Ag Connection
Your link to the Universities for ag extension and research information


This Month in Ag Connection
Sell Corn Before the Fourth of July
Managing the Margin
Weed Seedling I.D. on Video
On the Web
Burndown Herbicide Decisions
Black Cutworm
June 1997
Volume 3, Number 6

Ag Connection - Other Issues Online


Publishing Information
Ag Connection is published monthly for Central Missouri Region producers and is supported by University Extension, the Commercial Agriculture program, the Missouri Agricultural Experiment Station and the College of Agriculture, Food and Natural Resources, UM-Columbia. Editorial board: Maryann Redelfs, Managing Editor; Parman Green, James Rogers, Mark Stewart, Melvin Brees, Don Day and Ron Alexander.

MailboxComments or Suggestions?
Please send your comments and suggestions to Maryann Redelfs, Agronomy/Information Technology Specialist, University Outreach and Extension, 608 E. Spring Street, Boonville, MO 65233, call 660-882-5661, or send messages by e-mail to: redelfsm@missouri.edu.

To send a message to an author, click on the author's name at the end of an article.


Sell Corn Before the Fourth of July

History shows that some of the best marketing opportunities for corn come early in the growing season. Early season prices reflect the concerns about production risk that are built into the market. The recent ten-year average (1987-1996) December corn futures price patterns indicate corn price tends to peak in late June to early July. An Iowa State University study of December corn futures prices found a mid-May positive “risk premium” averaging $.30 compared to October average prices since 1975.

In normal crop production years and years following a short crop, prices nearly always trend lower after early July into harvest. Once the crop reaches the pollination stage and conditions appear good, production risk decreases significantly. This suggests that the best new crop selling opportunities come before July fourth!

Marketing Strategies

The most common method used to make early sales has been the forward cash contract. Nearly all grain elevators and many other corn users offer this contract. The contracts are relatively simple and lock in a cash price. The major problem with this sales method is the very same production risk that creates the price opportunities in the first place. The contract requires delivery of a fixed quantity and this can be a problem if production is reduced. A short crop can also cause prices to move contrary to the average and be higher at harvest time. This leaves the producer sold at a lower price and possibly having to make up a quantity shortage at a higher price.

One way around this dilemma is to only contract a quantity that is likely to be produced even if production problems develop. This protects a portion of the crop against the risk of lower prices and avoids most of the production risk associated with forward contracts. However, this leaves the remainder of expected normal production unprotected from the risk of lower prices.

Put options have the potential to manage price and production risk while taking advantage of early season pricing opportunities. A put option provides the right to make a sale without any of the performance obligations required by forward cash contracts. If production is reduced, there is no obligation to deliver a quantity. If prices go up, the option expires or can be liquidated and the cash grain can be sold at the higher prices. A farmer can use put options to set a minimum price and not worry about missing out on higher prices or whether the bushels can be delivered.

The major disadvantage to using options is the premium or cost of the option. In volatile markets, as risk increases, the premiums increase. In spite of the cost, using options to make early sales offers risk reducing strategies to take advantage of favorable prices. Premium cost may often be reduced by rolling out of the option in September while it still has some value. Another advantage of the option is that the farmer still has ownership of the cash corn and can elect to store it for later price recovery or income tax management strategies.

A futures hedge or a hedge-to-arrive cash contract can be used to lock in price. Buying a call option can offset some of the disadvantages of a cash forward contract or a minimum price cash contract can be used to protect an early season price. All offer potential to increase farm profits.

Using a combination of these strategies for portions of the crop may offer more flexibility and risk management while adding even more to profits. The Iowa study referenced on page 1 showed significantly increased profits, during the study period, for farms using strategies to make mid-May and early July sales.

Author: Melvin Brees, Farm Management Specialist

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Managing the Margin

Producers will generally agree that added production, whether it be corn, beef, alfalfa, hogs, soybeans, wheat, sunflowers, etc. can only be obtained by utilizing additional amounts of one or more of the factors of production. One of the goals of farm business management is to analyze the ways and means of employing land, labor, capital, and technical knowledge so the business will yield the maximum net return.

How do you utilize a given input to optimize returns? Marginal analysis is a management concept that suggests the most economical level of input utilization.

If you'll agree you are farming with limited resources, then you are consciously or unconsciously making marginal analysis type decisions. How much seed do you plant per acre? How much fertilizer do you apply to a field? What do you have the hired help do today? What do you do today? The list goes on and on! Farm managers analyze numerous questions similar to these every day and the totality of the results of these decisions will determine the financial bottom line for the farm.

Graph

The yield response to application of most nutrients follows the law of diminishing returns: each added fertilizer increment produces a progressively smaller yield increase. This graph is an example for determining the most profitable rate of application in relation to fertilizer cost. Situation 2, a rate double that of 1, gives the greatest return, as indicated by a line tangent to the yield response curve and parallel to the input cost line. (Gardener, F. P., R. B. Pearce, and R. Mitchell. 1985. Physiology of Crop Plants. Ames: Iowa State University Press.)

The law of diminishing returns is to the field of economics what the law of gravity is to the field of physics. The law of diminishing returns states that at some level of input, returns from each successive unit of a resource will decline as additional units of input are applied to a given operational unit. Marginal analysis suggests added input of a resource should be utilized as long as the cost of the added input is less than the value of the added production it generates; and its marginal addition to net income is greater than that of another input that is not added because of limited resources.

Additionally, we must be aware that cost has to be viewed not only in the monetary sense, but as the sum sacrifice that must be made in order to do or acquire something. The nature of the sacrifice (what is given up) may be tangible or intangible, objective or subjective. The sacrifice may be money, goods, leisure time, or security, to name a few.

Another concept of measuring cost is what economists call opportunity cost. Opportunity cost is the value of the benefit that is foregone by choosing one alternative over another. For example, could you make more money by investing in a bank CD than by buying more fertilizer?

Good farm business managers have the ability to employ and to utilize optimum quantities of resources in the right place and at the right time.

Author: Parman R. Green, Farm Management Specialist

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Weed Seedling I.D. on Video
To borrow a copy of the MU Bradford Research Farm video “Weed Seedling Identification”, contact your University Outreach and Extension Center.

On the Web

MU Weed Science Web Page - http://www.psu.missouri.edu/agronx/weeds/

This site has good information related to weed management from the University of Missouri, as well as links to information from other reliable sources.

Solutions — Quick Reference Library - http://www.ag.uiuc.edu/~robsond/solutions/solutions.html

The Illinois Cooperative Extension Service online reference library for commonly asked questions.

Sustainable Agriculture Web Site - http://sunsite.unc.edu/farming-connection

Two former editors of The New Farm magazine have launched Sustainable Farming Connection, an interactive World Wide Web site where farmers and others forging what they define as more sustainable food systems can find and share information. Discussion groups also provide a forum for farmers to ask questions, exchange tips and "talk" with others about topics of importance to them.

“Rural Internet access has soared in recent months,” notes author Craig Cramer. “With a website, we can reach more farmers and bring them even more of the practical information they want than we could in print.”

“We're calling on farmers and other ag professionals with Internet access to serve as information ‘hubs’ to help spread the word to others,” he adds. SunSITE at University of North Carolina is hosting the Sustainable Farming Connection. "Your 'on-site' comments will help ensure we meet your needs," says fellow editor Christopher Shirley.

Note: Whether you agree with what is being said at this site or not, all of us should pay attention to some of the articles. Sustainable agriculture to me means developing a system that is sustainable, both economically and environmentally. It has nothing to do with size of farm, but involves practices that accomplish the objectives. At this site, you can contribute your thoughts in regard to sustainable agriculture. I don’t know any farmer who would not want agriculture to be economically and environmentally sustainable. With all of us working together we can accomplish this.

Author: Don Day, Ag. Engineering/Information Technology Specialist

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From the Bradford Farm

John Poehlmann, Superintendent

Burndown Herbicide Decisions

Weeds, cover crops and sod growing in fields deplete soil moisture levels before planting and eliminate the soil moisture conserving advantages of no-till. Due to weather uncertainty, consider applying burndown herbicides two weeks prior to planting to prevent moisture depletion. If a residual herbicide is used, applying the product as close as possible to planting time will provide better weed control for the crop itself.

In soybeans, University research has shown that herbicide applications made prior to 14 days before planting without a split or sequential application at planting will usually provide poor control in Missouri and are not recommended. Burndown herbicides Gramoxone Extra, Roundup/ Touchdown, and 2,4-D can be tankmixed with many residual herbicides. Gramoxone Extra and Roundup may be applied early preplant through planting. 2,4-D applications must be made at least 7 days (ester) or 15 days (amine) prior to planting for application rates up to 1 pint /A, or at least 30 days (ester and amine) prior to planting if applied at 1 to 2 pints/A. When using 2,4-D in your burndown program for soybeans remember to plant soybeans at least 1.5 to 2 inches deep to avoid crop injury from 2,4-D.

Some of the available residual herbicides which may be applied alone or tankmixed with Gramoxone Extra, Roundup/ Touchdown or 2,4-D include Authority Broadleaf, Canopy, Canopy XL, Command, Cover, Dual II, Frontier, Lasso/Microtech, Lorox, Sencor/Lexone, Prowl, Scepter, Bronco, Broadstrike+Dual, Squadron, and Turbo. Authority Broadleaf, Canopy, Canopy XL, Cover, Lorox, Sencor/Lexone, and Turbo also provide some burndown activity since they contain either a triazine (Sencor/Lexone) a urea (Lorox), or a aryltriazolinone (Authority/ Cover) herbicide. Authority Broadleaf, Canopy, Canopy XL, and Cover can be used alone as burndown and residual herbicides.

Other non-residual herbicides for preplant weed control include Assure II, Fusion, Poast Plus, and Select. These products can be applied at reduced rates for 3 to 5-inch annual grass control and can be tankmixed with 2,4-D and a few of the above listed herbicides. These grass compounds with or with out 2,4-D will control existing vegetation, but will not provide any residual control. Residual control can be obtained by tankmixing one of the grass herbicides with a residual herbicide.

Always scout your fields and determine the weeds present before making a herbicide decision. Once you have identified the target species consult MP575 "Weed Control in Missouri Field Crops", the manufacturers label, and your dealer to determine specific weeds controlled and the most legal, effective, and economical products for your field.

Author: Bill Johnson, State Extension Weed Scientist

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Black Cutworm

By June 1, Central Missouri will probably be seeing one last surge of black cutworm (BCW). Depending on weather, corn may still be at risk and should be scouted closely. If temperatures are below normal, BCW develop more slowly and the corn grows slower, which extends the “at risk” time frame. The only accurate method of determining if a field has problems is to scout the field.

Scouting takes a little time, but can be very worthwhile.

1.

Choose 5 to 10 at random spots to check in the field (the larger the field the more stops needed)

2.

At each stop count a minimum of 20 plants and up to 50 plants. (Use the same number of plants at each stop)

3.

Add up all the damaged plants, keeping separate both the above and below ground damaged plants from all stops.

4.

Convert the numbers into percentages.

Example: If there were 8 below ground damaged plants, using 5 stops and counting 50 plants at each stop the result would be (8 (5 x 50)) x 100 = 3.2%, which would be in the economic threshold range.

The economic threshold (the point at which the cost of spraying is less than the cost of the damage) is as follows: above ground cutting 6-8% and below ground damage 2-4%.

Black cutworm is just one harmful pest during the summer. The Integrated Pest Management Unit, at the University of Missouri, specializes in crop pests. Each week the Unit publishes the IPM Newsletter, with timely information about field pests. The newsletter is now posted on the internet at http://etcs.ext.missouri.edu/agebb/pest/ipmltr/index.htm
Or — you can subscribe to a regular paper copy. The newsletter is weekly and published through the fall. To subscribe, send a $27 check payable to University of Missouri to: Integrated Pest & Crop Management Newsletter, 45 Agriculture Building, Columbia, MO 65211.

Author: Mary Sobba, Farm Management Specialist

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University ExtensionAg Connection - June 1997
http://outreach.missouri.edu/agconnection/newsletters/is-97-06.htm -- Revised: June 30, 1997
daydr@missouri.edu