CQ Perspectives May 2011

8/4/2019 CQ Perspectives May 2011

1/4C r o p Q u e s t P e r s p e c t i v e s

OFFICIAL PUBLICATION OF CROP QUEST AGRONOMIC SERVICES, INC

C r o p Q u e s t P e r s p e c t i v e s

Ethanol

Production

Helps Keep Corn

Prices Strong

Volume 21 Issue 3 May 201

The driving question for farmers right now is: How long will cornprices stay high? And, Will corn prices stay high enough to offset theskyrocketing cost of production?

Whether corn prices impact ethanol production or ethanol produc-tion impacts corn prices is an ongoing debate. However, it is clear thatncreasing demand for alternative fuels and projected $5 per gallon

gasoline prices have pushed corn prices up globally.The global demand for corn - for ethanol, livestock feed and human

consumption - combined with poor harvest in many areas of the worldhave pushed corn stocks to near record lows.

Corn stocks in all positions at the end of 2010 stood at 6.52 billionbushels, below what traders expected. To keep stocks at current levels,corn producers will need to average 160 bushels per acre, if they plant92.2 million acres.

According to veteran commodities marketer, Mick Lewis,President, Ft. Lewis, Inc., in Dodge City, KS, corn is a solid croppingchoice for this year. When you contract 4.5 billion bushels of corn toethanol production out of the 13+ billion bushels were projecting togrow in 2011, its a solid market driver. However, just like all thingsthat look too good to be true, the ethanol market has its risks.

Lewis adds, The big risk farm-ers face is a downturn in the

economy due to high fueland food prices. We

could see an economicdownturn later in theyear like we saw in2008. The problemwe saw there andcould possiblysee in 2011 wasthat the price forcorn dropped a lotfaster than the in-

put costs to raise thecrop did. If the price

of crude oil suddenlydrops, the higher cost of

ethanol production will come into play andwill hurt corn prices.

For that exact reason Lewis is workingwith producers to buy fuel and fertil-izer for the next three years right now.Were doing this because we are expect-ing the worst, but hoping for the best.However, we feel this is a solid move toassure future protability.

Troy Dumler, a Kansas State Universityeconomist located in southwest Kansas, says there isno doubt the combination of ethanol and high gasoline prices has instrumental in pushing corn prices up and keeping them up goingthe 2011 season.

Corn acres were up last year, and I expect more acreage this yeHow much of an impact ethanol demand will have on increasing cacreage is open for debate, but when you are using 35%- 40% of ttotal crop for ethanol, clearly there is an inuence on price.

If ethanol wasnt a factor and we produced the same amount of we produced the past 3-4 years, prices would be at historic lows, oaround $2.00- $2.50 a bushel, Dumler contends.

The rate of increase in ethanol production has slowed in recent in response to high corn and grain prices over the past two to threeyears. I dont really see much expansion in ethanol production la

because of uncertainty surrounding grain prices.The other determining factor is oil prices. These prices will demine overall ethanol protability. The price of the end product wildictate how much ethanol producers can spend on corn and remaiprotable, Dumler says.

Can I say with any degree of certainty that ethanol will remaincompetitive with gasoline in either the near or distant future? Id hto answer, no, because there are just too many factors involved antoo much volatility on the side of both gasoline and ethanol priceshe says.

If gasoline prices continue to increase, Dumler says he expects sumers will do the same thing they did last time prices jumped to gallon they will cut consumption. If that happens, both ethanol a

Continued on Page


2/4C r o p Q u e s t P e r s p e c t i v e s w w w . c r o p q u e s t . c o

2011 Cotton DemandCareful Farm Plannin

Cotton prices are high, acreage is up, seedmay be scarce and the King of Crops is expand-

ing outside its traditional boundaries.Mark Hatley, a Crop Quest agronomist in Dumas, TX, saysintentions are high for planting more cotton, but Mother Nature isntcooperating. We are really dry and have very low soil moisture. Ifweather patterns stay dry, I dont know whether we will plant as muchas some people think, Hatley says.

A big issue in west Texas and across the Cotton Belt is the availabil-ity of seed not so much the overall supply, but the supply of specicvarieties. The end result is many growers are going to be plantingvarieties with which they have no experience growing.

Having to go to the second, third or fourth choice of cotton varietiescan leave a grower not knowing exactly what to expect in terms of wa-ter utilization and susceptibility to a number of stress-related problems.

Finding early maturing varieties with the growth characteristicsand yield potential has been a problem. Its going to be critical for us

to properly manage these unfamiliar varieties, Hatley says. We canmanage earliness by limiting water, increasing water, or with growthregulators. Knowing what youre doing with these different varietiesis going to be a challenge for some growers in west Texas, Hatleystresses.

We dont have a long growing season here, and its going to be criti-cal that growers stay on top of things throughout the season to be surethey can get the crop in and get it stripped on time, the Crop Questagronomist concludes.

Its also going to be critical to keep weed competition down, he adds.On our irrigated cotton, we are doing a lot of pre-watering to get readyfor pre-plant herbicides. By the rst of May, we will be planting cotton

if we can keep elds clear of weeds and get enough subsoil moistureto plant.

"As long as we utilize these herbicides well ahead of planting, theherbicides of choice are 2,4-D and glyphosate. So far, we havent seenmuch resistance to glyphosate, but we know its coming," Hatley says.

How much cotton will be planted in 2011 is still just a guess. TheUSDA Crop Planting Intention Survey released March 31, called for12.6 million acres. Cotton leaders are quietly projecting more than 13million acres across the cotton belt. This has led Oklahoma, Crop QuestAgronomist Howard Bartel to tell his growers, If youre not abso-lutely sure you have the pickers lined up, dont plant the crop.

If we plant as much cotton as growers intend to plant, getting itout of the eld on time and nding a place to put it are going to be

important concerns, Bartel says.The seed issue is also a problem in Oklahoma. I urged allmy growers to buy their seed back in December. Those whowaited until January or February found supplies picked over,and those who waited until the last minute may not nd seedof any variety. Those who bought early will be OK, if whatthey ordered gets delivered. Those who waited may getseed they have little or no experience growing, Bartelnotes.

Bartel works out of Weatherford, OK, which is inthe west central part of the state. If they get enoughmoisture to plant cotton, they are looking at a 25% increase in drylandacreage and as much as 50% increase on irrigated cotton.

Im expecting to see a lot of cotton planted double crop behindbarley and wheat under pivot. You better manage it aggressively and

you better know what youre doing, or you might not have a crop toharvest, Bartel cautions. Even with good management, sometimesplanting cotton in a double crop situation comes down to, ' How luckydo you feel?' he adds.

We really need our growers to go into the planting season with aclean eld. We have a couple of weeds that are tolerant to glyphosate,so we need to manage these weeds from that standpoint. Moreimportantly we need to keep weed competition down to keepyields up, so farmers can capitalize on the high prices they canget for cotton, Bartel explains.

The veteran Crop Quest agronomist says he is a stickler forearly season insect control. Between emergence of cottonand match-head square, you can be sure Im going to beencouraging my growers to make multiple applicationsfor early season insect management, Bartel states.

I want to get early season fruit set, load that plantup early, and let it go, he says. "Keeping cottonweed-free and insect-free are critical issues in gettingthe crop up and growing quickly, he adds.

This will be a year in which growers will need to plan ahead beforeplanting their cotton crop. A good consultant, with experience grow-ing cotton, is clearly going to be a major asset for the 2011 croppingseason.

Howard

Mark H

gasoline prices will be impacted, he adds.From the farmers decision-making

perspective, I think the best route to take is tokeep track of current market prices and whatexpectations are heading into the next year.The market is still going to play the criticalrole, not whether ethanol blender credits arein place or not.

Going into the 2011 growing season, theethanol industry, especially in the U.S. ap-

pears to be on a winning streak.In the rst quarter of 2011, the EPA just an-

nounced a decision that allows for the expandeduse of E15 gasoline (gasoline blended with up to

15% ethanol). With this ruling, the EPA has effectivelyexpanded the size of the market for ethanol-blended gasoline by allow-

ing the use of E15 in cars manufactured after 2001.According to many industry experts, ethanol production at 2

levels puts production very near maximum capacity. Most ethaplants are running full out and much of the commercially viabcapacity that dates back to 2008 is back on line.

The K-State ag economist says ethanol may play a role in afarmers decision on whether to plant corn, but not the only ro

We are in such tight supply for several commodities right n not just corn. It will be a host of factors that will likely inuewhat farmers plant, Dumler notes.

If U.S. farmers plant the 92.2 million acres the USDA estimtheir Planting Intentions Survey and growers have a good yearwise, that wont make much of an impact on carryover stocks corn. There is demand for cotton and soybeans, which also havsupplies globally, and that bodes well for continued high corn Dumler concludes.

Ethanol Production ... Continued from Page 1


3/4C r o p Q u e s t P e r s p e c t i v e s

Harvest:Do It Yourself or Hire Custom Cutters

With commodity prices near record highs, many crops in 2011 shouldmore valuable than in recent years. Making sure you get them out of theds as efciently and timely as possible can be a headache especiallyen other critical management steps are ongoing like irrigating, sprayingeds and other eldwork that needs to be done. The question then is, do Irvest the crop myself, or do I hire it done?Crop Quest Agronomist Dwight Koops says some growers like to harvestir own crop because they have control over when their crop is harvested.r others, cost and availability of custom cutters is an issue.If a farmer has always had his crop custom cut and does not own harvestuipment, I would encourage him to continue to use a custom harvester,ops notes. A producer needs to weigh the cost of purchasing and main-ning expensive equipment and manpower needs against hiring the crop, he adds.

OST ALWAYS A FACTOR

Kansas State University Ag Economist Kevin Dhuyvettercautions farm-to be aware of the differences in buying, leasing and renting combinesen calculating whether to use their own harvest equipment versus custom

mbining.Cost for custom combining of wheat for 2011 is expected to go up due togher fuel prices. Dhuyvetter says, Custom harvest rates tend to have aed rate per acre and an extra charge per bushel for yields above some xedel. It also includes a hauling charge per bushel. These custom harvestinges are projected to be up about 9% compared to 2010. Of course, farmerst harvest their own crops will also have highers costs, he points out.

These projections were made back in January, based on our best esti-tes of what 2011 fuel prices would be at harvest time, he adds. Subse-ently, he has built an economic cost calculator that allows producers toer their fuel prices and thus modify the January estimates. The calculator

n be found at: http://www.agmanager.info/farmmgt/machinery/Tools/stomRates.swf.

ENTING COMBINES AS AN OPTION

Mark Gabrick, Director of Marketing for Machinerylink in Kansas City,O, says growers need an option to leaving a piece of expensive equipmenting in the farm yard for most of the year.

His company provides wheat and grain harvest equipment to both farmersd custom cutters. In 10 years of business, Gabrick says time is always anue, and he adds they have never missed a deadline on delivering a com-

ne when its needed.The whole concept of Machinerylink is framed around the combine beinge of the most expensive and least utilized pieces of equipment on the farm.e give growers access to the latest harvest technology without investinga $300,000 to $400,000 piece of equipment that wont be used 10 to 11onths a year, Gabrick explains.

"The growers can have full freedom of operating the combine howethey like. Typically, a thousand acre wheat operation would rent a comfor 15 days, and they can use the equipment however they chose durinthat time frame. If it takes longer, there is a day-to-day rate that will apGabrick explains.

"The grower can do things pretty much on his schedule and not worabout the cost in either money or time to winterize, store, maintain, reor deal with the year-around headaches of owning a combine," he stre

Often the company meets with custom cutters over the winter and thdevelop a use plan. The custom cutters typically know about how manthey will cut and a contract is made for the equipment needed. If the ccutter picks up a last minute customer, they can add equipment as nee

USED COMBINES AS AN OPTION

Depending on the size of the operation, if you can buy a used comfor a reasonable price and you have the labor to harvest your own cropmaybe its a worthwhile investment. On the other hand, buying new ement is not cheap, and its going to sit around the farm unused for mosthe year, Koops states. All of those costs need to be evaluated to deci

it is a good investment.LABOR CAN BE AN ISSUE

Finding and managing labor is often difcult and almost always cua farmers time, usually when multiple crops need attention. Tying uppart of that labor is a big factor in whether to cut the crop yourself or hsomebody to harvest it for you, Koops adds.

At the end of the day, whether to have your wheat crop custom comor invest in the equipment to do it yourself comes down to some fairlyeconomic considerations.

While that might sound obvious, I have seen folks compare the corenting a combine per acre with the cost of hiring a custom harvester aobviously it will be less, but that doesnt necessarily mean it is the moeconomical when all costs are accounted for, Dhuyvetter stresses. Bline, make sure you are comparing apples-to-apples as you consider

alternatives.TIMING IS A CRITICAL FACTOR

Timing is a critical issue with wheat, because when its ready to be it is about the same time a farmer is irrigating summer crops, side-drecorn, and maintaining fallow ground. A big part of how well a farmesatised with a custom cutter often is centered on whether the cutter cget there when the farmer needs him there, Koops notes.

Timing, labor and the economics of owning equipment are the majodeciding factors when choosing to do your own harvesting or hiring cucutters for the job.


4/4

Mission StatementCrop Quest is an employee-owned company dedicated to providing the highest quality agricultural services for each customer. The quest of our network

professionals is to practice integrity and innovation to ensure our services are economically and environmentally sound.

PRSRT STD

US POSTAGE

PAID

DODGE CITY K

PERMIT NO. 43

Employee-Owned & Customer DrivenCrop Quest Agronomic Services, Inc.

Main Ofce: Phone 620.225.2233

Fax 620.225.3199

Internet: www.cropquest.com

[email protected]

Crop Quest Board of Directors President: Ron OHanlon

Director: Jim Gleason

Director: Dwight Koops

Director: Cort Minor

Director: Chris McInteer

Director: Rob Benyshek

We are approaching the time of year when post-emerge herbicide treatments are applied to ourrow crop elds. We are all aware that resistance

is a growing issue in weed control. Resistanceis a problem not conned to just one specicchemical, or mode of action. There are manyconrmed cases of herbicide resistance fornumerous chemicals, and resistance is possiblewith any herbicide or mode of action if notmanaged properly.

Over use is probably the main culprit forbuilding resistance. Sub-lethal doses andapplying a single mode of action are otherlarge contributing factors to buildingresistance. We have control over all these

factors, and it is in our best interest to monitorand manage the use of all available herbicidechoices.

As you choose the best program to control weeds in youelds this season, follow a few simple guidelines:

1) Always have at least two compatible modes ofaction in the tank.

2) Remember, Dose Kills, so use proper rates.

3) Look at historical records and avoid using the saproducts on the same elds year after year.

4) Use proper adjuvants, additives and carriers forgood coverage and enhanced efcacy.

The same guidelines should be followed when treating inpests. Insects can become resistant to pesticides just as weebecome resistant to herbicides.

Consult with your Crop Quest Agronomist for assistancemaking the best pesticide choice for your elds this summand reap the benets of being good stewards of the producavailable.

Dwight Koops- Regional Vice President

Ron and Mary O'Hanlon with U.S. CongressTim Huelskamp (center), First District Kans

Washington, D.C. discussing ag issues that ar

concern to our farmers.

CROP QUEST

WORKING FOR YOU

CQ Perspectives May 2011

Documents