Wow What a WASDE!

The last few days have had the WASDE August 16 report released and a few days later I attended the Midwest-Great Plains Ag Outlook /conference in Des Moines IA. Many of us have heard the headlines from the WASDE report predicting the US largest corn and soybean crop on record. US corn yields are projected at 175.1 bushels (BU)/acre (A) for a 15.153 billion (b) bu crop. Both the size and yield were higher than the highest trade estimate. The same happened with the soybean estimates in WASDE, 4.060 bbu with 48.9 bu/A. Both are higher than trade estimates like the corn trade. Sounding like a broken record, milo followed the same pattern with WASDE beating trade estimates projecting 0.475 bbu total with 66.2 bu/A, both higher than analyst estimates.

Last year’s crops were not the largest on record leading to slightly lower corn ending stocks however soybean ending stocks did rise. Ending stocks for both corn and soybeans are projected to increase after the 2016 crop is harvested. Corn ending stocks are projected to be over 16% and soybean stocks 8% of use. That compares to last year’s ending stocks of 12% for corn and 6.5% for soybeans. The expected increase will over hang corn and soybean prices for some time, until some kind of news, lower yields or higher exports or problems with other country’s grain production, would change the supply/demand calculation. At this point however there are no big news items that could change our grains market to one that is bullish.

So what was the consensus, as if there really is such a thing, or my perception of it, at the Midwest-Great Plains Outlook conference? Except for a few areas of crop problems in Ohio and Michigan, crops are in very good shape and are likely to perform very close to the high yields that USDA and other crop yield modelers have calculated. No significant disease or insect problems were reported. The discussion led eventually to marketing, storage and transportation of the Fall 16 crop. We already know some portion of the winter wheat crop is stored on the ground which will likely lead to loss of quality and quantity. That wheat will probably end up in feed. The US wheat stocks are projected to be 47% of use by crop marketing end while world wheat stocks are projected to be only 35% of use. That is some good news for wheat but stocks of world wheat are up even though use is projected to be up. Use is projected up for the US wheat crop and still stocks are projected to increase. The same situation is going on in corn and soybeans. So then another question is about transportation. Railroad companies are telling university crop economists that they are ready for the anticipated large fall crop. Coal shipments are lower than in previous years freeing up rolling stock to move grain more expeditiously in the past. That is good news for farmers who can anticipate that Fall 16 basis may not be as low as would have been.

What are farmers to do when marketing such a big crop? Many will be convinced to store rather than sell at or near harvest. Big crops tend to have poor carry and thus storage may not gain enough to pay for itself. In planning post harvest crop marketing, farmers must consider the carry that is offered. If the carry is less than the cost of storage, the market is telling you to sell sooner rather than later which would mean less money for the crop in the future due to storage costs.

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Managing Cow/Calf Hay Costs

One widely adopted hay making technology is the round bale. In 1892 the first stationary round baler was built and Allis Chalmers building the first moving round baler with a pickup in 1947. Two other types of baler followed in 1970 and 1972. The first was a ground rolled bale but the 1972 baler built by Vermeer had a bale chamber and a pickup in front. Many companies followed so that 15 or so were selling round balers by 1975. Round bales are convenient for hay making, feeding, transport and storage. But there are some limitations farmers and ranchers must be aware of. Round bales stored and fed outside can have as much as 50% loss. But if stored and fed inside that loss can be as low as 5-15%. Let’s take a look at the worst case example to illustrate just how costly high hay losses can be.

 

The University of Nebraska-Lincoln Beef website, beef.unl.edu, includes some representative budgets which include feed use with losses estimated at 15%. So actual intake of the amounts listed will be 85% of the hay amount listed. I will use the 2015 Central Nebraska budget as my example. With feed losses for hay set at 50%, ranchers would need. 0.31 tons more hay for cows and 0.47 tons more hay for 2 year olds. At $80 per ton for meadow hay, the additional hay needed with 50% loss adds $26.40 to feed cows and $37.40 to feed 2 year olds. A typical 300 cow herd, 84% mature cows and 16% 2-year olds, would spend $6652 for mature cows and $1795 more for 2-year olds, total $8847 more in hay due to high hay losses.

 

The next question then becomes where on this typical ranch the losses are occurring. Recommendations for storage loss reduction are in a Beef website article: http://beef.unl.edu/minimizing-storage-and-feeding-losses-round-bale-hay which shows where the losses occur and how to reduce them in storage. Another publication for the University of Missouri discusses ways to reduce feeding losses: http://extension.missouri.edu/p/G4570. These are good resources to utilize when looking for the hay losses on a ranch but when implementing those strategies calculate the cost of implementation. If the implementation costs are more than reduced feed costs, implementing those strategies would make the ranch worse off financially.