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Monday, October 13, 2014

Corn Crop Forecast Moves Higher

Corn production in Kentucky is forecast at 222 million bushels, up 3 percent from the September forecast and down 9 percent from the previous crop. Yield was estimated at 153 bushels per acre, up 5 bushels from last month and down 17 bushels from the 2013 level. Acres for harvest as grain were estimated at 1.45 million acres, up 20,000 acres from 2013. 

The U.S. corn production is forecast at 14.5 billion bushels, up 1 percent from the September forecast and up 4 percent from 2013. Based on conditions as of October 1, yields are expected to average 174.2 bushels per acre, up 2.5 bushels from last month and up 15.4 bushels from 2013. Area harvested for grain is forecast at 83.1 million acres, down 1 percent from the September forecast and down 5 percent from 2013. 

Friday, October 10, 2014

KyCorn Welcomes New Communications Director

KyCorn is pleased to announce its newest team member, Danielle Beard Hayden, who was hired as communications director on Oct. 10.

An Oklahoma native, Danielle is a 2012 graduate of Oklahoma State University where she majored in Agriculture Communications and Agriculture Economics. After college she began work as the associate editor of Farm Talk Newspaper, a four-state weekly agriculture newspaper based out of Parsons, Kansas where she was eventually promoted to chief editor.

During her time in Kansas, she met her husband, a Kentucky cattle farmer, and now resides in Ohio County. Since moving to the Bluegrass state, she has worked as a freelance writer and photographer for several cattle publications.

“We are excited about bringing a new, talented, young person on board,” remarked Laura Knoth, KyCorn executive director. “Danielle is committed to agriculture and will help us tell the important story of Kentucky’s grain industry.”

Danielle is replacing Jennifer Elwell, who has been with KyCorn since 1998. Jennifer is now program coordinator of the Kentucky Agriculture and Environment in the Classroom and pursuing additional interests in ag education and farm public relations projects to serve a broader agricultural community.

Thursday, October 9, 2014

Grains Council Builds Export Markets

While price is an important consideration for buyers of corn and other commodities, the United States’ reputation for reliability and honesty is also a significant market asset. The U.S. Grains Council, a KyCorn-supported organization, has been promoting these benefits in top markets around the globe and will continue to do so as the United States begins harvest for another record corn crop.

The United States exported more than 11 percent of the U.S. corn supply in the 2013/2014 marketing year, which ended Aug. 31. More than 100 countries purchased the U.S. commodity.

U.S. corn exports to Japan enjoyed a powerful rebound, with USDA reports showing 2013/2014 exports and outstanding sales of 11.8 million metric tons (465 million bushels). The Council has been able to provide Japanese end-users with timely, reliable information to reinforce their traditional preference for U.S. corn. This included presentation of the Council’s 2013/2014 Corn Harvest Quality Report at the Japanese Outlook Conference last January.  Now in their third year, the Council’s Corn Harvest Quality and Corn Export Cargo Quality reports have become recognized benchmarks for Japanese buyers who monitor the U.S. crop with great care.

Colombia also saw a dramatic rebound in U.S. sales.  U.S. corn had become uncompetitive in recent years due to more favorable tariff treatment for South American producers. Implementation of the long-delayed U.S.-Colombia free trade agreement (FTA), recent policy changes and the Council’s promotion in that market resulted in dominant market share in the past year. In April 2013, the Colombian Price Ban System increased the duty on South American origin imports to 5.75 percent. Thanks to the U.S.-Colombia FTA, however, the first 2.1 million tons (82.7 million bushels) of U.S. corn imports have a zero percent duty. Overall, the U.S. provided more than 95 percent of the 3.4 million ton (134 million bushels) Colombian corn market, with expectations favorable for the coming year also.

The good news extends to North Africa.  For the 2013/2014 marketing year, Egypt, Morocco and Tunisia took a combined 3.0 million tons (118.1 million bushels) of U.S. corn (accumulated exports plus outstanding sales), compared to nothing over the same period last marketing year.

“A year ago, North Africa dropped off the charts in terms of U.S. corn sales,” said U.S. Grains Council President and CEO Tom Sleight. “But this year, Egypt took nearly as much corn (whole grain) as China, and Morocco and Tunisia are again buying U.S. corn.”

Black Sea producers will continue to provide strong regional competition, but the rebound in U.S. sales this year demonstrates the importance of maintaining a strong and creative presence in rapidly evolving regional markets.

Heading into the 2014/2015 marketing year, the Council has more plans to develop new markets for U.S. corn.  Examples of this include the Council exploring markets for U.S. ethanol demand overseas, building demand for coarse grains and co-products across the globe, including Latin America, Tanzania, China and Japan, in livestock sectors through tours of U.S. facilities, and Export Exchange 2014, the premier international trade conference focused on the export of U.S. coarse grains and co-products.

Wednesday, October 8, 2014

You Can Lead a Horse to Water

By Danielle Beard Hayden

Agriculturists across the nation rejoiced when Forbes released the article, “The Debate About GMO Safety is Over, Thanks to a New Trillion-Meal Study,” but is the debate really over?

Those who were adamantly anti-GMO are still touting ‘fish genes spliced into tomatoes’ and ‘infertility and tumors in lab rats’ propaganda. While the pro crowd waves flags of ‘but, we’re feeding the world’ and ‘because, science,’ leaving those left on the fence about GMO’s wondering what to believe.

Maybe it’s time agriculture, as an industry whole, takes a new approach to the GM-crop debate. Instead of reacting to those whose minds are made up, the industry becomes proactive in making facts readily available for those still trying to decide.

Some may argue, “the information is already out there, what more can we do?” Consumers are hungry for knowledge about their food, and they want it in elementary terms, and not only do they want it in an understandable fashion, they want it from sources they respect and relate to. They want to hear it from friends, mothers, doctors, bloggers, etc. With all that being said, how does the industry begin to get the facts to these sources?

Education without attitude.

Dropping the ‘I’m right, you’re wrong’ edge and working non-confrontational information into everyday conversations is a good start. Most don’t even realize what comes from genetic modification and what doesn’t. Explain that there are currently eight crops commercially available from GMO seeds in the US — Corn (field and sweet), soybeans, cotton, canola, alfalfa, sugar beets, papaya and squash.

Another common misconception is that Monsanto is the only company producing GM seeds. Introducing an information tidbit that Bayer CropScience, BASF, Dow AgroSciences, DuPont and Syngenta are also companies that work with plant biotechnology can help to subtly dismiss some of the misinformation that is floating around about GMO’s.

Honesty without fear.

It’s important to not try to educate past your own knowledge. Have no idea when asked about GMO’s banned in some European countries? Admit that you don’t know. Better to stick with what you do know, than risk losing any credibility. Suggest researching together or asking someone who would know the answer. Also encourage asking for themselves at www.gmoanswers.com or looking for online sources that have .edu at the end.

You can lead a horse to water, but you can’t make it drink. However, teach a man to fish and he will never go hungry. Share an article explaining that GMO’s are safe and they may or may not believe it, but educate the basics of what GMO’s actually are and you are giving consumers the seeds of knowledge they need to research their own conclusions.


Wednesday, October 1, 2014

What Does the Future Hold for Cash Rents?

By Lauren Turley, University of Kentucky Department of Agricultural Economics
Economic & Policy Update

If you have spoken with a farmer in the last month, I can almost guarantee one topic of conversation was the futures market. Cattle farmers are reaping the record high beef prices, while grain farmers are on the other side fretting, as grain prices have decreased to the lowest levels seen in several years. Grain producers have been projecting budgets for the upcoming years and realizing that something has to give. Expected returns are not high enough to cover all of the costs and provide a return to operators.

Most Kentucky grain producers have realized record returns the last three years and should have built equity in that time. However, it does not make it any easier to see the negative returns that are projected for the future. There may be some cost savings in 2015 if fertilizer price declines, as is expected. Other crop input prices are not expected to decrease. One major direct cost that should be examined is land rent, most likely the largest per acre cost for producers on ground that is not owned. In western Kentucky, competitiveness has taken rents to the next level. Many rents have been negotiated on a three or five-year term, thus the producer may be locked in at that level for the upcoming years. With slipping commodity prices, expectations would be a decline in rents going forward.

In Kentucky, from 2008 to 2013, average cash rents increased by 90%, according to USDA annual cash rent data. From 2009 to 2013, there was a 59% increase going from $93.50/acre in 2009 to $149/acre in 2013. Cash rents rose in recent years due to increases in land and operator returns, corresponding with the increased grain prices. Despite lower grain prices since fall of 2013, cash rents held steady for 2014. Throughout history, it has been demonstrated that rents may go down, but not usually by very much and not very often. Rents that are being negotiated now will likely be lower, and rightly so. Rent should decrease because of the projected lower returns; however, commodity prices are much more volatile than cash rents and farmers are at risk of losing farmland if landlords are not willing to accept lower cash rents. It is essential for producers to realize that not farming high cash rent farmland may be the best alternative to getting in a “bidding war”. There are some cash rents that may not need to be adjusted; either as a result of the rent being relatively low, or if the cash rent has lagged behind the increase in agricultural returns. Setting the cash rent for farms is difficult as the crop price and yield are unknown when the rental agreement is made. Rents will not always correspond to actual returns.

Other options to cash rents are crop-share agreements or flex leases. In the Ohio Valley area of Kentucky, crop-share rental agreements are the dominant rental agreement. In this arrangement, revenues, and sometimes direct costs, are shared between the land owner and the farmer. The share would depend on the type and quality of ground. With this agreement, the landowner is at risk just like the farmer, but there is an opportunity for the landowner to reap in the benefits of a stronger market or better production year. This year, farmers have become very interested in flex leases. With this type of lease, there is a floor, or minimum cash rent, and an opportunity for the landowner to receive a “bonus” under various circumstances. For example, a “bonus” may be paid if the gross revenue is higher than a trigger revenue, or if yields are higher than the trigger yields. If land owners are willing to share in some of the risk associated with production agriculture, they could receive higher average returns.

Grain producers need to begin looking at budgets for the upcoming years and determining if costs can be cut. Reality is setting in, and it looks like we will be seeing less than $4 corn for at least a couple of years. If rental agreements are up for renewal, conversations should be held with landlords to negotiate and talk about the options. The costs and returns should be analyzed. Cash rents have received much attention in the last couple of years, but as margins are squeezed, what will happen to cash rents is uncertain. If you have any questions about rental agreements, feel free to contact any KFBM specialist.

Tuesday, September 30, 2014

Grain Profitability 2014 and Beyond: How Bad Does it Look?

By Greg Halich, University of Kentucky Department of Agricultural Economics
Economic & Policy Update

The grain markets have dropped dramatically in the last 12 months, and the resulting effect on profitability may not be fully understood by farmers, landowners, and lenders. Figure 1 shows the December 2014 Futures contract from 2011 to 2014. Note that before early fall of 2013, this contract was trading mostly between $5-6/bu. This was the expected price for corn that most farmers were banking on during this time period. The current price for this contract is around $3.30/bu, or about $2/bu lower than the average contract price in 2011-2013. The price drop for soybeans (not shown) has been similar, coming down about $3/bu from its average in 2011-2013.The cash price for fall delivery has fallen under important psychological barriers in a number of locations: $3/bu for corn and $10/bu for soybeans.

Schwenke on Corn Prices, Food Prices and Opportunities

Russel Schwenke, KyCorn President
As the corn supply continues to grow, prices continue to drop. According to an AgriVisor analyst, the price of corn has dropped so much that an ounce of gold can now buy more than 370 bushels of corn, the most since 1975. So it goes with the laws of supply and demand. While many of us in grain production obviously see below breakeven prices as a detriment to our farm enterprises, this may provide us an opportunity to build our customer base. First, however, we must set the record straight about food vs. fuel.

Just two years ago, the corn industry was taking a real lashing from Mother Nature, corn buyers, and food retailers. The U.S. was suffering from one of the worst droughts in history. Corn prices rose dramatically, which is only beneficial if you have a crop to sell, and all fingers pointed toward ethanol as the culprit. Food processors and everyone else down the marketing chain pumped up their prices to follow suit and lobbied tirelessly, even still, to overturn the Renewable Fuels Standard.