Wheat: store or deliver?

Cory Walters, University of Kentucky Ag Economist, posted the following advisory on the state's grain blog Friday on wheat marketing strategies:

Wheat producers may be asking themselves if they should store or deliver wheat and if they store should they forward price or not.

Currently, the wheat futures contract at the Chicago Board of Trade is offering a large positive carry (the difference in price between two futures contracts) for storing wheat from now into the fall. The gross return between July and December futures is 53 cents per bushel (6.23 for July and 6.76 for December) as of June 5, 2009.

The July to September carry is 28 cents per bushel. The forward price benefit of 53 cents per bushel offers positive returns to storage, thereby making storage with a futures contract (a storage hedge) for fall delivery appealing since net return to storage is positive.

To calculate net returns you should subtract variable costs to storage (this includes the interest cost of capital in the wheat), cost of insurance on wheat, and cost of shrinkage from the gross return of 53 cents. Also, any basis improvement between now and delivery would add to storage hedge returns.

-- Owen Taylor

A season with more bad choices than usual

My favorite cartoonist, Joe Martin, draws a daily strip called "Mr. Boffo."

Boffo is a kind of an everyman who Martin places in all manner of situations, from prehistoric times to the space age and in all types of peril and predicaments. The humor in Boffo can be, well, subtle.

Perhaps my favorite one shows Boffo strapped in a hulking electric chair, and in each hand he holds a piece of white bread.

The caption: "Making the best of a bad situation."

In other words, the best Boffo can do at this point is make toast.

Which brings me to this cropping season in the American South.

With all the rain in April and/or May (depending on where you are), this season has started in a miserable fashion. The wheat crop (see the item below) has suffered terrible losses in yield, quality and test weight. We reported more comments about that in this week's AgFax: Southern Grain report, plus carried numerous advisories in the Worth Downloading section on our home page.

Beyond the wheat, many growers were unable to make fertilizer and herbicide applications on corn until weeks after they were due. Soybeans and cotton were planted late and/or replanted multiple times. People in the field are telling us about soybean farmers who have replanted some spots 2 and even 3 times. Cotton and rice planting have been delayed so long that growers finally switched acreage to soybeans where they could. And much of the South's peanut crop will be planted late enough that it will take an extremely warm fall to carry it to full maturity.

Which brings us back to Mr. Boffo holding that bread and hoping for toast when the voltage hits.

This is one of those years when we're trying to make the best of a bad situation, which I'm hearing almost universally from farmers and the people who advise them.

In many cases this year there have been no "right" or "best" decisions, only varying degrees of bad choices, whether you're dealing with replanting, herbicide drift on rice or Valor injury on peanuts. Every choice is bad, but some are worse than others.

A Mississippi consultant told me about attending a social function over the weekend where he came in contact with a cross-section of Delta farmers -- cotton, rice, grain, Baptists, Catholics, even a sprinkling of Ole Miss graduates. It was the kind of gathering that people who run corporate focus groups should attend if they actually want to know what farmers think.

When they talked about the way this season has unraveled, the consultant realized that nearly every farmer in the crowd at one time or another said, "I'll be glad when this SOB (or words to that effect) is over."

"You always hear that, but it tends to be as you approach harvest or maybe in the middle of the season when they've suddenly got to throw a bunch of money at insects or irrigation," the consultant observed. "But this is the earliest I've ever heard so many people say it so much."

We've been hearing the same thing.There are plenty of bad situations to go around and, unfortuately, ample opportunities -- like Boffo -- to make toast.

-- Owen Taylor

Sprouting wheat: a bad situation made worse

Wheat acreage dropped in the South for the 2008/09 crop, which was a blessing in many areas.

This has turned out to be a disappointing crop in much of the region due to heavy, persistent rain in April and May. Diseases flared, even where fungicides were applied on time. Growers who planted susceptible varieties and couldn't make fungicide applications on schedules were often left with crops that weren't worth harvesting, and what would have been a contribution to cash flow has now turned into an expensive cover in the absence of crop insurance.

Now, growers are dealing with sprouting issues. Grain dried down to the point it could have been harvested, but then rain developed again, keeping combines out of the field and exposing vulnerable grain to enough moisture to sprout the seed.

Dewey Lee, Georgia Extension Wheat Specialist, has been dealing with this issue and distributed an advisory last week.

Click here to download Lee's observations and recommendations.

Initial reports came from Georgia. But we're also hearing about sprouting in south Alabama. As wheat harvest moves north, more of this probably will be encountered. Farmers who might have been cutting wheat over the last week in the Midsouth were forced, instead, to finish planting other crops delayed by the rain, replant acres lost earlier and catch up on fertilizer and herbicide work across the board.

Rain moved into the region on Thursday, which could promote sprouting in some fields.

Most elevators in the affected areas are rejecting loads with sprouting of 4% or more, based on our conversations with several growers and Extension workers. In certain areas, 30% to 40% of the loads are above the limit. A handful of elevator operators, though, are buying the grain and finding a home for it in the feed market, albeit with dockage.

-- Owen Taylor

Across the Southeast, June 4, 2009: Summertime?

Based on the weather last weekend and this week, it appears the cool and wet spring is over. While crops are being planted in some areas, other crops and areas are doing quite well. All crops are responding to warmer and drier field conditions. However, approximately 10 early growing days were lost from this growing season. It is awfully difficult, if not impossible, to make them up. Now the management decisions will be made to prevent any more losses in yield potential.

Peanut producers should be concerned as they consider late planting dates and resulting late harvest dates. Two very timely articles by Beasley (University of Georgia) and Chapin (Clemson) can be found in the AgFax Media Publication PeanutFax.

Alabama: Wheat yields have a wide range from 25 to 50 bushels per acre and the test weights are reportedly dropping. Worse, in some fields mold is developing and grain is sprouting. Three-cornered-alfalfa hoppers are being found in low numbers in soybean fields. In North Alabama producers are reportedly giving up on corn and cotton in favor of soybeans, while in South Alabama cotton is still going in the ground. Heavy thrips damage is reported on cotton where the at-plant insecticide is depleted.

Alabama Weekly Crop and Weather Report: Alabama Crop Report

Florida: Rains on the Panhandle, some of which were heavy, have delayed wheat harvest and causes some disease. Also delayed are cotton and soybean plantings. The oldes cotton is at the third true leaf with mostly good stands. Peanuts are still being planted, but it's late and the spring rains continue.

Florida Weekly Crop and Weather Report: Florida Crop Report

Georgia: Rains have delayed field work with low temperatures of 60 degrees and daytime highs of the low 80's. Corn looks good with some at silking. Overall the crop is shorter than normal. Some disteases such as rust and Northern corn leaf blight are present in fields of corn followed by corn rotations. Perhaps 60% of the wheat crop has been harvested, but poor grain quality is a concern.

Peanut plantings are at 60% complete as compated to the normal 90% completed. Cotton is behind but the planters are rolling.

Georgia Weekly Crop and Weather Report: Georgia Crop Report

North Carolina: Wheat has a lot of disease pressure. Corn looks decent but needs rain on some to stop leaf curl. Cotton is reported to run from good to bad. While the thrips infestation is light, the at-plant insecticides are depleted and insects will increase. Farmers should be prepared to make foliat treatments as soon as threshold infestations are present. Hopefully the cotton plants will quickly grow out of the thrips stage.

North Carolina Weekly Crop and Weather Report: North Carolina Pest News

South Carolina: Soybeans are perhaps 45% planted with some delays due to excess rain slowing wheat harvest. Cotton planting is near completion. With the exception of a few grasshoppers, the insects are quiet. Farmers are nearly finished with peanut planting with most of the intended acres planted. The heavy rains earlier have triggered some herbicide damage to peanuts that warm dry soils should help.

South Carolina Weekly Crop and Weather Report: South Carolina Crop Report

Virginia: A Louisiana consultant noted the earliest corn was still in the sack. Reports indicate that a similar situation exists in parts of Virginia. The larger corn is getting side-dress fertilizer applications. The soil moisture is adeauate and crops are responding to the warmer temperatures. Cotton at-plant insecticides are depleted and foliar thrips treatments are being made. A few western flower thrips are present, but they are spotty and not at threshold levels yet.

Virginia Weekly Crop and Weather Report: Virginia Crop Report

--Tom Crumby

Across the Mid-South, June 3, 2009: Summertime?

Based on the weekend weather and a glance at the US weather map this morning, it appears the cool and wet spring is over. While crops are still being planted in some areas, cotton in South Louisiana is making good progress. And in other areas corn and soybeans are doing well. Weather conditions have created wide differences in crop development that will define the 2009 crop. The challenge is to make the correct management decisions that do not hinder crop development.

In the North Delta area late planting, especially cotton, is somewhat risky considering the potential for an early frost this fall. There are many questions regarding late cotton. How much fertilizer is needed? Do the pest thresholds change to tolerate lower damage levels? Do the maturity evaluations change to get the defoliation treatments out before frost?

One key component to very carefully watch is production expenses.

Arkansas: Arkansas agriculture is behind due to the frequent and heavy rains. The Crop Condition Report rated only 39% of the rice crop as good or excellent. For those prefering to plant soybeans instead of late rice or cotton, gains in soybean market prices were welcomed.
Arkansas Crop Report

Kentucky: Kentucky crops have progressed supported by imporoved weather conditions. As of May 26, 75% of the intended acres were planted, However, some fields were being replanted. Soybeans plantings (13% completed) for 2009 were reported to lag behind the five year average (24% completed). The wet weather has put increased disease pressure on wheat and funcicide treatments are being made.
Kentuck Weekly Crop and Weather Report Kentucky Crop Report

Louisiana: Louisiana's oldest cotton is now at node 10 and the youngest is just emerging. Pest levels remain low, but the insects are there. Warmer and drier conditions will only eggravate the insect infestations and weed pressure. Wheat harvest is nearing completion and farmers are planting double-crop beans with an eye on improving soybean prices. Wheat yields were reported in the range of 70 bushels per acre making some farmers wish they had planted more.
Louisiana Field Notes

Mississippi: Mississippi rice is late and out of sync. Due to the rains some fields did not get levees pulled and planted. The unfortunate aspect here is the overall yield loss from not having levee rice. There is an old adage, "paddy rice pays the bills, levee rice is the profit." Corn has done rather well during the cool and wet conditions. However, with all the rain, the plants may not have good root systems to hold up during potential hot and dry weather conditions in the near future. Irrigation may be needed quickly. Cotton is in a rather difficult situation. Planters were still running last week. But a lot of those intended cotton acres will likely be planted to soybeans. And with this late start, cotton pest problems in late August andSeptember could get expensive.
Mississippi Crop Report

Missouri: While corn planting is finished, the crop is approximately nine days behind normal. Cotton and rice are also lagging in field progress due to the frequent rains. For the week ending
May 24, soybeans plantings were nine days behind normal. A lot of the replanted acres likely went to soybeans.
Missouri Crop Report

Tennessee: Tennessee is experiencing more problems with glyphosate pigweed tolerance in many areas. There are also reports of soybean crop damage from dicamba being washed to low areas in the fields. The contaminated soil is being moved by the recent heavy rains. Cotton is being planted or replanted. In some cases, the replant acres in corn or cotton have been planted to soybeans.
Tennessee Weekly Crop and Weather Report: Tennessee Crop Report

--Tom Crumby