Fall Markets

Mon. Aug 29, 2016 3:32 PM


By Victoria G. Myers
Progressive Farmer Senior Editor

By the time this year's fall-born calves are being weaned, the cattle industry will be looking at prices 5% to 15% lower than they are today -- think somewhere between $100 per cwt to $120 per cwt for 500-pound feeders. It's the continuation of a downward trend not nearly as remarkable as the 40% to 50% drop producers endured during the last two years, but one that will likely plod along at a more predictable pace for the foreseeable future.

When it comes to markets, predictability at any level is a good thing. Oklahoma State University's Derrell Peel hinted the new reality will bring with it additional opportunity for those willing to take on more risk in the cattle business.

"You know, we had fun in 2014 and even in 2013 as we watched prices run up. But that is not the long-term reality of the cattle industry. We are back to doing business," the marketing specialist said.

He pointed out as revenue is under more pressure, producers will put renewed focus on managing the cost side of their businesses.

"That's not to say we ignore markets, or we don't look for opportunities to forward-contract. But you'll never know if something is an opportunity if you don't know your costs in the first place," Peel cautioned.

Costs include debt, and how much a producer is leveraged will be key to his ability to take on additional risk. The bottom line will not be as much market driven in the months to come as management driven.

"If a producer is not carrying a lot of debt and can afford to take more risks on the chance that prices will go up, that's one approach. Someone who is heavily leveraged, however, could be in a situation where one bad decision risks the viability of the operation. It's just really important to know how much risk you can stand to take as we move forward," Peel stresses.

RETAINED OWNERSHIP

One of those risks producers may soon be considering is retained ownership. On the positive side, Peel expects corn prices to stay level moving forward. While this would limit the value of stocker-based gains, it could make retained ownership at the feedlot level more attractive.

"Going to the feedlot with retained ownership is starting to look more possible than it has for most of the last couple years," Peel said. "It certainly has more potential in the next two to three years to be a good strategy for some producers."

Texas A&M Extension economist David Anderson agrees, adding: "When calf prices were at record highs, the advantage was in selling calves, pure and simple. But as they become cheaper, you always have to look at retained ownership as an option. Does it become a smart management decision again? I don't think we are there just yet, but I don't think it's too far off when we talk about strategies to maximize returns."

Retaining calves through the backgrounding, or stocking, level could be the riskier move in today's market, Peel explained. He said the value of putting on additional weight at the stocker level will be driven by the cost of gain in feedlots. Potential backgrounders will need to ask themselves if their grass is more valuable in producing another calf or in putting gains on stockers.

Anderson agreed the wild card going forward will be feed costs. "If feed costs are higher, then calf prices are going to be lower. Understand, we are in a market where the overall trend is for lower prices. You have to manage around that. If you have a lot of grass and cheap feed, you may be able to keep calves longer. It's just going to be an operation-to-operation call."

VALUE-ADDED CALVES

One area of cost always debated as calf prices slip is preconditioning. Texas' Anderson said a lower market usually means value-added programs will be more sought after by buyers.

"When we were looking at the fewest beef cattle in 60 years, anything alive and walking brought high prices. As numbers build, buyers can be more choosey. Those producers who have done more to differentiate their product will tend to see rewards," he said. That means a program including weaning, vaccinations and castration should be worth the expense.

FORWARD CONTRACTS

Of the last seven years, five have favored forward-contracting calves over spot-pricing them. Looking toward the end of 2016 and into 2017, Peel believes the industry is once again looking at a scenario where forward contracts are likely to bring the higher overall average price. He adds, however, it may be challenging to find buyers in an environment where everyone assumes prices will continue to fall. For that reason, he likes the idea of splitting calves into more than one marketing group to grab unexpected bumps in the market.

"I think we'll see little run-ups in the price. All else being equal, forward-contracting is potentially more attractive. But it's not a slam dunk by any means," he said.

Peel encourages producers to consider a forward contract on part of their calf crops looking to cover production costs. This, then, becomes a risk-management plan. On the remaining calves, look for spot-pricing opportunities throughout the year, always making sure that holding back calves isn't costing you more than you could make selling them.

CULL COW PRICES

Fall calvers who will cull cows in the spring can expect prices for that segment to be stable. Peel said this part of the market traditionally has the most dramatic seasonal price pattern of any, a trend he expects to continue.

"The fall calvers will make culling decisions in May and June, which is the seasonal peak for cull prices, typically. If cows are thin, you can turn them out on grass for 30 days to put on some additional pounds, if that is to your advantage. Typically, those prices will stay strong through the summer," he said.

GROW OR STAY

As prices trend down, will producers continue to hold back replacements and expand their herds? Peel said every operation is different, but he's reminding cattlemen that they ultimately are selling grass. It's time to ask where the grass has its greatest value in today's market.

"Is my grass worth the most if I'm selling it through a weaned calf or putting weight on stockers? Maybe it's worth more for hay production or even a hunting lease. When I'm asked if a producer should still be expanding their cattle operation, the real question is do they have the capacity to produce more, and how can they allocate that grass resource to receive the highest return in the market. The answers change over time and by circumstance."

Texas' Anderson said whether continued herd growth is in the best interest of an individual operation should be part of an overall management plan tied to production costs and future plans.

THE COST QUESTION

In light of high prices, it can be easy to focus on the income side. Costs, however, have been just a few cents behind, meaning profit levels may not have been as remarkable as it seems.

David Lalman, Oklahoma State University animal scientist, said cost per cwt of calves produced has accelerated at a rate of $5 annually, calf prices at an average rate of $5.25.

Those figures come from recent SPA (Standard Performance Analysis) data for the Southern Great Plains (Texas, Oklahoma and New Mexico). The numbers also reflected the cost to maintain beef cows increased at a rate of $22.45 per cow each year. Figures go back to 1991.

Anderson stressed, however, that averages don't tell the whole story. Variation in profitability among operations can be wide and dramatically impact profits.

A 2015 study looking at 79 Kansas cow/calf operations, for example, found one-third of the ranches averaged $415.03 more net return per cow than the lower one-third.

"When comparing the characteristics driving differences in profitability between the high-third and the low-third groups, they found that 67.8% of this difference was due to lower cost of production in the high-profit group," Lalman reported. The remaining 32.2% difference was due to gross income per cow.

The higher profitability herds had slightly higher average weaning rates, weaning weights and calf sale prices.

Texas A&M's Anderson said it's not unusual to hear that cow/calf producers don't know their true cost of production. He believes, however, that most have a big-picture number in mind, though it may not always include everything it should.

"I do think many times we underestimate our true costs of production. This is particularly true when we don't put in a cost for depreciation of equipment," Anderson said. "It's easy to forget something when you're not writing a check for it all the time. Ultimately, though, it's fair to say those producers who know their true costs do a better job of making management and marketing decisions."

He added having a profitable operation is about more than the economics; it's about knowing who you are and what you do well.

"Once you know that, then you know what your market is. Everyone has a different strength. It has to do with where they are based and their management style," Anderson said. "And there is nothing wrong with that. You have to make that decision, and then you can set your goals and improve. Target things that make sense for your operation.

"At the end of the day, cow/calf people get paid the most for having calves to sell. So whatever technology or ranch improvements may give you more calves to sell, those are probably good places to look to improve, because that's most likely where your greatest return is going to come from."

(CZ/AG)

DTN Market Matters Blog

Mon. Aug 29, 2016 12:00 PM


By Mary Kennedy
DTN Cash Grains Analyst

With near-record corn and soybean crops predicted in the U.S. and big crops also expected in Canada, railroad companies in both countries are gearing up for what looks to be another high-volume harvest this fall. The question on many farmers' and shippers' minds likely is: Can the railroads handle it?

The major railroad service disruptions in 2014 are still fresh for many farmers and shippers and likely is part of the reason for their concern about rail movement this fall, as a large harvest looms on the horizon.

In addition to the near-record U.S. harvest for corn and soybean crops estimated by USDA, Statistics Canada said even though some of Canada's crops will produce less than they did in 2015, Canadian farmers are still expecting production of wheat, barley and lentils to increase in 2016.

In the U.S., as of January, BNSF had about 4,800 furloughed due to slowing demand for rail cars by the agriculture sector, but also due to a large decrease in demand for coal cars during that month compared to the prior year.

A source knowledgeable with BNSF told me that the number of furloughed employees is now at about 2,000. He said BNSF has invested over $15 billion the past few years, keeping network infrastructure in optimal condition while also staying ahead of customers' freight service needs. Also, reduced coal and oil traffic has resulted in a significant amount of rail capacity that agriculture can use.

According to the most recent service update, the current shuttle (110-car unit) trips per month (TPM) is at 3.0, and most shippers plan around 2.5 to 2.8 turns. My source told me that BNSF is currently running 130 grain shuttles, a record for this time of year, and they can "scale up" some more if demand warrants.

Secondary shuttle freight costs have soared this past week, adding 25 cents to as high as 59 cents a bushel (at current cost) to already cheap cash prices. On Thursday, shuttle freight rose from the prior day with prices for September split into four weeks at $900/$1,100/$1,400/$1,900 per car. October costs were at $1,750/$2,200 per car split for the month. Remember, these costs are on top of tariff rates by the railroads, which sometimes increase in October. The tariff rate per car for a shuttle from Grand Forks, North Dakota, to the Pacific Northwest is $1.51 per bushel.

Freight costs play a large part in basis determination for an elevator. Note that corn basis in North Dakota, where most shuttles of grain flow to the PNW, ranges from a low of -95U cents to a high of -46U cents, according to DTN's regional average basis on Aug. 26.

Angie Setzer, vice president of grain at Citizens Elevator in Charlotte, Michigan, told me that while they do load cars normally, "we don't have too many concerns when it comes to not being able to ship the needed bushels because we are sitting in one of the few areas affected by drought this year. I know in Iowa there are some concerns, but so far, they have been told the cars will be there when they need them. Much of that, of course, will depend on whether or not harvest happens in a two-week compacted time frame or is spread out a bit. If it happens quickly, I foresee a lot of ground piles in our future until the railroad performs!"

CANADA RAILROADS ALSO GEARING UP FOR BIG HARVEST

DTN Canadian Grains Analyst Cliff Jamieson said that "Statistics Canada released its first estimates of Canadian crop production on Aug. 23, which showed a large prairie crop is on the way. This report, which is based on July producer surveys, tends to be conservative. The canola crop is pegged at 17 million metric tons, which is 5.5% above the five-year average but well below industry expectations. Canada's all-wheat production (including durum) is estimated at 30.5 million metric tons, only the second time in 25 years that the 30 mmt level has been cracked."

The topic of grain transportation remains one of the top issues for prairie agriculture as the industry looks to what should be a large prairie harvest, added Jamieson. "Both railways, The CP and CN, have made bold statements that they are prepared to move the 2016 crop."

The Canadian Pacific published a letter on their website to federal ministers of transportation and agriculture, stating they are "well-positioned and ready to move this year's western Canadian grain crop, which is forecast to be significantly bigger than the five-year average, to market." (http://goo.gl/…)

Canada's two railroads performed well in the 2015-16 crop year ending July 31, said Jamieson, but the Ag Transport Coalition, made up of prairie commodity groups which are involved with 90% of the grain movement originating from Western Canada, reported that:

-- 88% of the hopper cars ordered over the 2015-16 crop year were spotted in the country for loading in the week wanted;

-- 8% of hopper cars were spotted one week late;

-- 1% of the hopper cars were spotted two weeks late, and;

-- 3% of the cars ordered were outstanding at year-end.

"Prairie producers and industry are not satisfied that enough has been done, with the railroads' failure to move the record crop of 2013-14 at an estimated cost in the billions of dollars in lost sales and producer income still fresh in many minds," said Jamieson.

Jamieson noted that prairie grain transportation was on the agenda when Federal Agriculture Minister Lawrence MacAulay and Saskatchewan MP Ralph Goodale met with 19 agricultural stakeholders in a meeting in Regina this week. "Every effort that can and could be taken will be taken to ensure that the grain is moved more efficiently than it was (in 2013-14)," stated MacAulay. The issue of increased data availability and transparency is one issue that was reported to come up in many of the presentations. The Saskatchewan Association of Rural Municipalities has called for harsher penalties imposed upon railways in the event of failure.

In the U.S., all Class 1 railroads still provide thorough weekly service updates as directed on Oct. 8, 2014, by the Surface Transportation Board. On Dec. 30, 2014, the STB proposed that the weekly service updates become permanent, but would listen to opinions from railroads and shippers. As of this date, there is no final decision on whether to change the current reporting or leave it as is. Also note that in the U.S., there are no penalties for non-performance as there is in Canada.

The success of the railroads both in Canada and the U.S. will indeed be dependent on timing of the harvest and may have different results for different railways.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(AG/SK)

DTN Fertilizer Outlook

Mon. Aug 29, 2016 9:41 AM


By Ken Johnson and Karl Stenerson
DTN Fertilizer Columnists

AMMONIA

World ammonia prices moved lower through August. Export tons from Yuzhnyy, former Soviet Union (FSU), traded at $210-$220 per metric ton early and fell to $190-$200 late. (All prices in this column are wholesale.) Export ammonia prices from Middle East suppliers plunged from $295-$315 early to $225-$270 late. In the U.S., Yara and Mosaic agreed on the contract price for deliveries of imported ammonia in September at $240 per metric ton cfr (cost and freight), which is $30 down from the previous month. In the mid-month the OPZ, FSU, ammonia urea plant went down due to lack of gas supply. Also, the Sorfert, Algeria, plant remains down for a major turnaround which is expected to be completed in early September. Late in the month, Mitsubishi sold 7,000 tons of ammonia to CPDC in Taiwan at a price of $280 cfr, which was $27 below previous business. Despite the unexpected ammonia plant closures, the sentiment in ammonia markets continued to be widely bearish. We look for world ammonia prices to run flat to lower in the short term.

Domestic ammonia prices were flat through the month, with ammonia selling at inland terminals at $385-$405 per short ton both early and late in the month. Oklahoma producer prices were slightly lower at $300-$310 early and the low end of the range falling to $290 late. There is likely to be substantial new production coming on stream at Waggaman, Louisiana. For the short term, we expect domestic ammonia prices to run flat with an undertone of weakness.

UREA

Through August, world urea market prices firmed moderately. Early in the month, Yuzhnyy prilled prices traded in the $175-$181 range and moved up to the $184-$186 level by month's end. Middle East granular priced also firmed, moving from $162-$186 to $184-$193. Late in the month, India ran a small tender taking just 120,000 tons, which did little to firm the market; even so, the price was around $15 higher than what was paid in the last tender. While India offers little demand to the market today, a positive sentiment is that China chose not to compete, and their export volumes are significantly down on last year because of the lower export prices. Egyptian granular prices traded up to $200 fob (free on board -- the buyer pays for transportation of the goods), largely on the back of the tightness in Yuzhnyy as OPZ remains down and cannot fulfill August commitments. Late in the month, Sorfert, Algeria, reported the sale of 15,000 tons to a trader for September shipment to Europe at $202 fob. There is still concern in the market that prices will soften further out as Algerian and Egyptian production comes back on stream. There are, however, considerable shorts to cover for Europe and this may well help to prevent prices sliding back below the $190 fob Egypt level seen several weeks ago. For the short term, we look for world urea prices to run firm but flat.

Early in the month, NOLA (New Orleans, Louisiana) urea barge prices were trading in the $170-$180 range and moved up to the $184-$193 range by month's end. Late in the month, prices went up as high $199 but then fell back. End-user demand remains seasonally slow, but some large wholesalers are needing to come to market to get product in place for the fall wheat preplant run. Low crop prices are also weighing on farmer attitudes. For the short term, we look for domestic urea prices to run steady to slightly higher.

UAN

In early August, the CF UAN fill program came out higher than many expected for NOLA barge product, around $145/32%. Response was very limited for those numbers and NOLA UAN barge prices subsequently fell $5 through August, trading in the $135 to $140/32% range as of late. Interior demand for UAN has been light, besides some buying ahead of wheat preplant, and most interior prices were off slightly with UAN tons in St. Louis now trading in the $175 to $180 range. Prices for competing forms of N are variable; ammonia prices are looking weak and urea prices are running flat. Also, natural gas prices remain well below $3.00 per million cubic feet (mmcf), keeping producer margins wide. We look for domestic UAN prices to run firm but flat.

DAP

World phosphate market prices were stable or lower in most countries through August, with the U.S. NOLA barge market the only one to have bucked the trend. Moroccan DAP prices were flat, remaining in the $340-$355 mt fob range. Early in the month, OCP, Morocco, sold a large volume of mainly MAP at $355 cfr for September shipment to Brazil. However, in the wake of the Moroccan sales, buyers took to the sidelines, showing little to no interest at $355 cfr for new vessels for September/October loading. In the Far East, traders seem to have started to go short, lacking confidence in the phosphate market for the remainder of the third and into the fourth quarters. There were reports of lower prices of just above $340 cfr secured for Chinese DAP in Pakistan, with an Indian tender late in the month awarded at $335 cfr. Prices for Russian MAP also came down through the month to the low $330s fob as prices in Brazil remain static at $355 cfr. The relative lack of appetite for DAP in India continues to hinder trade not just in this market but elsewhere. Importers are purchasing tonnage gradually and only when needed, keenly aware that unless India is taking considerable volumes, there is a significant surplus of supply over demand in the market. We look for world DAP/MAP prices to keep moving lower in the short term.

Domestic DAP prices at NOLA traded at $307-$311 early and gradually rose through the month with trading in the $325-to-$328 range late. Interior DAP/MAP market prices firmed over light demand as buyers who use product in the fall need to get material moving their way or risk having little to sell when fall farmer/dealer demand does finally appear. In the very near term, DAP/MAP prices could firm slightly, but given the world supply/demand balance, upside potential is limited at best.

POTASH

Domestic potash prices moved higher through the month. NOLA barge prices traded at $175 early and moved to $185-$188 late. Interior potash prices also moved higher, with prices in St. Louis posted at $210 early in August rising to $220-$235 by month's end. In the mid-month, producers announced a $20/ton price increase. Many wholesalers/dealers decided to accept consigned product at the price available before the announced price increase. Fall demand is approaching in many markets, and wholesalers/dealers decided to cover in some of their expected needs. At month's end, at least part of the newly increased asking prices for potash by producers was holding. For the short term, we look for domestic potash prices to run steady to slightly higher.

(CZ/AG)

Seed Pain

Fri. Aug 26, 2016 12:47 PM


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- Seed prices, and the companies that set them, have appeared stubbornly indifferent to the decline in commodity crop values over the past few growing seasons.

This past indifference -- and farmers' growing frustration over it -- may have changed, with some seed companies now re-examining their portfolios and pricing strategies.

Most of the larger companies are officially staying the course in 2017, but at least one brand, Dow AgroSciences' Mycogen Seeds, is throwing their old pricing model out the window for next year. For some smaller, independent companies, the answer is to trim the fat from their seed portfolios and brace for another lean year, in solidarity with their customers.

A STUBBORN INPUT

Before the advent of biotech traits, corn and soybean seed prices roughly followed the value of the crop -- when commodity prices were low, seed prices dropped to reflect it; when commodity prices rose, seed prices followed.

The development of genetically modified seeds, including herbicide-tolerant and Bt traits, in the mid-1990s disrupted that paradigm. Companies now had to seek returns on their multi-million-dollar biotech investments, regardless of grain prices, Tom Burrus, president of Burrus Hybrids noted. "Seed prices have gone up virtually every year since that time," he said.

The trend continued in 2016, even as commodity prices sank below many growers' breakeven points. In an annual survey of its growers, Granular, a farm management software company, reported that 2016 seed costs dropped only 1% from 2015 prices.

MYCOGEN MIXES IT UP

The trait-driven pricing strategy has dominated the industry for at least a decade, said Damon Palmer, general manager of Mycogen Seeds. "We're walking away from that," he told DTN. "We've developed new regional pricing zones, using data points on hybrid yield and performance from over five years. We're really trying to understand where each hybrid performs well and where farmers would see a return on investment."

The new value-driven pricing strategy will only affect the brand's corn line-up in 2017, Palmer said.

When growers examine their Mycogen corn options this fall, they'll find a streamlined system, he added. Within each regional pricing zone, farmers will find a maximum of eight different price points, down from upwards of 40 in the past. Those prices will reflect the regional value of each hybrid for a farmer -- and not necessarily the traits in that hybrid, Palmer said.

"For many farmers, having more traits doesn't necessarily mean high-producing hybrids, but that's usually what you'll see in pricing," he said. Mycogen will bring 30 new hybrids comprised of different trait offerings to the market this year, Palmer said. "But the pricing will be based on how that hybrid itself performs in that regional area and yield goals expected in that region, regardless of the trait package" he explained.

To calculate this new pricing strategy, the company analyzed five years of yield and performance data, culled from both USDA and the company's own test plots. They also consulted and worked with Rockney Walters, a marketing professor specializing in pricing at Indiana University's Kelley School of Business.

OTHER COMPANIES' STRATEGIES

Mycogen isn't alone in hoping to ease farmers' input burden in 2017. As an independent seed company that doesn't answer to shareholders, Burrus Hybrids has some flexibility in setting its price points each year, Tom Burrus said.

The company's 2017 corn line-up features 18 hybrids with a lower price point, six with a higher price point, with the rest remaining static, he said. Their 2017 soybean portfolio features no higher prices, he added. Ten varieties will be priced lower and the rest will stay stable.

Burrus has focused on picking only the traits and seed treatments -- a growing profit tool for seed companies -- that had clear yield benefits, which meant trimming potential revenue for 2017, the company's president said.

"Our margins will take a hit this year, but we're managing for the long run," he said.

Other companies, such a Pioneer and Monsanto, are mostly staying the course in their 2017 seed pricing.

Drew Porter, Pioneer's director of product marketing in the U.S. and Canada, said the company has broadened the range of prices in its corn and soybean portfolio in the past few years but made no major adjustments to their pricing strategy.

Monsanto's product communication's lead, Jeff Neu, echoed that sentiment, and added that "most existing products' pricing will be flat to down" in 2017. Both Neu and Porter stressed their financing options for farmers, such as 0% interest financing programs and early purchasing cash discounts.

While seed companies readily discuss overall pricing strategies with DTN, they declined to give specific dollar amounts for either various price points or the range of prices a hybrid would sell for in a value-based system.

All the companies contacted noted that demand for non-traited conventional corn and soybeans has been stable, and none expressed any intention of increasing the availability of untreated soybean seed or offering untreated corn seed. "We get questions about untreated seed, but it's a good place to spend just 1 bushel of yield to gain back 2 or 3," Burrus said. "It gives better protection from disease or insects, you buy 90% treated seed, and we furnish 100% free replant. It's a dang good investment."

LOOKING AHEAD

Cole Hansen, Mycogen's corn portfolio marketing leader, insists that this year's corn pricing strategy is not a short-term reaction to lowered commodity prices, but a long-term pivot back to the value-driven pricing model.

"We believe this approach will continue whether corn is $4 or $7, because it's more simply about maximizing return on investment in each field," Hansen said.

Emily Unglesbee can be reached at Emily.Unglesbee@dtn.com.

Follow Emily Unglesbee on Twitter @Emily_Unglesbee.

(GH/CZ)

DTN Distillers Grain Weekly Update

Fri. Aug 26, 2016 12:26 PM


By Mary Kennedy
DTN Cash Grains Analyst

The DTN average weekly DDG spot price was unchanged for the week ended August 25 at $122 per ton. Of the 37 locations DTN collects spot prices from, eight showed increases of $2 to $5 from last week, five locations reported decreases of $5 and the balance of the prices were unchanged. A trader told DTN that prices are steady to higher as there seems to be more demand this week than last and there is more interest in export tons this week, which also has helped demand.

Other traders told DTN it was a very quiet week with DDG price movement flat to a little firmer across the board with most plants well sold in the nearby and prices are flat through December as well. Another trader added that prices were steady this week as domestic demand continues to be good thanks to cooler weather helping to bump domestic consumption while exports remain steady.

Some of the buying interest seen the past week is also due to buyers squaring positions ahead of month end. Spot prices could remain firm through next week ahead of the Labor Day weekend.

CIF NOLA bids were steady to higher Thursday compared to one week ago with August unchanged at $167 and September up 2 cents to unchanged at $161 to $167 per ton. Informa Economics reported Wednesday that results of an investigation by China into imports of U.S. distiller's dried grains is expected to come soon from the Chinese Commerce Ministry, according to signals from U.S. trade and industry sources. "The investigation this time, as it did in 2010, resulted in a downturn in U.S. DDG shipments to China. USDA data indicate DDG exports to China dropped 25% between September 2015 and June 2016. But the U.S. industry opted to expand their export efforts to other markets, resulting in a 6% rise in total U.S. DDG exports over that period. The decline in U.S. DDG prices has helped make U.S. supplies more competitive on the world market, helping to offset the impacts from a fall in the level of U.S. DDG exports to China. However, it's not clear the rise in shipments has made up for the value downturn in the shipments to China. Given that U.S. ethanol producers have access to corn priced cheaper than domestic Chinese supplies available to their ethanol producers, U.S. DDGs are still competitive in the Chinese market."

The value of DDG relative to corn for the week ending August 19 was higher vs. the prior week at 105.60% and the value of DDG relative to soybean meal was higher at 37.62% vs. 36.97% last week. The cost per unit of protein for DDG was unchanged at $4.88, compared to the cost per unit of protein for soybean meal at $6.83, which was lower vs. the prior week of $6.95.

CURRENT PREVIOUS
COMPANY STATE 8/25/2016 8/18/2016 CHANGE
Bartlett and Company, Kansas City, MO (816-753-6300)
Missouri Dry $135 $135 $0
Modified $65 $65 $0
CHS, Minneapolis, MN (800-769-1066)
Illinois Dry $135 $140 -$5
Indiana Dry $130 $130 $0
Iowa Dry $115 $120 -$5
Michigan Dry $135 $135 $0
Minnesota Dry $115 $115 $0
North Dakota Dry $110 $115 -$5
New York Dry $125 $125 $0
South Dakota Dry $110 $115 -$5
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
Kansas Dry $120 $120 $0
POET Nutrition, Sioux Falls, SD (888-327-8799)
Indiana Dry $125 $125 $0
Iowa Dry $115 $115 $0
Michigan Dry $120 $120 $0
Minnesota Dry $110 $110 $0
Missouri Dry $135 $135 $0
Ohio Dry $130 $130 $0
South Dakota Dry $110 $110 $0
United BioEnergy, Wichita, KS (316-616-3521)
Kansas Dry $118 $118 $0
Wet $40 $40 $0
Illinois Dry $145 $145 $0
Nebraska Dry $118 $118 $0
Wet $40 $40 $0
U.S. Commodities, Minneapolis, MN (888-293-1640)
Illinois Dry $130 $125 $5
Indiana Dry $125 $120 $5
Iowa Dry $115 $115 $0
Michigan Dry $125 $120 $5
Minnesota Dry $110 $105 $5
Nebraska Dry $112 $110 $2
New York Dry $125 $120 $5
North Dakota Dry $115 $115 $0
Ohio Dry $125 $120 $5
South Dakota Dry $110 $105 $5
Wisconsin Dry $115 $115 $0
Valero Energy Corp., San Antonio, TX (402-727-5300)
Indiana Dry $130 $130 $0
Iowa Dry $110 $110 $0
Minnesota Dry $110 $110 $0
Nebraska Dry $115 $115 $0
Ohio Dry $130 $130 $0
South Dakota Dry $105 $110 -$5
California $185 $185 $0
Western Milling, Goshen, California (559-302-1074)
California Dry $185 $185 $0
*Prices listed per ton.
Weekly Average $122 $122 $0
The weekly average prices above reflect only those companies DTN
collects spot prices from. States include: Missouri, Iowa, Nebraska,
Kansas, Illinois, Minnesota, North Dakota, South Dakota, Michigan,
Wisconsin and Indiana. Prices for Pennsylvania, New York and
California are not included in the averages.
VALUE OF DDG VS. CORN & SOYBEAN MEAL
Settlement Price: Quote Date Bushel Short Ton
Corn 8/25/2016 $3.2350 $115.54
Soybean Meal 8/25/2016 $324.30
DDG Weekly Average Spot Price $122.00
DDG Value Relative to: 8/26 8/18
Corn 105.60% 102.20%
Soybean Meal 37.62% 36.97%
Cost Per Unit of Protein:
DDG $4.88 $4.88
Soybean Meal $6.83 $6.95

Mary Kennedy can be reached at Mary.Kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(CZ\SK)

Midwest Crop Tour Day 4 Wrap

Fri. Aug 26, 2016 9:11 AM


By Chris Clayton
DTN Ag Policy Editor
and
Pam Smith
DTN Progressive Farmer Crops Technology Editor

ROCHESTER, Minnesota (DTN) -- The overwhelming take-away from the 2016 Pro Farmer Midwest Crop Tour was it's a great corn crop, but probably not a record.

Tour scouts expected to see a bumper corn crop based on USDA's August national average estimate of 175 bushels per acre. Scouts saw a really good overall crop, but as the week wore on there were more and more doubts expressed by farmers and analysts on the tour about USDA's projected yield and 15.15 billion bushel production forecast.

If numbers from scouts released on Thursday are correct, Iowa corn yields won't be as high as USDA's forecast.

Three-hundred-sixty-seven corn samples in Iowa projected an average yield of 188.17 bpa. That was higher than last year's crop tour average, but nine bushels below USDA's latest forecast for the Hawkeye State.

Yields in central Iowa in particular were low compared to the potential state average. Central Iowa fields averaged 172.83 bpa, down about four bushels from the three-year tour average. Yields in southern Iowa counties were 20 to 22 bpa higher than the three-year tour average.

Minnesota was projected at 182.32 bpa, just slightly less than the government estimate of 184 bpa. However, the tour's Minnesota number is somewhat skewed because scouts only sample the lower tier of the state.

SOYBEANS

Soybean pod counts in Iowa came in close to last year's tour average. Scouts this week counted 1,224 pods in a three-by-three-foot area, which compares to the 1,219 average for the tour last year. The crop tour does not project soybean yields because the soybean crop is not as mature as the corn crop at this time of the growing season.

Pod counts in Minnesota on Thursday came in averaging 1,107 which is down from 1,119 measured by scouts last year and also below the three-year tour average.

Pro Farmer will release its national production and yield estimates on Friday.

Steve Fellure, a farmer from Attica, Indiana, and scout on the eastern leg of the tour, ran a route across south-central Iowa, shooting north and running parallel just west of Interstate 35 on Thursday. Fellure noted his route saw a good corn crop -- his team's samples in 11 counties averaged 191.5 bpa. But Fellure thought overall he was seeing a better soybean crop because of higher pod counts on his route.

"We're going to have a helluva bean crop," Fellure said. "The corn crop is going to be good, but the bean crop is going to be stronger."

Overall, Fellure said he believed from Indiana to Iowa the weather was conducive to good yields, just maybe not as high as USDA had pegged them thus far. "I've seen a lot of good corn yields and bean pod counts," he said.

LOOK BEYOND BEAUTY

Kurt Line, a farmer from Lake Village, Indiana, scouted crops on the western leg of the tour and said he's seldom been on a crop tour when the crop looked this good from the road. "Every state we covered on the west looked beautiful as you drove by it, with exception of some heavy weed infestations," he said. "However, you get out in those fields and it's a different story." Missing ears due to green snap or skips in stand were common. Scouts also found hail damage in nearly every western state sampled.

"These things were just enough to take the top end off many of the fields we looked at. It's a good crop, but we just didn't find the monster crop we were expecting."

A few fields in Minnesota were showing a tad bit of nitrogen stress, but for the most part fields exhibited excellent plant health and very little insect damage. It was more hidden factors due to weather issues that farmers might not see unless they scout which can put a lid on this crop.

Many farmers indicated a cold spring had caused emergence problems and that could be seen in the erratic ear set within a field. Those warm days and nights that never cooled down also led to tip-back in some fields.

Soybeans still seem to have plenty of potential, but adequate moisture had caused many to grow lanky. Recent rains were leading to some lodging and the onset of sudden death syndrome was beginning to show up in a few fields in Nebraska and was more prominent in Iowa and Minnesota.

Waterhemp was the most pronounced problem across the western states. Infested fields lined up next to clean fields and scouts could only guess that those farmers got pre-emergence herbicides down in a timely fashion.

RECAPPING THE WEEK

Some 100 scouts fanned out through the Corn Belt this week to measure the potential yields growing within approximately 1,400 corn and soybean fields stretching from Ohio to South Dakota. They measured plant populations, grain length, kernels around and recorded observations about crop maturity and crop health.

The tour is strategically placed between the August and September USDA reports, said Chuck Roth, general manager of Pro Farmer. "We're not trying to compete with USDA, but trying to supplement it with information," Roth explained.

In Illinois, scouts estimated an average corn yield of 193 bpa. USDA's forecast is 200 bpa. History shows scouts in general measure Illinois 1.5 bpa larger than USDA.

Indiana's estimate for corn was 173.42 bpa. USDA pegged the crop at 187 bpa. In the past, the crop tour has usually come in about 2 bpa smaller than USDA.

Nebraska's average corn estimate was 158 bpa. USDA's forecast is 187 bpa. Historically, the tour has sampled Nebraska about 15 bpa short because routes sample more dryland fields than irrigated.

Ohio had a tour average of 148.96 bpa for the cornfields sampled while USDA forecasts 163 bpa.

South Dakota's corn average on the tour was 149.78 bpa, just slightly more than USDA's 147 bpa.

To see photos from Chris Clayton and Pam Smith while they were on the crop tour, check here: www.facebook.com/dtnprogressivefarmer

Pam Smith can be reached at pam.smith@dtn.com

Follow her on Twitter @PamSmithDTN

Chris Clayton can be reached at chris.clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(CZ)

Crop Tour Day 4 Midday Update

Thu. Aug 25, 2016 12:16 PM


By Chris Clayton
DTN Ag Policy Editor
and
Pam Smith
DTN/Progressive Farmer Crops Technology Editor

By Chris Clayton

DTN Ag Policy Editor

And

Pam Smith

DTN/The Progressive Farmer Crops Technology Editor

AMES, Iowa, and GAYLORD, Minn. (DTN) -- Scout teams from the eastern leg of the Pro Farmer Midwest Crop Tour fanned out Thursday morning on the last jaunt of the tour with mild weather conditions to pull samples.

DTN Ag Policy Editor Chris Clayton was on one of the longer tour routes on Thursday as his scout team moved southwest from Coralville, Iowa, through Iowa, Keokuk, Mahaska, Marion and Warren counties before turning north to get around Des Moines.

After six stops in south-central Iowa, the scout team's corn samples were averaging 196 bushels per acre. While the scout team crossed over multiple crop districts, the sampled fields generally were hitting higher yields than sample averages last year on the tour.

Pod counts in the six soybean fields in south-central Iowa sampled early Thursday were averaging more than 1,500 pods in a 3-foot-by-3-foot area, which was about 300 pods higher than the tour reported last year on those same crop districts. Still, soybean fields along the route also frequently showed signs of sudden death syndrome.

Meanwhile, scouts on the western leg of the tour headed into Minnesota Thursday morning to find a lush crop that had received recent rainfall. However, the green crop often looks different inside the field than from the road.

That's been the case on DTN/The Progressive Farmer Crops Technology Editor Pam Smith's route through southwest Minnesota Thursday morning where scouts sampled multiple fields that had hail damage that will take the top end off the yield in those fields. The eight fields sampled so far Thursday morning averaged 177.5 bpa for corn.

Soybean fields showed lots of potential on this route, with one field planted in 10-inch rows with a pod count of 2,362.9 in a 3-foot-by-3-foot square with several four-bean pods observed. The average for this tour so far was about 1,300 pods. Node spacing was good in many fields and beans were not quite as tall as scouts found in Iowa. There was also evidence of sudden death syndrome starting to show up.

Waterhemp remains to appear troublesome. However, nasty clogged fields were found next to clean fields.

The tour ends Thursday night in Rochester, Minnesota. Pro Farmer will then release its forecast for national corn and soybean production on Friday afternoon.

Pam Smith can be reached at pam.smith@dtn.com

Follow her on Twitter @PamSmithDTN

Chris Clayton can be reached at chris.clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/SK)

Looking Beyond Bt

Thu. Aug 25, 2016 7:36 AM


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- A handful of scientists believe better corn rootworm control is closer than we think -- specifically, just under our feet.

Your average cornfield hosts an impressive array of life. Microbes, bacteria, fungi, nematodes and insect predators like spiders, mites and beetles can lurk in every square foot of soil. There's growing evidence they could be deployed against corn rootworm larvae.

"We need to fight fire with fire," said Jonathan Lundgren, an independent agroecologist and entomologist, who has been studying the natural predators of corn rootworm for more than a decade. "Corn rootworm is a very plastic and dynamic critter and we need to use something equally plastic and dynamic to fight it. Why not use what Mother Nature made a long time ago?"

While Lundgren has been studying how to encourage insect predator communities, Cornell University entomologist Elson Shields has spent the better part of his career successfully deploying local nematodes against the devastating alfalfa snout beetle in New York. He's now found that a combination of two nematode species may decimate rootworm populations.

Out west, University of Nebraska entomologist Julie Peterson, is helping her graduate student, Camila Oliveira Hofman, hunt down fungal diseases of insects (called entomopathogenic fungi) that infect and destroy rootworm larvae.

Success from these scientists would be a boon to corn growers. Western corn rootworm has evolved resistance to nearly every chemical and biotech tool deployed against it in the past few decades. Biological control options could supplement both Bt and the next generation of RNAi rootworm traits, and perhaps supplant some of them.

THE NEMATODE WHISPERER

Shield's beetle-eating nematodes are the ideal farm investment. Alfalfa farmers in New York inoculated their soil with them once, using an evening field surface spray that cost $26 an acre. Now more than a decade later, those nematodes are still completely suppressing alfalfa snout beetle populations in alfalfa fields.

Their taste for rootworm larvae was discovered when Shields turned his attention to how well the nematodes survived if farmers rotated out of alfalfa to another crop, such as corn. To his surprise, the nematodes not only survived the corn rotation, but their numbers increased. "Their increases appear to coincide with when we see rootworm move in," Shields said.

Two years ago, he inoculated a continuous corn field and a corn-soybean rotation field with the nematodes and set up some untreated and Bt-corn fields nearby. The 2015 season proved too light a rootworm year to collect data. But in 2016, rootworms gnawed away at corn roots in the untreated control, causing up to 1.9 nodes of damage, Shields said.

Fields with his nematodes performed exactly as well as the Bt fields, which were planted to Yieldgard, Herculex, and Smartstax hybrids. "The key is that the nematodes were applied two years ago," Shields marveled. "We've worked really hard at keeping those persistent characteristics in these populations."

Much more than one year of data is needed to confirm the nematodes' efficacy against rootworm, but the results are so promising others are jumping on board. Monsanto has funded a project with USDA scientists in Columbia, Missouri, to find strains of nematodes in the Midwest that target the rootworm.

Some of these soil nematodes are attracted to rootworm-damaged corn roots, so the goal of the funded proposal is to help control Bt-resistant rootworm populations by targeting damaged Bt-corn roots with them.

"We need two things," said USDA-ARS entomologist Bruce Hibbard, an advisor on the Missouri project. "We need strains that overwinter here in the Midwest, and we need to figure out how to maintain them for as long as possible. That might require some alternate sources of food, such as cover crops."

COVER CROPS: FODDER FOR ROOTWORM PREDATORS?

Lundgren has long promoted winter cover crops to suppress rootworm populations, though not specifically for nematodes. His research is focused on larger, more visible field warriors -- spiders, ants, centipedes, beetles and other insects.

Lundgren's work revealed that rootworm blood has a repellent quality that keeps many biting insects at bay. However, sucking insects like spiders and ants appear to feast on the rootworm quite happily.

Cover crops can lure these predators to your field, Lundgren says. His work in South Dakota showed that cornfields planted after a winter cover crop of slender wheatgrass had higher insect predator populations and less rootworm damage than fields that lay bare over the winter.

Researchers found populations of ants, beetles and other insects, many of them with bits of rootworm DNA in their tiny tummies. "Overall, we've identified dozens of predator species as being important consumers of corn rootworm," Lundgren said.

HUNTING FOR FUNGAL WEAPONS

Like Shields, Peterson and Hofman have been looking to the soil for rootworm solutions. For two years, Hofman dug up hundreds of soil cores from five irrigated cornfields in southwest Nebraska. She used a common fishbait insect called the waxworm to lure the fungi. When they infected her bait, she collected the fungi, grew them out in petri dishes and identified them. Now, armed with a library of local Nebraska fungal insect diseases, Hofman will see which ones attack rootworm larvae. The project is funded by the Nebraska Corn Board.

Peterson and Hofman also will test any promising fungal candidates against non-target insects to protect beneficial insect populations.

The biological organisms these researchers are working on may be rootworm solutions in and of themselves, but they are most likely to be supplements to the system in place, Peterson said.

"The great thing about biological options is they can be completely compatible with Bt traits," she said. "We can get less broad-spectrum insecticide use, which will help conserve these natural enemies."

Lundgren has even more ambitious hopes for biological rootworm control. He wants growers to stop seeing corn rootworm as a target for insecticides and other controls, but rather a warning sign.

"Corn rootworm isn't the problem, it's a symptom telling you something in the field is out of whack," he said. He believes corn monocultures planted year after year into tilled fields have banished the valuable inhabitants of fields and soils, and with them, the rootworm's natural enemies.

"We are creating our own rootworm problems by reducing biodiversity in our cornfields," he said. "When you have a diverse insect community, then rootworms aren't an issue anymore."

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com

Follow Emily Unglesbee on Twitter @Emily_Unglesbee.

(GH\SK)

Kansas Cellulosic Plant to Sell

Wed. Aug 24, 2016 2:29 PM


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- Abengoa Bioenergy's cellulosic ethanol plant in Hugoton, Kansas, could have a new owner by the end of October, an official with the company hired by Abengoa to sell the plant told DTN Wednesday in an exclusive interview.

Mark Fisler, managing director of Los Angeles-based Ocean Park Advisers, the company hired by Abengoa to sell the biomass-based ethanol plant that shut down as part of Abengoa's ongoing bankruptcy proceedings, said there will be an auction for the plant sometime in October and that he's "100% confident" the plant will sell.

"Hugoton has never been a part of the same schedule as the gen-one assets," Fisler told DTN.

"We're going to get out a bid seeking institutional letter to interested parties this week. The activity and interest level at the site are reasonably high. We expect to get a number of letters of interest. There has been more than 15 entities doing site tours, doing engineering work, studying how they would use the asset. It's been very robust. We've been pleased with the opportunities."

The plant, which was built at an estimated cost of $400 million, remains in "cold status at this point," Fisler said. The plant was in the middle of start-up when Abengoa's financial problems surfaced.

Fisler said he expects to receive letters of intent to bid by the first week of September. "We will negotiate and finalize a stalking-horse bidder and will have an auction the latter part of October," he said.

A stalking-horse bidder is the first bid in an auction and more or less sets a floor price for the auction.

"So they get to set the draft of the purchase agreement everyone else has to be subject to," Fisler said. "They get the preliminary inside track."

The interested buyers come from all around the world and from three main camps, Fisler said.

That includes from existing cellulosic ethanol development companies and from first-generation corn ethanol companies looking to produce "generation 1.5" ethanol and maybe use some of the cellulosic aspects of the plant for corn fiber.

The third camp includes advanced biofuels/bio-based chemical companies that may retrofit some of their existing technologies to the plant.

Fisler said the cellulosic ethanol plant still has a "very small number" of employees who remain connected to the site and would be employees with "sound institutional knowledge" about the technology.

"There are a variety of employees (a new owner) would have access to, whether the employees would be interested is a personal choice," he said.

The Abengoa plant is designed to use a variety of feedstocks, including wheat straw, switchgrass and even municipal solid waste. It was expected to provide an annual $17-million, 300-million-ton feedstock market for area farmers.

The 25-million-gallon Hugoton plant is designed to process about 1,000 tons a day of corn stover, wheat straw, milo stubble, switchgrass and other biomass feedstocks, all within a 50-mile range of the plant. The plant also is designed to produce electricity.

Earlier this week, Abengoa sold three of its ethanol plants to Omaha-based Green Plains Inc. during a recent auction. Green Plains bid $237 million to purchase plants in Madison, Illinois, Mount Vernon, Indiana, and York, Nebraska. The plants have an annual combined production capacity of 236 million gallons.

KE Holdings LLC made a successful $115 million bid to buy the Abengoa plant in Ravenna, Nebraska, while Kansas-based ethanol plant builder ICM Inc. was the high bidder at $3.15 million for the Abengoa plant in Colwich, Kansas. ACE Ethanol, LLC, was the successful back-up bidder on the Kansas plant, with a bid of $3 million. The Abengoa corn ethanol plant in Portales, New Mexico, so far has not sold.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(AG/BAS)

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