Todd's Take

Tue. May 31, 2016 3:33 PM


By Todd Hultman
DTN Analyst

As we cross Memorial Day off the calendar and head into the growing season, 2016 has already distinguished itself with the most bullish start in spot soybeans since 1997. Riding on soybeans' coattails, spot corn just posted its highest close in ten months on Friday. Things are looking up.

For those who think market clues aren't important and only USDA estimates matter, this recent bullish enthusiasm for grains has been difficult to explain. According to USDA, the U.S. is going to have a 14.4 billion bushel corn crop and 2.15 billion bushels of ending stocks in 2016-17, the most excess corn since the 1980s. However, as we head into June, the corn market seems to have a different opinion.

2016 marks the fourth growing season since the drought of 2012, a reasonable place for prices to have found their low point by now. The first technical sign DTN noticed that the bear market was ending came back in October 2014 when an outside reversal on the monthly chart coincided with an upward turn in the stochastic indicator.

The 18 months since that reversal have been marked by choppy trading in which low prices demoralized traders, but held sideways. Bullish sentiment, as measured by the percent of noncommercial contracts held long, slid from a moderately bullish 63% after the October 2014 reversal to a bearish 44% on Apr. 4, 2016. The low point in sentiment came shortly after USDA announced its big corn planting estimate of 93.6 million acres.

Often, it turns out many of the market's best clues are the things it does not do and that was true in early April. As bearish as the mood for corn was at that time, spot corn prices never exceeded the low set back in 2014 -- a bullish hint that all the bearish talk had lost its impact on prices.

The other bullish clue that corn presented this spring was its uncommonly narrow six-month trading range. You may recall the article "How Quiet Is It?" written back on March 22 where I explained why the quietest six-month trading range in 20 years was potentially bullish for soybeans. The same reasoning also applied to corn in the first two weeks of April when its six-month range reached its narrowest point in 13 years.

In early April, corn's six-month trading range measured less than 12% of its low boundary and much less than the four-year average range width of 36%. In this case, trading in corn was being restricted by a lack of bullish hope on one hand and disciplined selling restraint on the other, as producers successfully held back from releasing grain at unprofitable prices.

As I explained for soybeans in March, uncommonly narrow trading ranges like these are the sign of an unhealthy market and are not sustainable. Long-term, markets need to distribute beneficial opportunities to both consumers and producers, and in this case, corn producers were being left out. The breakouts that eventually end these situations are worth paying attention to.

From a technical point of view, last week's close in July corn at $4.12 3/4 was a clear, bullish breakout from a failed trading range. Even if the breakout only serves to re-establish a more normal trading range of 36%, the upper boundary projects to $4.72 a bushel in the near-month corn contract -- a much more profitable opportunity for producers.

Yes, corn has had some help from fundamental changes since early April. Planting delays in Texas and parts of the Midwest will likely entice some acres to soybeans and we don't really know how good USDA's 93.6 million acre estimate ever was anyway. Notice however, that these fundamental explanations often come after the fact.

The future is subject to surprise and a 2016 corn crop of 14 billion bushels or more is still viable. But as has often been the case, the best clues of the market's future direction come from corn prices themselves. In light of the narrow range that corn prices held when all the talk was bearish earlier this spring, last week's bullish breakout just added more weight to the case for higher corn prices in 2016.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow him on Twitter @ToddHultman1

(CZ/BAS)

(CZ/BAS)

View From the Cab

Tue. May 31, 2016 3:29 PM


By Richard Oswald
DTN Special Correspondent

LANGDON, Mo. (DTN) -- Deep in the fertile Eastern Corn Belt, where rows are straight and long, few people think about forage. However, DTN View From the Cab farmer Chase Brown does.

"This is the most beautiful first cutting I've ever put up," Chase told DTN from his home outside Decatur, Illinois, late Sunday evening as he described this year's 2-plus-ton-per-acre first cutting alfalfa crop. It arrived just in time.

"Everybody's running out of hay," he said. "Horse people" are Chase's best customers right now. Some picked small bales directly out of the field, which helped Chase manage a tight hay storage situation.

"As soon as I got it off, I turned around and got it fertilized. A lot of guys try to fertilize for 2-ton alfalfa. We try to fertilize for 8 ton. That's what we hope to grow. A 18-46-240 (N, P, K analysis) kind of fits that 4-ton area (half the yield target). We use as little N as possible, but you get some with the phosphorous. Alfalfa tends to love it. We'll repeat that after the third cutting, weather permitting" Chase explained.

The trade says rain makes grain. But too much rain makes replanting. "I patched in quite a few spots of corn on 300 acres where it crusted or had cold rain (after planting). We had quite a few pond holes. We have 40 acres left to go. Most areas are in the 2 to 2 1/2 acre range. The big field I have to do -- 110 acres -- I wanted to dig it up and start over. Dad said, 'No let's just go in and thicken it up.'"

But spot replanting means making tough calls all day long. "This spot is so uneven. Where do you start and stop? The good part about patching in corn is you're not alone. I heard about a guy north of us who rotary hoed a thousand acres of corn (to aid emergence in crusted soil). Lots of guys are replanting soybeans. It was just that one day when it turned cold and rained," Chase explained.

Chase told DTN his first planted corn is receiving its post-emerge treatment of glyphosate. "With that, we've seen a lot of really yellow corn. Some is on the ground that was worked too wet. We're seeing zinc and sulfur deficiencies as well. I don't want to say it's lack of N, because we have plenty out there. Where we had zinc in starter we aren't seeing it. Fields we spray from now on will have foliar sulfur, boron, and zinc added." The foliar additive tacks on about $5 per acre to cost. "You can spend up to 20 bucks per acre on foliar products. I don't think the corn market is paying us to do that," he said.

Corn sidedressing seems to be in heavy use around Chase's farm. "Some guys have always done that, but all of a sudden we're seeing brand new tool bars. I think a lot of guys are splitting up their N applications."

Wheat has been treated with a fungicide for head scab. It is done flowering and just starting to turn. Corn is 2 to 8 inches tall. Earliest planted soybeans are barely emerged. Soybean planting is all but finished. Chase has a handful of small fields left to do. "We should be done tomorrow," he told DTN late Sunday. "We're all going to be glad to be done planting. Everybody's kind of burned out on it."

Chase has a herd of purebred Hereford cows with calves. Part of last week was spent placing calf creep feeders in pastures, filled with a mix of one third corn, one third soy hulls, and one third dried distillers grain. "I really like that mixture, because if a feeder runs out and a calf stands in there and eats all day (after its refilled), he won't founder." Chase has set a goal of weaning weights 50 pounds per head higher than previous calf crops.

After turning them out to pasture, the Brown's artificially inseminate their cows. To encourage ovulation, each one is given a hormone shot that fools her into thinking she's pregnant. A second shot two days later encourages her to cycle quickly. "In two days she'll be in heat. When we catch her in heat we'll breed her 12 hours later. We will synchronize our heifers to be in heat when the vet is here. He will horn breed them by feeling each horn of the uterus to see which side the egg is on. He will bypass the cervix and place two thirds of the semen in that horn, and place the other third on the opposite side just in case he's wrong. If we want to implant an embryo, then seven days later (after the heat cycle), we have an embryologist come out and implant an embryo. The rest of the cows we aren't planning on keeping we just put a bull in with them. We want everything bred in 60 days, but they'll be with a bull 120. We'll turn in a back-up bull for the last 30 days. When we preg check. If they're open they go right on the truck."

However, really good cows get a reprieve. "If she's a cow I really like I'll give her a pass," Chase said.

Meanwhile, outside Newport, Pennsylvania, View From the Cab farmer Jim Hoover told DTN late Sunday, "It was a good week."

The crops are in. Jim and his family were able to get quite a bit done between rain showers, including moving planting equipment home from their Tower City farm. Like his counterpart in Illinois, Jim baled hay. "We baled 128, 8-foot big bales of timothy/brome that weighed about 800 pounds apiece," he said.

In addition to hay, once small grain is harvested, the Hoovers bale straw from their wheat and triticale crops. Big square bales have replaced other forms of bales on the Hoover farm because of their ease of bulk handling and plenty of nearby storage for bales as they come off the field. One neighbor, a friend of Jim's, has begun growing triticale and baling the straw. "I got him started on triticale, and he has just fallen in love with the product." He's also been converted to Jim's way of thinking on straw handling. "He told me 'I'm gonna square bale everything and I'm gonna wait for Mason (Jim's grandson) to do it.' Mason does a real good job. We have a nice New Holland square baler that does a really nice job. The straw business has been pretty good to us. It's like a lot things when you do a good job."

Jim said he started putting up straw when his turkey business demanded it for litter. Pine shavings soon replaced straw there. That's when he started selling straw to a nearby business that made straw mats for reseeding construction areas and roadsides.

With row crops planted and hay put up, it was time to spray both wheat and triticale seed crops for head scab with the fungicide Prosaro. "I've done this for over 40 years, but it never took me so long because it's never taken so long to flower. Nobody knows why. If you put Prosaro on too soon (before flowering) it doesn't work," Jim said. Slow blooming doesn't necessarily mean small plants. Jim told DTN his triticale is about chest high. "I can tell you now all my crew knows about triticale flowering," he added.

First planted corn is 10 to 12 inches tall, and in some cases as tall as 16 inches. Slowly emerged soybeans at 3 to 4 inches tall are looking better, but in a strange twist, following a wet, cold spring, "it would be nice to have a shower on them."

When a farmer needs a truck, he's needs it right now. But when a farmer doesn't need an extra truck, it just sits. That's Jim's problem. He needs a truck now, but later on he won't. The answer is renting a truck. Now rental rates have risen. "We have three tractor trailers. Two Petes and a KW. We need a fourth. It's always this time of year with wheat and triticale -- two for grain and two for straw," Jim explained. "We've been renting a truck. Jim's son, Craig, said we need to consider buying another truck. Do you spend $5,000 or $25,000? We're looking at a couple of 2000 to 2002s but I think we'll end up leasing one."

Something else every farmer needs is a banker. That situation is changing too. It's getting more complicated.

"My bank has started a new deal that I have to have everything appraised on the farm every four years. Now they take pictures of everything. The representative from the bank is "a new kind of appraiser, (who) said that when he's appraising the farm, if he has an excellent manager managing the farm, he will reduce the value of my assets because of that," Jim said.

Richard Oswald can be reached at Talk@dtn.com

Follow Richard Oswald on Twitter @RRoswald

(BAS/CZ)

Stabilizing the Cattle Market

Tue. May 31, 2016 3:22 PM


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Livestock futures can be as volatile as spring weather in the Southern Plains and contracts were soaring higher Tuesday after producers spent part of last week complaining about downward price swings.

Live cattle contracts opened higher Tuesday in part because consumer spending was up 1% in April, the biggest monthly gain in more than six years and considered bullish for livestock demand, noted DTN Analyst Todd Hultman. Additionally, Hultman added, prices are moving up because frozen beef supplies in storage are down about 7% from a year ago -- a sign that beef demand has been keeping up with increases in beef production.

June live cattle contracts closed $1.40 higher per cwt on Tuesday at $121.10, while the August contract was up $1.625 at $118.05.

The June live cattle contract has moved from a March 17 high of $130.50 per cwt down to a low in late April of $114 before another rise, fall then rally again this month.

Cattle producers are questioning those price swings, arguing the futures price isn't following cash market fundamentals. Those issues were front and center last week as livestock producers testified before the Senate Agriculture Committee.

Joe Goggins, a Montana cattle producer and livestock auctioneer, represented the U.S. Cattlemen's Association at the Senate hearing on Thursday. He told senators the futures contract was failing as a risk management tool for both cow-calf producers and feeders. He has stopped using the futures market to hedge.

"The futures board is no longer a viable tool for us due to the volatility of the market and the amount of money it takes to hold a position," Goggins said. "It's really becoming a serious problem I think, especially from the risk management side."

Tracy Brunner, president of National Cattlemen's Beef Association, also raised concerns at the Senate hearing about the disrupting effect of high-frequency trading in futures markets. He told senators that cattle producers want more data from CME on the high-frequency trading in the markets.

"In many other markets it gets covered up. Because cattle are a somewhat unique commodity because we're a perishable commodity," Brunner said. "We can't put the corn back in the bin and wait until the market stabilizes."

Brunner also told senators that without integrity in the futures market cattle producers will abandon it.

Ed Greiman, a northern Iowa cattle producer and chairman of the NCBA's marketing committee, said in an interview Tuesday that NCBA leaders have been meeting more frequently with staff from CME Group since some grievances were aired at the Cattlemen's Convention in late January. NCBA and CME have put together a working group looking at ways to ideally slow down the market swings and level the playing field for producers.

David Lehman, managing director of Research & Product Development for CME Group, said in an interview Tuesday that CME has taken multiple steps to deal with volatility. Following the convention, CME Group created new rules dealing with trader messaging to regulate the number of messages people can put on the market compared to their actual trades. Entering orders, modifying and canceling orders on the cattle futures market is now limited depending on the volume of actual trades by a trader. Since the rule went into effect, the messaging on the live cattle market has declined by about 15%.

CME also reduced trading hours for livestock contracts, essentially by removing the overnight trading session. During a roundtable on livestock markets put together by Sen. Heidi Heitkamp, D-N.D., staff from CME also discussed introducing "circuit breakers" in the live cattle market as a way to slow down the market.

"We haven't finalized this yet. We're still discussing it with the working group of NCBA and getting their feedback and answering their questions on how it would work so this is still ongoing," Lehman said. "It's another step that we think could help reduce some of the volatility in the contract."

Greiman said members of the NCBA working group haven't formed an opinion on whether the circuit breakers should be implemented. "It's not that we're against them, but it's not that we're for them either. We don't know what they will do to the market."

Goggins said in the Senate hearing he believes the violent moves in the market are due to expanded trading limits and high-frequency algorithms used by noncommercials (speculative traders).

The volatility in cattle markets especially hits producers who have to borrow money to buy cattle. Banks require as much as a 75% hedge on the cattle they wish to buy, but the margin calls then limit the actual money left over to buy cattle, Goggins said.

Goggins noted that in early May he sold cattle at $134 to $136 cwt, but the futures board on the June contract then dropped to $121, creating a $15 basis for his sales.

"That's proof fundamentals don't have much to do with this market," Goggins said. He added, "There is no way the cattle market moves that much on a cash basis."

Heavy volume pushed prices lower in April, leading to more questions about where the trades were coming from. Greiman added in an interview that when the futures market starts to sell off then the cash market has to follow it. "It just takes weeks to get it back."

"That's one thing we've been asking for from the CME is more transparency," Greiman said. "Who is participating on these high-volume days? What's causing this when we just go down, down, down for about a week?"

Greiman said the price swings on the futures market can change the price of live cattle by $150 a week. "It just doesn't make any sense how fast this can all happen and that's what's bothering us."

Heitkamp asked producers at the hearing last week, "How do we get trust back into the cattle market?" Heitkamp also wanted to know if there was a way to get more cattle sold on a cash basis "There is always room for mischief when you have a thin market and we don't have much participation. So my question is: How do you expand participation?"

Cattle producers concur that the volume of cattle sold on the live market has been declining for 20 years as more and more producers sell on a formula basis to packers. Greiman agreed that producers need to make a conscious effort to try to negotiate with packers for delivery of live or dressed cattle, or utilize auctions.

"That would provide more prices, more fundamentals that the market can see what is going on in the live market," Greiman said.

Lehman pointed out the market was at record highs in 2014 before prices came down pretty rapidly in 2015 and this year. When markets go through such a cycle there is always volatility associated with it that can stress the industry. The decline in live sales also hurts.

"The cash market structure is changing pretty significantly over the last several years. There are fewer and fewer cattle being negotiated between cattle producers and packers so there are less underlying cash market pricing information and price discovery going on," Lehman said. "That's also a contributing factor to the volatility we're seeing in the market."

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

Follow him on Twitter @ChrisClaytonDTN.

(CZ/SK)

Better to Keep Than Give

Fri. May 27, 2016 2:28 PM


By Marcia Zarley Taylor
DTN Executive Editor

DENVER (DTN) -- Just as it pays to monitor your blood pressure or cholesterol levels, it's worth checking the health of your estate plan. Besides changes in your wealth or the status of your personal situation -- marriages, divorces, births and deaths of heirs -- new state and federal tax laws can trigger 180-degree reversals in strategies.

"Farm estate planning is radically different from what it was only five or 10 years ago," said Roger McEowen, a Washburn University law professor and tax director for CliftonLarsonAllen in West Des Moines, Iowa. Back then, federal taxable exemptions jumped all over the map and made it virtually impossible to conduct long-term planning. Recall that estates as small as $2 million were subject to tax in 2006, a worry for those with highly appreciating farmland.

Then the Tax Act of December 2010 made permanent a $5 million federal estate tax exemption, indexed annually for inflation, and adjusted the tax on estates above that level to 40%. What's more it also made the exemption "portable" between spouses, so if the first to die didn't maximize that exemption, the second spouse's estate could tap the unused amount. That suddenly meant couples didn't need to go to the expense of "equalizing" the size of their estates to get maximum exemption relief.

If you haven't reviewed your estate strategies since 2011, here are several items worth discussing with your estate planners.

Why gifting is out of vogue. So few farm estates top the current $5.45 million exemption for deaths in 2016 ($10.9 million for couples) that it isn't necessary for most farm or small business owners to reduce the size of their estate for tax purposes anymore, McEowen pointed out. Instead, what matters most is qualifying your highly appreciated assets -- particularly land -- for a "step up" in basis at the owner's death. In effect, that means a lifetime of capital gains can be forgiven if the heirs sell the property.

Watch "transfer on death" accounts. More than two dozen states have tried to simplify estate planning by giving farmland the same "transfer on death" treatment as you'd get on bank or brokerage accounts. These are legal forms you sign so your beneficiaries get title to the property without going through probate. This property gets counted in the estate and is eligible to receive a step-up in basis. Just be sure to include it in the estate.

How executors will have new duties. Starting June 30, IRS will begin requiring executors to report the tax basis of inherited property to all heirs as well as IRS. The purpose is to create a paper trail, so when that inherited property is later sold, appropriate capital gains taxes are paid, McEowen said.

The problem is that CPAs and tax lawyers worry the process will be messy, since final valuations and even a complete inventory of all assets may not be finished by the new IRS deadline. (The agency wants executors to file these mandatory reports within 30 days of filing Form 706, the estate tax report that must be filed within nine months of death, if not sooner.) In cases where assets are omitted from this report after a statute of limitations, the heir's tax basis in the property will be zero.

"It's not typical for it to take several years to settle a farm estate, but it does happen. These added duties could be a real hassle in the process," McEowen said. "It's a mess."

To ease the burden on your estate's executor, make sure you keep a current inventory of all your assets, including farm equipment, real estate, personal valuables, savings and brokerage accounts. For more details on the reporting requirement, go to

http://washburnlaw.edu/…

Marcia Taylor can be reached at marcia.taylor@dtn.com

Follow Marcia Taylor on Twitter@MarciaZTaylor

(CZ/BAS)

USDA Extends FSA Farm Changes

Fri. May 27, 2016 12:00 PM


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Does USDA know if you are actively engaged yet?

The department announced Friday a 30-day extension for farmers to record their organizational structures with the Farm Service Agency to determine active engagement in farming.

The deadline has been extended to July 1 to complete restructuring or finalize any operational changes and determine how much interest a person has for farm programs. USDA set the extension at the request of farmers and ranchers who sought more time to comply with the rules.

"Most farming and ranching organizations have been able to comply with the actively engaged rule," Agriculture Secretary Tom Vilsack said. "This one-time extension should give producers who may still need to update their farm structure information the additional time to do so."

This issue is more critical for farmers in general partnerships and joint ventures under the department's rules for active engagement under the 2014 farm bill.

The active-engagement rule does not apply to farm entities made up solely of family members. These family farm operations were exempted from the actively engaged requirement in the farm bill.

The rule also does not change existing regulations regarding the contributions of land, capital, equipment or labor, or the existing regulations related to landowners with a risk in the crop or to spouses.

The rule for active engagement finalized last year largely focuses on farm managers and others in general partnerships and joint ventures. The rule limits the number of farm managers who can receive payments under programs such as the Agricultural Risk Coverage (ARC-County) or Price Loss Coverage (PLC).

A general partnership or joint venture must be deemed "large" or "complex" to have more than one farm manager qualify for program payments. A farm must meet the rules for both size and complexity to qualify up to three farm managers for payments.

The rules were expected to affect about 3,200 general partnerships or joint ventures that had more people listed as farm managers than considered eligible under the rule. Those operations were likely to lose out on roughly $106 million in payments from 2016-18, according to USDA analysis of the rule last year.

The default for a "large farming operation" is a farm with more than 2,500 acres, though FSA has some range in acreage built in depending on the state and kind of crop or livestock. Regarding "complexity," a farm operation that seeks payments for multiple people based on complexity must make a request to the state Farm Service Agency committee. The diversification of the operation then becomes a factor in the FSA committee signing off on that request.

If a person is found ineligible, the overall operation could lose payment eligibility for up to $125,000. Each person in the operation must contribute management or labor to qualify, or risk losing that member's share of the payment.

Farm managers must prove they contribute at least 500 hours of farm-management work per year or at least 25% of the time necessary to run the farm. And they must keep some sort of record book to show they are indeed doing the management or labor required. This new definition defines "active personal management" on the operation and only applies to farm managers on non-family farming operations seeking to qualify multiple people for program payments.

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

Follow him on Twitter @ChrisClaytonDTN

(CZ/SK)

DTN Distillers Grain Update

Fri. May 27, 2016 11:13 AM


By Cheryl Anderson
DTN Staff Reporter

Advancements in developing new fractionated and higher value products from distillers grains into higher value products, and new ethanol processing aids such as antimicrobials, were the focus of a number of speakers at the recent Distillers Grains Technology Council's annual Distillers Grains Symposium Thursday in St. Louis.

Dr. Harold Tilstra, manager and ingredient merchandising technical support for Purina Animal Nutrition LLC (Land O'Lakes), spoke about the trend of fraction, the first being corn oil separation.

Tilstra described oil removal as "the biggest change in distillers grains in the last decade," however, the technology has become so popular that most ethanol plants currently operating now remove oil by use of a centrifuge. The oil becomes an additional source of revenue for ethanol plants and is usually sold for biodiesel production or as an addition to some animal feeds, especially for poultry rations.

Tilstra described a variety of nutrient enhancements and concentration technologies that are being incorporated by the industry, including fiber digestion/removal. Fiber digestion involves converting fiber into sugars to achieve higher ethanol production or to provide extra energy for poultry, and possible swine rations. Fiber is removed from the corn fiber either before or after fermentation. However, fiber removal may change the nutrient profile of the resulting distillers grains, possibly even improving nutrient availability.

Protein concentration/separation is another new fractionation technology coming to the forefront -- one that can add value to the resulting distillers grains as well.

Alfredo Dicostanza, professor of beef cattle nutrition and management from the University of Minnesota, spoke about high-protein DDG in livestock rations. He said that high-protein DDG is sold at a premium to corn and that feeders like that it has better consistency because of less intensive drying that is used. The bran removal used to produce high protein DDG can also significantly reduce mycotoxins. He added that although high-protein DDG is currently being produced and sold, it needs more trials and analysis.

Challenges facing the industry regarding new fractionated products include nutrient variation, overlap in commodity space, meeting existing product definitions, customer and nutritionist acceptance, and competition for storage space at feed mills, Tilstra said.

A panel of researchers spoke about a new project: an integrated C5-based platform for coproducts from DDG: David Timmons from Brown Forman Corporation, and Jagannadh Satyavolu, Michael Nantz and Christopher Burns, all from the University of Louisville. While other fractionation methods are being used to separate the oil, starch or protein, this technology uses the corn fiber from DDG to create two coproduct streams: one that is higher in protein and another that is higher in fat and digestibility energy. The technology can also be used to use other fractions of DDG to producer sweeteners and food coloring, biodegradable polymers, cyclic olefin polymers, and aviation fuels.

Another speaker, Joe Riley from Riley Resource Group, told conference attendees about new products made from distillers corn oil (DCO). He said technology has potential uses in both feed and fuel applications, and that corn oil use was predicted to more than triple by 2022.

So far, the DCO produced has varied significantly in quality and quantity, however, Corn Oil OneTM has a processing plant in Council Bluffs, Iowa, that is producing a ready-to-use, consistent corn oil product for both biodiesel and industrial applications. This product could potentially open up new feed markets as it is antibiotic free and meets standards for pet foods (equal to human food standards). However, generally recognized as safe (GRAS) and Kosher certifications would be essential for the product, Riley said. Uses for industrial markets could include paints, polymers and lubricants, as well as higher-end applications.

Riley predicted that DCO production per bushel will continue to grow. He added that product differentiation is key to unlocking new markets, and that improved quality is the key to adding value.

PROCESSING AIDS

The symposium also featured a New Product Panel with representatives from various companies who spoke on new antimicrobial agents and processing aids developed for ethanol production.

Two speakers highlighted new antimicrobials that their respective companies have developed, a timely topic amid growing public concern over antibiotic use/antibiotic residue in livestock feed.

Eric Summer spoke about new antimicrobials for the ethanol industry developed by his company: Anitox. The company has developed an antimicrobial that takes a proactive, rather than a reactive approach to control bacteria. The product (OptimOH) is antibiotic-free and residue-free, meets generally recognized as safe (GRAS) requirements, and is injected early in the process before bacteria have a chance to take hold.

Allen Ziegler, with the Hydrite company, told attendees about Defender, a new broad spectrum antimicrobial his company has developed. Defender is an antimicrobial agent that acts on cell membranes and cell cytoplasm. It is GRAS approved for animal feed up to 173 parts per million, is effective against both gram positive and gram negative bacteria, and is available in both solid and liquid forms. Hydrite is currently running trials on the product at ethanol plants.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com

Follow Cheryl Anderson on Twitter @CherylADTN

(PS/CZ)

Brazil Land Law May Retract

Thu. May 26, 2016 3:26 PM


By Alastair Stewart
DTN South America Correspondent

SAO PAULO, Brazil (DTN) -- The new government in Brazil will review a 2010 decision to bar foreigners from buying large tracts of farm land, a local press report said Wednesday.

According to O Globo, a local daily, advisers close to Interim President Michel Temer want to overturn the six-year-old ruling that limits land purchases by foreigners to small plots.

Back in 2010, the leftist government of President Dilma Rousseff took the step amid concerns that foreigners, more specifically the Chinese, were looking to buy up large swathes of grain land.

However, the Temer administration doesn't see any threat to sovereignty. The ban is "totally out of proportion" to the threat, a source close to the new president told the newspaper.

Temer took over the presidency at the start of May, while impeachment proceedings against Rousseff are heard in the Senate. Temer has wasted no time in pushing a more market-friendly agenda. Commentators think it unlikely that Rousseff will return.

For a long period up until 2010, foreigners were allowed to buy land freely. However, alarmed by Chinese purchases in Africa, the attorney general created tighter restrictions by reinterpreting a 1971 law.

According to O Globo, the government sees no legal impediment to going back to larger land sales as part of a wider effort to attract foreign investment. Officials see this as a way to help pull Brazil out of one of the deepest recessions in its history.

However, the land plan has a significant opponent in the shape of Blairo Maggi, the new agriculture minister, who wants to maintain restrictions on the purchase of agricultural land for grain use.

The presidential palace did not respond to a request for comment for this article.

The Brazilian land market is very quiet at the moment, not helped by the downturn in the economy, restricted credit and lower grain prices.

Alastair Stewart can be reached at astewartbrazil@gmail.com

(ES/CZ)

By the Numbers

Thu. May 26, 2016 2:23 PM


By Danny Klinefelter
DTN Farm Business Adviser

Counterparty risk has become an increasing concern for lenders in assessing a borrower's risk profile. Counterparty risk is defined as the risk that a party to a transaction will fail to fulfill its obligations.

Producer production and marketing contracts are an obvious example, but the concept applies to a much broader range of formal relationships. MF Global, VeraSun and Eastern Livestock have been well publicized examples, but there have also been concerns about the financial viability of several hog and poultry integrators who represent repayment risks to their contract growers. When fertilizer markets collapsed in 2008, many producers rightly worried about the security of their deposits at local retailers.

Producers can also present risks if their contracts contain quality requirements that they may fail to meet thus negating the contract or resulting in significant price discounts.

Other examples involve lenders themselves. If the size of a borrower's loan requires the involvement of participating lenders, consider their track record of commitment. Bankers in remote cities don't know you personally and may not share the relationship you have with a local lender or its alliance with production agriculture. Financial problems in a participating institution, their acquisition by another lender not committed to agriculture, or their unwillingness to work with a borrower who gets into financial trouble or whose loan requires restructuring, can also represent a major risk during an economic downturn. If the lead lender is unable to find a replacement for a participating lender who pulls out of the arrangement, it can create a house of cards where the entire borrowing relationship crumbles.

Another case which affects many products is the listed derivative markets on the major exchanges. The exchange clearinghouse is a counterparty to every sale or purchase of options or futures contracts. That eliminates the possibility that a buyer or seller won't make good on the transaction. The clearinghouse, in turn, protects itself by requiring market participants to meet margin requirements. However, there is no such protection in the unlisted derivatives market where forwards and swaps are arranged. The prime example was the collapse of credit defaults swaps during the 2008 financial crisis.

There are also the cases of counterparties to the counterparty. If the primary contracting entity is primarily dependent on a single buyer or supplier, the failure or decision by the primary buyer or supplier to go elsewhere can also lead to financial problems. Some of these firms have also been victims of foreign buyers or suppliers being hit by changes in exchange rates, the imposition of tariffs or simply economic or political problems in their own country.

In all instances it is imperative that producers and their lenders are aware of the potential risks that each of these relationships represent. Producers need to know the financial condition of their direct counterparty as well as the domestic and global economic and geopolitical issues that may affect the relationship.

Too many producers have become victims by assuming that just because the relationship has worked in the past, it will continue to work. It is always good business to develop personal relationships, open communication and have a backup plan. The effects of increases in regulations, regulatory compliance measures and changing consumers' tastes and preferences also need to be kept in mind. Just look at the impact that retailers and processors shifting to cage-free suppliers is having on egg producers.

**

EDITOR'S NOTE: Danny Klinefelter is an agricultural finance professor and economist with Texas AgriLIFE Extension and Texas A&M University. He also is the founder of the mid-career Texas A&M management course for executive farmers called TEPAP. Access his recent DTN columns at https://www.dtnpf.com/….

(MT\SK\CZ)

Dr. Dan Talks Agronomy

Thu. May 26, 2016 8:26 AM


By Daniel Davidson
DTN Contributing Agronomist

Generally speaking, if planting is delayed in May because of rains, you don't have to switch out to shorter maturities of either corn or soybean varieties. Finding seed of shorter maturity varieties for your location could be a challenge and both corn and soybeans naturally shorten their maturity requirements when planted a few weeks later than expected.

However, when we move into June all bets are off and it may be time to consider switching from corn to soybeans, depending on which has the better yield and profit potential. There are agronomic considerations that should be part of the decision to switch crops.

Planting delays are always an inconvenience involving some financial loss and require a hard decision -- do I stay with the same crop or do I switch out crops? Factors going into that decision include relative yield expectations, anticipated crop prices, meeting production contracts, application of inputs, seed availability and agronomic considerations such as running into hotter and drier weather during pollination.

Chris Hurt, Purdue agricultural economist, believes the rally in soybean prices the last three months, concurrent with the inability to plant corn, may offer the financial incentive to shift to more soybeans now. Soybean prices have been moving steadily higher since January and more money can be made off soybeans than corn. This may be an opportunity.

John Bailey, with JCB Ag Research in Effingham, Illinois, stated that in southern Illinois's light timber soils the decision to switch to soybeans needs to be made by May 20. "Planting corn in late May and into June will put corn's pollination into a hot and dry period," Bailey said. "Soybeans will fare better for us."

Of course, if you laid down a corn nitrogen and herbicide program already it probably behooves you to stay with corn. Corn roots will capture more of the soil nitrate than soybean roots will. That gives the best chance of profit from the nitrogen investment and keeps the nutrient out of surface waters. If you laid down a preplant herbicide program, it probably will hurt soybean seed germination. That's enough reason to avoid switching crops.

Shawn Conley, soybean extension specialist offered three tips when considering the switch from corn to soybeans.

Check the herbicide label. "Several burndown or early pre-plant programs have labels for both crops. However, tankmix partners or rates may differ between the two. Make sure you verify rates, timings and plant-back restrictions before you make the switch."

Consider residual nitrogen available after heavy spring rainfall. Conley said that biologically, it's impossible to know how much is too much residual nitrogen to decide whether to stay with corn or switch. "Economically that number is a moving target given yield penalty, corn drying costs, etc. Over the last four weeks (into late May) the amount of nitrogen readily available to the late-planted corn crop, or in this case soybean crop, has declined, though some nitrogen is still readily available in the soil profile."

He noted that since excess nitrogen can lead to a more lush soybean crop, growers should consider whether diseases such as white mold are an issue in the field, and select varieties, seeding rates, and timing of disease scouting accordingly.

Is an inoculant required? "Should I use an inoculant (on soybeans) even when excess nitrogen is present? The simple answer is yes," Conley said. Studies show excess available nitrogen will inhibit N fixation later on. Increasing nodulation by inoculating seed can overcome that.

Read Conley's full report here: http://thesoyreport.blogspot.com/….

Growers were best served by keeping their corn cropping plan and varieties unchanged in May even though yields may fall slightly the later in May planting occurs. However, in June moving to soybeans may make more sense if yield and revenue potential is higher and there are no herbicide limitations.

(GH/CZ/SK)

Need Help?

We're here to help.

Do you need help choosing an account or applying for a loan?
Contact your Starion Personal Banker today.

Have another question? Chat with us.

Our Customer Service Team is available to chat when the “Start Chat” button appears below. Click to begin a chat. If a "Chat Closed," button appears you can leave us a message and we’ll be back to you.

Start Chat

Contact Us

1.888.258.6050

- or -

Find a local branch.