Looking ahead on uncertainty
FORT?DODGE – Iowa Central Community College’s annual crop fair on Feb. 13 gave producers and industry professionals a glimpse into the 2014 growing season, plus an update on the growing demand for corn stover.
An overview of the Iowa Corn Growers Associations’s 2014 state and federal legislative lobbying priorities were outlined.
Dan Greder, with Sciota Trading Ltd., of Ames, outlined several factors to consider when marketing corn and beans this year.
With an estimated 1.48-billion bushel U.S. corn carryover, which is lower than earlier predictions, Greder said this allows for better opportunities in the marketplace versus an over burden of supply.
However, with the potential of the U.S. growing another 14 billion bushel crop in 2014, he said, it may bring farmers to plant fewer corn acres this spring and the price of corn rise again next fall.
“I’m not saying it is going to take us back up to the $6 to $7 range in corn anytime soon,” Greder said, “but it means there are better opportunities.
“The last two reports have opened the door to use last year’s crop, or at least more opportunities for volatility for new crop corn.”
Without a reduction of corn acres, Greder said, there is a possibility of another 2.2 billion bushel carryover by the end of August 2015.
If that happens, analysts expect corn prices to slip to the $3.50 per bushel level.
However, he said, it would depend on the national yield average of 171 bushels per acre, which would be an historic high and unlikely.
Greder said the current carryover was created by several factors, including stabilization in the ethanol industry.
“The ethanol industry is stabilized at five billion bushels,” said Greder. “It is a very stable part of the equation, and we are not going to see a jump in corn needed for ethanol like we have before.”
Greder said it wouldn’t be unheard of if corn acres planted was reduced by four to six million acres. Many of those could be in Iowa.
Steering producers into planting more soybeans is being spurred by ag lenders.
“Producers just don’t have the cash flow to go back to all corn again,” Greder said, “so that could reflect on corn acres dropping to more beans.”
As far as soybeans, South America is expecting a record harvest, which has already started.
Although weather has changed in that hemisphere, he said, it is too late to affect that record soybean crop.
From an economic standpoint, those beans will be exported out of Brazil at $1 per bushel cheaper than from the U.S., which is attractive to end-users like China looking for a cheaper soybean supply.
The Chinese, Greder said, have stayed with U.S. soybeans because transportation is more timely; Brazil’s infrastructure creates shipping delays.
With the possibility of increased soybean acres comes the possibility of a larger carryover of bushels in August 2015.
Greder said the U.S. could see a carryover similar to almost 10 years ago.
“We could see a drop of $2 per bushel with that kind of carryover,” said Greder, “but it seems we always find a demand for those beans somewhere.”
Farmers wonder if 2014 will be under La Nina, El Nino or neutral conditions.
Currently, water that is warming off the coast of Alaska will typically push moisture in the forms of snow and rain up to the Yukon, lessening Iowa’s chances for spring rains.
This is a sign of a La Nina year, said Elwynn Taylor, Iowa State University’s climatologist. The last three weeks have been showing increasing proof that the Midwest may be in for a La Nina pattern.
A La Nina, Taylor said, is problem weather for agriculture, because it brings drier, warmer weather.
However, Taylor said, analysts will not know for sure if the growing season will be subjected to La Nina, El Nino or a neutral pattern until mid-March or mid-April.
In order to be profitable in agriculture, Taylor advises producers be aware of what is happening with the environment because they need to manage the weather risk.
For example, with a La Nina event, there is a 30 percent chance of a drought, which could cause a 70 percent chance of below-trend yields.
“Risk always has numbers,” said Taylor. “You have to manage the numbers to be successful.”
One method, Taylor said, is to track growing degree days, precipitation and heat stress on one’s farm and determine how much grain they’ll have to sell.
Farmers also must be aware of these factors in the region in order to anticipate which way local cash markets will go.
He suggests comparing current and historic weather patterns near one’s farm, district and state, since history does repeat itself.
There is a continuous growing interest in the harvest of corn stover, said David Ertl, technology commercialization manager at Iowa Corn.
With two cellulosic ethanol plants to begin production in Iowa this year, they are looking for stover.
Ertl said stover has also become a popular feed and bedding source for livestock, especially during drought years.
Stover is the stalks, leaves and cobs remaining after harvest.
Corn stover, Ertl said, can be an additional means to generate income, but only if it can be harvested without depleting the soil underneath it.
Environmental concerns that accompany harvesting stover include soil protection from wind erosion, adding organic matter and nutrients to soil as it decays.
The use of cover crops, Ertl said, is a complement to harvesting stover. He recommends that slopes greater than 3 percent should avoid stover removal.
According to Ertl, removal should be used as a residue management tool, with tillage practices adjusted as needed.
No-till, he said, allows for the most stover to be removed, while strip-till allows more stover on the ground, yet provides a band of soil that will warm and dry faster in the spring for planting.
Ertl said research finds 3 pounds of phosphorus and 19 pounds of potassium are removed per ton of stover and those nutrients must be replaced.
Removing corn stover denies organic matter to the soil. If stover is harvested, some sort of reduced tillage will be necessary, Ertl said.
The logistics of harvesting, baling and hauling corn stover are additional factors to consider.
Ertl said harvesting stover requires unique processes and equipment.
“If this turns into an industry, as there are hopes for,” he said, “there will be a lot of infrastructure issues” which include options for windrowing, baling, storing and transporting.
The economic factors, Ertl said, include when to harvest, equipment and capital needed, storage and delivery, nutrient and dry matter replacement.
Benefits to harvesting stover, Ertl said, include “reduced residue to manage, which could mean a reduction in cost of operation, a $50 to $100 per ton additional income from your corn acres, and an improved seed bed.”
Presenting the Iowa Corn Growers Association government relations update was Amanda De Jong, a senior policy advisor for the group.
Some of the main priorities at the state level for 2014 will be to:
A). Help support the extension of current biodiesel production tax credit;
B). Raise the cap of the corn checkoff for any potential future increases;
C). Help with funding for the Iowa Department of Agriculture and Land Stewardship budget requests;
D). Work on the development of the Iowa Nutrient Reduction Strategy.
De Jong said Iowa Corn is continuing to support the livestock industry and lobbying for increased funding for the ISU Veterinary Diagnostic Lab, as well as increased funding up to $2.8 million for ISU Experiment Station and other related research.
Transportation continues to be a fight, De Jong said. Iowa Corn continues to lobby for a fuel tax increase for roads and bridges.
“It is estimated that a third of Iowa’s bridges are structurally inefficient,” she said, “and at some point we will need to seriously address our state’s infrastructure.”
Iowa Corn’s federal lobbying efforts include biotechnology, continuing to support ethanol production, extending expiring agricultural tax credits, trade and transportation issues.
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