US Corn Prices May Find Support

Wednesday, 03/10/2010 3:47 PM

USDA increased projected world corn production for 2009/10 by 5.86 million metric tons (MMT) in Wednesday morning's World Ag Supply and Demand Estimates (WASDE). That's seven-tenths of 1 percent. Feed use was increased by 350,000 MT. Most of the remainder flowed to the ending stocks estimate, which rose from 134.04 MMT to 140.15 MMT. Because of the rise in world production (the U.S. production estimate was reduced by 20 million bushels), USDA reduced projected U.S. corn exports by 100 million bushels and increased U.S. ending stocks next Aug. 31 to 1.799 billion bushels. Is this really all that bearish for U.S. corn prices?

Let's look at where the changes were made. The bulk of the increase in world corn production came in one country, which was Argentina. USDA hiked production from 17.2 MMT to 21.00 MMT. That's a one-month increase of 3.8 MMT, or 149.6 million bushels. Better-than-expected summer weather gets the credit for increasing yield prospects there. USDA sees Argentina's average corn yield at a record 8.4 MT/HA (metric tons per hectare), beating out the previous record of 8.04 MT/HA in 2006/07 and up 40 percent from last year's drought-reduced output

South Africa's crop, a mix of white and yellow corn, is also seen 2 MMT larger than it was a month ago. The average yield there is not as high as it was a year ago, but production would exceed the previous record set in 1993/94.

Minor changes in places like the Former Soviet Union (FSU-12) and Southeast Asia make up the rest of the production adjustment.

One key point to remember is that the projected world corn ending stocks total of 140.15 MMT is still smaller than last year's total, 146.40 MMT. Despite the record production of 803.69 MMT (approximately 31.638 billion bushels), world ending stocks are still shrinking during 2009/10. Projected use is a record-large 809.93 MMT, or 31.88 billion bushels. Use is up due to a recovery in livestock demand in some areas, and also due to increased use as ethanol feed stock.

Ending stocks are not shrinking as quickly as it appeared a month ago, but they still are shrinking. The stocks/domestic-use ratio is 17.3 percent, or 63 days of use at the current pace. The stocks/domestic-use ratio for last year (based on today's data) was 18.8 percent. Thus, world corn supplies are still tighter than last year, even after the upward revisions in production.

That implies a higher average world cash price for the year, if there was such a critter. It doesn't necessarily mean a higher U.S. cash average price, since U.S. ending stocks are currently seen growing year over year. The U.S. stocks/domestic-use ratio would be 16.18 percent.

With the projected stocks drawdown, the corn market's job continues to be one of discouraging use and trying to buy more acreage in the Northern Hemisphere, where corn planting is just getting under way. Given the world surplus of feed wheat and price weakness in that sector, some loss of corn feed use to wheat will likely happen. It can be argued that this "should" happen in the United States, where USDA now believes that carryover wheat stocks will exceed 1 billion bushels on May 31. That substitution can be accomplished by keeping corn prices comparatively high compared to wheat. As to attracting more U.S. acreage, we'll have to wait for the March 31 USDA Planting Intentions report to see whether current prices are getting that accomplished.

Alan Brugler can be reached at alan.brugler@dtn.com

(CZ/AG)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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Seed Trait Battles Raise Eyebrows

Wednesday, 03/10/2010 9:19 AM

ANAHIEM, Calif. (DTN) -- While a few companies will shoulder the brunt of criticism in upcoming discussions on the competitive climate -- or lack of one -- in agriculture, the reputation for all of agriculture may be at stake.

On March 12, farmers, consumers, ag industry leaders and many others with an opinion about how U.S. food should be grown, processed and sold, will descend on Ankeny, Iowa, for the first of four workshops to discuss competition issues in agriculture. The workshops are being coordinated by the U.S. Department of Justice under the banner of "Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy."

This will be the first time the department has explored the issues of consolidation in the farming and food sectors in such a public way.

Much of the first event, at the Des Moines Area Community College in Ankeny, will focus on the battle for market power in the seeds industry. Introducing that issue in a public forum raises a host of related issues: public sentiment on what crops farmers grow, the biotech seeds they use, and what is the market power some companies appear to have over food.

At the heart of the seeds discussion is the battle between DuPont and its seed division Pioneer HiBred, and DuPont's sometimes partner, sometimes rival, Monsanto.

SEED TOP SPOT CHANGED

As recent as the early 1990s, Pioneer was the largest seed company in the world and one of its popular corn hybrids ranked Number 2 in terms of bags of seed corn sold.

In the 20 years since, Monsanto changed the industry. With its flagship brands DeKalb, Asgrow and Delta Pine, its American Seeds LLC subsidiary, and developing licenses and partnerships with practically everyone else in the seeds business, Monsanto emerged as the most powerful player in the seed trade industry. As such, Monsanto became the firm that farmers either praise or curse, sometimes in the same breath.

As Monsanto grew larger, this inevitably drew criticism from some farmers, trade competitors, consumers and special interest groups. Monsanto's growth also attracted the attention of the U.S. Department of Justice, which began to look deeper at agriculture's competition issues.

DEBATE ABOUT DOMINANCE

Monsanto argues its percentage share of the seed business is in the mid-30s for corn and below 30 percent for soybeans. That is below DuPont/Pioneer in both categories, according to Monsanto. Yet, it's the debate about seed trait dominance that will likely be highlighted Friday. In comments to the DOJ, Monsanto has said that "At the end of 2008, the soybean industry had four large vertically integrated trait providers (Monsanto, DuPont/Pioneer, Syngenta and Bayer) and another 146 independent seed companies. Thus, there was only a moderate increase in concentration in soybean(s) over this decade."

Still, despite the various brand names, 91 percent of all soybeans planted in the U.S. last year carried Monsanto's Roundup Ready trait. Anyone selling Roundup Ready seed paid some form of licensing fee to Monsanto for rights to the trait.

One of those licensees has been Pioneer. But in 2009, Monsanto sued DuPont/Pioneer over Pioneer's plans to include that Roundup Ready 1 trait in its upcoming Optimum GAT seeds. Those seeds contain a Pioneer-developed Roundup-resistance trait, but the Johnson, Iowa, company chose to also include Monsanto's trait, to give double-safe resistance to glyphosate herbicides. Monsanto claimed its license to Pioneer for Roundup Ready 1 did not include the rights to such a double-up. Courts agreed.

In the meantime, DuPont began to push DOJ to investigate Monsanto's business practices.

The contentious Monsanto-DuPont rivalry is being watched closely, but attracts only cautious speculation on outcome by other seed and trait industry players.

CAUTIOUS PARTNERS

"We are partners with both these mega players," said Michael Deall, vice president, marketing and portfolio for Bayer Crop Science. Bayer collaborates with Monsanto on a number of traits, and works with Pioneer on Bayer's Liberty Link herbicide-resistant seeds.

"There's no question, this (seed business) at the moment is a highly competitive market," Deall told DTN in an interview. "Whether or not we need to have these investigations is really difficult to answer."

Bayer also has been a direct competitor with Monsanto in soybeans. Bayer's Liberty Link soybeans, which it introduced in 2009, are resistant to Roundup-competitor Ignite herbicide. While it has more than 100 regional seed companies selling Liberty Link varieties, many companies proceeded slowly when jumping into the Liberty Link market. Some hinted part of that slowness was in working through the issues of being a supplier of both Liberty Link and Roundup Ready seed.

"It is a challenge, no question about that," Deall said of introducing traits into such a competitive market place. "We're working with as many germplasm suppliers and seed suppliers as we can to make our technology available to as wide an audience as possible. But not owning a seed business, it is a challenge."

Whether any moves by DOJ or Congress would change the competitive playing field "is impossible to speculate on at this time," Deall said.

What does concern Deall and others is the potential negative spotlight that the contentiousness may bring to agriculture. "I think any hot debate, whether about seeds or the environment or whatever, that is not fully understood by the general public, can have a negative impact," said Deall.

"But the debate needs to be open, it needs to be transparent. The industry needs to be willing to show that we're not hiding anything," Deall said.

"Lots of things are happening that just aren't good for agriculture," said Paul Rea, director of business operations for BASF. That company also is partnered with Monsanto on a number of seed traits, and seed treatments, as well as working to be a seed trait supplier to others.

"There's just not much good news. So as that goes, this (DOJ investigation) is not good, it's not good for anyone," Rea said.

CRITICAL TO ADDRESS CONTENTIONS

Rea agrees with Deall that it's critical that the discussions begin to answer long-hanging contentions, like who has the rights to what in the seeds business. "And it's important to bring the general public along in that understanding," he said.

"Ag has this huge challenge on its hands to feed the world," Rea said. "We're going to need, clearly, a lot of technological innovation to meet that challenge. But, at the moment, we're on a bit of a collision course between that need and members of the general population who are growing more concerned, misinformed, and even weary, of what is modern agriculture. If we don't take the general population with us on that journey, we're only going to have more issues in the future."

DTN/The Progressive Farmer Policy Editor Chris Clayton contributed to this article.

Greg D. Horstmeier can be reached at greg.horstmeier@telventdtn.com

(ES/SK)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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DTN Fertilizer Outlook

Wednesday, 03/10/2010 9:17 AM

AMMONIA

World ammonia supplies were very tight through February, and world market prices moved up sharply. Early in the month, there were interruptions in gas supplies to ammonia producers in the Former Soviet Union (FSU) and Eastern Europe. Bad weather delayed loading of the reduced amount of production which was available at Yuzhnyy, further reducing supply. The market was also tightened by the loss of 10 days output from EBIC/Egypt due to technical problems. However, at month's end, the plant was operational and shipping tons. The strong demand and higher prices for DAP, which consumes a sizeable part of global ammonia imports, is supporting higher ammonia prices. The most recent delivery into Tampa was priced at $450 mton, up $150 from the first of the year.

World ammonia market prices look to run steady to higher until supplies begin returning to normal levels. Domestic ammonia prices at interior terminals were flat due to inactivity. Many tons had been sold earlier in prepay transactions, and there is a good deal of tonnage carried over from last fall in most markets. It remains to be seen how spring demand for ammonia is affected by the interplay of lower corn and wheat prices and the strong likelihood of higher asking prices for ammonia in the short term.

UREA

World urea market prices moved lower through the last half of the month as India stayed away and long supplies began to take a toll. World urea prices slipped to $270 fob Yuzhnyy late in the month, which stirred buying interest in Turkey and parts of South and Central America. Asian and South American markets were quiet at mid-month because of holidays. Demand was slow in northwest Europe, and normal spring application activities in the U.S. were delayed by continued cold, wet weather. Late in the month, there was limited supply to clear out of Yuzhnyy. There were also unsold tons in Egypt, which traders struggled to place, and a significant correction is expected in March from the $330 to $335 levels paid for February tons. Iranian tons are also finding it difficult to find a home as prices for product moved down to $300 fob after a mid-month sale at $325.

We look for world urea prices to run flat with a soft undertone. Domestic urea prices drifted lower through the month, dropping from $322 early to $315 late. Again, interior terminal prices were flat over inactivity. Some large wholesalers believe the U.S. market could be short once demand starts as the volume of imported urea tons is down from normal. Current supplies of urea seem adequate to meet present low levels of demand, and the late start to the spring season could diminish demand enough to skate over thin supplies without generating much of a price increase. The start-up of substantial Trinidad UAN production could also keep competitive pressure on urea prices, to say nothing of what appears to be a long supply situation developing in the world urea market. We expect domestic urea prices to run flat in the short term and lower in the medium term.

UAN

UAN barge prices at NOLA (Port of New Orleans) moved higher through the month, rising from $195 early to $215 to $220 late. Interior terminal prices were flat over inactivity. At month's end, there was finally production from the new world class UAN production plant in Trinidad. We expect the steady pressure of supply coming from the plant could keep downward pressure on domestic UAN prices well into the medium term and beyond.

DAP

The return of India to the DAP market toward month's end for a 1 million metric ton contract with Ameropa/PhosAgro, Russia, allayed concerns of some producers regarding a potential downward correction in DAP prices for April/May shipments. U.S. DAP prices export prices moved steadily higher through the month, but as in the previous month, on very small volume sales. Cutbacks in processing of sour gas and crude oil have diminished sulphur supplies significantly to all DAP export producers. The effect of the short supplies has been to send sulphur prices up to around $90 per metric ton from negative numbers a year ago. DAP producers are also paying significantly higher numbers for ammonia with the most recent settlement into Tampa crossing at $450 mton, up $150 from the first of the year. Despite the cost increases, however, DAP producer margins have stayed strong, giving them room to cut prices if necessary.

Most exporters into world markets are well placed, and world DAP prices could keep moving up in the short term. Domestic DAP prices at NOLA are following world market prices higher ($421 to $425 per short ton fob NOLA) but are still below world values. Spring demand is delayed by weather. Several wholesalers/dealers have expressed concern that farmer demand could be diminished substantially by retail prices well over $500/t. Given the imminence of spring demand and thin supply, domestic DAP prices seem likely to keep rising in the short term.

POTASH

Thin supply kept potash prices moving steady to slightly higher through the month. Wholesalers still are reluctant to build inventory, and new sales are either going on the ground or to cover prepay sales. We look for potash prices to run firm but flat in the short term. Recent drops in price have encouraged some good levels of demand over the past few weeks, but producers are now attempting a $30 per short ton increase. Competition has been slow to return to the market, but there have been glimmers here and there. For the short term, we expect potash prices to run flat.

(CZ/AG)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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For Argument's Sake

Tuesday, 03/09/2010 5:42 PM

In our weekly column, "For Argument's Sake," DTN Analyst Rick Kment will take an opposing, or contrarian, view on a commonly held opinion or topic. One of Rick's strong points, as discovered through many hours of office debate, is his ability to see both sides of an argument. Although he will be presenting a case, this may not be his personal opinion or the opinion of DTN/The Progressive Farmer, Telvent, or any of its employees.

---

Ethanol markets have always been thought to follow the reformulated gasoline blendstock for oxygen blending (RBOB) market because ethanol is used as a blending agent in gasoline and petroleum. Ethanol production remains active as corn prices are soft, fuel demand is expected to rebound, and ethanol prices were higher through the end of 2009. The whole market model of ethanol production is that ethanol prices will move in direct correlation to the price of gasoline. So if gasoline prices increase strongly due to either short supply or increased demand, then according to the market model of ethanol, ethanol prices are also likely to increase.

Taking the contrarian view, I argue that not only is this model incorrect, but the relationship between ethanol and gasoline prices seems to be changing, and this could have a long-term effect on the ethanol industry.

Through the first few weeks of 2010, ethanol prices have not followed the generally-accepted market model. There has been a growing disconnect between the price of ethanol and the price of RBOB gasoline markets. This disconnect has been partly due to the bearish tone of the corn market the last couple months. Corn futures moved from a high of $4.23 per bushel on Jan. 8, to the current price of $3.60 per bushel. This has allowed ethanol producers to hold onto slim profit margins due to the lower cost of production, even though ethanol prices slipped significantly over the last three months. The outlook for corn futures continues to be bearish with strong production expected as well as large carryouts, even though demand for corn is starting to regain traction.

Ethanol futures have fallen more than 35 cents per gallon from the first of the year, as overall supplies of ethanol have grown while demand for ethanol has stabilized. Even though the expectation is for ethanol demand to increase during the traditional summer driving season, buyers are not interested in stepping into a falling market. For instance, most in the market look for additional pressure in the coming weeks and only want to secure immediate needs because down the road, product will likely be even cheaper than current prices .

The gasoline market, on the other hand, has rallied sharply over the first three months of the year, climbing from $1.85 per gallon at the end of December on the futures market to a current price of $2.26 per gallon. Through mid-December, ethanol was priced at 9 cents per gallon over the RBOB gasoline price. But the roles have reversed in the first quarter of 2010, with gasoline trading at a 64-cent premium over the current ethanol price. As demand for gasoline remains strong and ethanol demand limps along like a wounded rabbit, there are questions about whether or not this wide price spread can be narrowed before plant profitability goes down the tube again and significant production levels are lost.

Even though the ethanol industry continues to focus on growth and production as well as development of second-generation processes, the market is becoming very ugly, and there are questions about whether or not ethanol can move to a more even playing field when it comes to the price spread between ethanol and gasoline. In the ethanol market, the golden nugget has always been that if ethanol price is significantly cheaper than gasoline, then demand for ethanol will quickly increase. But over the last several weeks, this has not been the case. If the blenders' credit, which is used by ethanol blenders to help even the playing field, is added, this puts ethanol at a more than $1 discount to the current gasoline price. But even this price spread has not been able to narrow the pricing gap between ethanol and gasoline.

Ethanol production continues to steadily increase with corn prices significantly below $4 per bushel, but there is very little incentive to increase demand. Even the slow increase in the Renewable Fuels Standard blending regulation has failed to affect the price discrepancy between ethanol and gasoline futures markets. It is uncertain if ethanol markets can regain ground on the gasoline market due to strong investment interest in the gasoline market as well as traditional driving demand, which is likely to push gasoline prices higher. But, for now, ethanol prices still seem stuck in the mud that is developing throughout most of the Midwest.

Rick Kment can be reached at rick.kment@telventdtn.com

(AG/CZ)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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DTN Retail Fertilizer Trends

Tuesday, 03/09/2010 5:40 PM

OMAHA (DTN) -- Retail fertilizer prices continued to show little movement in any direction during the first week of March.

Five of the eight major fertilizers were higher compared to a month earlier, according to retail price information collected by DTN. The only fertilizer with any significant change was UAN28, which was up 7 percent. DAP, MAP, potash and UAN32 all were up just slightly.

Three fertilizers were lower for the time period. Urea, 10-34-0 and anhydrous were all just slightly lower in price compared to the first week of February.

Like many producers, Lake Benton, Minn., farmer Bob Worth already has his fertilizer needs taken care of for the upcoming crop season. He bought his fertilizer at the end of the last calendar year.

"For probably the last 7 to 8 years, we have bought fertilizer at the end of the year, mainly for tax purposes, but fertilizer prices at that time of year also make it a best buy," Worth said.

Worth, who farms with his son, Jon, said they did tighten their fertilizer budget last spring when prices were higher. They did not fertilize their land planted to soybeans last spring. With considerably lower prices this year compared to last spring, the Worths purchased enough fertilizer to cover all their fertilizer needs this spring.

As in other areas of the Corn Belt, farmers in Worth's region of southwest Minnesota saw an early winter. Some producers still have corn standing in the field, and they were unable to accomplish much field work or apply fertilizer before the snow started to fly. The Worths managed to get the harvest and all their tillage work completed before the snow started to fall.

Worth said this is shaping up to be another late spring for field work due to the amount of snow the region had this winter. The wet field conditions, however, are not all bad, he said.

"The ground is not frozen under the surface, which means that the soil will be able to absorb most of the moisture, and with our tile system, the water will not sit too long on the surface, so that is some good news," he said.

Since DTN began tracking fertilizer prices on a weekly basis from Nov. 3-7, 2008, all eight of the major fertilizers are now showing double-digit decreases in prices. 10-34-0 leads the way lower, down 68 percent, with anhydrous falling 55 percent and MAP settling 53 percent lower.

DAP is now 51 percent lower, UAN28 has decreased by 49 percent and UAN32 has fallen 46 percent. Potash is down 43 percent, and bringing up the rear is urea, which is 31 percent lower.

DTN Pro Grains subscribers can find current retail fertilizer prices by location on the Fertilizer page under Farm Business.

DTN collects fertilizer prices from several dozen retailers weekly. Not all fertilizer prices change each week. Prices are subject to change at any time.

DTN's average of retail fertilizer prices from the first week of the month ($ per ton):

DRY
Date Range	DAP	MAP	POTASH	UREA
Nov 3-7 2008	984.08	1079.23	896.33	607.61
Dec 1-5 2008	812.81	893.21	882.05	485.52
Jan 5-9 2009	597.93	653.84	852.23	429.00
Feb 2-6 2009	505.20	621.07	841.50	462.74
Mar 2-6 2009	537.86	575.48	836.04	454.00
Apr 6-10 2009	547.36	578.14	821.78	443.65
May 5-8 2009	494.60	544.63	817.70	437.02
June 3-5 2009	499.50	553.09	787.23	425.50
July 3-10 2009	478.72	462.79	775.35	421.82
August 4-7 2009	404.71	423.75	728.55	382.24
Oct. 6-9 2009	377.72	397.57	613.77	376.27
Nov. 2-6 2009	366.36	386.13	592.52	376.17
Dec. 1-4 2009	374.88	397.25	585.93	381.98
Jan. 5-8 2010	460.35	463.24	518.39	408.50
Feb. 2-5 2010	468.05	479.72	503.33	418.38
Mar. 2-5 2010	482.79	495.50	507.29	417.01
Liquid
Date Range	10-34-0	ANHYD	UAN28	UAN32
Nov 3-7 2008	1250.00	1043.14	482.75	507.00
Dec 1-5 2008	1016.88	870.46	386.58	453.33
Jan 5-9 2009	1006.88	645.65	333.07	423.33
Feb 2-6 2009	881.50	679.50	329.18
Mar 2-6 2009	789.79	664.74	310.62	413.43
Apr 6-10 2009	847.50	598.50	325.75	390.80
May 5-8 2009	735.00	647.50	290.10	358.68
June 3-5 2009	765.63	618.09	291.70	317.50
July 3-10 2009	708.85	481.93	254.85	319.93
August 4-7 2009	567.05	434.91	222.83	279.50
Oct. 6-9 2009	405.39	426.30	208.89	273.16
Nov. 2-6 2009	398.67	409.80	201.28	260.47
Dec. 1-4 2009	410.83	433.71	221.67	263.83
Jan. 5-8 2010	386.75	454.73	226.69	265.25
Feb. 2-5 2010	392.14	471.56	237.62	273.00
Mar. 2-5 2010	397.04	469.00	248.50	273.50

Russ Quinn can be reached at russ.quinn@telventdtn.com

(AG/CZ)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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Get More Coverage for the Money

Tuesday, 03/09/2010 5:38 PM

HADDONFIELD, N.J. (DTN) -- Dryland grain farmer Terry Swanson of Walsh, Colo., knows the 30 percent deductible he carries on crop revenue insurance policies means he still shoulders a sizable risk in case of drought. Given that he averages only 15 inches of rain in a good year, that's no small deal. "You try to cover a catastrophic situation, but it's a balancing act with cost," Swanson said.

Picking the right deductible is an issue even in agricultural Edens such as Champaign County, Ill.: A grower who purchases a 70 percent Crop Revenue Coverage (CRC) policy there has only a 17 percent chance to receive a payment any given year. Someone with the maximum 85 percent coverage increases those odds to 43 percent.

That's an important distinction to consider before insurance sign-up for most spring-planted crops ends March 15. "There's a low probability of payment at low coverage levels, so growers should consider buying up whenever they can," University of Illinois economist Gary Schnitkey advised.

Anthony Bush of Mount Gilead, Ohio, takes that advice to heart. He's upgrading his crop insurance levels this year from 75 percent to 80 percent coverage. That boost increases the odds that crop insurance will cover his input costs if disaster strikes.

"It's really a no-brainer for me," he said. "I'm trying to insure revenue instead of yields, and with discounts available this year, premiums for higher coverage aren't that bad."

Crop revenue policies such as CRC, Revenue Assurance (RA) -- and in some cases Group Risk Income Protection (GRIP) -- will be significantly more affordable this year. That's happening even though corn's spring price guarantee runs $3.99 per bushel versus a $4.04 guarantee last year. Soybean's 2010 guarantee runs $9.23 per bushel, up from $8.80 a year ago.

Farmers can look in three areas to provide ways to save or upgrade their insurance levels:

-- Volatility ratings. Adjustments in the Risk Management Agency's "volatility rating" will knock 10 percent to 40 percent off premiums on all three revenue policies, compared to 2009 levels. In Sagamon County, Ill., typical rates could slide by $3.50 per acre on an 85 percent coverage CRC corn policy, but more than $24 per acre on the maximum GRIP policy, according to Schnitkey.

Roger Schlitter, a crop insurance agent in Mason City, Iowa, thinks the savings equate to a "two-fer" for policy holders. "Compared to buying a stand-alone CRC policy last year, you could get both CRC and hail policy for the same price this year," he said.

Another welcome result is that GRIP policies could become more affordable and may be something worth considering. County-based programs such as GRIP carry no prevented-planting or replant provisions, Schnitkey cautioned, and they aren't recommended for highly leveraged operators. "But where GRIP outshines individual revenue policies is in years of big price declines or drought. If you're in a county where a corn GRIP policy is a $40-per-acre option, and you have fairly uniform land, I'd look at it seriously," he said.

-- Enterprise units. A pilot program that increased subsidies for policies grouped in whole farm or enterprise units remains in effect through 2012. In the first year of the pilot program, growers saved an average of about $4 per acre. The theory is that since enterprise coverage combines all acres of a crop grown in the same county (or whole farm coverage lumps corn and soybean acres into one policy) a grower is less likely to collect from isolated crop disasters than when insured in optional or basic farm units.

"Essentially, the government is asking producers to assume more risk in exchange for a lower premium," said Bush. "But it's definitely the most important thing you can do to lower your overall insurance premiums." Bush would have saved $2,200 in premiums this year if he had stayed with a 75 percent CRC policy on his corn and soybean production. Instead, he spent the discount and upgraded to 80 percent coverage.

-- Biotech Yield Endorsement (BYE). If you plant certain biotech hybrids with YieldGuard, Herculex or AgriSure genetics on 75 percent of an insured unit, you could be eligible for another markdown. Again, it's the theory that new hybrids demonstrate a more robust yield, even under extreme weather, so your yield risk is diminished compared to conventional varieties. Growers who elected BYE in 2009 saved an average of 13 percent on their premiums, or about $3 an acre.

Bush tacked the BYE option on his enterprise unit discount, so even with the higher levels of coverage, he thinks premiums "aren't that bad" compared to 2008 and 2009 levels.

Biotech hybrids have been boosting his average corn yield 5 to 7 bushels per acre per year, faster than his crop insurance guarantee can keep up. So it's revenue coverage -- not yield protection -- that Bush values in today's crop insurance. "Corn has a large carryout, and there are risks for soybeans, too. If prices head down from here, I know I'll have $3.99 corn and $9.23 soybeans. It's not a profit, but from a risk perspective, it gives me confidence I will farm next year."

* * * * *

Join a free DTN Webinar March 11 at 8 a.m. central time to reviewing your crop insurance choices for 2010. Risk Management Agency Deputy Administrator Tim Witt, University of Illinois economist Gary Schnitkey and farmer-crop insurance agent Steve Pigg review your options. Register at http://about.dtnpf.com/…

Marcia Zarley Taylor can be reached at marcia.taylor@telventdtn.com

(ES/CZ/SK)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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Trapped in Grain

Monday, 03/08/2010 6:21 PM

By Susan K. Davis
DTN/The Progressive Contributing Editor

"Get up there and don't take long," were the last words Jim Roman's 13-year-old grandson, Jordan, said to him. The Dresden, Ohio, farmer was headed to a neighboring town to get his pickup truck. Before he left, he told Jordan and an employee to wait to unload a gravity wagon of corn until he returned.

Roman hadn't been gone long when he received a call that there was an emergency. Jordan was in the 500-bushel, gravity-fed wagon with a center draw emptying the grain at the mill Roman co-owns, Dresden Feed and Supply Inc. In a matter of seconds, Jordan had suffocated.

While most on-farm deaths, such as tractor overturns and power-take-off shaft incidences, are decreasing, the number of children and adults being engulfed in grain is rising every year, reports Bill Field, Purdue University Extension safety specialist. In 2008 there were 34 grain entrapments nationwide compared to 33 in 2007. In five years, incidences increased 33 percent, according to Purdue University's National Grain Entrapment Database.

Researchers document the cases from news reports and estimate the figures are actually 20 to 30 percent higher because many entrapments are unreported. In an entrapment the victim is partially covered. In an engulfment the victim is fully buried and usually doesn't survive.

Although the 2009 figures haven't been finalized, Field expects the uptrend to continue.

Why is this happening? There is a direct relationship between out-of-condition grain and a greater probability of entrapment, reports Field.

Safety specialists speculate the reasons for the rise are larger grain-handling equipment, record harvests, grain stored at higher moistures and long-term storage.

Indiana farmer Matt Roberts, who studied grain storage accidents while pursuing his master's degree at Purdue, believes the majority of tragedies will unfold in spring and summer.

As the temperature warms and the grain goes out of condition, people enter bins to break up the moldy grain that sticks together and prevents grain flow.

Purdue researchers report the primary cause of grain entrapments is entering a bin to loosen crusted, spoiled or frozen grain while the equipment (augers, elevators, etc.) is running, or falling into grain transport vehicles while loading or unloading grain.

Fortunately, tragedies like these are preventable. Here are some tips for safely working around grain:

-- Never enter a bin with loading or unloading equipment running. "The only reason to enter a bin is to sweep the floor with a broom or perform maintenance after the bin has been emptied," Roberts says.

Like many farmers, when Roberts was in high school he had a near miss while unloading grain in a 30-foot bin. A 6-foot bar he was using to loosen grain caught in the equipment and flew back at him. Roberts shudders to think of the outcome if he had fallen face-down in the pile of corn.

-- Avoid working extremely long hours or hurrying. "One of the first things people overlook when they are rushing is safety procedures and personal welfare," says Roberts.

-- Check equipment to make sure it's up to standards. The good news is manufacturers continue to make design changes to decrease the chance of grain entrapments. Many new grain carts and wagons have windows allowing you to see inside and decals to warn of dangers.

Harmon Towne, of the Steel Bin Manufacturers Council, says the group would like to develop a restraint system, attaching a harness to a track or cable in the bin's eaves, installed in new bins and retrofitted at a reasonable cost to existing bins.

The system would allow workers to move around the bin but keep them from getting pulled down in the grain, says the retired Brock Products & Systems representative.

-- Always lock access doors to grain storage structures.

-- Lock out power to all types of grain-handling equipment.

-- Always use the buddy system when you are unloading or loading grain.

-- Do not allow children to enter grain storage areas or ride in grain wagons.

Though it's tempting to allow children to slide down stacks of corn, Purdue's Bill Field's advice is: "Don't do it. I get a little concerned at field days when I see kids being allowed to play in corn."

A group of kids playing in corn buried a first-grader at an agrotourism farm during a field trip. "Before anybody knew what happened, the child had suffocated." It only takes an inch or so of grain covering a person to cause suffocation.

-- Always know where all family members are—especially children—at all times when grain is being loaded, unloaded, moved or otherwise handled.

-- Check to see if your local fire department or emergency personnel has grain rescue training.

While commercial elevator operators have to follow OSHA Confined Space regulations—using harnesses, lifelines, etc.—farmers do not have these requirements. After grain claimed the life of several farmers around London, Ohio, Andy Bauer, Heritage Cooperative branch manager, wanted to make growers more aware of the hazards and conducted a grain bin rescue demonstration at the Farm Science Review.

"Farmers are dying all across the country on a daily basis because of human error. All of these deaths could have been prevented," Bauer asserts. According to Dee Jepsen, Ohio State University Extension safety leader, "In the past 10 years, Ohio has experienced 19 fatalities from grain engulfments."

Roman remembers the tragedy every day as he passes the unloading area where his grandson, who lived with him, died. "He loved to be here," remembers 60-year-old Roman about Jordan helping at the mill. "All my partners and I thought we'd send him to a university and he'd come back and take over. That plan didn't happen."

While he hasn't spoken much about the tragedy that occurred in 2006 in the eastern Ohio town, Roman hopes sharing his story can help other farm families.

"With the help of God I've come a long way. We don't think about something like this happening. We're in a dangerous business and we can't forget."

(AG)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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Take the Stress Out of Calving Season

Monday, 03/08/2010 6:20 PM

By Becky Mills
DTN/The Progressive Farmer Contributing Editor

In his 50 years of practice, veterinarian Fred Ingle has seen just about everything. Still, there is one bovine delivery complication that stands out. "I reached in and felt two heads," recalls the Clermont, Ga., practitioner. Not twins, but two heads on one calf.

With Ingle's help, the cow made it through delivery. The calf didn't survive, but it did find a home at the Smithsonian Institute.

Hopefully you won't encounter a two-headed calf during calving season, but it does pay to be prepared for the unexpected. And preparation all starts with the cow.

Bump Up Nutrition

"During the last 90 days of gestation, the heifer or cow needs plenty of protein and energy," says Charlie Stoltenow, North Dakota State University Extension veterinarian. "I can't stress how important this is. Protein is directly related to colostrum quality and calf vigor. The calf needs to be able to bounce up and get off the cold ground."

Stoltenow says those last 90 days of gestation are known as fetal programming and affect the calf not only at birth, but also through weaning and into the feedlot or puberty. "This is no time to be stingy with protein or energy," he emphasizes.

Don't forget a high-quality mineral mix, says veterinarian Ingle. "Down here, from mid-October through mid-April, cows should have access to high-magnesium minerals—14 percent—to prevent grass tetany."

Immunize heifers and cows. "If a cow or heifer is immunized against IBR, BVD, PI3, BRSV and lepto, that immunity is passed on through the colostrum," says Ingle. "If you have a scours problem in your calves, you can eliminate almost 100 percent of it by doing that.

"The vaccinations are so good now and only cost around $1 to $4 a dose. You can't treat a calf for that."

He recommends vaccinating the females 60 days prior to calving, preferably at preg-check time to prevent an extra trip through the chute.

Clean Calving Areas. Move the pregnant females into fresh, clean pasture prior to calving. Make sure the pasture has access to a corral or squeeze chute in case any of the cows or heifers need help.

Time Your Seasons. Aim for controlled breeding and calving seasons. It's hard to implement other recommended practices if your cows and heifers are calving year-round instead of as a group. Frequent checks to monitor labor and delivery are even harder to keep up all year.

Take a refresher course. "One of the best things you can do is take a short course on delivering calves," says Stoltenow. "Then you can recognize the stages of labor. If the heifer or cow is having dystocia, you can assess whether you can handle it yourself or need to get help. Time is of the essence when the calving process starts."

Ingle agrees the worst thing is to wait too long before helping or getting help. Besides lowering the calf's chances of survival, the cow or heifer is in more danger too. "If she is already toxic from a decomposed calf, she can't live."

He recommends checking cows and heifers at least twice a day during calving season. Even if you've used bulls known for calving ease, there is always the chance of a breech birth, a deformed calf or a leg getting hung in the birth canal.

Calving prep time

The moment when a cow or heifer is having trouble delivering a calf is not the time to realize you lack the tools to help her. Here is a list of the basics you'll want to have on hand before calving season begins.

1. OB chains and a calf jack, plus the knowledge needed to use them.

2. Soap and water and/or a disinfectant to clean her up before you enter her birth canal, as well as to wash your hands.

3. A lubricant to make entering the birth canal easier, as well as gloves and paper towels.

4. Iodine to apply to the calf's navel.

5. Colostrum and a feeding tube or bottle. "Preferably the colostrum is from your own herd," says Charlie Stoltenow, North Dakota State University Extension veterinarian. He says this will have the antibodies needed to protect calves from diseases in your herd and area. If you can't get and freeze colostrum from one of your own cows, buy commercial colostrum.

If the calf can't or won't nurse and you have to feed it with a stomach tube, Stoltenow says, "make sure the tube goes straight into the esophagus and not into a lung or you'll lose the calf. The first couple of hours you need to get at least a quart of colostrum in the calf and 2 quarts in the first six hours."

6. A cold-weather game plan. After helping ranchers cope with calving in blizzard-plagued North Dakota, Stoltenow has more experience than he wants in cold-weather calving. He says there are two hard and fast rules. "Calves need to be out of the wind and they need to be kept dry.

"During wet weather, provide some type of cover or some way to dry them. I'm a big proponent of bedding. It can keep them dry and get them off the cold ground. If a calf won't get up, have some way to warm him—a calf warmer or wool blanket. Have it ready ahead of time.

"When it is 2 a.m. and 25 degrees below zero, that is no time to be thinking about what to do."

Stoltenow continues, "Provide windbreaks, fences, tree lines or hay bales. Hypothermia probably kills more calves in the first two days of life than any other thing. It leads to more problems. He may not be able to absorb colostrum as well and that makes him more susceptible to scours or pneumonia."

There is also the danger of frostbite. "If they lose the tips of their ears or their tails to frostbite that is one thing, but if they start losing their hooves it is disastrous."

(AG)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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Personalize Crop Insurance Decisions

Monday, 03/08/2010 6:18 PM

ANAHEIM, Calif. (DTN) -- There's no one-size-fits-all policy to help farmers insure their crops from risk.

Randomly pick any five grain and soybean producers across the U.S., and you will likely find five rational, but very different approaches to risk management.

Irrigated corn grower Curt Friesen of Nebraska needs protection to aggressively forward price crops up to two years in advance. In central North Dakota, some of Mike Clemens' 2009 corn remains buried in 6-foot snowdrifts, so he needs security for a water-logged spring planting.

Value shopper Anthony Bush of Ohio emphasizes affordability, so he can return to the low deductible, 80-percent coverage levels he used to buy on corn and soybeans.

Lyle Pugh of Virginia wants enough protection to cover his fixed costs, just in case another hurricane or other weather disaster hits. Contrast that goal with dryland farmer Terry Swanson of Walsh, Colo., who needs a drought defense for years when his land receives less than its average 15-inch annual rainfalls.

While they have different risk management needs, they all look carefully at how crop insurance can be an important tool for them.

Crop insurance sign-up for spring-planted crops ends for most of the Grain Belt March 15. Revenue price guarantees are likely high enough to cover most growers' production costs, with corn at $3.99, soybeans at $9.23, wheat at $5.43 and sorghum at $3.90.

But the kind of revenue coverage growers ultimately choose, and the deductibles they are willing to bear, will depend on each farm operator's unique circumstances.

Here's a sample of five farmers and their crop insurance philosophy for 2010.

CURT FRIESEN, HENDERSON, NEB.

Friesen radically revised his marketing plan in 2008 when corn spiked to $8. Local elevators and a half-dozen ethanol plants offered no bids more than a year out. Not wanting to miss a rare price opportunity, the irrigated corn grower dove directly into futures contracts, selling up to two years out.

"The margin calls made me uneasy, but as long as I wasn't speculating, it wasn't a problem for me or my lender," he said.

Friesen typically sells 70 to 80 percent of his corn and soybean crops prior to harvest, an aggressive plan designed to capture seasonal highs most years. Once sold, he scouts for good basis bids as they occur.

His main risk is that he won't get enough yield to offset his sales, so he typically buys an 85 percent, Revenue Assurance (RA) policy with a harvest-price option upgrade that triggers if prices rise next fall. Some years he also buys a separate hail policy, but his average corn yields jumped from about 200 bushels to 240 bu. in the past three years. Even hail damage assessed at 20 percent last year failed to generate a claim once the crop was harvested, so he may drop the expensive coverage this year.

Outlays for RA coverage aren't cheap, but "if we didn't have crop revenue insurance to back up our input costs today, it could be the downfall of your farm," Friesen said.

MIKE CLEMENS, WIMBELDON, N.D.

Saturated soils are nothing new to corn grower Mike Clemens, who farms 90 miles northwest of Fargo on the outskirts of the Red River Valley. Unprecedented flooding delayed planting in 2009, and left the state with standing corn at Christmas. Clemens still needs to harvest 20 percent of his total acres, and expects spring work to be delayed. During the winter, outer corn rows acted like snow fences, he said, accumulating drifts six foot deep. Inside rows have snow 2 to 3 feet deep, but ears 20 to 36 inches off the ground.

"Now it's a balancing act to wait for snow to shrink but soils to stay frozen long enough to support harvest equipment," he said.

"The situation probably isn't as bad as 2008, but it might be second place," added Clemens. "Plus, we have one or two more months of precipitation that could come our way before planting."

Traditionally, he's purchased prevented planting coverage that pays on 60 percent of his guarantee. This year, he's contemplating buying up to 70 percent prevented planting protection, but must weigh whether that extra security is worth a 12 percent increase in premiums.

ANTHONY BUSH, MOUNT GILEAD, OHIO

Value shoppers like Bush will welcome a 10-percent to 30-percent reduction in revenue insurance premiums in 2010. Thank calming commodity markets and the government's "volatility" index for the rate relief.

Two years ago, when price volatility sent insurance rates soaring, Bush was forced to take cost-saving measures. Instead of buying his normal RA or Crop Revenue Coverage (CRC) at 80 percent, on corn and soybeans, he let coverage dip to 75 percent levels. That's exposure he hopes to correct in 2010.

New pricing formulas for revenue insurance products like RA and CRC should run 10 to 15 percent lower this year; Group Risk Income Protection (GRIP) plans may show a 35 percent cut in some counties, or a $20-per-acre savings.

Bush already slashed premiums in half by opting to insure much of his 1,400-acre farm in enterprise units, which lumps together total crop acreage in a county. All of the land he farms is within an 8-mile radius from home anyway, so he doesn't have the natural hedge of a grower spread out over a larger geography.

Another surprise feature to Bush's crop insurance coverage has been quality adjustments. A widespread vomatoxin outbreak in his area led to a 45 percent adjustment in his 2009 corn yield.

That won't cover all of the dockage grain buyers imposed, but it will help, he said. "My most devastating year was a 39 bu. wheat crop," he said. "I've bought crop insurance ever since, and there have been years when it saved my hide."

LYLE PUGH, CHESAPEAKE, VA.

Fertilizer's 2007-08 roller coaster ride persuaded Pugh he needed revenue insurance products to adequately cover his input costs. It's a strategy he's sticking with in 2010: While fertilizers have crashed to half their 2008 levels, input costs still hover at historically high levels compared to pre-2006.

"I estimate my cost of production and insure to that level," the 1,800-acre corn, soybean and wheat producer said. In addition, when he pre-sells a large part of his crop (as he did for wheat in 2008), he bumps up the coverage level to make sure he has volume to meet delivery.

Soils along the coastal plain show much more corn yield variability than back in the central Midwest, so Pugh can only take advantage of the big enterprise unit discount on his soybean acres.

"If we happen to get two dry weeks at the wrong time in summer, our corn yields can be a disaster," he said. He compensates for this by insuring his corn crop in optional units, which includes all of his crop by township section and makes it easier to qualify for claims.

The cost of insurance still remains a constraint for Pugh. He'd like to be able to afford 85 percent coverage, instead of the 70 or 75 percent he's limited his budget to in recent years. Living only 30 miles from the Atlantic Ocean means threats of fall hurricanes are real.

"I'd much rather take a 15 percent loss for two years, than a 30 percent hit in one year," he said. But with the price of coverage, he buys enough protection "to keep him in business."

TERRY SWANSON, WALSH, CO.

When you farm in the epicenter of North America's Dustbowl, you have to master risk management before it masters you. Swanson's dryland fields normally average only 15 inches of rain annually, so he rotates with water-sipping crops like grain sorghum and plants only three crops every four years. Recently, the Risk Management Agency has indicated it may even restrict insurance to growers who give their fields a longer fallow, a policy shift he thinks would be a major blow to producers.

"Your worst-case scenarios were years like 2000 to 2006 where it just didn't rain," Swanson said. "You put all the inputs in, and if you've insured to the 70 percent level, you keep getting behind." Your claims just don't make up for the 30 percent loss you've taken year after year, he said. Meanwhile, his 10-year actual production history on corn has slipped from about 65 bu. in the 1990s to about the mid-40 bu. today. County transition (T) yields hover in the high 20s or low 30s.

When policies carried high yield guarantees and before he built his own history, Swanson used to buy GRIP for his corn coverage. Now he opts for 70 percent RA for corn and CRC on his milo: The policies are nearly identical, but for technical reasons may carry significantly different rates. He opts for the less expensive option as a result.

"Insuring at the 70 percent level is about as much as I can afford to pay. You try to cover a catastrophic situation, but it's a balancing act with cost," Swanson said.

* * * *

Join a free DTN Webinar March 11 at 8 a.m. Central reviewing your Crop Insurance Choices for 2010. Risk Management Agency Deputy Administrator Tim Witt, University of Illinois economist Gary Schnitkey and farmer-crop insurance agent Steve Pigg review your options. Register at http://about.dtnpf.com/…

Marcia Zarley Taylor can be reached at Marcia.taylor@telventdtn.com

(ES/AG)

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

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