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  • CME Group's price limit for grain and oilseed futures contracts will change on Sunday evening for the Monday, Nov. 3 trading day.

  • Reports railroads submitted to the Surface Transportation Board appear to bolster claims by elevators that the railroads are giving priority to oil shipments over grains. Meanwhile, rail backlogs seem to get a little bigger each week in the upper Midwest as harvest continues.

  • It may be a little early to start talking about 2015 planted acreage, but there are plenty of opinions on just how much farmers will increase soybean planting.

  • Crude oil futures have sunk to four-year lows, giving farmers an ample window to consider pricing their fuel needs for 2015.

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  • Carl Coleman, Dillon, South Carolina, is conducting cover crop research on his farm using university protocols. The project’s funding source the long-term no-till is using, however, is unusual: the crowd-funding website, www.Experiment.comColeman has used cover crops on his farm for three years in combination with commercial fertilizers and cash crops. He notes rapid and dramatic improvements in soil texture and the earthworm population has exploded.This year, he wanted to see if cover crops could suppress weeds after corn harvest. He first applied a burndown herbicide treatment to kill a flush of pigweeds and morning glory, then planted a cover crop blend of sunn hemp, sorghum sudangrass and buckwheat. The hope is that the blend would keep weeds at bay until he planted winter wheat this fall. The cover crops worked great at suppressing weeds. Yet Coleman wondered just how much nitrogen (N) from the cover crops could the wheat crop use?  Moreover, could commercial fertilizer applications be reduced on the wheat and provide more net income per acre?"I wanted to see if the roots could capture the nutrients and see what kind of return per acre we could generate," Coleman says. "Yield doesn't pay the bills, but return per acre does." Enter Buz Kloot, research associate professor at the University of South Carolina. "We started talking and decided to perform a test. Why don't we do a real scientific test, to see whether we can grow a wheat crop with much less fertilizer than what the commercial recommendations call for?" Kloot explains. "The premise is, the cover crop would release minerals in the soil, and make nitrogen in the soil."  Coleman chose a 10-acre site along a state highway on which to conduct a test plot. He selected four treatments: no fertilizer, 30 pounds per acre of starter; 30 pounds per acre of N and 20 pounds of phosphorous, and a full rate of fertilizer based on pre-plant soil test results. There are 40 different plots divided into two experiments. E experiment has five plots of four treatments each.The winter wheat will be planted next week.Kloot is one university scientist overseeing the project; Clemson University researcher Dara Park created the experiment protocol. What sets this experiment apart from others, however, is the funding. The Experiment.com website collects donations from interest parties to fund the project; in turn, the donors receive periodic updates of the project's status. Crowd-funding is as the name implies; interested third parties provide the money to conduct scientific projects. This site is intended to let scientists perform research instead of writing grants and research proposals.  At just $6,305, the project's budget is modest. But, it is important to use the crowd-funding approach for a couple of reasons, Koot and Coleman agree. First, the idea materialized so quickly that there was no way a university could fit it into its budget. Second, the thirst by farmers for information about cover crops and soil health gives producers across the country a chance to take part in this research project. What Coleman believes will happen is that as the soil health of his farm improves, microbial activity and earthworms more efficiently use nutrients already in the soil, reducing the need for commercial fertilizer. "I believe cover crops have a place on our farm. I know they help with hardpan and water infiltration. The big question is fertilizer," he says. "If a healthy soil environment helps us reduce our fertilizer use, that's where the value is. "What can I do that makes me money or saves me money. That's what we're trying to find out," he explains. Keep track of Coleman and Kloot's experiment online at https://experiment.com/projects/how-much-fertilizer-do-we-really-need

  • Global meat consumption is still ascending. Its expected growth is pegged at about 1.9% per year from 2014-2023. Meat shipments from major exporters are projected to rise 2.2% per year.  “With the tight domestic supply and emerging explosion of global trade, it’s absolutely the most dynamic landscape I’ve ever seen,” says Don Close, protein analyst for Rabobank Food and Agribusiness Research and Advisory Group.About 14% of U.S. beef is exported. Exports added $245 per head to the value of a beef carcass in 2013 and $54 a head for a hog carcass, based on U.S. Meat Export Federation data. (This includes muscle cut and variety meat values).Midsummer beef exports fell but were still 4% higher in volume and steady in value.Hong Kong, the fourth largest market for U.S. beef and beef product exports, reopened to the U.S. in mid-June. Sales hit a historic $823 million in 2013. Prior to this agreement, only deboned U.S. beef could be shipped. Mexico, Uruguay, Ecuador, and Sri Lanka also lifted their longtime restrictions.Rabobank’s third-quarter global beef report indicates a relatively balanced supply/demand market. It forecasts strong price levels based on limited supply, strong import demand, and high prices for competing proteins. Demand for U.S. beef in Asia is building. Imports of grain-fed beef by higher-income countries are projected to grow steadily. U.S. exports to these countries are expected to rise after 2014.“In countries with limited resources, it makes more sense to import meat than to import grain for their livestock,” says Howard Hill, president of National Pork Producers Council.However, availability of feeder cattle and rising production costs will limit production expansion across the globe into 2015.  In the decade since the Central American Free Trade Agreement-Dominican Republic (CAFTA-DR), Honduras has become a top 10 destination for U.S. pork. Guatemala also is a strong importer of beef and pork.In Central and South America, Colombia is the largest destination for U.S. pork. Chile is a top 10 market for U.S. beef and pork. Peru ranks at number 15 for beef. Last year, U.S. beef exports totaled 17,352 metric tons, valued at $32.8 million. It’s the eighth-largest volume destination for U.S. beef and the 13th largest in export value. U.S. pork also is gaining traction in Peru. Last year, exports more than doubled from 2012, reaching 2,279 metric tons valued at $5.6 million. “Today, we export 25% of all U.S. pork production,” Hill says. “That includes muscle and variety, offal, organ, ears, and snouts. One fourth is variety meat. The U.S. has a low-cost, high-quality product that’s attractive globally. Asia, Southeast Asia, and China have tremendous growth potential.“Pork exports over the next few years will be in countries with young, growing populations and economies, and middle class incomes, especially Asia, Southeast China, and Africa,” he says.Dairy ExportsBetween China pulling back on purchases of dairy products for at least the next six months and the Russian import ban, U.S. dairy prices will depend on the appetite in regions like Southeast Asia.The main driver behind slowed demand and lower prices is dairy fundamentals, says Tim Hunt, global dairy strategist, Rabobank Food and Agribusiness Research and Advisory Group.“The long-term story looks better,” he says. “Population growth, rising income, and urbanization mean the world’s milk producers will struggle to keep up with demand due to rising production costs.”

  • Better but not yet good enough. That sums up grain transportation in the northern Plains. Shippers and farmers are worried that pressure will be felt nationwide by barge lines as well as railroads struggling to move record crops to export.Statistics that railroads give to the federal Surface Transportation Board (STB) show big gains, from a backlog last March of 16,000 grain cars in the BNSF Railway Company system and 8,000 in North Dakota alone. By summer, cars more than three days past due fell to 1,000 in North Dakota but crept back up to about 3,000 in October.Through summer and fall, BNSF continued work to boost service. It now has 130 grain shuttles of 110 cars, a record, says John Miller, agricultural products group vice president for BNSF. “From Fargo, North Dakota, and west is really going to feel like a different railroad,” Miller says.That’s due to $5 billion in capital investments by BNSF this year, with nearly $1 billion of that in the North Dakota region. It includes 55 miles of new double track between Minot, North Dakota, and Glasgow, Montana. BNSF has installed nine new or expanded sidings in North Dakota and six in Montana, along with better signaling. In farm fields, the improvement isn’t obvious. Southwest of Grand Forks, North Dakota, when Rick Ostlie started combining soybeans this fall, the corn basis at his local elevator was still 95¢ under futures, for a cash price of $2.29 a bushel.“It’s costing me 50¢ to 60¢ a bushel on corn because of the oil boom,” says Ostlie. “I’m competing with the Bakken area for railcars. I can’t compete with oil when it comes to shipping.”Without adequate pipelines for oil, shipping in tanker cars has ballooned. In 2009, U.S. railroads carried 11,000 carloads of crude. By 2013, they shipped 400,000, says Mike Steenhoek, executive director of the Soy Transportation Coalition in Ankeny, Iowa. Landlocked North Dakota depends on rail. Corn Belt states have more processing and river barge terminals, but Steenhoek says they’ll feel North Dakota’s pain. “Our system is so interconnected that if there’s an issue in one place, the ripple effects will be felt elsewhere,” he says.  In states near North Dakota, “people are going to be willing to assume more trucking costs to get to the river. I think it’s going to increase demand for river services, as well.”Barge rates are generally slower to rise, says Dan Mack, vice president of rail transportation and terminal operations for the cooperative, CHS, “but the market is starting to respond to that.”“I don’t anticipate anything to the degree that we saw on rail, but there will be more demand for barges as we get into winter,” he adds. As 2014 crops are marketed, “we probably are going to see more exports finding their way out of the Gulf Coast,” he says.Oil is a big player but not the only one pressuring railroads. A recovering economy is boosting demand for intermodal trains that carry containers for trucks, Mack says. Demand for coal has  bounced back. Even agriculture is adding pressure in the northern Plains region. “If you look at the growth of corn and soybean production over 10 years, it’s pretty significant,” he says. 

  • 2014 Benchmark Marketing SurveyAs the price environment gets tougher, farmers are using more of the marketing tools available to extract profits from a tightening marketplace.That’s the most striking difference from a year ago in the annual Successful Farming® Benchmark Marketing Survey for 2014-15. When asked, “Which of the following marketing tools do you typically use?” there was a significant increase in several tools. Between one fourth and one third of the sample of readers now use futures, options, basis contracts, and hedge-to-arrive (HTA) contracts. Yet, a bigger majority, 86%, relies on cash sales. Because some farmers typically use a variety of marketing tools, the survey allowed them to list all of the approaches used. The shift in marketing isn’t as dramatic as it looks at first glance, however. When asked what percentage of a crop or livestock was sold with each tool, the changes were small. With corn, for example, the amount sold for cash dropped from 52% in 2013 to 50% this year, on average; 23% was sold with a cash forward contract both years. The amount sold with futures rose from 9% last year to just 10% this year. The use of options rose from 3% to 4%. Basis contracts covered 6% both years, and the use of HTA contracts rose from 5% to just 6%. Steve Wellman, who farms near Syracuse, Nebraska, sees farmers sticking with what they know best.“To me, farmers are very comfortable with the cash market and dealing with the local elevator,” says Wellman, a past president of the American Soybean Association who agreed to be part of an advisory group that helped put together this marketing survey.“Farmers are still generally satisfied with what they’re doing,” he says.In the cash market, “you’ve accepted basically a price for your product, and that’s it,” he says. If you use futures, you do have a chance to look for a better basis from several buyers. That chance to shop around was listed most often (by 55%) among survey respondents who do use futures.One of the main purposes of the survey is to allow farmers to compare their success with others, without requiring detailed financial information. Farmers were asked to rate themselves on a scale of 1 to 10, with 1 being very poor and 10 as excellent.  As you might expect, most farmers put themselves somewhere near the middle. Very few, less than 2%, rated their marketing with either a 1 or a 10 in 2013 or in 2014. Last year, 28% rated their marketing with a 5. This year, nearly a third – 31.7% – clumped in the middle. A year ago, most respondents were at 5 or better: 19.2% gave themselves a 6, 22% chose 7, and 19.2% picked 8. This year, only 11.3% picked 8, 17.9% picked 7, and 14.3% picked 6. A few more farmers rated their marketing below 5, with those picking 3 jumping from 1.7% last year to 8.3% this year.“With the price scenario of the past few years, it was pretty easy to feel good about marketing,” says Wellman. “Now, with lower prices, maybe people are considering it differently.”Even Split on GoalsOther questions in the survey show almost no change in farmers’ overall marketing strategy. A year ago, 52.9% said their primary goal of marketing is enhancing price; 47.9% said it’s managing risk. This year, the answers were an even split of 50% for each goal.A couple of new questions show similar consistency. When asked if their primary marketing goal has changed, 57.7% said no. When asked, “Have you considered changing how you make marketing decisions, including hiring or changing outside advisers?” 60.9% said no. In fact, the percentage who make their marketing decisions independently rose from 77% last year to 80% in 2014.Among the farmers who don’t use futures, the top reason was “I don’t trust futures brokers/advisers.” A year ago, 27% chose that reason, behind two others: that they like working with their co-op or elevator manager to forward contract, or they find it convenient to forward contract.Another member of the advisory panel, Roy Smith of Plattsmouth, Nebraska, wasn’t surprised by any of these results.“Cash forward contracts are simple, easy, and clear as to the final return,” says Smith, a long-time contributor of marketing commentary for Agriculture.com. “Basis is locked in, for better or worse. It’s easy to understand why they remain popular as the means to forward price. In addition, there is no margin requirement, which appeals to most farmers.“On the other side, options remain largely off the radar screen,” he adds. “Most people use options to replace inventory already sold. The nature of the strategy almost guarantees a loss. If more people used put options instead of calls, options would probably be more popular. However options strategies can be quite complicated, which does not meet with favor by most marketers.” Seasonals are BackIowa State University agricultural economist Chad Hart finds the traditional results of this survey lining up well with the markets themselves, which are returning to seasonal patterns. At the time the survey was done just before harvest, there was carry in the market. Higher futures prices in deferred delivery months reward storing both corn and soybeans after harvest and selling later, either in the cash market or with a forward contract, he says.“What farmers are seeing in the market is the pattern we’re used to seeing, that seasonal pattern,” Hart says. “This was the way markets looked before the ethanol boom.”Just as before that boom, they’re trading in a narrow range – between $3.50 and $4 a bushel on corn and $9.50 to $10 a bushel on soybeans.Nor was Hart surprised by the shift toward less positive views of farmers’ success in marketing. He has talked to farmers who were disappointed in hindsight that they didn’t sell more of 2014 crops last spring at higher prices. “We’re always influenced by our most previous result,” he says. “As they look forward to the 2014-2015 crop year, they see that marketing is going to be a lot rougher than it has been.”Hart is another member of the advisory group for this survey. The other advisers were economists Darrel Good at the University of Illinois, Chris Hurt at Purdue University, and Frayne Olson at North Dakota State University.

 

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