the time of the year where speculation about acreage for the 2019 crops begins in earnest.  While the number of acres planted to soybeans appears set to decrease, current projections indicate an intention to plant significantly more acres than necessary to reach breakeven prices in Illinois under current consumption and stock level forecasts.

Projections by industry analysts place 2019 soybean planted acreage in a range from 84.5 to 86.5 million acres.  A reduction in soybean acreage from the 89.1 million acres planted in 2018 seems probable.  We currently project soybean planted acreage at 85.7 million acres.  An analysis of the number of soybean acres necessary in 2019 to produce a 2019-20 marketing year price for soybeans near the cost of production may be revealing.  This analysis uses a 2019 crop budget on high productivity farmland for soybeans following corn in central Illinois.  A land cost of $260 per acre and $363 per acre non-land costs brings total costs to $623 per acre.  Assuming a 63-bushel per acre yield, the breakeven price under this cost structure comes in at $9.80 per bushel.  The seasonal average price for soybeans in Illinois averaged near 27 cents per bushel higher than the national farm price over the last three years.  Assuming this holds next marketing year, a national average farm price near $9.53 per bushel is necessary during the 2019-20 marketing year to reach breakeven in central Illinois.

In 2016-17, the seasonal average farm price was $9.47 at an ending stocks-to-use ratio of 7.1 percent.  We assume an ending stocks-to-use ratio near 7.1 percent creates the scenario necessary to reach soybean prices in the mid-$9.00 range for 2019-20.  In the latest WASDE report, the USDA projected soybean stocks at the start of the 2019-20 marketing year at 955 million bushels.  At 52.1 bushels, the current 2018 forecast for U.S. average soybean yield is widely expected to move lower in the final USDA production estimate.  By assuming a 2018 final yield of 51.8 bushels per acre, ending stocks of 929 million bushels result from the consumption level at the current forecast of 4.107 billion bushels.

Soybean use projections for the 2019-20 marketing year suffer from uncertainty regarding trade negotiations with China.  While a wide variety of scenarios are plausible, this analysis focuses on two scenarios.  The optimistic scenario projects soybean use next marketing year at 4.359 billion bushels on a resolution to the trade impasse and expanded exports during the marketing year.  The other scenario assumes consumption at 4.109 billion bushels on a continuation of trade disruptions and flat consumption growth.  At a 7.1 percent stock-to-use level, the optimistic scenario requires ending stocks for 2019-20 marketing year of 310 million bushels.  The low consumption scenario requires ending stocks at 292 million bushels.  By using a beginning stock level of 929 million bushels and 20 million bushels of imports, the optimistic and low consumption scenarios call for a U.S. soybean crop near 3.7 and 3.4 billion bushels respectively.

For this analysis, a soybean yield of 49.2 bushels per acre in 2019 is used for national average yield.  At this yield, the optimistic use scenario requires 75.6 million harvested acres of soybeans to produce 3.7 billion bushels.  Given this level of harvested acreage, planted acreage comes in at approximately 76.3 million acres.  The low consumption scenario results in 70.2 million harvested acres to produce 3.4 billion bushels.  Planted acreage comes to 70.9 million acres under this scenario.  Under either scenario, planted acreage results in substantially lower acreage than currently expected by analysts.  As one would expect, a higher yield assumption changes the analysis.  For example, a trend yield of 50 bushels per acre provided in the USDA’s long-term projections lowers 2019 soybean planted acreage necessary, under the hypothetical consumption scenarios, to 75.1 and 69.8 million acres under the stocks-to-use ratio assumption.

Soybean acreage seems destined to be well above levels necessary to produce an average price in the mid-$9.00 range and meet the cost of production in Illinois.  The potential for lower ending stocks in the current marketing year still exists due to strong crush levels and a potential trade resolution.  A substantial reduction in 2018-19 ending stocks appears unlikely at this time.  The large ending stocks of soybeans built up over the last few years require a sharp increase in consumption or a significant shortfall in production to get back to breakeven prices over the next marketing year if planted acreage comes in close to current projections.

Reference

Schnitkey, G. “Crop Budgets, Illinois, 2019.” Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 2018.

YouTube Video: Discussion and graphs associated with this article available at

Field Performance of Seed Treatments and Soil Insecticides for Corn Rootworm Control

Producers across east-central Illinois have enjoyed low western corn
rootworm pressure for several years, due to a combination of saturating
rains during rootworm egg hatch and widespread use of Bt corn hybrids.
Following a low point in the rootworm population in 2015, statewide
monitoring of corn and soybean fields has documented a slow western corn
rootworm population rebound in some areas.  Recent low corn pest
abundance (combined with lower commodity prices) provides an opportunity
to become reacquainted with rootworm monitoring and non-Bt options for
their management. While relying on soil insecticide or a seed treatment
to protect corn roots may not fit into every growers’ operation every
year, rotating among different rootworm management tactics should be
considered a part of the best management practices for corn rootworms in
the transgenic era. Rotating between different rootworm management
tactics and Bt modes-of-action is necessary because western corn
rootworm populations are evolving resistance to the Bt proteins
expressed in Bt corn hybrids. In addition, monitoring adult populations
in fields that will be planted to corn the following year will help to
assess the need for control (whether a Bt trait or an insecticide).

In 2018, we conducted a series of field trials to evaluate control options for corn rootworm. These trials were planted following a 2017 “trap crop” of late planted corn and pumpkins to artificially increase rootworm populations in the field. Root masses (5 per plot) were removed during the early reproductive stages (R1-R3), cleaned using pressure washers, and rated for corn rootworm damage using the 0-3 Node-Injury Scale developed by researchers at Iowa State (Oleson et al. 2005). The rootworm population at this location consisted almost entirely of western corn rootworm, and previous bioassay data indicated a high level of resistance to the “Cry3” Bt traits within the population. Note that additional information and data for these trials (as well as additional insect and disease management trials) are available in the recently published “Applied Research Results on Field Crop Pest and Disease Control,” available at the following link: http://cropdisease.cropsciences.illinois.edu/wp-content/uploads/2018/12/Pestpathogenappliedresearchbook2018.pdf. In addition, readers are encouraged to consult “on Target” for summaries of applied research trials conducted by University of Illinois personnel from 2004-2014: http://ipm.illinois.edu/ontarget/.

Seed Treatments. Seed treatments are nearly
ubiquitous on seed corn planted across the Corn Belt.  In our trials,
the seed treatments Poncho Votivo and Poncho Votivo 2.0 offered
significant root protection from corn rootworm larvae compared to an
untreated control (Table 1).  For many years, some corn hybrids have
been marketed with seed treatments at what has been described as the
‘rootworm rate’.  These data indicate that at modest larval pressure (ca.
1.9 on the 0-3 Node Injury Score scale), these seed treatments provide
some root protection; however, based on previous studies these
treatments should not be relied upon alone for control under heavy
rootworm pressure. Note that all hybrids used in this trial expressed
Cry3Bb1 for root protection. The relatively high root pruning observed
in the untreated plots illustrates that resistance to the “Cry3”
proteins is an issue at this site.

Soil-Applied Insecticides.  We tested soil-applied
insecticides with a non-Bt hybrid for rootworm control, and all
insecticide materials tested in 2018 reduced injury from corn rootworm
larval feeding compared with the untreated control. This trial was
conducted under relatively low larval pressure (1.07 on the 0-3
node-injury scale in the untreated plots), and no distinctions among the
different insecticides could be made.

Before commercialization of Bt corn hybrids, a soil-applied
insecticide was one of the only options available to growers
anticipating economic rootworm injury in continuous or rotated corn. 
Over the years, soil-applied insecticides were regularly evaluated in
University of Illinois Insect Management Trials (see previously linked
“on Target” reports). They typically provided significant reductions in
corn rootworm larval damage to corn roots compared to untreated
controls.  Oftentimes, soil-applied insecticides provided root
protection equivalent to, or approaching that provided by single trait
Bt corn hybrids with similar yield results (see 2013 “on Target”
report). Ultimately, Bt corn’s season-long root protection that was as
good as or better than a soil-applied insecticide, reduced pesticide
exposure, and simplified planting operations were powerful motivations
that drove adoption of Bt corn. However, use of a granular or liquid
soil-applied insecticide on a non-rootworm Bt corn hybrid remains a
viable tactic to protect corn roots without the use of a Bt corn hybrid.
If you are interested in using one of these products and have not done
so in a while, now is a good time to verify that your application
equipment is in good shape. Rotating corn hybrids that incorporate Bt
traits with non-Bt corn treated with a soil-applied insecticide should
be considered as a strategy to slow resistance evolution, especially in
areas that are currently experiencing only moderate corn rootworm
pressure.

Oleson, J. D., Y. Park, T. M. Nowatzki, and J. J. Tollefson. 2005.
Node-injury scale to evaluate root injury by corn rootworms
(Coleoptera: Chrysomelidae). Journal of Economic Entomology 98: 1-8.

Table 1. Mean (± standard error) node-injury ratings of corn rootworm larval feeding injury on corn hybrids expressing the Bt trait Cry3Bb1 treated with Poncho Votivo, Poncho Votivo 2.0, or Untreated at Urbana, IL in 2018.

a Means followed by the same letter within a column are not different based on the Fisher method of least significant difference (α = 0.05)

Table 2. Mean (± standard error) node-injury ratings of corn rootworm larval feeding injury on non-Bt corn treated with granular and liquid insecticides at planting at Urbana, IL in 2018.

a Means followed by the same letter within a column are
not different based on the Fisher method of least significant difference
(α = 0.05)  b Note that Ampex EZ is not labeled for use in corn at the time of this publication

Contact:

Nick Seiter nseiter@illinois.edu, University of Illinois Department of Crop Sciences

Joe Spencer spencer1@illinois.edu, University of Illinois Natural History Survey

Source: University of Illinois

Weather at Three Key Growth Stages Predicts Corn Yield, Grain Quality

Corn is planted on approximately 90 million acres across the United States every year. With all that data, it takes months after harvest for government agencies to analyze total yield and grain quality. Scientists are working to shorten that timeline, making predictions for end-of-season yield by mid-season. However, fewer researchers have tackled predictions of grain quality, especially on large scales. A new University of Illinois study starts to fill that gap. 

The study, published in Agronomy, uses a newly developed algorithm to predict both end-of-season yield and grain composition – the proportion of starch, oil, and protein in the kernel – by analyzing weather patterns during three important stages in corn development. Importantly, the predictions apply to the entire Midwest corn crop in the United States, regardless of corn genotypes or production practices. 

“There are several studies assessing factors influencing quality for specific genotypes or specific locations, but before this study, we couldn’t make general predictions at this scale,” says Carrie Butts-Wilmsmeyer, research assistant professor in the Department of Crop Sciences at U of I and co-author of the study. 

As corn arrives at elevators across the Midwest each season, the U.S. Grains Council takes samples to assess composition and quality for their annual summary reports, which are used for export sales. It was this comprehensive database that Butts-Wilmsmeyer and her colleagues used in developing their new algorithm. 

“We used data from 2011 to 2017, which encompassed drought years as well as record-yielding years, and everything in between,” says Juliann Seebauer, principal research specialist in U of I’s Department of Crop Sciences and co-author of the study. 

The researchers paired the grain-quality data with 2011- 2017 weather data from the regions feeding into each grain elevator. To build their algorithm, they concentrated on the weather during three critical periods – emergence, silking, and grain fill – and found that the strongest predictor of both grain yield and compositional quality was water availability during silking and grain fill. 

The analysis went deeper, identifying conditions leading to higher oil or protein concentrations- information that matters to grain buyers. 

The proportion of starch, oil, and protein in corn grain is influenced by genotype, soil nutrient availability, and weather. But the effect of weather isn’t always straightforward when it comes to protein. In drought conditions, stressed plants deposit less starch in the grain. Therefore, the grain has proportionally more protein than that of plants not experiencing drought stress. Good weather can also lead to higher protein concentrations. Plenty of water means more nitrogen is transported into the plant and incorporated into proteins. 

In the analysis, “above-average grain protein and oil levels were favored by less nitrogen leaching during early vegetative growth, but also higher temperatures at flowering, while greater oil than protein concentrations resulted from lower temperatures during flowering and grain fill,” the authors say in the study. 

The ability to better predict protein and oil concentrations in grain could influence global markets, considering the growing domestic and international demand for higher-protein corn for animal feed applications. With the new algorithm, it should be theoretically possible to make end-of-season yield and quality predictions weeks or months ahead of harvest simply by looking at weather patterns. 

“Other researchers have achieved real-time yield predictions using much more complex data and models. Ours was a comparatively simple approach, but we managed to add the quality piece and achieve decent accuracy,” Butts-Wilmsmeyer says. “The weather variables we found to be important in this study could be used in more complex analyses to achieve even greater accuracy in predicting both yield and quality in the future.” 

The article, “Weather during key growth stages explains grain quality and yield of maize,” is published in Agronomy [DOI: 10.3390/agronomy9010016]. Authors include Carrie Butts-Wilmsmeyer, Juliann Seebauer, Lee Singleton, and Frederick Below. Financial support for the work was provided by USDA NIFA, the Illinois Agriculture Experiment Station, as well as the U.S. Grains Council.

Source: University of Illinois

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