Ag Connection

Your link to the Universities for ag extension and research information

 


Volume 3, Number 9
September 1997
 
This Month in Ag Connection
Store This Fall's Harvest?
Methods of Pricing Hay
Market Hay Grades for Legumes, Legume-grass Mixtures and Grasses
National Pesticide Telecommunications Network (NPTN)
New Tax Act Checklist for Farmers
MU Wheat Trials Set Yield Record — Test Weights Above Average

[This Month in Ag Connection] [Ag Connection - Other Issues Online]

Store This Fall's Harvest?

Corn and soybean futures prices typically bottom during the fall harvest months of October and November. The seasonal pattern for both crops is for prices to gradually recover and peak by late spring or early summer. Basis (the difference between futures price and local cash price) is usually the weakest (widest) during harvest time. This combination of low futures price and weak basis are the reason harvest time prices are generally unattractive. Following harvest, basis usually strengthens (narrows or improves) and allows cash prices to gain on futures prices. This seasonal price pattern and the strengthening of basis provides the opportunities for storage profits.

Will this price improvement cover the cost of storing? History suggests that in many years it does. Seven out of the last ten years have provided opportunities for storage profits when corn was stored four months or more. Another seven out of the last ten years have also offered storage opportunities for soybeans.

The size of the nation-wide crop can offer clues as to whether storage may pay in any given year. One rule-of-thumb says "always store a large crop and never store a short crop!" This "rule" is based on the idea that a large crop depresses prices and weakens basis more than normal at harvest time. The low harvest time prices encourage demand and prices begin to recover as demand uses up the crop supplies. This recovery is often more than enough to cover the cost of storage.

The opposite often occurs with a small crop. The need to "ration" a short crop results in high prices before or during harvest. These high prices reduce demand and encourage increased planting and larger supplies the following year — both of which lead to steady or lower prices and no return to storage.

The other years (that are neither a large crop nor a short crop) usually follow the typical seasonal pattern. For these years, the seasonal futures price increases, especially through late spring or early summer, are often not enough to recover storage costs. While storing long term (late spring or early summer) may not work, short term storage until mid or late winter often does. This is because basis improvement along with winter price recovery more than covers the cost of short term storage. Long term storage has less potential in these years because late spring price increases don't cover additional storage costs.

USDA's Crop Production and Supply/Demand Reports estimate this year's corn crop to be the third largest. While not record yields, the large acreage of soybeans is projected to produce the largest soybean crop to date. The potential large crops suggest that, at least, short term storage would be profitable. USDA also estimates record demand for both crops. Meeting this strong demand requires that the large crop expectations be met. This means that continued dry weather or an early frost would have a significant effect on prices that could be somewhat like a short crop year.

Relatively low grain stocks, strong demand and uncertain production results in weather sensitive markets and considerable price volatility. Under these conditions market plans and strategies should be flexible. However, even though it could change, current crop estimates and past history argue that storage of this year's crop should be considered.

Author: Melvin Brees, Farm Management Specialist


 

For additional information, see:
G03160:Understanding and Interpreting Feed Analysis Reports

 

 

 

 


Note the term “representative sample”. Do a good job of sampling. Occasionally the purchaser runs another forage analysis after purchase and it sure is nice if the nutritional values are similar. For information on hay sampling, contact your University Outreach and Extension center.


[This Month in Ag Connection] [Ag Connection - Other Issues Online]

Methods of Pricing Hay

“What is the going price for hay?” This question is about as wide open as the front door on a hot summer evening. There are several ways for determining the value of hay.

A considerable amount of hay is sold by the old sight and smell method. In other words, the hay looks like hay, and smells like hay, so it should be worth X?? dollars.

Another method is to take a load of hay to the local auction. The price then is determined by the last bidder, not necessarily the value of the hay or the overall supply and demand conditions.

A preferred pricing method is to take a representative sample of the hay and have it analyzed for nutritional content. Once the forage analysis report is received, check the crude protein (CP) and net energy (NE). These can be used to calculate the value of the forage for protein and energy compared to their costs from corn and soybean meal (SBM). These prices are calculated weekly using current corn prices from the Missouri Department of Agriculture and SBM prices from the By-Product Feed Prices listing on the Commercial Agriculture electronic bulletin board (AgEBB). These comparison prices are posted by the UMC Dairy Science Department on the Internet.

Using these calculated values for the price/pound of CP and NE, and the CP and NE from the forage analysis, calculate the value of the hay/ton using the formula:

2000 pounds/ton x ((CP x CP price/pound) + (NE x NE price/pound)) = $/ton

Example: Consider alfalfa hay with CP and NE values of 16.2% and 0.54 Mcal/pound, respectively (as fed). Use August 22 values from the AgEBB web site of corn and SBM (CP = 48%) prices of $2.96/bushel and $276.00/ton, respectively. The cost of protein and energy are calculated at $0.207/pound and $0.049/pound, respectively (these are posted on the web site). The alfalfa would have a feeding value of $119.99/ton.

2000 x ( (0.162 x $0.207) + (0.54 x $0.049)) = $199.99/ton

Fescue hay with an 8% CP and 0.50 Mcal/pound NE (as fed) would be worth $82.12/ton.

Keep in mind that the prices for corn and SBM are considered at the elevator or in the bin. The hay price will need to be adjusted due to the difference in costs of transporting hay vs. corn or other concentrated feed.

Another method is to use the Relative Feed Value (RFV) index. The RFV is a calculation used to compare forages and is determined from the digestible dry matter (DDM) and the dry matter intake (DMI). Forages with neutral detergent fiber (NDF) values of 53% and acid detergent fiber (ADF) values of 41% represent the RFV of 100. The higher the RFV index, the higher the quality of the forage. Protein is not considered in the RFV calculation and must be taken into consideration. In general, high protein forages have low fiber content and high fiber forages have low protein content.

Author: Dale Watson, Livestock Specialist


a Pre B1 = Prebloom; EB1 = Early Bloom; MB1 = Mid Bloom; FB1 = Mid to full bloom; V = Vegetative; EH = Early Head

b Reference hay mid to full bloom alfalfa (Lema & Kawas & Jorgensen) RFV = 100%

[This Month in Ag Connection] [Ag Connection - Other Issues Online]

Market Hay Grades for Legumes, Legume-grass Mixtures and Grasses

Grade Descriptiona CP % ADF % NDF % RFV %
Prime Leg-Pre B1 >19 <30 <39 >143
1 Leg-EB1 20% Grass-V 17-19 31-35 40-46 126-143
2 Leg-MB1 30% Grass-EH 14-16 36-40 47-53 113-126
3 Leg-FB1 40% Grass-Head 11-13 40-42 53-60 97-113b
4 Leg-FB1 50% Grass-Head 8-10 43-45 61-65 86-97
Fair Grass-Head &/or Rain-damaged <8 >46 >65 <86

Author: Mark Stewart, Livestock Specialist


 

Information is available at no cost over the phone and non-copyrighted materials can be mailed or faxed for a nominal fee. Information is also available through the NPTN World Wide Web site.

NPTN can be reached 6:30 a.m. to 4:30 p.m. pacific time, daily, excluding holidays.
Telephone: 1-800-858-7378
Fax: 1-541-737-0761.
E-mail: nptn@ace.orst.edu

[This Month in Ag Connection] [Ag Connection - Other Issues Online]

National Pesticide Telecommunications Network (NPTN)

Have you ever wondered or been asked the following questions:

  • Is it dangerous to use pesticides for insect control if I am pregnant or have small children?
  • What is the persistence of the chemicals used on my lawn for weed control?
  • Will they contaminate my well?
  • Could this old bottle of liquid I found in the garage be a pesticide?

If you have had these questions and wanted a place to call, the National Pesticide Telecommunications Network (NPTN) may be a useful resource for you. NPTN provides objective, science-based information about a wide variety of pesticide-related subjects including: pesticide products, pesticide poisonings, toxicology, and environmental chemistry. NPTN uses a variety of information sources such as EPA documents, USDA Cooperative Extension publications, the scientific literature, and a pesticide product database.

NPTN is staffed by highly qualified and trained pesticide specialists who have the toxicology and environmental chemistry training needed to provide knowledgeable answers to questions about pesticides. Pesticide specialists can help callers interpret and understand toxicology and environmental chemistry information about pesticides.

NPTN receives more than 2000 calls per month. Most callers are homeowners concerned about their family's health when pesticides are being used in and around their home (e.g., for control of ants, termites, fleas, or garden and lawn pests). NPTN can provide information on the pesticides used in these situations and methods to reduce exposure.

While NPTN does not make recommendations about which pesticides to use for control of pests, NPTN can direct callers to local resources for products available in their area. If people call with pesticide emergencies, NPTN can connect them directly with the Oregon Poison Control Center or the National Animal Poison Control Center. NPTN can also direct callers for pesticide incident investigations, safety practices, cleanup and disposal, and laboratory analyses.

Information is available at no cost over the phone and non-copyrighted materials can be mailed or faxed for a nominal fee. Information is also available through the NPTN World Wide Web site.

NPTN can be reached 6:30 a.m. to 4:30 p.m. pacific time, daily, excluding holidays. Telephone: 1-800-858-7378 Fax: 1-541-737-0761. E-mail: nptn@ace.orst.edu

Author: Mary Sobba, Farm Management Specialist


 

For details on the tax issues that may apply to you, contact your tax professional. A 34 page summary detailing the revenue provisions of the Act can be found on the web.

[This Month in Ag Connection] [Ag Connection - Other Issues Online]

New Tax Act Checklist for Farmers

The most extensive tax cutting legislation in more than 16 years has just been enacted as the “Taxpayer Relief Act of 1997". However, the promised tax law simplification never had a chance with this legislation. Most small business taxpayers will now find it increasingly difficult to complete their tax returns without professional assistance. Further, almost every tax advisor will now find it necessary to utilize income tax preparation software.

To illustrate the added complexity: the new Act contains 36 retroactive provisions; 114 changes which were effective upon the President’s signing; 69 changes effective 1-1-98; 5 changes effective after 1998; 285 new sections and 824 Code amendments.

The following are some of the tax provisions farmers will want to review with special interest:

*Reduction of the maximum capital gains rate for individuals.
*Increase in self-employed health insurance deduction.
*Repeal alternative minimum tax (AMT) installment method adjustment for farmers.
*Increase in estate and gift tax unified credit.
*Indexing (adjusting for inflation) annual exclusion for gifts, special use valuation, and generation-skipping transfer tax exemption.
*Estate tax exclusion for qualified family-owned businesses.
*Liberalization of installment payment provisions of estate tax attributable to closely held businesses.
*Exception from real estate reporting requirements for certain sales of principal residences.
*Clarification of definition for principal place of business relative to home office deduction.
*Treatment of livestock sold on account of weather related conditions.

Author: Parman R. Green, Farm Business Management Specialist


 

Special Report 506:
1997 Missouri Winter Wheat Performance Tests

[This Month in Ag Connection] [Ag Connection - Other Issues Online]

MU Wheat Trials Set Yield Record — Test Weights Above Average

The 1997 winter-wheat variety performance trial averages are the best ever at 71.1 bushels/acre. Overall, the average yield was up 22.3 bushels over last year and up 5.6 bushels over the previous high yield in 1994.

The tests compared 64 soft red winter wheat varieties at seven locations and four hard red winter wheat varieties at three locations across the state. Test results can be downloaded electronically by computer from two sites. Printed reports were mailed in August to all growers with 50 acres or more of wheat. Or, copies can be picked up at local University Outreach and Extension Centers.

The winter wheat crop got off to a slow start last fall because of either delayed planting or cool weather. However, winter damage from freeze injury or soil heaving was nothing like recent years. A cool dry spring encouraged spring tiller development that helped yields. Spring weather minimized leaf diseases and favored kernel development.

For the second consecutive year, Pioneer 2540 was the highest yielding soft red winter wheat tested with an average of 78.2 bushels/acre across all locations. Lewis 8404 and Pioneer 25R26 were in close second at 78.1 bushels.

Look at more than yield when selecting a variety for planting. This year, 13 other wheat varieties produced yields that were statistically the same as the top yielding variety. Consider yield averages over time and at different locations. Also, consider test weight, plant height, heading date, and disease resistance. The report gives three-year yield averages when available.

Test weights in 1997 averaged 3.5 pounds heavier than in 1995 and 8 pounds heavier than in 1991 when wheat scab produced lightweight kernels. This year 48 of the 64 soft red wheat varieties weighed 58 pounds or more. That's the minimum test weight per bushel to grade U.S. No. 2.

The publication is Special Report 506 from the MU Agricultural Experiment Station. The Missouri Seed Improvement Association sponsored printing and mailing. The information can be received via computer modem from the extension Commercial Agriculture electronic bulletin board (AgEBB) at (573) 882-8289. Voice line assistance is at (573) 882-4827. Or, on the Internet, the address is http://www.psu.missouri.edu/pubs/sr506. These addresses have a chart of wheat yields on all soft red varieties that can be downloaded.

Author: Ken Kephart, State Extension Small Grains Specialist

[This Month in Ag Connection] [Ag Connection - Other Issues Online]


University ExtensionAg Connection - September 1997
http://outreach.missouri.edu/agconnection/newsletters/is-97-09.htm -- Revised: November 14, 2002
daydr@missouri.edu