USDA’s juggling of its corn balance sheet left the expected carryover next August at an 18 year high. By reducing export estimates Extension Specialist Darrel Good says we will have 2.419 bil. bu. which is 22.5% of the projected consumption during the current marketing year. He says that stocks-to-use ratio would be the highest in 13 years.

USDA also reduced its expectations for soybean exports, which Darrel Good says means that year ending stocks of US beans are projected at a 19 year high of 405 mil. bu. The projection of the year ending stocks-to-use ratio is at an 11 year high of 14%.

Darrel Good says, “Corn and soybean futures prices moved higher following the USDA reports that contained larger projections of ending stocks. The price action suggests that the forecasts were well anticipated and that the market is now focusing on other factors. Still, the recent trading range for corn futures is not expected to be expanded. That would mean March corn futures trading between $2.00 and $2.20. The magnitude of the strength in soybean futures following the USDA report is more surprising. The recent trading range has seen January futures near $6.05. That level may soon be challenged again.”

If you are storing unpriced corn, without LDP protection, Purdue’s Chris Hurt offers four different marketing options to manage your price risk. Those choices include:
1) Simply forward cash contract the corn at the elevator.
2) Visit a commodities broker and create a hedge by selling futures.
3) Buy July or Sept put options to establish a minimum, not a maximum, futures price.
4) Do the same thing through the elevator, by forward contracting and have the elevator manager buy call options for your account to establish a minimum final price.

Chris Hurt says, “Unlike corn, soybean price premiums for delivery next spring and summer are relatively small, and cover on-farm interest costs, but are not sufficient to cover both interest and commercial storage charges. This means producers will have to speculate to earn additional returns from continued storage. And, of course, when one is speculating for higher prices, they take the risk that prices may move downward instead.”

If more farmland is in your future, VA Tech Ag Finance Specialist Dave Kohl says check the soil map. He says, “With good to excellent soils, the risk is reduced in times of drought or too much rain. Thus, when acquiring land or negotiating land rents in a period of margin compression, get the soil maps out for study before acquiring land. In these instances, the “better is better” philosophy beats “bigger is better” every time.

Soybean producers may want to watch the availability of seed for low linolenic beans, whose oil may generate price premiums. The United Soybean Board says nearly 1 mil. acres may be planted in 2006, up from 200,000 acres in 2005, to meet the anticipated demand for low-lin soybean oil. The oil does not require hydrogenation for shelf life.

With increasing farmer interest in saving soybean seed for replanting the next year, Extension Ag Law Specialist Bryan Endres says, “Policymakers pursuing such a course need to tread carefully. That’s because of potential conflict with US patent law and the possibility of interfering with the patent holder’s property rights.” He says, “The economics of such laws are open to question but from a legal standpoint, this is a populist concept that could work but needs refinement to pass constitutional scrutiny.”

If your year-end tax planning has uncovered the need for a deduction, review the article of Extension Ag Law Specialist Gary Hoff has the details about commodity donations. He says since the production costs of the grain are deducted on Schedule F, the gift of a commodity would reduce both taxable and self-employment income for farm operators.

The new bankruptcy law is farmer-friendly says Univ. of Arkansas Ag Law Specialist Susan Schnieder, who said farm provisions were a political trade-off to pass the new law:
1) The maximum Chapter 12 (farmer) debt level is raised from $1.5 to $3.237 million.
2) Only 50% (down from 80%) of the debt must come from the farming operation.
3) Delays in filing for bankruptcy, due to production adversities, are acceptable.
4) Capital gains penalties are mitigated if bankruptcy forces the sale of farm equipment.

You will appreciate a new web-based calculator to determine how much nitrogen to apply to corn ground. Developed by Iowa State University, and based on economic values, rather than “bushel rates,” it asks your state, prices of corn and nitrogen, and whether corn follows corn or beans, and also lets you enter multiple prices of N.

If organic production is part of your present or future, plan to attend a Jan. 11 & 12 Extension conference at Bloomington’s (IL) Interstate Center. Seminar tracks include field and specialty crops and livestock.

The CBOT doesn’t trade carbon yet, but you may be able to work out a trade with a local industry which is pumping too much carbon dioxide into the air. At (IL) Extension’s regional tillage seminars in Feb. you will learn that your conservation tillage practices are a good trade off for CO-2 rule violators, and could become a profit center on your farm.

You should not get shocked checking stored corn, but researchers at USDA’s Peoria lab have created corn-based polymers that will conduct electricity, and will be cheaper substitutes for petrochemicals used in biomedical applications, from light-emitting diodes and controlled-release devices to artificial muscles and environmental sensors.

Stu Ellis
Farm Gate at U of I

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