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Northwest Iowa Dairy Outlooks

A local discussion of current science and issues concerning dairying in northwest iowa

Monthly Archives: June 2010

Recent rains and lingering wet field conditions have hampered alfalfa harvest and may contribute to a condition Nebraska Extension Forage Specialist Bruce Anderson calls “windrow disease.”

This refers to the striped appearance in fields where alfalfa windrows remained so long that regrowth was delayed. Usually it’s due to rained-on hay.

This situation presents special challenges. Weeds often invade, requiring spraying to maintain quality and protect stands. During the next growth period, plants that were not smothered regrow rapidly, while plants underneath the windrow suffer delays. Often part of the field will begin to bloom while windrow-stressed plants are still short and tender. So when do you harvest? When the first plants begin to bloom or do you wait until injured plants are ready?

Two factors can help guide your decision as to when to cut — the health and vigor of your stand and the nutrient needs of your livestock.

Is your alfalfa healthy and regrowing well? If not, wait to cut until stunted plants begin to bloom so you can avoid weakening them even more.

If your alfalfa is in good shape, cut when it will best meet the needs of your animals. Dairy cows need alfalfa that is cut early, so harvest when the first plants begin to bloom. Regrowth of injured plants may be slow after cutting, but this sacrifice is needed for profitable milk production. In contrast, beef cows do not need such rich hay. So let stunted plants recover, and then cut when they are ready to bloom.

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Dan Fiedland with MeatingPlace notes that the UN’s Food and Agriculture Organization and the Organisation for Economic Co-operation and Development reports that dietary changes and a growing population will drive food prices  up between now and 2019.  

The annual agricultural forecast says growing swine herds in Brazil and China will likely keep pork prices in check as other food prices increase over 1997-2006 levels.

On average, prices will remain below the levels they reached during the 2007 and 2008 price spike. Beef and pork prices did not go up during that period, and the forecast calls for these costs to increase by 10 percent to 20 percent by 2019 as compared to 2007-2008 levels.

Lower supplies and higher feed costs are behind the predicted increase in livestock prices, as well as increasing demand for meat and processed food in developing countries with rising income levels.

By 2050, the global population is expected to hit 9.1 billion, up from roughly 6.8 billion right now, and the FAO has said that food production will have to increase by 70 percent. Agricultural growth is on track to hit that level, according to this year’s report.

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D. Mark Welch asks “What has happened to the basis?” Basis is defined as the difference between the local cash price and the futures price (cash – futures = basis). This applies whether we are considering the cash wheat price at your local elevator or export bids at the port of Houston. Location and related transportation costs are usually considered to be the primary explanation for the basis level in a given market area. But other factors also have an influence on the basis. These include storage capacity, government programs, weather at harvest, and general market conditions.  Changes in the basis can often tell us about changes that are occurring in the overall level of demand in the market place1. $1.40. The wheat basis at the port of Houston this week is $0.35, only the second time since we have been tracking basis levels that this basis has been negative.

Supply and demand fundamentals for wheat point to weak basis levels, particularly in Texas. Harvested acres are up over a million acres from last year and the state average yield is expected to be 35 bushels per acre. This is just below the all time record yield of 37 bushels seen in 2007 (the last time the basis was this weak). Protein levels from hard red winter wheat are expected to be lower than normal this year removing a price advantage Texas wheat might have on the basis of quality.

Nationally and internationally wheat supplies are ample. U.S. wheat production has exceeded consumption the last two years and ending stocks are at their highest levels since the 1980s. World wheat supplies have recovered quickly from record tight stocks two years ago and are back to long term averages. U.S. wheat exports in the 2009/2010 marketing year hit a 25

year low and projections for 2010/2011 are basically unchanged. This puts back to back wheat exports at their lowest levels since the early 1970s.

An additional factor pushing this year’s basis levels to record lows may be the economic situation in Europe. Concerns over the abilities of several governments in the European Union to meet their debt obligations have weakened the financial situation, dampened expectations for economic recovery from the recent recession, and pushed the Euro to its lowest levels in over four years.

Many studies have confirmed the relationship between currency exchange rates and grain exports, particularly wheat

. The recent fall of the Euro versus the currencies of countries that import wheat has increased the price competitiveness of European wheat in world markets and made wheat from the U.S. less competitive.

Given the weakness in the Euro to this point, it appears U.S. wheat prices have fallen sufficiently to once again approach price competitive levels, at least back to where we were a few months ago. While other factors contribute to current weak basis levels at specific locations, this situation has been exacerbated by increased export competition due to exchange rate volatility. It appears that the U.S. wheat price has adjusted in an effort to once again be price competitive; additional weakness in the Euro will likely pressure U.S. wheat prices lower. Conversely, improvement in the overall economic situation in Europe and a strengthening Euro will be positive for U.S. wheat prices.

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Across the state producers are harvesting wheat and many have found a lack of demand for their product. With wheat prices falling and a widening basis, the difference between the local cash price and the futures price, many producers are left with few options to market their crop.

Over the past seven days, producers have seen the cash value of their crop fall dramatically, often to less than $3.00 per bushel, due to a record-setting basis. This drop in price is a direct reflection of declining export demand, overly abundant world supply and the high price of U.S. wheat on the world market. All of these factors, combined with a lack of storage space in some areas, contribute to the low prices and lack of demand producers are seeing at their local grain elevators.

Ken Davis, chairman of the Texas Wheat Producers Board, expressed concern for the financial future of wheat producers in the state.

“These producers have already put in all the resources needed to grow the crop and there is no way for them to recoup those expenses,” said Davis, a wheat producer of Grandview, Texas. “If producers are forced to sell grain at the current cash price, it will impact their bottom line significantly.”

Texas AgriLife Extension Economist Mark Welch blames the unprecedented market conditions on concerns of the global economy, level of demand and the increase in buying power of foreign currencies.

“The European market is seeing a significant price advantage right now,” said Welch. “Buyers want to see where the bottom is. There is no incentive to buy right now.”

Although the United States has a reputation of providing high quality wheat to overseas buyers, concern over quality characteristics, specifically the protein content, of the current supply have also limited demand.

“Historically when Texas has higher than average yields, the protein levels in the crop have been lower,” said Davis. “Buyers are looking at early reports which show favorable yields and are concerned with the possibility of lower protein levels.”

According to Executive Vice President Rodney Mosier, the board has been working with partner organizations to speed up the protein testing of harvested grain in an attempt to calm wheat buyers’ concerns.

“The higher protein and overall quality of the Texas crop is the reason overseas buyers pay the premium to purchase U.S. wheat,” said Mosier. “Until we can ensure our customers a top-quality product they likely will not invest the extra capital to purchase the higher priced commodity.”

No matter the cause, wheat producers are faced with the tough decision of what to do next.

The Texas State Office of the Farm Service Agency (FSA) announced yesterday the establishment of a county by county Distress Loan Program. The program, designed to aid producers in regions where grain storage is limited, will be available to producers in eligible counties who haven’t sold their grain.

“Although the Distress Loan Program will not fit the needs of all producers, it is a very important first step in helping producers navigate through the unfortunate wheat market,” Mosier said.

The distress loan program will cover ground or any unapproved on-farm storage for 75 percent of the estimated quantity. Rates will be based on current county loan rates. The 90 day distress loan must be repaid, including interest, but will provide producers additional options when grain storage is severely limited. 

Wheat loans are also available through FSA which cover 100 percent of the eligible quantity if the crop is stored in state or federally approved facilities or approved farm storage.  The loan term is for nine months using the county loan rates where the commodity is stored.  Market gain repayments will be in effect.

Producers can also request loan deficiency payments (LDP) in lieu of placing the wheat in the loan.  Beneficial interest in the commodity must be retained at the time the LDP is requested.

Producers are encouraged to contact their county FSA office for additional information.

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Cooperatives Working Together (CWT) announced it will conduct its 10th dairy herd retirement since 2003. There were three last year; the most recent last fall.

“It is our belief that a herd retirement at this time will add to the positive momentum already building and should result in speeding up the milk price recovery already in progress,” says Jerry Kozak, president and CEO of the National Milk Producers Federation (NMPF), which manages CWT. “With beef prices very strong, and replacement cow and springer prices still relatively low, CWT has determined that it will consider bids up to, but not to exceed, $3.75/cwt. However, there is no guarantee that a producer who bids at the maximum level will be selected.”

Participating producers receive payment for 12 months worth of milk production of retired cows, as well as the beef salvage value of the cattle.

As was the case last year, CWT has no set target for the volume of milk or the number of cows to be removed in this herd retirement. “Whether CWT will remove a significant number of dairy animals will depend on the number of bids received and the price level of those bids,” Kozak says. “CWT will not pay more for cows than what they are currently worth in the marketplace.”

The cutoff date for producers to submit bids this time around is June 25. So, chances are cattle accepted into the program will head to market in mid to late summer.

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The MeatingPlace recently cited a story in The New York Daily News about the Mangaliza or Mangalitsa hogs, also known as sheep hogs. The hogs were originally bred to withstand the harsh elements of the Hungarian landscape; sheep hogs don a heavy, fur-like coat. This odd and strange-looking breed has been revived for its unique marbling, sweet distinctive flavors and is used both fresh and cured. This has given the Black Pigs, or Jamón Ibérico, from the southern region in Spain, a run for the culinary spotlight in the cured meat world.

According to the article the shop that was featured in the article was a small, artisan-style locale in Brooklyn, N.Y., that specifically caters to a discerning neighborhood clientele with a fair amount of disposable income. Two-year-old, dry-cured, prosciutto-style ham from the sheep hog was weighing in at a lofty $83 dollar a pound. The spokesperson for the shop said they might be replacing their Pata Negro with the sheep hog cured ham because it offered a more distinctive flavor and was more unique.

First, who in their right mind would pay $83 for ham? That said, I think it’s great and want to know where to get breeding stock. I have promoted niche markets in agriculture for years- organics, grass fed beef and heavier, fatter hogs (the kind that taste like pork did when I was growing up)- but this kind of PR will only confuse most consumers and add to class envy in the population. However, if I can get Mangalitsa pigs on the ground and marketed, you will hear me signing their praises!

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The new Wichita County Master Gardeners Garden Calendar is “hot-off-the-press”. It is a 16-month calendar that runs from September 2010 to December 2011. Each page features a monthly garden checklist and other information useful for anyone with a “green thumb” or who would like to have one.

 

Commissioner Ray Gonzalez received the first Master Gardener Garden Calendar from Club President Beth Turlington on Friday.

 

In addition, the calendar features original artwork by local artist Phyllis Boyd Lawson. A native of New York, she moved to Texas as fast as she could and has called Wichita Falls home for many years. She is a multi-talented artist who has displayed her skills in oil and acrylic plus pen and ink. Her work has been shown in many studios across the country and she has painted many commissioned pieces. Master Gardener Jan Gardin is her daughter.

The calendars are available at the Extension office. The cost is $10, with the proceeds going to support and expand the services that these trained volunteers offer to improve the lives of citizens in Wichita County.

Master Gardeners are an interesting lot and the nation-wide program binding people of all ages, races, shapes and sizes together in their love of growing things. In the local group we have trained experts in vegetable, pests and diseases, EarthKind roses, native plants and a host of other interests. If you are interested in becoming a Master Gardener we will be hosting a training beginning on Saturday, September 25 and continuing for a total of seven Saturdays into the fall. For more information, contact the Extension office at 940.716.8610.

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