Department of Energy Finishes Recommendation on Retroactive RFS Exemption Requests

Reuters writer Stephanie Kelly reported this week that, “The U.S. Department of Energy has recommended that some of the oil refiners that applied for retroactive exemptions from the nation’s biofuel blending law be granted partial relief, two sources familiar with the matter said on Tuesday.

“The move could help bring those refining companies into compliance with a court ruling earlier this year that requires waivers granted since 2010 to take the form of an extension – the latest twist in a long-running battle between the refining and biofuel industries over the program.

At present there are 58 pending requests from refiners for waivers covering the years 2011 through 2018, according to government data. The sources said the DOE recommended to the U.S. Environmental Protection Agency, which has final say on the waivers, that ‘a number’ of those requests be partially granted. The sources, who requested anonymity in order to speak candidly, could not immediately provide further details.

The Reuters article noted that, “Under the U.S. Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into their fuel, or buy credits from those that do. Small refiners that prove the rules would financially harm them can apply for exemptions.

“In January, the Denver-based 10th U.S. Circuit Court of Appeals ruled that waivers granted to small refineries after 2010 had to take the form of an ‘extension.’ Most recipients of waivers in recent years have not continuously received them.”

Ms. Kelly added that, “Senators Chuck Grassley and Joni Ernst, both from Iowa, the top ethanol-producing state, sent a letter to DOE on Tuesday asking for further details on the recommendations and expressing opposition to the waivers.”

Also this week, DTN writer Todd Neeley reported that, “Iowa Sens. Charles Grassley and Joni Ernst, both republicans, voted against the nomination of Mark Menezes as deputy secretary of energy, stating in a letter to Menezes on Tuesday that they need to see more transparency on the U.S. Department of Energy’s evaluation of small-refinery exemptions.

“During a news conference on Tuesday, Grassley said the DOE sent to EPA 58 so-called gap-year requests for exemptions. EPA has 90 days to decide whether to grant them.

“The requests have been made by refiners for retroactive exemptions for years 2011 to 2018. Refiners made the requests to comply with a court ruling from the U.S. Court of Appeals for the 10th Circuit in Denver. The court ruled the EPA mishandled waivers granted to three companies.”

Capehart, Tom, Liefert, Olga, Olson, David W., Feed Outlook, FDS 20g, U.S. Department of Agriculture, Economic Research Service, July 14, 2020.

Meanwhile, Ken Anderson reported last week at Brownfield News that, “Iowa Senator Joni Ernst is again calling on EPA Administrator Andrew Wheeler to cut ‘unnecessary’ barriers to increased sales of E15.

“Ernst says Wheeler has failed to follow through on an agreement he made last year to expedite EPA’s process for certifying underground fuel tanks and to eliminate E-15 warning labels.

“In a letter to Wheeler, Ernst requests action on those issues by October 4th.”

Source: Keith Good, Farm Policy News

Soybean Crop Potential Tempering Demand News

Soybean prices seem likely to vacillate between news on crop conditions and more robust demand prospects over the near term.  USDA’s Crop Production report, due out August 12, holds the potential to be an inflection point if the 2020 soybean crop comes in at levels anticipated by crop conditions.

The prospect of an above-trend soybean yield in 2020 appears high and creates headwinds for soybean prices.  USDA projected the national soybean yield at 49.8 bushels per acre in July.  Better crop ratings point to significant improvements in this year’s crop.  The soybean crop rated in good to excellent condition came in at 72 percent for the week ending July 26.  The three percent increase from the previous week saw the rating come in 18 percent above last year’s condition report and 11 percent above the ten-year average.  Cooler and wetter weather across large areas of the Corn Belt holds the potential for ratings improving even more as we move into the critical period for soybeans in early August.

While many areas saw advances in ratings over the last week, some key states show greater than fifteen percent of acres in various levels of drought conditions.  Iowa, Nebraska, Michigan, and Ohio all meet this criterion.  Iowa shows 18 percent under severe drought levels.  In total, sixteen percent of soybean acreage is currently experiencing drought conditions through July 28 according to the recent Drought Monitor report.  The latest weather forecasts show the potential for some relief in many of those areas.

The current 6 to 10-day weather outlook provided by the National Weather Service projects warmer temperatures than usual across most of the Corn Belt next week.  Precipitation forecasts indicate the probability of above-normal rain levels in the eastern Corn Belt with a higher likelihood of below-normal rain in the mid-South and Plains.  A continuation of favorable weather and improving crop conditions brings the August 12 Crop Production report into focus.  An August soybean yield above current trend projections seems likely and only the magnitude remains in question.  Personal yield forecasting models currently project national soybean yield at 51 bushels per acre.   If a yield of this magnitude came to fruition, 2020-21 marketing year ending stocks move well above 500 million bushels under current USDA consumption and acreage projections.

The prospect of growing supply places added emphasis on consumption. Exports, in particular, require growth in shipments.  Any discussion of U.S. soybean export potential eventually ends up focusing on Brazil and China.  Brazil’s soybean production came in at 4.63 billion bushels in the 2019-20 crop year.  China bought large amounts of soybeans from Brazil in the first half of 2020 to support a recovering hog herd.  At over 1.6 billion bushels, Brazil’s shipments to China supported record export totals.  Exports in July slowed a bit from Brazil, but Chinese demand puts in place another strong month for Brazilian soybean exports.  Supplies in Brazil appear less robust than in previous months and holds promise for expanded U.S. exports moving forward.

China’s purchases of U.S. soybeans began in earnest in July.  Outstanding sales through July 23 totaled approximately 560 million bushels of soybeans for the current and next marketing year.  An additional 14 million bushels reported by the Foreign Agricultural Service reporting program can be attributed to China since the last sales report.  After a string of Chinese sales recorded in July, last week saw a noticeable pullback in soybean sales.  While large corn sales came through, the lack of soybean sales causes some concern.  An uptick in geopolitical tension between China and the U.S. looks unlikely to cool down anytime soon.  The impact on soybean purchases remains an active area for speculation.  While soybean exports stay on pace to hit the current marketing year estimate of 1.65 billion bushels, the prospect of reaching 2.05 billion bushels in 2020-21 rests on Chinese buying in the fall.  Tighter Brazilian supplies and China attempting to meet trade deal commitments offer the promise of large shipments as we move into the next marketing year.

Monthly crush totals appear set to drop for the third straight month when the USDA releases the June crush report on August 3.  Despite lower monthly levels, soybean crush remains healthy and maintains a pace to hit the current USDA estimate for the 2019-20 marketing year of 2.155 billion bushels.  Estimates of monthly soybean crush indicate total soybean use through June near 1.805 billion bushels.  Crush during the last two months of the marketing year needs to come in at 350 million bushels to reach the USDA estimate, slightly below last year over the same period.

The USDA currently projects a 488 million bushel increase in soybean consumption over the current marketing year for 2020-21.  Based on improving crop conditions, soybean prices need every bushel of consumption currently projected.  While recent soybean sales provide support,   significant uncertainty remains regarding the soybean export outlook.  The potential for higher yields in the U.S. and growth in South American production look to temper soybean price rallies.

Source: Todd Hubbs, Farmdocdaily

Drought Maps and Corn Yields

The following is a condensed version of an AEI Premium article, which included a look at soybeans. Not a subscriber yet? You can access the full story – and much more – by starting a free trial here.

The drought monitor maps have been everywhere this year. Flipping through, we can conclude conditions in mid-July are worse than the same time last year but not nearly as bad as 2012. Can we learn more? This week’s post considers recent drought monitor conditions and potential implications for the 2020 U.S. corn crop.

How Big of an Impact?

To provide a bit of context, we took county-level drought monitor data for the second week of July and compared it with county-level corn acreage estimates.

Figure 1 shows the extent of corn acres impacted by dry (in blue) and drought (in orange) conditions. Additionally, the dashed lines plot the average share of corn acres in dry conditions (14%) and drought conditions (14%).

For 2020, an estimated 44% of U.S. corn acres are in dry (30%) or drought (14%) conditions. On the surface, that’s eye-catching. However, keep in mind 28% of acres (14% + 14%) are in dry and drought conditions on average. Along similar lines, we wrote a few years ago about there always being millions of corn acres with low yields. In short, there are always acres in trouble.

While dry and drought conditions in 2020 are the most widespread in recent years, it’s a long way from July 2012 conditions. During that memorable year, 76% of corn acres were in drought conditions, and another 17% were in dry conditions.

Keep in mind the story in 2020 is mostly dry conditions (30% of corn acres in dry conditions vs. the average of 14%). Drought conditions are less prevalent and closer to the average. In other words, it’s dry conditions – not drought – that are catching most of our eyes when looking at the drought maps.

Finally, drought monitor conditions in 2020 are, perhaps, most similar to 2005, 2006, and 2007, which are years that will come up again in the next section.

2020 corn yield drought. ag economic insights.

Figure 1. Estimated Share of Corn Acres in Dry and Drought Conditions, 2000-2020. Data Source: National Drought Mitigation Center, USDA NASS, aei.ag calculations.

What About Yield Implications?

With a large share of the crop in dry/drought conditions, the next question on our minds is, “What are the implications for yields?”

Figure 2 plots the annual estimated share of corn acres in drought conditions against the yield departure from trend. Overall, the trend line slopes down and to the right as we’d expect; more acres in drought, the lower the yield. However, we must be careful with observations like 2012 as it has a huge impact on the slope of that trend line.

Consider 2000, 2005, 2006, and 2007. In these four years, the share of corn acres in drought conditions was more widespread than current levels, but yields came in above-trend. On the other side of the coin, there are also years (2010, 2011) with fewer acres impacted by the drought, but yields came in below trend. In other words, the relationship between drought monitor conditions (and maps) isn’t as clear-cut as we might initially expect.

2020 corn yields and drought

Figure 2. Relationship Between Drought Conditions and National Corn Yields, 2000-2019. Data Source: National Drought Mitigation Center, USDA NASS, aei.ag calculations.

Wrapping it Up

The first thing to note is how powerful these maps can be at influencing our thinking. However, it is really difficult to consider potential implications.

Overall, dry and drought conditions in 2020 are more widespread than in recent years. We estimated 44% of corn acres are in dry or drought conditions. That said, conditions are nowhere near 2012 levels. Furthermore, dryness – not drought – is the bigger story in 2020.

When thinking about possible implications, the relationship between final national yield and the extent of drought conditions is not a clear-cut as one would hope. There are several years (2005, 2006, 2007) that had more extensive drought conditions in mid-July but with above-trend final yields. Conversely, years with less extensive drought conditions have had below-trend yields.

There are several reasons why the relationship between drought conditions and final yields is tricky. Perhaps the most remarkable is the impact of timely received (or missed) rains.

The goal of this article is to help inform our decision-making process. In this case, the biggest lesson is to exercise caution when thinking about national-level yields as the relationship is less clear-cut than one might expect.

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Source: Agricultural Economic Insights

Western Corn Rootworm Beetles Emerging, Time to Scout

Western corn rootworm beetles began emerging in southeast and south central Nebraska at the end of June. Beetles typically emerge somewhat later in northeastern and western Nebraska.

Beetles emerging before silk emergence may feed on corn leaves. They feed by scraping the surface tissue, leaving a white parchment-like appearance. Once silks emerge, they become the favored food. The earliest silking fields in an area often are most heavily damaged because beetles will move to them in search of green silks.

There are no thresholds for silk-clipping damage based on beetle numbers because damage levels are not correlated well with beetle densities. Usually an average of 5-10 beetles per ear is required to seriously affect pollination. Severe silk feeding (silks clipped to less than ½ inch from the ear) at 25%-50% pollen shed may indicate a need to apply insecticide. Silk feeding after pollination is complete does not affect yield potential.

See the 2020 Guide for Weed, Disease, and Insect Management in Nebraska (EC 130) for insecticides labeled for adult rootworm control.

Japanese beetles also prefer to feed on corn silks. See the article Japanese Beetles Emerging; Scout Corn and Soybean Fields for Japanese beetle thresholds for silk feeding damage.

Source: University of Nebraska CropWatch

Phase-Two Deal with China Unlikely, as U.S. Corn Exports Continue

Josh Zumbrun and Catherine Lucey reported on the front page of Saturday’s Wall Street Journal that, “President Trump damped expectations for a promised phase-two trade pact with China on Friday, saying the relationship between the countries has been too badly damaged by the coronavirus pandemic.

“‘I don’t think about it now,’ Mr. Trump told reporters aboard Air Force One, where he criticized China’s response to the new coronavirus, which continues to spread rapidly throughout the U.S. ‘They could have stopped the plague, they could have stopped it, they didn’t stop it.’

“A spokesman for the Chinese Embassy in Washington didn’t immediately respond to a request for comment.”

The Journal article noted that,

The economic fallout from the pandemic also made it increasingly unlikely that China would meet its targets for expanded purchases of U.S. goods under the phase-one deal, fueling further doubts about prospects for new talks.

Bloomberg writer Jennifer Jacobs explained on Friday that, “When the two nations agreed to the first phase trade deal in January, Trump said that talks on a second phase could start right away but might not finish until after the Nov. 3 general election. Since then, the two countries have been wrangling over the implementation of the initial agreement, and Phase 2 was contingent on the first rounds going well.”

Meanwhile, Bloomberg writers Michael Hirtzer and Mike Dorning reported late last week that, “China is making further moves to try to link the spread of coronavirus and food shipments. And yet again, U.S. officials are rebuffing the attempt, emphasizing what’s considered to be the established science on the matter — that no proof of that link exists.”

China has been stirring the pot over whether the pathogen can spread through food or frozen products, drawing the connection against the advice of global health experts and authorities.

Last month, the Asian country pointed to imported salmon as a possible culprit for Beijing’s fresh Covid-19 outbreak, sparking a boycott of the fish as supermarkets took the produce off their shelves. China also began mass testing of cold food imports at ports, and blocked shipments from meat plants abroad that reported infections among workers.”

Hirtzer and Dorning pointed out that, “In the latest move, China halted imports from three Ecuadorian plants linked to the shrimp samples. The announcement created a new level of uncertainty in the global meat, poultry and seafood trade that further shipments or sales could be disrupted.”

U.S. soybean export commitments (outstanding sales plus accumulated exports) to China are 1.8 million tons higher than last year at 16.2 million, but remain below historic levels on a slow export pace. Brazil exports to China remain strong on a weak real and a record Brazilian soybean crop. Total commitments to the world lag behind last year, totaling 46 million tons as export commitments to markets outside China remain below 2018/19 levels.” (“Oilseeds: World Markets and Trade.” USDA- Foreign Agricultural Service (July 2020)).

In other news regarding U.S., China trade, Reuters writer Karl Plume reported late last week that, “China booked its second-largest single-day U.S. corn purchase on record, according to U.S. Department of Agriculture (USDA) data released on Friday, as the country works to fulfill its Phase 1 trade deal obligation to dramatically increase U.S. farm product imports.

“The USDA said China bought 765,000 tonnes of corn for shipment in the current marketing year which ends Aug 31 and 600,000 tonnes for shipment in the following year.”

The Reuters article noted that, “China on Friday increased its corn and soybean import forecasts for the current season, as the country was expected to step up purchases from the United States.”

And a report Friday from USDA’s Foreign Agricultural Service (FAS) (“Grain: World Markets and Trade“) stated that, “Combined [Chinese] imports of corn and sorghum are up sharply from a year ago, more than offsetting smaller imports for barley. This may also reflect implementation of the U.S.-China Phase One Agreement.  Regardless, demand for competitively priced feed grains runs strong as China’s corn harvest is still a few months away.”

“Grain: World Markets and Trade.” USDA- Foreign Agricultural Service (July 2020).

With respect to Chinese protein imports, FAS stated in a separate report Friday (“Livestock and Poultry: World Markets and Trade“) that, “Demand for imported meat in China remains incredibly strong as the protein deficit caused by African swine fever (ASF) continues to drive trade. Despite headwinds caused by COVID-19 and disruptions to the economy and foodservice, demand growth during the first 5 months of the year exceeded expectations.

“Livestock and Poultry: World Markets and Trade.” USDA- Foreign Agricultural Service (July 2020).

“As a result, forecasts for pork, beef, and chicken meat imports are all revised upward.  China continues to increase its share of the global market, accounting for over 43 percent of global pork imports and 29 percent of beef. All together, China now accounts for 28 percent of imports by major traders, up from 20 percent in 2019.”

Source: Keith Good, Farm Policy News

If you Have Not Been Scouting Corn, Now Is the Time to Start

Most of Illinois this season has been hot and dry, especially through central and northern portions of the state .  This has been good as far as limiting foliar diseases in our corn crop.  Fungi require some level of moisture for spores to germinate, and the fungus to grow and infect foliage.  This is a major reason why we have less foliar disease in dry seasons vs wet seasons (earth shattering information, I know!).

The rains that have moved through the state the past week, though needed by our crop, also likely will cause foliar diseases to start to increase.  Recently we have seen reports of the following in parts of the state:

1) Grey leaf spot.  This one is our biggest issue across seasons.  It likes it warm and really wet.  Lesions start out as small flecks that expand to matchstick lesions on leaves and blotchy lesions on stalks.  Ends are squared and lesions often delimited by veins.

2) Tar spot.  This one likes it moderate and wet/muggy.  Starts as chlorotic specks that develop into small circular to angular, often raised growths scattered on leaves, sheaths, and husks.  They cannot be washed or scraped off of leaves, unlike insect frass.  They are not found in bands or strips like Physoderma. I expect that if you look hard enough you will find a spot or two (literally) in Northern Illinois, especially if you are following no till corn that had tar spot last year.  I also think that it shows up around this time each year we have had it since 2015.  The difference is that now people are looking for it and can recognize it, as opposed to ignoring it or missing it.  Therefore, I would not be too riled up about reports of it on a plant or two in surrounding states right now.  Just make sure you are getting out into your fields and scouting.  As I said last year, AVOID THE COSMIC FREAKOUT. With the rains that moved through, it wouldn’t surprise me if you start seeing more tar spot in about 2-3 weeks (around the week of July 26th), depending on hybrid and local environmental conditions.  If you start to encounter stroma frequently in a field and and you are near VT-R3, you might want to consider a premix fungicide if you are frequently encountering stroma in the field.  We saw  good residual control from residue borne tar spot last season (click here for 2019 applied research book, results, and more information).  A single well timed application can work well for this one.  As I said over the last two years, don’t be that person who calls in a sprayer over bug feces.   As usual, if you see something, send me a note (@ILplantdoc, nathank@illinois.edu, phone).

3.  Northern corn leaf blight.  This one is another one that likes it moderate and wet.  Look for long, cigar shaped lesions with a gray/green center.  If you have a microscope, the spores look like the bratwurst you ate over the July 4th holiday.  If this one flares up on a susceptible hybrid, look out!  Check out the trial from Carmi Illinois in the 2019 Applied Research Book (link above) for some data showing fungicide performance in a “perfect” situation (susceptible hybrid, disease present near ear leaf at very low levels at VT, fungicide applied at disease onset, and wet weather+irrigation).

4.  Southern Rust.  In the southern parts of the state this one can be scary.  Small, orange to light brown pustules mostly on the upper leaf surface and occasionally stalks. It is picking up a tick in Arkansas, but weather patterns and conditions luckily are not likely to push things into the state.  When southern rust blows in before R3 and conditions are conducive, you can see some major damage.  The Carmi trial mentioned above also had a lot of Southern rust.  Most hybrids are very susceptible, so again, scout!

You’ll also see some Diplodia leaf streak in the Southeast (blocky lesions with dark centers) and a smattering of common rust (brick red pustules on upper and lower leaf surfaces) in the state.  Now is also the time to start seeing foliar symptoms of Physoderma popping up, which is very likely given the wet start to the season.  No need to spray for any of these.

Research has shown that producers have the best chance to make a return on the investment of an application when fungicides are applied between that VT-R2 window.  Yes there are occasions where maybe waiting a little later might pay, as well as two pass programs, but the data since the 2010’s still say that VT-R2 window is the sweet spot.  More applications mean you need to recover larger yield reductions, and waiting until R4/5 to spray isn’t likely to result in much benefit, as most of the yield has been made at that point.  Standability?  If you have severe disease pressure, fungicides certainly can help in that regard.   Little to no disease?  Don’t expect a consistent benefit.

The take home message: given the status of the crop and recent storms, we need to step up our scouting efforts.  Check fields every 7-10 days through R3, or longer depending on your abilities.

Source: University of Illinois

Soybean Demand Linked to Economic Recovery

Wet and warm conditions over some key soybean growing regions pressured soybean prices recently.  The prospect of a good soybean crop places added emphasis on demand over the next year.  Soybean consumption in 2020-21 shows a substantial increase driven mostly by expanded exports in the recent WASDE report.  A robust recovery in domestic and world economic growth looks necessary to meet the higher consumption forecast.

Current marketing year ending stocks moved up to 620 million bushels in the WASDE report released on July 10.  Despite the crush estimate increasing by 15 million bushels to 2.155 billion bushels, changes in the soybean residual drove stocks higher.  In conjunction with the increase in this marketing year’s crush estimate, the USDA increased crush prospects for the 2020-21 marketing year to 2.16 billion bushels.  Total use for 2020-21 sits at 4.345 billion bushels, up 488 million bushels over this marketing year.  Even with the expanded use totals, ending stocks come in at 425 million bushels for the 2020-21 marketing year.  An expectation of higher soybean export totals and continuation of a healthy crush pace, while feasible, requires a better economic outlook than the current reality indicates.

Soybean crush appears on pace to meet the current marketing year estimate.  Estimates of monthly soybean crush from the USDA through May totaled 1.63 billion bushels.  From March through May, soybean crush levels eclipsed the previous year’s amount by 7.5 percent.  To hit the USDA estimate, crush over the last three months needs to total 527.12 million bushels.  Last year over the same period, crush came in at 514.4 million bushels.  As slaughter rates continue to improve in the livestock sector, meeting current crush projections looks good.  Weak livestock prices impacting herd levels and plentiful vegetable oil supplies may inhibit further expansion in crush demand in the next marketing year.  Economic activity affected by the coronavirus may lag current projections and hurt domestic meat consumption in the process.

Soybean exports remain on pace to hit the USDA estimate of 1.65 billion bushels this marketing year.  As of July 2, exports for the year equal near 1.43 billion bushels.  Outstanding sales sit at 302 million bushels.  USDA’s forecast for soybean export in 2020-21 sits at 2.05 billion bushels, up 400 million bushels 2019-20 estimates.  Chinese buying under the phase one trade deal remains crucial to meeting this forecast.  In general, soybean demand seems to rely on China over the next year as expanded meat and soybean exports hold importance for U.S. soybean consumption.

China’s hog herd fell around 40 percent during the African swine fever (ASF) outbreak and production is yet to recover completely.  Recent updates from the World Organization of Animal Health (OIE) indicate the disease continues to show up in Asia and parts of eastern Europe.  In Asia, reports of ongoing outbreaks of the disease in Vietnam, Myanmar, the Philippines, and North Korea point toward a long-term continuation.  Recent flooding in southern China led to reports of the disease resurgence in parts of the country and causes concern.  A vaccine for ASF seems unlikely in the near term, so expanded disease issues could hamper China’s domestic hog industry.  USDA’s projected soybean imports by China in the 2020-21 marketing year sit at 3.53 billion bushels and rely on recovery in Chinese hog and poultry numbers for higher domestic crush.  Hog prices remain strong in China due to the protein shortfall and recent restrictions on meat imports due to coronavirus concerns.  Expectations of increased pork imports seem reasonable over the next marketing year.  The potential for increased soybean imports by China from the U.S. looks certain.  The magnitude remains in question.

Soybean outstanding sales for the next marketing year sit at 269 million bushels with 155 million bushels slated for China.  Sales of this magnitude last occurred in the 2016-17 marketing year for this point in July.  While a positive sign, geopolitical tensions between the U.S. and China continue unabated and insert a substantial amount of uncertainty into potential trade flows over the next year.  Recent comments from the administration indicate that a phase two trade deal is unlikely.  In conjunction with the expanded uncertainty with the world’s largest soybean importer, soybean production in South America’s major exporters is forecast up 4.7 percent in 2021 to 7.23 billion bushels.  Brazil’s production forecast sits at 4.81 billion bushels, up 184 million bushels over the estimate for the 2019-20 crop.  Another good crop year in South America creates a highly competitive export environment in 2021.

Soybean crop potential will continue to be a significant factor in soybean price movements through harvest.  Without a crop shortfall, higher soybean prices rely on demand prospects over the next year.  Increased demand is linked to the nascent economic recovery and recent developments provide limited support for economic growth prospects.

Source: Todd Hubbs, Farmdocdaily

Comparison of a Conventional Crop Rotation with an Organic Forage-Based Crop Rotation

Due to continued increases in demand for certified organic grains, crop farmers that have transitioned from conventional to certified organic grains report higher net returns per acre (McBride et al., 2015; Greene et al., 2017; Greene and Vilorio, 2018; Center for Farm Financial Management, 2020).  Despite this, certified organic land accounts for less than 2 percent of U.S. farmland (U.S. Agricultural Census, 2017).  For those interested in exploring the potential associated with transitioning to an organic system, information pertaining to the relative profitability of conventional and organic production is often lacking.  A previous article (farmdoc daily, June 5, 2020) examined the relatively profitability of conventional corn/soybean and corn/soybean/wheat crop rotations with an organic corn/soybean/wheat crop rotation. This article compares the long-run net returns to land of a conventional corn/soybean crop rotation to an organic forage-based crop rotation that includes corn, soybeans, oats, and alfalfa.  This crop rotation consists of three years of alfalfa production.  Oats are planted with alfalfa in the first year, so essentially the organic crop rotation is a 5-year rotation.  Organic practices tend to involve more complication crop rotations and often include cover crops (Greene et al., 2019).  Ten-year enterprise budgets for each crop rotation were developed so that we could capture the net returns of both the transition years and organic production years for the organic crop rotation.

Price, Yield, and Cost Comparisons

Certified organic grains tend to receive higher crop prices and have lower crop yields (McBride et al., 2015 and Center for Farm Financial Management, 2020).  Using FINBIN data for the 2014 to 2018 period, organic corn, soybean, and oat prices were more than double the corresponding prices for their conventional counterparts.  Organic alfalfa prices were approximately 20 percent higher than average alfalfa prices for conventional production.  The crop yield drags for organic corn, organic soybeans, and organic oats were approximately 32 percent, 33 percent, and 23 percent, respectively.  The yield drag for organic alfalfa was approximately 9 percent.  Combining crop prices, crop yields, government payments, crop insurance indemnity payments, and miscellaneous revenue for both conventional and organic crops, gross revenue for the organic crops was higher, with the most significant difference associated with corn.

Organic crop production often involves higher manure, machinery, and labor costs, and lower fertilizer, herbicide, and insecticide costs.  Using FINBIN data for the 2014 to 2018 period, total expenses for organic production in comparison to conventional production were slightly higher for corn and alfalfa, and from 40 to 50 percent higher for soybeans and oats.

Enterprise Budget Summary

Enterprise budgets were developed for conventional and organic corn and soybeans, and for conventional, transition, and organic oats and alfalfa.  Conventional corn and soybean enterprise budgets were used to estimate net returns per acre for a corn/soybean rotation.  Transition oats and alfalfa were used along with organic corn, soybeans, oats, and alfalfa to estimate net returns per acre for an organic corn/soybean/oats/alfalfa rotation.  Oats and alfalfa were used as transition crops, and the transition was assumed to take place over time rather than just the first two years of the ten-year period.  The organic crop rotation was set-up to ensure that the first organic crops would be alfalfa and corn, which have historically been the most profitable organic crops.  More detail pertaining to the enterprise budgets can be found here.

Table 1 illustrates the crop prices that were used for year 1 and years 2 through 10.  After being lower in the first year (i.e., 2020), corn and soybean prices were assumed to stabilize and reach a long-run equilibrium.  The historical difference between conventional and organic prices was used to estimate the organic prices.  Sensitivity analysis related to organic crop price assumptions can be found below.

Average net returns per acre for conventional and organic crop rotations are presented in Table 2.  The contribution margin is computed by subtracting variable cost from gross revenue, which includes crop revenue, government payments, and crop insurance indemnity payments.  Earnings are computed by subtracting variable and fixed costs from gross revenue.  The gross revenue for the organic crop rotation was significantly higher than the gross revenue for the corn/soybean rotation.  Variable cost per acre was relatively lower for the organic crop rotation, but fixed costs were relatively higher.  Essentially, the organic crop rotation substitutes manure and machinery costs for fertilizer, herbicide, and insecticide.  Labor costs are higher for the organic crop rotation.  The net return to land for the organic rotation was $353 per acre, or approximately $190 and $200 higher than that of the conventional corn/soybean rotation.

Sensitivity Analysis of Organic Crop Prices

The average net returns per acre for the two crop rotations illustrated in Table 2 are sensitive to changes in relative prices, relative yields, and relative costs.  The analysis in this section examines breakeven organic crop and forage prices under two scenarios.  The first scenario examines the impact of lower oats and alfalfa prices.  Strong alfalfa prices, in particular, are very dependent on the demand for this crop in the vicinity of the organic farm.  For this scenario, corn and soybean prices were held at their breakeven levels, and oats and alfalfa prices were allowed to be lower than the levels for year 1 and their breakeven prices.  The second scenario examines the impact of lower corn, soybean, oats, and alfalfa prices.  Under this scenario, all crop and forage prices were allowed to be lower than their values in year 1.  The prices reported for both scenarios represent breakeven prices, which were computed by comparing the net present value of net returns to land among the conventional and organic crop rotations.

The results for the first scenario in the second column of Table 3 show what the oats and alfalfa prices would need to be for the net returns for the organic crop rotation to equal those of the conventional corn/soybean rotation.  Holding crop yields and costs constant, oats and alfalfa prices would need to be reduced 45 percent for the average net return to land to equal that of the average net return for the conventional corn/soybean crop rotation.

The results for the second scenario in the third column of Table 3 illustrate what the crop and forage prices would need to be for the net returns for the organic crop rotation to equal those of the conventional corn/soybean rotation.  Holding crop yields and costs constant, crop and forage prices would need to be reduced 33 percent for the average net return to land to equal that of the average net return for the conventional corn/soybean crop rotation.

Under both the first and second scenarios presented in Table 3, the net returns for alfalfa are helping maintain net returns for the organic rotation even when faced with significantly lower prices.  As noted above, the forage based organic rotation relies on a demand for forage in the vicinity of the organic farm.  It is also important to note that the forage based organic rotation has potentially higher net returns that an organic rotation containing corn/soybeans/wheat (Langemeier, 2020).

Summary and Conclusions

This article compared the long-run net returns to land for a conventional corn and soybean crop rotation with an organic forage-based crop rotation.  An analysis of this sort requires a lot of assumptions.  Producers considering transitioning a portion of their acres to certified organic crop production should carefully examine the sensitivity of net returns using alternative price, yield, and cost assumptions.  It is also important to recognize that the crops grown, manure used, and tillage practices vary substantially among organic crop farms.  Furthermore, the FINBIN data shows a much wider difference in enterprise net returns among organic crop farms than their conventional counterparts.  This wider difference is likely due to the difficulty of managing an organic crop system, and the learning curve associated with growing organic crops.  Finally, an organic forage-based crop rotation is difficult to implement if there is not a demand for forages, particularly alfalfa, nearby.

References

Center for Farm Financial Management, University of Minnesota, FINBIN web site, accessed May 31, 2020.

Greene, C., G. Ferreira, A. Carlson, B. Cooke, and C. Hitaj.  “Growing Organic Demand Provides High-Value Opportunities for Many Types of Producers.”  USDA-ERS, Amber Waves, February 6, 2017.

Greene, C. and D. Vilorio.  “Lower Conventional Corn Prices and Strong Demand for Organic Livestock Feed Spurred Increased U.S. Organic Corn Production in 2016.”  USDA-ERS, Amber Waves, June 4, 2018.

Greene, C., C. Hitaj, and W. McBride.  “U.S. Organic Farming Systems.” In Agricultural Resources and Environmental Indicators, 2019.  USDA-ERS, EIB 208, May 2019.

Langemeier, M. and X. Fang. “Comparison of Conventional and Organic Crop Rotations.” farmdoc daily (10):103, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 5, 2020.

McBride, W.D., C. Greene, L. Foreman, and M. Ali.  “The Profit Potential of Certified Organic Field Crop Production.”  USDA-ERS, Economic Research Report Number 188, July 2015.

Source: Michael Langemeier and Xiaoyi Fang, Farmdocdaily

Tar Spot in Illinois Corn-2020

It’s early in the season, but before we know it, corn will be chest high and we will be thinking about if in season management is needed.  Last year I mentioned that you should “avoid the cosmic freakout” around tar spot.  I again emphasize this statement this season.  Tar spot is endemic to the state and region and it isn’t going anywhere any time soon.  What sorts of things should you keep in mind this year when management is concerned?

1) Resistance.  We do not have resistant hybrids that are commercially available.  Dr. Tiffany Jamann’s lab from UIUC conducted a multi-state trial assessing several hundred exotic sources of resistance (and screened smaller subsets of highly diverse materials across several states and identified several promising sources of resistance).  These results are being confirmed, and the genomes will be mapped.  Hopefully by Fall we will have more information and tools to help screen materials for tar spot resistance.  That being said, remember that currently no materials that are available are resistant to tar spot in the USA.  Some hybrids are more tolerant than others.  If your seed dealer has information on the relative tolerance of their hybrids to tar spot, and you are in an area where tar spot has been popping up over the past 5 years, try to select the hybrid with the most relative tolerance to tar spot.  Remember, you still will get infection, but disease progress may be slower, and therefore yield impacts limited

2) Residue Management.   Tar spot is residue borne, but also disperses on air currents.  Although we do not know exactly how far the pathogen can spread from a source location, observations indicate that the disease likely travels at least several miles from a source.  This limits the usefulness of residue management.  A similar situation can be observed with Fusarium head blight in wheat, where residue management at the field level has a small impact on overall disease development, as under the correct conditions, the disease can be dispersed from neighboring fields and locations to other fields.  Does this mean tillage and residue management won’t help with tar spot?  Tillage will bury residue, but the type of tillage and amount of residue remaining likely impact the amount of inoculum or source strength of a particular field.  Therefore, tillage could help reduce that source strength, but the impacts are likely to be variable and small, as nearby fields could provide inoculum.  Later arrival of inoculum from distal sources could reduce overall amount of disease, but don’t expect to observe much of an impact under conditions that favor epidemics.  The bottom line is that if you are practicing conservation tillage/no till, there isn’t a reason to return to conventional tillage systems.

Similarly crop rotation is unlikely to have much of an effect on tar spot.  Many fields where corn was planted behind soybeans suffered just as much as corn on corn fields in the epidemic of 2018.  Rotation still should be practiced to reduce the impact of more common (and significant) diseases such as grey leaf spotnorthern corn leaf blight, and anthracnose.

3) Fungicides.  There are many fungicides labeled for tar spot suppression.  Fungicides can reduce tar spot.  However, this disease ramps up reproduction and symptom/sign development rapidly.  This means that timing of application is critical.  Should you be making two sprays?  Maybe under limited circumstances, but the likelihood of recovering your application + product costs under current commodity prices is low.  A single application of a fungicide with mixed mode of action can be very effective.  Shoot for the R1-R3 window, and remember, revenge sprays after the fact are not going to help you manage tar spot, although they may maye you feel better in the short term.

4) Biologicals.  There is a hyperparasite that occurs quite frequently on those black spots (stroma) produced by the tar spot fungus.  Much like this disease, we do not know much about this hyperparasite.  However, given that it frequently occurs where the disease occurs, the likelihood that it has a significant impact is small.

5) Other items.  Spacing and planting rate potentially may impact canopy closure and humidity in the canopy.  In Mexico they also suggest to avoid excessive fertilization.  Currently these aspects of management are being studied and hopefully we can get more information soon.

The last thing to remember is that this disease is heavily impacted by weather.  Just because you had severe tar spot one season does NOT mean you are going to have it the following year.  However, if you start to see the forecast calling for persistent rains heading into VT and you had it in previous seasons, you might need to consider a fungicide application.

Below is a map of where tar spot has been confirmed as of 2020.  Because the disease in endemic, we will not be monitoring for the disease except in counties where it has been detected going forward.  This is not a rust, and therefore continued annual mapping efforts are not especially useful for managing the disease.  Imagine if we did that for grey leaf spot?

Thanks to FFAR, Pioneer, Wyffels Hybrids, and the national corn board for supporting the preliminary work that will help move research on this disease forward.

Source: University of Illinois

Bacterial Leaf Streak in Corn

Recently there have been a flood of reports of Bacterial leaf streak (BLS) from areas within Iowa.  Not surprisingly reports of  BLS have started to come in from portions of Northern Illinois, an area of the state that has been subject to several significant rain events over the past two weeks.  Severe weather pushed through these areas yesterday, and more is forecast over the coming days.

Bacterial leaf streak is a fairly new disease in the United States, and has been detected at low levels in parts of Northern Illinois for several years.  This bacterial disease is predominantly borne on corn residue, and is dispersed locally to surrounding plants by driving rains and potentially wind.  Disease is favored by corn on corn production, warm weather, and heavy rains/irrigation.  Injury to plants, for example hail or sandblasting, can promote infection by the pathogen.  Under the appropriate conditions, significant yield losses can occur.

Bacterial leaf streak on corn in Illinois, 2020. Photo J. Donnely
Bacterial leaf streak in Illinois corn, 2020. Photo J. Donnely.

The disease is characterized by lesions that follow the veins.  Lesions can range in size, but contain a bright yellow, wavy boarder that can be easily observed when leaves are backlit.  Disease can be observed throughout the canopy.

Right now it is important to scout fields and ensure that this disease is not being misidentified as more commonly occurring fungal diseases, for example grey leaf spotanthracnose, and northern corn leaf blight.  Some additional tips on distinguishing BLS from these diseases can be found here.  Remember that this is a bacterial disease, so fungicides will not have an effect.  If you suspect BLS in your fields send a sample to the UIUC clinic for confirmation.  Information on how to submit a sample can be found here.

In terms of management, residue management and rotation may help reduce local levels of inoculum, although some disease may still occur in these fields on remaining residue or potentially spread from nearby fields.  Avoiding excessive irrigation also may help reduce development and spread in the few fields that utilize irrigation in the state.

Source: University of Illinois

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