FarmWeek November 19 2012 by Illinois Farm Bureau

GROWMARK donated $75,000 for the Illinois Agriculture in the Classroom program and encouraged its employees to buy special license plates to help the program. ................2

A MediCARe suRTAx to be applied on Jan.1 may affect many landowners who cash rent their land and thus do not materially participate in their farming operation. ......4

A POssible ReduCTiON in barge shipments or temporary closure of the Mississippi River between St. Louis and Cairo could have serious effects on the ag economy. .........5

Monday, November 19, 2012

Two sections Volume 40, No. 47

‘Fiscal cliff ’ debate has far-reaching implications BY MARTIN ROSS FarmWeek

Periodicals: Time Valued

As they peer into the uncertain landscape beyond the socalled “fiscal cliff,” farmers, manufacturers, dealers, and analysts fear one of the U.S.’ continued economic bright spots — agriculture — could flicker or fade. That’s a dark prospect for rural families and businesses, their communities, and workers who supply the sector, Illinois Farm Bureau President Philip Nelson warns. That’s not to mention the production, distribution, and urban retail labor force that depends on consumer confidence and disposable income

for their livelihoods. Congressional tax and spending decisions over the next month could determine the future of homegrown fuels and consumer fuel prices and even affect the quality of the environment nationwide. Lawmakers returned to Capitol Hill last week to consider lame duck measures aimed at averting severe fiscal mandates set to kick in in January and address a raft of expiring Bushera, Obama stimulus-directed, and bioenergy tax provisions. Nelson urged House Speaker John Boehner (R-Ohio) to provide “at least some assurance from Congress as it relates to taxes.” He cited concerns about pending expiration of capital expensing/first-year bonus depreciation incentives and temporary estate tax and middle-income Alternate Minimum Tax (AMT) relief measures and possible loss of nextgeneration ethanol, biodiesel, and wind energy credits. All are vital to the economy “because they touch so many

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facets of it,” Nelson argued. “We’re a part of the whole picture,” he noted. “When farmers have a good year, they tend to spend money. That stimulates the economy, whether they buy equipment, they buy farmland, or they buy a pickup truck. “And they’ve utilized some of these tax provisions in the past. Farm equipment dealers are very worried with the (Section 179 capital) expensing option rolling back from $139,000 this year to $25,000 next year.” Confidence and construction Economists at a recent ag bankers conference stressed the connection between consumer confidence and potential

demand and, by extension, investment and growth. Andrew Busch of Chicagobased BMO Capital Markets sees vast untapped growth potential — an estimated $1.4 trillion in excess U.S. bank reserves and $500 billion in private pension fund liquidity. But with consumer confidence still waning, “we have a long way to go toward unleashing that potential,” he advised. Whatever the true import of fiscal debate, economic consultant Ross Korves argues “consumers are convinced it’s a big issue.” Congressional policy and tax gridlock “give businesses and consumers no confidence they can get anything

accomplished,” said IFB Vice President Rich Guebert Jr. Taxing concerns According to Busch, the U.S. edge over European economies lies in “super, fast-growing” smaller businesses that add and retain domestic jobs and pay U.S. taxes. Korves warns increased tax liability “directly impacts economic activity.” He noted a potential jump in the current 15 percent capital gains tax rate, interest rate hikes, a possible average 10 percent income tax bump, and a “huge jump” in households required to pay AMT taxes. See Cliff, page 3

Nelson: Pick up a phone Now that lawmakers are back in the House, Illinois Farm Bureau President Philip Nelson urged farmers to give them a call on behalf of lame duck farm bill passage. Last week, IFB issued an action request asking members to contact lawmakers toll-free at 1877-422-8424. The Illinois Corn Growers Association and the Illinois Soybean Association also have intensified a member push for a “farm bill now.” “We want everyone to take time to pick up the phone,” Nelson stressed. “We’re trying to put pressure on (House Speaker) John Boehner (R-Ohio) to schedule time to take up the floor debate in the House.”

FarmWeek on the web: FarmWeekNow.com

Nelson cited “mixed signals” from House leadership regarding prospects for lame duck floor debate vs. a mere one-year extension of currently expired 2008 provisions. In a Web chat last week, American Farm Bureau Federation farm policy specialist Mary Kay Thatcher said she saw about a 15 percent chance Congress would pass a farm bill by year’s end. The most likely scenario is a one-year extension, “although there is also talk of a six-month extension,” Thatcher said. “Either way, writing the bill next year will be more difficult than this year, as there will be less money available to write a bill with a good safety net,” she said. — Martin Ross

Illinois Farm Bureau®on the web: www.ilfb.org

FarmWeek Page 2 Monday, November 19, 2012

AG LITERACY

Quick Takes STATE DEBT WORSENS — The state owed more at the end of the first quarter of fiscal year 2013 than during the same quarter a year ago, according to Illinois Comptroller Judy Baar Topinka. She reported the bill backlog totaled $5.927 billion, compared to $3.817 billion last year. “One thing is certain, payment processing delays will continue for the foreseeable future,” Topinka reported. She warned underfunding of programs and services likely will lead to pressure on lawmakers to pass supplemental appropriations as they did last year. However, that would make a difficult budget further unbalanced, she added. DEER HUNTERS IN THE FIELD — The state’s busiest and most popular hunting season opened during the weekend. The sevenday firearm deer season will conclude Dec. 2. Last year, deer hunters in Illinois claimed 98,820 deer during the season. The Illinois Department of Natural Resources (IDNR) to date has issued about 334,000 permits. The legal hunting hours for the firearm deer season are one-half hour before sunrise to onehalf hour after sunset. TAGGING A TREE — Illinois Christmas tree farms are preparing for the onslaught of families who tag their trees over the upcoming Thanksgiving holiday season. University of Illinois Extension horticulture educator Ron Wolford recommended shoppers include the tree’s health as well as size and shape when making a decision. “Choose a fresh tree, one that has a healthy green appearance with few browning needles. Needles should be flexible and not fall off if you r un a branch through your hand,” he advised. The U of I Extension offers an online directory of Illinois Christmas tree farms and other information at {urbanext.illinois.edu/trees/}.

(ISSN0197-6680) Vol. 40 No. 47 November 19, 2012 Dedicated to improving the profitability of farming, and a higher quality of life for Illinois farmers. FarmWeek is produced by the Illinois Farm Bureau. FarmWeek is published each week, except the Mondays following Thanksgiving and Christmas, by the Illinois Agricultural Association, 1701 Towanda Avenue, P.O. Box 2901, Bloomington, IL 61701. Illinois Agricultural Association assumes no responsibility for statements by advertisers or for products or services advertised in FarmWeek. FarmWeek is published by the Illinois Agricultural Association for farm operator members. $3 from the individual membership fee of each of those members go toward the production of FarmWeek.

Address subscription and advertising questions to FarmWeek, P.O. Box 2901, Bloomington, IL 61702-2901. Periodicals postage paid at Bloomington, Illinois, and at an additional mailing office. POSTMASTER: Send change of address notices on Form 3579 to FarmWeek, P.O. Box 2901, Bloomington, IL 61702-2901. Farm Bureau members should send change of addresses to their local county Farm Bureau. © 2012 Illinois Agricultural Association

STAFF Editor Dave McClelland (dmcclelland@ilfb.org) Legislative Affairs Editor Kay Shipman (kayship@ilfb.org) Agricultural Affairs Editor Martin Ross (mross@ilfb.org) Senior Commodities Editor Daniel Grant (dgrant@ilfb.org) Editorial Assistant Linda Goltz (Lgoltz@ilfb.org) Business Production Manager Bob Standard (bstandard@ilfb.org) Advertising Sales Manager Richard Verdery (rverdery@ilfb.org) Classified sales coordinator Nan Fannin (nfannin@ilfb.org) Director of News and Communications Michael L. Orso Advertising Sales Representatives Hurst and Associates, Inc. P.O. Box 6011, Vernon Hills, IL 60061 1-800-397-8908 (advertising inquiries only) Gary White - Northern Illinois Doug McDaniel - Southern Illinois Editorial phone number: 309-557-2239 Classified advertising: 309-557-3155 Display advertising: 1-800-676-2353

Illinois Farm Bureau President Philip Nelson, left, and GROWMARK Chief Executive Officer Jeff Solberg display an agriculture specialty license plate after GROWMARK’s presentation of $75,000 to the IAA Foundation last week. GROWMARK also is encouraging its employees and FS members to buy the ag plates. Nearly $25 from each plate renewal goes directly to support the Illinois Agriculture in the Classroom program. (Photo by Ken Kashian)

GROWMARK donation supports ag literacy program statewide

FS helping local efforts BY KAY SHIPMAN FarmWeek

GROWMARK and its FS member cooperatives last week donated $75,000 for Illinois Agriculture in the Classroom (IAITC) programs during a formal presentation to the Illinois Farm Bureau Board of Directors. GROWMARK, the secondlargest contributor in 2012 behind Country Financial, has made annual contributions to the IAITC program since 2003. “As more Americans are further removed from the farm,

bringing the facts about farming to students at an early age is vital,” said Jeff Solberg, GROWMARK chief executive officer. GROWMARK’s annual contribution — the 2012 donation was a 15 percent increase over last year — helps fund 63 county ag literacy coalitions that teach students about agriculture and farming. Recently, local coalitions received grants from IAITC totaling $497,000, an increase over the previous year, in part due to GROWMARK’s contributions and commitment to IAITC. On the local level, FS representatives serve on 24 county

EPA rejects ethanol waiver, cites minimal ‘economic harm’ The U.S. Environmental Protection Agency (EPA) Friday announced it would maintain 2013 corn ethanol requirements under the federal Renewable Fuel Standard (RFS2), citing no evidence biofuels use would cause severe “economic harm.” Several state governors and key livestock groups had requested a waiver of ethanol blending targets in light of drought conditions that threatened potential corn supplies. Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation, recognized “this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers.” But she reported “congressional requirements for a waiver have not been met and that waiving the RFS2 will have little, if any, impact.” “(EPA’s) decision reflects a thorough review of all the appropriate data,” Illinois Corn Growers Association (ICGA) President Jeff Scates said. “We believe that, as is indicated by EPA in its decision, the market system has done its job in this year of unfortunate heat and drought, and the subsequent increase in commodity prices across the board.” ICGA stated “the (ethanol) market has signaled for less corn usage.” More than 800 million gallons of production has been idled this year, with Abengoa’s Madison and Aventine’s Pekin plants temporarily curtailing some operations. Further, 2012 ethanol exports are expected in the 750- milliongallon range, down from more than 1 billion-plus gallons in 2011. EPA’s decision was based on economic analyses and modeling done in cooperation with USDA and the U.S. Energy Department. Analyses concluded that on average, waiving the RFS2 mandate would reduce corn prices only by about 1 percent and that a waiver would not impact household energy costs.

AITC advisory councils. “The local FS serves as a focal point to discuss what is going on in agriculture, whether it is with the seeds that become the crop, with the nurse tanks applying plant food, or what’s happening at the elevator. That local connection to agriculture is critical across the state,” said Kevin Daugherty, IFB education director. Solberg added GROWMARK is encouraging its employees, FS members, and others to buy agriculture specialty license plates. Nearly $25 from each plate renewal directly goes to support the IAITC program, according to Susan Moore, IAA Foundation director. “That means free Ag Mags and other resources, mini grants for teachers, and funds to support local ag literacy coalitions,” she explained.

Tuesday: • Live from the Commodity Conference in Bloomington • Doug Reeves, biofuels key accounts manager for Pioneer • Chesapeake Meteorology • Monsanto • Jim Williams, AgrAbility field coordinator • Jeff Adkisson, executive vice president of the Grain and Feed Association of Illinois Wednesday: • Alan Jarand and Rita Frazer • Illinois Department of Agriculture • Jim Bower, Bower Trading • John Hagenbuch, farmer and vice chairman of the Illinois Soybean Association’s Animal Agriculture Committee Thursday: • Rita Frazer, RFD Network anchor • Martha Downey, site superintendent, Bishop Hill •Mike Vande Logt, executive vice president and chief operating officer for WinField Solutions Friday: • Alan Jarand and Rita Frazer • Sara Wyant, Agri Pulse publisher • Joyce Fikri and Monica Nyman, St. Louis Dairy Council • Alan Jarand, RFD Radio director To find a radio station near you that carries the RFD Radio Network, go to FarmWeeknow.com, click on “Radio,” then click on “Affiliates.”

Page 3 Monday, November 19, 2012 FarmWeek

IFB IN ACTION

Aflatoxin, fracking, road authority on delegate agenda BY MARTIN ROSS FarmWeek

The 2012 drought, rising input costs, and concerns about ag transportation and access fueled Illinois Farm Bureau Resolutions Committee (RC) discussions this month. As a result, IFB farmer delegates will address proposals dealing with reliability of aflatoxin testing, potential guidelines for use of hydraulic fracturing or “fracking” in natural gas extraction, and river infrastructure needs both for flood protection and commodity commerce. The RC focused on current concerns about aflatoxin in corn and its implications for marketing, feeding, and risk

management especially in Southern Illinois. The drought raised issues regarding accuracy of and uniformity in aflatoxin testing technologies, false positive results, and potential for non-representative grain sampling. The RC thus is asking delegates to review a proposal encouraging local elevators to use and accept test results from USDA-approved testing facilities when determining aflatoxin content. In some cases, a farmer may be docked at a local elevator because of the presence of aflatoxin, though the grain subsequently may be found to be free of the contaminant when samples are submitted for crop insurance reimbursement.

“Aflatoxin can randomly show up in a load of corn, depending where a sample is taken from,” noted RC Agricultural Production/National Issues Subcommittee Chairman Bob Brackmann. “You can take two samples from a load of corn and get different readings. “Plus, not all elevators have the same types of testing equipment. Some of that equipment is newer and sophisticated, and may do a little better job of testing for aflatoxin. Some of it is older and may be out of date.” Current IFB policy supports legislation aimed at standardizing and certifying elevator testing equipment and personnel and accepting their test results

for federal crop insurance loss payments. In Texas, state officials have developed the One Sample Strategy, a voluntary program that allows participating elevators to use the same aflatoxin test results for both grading and crop insurance purposes. This single test procedure is conducted at the initial point of sale, and the test result is tagged to the grain to satisfy regulatory requirements and ensure collection of insurance payments. USDA’s Risk Management Agency has signed off on program use to determine crop indemnities. The RC also considered the public controversy over fracking — use of pressurized fluids to create fractures that can

release natural gas from rock layers. Natural Resources Subcommittee Chairman Terry Smith noted the “very promising” technology has been used at a shallow depth in oil exploration for decades. RC members mulled what Smith termed “commonsense regulations” that might allay fracking-related groundwater and safety concerns. Delegates also will consider recommending state officials develop a five- to 10-year plan to move the Illinois State Fair up one week to avoid conflicts with the beginning of the school year. “Neighboring states have done it and found that attendance has actually picked up,” Brackmann said.

Levee policies force districts to race the clock Prairie du Rocher Levee District Commissioner Rich Guebert Jr. offers some potentially grim math for a Randolph County community forced to weigh the value of thousands of acres and dozens of homes against millions in federally mandated costs. The Federal Emergency Management Agency (FEMA) has granted Guebert’s district “provisional” levee accreditation, neither recertifying the levee as adequate to protect against a major 100-year flood event nor revoking existing certification until specific

structural issues are addressed. The Prairie du Rocher Levee protects some 16,000 farmland acres, 120 homes, and Rich Guebert Jr. the historic Village of Prairie du Rocher. Levee certification relieves residents and businesses of floodplain development restrictions, removes flood insurance requirements for properties under federally

Cliff Continued from page 1 Section 179/bonus depreciation provisions have provided “an easy way for farmers to write off more of their equipment purchase,” said Mike Williams, North American Equipment Dealers Association vice president for government relations. He deemed tax policy “a supply chain issue,” arguing manufacturers, union laborers, and rural communities “all benefit from a new purchase.” Newer models offer cleaner-burning engines and thus, “there’s an environmental benefit to encouraging turnover in farm equipment,” Williams said. “If the tax law changes and incomes do start to fall off, then we’ll probably see a reduction in some new farm equipment purchases,” Williams told FarmWeek. Land, legacies, and legislation Korves suggests lawmakers ultimately may extend key expiring tax measures for three to six months, leaving longterm extensions to the new Congress. Dec. 31 expiration of the $5 million federal estate tax exemption is a particular worry for farm families and rural businesses. If Congress fails to act, the estate tax would revert to a pre-2002 $1 million individual exemption and a high 55 percent rate. According to Korves, that is an alarming shift for families who’ve seen land values soar over the past decade. “If it were left unchanged long-term, it would have a huge impact,” Korves told FarmWeek. “Look at those guys out there who are paying $20,000 an acre. Ten acres would be $200,000, and at 50 acres, you’d hit the million-dollar mark. “While this issue is just extremely important to farmers, in the broader (deficit) context and particularly over the short run, it doesn’t mean very much. Some of the other tax provisions have much more immediate impact.”

insured loans, and reduces coverage costs. FEMA questions the levee’s slope stability and potential for water seepage. Neither’s an “easy fix”: Renovation costs could run $5 million to $18 million, and even the $1 million cost of related engineering services is prohibitively high, said Guebert, Illinois Farm Bureau vice president. Plus, the levee must be recertified before FEMA receives congressional funding it needs to draft new regional Flood Insurance Rate Maps. Given the budget situation, that could be early next year, next fall, or even two years from now. “We don’t have the funds available to do this,” Guebert said. “If we have to do this with our limited funds, then the timeframe’s too short to reach our goals and get all our data to FEMA in time to get recertified. “We need to determine the

cost (of repairs) per acre and home, and then decide whether that’s justifiable. If we are decertified, the costs for all of those required to buy flood insurance will skyrocket — probably threefold. “And you can’t build in that area — there’s no new construction. You won’t be able to repair any existing homes. You’ve killed the community. And I can’t believe we are the only levee district in this dire a need.” In Guebert’s view, an obvious solution is to “send the money with the mandate” — provide funding to help the district meet federal guidelines. As an alternative, policymakers could authorize the U.S. Army Corps of Engineers to certify levees, he suggested. Prairie du Rocher already requires an annual acceptable rating from the Corps in order to remain in the P.L. 8499 program. In addition, a Corps

team conducts a comprehensive safety inspection every five years. FEMA does not account for the district’s past record in flood control or “flood fighting,” he noted. The levee has survived high water marks in 1973, 1983, 1993, 2005, and 2008 — the 1993 event “really tested our levee for an extended period of time,” Guebert said. Meanwhile, the IFB Resolutions Committee (RC) has addressed recent Senate proposals to “arbitrarily” designate special “flood hazard areas” behind the nation’s 100,000 miles of levees and 84,000 dams. The RC will ask IFB member delegates in December to consider supporting National Flood Insurance Program exemptions for property behind “properly designed, built, and maintained levees, dams, and other flood control infrastructure.” — Martin Ross

Keeenn K Ken K Kash Ka aash shi sh hiaaann hian h

Ken Kasshi K hiia ian an an Limited Ed L diti dition iti Print Pi t Bishop Hill Blooms, 2012 Illinois Farm Bureau photographer Ken Kashian has captured the beauty of this historic Henry County community in western Illinois. Fourth in an annual series, the t matted, signed and or $25 at the numbered prints will be available ffor IAA Annual Meeting, December 1-4, in Chicago. Find them at the Foundation Country Store (in the Hospitality/Silent Auction area).

O Other ther prints in the series will also be be a available vailable in limit limited ed quantities. quantities.

Only 50 A Available Av vailable

All proceeds benefit the IAA Foundation. Questions? Contact Carol at (309) 557-2230 or charms-garman@ilfb.org

FarmWeek Page 4 Monday, November 19, 2012

RISK MANAGEMENT

Information, insurance Medicare tax crucial for ‘go-go farmer’ twist issue BY MARTIN ROSS FarmWeek

Robert Craven calls them “go-go farmers” — optimistic, aggressive producers caught up in the excitement of the current ag “supercycle.” Ag lenders may temper that excitement as they gauge borrower liquidity, risk management, and contingency planning, according to Craven, director of the University of Minnesota Center for Farm Financial Management. With the exception of a slight “dip” in 2009, farmers on average have seen increased annual profitability for the last decade, he said. However, financing remains a key concern for the ambitious farmer, Craven stressed. In terms of “selling yourself to a lender,” the go-go farmer needs to maintain scrupulous records, pay attention to what lenders have to say, and provide information as they ask for it, he said. “As bankers think about the go-go farmer, they’re thinking about the hard-charging folks out there trying to rent additional ground who are focused on expansion, who are probably willing to take more risk than most farmers would,” he told FarmWeek. “For those guys, liquidity seems to always be an issue. As you’re expanding rapidly, it’s a real challenge. “As (lenders) analyze you as a go-go farmer, one of your first lines of defense is working capital, the difference between the current assets on your balance sheet and current liabilities. That’s more than just the cash in the bank. It’s the grain in the bin; it’s the prepaid expenses.” Ideally, lenders would like to see individual working capital of at least 35 percent of annual gross income, Craven said. Anything less than

15 percent working capital is a “red-light situation” for the banker, Craven suggested. Thus, as farmers mull expansion — and related financing needs — “they need to keep liquidity in mind,” he said. Craven deems a solid accrual analysis — a comprehensive accounting of yearly income, expenses, prepaid inputs, crop-livestock inventory changes, and the like — a key tool in building lender confidence. Because a major goal of farm tax filings is “minimizing taxes,” he argues a simple federal Schedule F may not accurately reflect operator profitability. Further, amid recent availability of “pretty generous” federal Section 179 tax deductions for depreciable assets, Schedule F depreciation “may well overstate the true economic depreciation most operations are facing,” Craven said. The farmer’s prospective business plan, including ongoing marketing and risk management strategies, also is crucial to lender appeal. Revenue protection — i.e., crop insurance — is “particularly important,” Craven said. He studied yield and price risks for a 10,000acre corn farm, concluding that in a “worst-case scenario” (140-bushel-per-acre corn at a price of $4 per bushel), that farm could lose $4 million in a single year. With an 80 percent Revenue Product policy, that farm might lose closer to $1.3 million, Craven said. He urged farmers to project the impacts of a revenue shortfall, a price drop, a bump in interest rates prior to meeting with their lender. “Those are the kind of things your lender’s going to do, so you might as well do them ahead of time so you know what the answers are,” Craven said.

PNTR halfway home

As lawmakers returned to the Hill last week, As Russia and other key developing Farm Bureau and other ag groups applauded nations gain influence in the global market House approval for Permanent Normal Trade (see page 12), Nelson stresses the imporRelations (PNTR) with Russia. tance of assuring through WTO compliance Congress must enact PNTR legislation to and bilateral trade relations that Russia does guarantee U.S. access to market-opening and not impose market restrictions in the name legal reforms under Russia’s of suspect health concerns or membership in the World Trade a self-proclaimed need for Organization (WTO). The ‘Now that Russia “self-sufficiency.” House passed the measure 365“Now that Russia has ascendhas ascended to ed into the WTO, it’s imperative 43; Senate action is pending. American Farm Bureau Fed- t h e W T O , i t ’ s that we have PNTR to strike eration President Bob Stallman deals going forward,” he i m p e ra t i ve t h a t trade argued U.S. farmers will see said. w e h a ve P N T R “more certain and predictable Nelson nonetheless market access” as a result of t o s t r i k e t r a d e acknowledged resistance to Russia’s new WTO commitdeals going for- PNTR passage, particularly ment to hold import tariffs to among congressional Democward.’ negotiated rates and to apply rats who seek to tie Russian food safety standards “in a unihuman rights provisions to form and transparent manner.” trade measures. PNTR requires — Philip Nelson lawmakers to lift the Cold WarAg exports to Russia are forePresident cast at $1.4 billion for 2012, and era Jackson-Vanik amendment, Illinois Farm Bureau which tied favorable U.S. tarRussia offers potential for signififfs on Russian goods to the icant increases in poultry, pork, rights of Jews in the former and beef purchases. Soviet Union. In discussions with Farm Currently, some lawmakers have proposed Bureau prior to the country’s WTO accession, imposing visa or other sanctions on Russian Russian trade delegates deemed PNTR passage “imperative,” Illinois Farm Bureau President Philip officials linked to the death of Sergei Magnitsky, a lawyer who died in a Russian jail in Nelson reported. At that point, the Russians were 2009. Last week, Russian officials warned of pushing for inspection of U.S. poultry and pork possible consequences if Congress passed facilities — a move many viewed as a “slowdown tactic” aimed at impeding meat imports as Russia’s “unfriendly and provocative” legislation. — Martin Ross own production grew, Nelson said.

for farmers

A wrinkle in new health care law could pose an added tax hit for some Illinois landowners beginning next year. Under the 2010 federal Patient Protection and Affordable Care Act, a 3.8 percent Medicare surtax is to be applied to unearned income (separate from wages and farm self-employment income) effective Jan. 1. Further, the law uses an expanded definition of taxable unearned “investment income” to include not only dividends, interest, and capital gains but also annuity distributions, royalties, and rents. That raises questions about tax liability under various types of farm lease agreements. The surtax will apply to landowners who are not “materially participating” in far m operations. According to Iowa State University Center for Agricultural Law and Taxation Director Roger McEowen, the Medicare surtax thus may affect many landowners involved in cash rent agreements. Some experts suggest landowners could avert surtax liability by moving from cash rent arrangements to more participatory crop-share agreements. But University of Illinois Extension tax specialist Gary Hoff questions the extent to which lease structure will impact net landowner liability in an overall tax context. Further, Hoff is uncertain how broadly the surtax might impact Illinois producers, given that it will be assessed on so-called “high-income” taxpayers. The taxable threshold is $250,000 for joint filers and $200,000 for individual filers. The surtax would apply to the lesser of either modified adjusted gross income above those thresholds or net unearned income. Thus, a married farmer with $300,000 in annual adjusted gross income and $30,000 in dividend/interest income would pay the 3.8 percent tax on the $30,000 vs. the $50,000 in modified adjusted gross income over the tax threshold. “If I materially participate in my rental, it’s going to be earned income — I’m going to be reporting it on Schedule F and paying self-employment taxes and Medicare taxes,” Hoff noted. “If I’m not materially participating, then it’s passive income (subject to the surtax). Basically, they’ll get me one way or another. “One of the things farmers do need to be thinking about is whether this is the year to defer (2012) income. If I have crop insurance payments, I can defer them to next year. “But if I have this 3.8 percent hit, and if we don’t extend any of the Bush tax cuts, I could incur substantially more tax by deferring income to 2013.” Farmers can elect to defer income with their 2012 tax year filing. Given current tax policy uncertainty and the possibility lawmakers could even retroactively extend expiring tax provisions, farmers may want to delay filing returns until Congress takes definitive action, Hoff said. To avoid an estimated tax penalty, a farmer may make one estimated tax payment by Jan. 15. Hoff noted some confusion over a purported new “sales tax” on the sale of a personal far m residence — in actuality, it is the Medicare surtax applied to such sales. Hoff cited the Section 121 exclusion on the sale of a principal residence — joint filers pay no income tax on gains up to $500,000, or $250,000 in gains in the case of an individual. As a result, surtax requirements should not affect most property sellers, he said. — Martin Ross

Page 5 Monday, November 19, 2012 FarmWeek

the rivers

River closure could affect crop, fertilizer prices BY DANIEL GRANT FarmWeek

A possible reduction in barge shipments or temporary closure of the Mississippi River between St. Louis and Cairo could have a ripple effect on the ag economy. The U.S. Army Corps of

Engineers last week maintained its intention to reduce the flow from an upper Missouri River reservoir into the Mississippi from 17,000 cubic feet per second to 12,000 cubic feet per second, starting Friday. The reduced flow could

Groups seek to cut red tape, keep river open BY MARTIN ROSS FarmWeek

Commercial river interests propose what one barge industry spokesman calls a â&#x20AC;&#x153;really viable solutionâ&#x20AC;? to a potential economic dilemma on the Mississippi River. Ag groups joined the Waterways Council Inc. (WCI) and American Waterways Operators (AWO) in a push to maintain service on the Upper Mississippi River during a crucial December-March shipping period. Under the U.S. Army Corps of Engineersâ&#x20AC;&#x2122; Missouri River â&#x20AC;&#x153;master manual,â&#x20AC;? water releases from dams on the upper Missouri will be significantly scaled back later this month. Reduced flows from the Missouri into the Mississippi, combined with low river levels and rock formations in the Mississippi River channel, could halt barge movements on the middle Mississippi by Dec. 10. WCI President Mike Toohey told FarmWeek â&#x20AC;&#x153;weâ&#x20AC;&#x2122;re deploying our forcesâ&#x20AC;? to expedite removal of elevated rock â&#x20AC;&#x153;pinnaclesâ&#x20AC;? near Thebes and Grand Tower on the riverâ&#x20AC;&#x2122;s Illinois side. The Corps normally must conduct environmental impact assessments and a 45-day bidding-contracting period for such projects. Rock removal could take 60 days, and those requirements could delay startup until February. WCI and others, therefore, are asking lawmakers and respective Illinois and Missouri Govs. Pat Quinn and Jay Nixon to seek a presidential emergency declaration that would enable the Corps to bypass routine project requirements. â&#x20AC;&#x153;Until such time as they can perform that work, weâ&#x20AC;&#x2122;re asking (the Corps) to continue the flow of water from the Missouri into the Mississippi so we donâ&#x20AC;&#x2122;t have any interruption of critical service,â&#x20AC;? Toohey added in an interview from WCIâ&#x20AC;&#x2122;s annual meeting in Texas. â&#x20AC;&#x153;The Corps is doing a marvelous job of maintaining a ninefoot navigation channel, as authorized by Congress. But normal operation of the Missouri River plan would begin the impoundment of water on or about Nov. 23 (Friday). We would see the impact of reduced flows on or about Dec. 10. We know thereâ&#x20AC;&#x2122;s a problem coming, so why donâ&#x20AC;&#x2122;t we get to it and get working?â&#x20AC;? Beyond an expected uptick in grain shipments in January, Illinois Corn Growers Association field services director Jim Tarmann is concerned about a possible shutdown on the Mississippi â&#x20AC;&#x153;at a time when our input providers are trying to move fertilizer northboundâ&#x20AC;? (see accompanying story). Quinn and Nixon already have contacted Corps officials regarding Missouri releases, but Tarmann said Corps officials were â&#x20AC;&#x153;holding firmâ&#x20AC;? to master manual requirements. Rock pinnacles normally donâ&#x20AC;&#x2122;t interfere with navigation, but the 2012 drought has resulted in reduced water levels within the river system. Because of the drought, the Mississippi has received as much as 78 percent of its water from the Missouri this year vs. 60 percent in a normal year. Toohey estimates rock blasting would provide an added two feet of navigable depth within the regional channel. The sooner pinnacles are removed, the less water shippers likely would need released via the Missouri, Tarmann maintained. Current Corps funding would cover proposed rock blasting â&#x20AC;&#x201D; Toohey said no new congressional spending would be necessary. Further, he stressed waterways groups are proposing a â&#x20AC;&#x153;waterneutralâ&#x20AC;? solution. In exchange for Missouri reservoir releases during the December-March period, they would support later adjustments in navigational water allocations. â&#x20AC;&#x153;There would be no adverse effect on any other beneficial use of those waters â&#x20AC;&#x201D; municipal and industrial water supplies, ecosystem restoration, fish and wildlife enhancement, or recreation,â&#x20AC;? Toohey said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re very sensitive to the interests of others in this.â&#x20AC;?

suspend the Corpsâ&#x20AC;&#x2122; ability to maintain a navigable channel for barge traffic on the key portion of the Mississippi that runs along Southwestern Illinois. Barges lose about 100 tons of load capacity for each six inches of reduced draft. â&#x20AC;&#x153;The critical area is between St. Louis and Cairo, where we transition from locked river to open river and before we get all the water from the Ohio,â&#x20AC;? Mike Peterson, spokesman for the Army Corpsâ&#x20AC;&#x2122; St. Louis district, told Reuters news service. â&#x20AC;&#x153;We can see flows change by a couple of feet at St. Louis as those flows decrease from the Missouri.â&#x20AC;? Disruptions to river navigation are expected to occur by Dec. 10. The situation is expected to affect everything from outbound crop exports and prices to inbound fertilizer shipments. â&#x20AC;&#x153;Slowing down or even severing the countryâ&#x20AC;&#x2122;s inland waterway superhighway would imperil the shipment of critical cargo for export, significantly delay products for domestic use, threaten manufacturing production and power generation, and negatively impact jobs up and down the river,â&#x20AC;? said Craig Philip, CEO of Ingram Barge Co. â&#x20AC;&#x153;It would bring a ripple effect of economic loss that would be

felt most heavily in the Midwest.â&#x20AC;? More than 500 million tons of cargo is moved on the Mississippi River each year, Philip said. Among the cargo shipped on the river this time of year is fertilizer. Disruptions to that supply could affect prices, according to Chuck Spencer, director of government relations at GROWMARK. â&#x20AC;&#x153;As we work through the fall (fertilizer) application season, then itâ&#x20AC;&#x2122;s time to rebuild supplies for the spring season,â&#x20AC;? Spencer said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a regular cycle that could be disruptedâ&#x20AC;? if barge shipments are reduced or temporarily halted. Products instead may have to be transported by rail or truck, which isnâ&#x20AC;&#x2122;t as price competitive. One barge carries the equivalent cargo of 60 trucks or 15 rail cars, according to the Greater New Orleans Barge Fleeting Association. â&#x20AC;&#x153;Barge transportation in bulk has a competitive advantage,â&#x20AC;? Spencer said. â&#x20AC;&#x153;When we put (fertilizer) on rail or trucks, the demand (for those modes of transportation) goes up and prices follow.â&#x20AC;? The loss or reduction of river transportation also could hurt crop exports and wreak havoc on local basis bids.

â&#x20AC;&#x153;It could really change the flow of grain,â&#x20AC;? said Dale Durchholz, AgriVisor senior market analyst. â&#x20AC;&#x153;Some farmers could be winners and others losers from this. It depends on where you live (and the nearby) transportation structure.â&#x20AC;? A temporary loss of the Mississippi River market could

â&#x20AC;&#x2DC;It could bring a r i p p l e e f fe c t o f economic loss that would be felt most heavily in the Midwest.â&#x20AC;&#x2122; â&#x20AC;&#x201D; Craig Philip Ingram Barge Co.

weigh on crop prices in Central Illinois and central Iowa and add a premium to prices at locations near rail and along the Ohio River. It also could cut into U.S. soy exports, which currently are on a record pace. â&#x20AC;&#x153;It could be difficult to continue the pace of about 60 million bushels (of bean exports) per week,â&#x20AC;? Durchholz said. â&#x20AC;&#x153;It takes a lot of train cars to offset one barge of beans.â&#x20AC;?

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FarmWeek Page 6 Monday, November 19, 2012

harvest

Harvest complete in Illinois; farmers prepare for next year BY DANIEL GRANT FarmWeek

The 2012 harvest season is complete in Illinois, with the exception of a handful of scattered fields. The National Agricultural Statistics Service’s Illinois office reported that as of the the first of last week 99 percent of the corn crop and 98 percent of soybeans were in the bin. The harvest pace last week was 16 percent ahead of average for corn while soybean harvest was 4 percent ahead of the average pace. Meanwhile, sorghum har vest in the state last week was 99 percent complete, 19 percent ahead of

the average pace. “With the exception of a few fields here and there, (harvest) is pretty well wrapped up,” said Bill Wykes, a farmer from Yorkville and chairman of the Illinois Soybean Association. Many farmers currently are preparing fields and pricing or ordering inputs for next season. “There’s still quite a few guys chisel plowing, applying anhydrous, or working on their seed selection,” Wykes said. Many farmers likely are happy to put the 2012 crop season behind them after going through the worst drought since 1988. “We ended up with about

Bill Wykes, a farmer from Yorkville and chairman of the Illinois Soybean Association (ISA), harvests corn on a bright fall day this season. Harvest in Illinois last week was virtually complete. Many farmers have turned their attention to field preparation and input purchases for next season. (Photo courtesy of ISA)

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half a corn crop,” Wykes said. “The beans were looking bad in July, but we got some late rain that proved to be exceedingly beneficial. We finished with above-average bean yields.” USDA earlier this month raised the statewide yield averages 3 bushels for corn (to 101 bushels per acre) and 4 bushels for beans (to 43 bushels per acre) compared to the October forecast. The majority of the winter wheat crop (81 percent) had emerged as of last week and was off to an encouraging start. The condition of the wheat crop in Illinois last week was rated 72 percent good to excellent, 24 percent fair, and just 4 percent poor to very poor. One of farmers’ top concerns at this point is the need for additional rain to recharge subsoil moisture prior to spring. “It’s a real concern,” Wykes said. “We want to make sure the subsoil moisture is recharged. It was completely depleted. I don’t know of anyone whose tiles are running yet.” Topsoil moisture across the state last week was rated just 18 percent short or very short, 78 percent adequate, and 4 percent surplus. But subsoil moisture last week was rated 56 percent short or very short and 44 percent adequate, with no surplus.

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The Illinois Farm Service Agency (FSA) Land of Lincoln and Partners Community Garden in Springfield was responsible for more than 16,173 pounds of produce, including a final crop of turnips Nov. 7. The produce was donated to a local food pantry. “Despite the drought conditions that were handed us this summer, the Illinois FSA Land of Lincoln & Partners Community Garden volunteers proved to be great sports and produced an enormous amount of vegetables for those in need in the surrounding community,” said Scherrie Giamanco, state executive FSA director. Employees volunteered time in early morning and during lunch hours to work in the garden. The community garden project included volunteer work of some local FFA chapters and members, University of Illinois Extension Master Gardeners, and several local businesses and organizations.

Page 7 Monday, November 19, 2012 FarmWeek

lIVESTOCK

Sow housing requirement contributes to decline of UK herd BY DANIEL GRANT FarmWeek

Legislation or requirements that limit farmers’ choices of livestock production methods may not be the best for animal welfare, consumers, farmers, or retailers. A ban on sow gestation stalls in 1999 was the beginning of the end for many hog operations in the United Kingdom (UK), according to Zoe Davies, general manager of the National Pig Association in the United Kingdom (UK). Hog farmers in the UK in the late 1990s already were dealing with low prices and poor margins when they were hit with the legislation that required them to change housing systems in their swine facilities. Gestation stalls were banned, and farmers there were forced to adopt group housing systems. “People had to invest a lot of money (to change their hog facilities in the UK to meet the new requirement),” Davies told the RFD Radio Network. “Many were losing money and decided it was easier to get out (of the business) than get in a lot of debt.” The UK swine industry, which was reeling by the late

USDA awards National AgrAbility Project grant

Purdue University’s Breaking New Ground Resource Center received a four-year, $1.9 million National AgrAbility Project grant from USDA. The new National AgrAbility Project is a partnership that includes Purdue, the University of Illinois at Urbana-Champaign, Goodwill of the Finger Lakes (New York), and the Arthritis Foundation-Heartland Region. U of I ag safety specialists Chip Petrea and Bob Aherin are involved with the project; Aherin will be the evaluation project director. The new National AgrAbility Project will involve new initiatives, such as core training for AgrAbility staff members across the country and regional workshops to enhance services to disabled agricultural workers. The National AgrAbility Project also will triple the number of webinars it offers and continue to expand its website {agrability.org}. One of its most widely used resources is “The Toolbox Assistive Technology Database” that contains information on nearly 1,000 commercial and homemade technology products for farmers and ag workers with disabilities.

1990s, faced pressure from major swine disease outbreaks in 2000 (classical swine fever) and 2001 (foot and mouth disease). “By the time we (in the hog industry) got to 2002, a lot of people pretty much had enough,” Davies said. Hog production in the UK since the 1990s has been cut in half, according to Davies. The UK, which was about 75 percent self sufficient in pork production at the time the sow housing law was enacted, now is just 50 percent self sufficient. “It’s difficult to extract one reason for the halving of our sow herd,” Davies said. “But (the ban on gestation stalls)

exacerbated a lot of other problems going on.” The rest of the European Union is scheduled to ban ges-

pened to the UK hog industry. “We were the first country to do it. We didn’t know what we were doing,” Davies said.

‘It’s difficult to extract one reason for the halv-

ing of our sow herd, but (the ban on gestation stalls) exacerbated a lot of other problems going on.’ — Zoe Davies United Kingdom National Pig Association

tation stalls after the first of the year. Meanwhile, a growing number of retailers in the U.S. plan to source pork only from producers who use group housing systems. Davies hopes others can learn lessons from what hap-

“People were mixing sows at the wrong time and (in some cases) the genetics were wrong. “Changing from stalls to group housing is all about management,” she noted. Many pork producers in the

UK have switched to contract production to continue their operations with less risk. Davies estimated half the herd there is in contract production. Environmental regulations “and pressure we’re getting from welfare groups are having a big impact on people (in the hog industry) actually being able to put up new buildings and invest in their businesses going forward,” she said. Many pork producers in the UK instead have improved feed efficiencies, genetics, animal management, and health management to increase their output and remain in business, she said

FarmWeek Page 8 Monday, November 12, 2012

ProDuction

Researcher plugging energy efficiency into livestock farms BY KAY SHIPMAN FarmWeek

Many livestock farmers know their animals’ rate of feed conversion and other key measurements, but few know how much energy they use to produce a pound of meat, according to a University of Kentucky (UK) researcher. When UK professor Doug Overhults has asked livestock farmers about their energy costs, he said those farmers discussed power bills or the amount of propane bought. “Dollars are not really a measure of energy,” Overhults said. “We need to get energy consumption related to production. We need to get it on a per-unit of production basis.” In other words, the unit of energy used per pound of animal raised. “That would let you know if you’re being more energy efficient instead of just tracking kilowatt hours (kwh) or LP gas used,” Overhults explained. Case in point was his study

of several Kentucky broiler houses and their energy use. On-farm assessments showed growers used 4 to 9 gallons of LP gas and 25 to 55 kwh for each 1,000 pounds of birds produced.

‘Dollars are not really a measure of energy.’ — Doug Overhults University of Kentucky

Overhults encouraged farmers to track energy use over two or three years and develop two- or three-year averages. Variables influence the amount of energy used, and no two years are the same, but those fluctuations are reduced by using multi-year averages, he added. To calculate the average

production energy efficiency of electricity consumption, add all the khw used in a year and divide that number by the total of animal weight produced in the same year. The same calculation may be made for LP used. Determining an “energy baseline use is very important,” Overhults said. “If someone says some practice will save you 20 percent, 20 percent of what? And what is the payback? If you’re already real (energy) efficient, it will be harder to generate savings,” he explained. Basing decisions on production energy efficiency is better than simply cutting energy use, which may be counterproductive if the animals’ growth, feed conversion, or productivity suffers, Overhults said. “In some cases a change that increases energy use but also improves productivity could actually be considered an improvement in energy efficiency,” he said.

Bloomington farmer John Olson shows the proper protective garb farmers should wear when dealing with anhydrous ammonia. He donned goggles and gloves recently while hooking up an anhydrous ammonia tank. (Photo by Cyndi Cook)

OSHA checking for protective equipment Farmers, be sure to wear goggles, gloves, and other personal protective equipment when working with anhydrous ammonia. Recently, a farmer in Northern Illinois was applying anhydrous ammonia when he was approached by an Occupational Safety and Health Administration (OSHA) representative while switching from an empty nurse tank to a full one, according to the Illinois Fertilizer and Chemical Association. The farmer was not wearing gloves and goggles when he hooked the tank to the toolbar. That prompted the OSHA official to pull to the side of the road and tell the farmer about the need to wear gloves and goggles when working around anhydrous. Although the OSHA official stopped because he thought the farmer was a fertilizer dealer employee, the farmer still should have been wearing proper protective equipment. Use of proper personal protective equipment (PPE) is an OSHA requirement. In addition, Illinois Department of Agriculture rules related to anhydrous ammonia state that anyone making or breaking an ammonia connection must wear gloves and goggles.

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Illinois Soybean Association scholarship — The Illinois Soybean Association will offer up to 10 scholarships of $4,000 each to students entering their junior year at specific Illinois universities. The application period runs Dec. 1 through Feb. 1. Eligible students must major in crop sciences at Illinois State University in Normal, Southern Illinois University in Carbondale, University of Illinois at Urbana-Cham-

paign, or Western Illinois University in Macomb. Recipients may reapply for another $4,000 scholarship their senior year. Awards are based on exceptional academic ability, leadership, and financial need. The IAA Foundation administers the scholarship program. Guidelines, applications and an activities template will be available at {iaafoundation.org}. Questions should be directed to the program administrator at the IAA Foundation at 309-557-2230 or charms-garman@ilfb.org.

Page 9 Monday, November 19, 2012 FarmWeek

OUTREACH National ag spokesman finalist

Illinois farmer wants conversations to secure the future of farming

BY KAY SHIPMAN FarmWeek

Illinois farmer Katie Pratt of Dixon said she’s willing to invest a year as a national ag spokesman for the future of farming. Last week, the U.S. Farmers & Ranchers Alliance (USFRA) selected Pratt as one of nine national finalists to serve as an agriculture spokesman. Three or four persons will be chosen as USFRA’s “faces of agriculture” and spend a year making public appearances, giving media interviews, and being involved in marketing campaigns. “My young son, who is 7, lives and breathes farming. I thought to myself, ‘If I didn’t do this, would he have the opportunity that we have as farmers today?’ That helped put it in perspective for me,” Pratt said of her decision to apply. She spoke with FarmWeek and the RFD

Radio Network from New York City where the announcement of the finalists was made last week. “I believe that by being a spokesman for agriculture, I will be helping to secure his future as a farmer in America,” Pratt added. Pratt and her husband, Andy, a seventh-generation farmer, grow corn, soybeans, and seed corn in Lee County. They have two children, Ethan and Natalie. The Pratt family has hosted school groups and teachers through Illinois Agriculture in the Classroom and communicate with Chicago-area students through the Adopt a Classroom program. They are active in the Farm Bureau Young Leaders, and she was one of four finalists in the 2012 American Farm Bureau Young Farmer and Rancher Discussion Meet. Pratt also served as a volun-

IAA Foundation caps fruitful fundraising year IFB annual meeting activities announced

Illinois Agriculture in the Classroom (IAITC) will reap the dividends of successful summer and fall fundraising events hosted by the IAA Foundation. “A great year of fundraising means the IAA Foundation will contribute $136,425 toward the IAITC program year,” said Susan Moore, IAA Foundation director. “This increased donation is attributed to the generosity of our Farm Bureau members, county boards, and staff as well as business partners who sponsor our events. We are grateful for their contributions to help fund ag literacy. “The 2012 Illinois Farm Bureau annual meeting will kick off the first event to help support the 2013 IAITC year, and we hope to be off to a great start for the new fundraising year,” Moore said. All event proceeds support the IAITC program. This spring’s 5K run netted $19,625 for the foundation and included a host of agricultureawareness activities for children and adults. In June, close to 200 golfers participated in the IAITC Golf Outing at the Wolf Creek Golf Club and Elks Country Club in Pontiac. The event netted $39,416. In September, cyclists spread the message of agriculture and bike safety to 2,000

students through school stops in McLean, Piatt, and DeWitt counties. The 17th annual Bike Ride for IAITC netted $34,803 for ag literacy. Fundraising activities at the IFB annual meeting will start at 3:15 p.m. Saturday, Dec. 1, with an ice cream social sponsored by Prairie Farms Dairy. A live auction will begin at 3:45 p.m. Items up for bid may be viewed online at the IAA Foundation website {iaafoundation.org}. The silent auction will start Dec. 1 and bidding will continue until Dec. 3. Currently, the foundation is accepting donated items for the silent auction either with an online form or by contacting the foundation office at 309-557-2230. The trivia contest will be Dec. 2 with doors opening at 7:30 p.m. and the contest starting at 8:15 p.m. This year’s theme is Dr. Seuss. Teams of eight that register before Nov. 26 will qualify for a reduced registration fee. After that date, teams will register at the door. Registration is limited to the first 45 teams. Teams will compete for prizes in the county Farm Bureau and the staff-corporate divisions. A prize also will be awarded to the team with the best costumes and table décor. For more information or to register a team, go online to {iaafoundation.org/iaaf/Event s/AnnualMeeting.html}. — Kay Shipman

Katie Pratt of Dixon is a national finalist to be an agriculture spokesman. Her family includes son, Ethan; husband, Andy; and daughter, Natalie. (Photo by Ken Kashian)

teer for the Illinois Farm Families (IFF). The coalition is comprised of commodity groups for beef, corn, pork, soybeans, and IFB. Pratt was chosen as a finalist from more than 100 applicants by a panel of judges that included journalists, a chef, and a food-parenting blogger. Online voting — each individual may vote once a day —

will contribute to the finalists’ scores and end on Dec. 14. The national ag spokesmen will be named in January. To vote, go online to {FoodDialogues.com}. Registration is required; however, email addresses will not be shared or sold to any third parties. The other finalists are: Tim Nilson, turkey grower, Wilton,

Calif.; Daphne Holterman, dairy farmer, Watertown, Wis.; Chris Chinn, hog and grain farmer, Clarence, Mo.; Eric McClam, specialty grower, Columbia, S.C.; Janice Wolfinger, cattle farmer, Morristown, Ohio; Bo Stone, grain and hog farmer, Rowland, N.C.; Will Gilmer, dairy farmer, Sulligent, Ala.; and Brenda Kirsch, diversified farmer, St. Paul, Ore.

FarmWeek Page 10 Monday, November 19, 2012

EdUcaTiOn

FFA, IDOA project promotes Illinois products, ag careers BY KAY SHIPMAN FarmWeek

Ag learning opportunities abound thanks to a new project of the Illinois FFA and Illinois Department of Agriculture (IDOA). Not only will FFA members learn about Illinois food and agricultural products, but those students will educate consumers about those products while learning about potential careers. “If students learn horseradish is an Illinois product, they’ll learn about the scientific process to grow and produce the crop — and they can help educate the general public. It is a trickle up of education,” explained Jim Craft, Illi-

nois FFA executive secretary. Through the Illinois Product FFA Challenge, FFA chapters and members are to raise awareness of and promote Illinois food and ag products through different activities,

said Jennifer Tirey, IDOA head of marketing and promotions. Tirey’s list of possible activities ranged from taste-test programs to community presentations to marketing campaigns.

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“As a small staff, it’s hard for us to get the word out; we’re hoping a lot of kids will help make connections for us. They are our ambassadors,” she said. Craft viewed the project as an opportunity for students to gain supervised agricultural experience in ag marketing, agriscience, ag communication, and other fields. The project also helps promote Illinois products and “helps connect students to the agricultural economy,” Craft noted. “Our students need

opportunities for career exploration.” Participating chapters will register with IDOA and report their activities to earn points. The top two chapters and top three members with the most points by April 16 will win cash prizes. The prizes will be awarded during the state FFA convention. To Craft, the project offers endless opportunities to connect students with retailers, farmers, manufacturers, and real-world experiences.

Cattle numbers continue to shrink BY DANIEL GRANT FarmWeek

The inventory of cattle and calves on feed in the U.S. continued to shrink last month. Cattle and calves on feed on Nov. 1 totaled 11.25 million head, down 5 percent from a year ago, USDA noted Friday in its monthly cattle on feed report. Meanwhile, placements in feedlots in October totaled 2.18 million head, down 13 percent from last year. It was the lowest number of cattle placements in October since at least 1996. “The numbers were right on the average trade guesses, which is neutral to the market short-term,” said Rich Nelson, director of research at Allendale Inc. in McHenry. “But, longer term, we’re setting up for beef production and slaughter in the first and second quarters of 2013 to be down,” he continued. “This is the fourth month in a row we’ve had a double-digit decline (in placements).” Marketings of fed cattle in October increased 3 percent to a total of 1.84 million head. The marketings’ number appeared negative to prices, but Nelson noted there were two extra weekdays of marketings

last month compared to October 2011. “If you take that out of the equation, marketings actually were less than last year,” he said. The analyst predicted sluggish beef demand, concerns about the U.S. fiscal cliff, and the fact that sale barns are full of lightweight cattle could keep the market in a sideways trend near-term. But, long-term, Nelson predicted April cattle futures could spike to $138 to $140 per hundredweight due to tighter supplies.

BEEF TOUR

Kevin Kapelski, left, account manager for Land O’Lakes, discusses feed ingredients and nutrition for beef cattle during the recent FS Total Livestock Solutions beef tour on the farm of Todd Slykuis in Saline County. Participants of the tour viewed a new monoslope facility and discussed feed bunk management and feeding for maximum performance, among other issues. (Photo by Jenette Mulcahy, South Central FS, Marion)

Page 11 Monday, November 19, 2012 FarmWeek

EDuCATION CREATIVE HAND-OFF

IAITC making difference for students and teachers BY KAY SHIPMAN FarmWeek

Illinois Agriculture in the Classroom (IAITC) worked with thousands of teachers and students, involved more volunteers, and created new educational resources from Sept. 1, 2011, through Aug. 31, reported Kevin Daugherty, Illinois Farm Bureau education director. Since 2005, the funded county ag literacy coalitions have grown from 46 to 63, a 34 percent increase. Those coalitions work with schools in 77 counties. While the number of students remained high, districts cut transportation budgets for field trips and that decreased student participation in ag field days and expos, Daugherty noted. In the past, those types of events have exposed large numbers of students to ag and natural resource topics. IAITC directly worked with more than 31,300 teachers, which was down slightly. However, Daugherty projected educators will continue to value ag-based educational resources as the state transitions to new learning standards and emphasizes the need for students to be ready for college and careers. In an effort to reach more teachers, IAITC is exploring an online option for summer education programs with a virtual classroom session combined with a day of extended field trips, according to Daugherty. In addition to educational materials and training, teachers are gaining a variety of benefits through county AITC. He pointed to a 16 percent increase in professional development credits provided to teachers by many county AITC programs. At the same time, the number of volunteers who worked with local AITC programs increased slightly to 3,104. New IAITC educational materials included school cafeteria posters featuring Illinois farmers, ag-based achievement test preparation materials, and lessons for libraries’ summer reading programs.

Henry County school, ag teacher receives AFB foundation grant Galva High School, Galva, and agriculture teacher Trisha Main recently were selected as a grant recipient by the American Farm Bureau Foundation for Agriculture with partnership from The Nutrients for Life Foundation. Main and her school will receive a class set of “The Man Who Fed the World” about the life of Norman Borlaug.

She also will receive a teacher’s guide of lesson plans. An upcoming national essay contest is open to high school students whose schools have used the book. Contest details are available online at {http://bit.ly/MGUrRJ}. Essays and an entry form must be emailed to foundation@fb.org or faxed to 202314-5121 by April 1.

Still time to apply for advisory teams Farm Bureau members have until Dec. 6 to apply for one of three new advisory teams. Illinois Farm Bureau is developing Strength With Advisory Teams (SWAT) to surface emerging issues in agriculture, provide a vision for IFB and the agriculture industry, and help guide issues. The teams are: Conservation and Natural Resources, Farming Production and Marketing, and Local and State Government. For information, contact your county Farm Bureau, call IFB at 309-557-3984, or go online to {ilfb.org/swat}.

Danny Mielneckzek, Illinois Farm Bureau education specialist, shares corn starch with Parrish Smith of Ashland, a member of the A-C Central FFA Chapter, during the Elite Conference last week at Heartland Community College, Bloomington. Smith was among 68 FFA and 4-H members who explored agriculture teaching careers at the event. Illinois Agriculture in the Classroom staff helped the students use corn starch and other common materials to make teaching tools. Another 107 high school students explored careers in teaching business, industrial technology, health occupations, and family and consumer science. (Photo by Kay Shipman)

FarmWeek Page 12 Monday, November 19, 2012

trade

Dollar value should remain export friendly BY DANIEL GRANT FarmWeek

The value of the dollar should remain low enough next year that it will continue to be friendly to U.S. exports, according to a Federal Reserve Bank economist. That should be good news for the ag economy which generally is strong in spite of the drought and lingering

issues with the overall U.S. economy. “We’re in a (dollar-value) range that’s underneath where we were 20 years ago,” David Oppedahl, business economist with the Federal Reserve Bank of Chicago, said at the recent AgEngage farmland value and leasing conference in Decatur. “The dollar’s value is not as strong, which benefits

exports,” he continued. “The value of exports is projected to rise.” USDA recently projected fiscal year 2013 ag exports will reach a record-high value of $143.5 billion. Imports also are projected to set a new record ($117 billion), although it still would leave a significant ag surplus of $26.5 billion. “There’s a lot of growth potential out there,” Oppedahl said. “And we have a competitive advantage in the Midwest” with high productivity soils, a central location, and a viable transportation system to produce and ship ag commodities around the world. The export situation, near term, isn’t as positive. Soy exports are on a record pace, but corn exports have slumped, wheat exports this month were cut by 50 million bushels, pork exports in August declined 3 percent due in large part to weaker demand from the Asian markets, and the U.S. in 2013 is projected to become a net

importer of beef due to low domestic supplies and high prices. In fact, USDA this month increased its estimate of U.S. corn imports this year by 25 million bushels to a recordhigh 100 million bushels. Meanwhile, growth of the U.S. economy was projected to remain sluggish to slightly improved in 2013. “There definitely are concerns about getting the economy moving faster,” Oppedahl said. “Consumer confidence hasn’t come back to levels it was at prior to the recession.” The gross domestic product and industrial production were predicted to grow about 3 percent next year and interest rates were forecast to remain low through at least 2015. But the U.S. unemployment rate was projected to remain at

January 9 Pre-Conference Workshops 1) 2) 3) 4)

Cover Crops High Tunnels (including beneficial insects/biocontrol) Basics of Orchard Establishment/Tree Fruit Production Sweet Corn

January 10 - 11 Conference Tracks © Fruit © Vegetables © Herbs © Agritourism/Marketing © Organic Production © Business Management © Irrigation

For more information: 309-557-2107 or dhandley@ilfb.org Go to www.specialtygrowers.org for full agenda

— David Oppedahl Federal Reserve Bank of Chicago

or above 7 percent for at least the next couple years. “The outlook for the economy is it will grow slightly above trend next year,” Oppedahl added. “Agriculture should be healthy, although lingering effects from the drought could be an issue.”

Changing global players, new market dynamics complicate trade picture BY MARTIN ROSS FarmWeek

This program is overflowing with the resources you need to grow your business and your profits.

‘There’s a lot of growth potential out there.’

U.S. export prospects may be riding high (see accompanying story), but that doesn’t mean it won’t be a bumpy ride. Jeff Hebble, market analyst with Clarendon Hills-based AgYield, anticipates increased volatility in global trade as developing economies hold greater sway in key markets, new players emerge on the international scene, and sociopolitical ripples cause stronger tremors in major commodity sectors. Hebble, former president of Illinois Corn Products International’s Asia/Africa division, noted the growing market influence of such countries as Russia, Argentina, Brazil, and India. “They’re a lot less transparent; they can do things overnight that the U.S. couldn’t do in four years of policy,” he related. “They might ‘stop’ exports, for example. They see a shortage in wheat, so they just stop all their exports. It’s more disruptive to trade. “Seemingly remote events can have a very local impact and vice versa. You talk about the ‘Arab spring’? I think that’s really Food Riots 2.0. It started in Tunisia, in a very small market, because of protests over high prices of wheat and other grains. Then it just evolved. They weren’t clamoring for democracy; they were clamoring for cheap food.” Hebble also sees more global “cross-correlational volatility” between commodities and products. A prime example is the biofuels market, where the fortunes of Brazilian sugar, U.S. corn, and ethanol have become heavily intertwined. Further, Hebble notes a raft of major new players in world trade and ag commerce. India recently passed the U.S. as top beef exporter, thanks to a “dairy revolution” on the Indian subcontinent. China has become a top beer exporter, Vietnam is commandeering the coffee trade, and Morocco provides 40 percent of the world’s phosphate supply. Wilmar International, founded in 1991, is the world’s largest palm oil merchandiser and currently one of the key companies on the Singapore Exchange. Singapore ag product-food ingredient supplier Olam International nearly partnered with industry giant Louis Dreyfus Commodities in 2010. Meanwhile, CP (Charoen Pokphand), a Chinese-Thai conglomerate, has surpassed Cargill in feed sales and has heavily integrated into specialty poultry production for high-end European markets. On the equipment side, India’s Mahindra and Mahindra is the world’s largest tractor producer and a NASCAR sponsor. And Orascom Construction Industries, an Egyptian company, has announced plans to build a $1.4-billion fertilizer plant in Iowa. “Again, your world is changing,” Hebble advised.

Page 13 Monday, November 19, 2012 FarmWeek

FROM THE COUNTIES

LARK â&#x20AC;&#x201D; An informational meeting on the Ameren power line will be at 6 p.m. Monday (today) at the Clark County Extension office, Marshall. Call the Farm Bureau office for more information. FFINGHAM â&#x20AC;&#x201D; The Young Farmers Committee and South Central FS will collect coats for local families in need. Drop off new or gently used coats until Wednesday and receive a chance to win three tickets to an Illini basketball game. Donations may be taken to the Fast Stop General Store, Effingham; Farm Bureau office; or Promark Advertising, Altamont. Call the Farm Bureau office at 217-342-2103 for more information. â&#x20AC;˘ Members are invited to participate in one of the Farm Bureau Action Teams, which meet two times a year. The teams are legislative, commodities/marketing, and local affairs. The fall planning meeting will be at 6 p.m. Monday (today) at the Farm Bureau office. Dinner will be served. Call the Farm Bureau office at 217-342-2103 for reservations or more information. ASALLE â&#x20AC;&#x201D; The annual meeting will be at 6 p.m. Tuesday, Nov. 27, at Pitstickâ&#x20AC;&#x2122;s, Ottawa. Dinner will be served. Tickets are $10 and may be purchased at the Farm Bureau office or from a Farm Bureau director. Call the Farm Bureau office at 815-433-0371 for more information. OCK ISLAND â&#x20AC;&#x201D; Mercer and Rock Island

County Farm Bureaus will sponsor an estate planning seminar from 10 a.m. to 3:30 p.m. Monday, Nov. 26, at the Reynolds American Legion. Erica Eckley, Iowa State University Center for Agricultural Law and Taxation, will be the speaker. Topics include estate planning, planning for business succession, and Illinois estate tax exemptions. Cost is $10 for members and $20 for nonmembers. Reservations and payment are due Wednesday to the Farm Bureau office. Call the Farm Bureau office at 309736-7432 for more information. â&#x20AC;˘ Henry and Rock Island County Farm Bureaus will sponsor a marketing dinner and seminar at 6:15 p.m. Thursday, Nov. 29, at the Geneseo Moose Lodge. Cost is $20 if pre-registered and $30 for walk-ins. Andy Shissler, Roach Ag Marketing, will be the speaker. Call the Farm Bureau office at 309-736-7432 for reservations or more information. ERMILION â&#x20AC;&#x201D; The annual meeting will be at 6 p.m. (Illinois time) Tuesday, Nov. 27, at the Beef House Banquet Center, Covington, Ind Tickets are available at the Farm Bureau office and must be purchased by Wednesday. The Vermilion County Farm Bureau Foundation will host its annual silent auction. Kevin Green will speak about his participation in the Illinois Farm Bureau market study tour to Cuba. Call the Farm Bureau office for more information.

Get Your Gator On! At the IAA Foundation Live Auction Up for bid at the IFB Annual Meeting in Chicago on Saturday, December 1 at 3:45 Full spec sheet and video may be viewed at www.iaafoundation.org All proceeds benefit Illinois Agriculture in the Classroom Not attending IFB Annual Meeting? Contact the IAA Foundation for phone-in BIDDING OPTIONS s s *OHN $EERE 'ATOR I 856 X $ONATED BY $EERE #O AND 3,/!. IMPLEMENT The Details: s 9ELLOW !LLOY 7HEELS -AXXIS "IGHORN 2ADIAL 4IRES s $ELUXE #ARGO "OX WITH 0OLYUREA ,INER s 0OWER AND &RONT 0ROTECTION 0ACKAGE s Valued

at $14,205 i820T2

GETTING DOWNSTATE EXPERIENCE

Jenna Kilgus explains the dairy operation she and her husband, Matt, own at Fairbury to students from four Chicago schools. The Cook County Farm Bureau Foundation recently hosted an Agriculture Leadership Academy, a fully funded trip for 40 urban students who attend schools with approved ag programs on ag tour in Central Illinois. The objective was to let the students explore ag career opportunities. In addition to the dairy farm, the students toured the Joliet Intermodal and visited Pontiac High School, where the Pontiac FFA students and the Chicago students participated in leadership games. (Photo by Diane Merrion, Cook County Farm Bureau ag coordinator)

FarmWeek Page 14 Monday, November 19, 2012

profitability

Look at crop yield data more critically this year BY LANCE RUPPERT

In most areas, harvest is now complete and fall tillage is under way. With the 2012 growing season “in the books,” it is now time to start making decisions for 2013. Most of us base our business decisions on information, facts, and Lance Ruppert observations. Today, information is everywhere. We have more information at our fingertips than ever before. We get bombarded every

is different. With extreme environmental conditions like we saw this year, every hybrid or variety will fail somewhere and shine somewhere else. Don’t put too much emphasis on data from one plot or from one year. Try to look at data compiled from multiple sites and from multiple years, if possible. Your local FS crop specialist can help you gain information to assist you in making informed decisions for 2013.

day via television, radio, websites, email, Twitter, and text messages. Sometimes we even learn things from face-to-face conversations with another person! Do you ever wonder about the validity of the information you receive? Have you started to become skeptical of all information, especially from certain sources? Coming off the elections, I think we can all relate. As you receive this year’s plot data, take a minute to ask critical questions of that data so you can make good, fact-based decisions for next year’s crop. Fundamentally, hybrid and variety plots are good. They give

seed companies and growers a way to evaluate and compare products across a large geography and varied environments. How was your growing environment this year? In most areas of Illinois, the growing environment wasn’t ideal, with different and multiple factors working against your crop yield. Extreme environments can cause extreme differences in product performance, because not all genetics are the same and react the same in those environments. Be cautious when looking at and making decisions based solely on plot data. Ask ques-

tions about what happened throughout the growing season that may have affected the plant’s ability to perform: rotation, soil types, size of the plot, tillage/compaction, and drought can all affect performance. Also, find out when the plot was planted. That will have a direct correlation to pollination/flowering date and the environmental effects during those important times in the plant’s life. This year, be critical of plots with huge yield swings. This could be more related to soil type than genetics. Consider looking at multiple locations and multiple years of data. Every year and location

Lance Ruppert is FS Seed sales and marketing manager His email address is lruppert@growmark.com.

enough bushels to cover the hedges, could experience major losses this year. Livestock farmers who ran low on feed and faced much higher feed prices also had a more difficult time this year. “The drought impacted farms very differently,” said Gary Schnitkey, University of Illinois Extension farm management specialist. “Gross revenue in 2012 is near record levels, but some will be looking at financial stress.” Darrel Good, U of I ag economist, also noted an extreme amount of variability in farm income. “The USDA numbers always look at total income

and not the distribution of that,” he said. “There is a huge amount of (income) variability in the crop sector. And if you include the livestock sector, the picture is very different. It’s not nearly as rosy.” The two keys to income this year in the crop sector were rainfall patterns and crop insurance. Farms that received timely rainfall and produced adequate crops obviously put farmers in an advantageous position due to record-high prices.

Farmers who had major crop losses but took out high levels of insurance also are expected to have a good year. “Low yields aren’t necessarily bad for income,” Schnitkey said. About 60 percent of Illinois’ cropland acres had a high level of crop insurance, 20 percent of acres was modestly insured, and another 20 percent had no insurance coverage, according to Schnitkey. “The acres that have a high level of insurance will offset

the yield declines,” Schnitkey said. “Most (farmers) took revenue protection guarantees and it worked exactly like it should, although (high payouts) will cause some bad publicity.” Schnitkey and Good next month will discuss the outlook for 2013 commodity prices and farm income at the Illinois Farm Economics Summit to be held at five locations around the state Dec. 10-14. Information about the summit is available online at {farmdocdaily.illinois.edu}.

Record farm income doesn’t tell whole story; distribution highly variable BY DANIEL GRANT FarmWeek

The USDA farm income forecast, which calls for a record-high $122 billion for 2012, looks really good on the surface. But the reality is 2012 likely will go down as a feast or famine year on many farms. Record-high crop prices and record-large crop insurance payments are expected to more than offset drought-induced crop losses on some farms. But farmers who took out low levels of crop insurance, have no insurance at all, or who hedged their crops at much lower prices early in the season and then didn’t have

M A R K E T FA C T S Feeder pig prices reported to USDA* Weight 10 lbs. 40 lbs.

Range Per Head $32.25-50.59 n/a

Weighted Ave. Price $41.60 n/a

This Week Last Week 79,653 70,185 *Eastern Corn Belt prices picked up at seller’s farm Receipts

Eastern Corn Belt direct hogs (plant delivered) Carcass Live

(Prices $ per hundredweight) This week Prev. week $72.85 $79.10 $53.91 $58.53

Change -6.25 -4.63

USDA five-state area slaughter cattle price Steers Heifers

(Thursday’s price) (Thursday’s price) Prev. week Change This week 124.90 125.00 -0.10 n/a 127.00 n/a

CME feeder cattle index — 600-800 Lbs. This is a composite price of feeder cattle transactions in 27 states. (Prices $ per hundredweight) Prev. week Change This week 143.48 144.17 0.69

Lamb prices Slaughter Prices - Negotiated, Live, wooled and shorn 127-170 lbs. for 88.88-115 $/cwt. (wtd. ave. 102.05)

Export inspections (Million bushels) Week ending Soybeans Wheat Corn 11-09-12 64.1 10.5 9.5 11-02-12 60.0 14.0 15.4 Last year 54.1 12.9 37.7 Season total 434.2 427.3 168.2 Previous season total 314.3 488.8 288.2 USDA projected total 1055 1200 1250 Crop marketing year began June 1 for wheat and Sept. 1 for corn and soybeans.

USDA

Farm Service Agency NAP CLOSING DATES — Tuesday is the Noninsured Crop Disaster Assistance Program (NAP) sales closing date for the 2013 year for apples, blueberries, caneberries, cherries, grapes, peaches, pears, plums, and strawberries. March 15 is the NAP sales closing date for all spring-and summer-planted crops. Contact your local Farm Service Agency (FSA) office with any questions. NEW ACREAGE REPORTING — The new acreage reporting dates are in effect for the 2013 crop year. Filing an accurate, timely acreage report for all crops and land uses, including failed acreage, can prevent the loss of FSA program benefits. Prevented planted acreage must be reported no later than 15 calendar days after the final planting date for the applicable crop. Failed acreage must be filed before the crop’s disposition. Dec. 15 is the acreage reporting date for FSA and Risk Management Agency (RMA) purposes for perennial forage and fall-seeded small grains, such as barley, rye, and wheat. Other acreage reporting dates and the affected programs/crops are: Jan. 2 — honey. Jan. 15 — perennial fruits, such as, apples, peaches, nectarines, pears, plums, strawberries, and grapes. July 15 — spring cabbage, corn, grain sorghum, green peas, hybrid seed corn, spring oats, popcorn, processing beans, pumpkins, soybeans, sweet corn, and all other crops. 2009, 2010 AVERAGE ADJUSTED GROSS INCOME REVIEW — The adjusted gross income (AGI) verification and compliance

reviews for 2009 and 2010 are ending. Compliance reviews were conducted on farmers the Internal Revenue Service (IRS) indicated may have exceeded the adjusted gross income limitations described in regulation. If a farmer was determined to have exceeded the AGI limit of $500,000 of nonfarm income, $750,000 of farm income, or $1 million nonfarm income for conservation benefits, then receivables were established for payments earned directly or indirectly by the farmer subject to the applicable limitation. The Illinois FSA state office did the reviews and made the determinations. Any concerns should be directed to the Illinois state FSA office at 217-241-6600. Farmers who received initial debt notification letters may appeal only the amount of the debt to their local FSA office. MARKETING ASSISTANCE LOANS — Marketing Assistance Loans, also known as Commodity Loans, are available to farmers who share the risk of producing a crop. To be eligible, you must maintain beneficial interest in the crop through the time of application. Once beneficial interest in a commodity is lost, the commodity is ineligible for loan — even if you regain beneficial interest. Violating provisions of a marketing assistance loan may trigger administrative actions, such as assessing liquidated damages, calling the loan, and denial of future farm-stored loans. The most common violations are removing or disposing of a commodity being used as loan collateral without prior authorization and providing an incorrect quantity certification.

Page 15 Monday, November 19, 2012

PROFITABILITY Corn Strategy

CASH STRATEGIST

A look ahead at soybeans Last week we discussed how our larger-than-expected crop would impact the demand structure until the new South American crops become available. With the shift in South American weather, we think it is important to lay out how a good crop there will impact world buyers. Specifically, what might the pace of the South American new export campaign look like? One can look at all of that area’s drought and postdrought years, but the only period we believe is applicable is 2009/2010 because of the share of world output South America now commands. Even then, that’s not a great analog to use as there was only a modest drought in Brazil in 2009 with yields only 6 percent below the record set the prior year. And that was partly offset by larger plantings. Argentina’s yield was 32 percent off from the prior year, a year that also had a near-record yield. The year following 2009’s drought had larger plantings, record yields, and record production in Brazil and Argentina. Argentine plantings and production have flattened somewhat, but Brazilian output is still growing sharply. This year’s crop could be 15 to 20 percent larger than it was in 2010 with

good to average yields. Like this year, exports from those two trickled to near nothing from November 2009 through January 2010. But by February, exports started to increase rapidly, building to a peak in May before subsiding. If anything, shipments could build a little faster this February if weather and output hold up because producers in earlier-harvest areas were said to have planted more shorter-season soybeans. By March, certainly by April, exports should expand dramatically, provided the crops are as big as currently expected. Starting in April 2010, our exports slowed to a trickle, with most weekly shipments at 5 million bushels or less. There is a question as to whether Brazil has the load-out capacity to allow our shipments to come to a virtual halt. But world demand, especially from China, could fall short of expectations too. Sluggish demand for soybean meal and soybeans was a part of the mix behind this past week’s cancellations. And the Chinese government always has the wherewithal to sell soybeans from inventory to supplement needs if supply would pinch imports for the short term. No doubt, the key is South American weather. But if it’s good, and production is large, end users will not be inclined to book ahead. And that could take a little more pressure off the world trade, making the situation workable.

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Cents per bu.

ü2012 crop: Corn futures broke below the recent narrow trading channel, but held the late-September 20-week low. The market is in a window for a six to seven-week low, which might spark a rally. But this latest break hints the trend for the current 20-week cycle might have turned down. Use a rally to $7.50 on March futures for catch-up sales. ü2013 crop: Use rallies to $6.25 on December 2013 futures for catch-up sales. We could add another increment at that level, too. Check the Hotline if prices get back there. vFundamentals: Sluggish export demand and demand to grind into ethanol have been pulling prices lower. The U.S. Environmental Protection Agency’s rejection of requests to waive the Renewable Fuel Standard (RFS) was a psychological plus, but the current grind rate is still below the level allowed by the RFS. Producer selling has been suppressed by low prices and by talk that export demand should pick up as the marketing year progresses. Weather has cut Argentine potential, but it could favor crop potential in Brazil this spring.

Soybean Strategy

ü2012 crop: As we implied last week, the new supply/demand projections changed the market attitude. And China canceled 10 cargoes, which further undermined optimism. Use a rally back to $14.80 to make catch-up sales. And given the extent of this break, we may add a sale at that level. ü2013 crop: The shortterm trend is down; now it’s a matter of how far a rebound might carry. Use a rally to $12.90 on November 2013 futures for catch-up sales. We are seriously considering adding another small increment at that level as well. vFundamentals: The continued price decline should be telling you the market no longer perceives the need to ration soybeans. The increase in our crop assured users supplies will be plentiful until the new South American crops become available. And the shift to more favorable weather

across South American growing regions made buyers more comfortable with soybean fundamentals until our next crop.

Wheat Strategy

ü2012 crop: The break to the lowest levels since last summer keeps the short-term downtrend intact, and may signal the long-term trend has turned down, too. The next level of support on the Chicago March contract comes at $8.25-$8.35. Use a rally to $8.75 for catch-up sales. ü2013 crop: Make catchup sales when Chicago July futures are trading above $8.50.

Check the Hotline frequently; we could add a sale at any time. vFundamentals: The tone of the market has remained negative since USDA released the November supply/demand forecasts. Downside risk should be limited to some degree because of tightening international supplies and ongoing dry conditions in the U.S. Plains. The most recent weekly condition report indicated 36 percent of the winter wheat crop, primarily the hard red winter crop, was in good to excellent conditions, the lowest rating it has had prior to going into dormancy.

FarmWeek Page 16 Monday, November 19, 2012

perspecTives

The art of cutthroat politics — insect style Another U.S. presidential campaign has come and gone. Every four years we go through the throes of choosing the individual entrusted to lead the USA. By the time we get to exercise our cherished privilege of voting, we have endured many months of campaign rhetoric. Paid political advertisements, candidate debates, yard signs, letters to newspapers, opinion polls, and even advice from grandma are designed to influence our choice of candidates. It is a costly and mind-numbTOM ing process. TURPIN Insects also have the need to put new leaders in place. Social insects have queens that rule the colony. Insect queens don’t live forever, even though some have very long lives when compared to other insects. Honey bee queens can live four to five years. Mound-building termites of Africa have queens that are reported to live up to 50 years. In spite of a long life relative to their loyal subjects, social insect colonies do have to replace rulers from time to time. Insects don’t vote for new rulers or for anything else, for that matter. So the transition of power in the social insect colony is accomplished through other means — some of which equal the dirty tricks that sometimes haunt human political campaigns.

Leadership in the honey bee colony is a matriarchal kind of thing. Here’s how the system works: The queen of the colony has only one function — to lay eggs. She is really good at her job. On an average day during the egglaying season, a honey bee queen can deposit 2,000 eggs. That means the queen produces an egg every 45 seconds or so all day long. That feat is more remarkable when you consider that the queen has to inspect a cell in the comb to ensure its suitability prior to depositing the egg. Fertilized eggs hatch into grubs that will become female bees. Unfertilized eggs of honey bees become males, which are called drones. Whether the female grub develops into a queen or a worker depends on the type of food it consumes during development. Worker bees, which serve as nursemaids, determine the food that each grub receives. Thus, the workers dictate which of their sisters become queens. But there is more to the story. Several new queens generally are produced at the same time in a hive. This results in a situation similar to having several candidates declare for the same political office when only one from each party can compete. So the contending candidates must be narrowed to one in some way. Think of our political system and nominating conventions. In a hive it happens this way: The first queen to emerge seeks out other queens and stings them to death

before they emerge. If by chance two queens emerge at the same time, they fight a duel to the death. It is a winner-take-all scenario! But the spoils will go to the victor only if she can successfully complete a mating flight and return to the hive. If that happens, an orderly transition of power begins. The queen mother abdicates the throne in favor of her daughter. The former queen and an entourage of loyal workers leave and seek a new home to call their own. This process is known as swarming. Ants are another group of social insects that sometimes engage in behaviors that resemble those of humans running for political office. For instance, there is a species of ant that only survives when a queen parasitizes the nest of another species of ant. The parasitic ant manages to get into the nest by adorning herself in the odors of that nest and bribing guards with a gift or two. Does that sound a bit like a politician changing positions and buying favors as the need dictates? Once into the nest, the invading queen then works her way to the queen chamber. There the invader manages to behead the resident queen. The perpetrator of the evil deed then assumes control, and the workers begin to raise her offspring. Cutthroat politics, for sure! Tom Turpin is an entomology professor at Purdue University, West Lafayette. His email address is Turpin@purdue.edu.

Giving thanks for small things that add spice to life Fall is hard upon us. It is time to turn our thoughts to domestic matters and the upcoming holidays. Much has been written about the first Thanksgiving, and the foods that were enjoyed. Much has changed over the years, and modern Thanksgivings differ from those celebrated even 20 or 30 years ago, with such staples as broccoli casserole and MARI crispy kale LOEHRLEIN chips now adorning many tables during the holiday season. Recently, I was thinking about the small things that give our favorite foods their special flavor — the spices. I was thinking particularly of the spices that go into a good apple or pumpkin pie: cinnamon, nutmeg, cloves, and allspice. Cloves are actually unopened flower buds of a tree that is native to Indonesia. They were exported and used

in China as early as 2,200 years ago. A major use during the Han Dynasty (220-206 B.C.) was to combat halitosis. The name clove comes from the French word clou, meaning nail, due to their resemblance to that piece of hardware. They are used in such a manner in cooking ham. They also are used as a flavoring in chewing gum, cigarettes, herbal tea, and the mixture of spices known as Garam Masala. The bark of several species of Cinnamomum trees are the source of our cinnamon. It has been in use for at least as long as cloves. Sri Lanka (Ceylon) is the native land of true cinnamon, Cinnamomum verum. Other types of cinnamon are commonly called cassia, which is also known as Saigon, Chinese, or Indonesian cinnamon. Cinnamon production is a fascinating process. When trees are 2 years old, they are cut back to a stump and covered with soil. This process is known as coppicing. It has the effect of causing

the tree to send out numerous sprouts. These new young shoots are harvested and laid out to dry, at which point they curl up into the cinnamon sticks that we know. These sticks, or quills, can be ground up to make the familiar cinnamon powder. Cinnamon is an anti-oxidant, which may help fight cancer. It also serves as a blood thinner and should be used in moderation. The nutmeg tree actually produces two spices: nutmeg and mace. The nutmeg portion of the fruit is larger, and so mace tends to command a higher price. Nutmeg has a fascinating history that figures into the purchase of Manhattan from Native Americans by the Dutch. It has also been claimed that nutmeg could cure or prevent the Black Plague, if worn around the neck. In Trenton, N.J., nutmeg was prohibited in kitchens of federal prisons due to its suspected hallucinogenic properties. Allspice is the unripe berry

of the Pimenta dioica tree. It has the flavors of cinnamon, nutmeg, and clove all wrapped into one. Of all the spices considered so far, this is the only one that is native to the Western Hemisphere, specifically, the Caribbean region. Even today, Jamaica dominates in world production of allspice. Columbus took allspice back to Spain, probably from his first voyage in 1492. I do not know whether these spices were present during the first Thanksgiving — or how long it took until they were commonly available at American tables.

By all accounts, though, the British, Dutch, Portuguese, and others already had been using them, trading them, and ensuring their continued agricultural production. All such efforts required no small amount of effort and time. So, while enjoying your holiday feasts this year, take a moment to give thanks for these small but important things. Mari Loehrlein is a professor of horticulture and landscaping at Western Illinois University’s School of Agriculture, Macomb. Her email address is MM-Loehrlein@wiu.edu.

Letter writing policy Letters are limited to 300 words and must include a name and address. FarmWeek reserves the right to reject any letter and will not publish political endorsements. All letters are subject to editing, and only an original with a written signature and complete address will be accepted. A daytime telephone number is required for verification, but will not be published. Only one letter per writer will be accepted in a 60-day period. Typed letters are preferred. Send letters to: FarmWeek Letters 1701 Towanda Ave. Bloomington, Ill., 61701