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DTN Early Word Grains 02/17 05:56

DTN Early Word Grains 02/17 05:56 Declining Oil Prices Weigh on Soybeans March corn was down 3 1/4 cents, March soybeans were down 7 3/4 cents, and March Chicago wheat was down 3 3/4 cents. By Todd Hultman DTN Analyst 6:00 a.m. CME Globex: March corn was down 3 1/4 cents, March soybeans were down 7 3/4 cents, and March Chicago wheat was down 3 3/4 cents. CME Globex Recap: March soybean were down 7 3/4 cents early Friday, pulled down by new overnight lows in palm oil and soybean oil futures. Corn and wheat are also lower after Thursday's turn from recent highs while the news remains mostly favorable for crops in South America. OUTSIDE MARKETS: The Dow Jones Industrial Average closed up 7.91 points at 20,619.77. The NASDAQ Composite was down 4.54 points at 5,814.90 and the S&P 500 was down 2.03 points at 2,347.22 Thursday. DJIA futures were down 62 points early Friday morning. Asian markets were lower with Japan's Nikkei down 112.91 points (-0.6%), Hong Kong's Hang Seng down 73.96 points (-0.3%), and China's Shanghai Composite down 27.54 points (-0.8%). European markets were also lower Friday with London's FTSE 100 down 3.88 points (-0.05%), Germany's DAX down 54.63 points (-0.5%), and France's CAC 40 down 46.83 points (-1.0%). The U.S. dollar index was up 0.16 at 100.66 while the euro was down 0.00280 at 1.06570. March 30-year T-Bonds were up 19/32nds at 151'13 while April gold was up $1.00 at $1,242.60. March crude oil was down $0.38 at $52.98 while Brent crude was down $0.51 at $55.14. Soybeans at the Dalian Exchange are lower overnight and Malaysian palm oil futures were down 2.4%.

DTN Early Word Opening Livestock 02/17 06:01

DTN Early Word Opening Livestock 02/17 06:01 Late Week Meat Paper to Open With Uneven Pricing Expect the cattle complex to open on a mixed basis as traders cautiously position ahead of cash news. Lean hog contracts should also begin unevenly thanks to cash premiums on one hand and softer carcass values on another. By John Harrington DTN Livestock Analyst Cattle: Steady Futures: Mixed Live Equiv $130.82 + .54* Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 89.77 -1.06** * based on formula estimating live cattle equivalent of gross packer revenue ** based on formula estimating lean hog equivalent of gross packer revenue GENERAL COMMENTS: Cattle buyers and sellers have been successfully avoiding each other this week, but business necessity will surely cause some kind of hookup Friday. The tug-of-war is between tight fed supplies and poor processing margins. Look for opening bids around $116 in the South and $186 in the North, well below asking prices of $122/$190 to 192. Live and feeder futures are geared to open on a mixed basis as specs and commercial slowly position before the development of cash news.

DTN Feeder Pig Index


DTN Midday Grain Comments 02/17 11:33

DTN Midday Grain Comments 02/17 11:33 All Grains Lower at Midday Soybeans lead trade lower at midday, only Minneapolis wheat is higher. By David Fiala DTN Contributing Analyst General Comments The U.S. stock market indices are lower with the Dow futures down 70 points. The interest rate products are higher. The dollar index is 40 points higher. Energies are lower with crude down 0.30. Livestock trade is higher. Precious metals are lower with gold down 2.10. CORN Corn trade is 2 to 4 cents lower at midday with trade continuing slide after the poor finish Thursday. Weakness could continue going into the long weekend for Presidents Day with profit taking from the recent rally. Ethanol margins remain under pressure this morning. The USDA announced 194,112 metric tons of corn sold to Japan split between old and new crop. Support is at the $3.71 10-day which we are testing this morning then the $3.68 20-day. Resistance is the $3.80 high this week, and then the $3.87 multi-month high. SOYBEANS Soybean trade is 7 to 12 cents lower with trade followong through lower after the poor close Thursday. Meal is $3 to $4 lower and oil is 50 to 60 points lower. The firmer Real continues to limit Brazilian export competitiveness which has been supportive for near term US demand but harvest will provide bushels for the market to deal with as the export pipeline fills. On the March soybean chart we broke below nearby support levels yesterday with the 20-day at $10.45 becoming resistance, and the 50-day at $10.35 now support which is trying to hold at midday, with the 200-day at $10.18 below that. WHEAT Wheat trade is following the row crops lower this morning with trade 1 to 5 lower on the winter wheat, but flat to 2 firmer on the Minneapolis as the protein spreads build this morning. The warm stretch will continue to raise concerns about breaking dormancy early, with the more extended forecast showing potentially for a cold snap into early March for the western belt. Better moisture is expected for Kansas in the next week. On the March Kansas City contract support is at the $4.54 10-day then the $4.51 200-day. Resistance is at the seven-month high at $4.74. David Fiala is a DTN contributing analyst and the President of FuturesOne and a registered adviser. He can be reached at dfiala@futuresone.com Follow Fiala on Twitter @davidfiala (BAS) Copyright 2017 DTN/The Progressive Farmer. All rights reserved.

DTN Midday Livestock Comments 02/17 11:51

DTN Midday Livestock Comments 02/17 11:51 Livestock Futures Follow Strong Buyer Support in Live Cattle Complex Triple-digit gains have quickly developed in nearby live cattle futures. The overall tone of the market remains firm across all markets as end of the week positioning is also developing. By Rick Kment DTN Analyst GENERAL COMMENTS: Live cattle futures have posted strong triple digit gains through the morning Friday with April futures leading the complex higher with gains exceeding $1.50 per cwt. This rally is helping to spark additional buyer support in both feeder cattle and lean hog markets. Corn prices are lower in light trade. March corn futures are 3 cents lower. Stock markets are mixed in light trade. The Dow Jones is 62 points lower while Nasdaq is up 3 points. LIVE CATTLE: Sharp triple-digit gains are seen in live cattle futures with traders focusing on strong commercial buyer activity moving back into the market. February futures are holding a $1.37 per cwt rally at midday while April futures are leading the market higher with a $1.62 cent per cwt rally. The building support seen in the complex continues to focus on uncertain fundamental support, but active commercial activity based on the potential for follow through buyer interest next week. Cash cattle quickly developed through the morning with prices generally steady with last week price levels. The lion's share of trade is expected to be done for the week, with prices already established even on expected clean-up trade that may develop. Prices in the South are $119 to $120 per cwt with most late trade seen at $120 per cwt. Dressed trade in the North is seen at $190 per cwt. It is still uncertain just how many cattle traded through the morning Friday, but the ability to draw trade early in the session and not drag it out through the rest of the day is impressive. Beef cut-outs at midday are higher, $1.12 higher (select) and up $1.15 per cwt (choice) with moderate movement of 89 total loads reported (61 loads of choice cuts, 11 loads of select cuts, 2 loads of trimmings, 15 loads of ground beef). FEEDER CATTLE: Feeder cattle futures have bounced higher midday following the strong support in live cattle futures as well as steady cash cattle trade which is helping to build some needed stability into the market following the price shifts seen through the week. Nearby contracts are holding gains of 30 to 70 cents per cwt as traders remain focused on the ability to draw increased market support back into the complex. LEAN HOGS: Firm buyer support is seen through nearby and most deferred lean hog futures following the firmness in pork values and spillover support seen across the live cattle market. Nearby trade is seen from 50 to 75 cents per cwt higher at midday, as traders continue to draw underlying support back into the market at the end of the week. Sharp losses seen Thursday are being retracted more based on additional trade volume rather than any shift in overall fundamental market direction. Deferred futures remain lightly traded and generally weak, but the focus on nearby gains is driving most trader activity. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.46 at $71.83 per cwt with the range from $68.00 to $74.25 on 4,272 head reported sold. Cash prices are unreported due to confidentiality on the Iowa Minnesota Direct morning cash hog report. The National Pork Plant Report reported 128 loads selling with prices up $0.78 per cwt. Lean hog index for 2/14 is at $75.31 up $0.69 with a projected two-day index of $75.98 up $0.67. Rick Kment can be reached at rick.kment@dtn.com (ES) Copyright 2017 DTN/The Progressive Farmer. All rights reserved.

DTN Closing Grain Comments 02/17 13:56

DTN Closing Grain Comments 02/17 13:56 Grains Finish on a Down Note After trading at or near new highs on Wednesday, corn, soybeans and wheat all finished lower on the week, hit by profit-taking ahead of the three-day weekend. Early bearish influence came to soybeans Friday when palm oil prices fell to their lowest close in twelve weeks.

DTN Cattle Close/Trends 02/16 15:45

USDA MARKET NEWS--AFTERNOON CATTLE REPORT 02/16/17 VOLUME USDA TOTAL RANGE DTN PRACTICAL RANGE WT AVG KANSAS CONFIRMED CASH SALES - TODAY: 15,665 WEEK T0 DATE: 20,952 STEERS 9,473 119.00-120.00 119.00-120.00 119.62 HEIFERS 3,936 118.00-120.00 119.00-120.00 119.40 NEBRASKA CONFIRMED CASH SALES - TODAY: 39,707 WEEK TO DATE: 42,427 STEERS 11,197 190.00-190.00 190.00-190.00 190.00 HEIFERS 5,731 119.00-190.00 190.00-190.00 190.00 TEXAS CONFIRMED CASH SALES - TODAY: 6,186 WEEK TO DATE: 8,142 STEERS 3,595 118.50-120.00 119.00-120.00 119.38 HEIFERS 1,281 119.00-120.00 119.00-120.00 119.85 COLORADO CONFIRMED CASH SALES - TODAY: 8,742 WEEK TO DATE: 10,842 STEERS 5,969 119.00-120.50 119.00-120.50 120.29 HEIFERS 2,341 120.00-120.50 120.00-120.50 120.12 IOWA CONFIRMED CASH SALES - TODAY: 18,328 WEEK TO DATE: 20,424 STEERS 4,473 188.00-190.00 190.00-190.00 189.98 HEIFERS 6,321 190.00-190.00 190.00-190.00 190.00 COMMENTS: A moderate to active trade today in most areas with Southern live Deals generally steady with a few $1.00 lower. Northern dressed business came In fully steady compared with last week's weighted average basis Nebraska. 5-AREA LV STR AVE PR&WT: $118.78(1406) HIDE&OFFAL: $11.87 Unchg CARCASS EQV INDEX CHOICE (600-900#) SELECT (600-900#) #OF HEAD LIVE BASED 174.23 170.10 12,580 BOX BASED 178.49 177.24 49,692 AVE INDEX 176.36 -0.11 173.67 -0.23 62,272 BEEF CUTOUTS CHOICE (600-900#) SELECT (600-900#) 190.49 +1.27 189.24 +1.05 77.24 LDS CH CUTS / 14.43 LDS SEL CUTS / 5.40 LDS TRIM / 21.50 LDS GROUND BOXED BEEF TREND: Hr on mod dem & mod-hvy offers COMPREHENSIVE WEEKLY CUTOUT VALUE: Week ending 02/10 $190.37 -1.54 CUTTER 90% 350# UP C/O: $164.71 +0.04 NAT'L BONELESS BF TRIM: 07.17 lds / Sharply hr on gd dem & lt offers 90% TRIM: 00 lds: Wtd Avg $No Test/ Not fully established *ABCDE AFTER QUOTE REPRESENTS DAYS SINCE LAST REPORTED MARKET TEST*. FI KILL(WTD) FRI 107(543) WK AGO 110(556) YR AGO 99(511) MIX: THU SH74/CB25 SAT 29(572) WK AGO 21(577) YR AGO 14(525) ** REVISION ** THU 99(436) ** REVISION ** WEEKLY CANADIAN CATTLE IMPORTS. FEEDERS SLAUGHTER S&H Week Ending: 02/04/17 2,378 5,424 Week Ending: 01/28/16 2,028 4,834 Change from prev week: +350 +590

DTN Chart Technical Points 02/17 16:30

DTN Chart Technical Points 02/17 16:30 DTN FUTURES 10 2/17/17 SLOW STOCHASTIC PRICES ARE DECIMAL MOVING AVERAGES RSI'S 5 Day 20 Day CONTRACT CLOSE 4-Day 9-Day 18-Day 45-Day 9Day 14Day 30Day %K %D %K %D CBTWT MAR 441.00 448.25 444.56 434.93 423.62 52.69 54.90 54.15 44 66 77 87 CBTWT MAY 455.50 462.13 457.75 448.14 436.66 53.96 55.87 54.70 48 69 78 87 KC WT MAR 456.25 462.19 456.53 446.47 435.18 56.39 57.78 56.35 54 75 83 85 KC WT MAY 469.25 475.06 469.31 459.14 447.26 56.86 58.22 56.68 55 76 84 86 MN WT MAR 546.25 558.19 561.94 559.54 554.68 34.04 40.98 48.13 18 43 39 46 MN WT MAY 554.50 562.13 563.14 558.65 550.78 42.03 47.48 52.02 28 53 64 75 CORN MAR 368.25 373.69 372.61 368.24 361.73 47.66 51.38 53.28 47 69 80 89 CORN MAY 375.50 381.06 380.08 375.65 368.68 47.42 51.40 53.43 47 70 81 90 CORN JUL 382.50 387.81 386.89 382.54 375.69 47.64 51.56 53.51 47 70 81 90 OATS MAR 256.75 254.25 254.69 254.14 242.61 57.82 58.23 59.07 45 37 44 52 OATS MAY 251.25 251.31 251.58 248.74 239.01 55.66 57.56 58.79 24 32 60 72 BEANS MAR1032.501045.631049.751043.671034.73 42.49 46.07 49.78 33 45 51 59 BEANS MAY1043.251056.441060.611054.011044.06 42.63 46.32 50.13 32 45 55 62 BEANS JUL1052.251065.001068.811061.921050.93 42.98 46.76 50.59 33 47 59 66 S MEAL MAR 339.60 342.00 340.98 338.93 330.12 50.90 53.21 54.53 49 61 54 58 S MEAL MAY 343.90 346.27 345.27 342.74 333.20 51.66 54.05 55.35 49 62 61 66 B OIL MAR 32.89 33.62 34.10 34.18 35.05 24.49 30.24 38.89 6 13 19 30 B OIL MAY 33.16 33.90 34.38 34.46 35.30 24.41 30.22 38.97 6 13 19 31 CATTLE FEB 117.93 117.15 117.00 117.08 117.12 55.72 54.20 54.88 60 51 34 31 CATTLE APR 114.93 113.88 114.14 115.02 115.53 51.08 49.83 51.99 51 39 19 17 FEEDER MAR 124.07 124.04 123.36 124.12 125.95 48.70 47.53 49.02 78 74 27 21 FEEDER APR 124.20 123.97 123.55 124.07 125.64 49.79 48.41 49.62 78 71 29 26 HOGS APR 70.78 70.67 70.90 70.08 68.85 54.31 55.38 56.58 43 45 63 68 HOGS MAY 75.70 75.47 75.42 74.60 73.70 57.83 57.53 56.88 55 59 77 77 COTTON MAR 73.48 75.13 75.43 75.35 73.25 35.34 43.42 50.51 12 34 61 70 COTTON MAY 75.52 76.88 76.89 76.40 73.91 42.55 49.58 54.45 19 45 76 82 RICE MAR 9.34 9.38 9.45 9.54 9.65 31.46 35.68 41.33 13 19 10 17 RICE MAY 9.57 9.62 9.69 9.80 9.90 29.92 34.61 40.91 14 18 9 16

DTN Closing Livestock Comment 02/17 16:46

DTN Closing Livestock Comment 02/17 16:46 Late-Week Short-Covering Sponsors Decent Meat Futures Gains The cattle complex closed significantly higher with nearby live contracts attracting the most buying interest. Lean hog issues also settled solidly higher, supported by short-covering and cash premiums.


 DTN Headline News


Mexico, Argentina Talk Corn


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- A key corporate leader in the grain trade told analysts this week he doesn't think Mexico would start heavily buying corn from South America simply because the U.S. offers a better deal.

Still, Mexican officials are starting to better gauge the possibility of buying more agricultural products from South America and Argentinian officials are encouraging those conversations.

Soren Schroder, chief executive officer for Bunge Limited, told analysts Wednesday in a quarterly earnings call that it would require a price shift in Brazil and Argentina to significantly change the market flow of exports. He noted, "the extent to which there is any switching that takes place to South America, frankly, it all depends on price. And at the moment, it doesn't work."

Concerns were raised in the corn market earlier this week when a Mexican senator said he would introduce legislation to encourage or require Mexico to buy corn from Brazil or Argentina rather than the U.S. Mexico is the largest export market for U.S. corn, buying 13.3 million metric tons in 2015-16 at roughly $2.5 billion in value. Since the new marketing year began in September, the U.S. has shipped 5 mmt to Mexico, up 8% from a year earlier.

Conflicts with Mexico began not long after President Donald Trump was sworn-in and signed the executive order to build a wall on the southern border. He further raised tensions with the suggestion of creating a border adjustment tax on imports from Mexico and other countries to deal with the trade imbalance. The border adjustment tax is getting more attention as lawmakers in Congress work on a broader tax reform package, but it is unclear whether such a tax would actually come to fruition. Retailers and other importers oppose such a tax.

Still, Mexican officials are looking to strengthen ties to South America. Reuters reported Mexico's ag minister is now planning a trip to Argentina and Brazil within the next month to look at the possibility of buying corn.

"It's not a trip to open relationships or of goodwill, it's a trip to do deals," Mexico's Ag Minister, Jose Calzado, told Reuters. "We are very interested in our producers seeing the opportunity to import grains from Argentina, and yesterday I spoke to the Brazilian ambassador."

Argentina's secretary of agro-industry also told Reuters and other news agencies this week that her country would certainly like to export more grain to Mexico. Coupled with that, the presidents of Brazil and Argentine also have made it clear they would like to increase trade with Mexico as well.

"Corn obviously is a sector that is on the list to have greater access and to have a slightly larger space for Argentina, beyond the presence of the United States," said Marisa Bircher, Argentina's Secretary of Agroindustrial Markets.

Bunge's Schroder said underlying demand for both milling and corn products in Mexico is still strong. Further, the U.S. continues to have a price advantage over South America sending corn to Mexico and that price remains the dominant factor in trade. "We don't really see any change in trade flows. North America, both in terms of corn and soybeans are obviously more than well supplied, with mounting surpluses, so that will remain the cheapest origin for most of the flows of corn, beans, and also wheat, assuming that the flows are normal. So at this point, I wouldn't see any dramatic change."

DTN Analyst Todd Hultman agreed, citing that the U.S. has about a 30-cents-a-bushel advantage in cost compared to Brazil right now.

"I realize there have been concerns this week about the possibility of Mexico taking its corn business elsewhere, most likely to Brazil and Argentina in an act of countering possible new tariffs from the Trump administration," Hultman said. "Of course, we do not know yet what specific proposals the White House has in mind yet, but as the situation currently stands, there is little danger of Mexico not buying U.S. corn."

USDA's Foreign Agricultural Service circular on world markets and trade for February indicated the U.S. corn was averaging $168 a ton while Argentine quotes were around $182 a ton. Moving into March and beyond, however, FAS suggested, "Argentine forward prices, March onward, are competitive relative to the United States."

Argentina's corn production this year, pegged by USDA at 36.5 million metric tons, will start to hit the world markets in April or May. Brazil is projected to produce about 86.5 million metric tons, as both countries are expecting larger crops.

Brazil and Argentina also will have a larger and quicker footprint on the world soybean market. "As we speak, that transition is already ongoing," Schroder said.

Chris Clayton can be reached at chris.clayton@dtn.com\

Follow him on Twitter @ChrisClaytonDTN


Farmer Stress Rising


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Sen. Cory Gardner of Colorado was talking about the struggles of health care in rural Colorado last week when he noted he had met in January with the director of the Colorado Department of Agriculture, who told the senator that the ag department was looking to reestablish a farmer suicide hotline.

"Because the conditions in farming are so bad right now in Colorado that they wanted to get ahead of it before it got too bad," Gardner said. "That's a health care challenge we face in our communities."

A group of top economists told the House Agriculture Committee this week that the farm economy is bad, but not as bad as the 1980s. Still, the prolonged downturn in the ag economy -- moving into its fourth year -- is increasing stress on farmers who rely heavily on operating credit. Banks have tightened loan requirements, leading more farmers to rely on USDA loans. And roughly one-in-five farmers specializing in some key commodities and livestock now have debt-to-asset ratios that will make those more vulnerable to a financial crisis if prices continue to worsen for the crops and livestock they raise.

While it isn't quite like 1983, the level of stress and worry is growing out in the countryside. People who deal with some of the few rural hotlines out there are seeing the level of calls and emails picking up as well.

"There are some problems out there," said Margaret Van Ginkel, director of Iowa Concern Hotline at Iowa State University Extension. "It seems to be there are more problems with the bigger farmers. The issues are bigger and there's a lot of money involved."

In Colorado, Ben Rainbolt, executive director of the Rocky Mountain Farmers Union, said his board members began expressing some concern last summer when it became clear the economic condition for farmers wasn't going to be improving quickly. The group began putting together some resources on finances and family stress to provide farmers. RMFU began working with some Extension people at Colorado State University, as well as leaders from the Colorado Farm Bureau and the state department of agriculture.

"We're getting together in March to discuss how we can get these resources in the hands of people and maybe more on a subtle basis," Rainbolt said. "You know some of the nature of that kind of stress sometimes has to be handled subtly in small communities and small towns and farmers who are experiencing that kind of stress. Typically, a farmer's very proud and doesn't rely a lot on help."

Rainbolt said Rocky Mountain Farmers Union leaders also reached out to their counterparts in Nebraska, which has continued to maintain a farmer crisis hotline since the 1980s.

Rainbolt noted he was not aware on any specific incident that sparked the farmers union into action. "We're just worried. We don't want to have the problems we had in the 1980s and we want to get out in front of it."

Iowa Concern Hotline was started in 1985 during the farm crisis and has evolved over time to focus on broader concerns. The hotline also offers legal counseling. Van Ginkel said the hotline calls have been largely quiet on the farmer side but seeing more activity. Van Ginkel noted calls and inquiries are about 10% to 15% higher than in the past.

"We're hearing there are problems with landlords and tenants who haven't signed leases and March is almost here," she said. "They are trying to get them to lower the rent. Of course, some of the landlords are widowed women that rely on that income, too, and they don't understand why the renter is trying to lower the rent."

Van Ginkel said typical calls might involve multi-generation operations that have a lot at stake in changes to yearly farm income, or a spouse who wants to get the family out of farming. Then there are family conflicts over land. She also works with a group of stakeholders such as ag lenders, cooperatives and Extension staff who meet from time to time.

"Last week at the meeting, the tone was changing a little bit," she said. "Mediation has seen a big increase."

Another topic not discussed as much is that at least some farmers have less time to talk to peers about issues in the industry because they are relying more heavily on another job for family income, Van Ginkel said. Fewer guys have time for the traditional coffee talk.

Even before the current downturn, farmers were more prone to succumbing to mental stress on the job than other careers. A study released last summer by the Centers for Disease Control looking at suicide rates by professions in 20 states from 2000 to 2012 showed people working in farming, fishing and forestry had a suicide rate of 84.5 per 100,000 people, and hit a rate of 90.5 per 100,000 when just analyzing males. The suicide rates for people in farming, fishing and forestry was the highest of any profession by a wide margin, though the study did not offer any explanation as to why the suicide rate in agriculture was higher than other jobs. (http://dld.bz/…)

The 2008 farm bill included a program called the Farm & Ranch Stress Assistance Network, but the program was discretionary and never funded, so it never got off the ground. The program would have cost an estimated $17 million to $18 million to run, but it was dropped by Congress when lawmakers wrote the 2014 farm bill.

"I'd like to see it permanently put in place because we have to deal with suicide in the agricultural population, even in the good times," said Dr. Michael Rosmann, a psychologist from Harlan, Iowa. "We have to deal not only with the financial cycles, but there are other factors. One of them is that farming is so stressful and there are exposures that other occupations don't have."

Rosmann said he gets anywhere from three to 20 emails or phone calls a week from farmers or their family members around the country asking for information on farm counseling. Rosmann writes a syndicated column on rural issues and behavioral health.

"The story is financial uncertainty," Rosmann said. "There isn't any bright spot in agriculture in the moment, except for specialty areas such as organic production. For most everybody else, everything is either break even or a loss."

Rosmann also consults farm financial experts from time to time to hear more about the economic challenges from bankers. Rosmann also said farm mediators in states such as Minnesota and Wyoming are telling him more about farms that will need to foreclose or go through bankruptcy in the near future.

Right now, five states have rural hotlines. The Iowa Concern Hotline, 800-44-1985; Nebraska Rural Response Helpline, 800-464-0258; New York Farm Net, 800-547-3276; Vermont Farm First, 877-493-6216; and Wisconsin Farm Center, 800-942-2474.

"It is a good time for Colorado to set up a farm crisis hotline because there is a need for it and there is a risk of stress-related behavior problems," Rosmann said.

Chris Clayton can be reached at chris.clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN


Best Young Farmers/Ranchers-3

By Dan Miller
Progressive Farmer Senior Editor

By local acclaim, Arenzville is home to the world's best burgoo. It's a spicy and slow-cooked stew containing any number of meats and vegetables prepared by townspeople as they commemorate the town's founding in 1839. Adam and Breanna Winkelman often venture into the small west-central Illinois community for bowls of burgoo ladled from a line of steaming iron pots. "We like it," says Breanna, a schoolteacher raised on a farm not 3 miles from Adam, her husband of eight years and a fifth-generation farmer.

Adam is engaging, quick to smile, a man of good humor who declares his delight with a hearty laugh. "I enjoy waking up each morning and being able to farm," he says. "Being progressive, while holding onto traditional values is what inspires me." His management concept of farming also is a mix, slow-cooked.

Adam is building income streams from a blend of livestock, grain and trucking enterprises. "When done correctly, [they] complement each other," he says. "There is nothing more sustainable than feeding the grain we raise to livestock, and using their manure to raise the next crop."

Winkelman Farms is 700 acres of soybeans and 200-bushel corn drained by the Illinois River that forms the western boundary of Adam's home in Cass County. Supplementing 39 inches of annual precipitation, center pivots draw water from wells gushing forth at 1,000 gallons per minute, to irrigate 260 acres of sandy knobs. Adam's corn is fertilized by 1.8 million gallons of manure from the 11,000 market hogs and 12,000 feeder pigs he raises annually. He applies another million gallons to neighboring fields. Adam custom farms 160 acres -- plant, spray and harvest. Adam's beef feedlot produces 100 head of market cattle a year. It's an enterprise he plans to grow by two or three times over.


"There's not a lot of cattle still being finished in west-central Illinois," he says. "But with the ethanol plants coming on line in the past few years, there are more readily available feedstuffs we can use to be more competitive." Large, local supplies of gluten from those plants cut Adam's feed costs by $30 a head.

The Winkelman operation owns a fleet of seven semi-trucks. Drivers haul hogs from Adam's two hog barns to the processor in nearby Beardstown. The trucks bring gluten to his feedlot from ethanol plants in Decatur and Peoria, Illinois. Finished cattle go to a Tyson plant in Joslin, Illinois. Adam cuts his cattle transportation costs by $10 a head when his trucks return from Joslin with hogs bound for Beardstown.

"[I] continue to be amazed at how strategically Adam spends his money on his operation," says a neighbor. Adam carefully husbands his money, he says, noting Adam's truck lacks power windows. "I guarantee the money he saved went to a part of his operation where he knew it would provide him with a return."

For example, Adam purchased a Case-IH 305 Magnum last year. He'll use it to expand his custom manure handling business. The business expansion will pay for the tractor. The tractor became affordable because "the weakened ag economy has softened values on late-model equipment," Adam says.

A few years ago, Adam thought hard about adding two finishing buildings to his hog operation. Now, he thinks the better decision was to postpone construction.

"I was 25. Now I'm 32 and I don't know if that [hog expansion] makes sense [today]," he says. "Farms of all sizes can be successful; however, I want to be hands-on in every aspect of the operation as it grows. No one will ever do the job as good as you can do it yourself."

Farming across several soils -- prairie, upland and sand -- is demanding. "Growing corn in sand can be [especially] challenging in a continuous corn operation," he says. Yields vary up to 30 bushels within 100 yards, even in irrigated ground. Adam employs leaf tissue analysis -- it has helped him identify a need for boron in corn, for example. Side-by-side yield comparisons help him gauge the benefit of varying nutrient levels.

Adam plants a cereal rye cover crop to protect soils prone to erosion. The crop reduces wind erosion on the sandy fields and it reduces soil erosion on hillier ground. "With the use of cover crops and a minimum disturbance injector on my manure wagon, I'm able to control the soil in the fields," he explains.


The large supply of hog manure has eliminated Adam's need for commercial sources of phosphorus and potassium. He supplements the corn crop's nitrogen needs by sidedressing ammonia at a rate of 100 pounds per acre. Adam credits the manure for giving him a 10% to 15% yield bump in sand.

"With the manure and irrigation, we can raise as good of corn on sand as on our heavier, non-irrigated ground," he says. Yields typically hit 190 to 220 bushels per acre.

Adam's banker is an admirer of her client. "Adam responds to his [farming challenges] with extraordinary gusto, and delivers while sustaining a sensible and intelligent demeanor," says Noelle Flesner, agricultural loan officer from CNB Bank and Trust in Pittsfield, Illinois. "He has the ability to recognize and communicate his current and future needs which assist in maintaining a direct sightline to this goals. Producers such as Adam are what strengthens and enriches a rural community."


Editor's Note: This is the third of five profiles of our seventh class of DTN/The Progressive Farmer's America's Best Young Farmers and Ranchers. They embrace the future of agriculture and are developing the technical and managerial skills to build innovative and successful businesses. They are among the best of their generation.

Dan Miller can be reached at dan.miller@dtn.com


Farm Bill Hearing


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Economists painted a gray outlook for the farm economy and called for a stronger federal safety during a congressional hearing meant to set the stage for drafting a new farm bill.

Economists from USDA, the Kansas City Federal Reserve, Texas A&M and the University of Missouri all said farm finances look to dip in 2017 for the fourth consecutive year. Farmers are struggling, but not as bad as the 1980s yet and low prices are buoyed by higher yields.

Low interest rates and better-than-expected land values are also offsetting at least some of the concerns over higher debt-to-asset ratios.

The House and Senate Agriculture Committees are both ramping up hearings with the goal of getting a farm bill done by the Oct. 1, 2018. The Senate Agriculture Committee will hold a field hearing next week in Manhattan, Kansas.

In Washington, House Agriculture Committee leaders opened Wednesday's hearing by pointing out that the farm economy has slipped since the last farm bill was drafted. The 2014 farm bill also so far is projected to cost $100 billion less than initially scored, mainly due to fewer people enrolled in nutrition programs. That cost savings prompted Chairman Mike Conaway, R-Texas, to say lawmakers intend to start looking at the needs in rural America rather than just trying to hit a budget target.

"Because we were asked during the last Farm Bill -- when times were good -- to cut twice before measuring once, in the upcoming Farm Bill debate we will measure our requirements first and then determine what kind of a budget we will need to meet these needs," Conaway said.

Rep. Collin Peterson, D-Minn., ranking member of the House Agriculture Committee, reiterated Conaway's take of focusing on need over specific budget target. Peterson also said tremendous yield growth in and around his district have helped offset the low prices. "So we're not seeing the kind of pressure I expected we would be seeing at this point, but if these crop prices stay where they are at, and we get an average crop or a below average crop, we've got big problems," Peterson said.

Joe Outlaw, an economist at the Agricultural and Food Policy Center at Texas A&M University, broke down data on 100 "representative" crop and livestock farms in 29 states that he and others track the farms' cash flow and ability to maintain net worth or equity. An overwhelming majority of the crop farmers tracked by the food policy center are likely to face serious cash flow problems in 2017, barring a strong price rebound. Still, those grain farmers weren't as likely as other farmers to see large equity losses. "The cash flow situation is really bad, the equity situation isn't quite as bad," Outlaw said.

Outlaw noted crop insurance and commodity programs were helping farmers stay in business. The safety net has largely worked with the exception of cotton farmers. Still, Outlaw said farm programs will probably need to be increased. He noted that farm income has fallen $23.7 billion since the last farm bill was passed while commodity program payments have been $13.2 billion, or a little more than half of the loss in crop receipts. Thus, in no way are commodity payments making farmer whole, he said.

Despite complaints from farm-bill critics, Outlaw said farmers are going need more support if the current market conditions continue. "Not only are programs not too lucrative, but there is a growing need to provide additional funding as adverse economic conditions are expected to continue," Outlaw said.

Robert Johansson, chief economist for USDA, cited that farmers specializing heavily in certain commodities are seeing much higher debt-to-asset ratios. Close to 20% of farmers growing mainly wheat, cotton, poultry and hogs have debt-to-assets higher than 40%. These are the farmers most vulnerable at this point. Along with that, the Federal Reserve recently cited a decline in new farm loans near the end of 2016, likely due to some tighter lending standards, but farmers also are tightening their expenses for items such as machinery.

"Credit availability at commercial banks has tightened, though we've seen little increase in delinquencies," Johansson said.

Reiterating some of those points later, Scott Brown, an agricultural economist at the University of Missouri, cited that higher debt is hitting younger farmers harder than older ones. In Missouri, farmers age 35 to 44 saw debt-to-asset ratios double from 2012 to 2015.

Working capital for farmers also has decreased modestly each of the last three years and the rate in which farm loans are repaid has declined every quarter since mid-2013.

In helping younger farmers, Rep. Glenn Thompson, R-Pa., asked the economists how much a loan forgiveness program would help younger farmers. He's proposing such legislation for federal loans.


Brown stressed the Margin Protection Program has not worked for dairy farmers the way it was expected to do. Overall dairy income went from $24.3 billion in 2009 to $49.3 billion in 2014. Dairy income then fell to $34.2 billion in 2016. As dairy prices became volatile, farmers stopped signing up for the MPP program, then they got burned in 2016.

MPP was supposed to act as an insurance on production costs. It has an annual signup and different levels farmers can sign up for and pay a premium. However, the program is not paying out much indemnity so farmers have enrolled less.

Peterson noted dairy producers are expecting a change that is going to pay them significantly higher than the current safety net. Peterson indicated he didn't think that would happen. Further, if prices collapsed further, Peterson said farmers believe Congress would step into help.

"The dairy farmers I'm talking to think we're going to come in and bail them out," Peterson said. "And I don't see that happening so somewhere we have to fine-tune this thing to get people to participate."

Peterson suggested the one way to provide more insurance stability was to make it a five-year program for enrollment, much like commodity programs.


One of the key issues in the tax reform debate is the border adjustment tax that would impose a tariff on imports. Numbers floating around would tax imports anywhere from 20% to 35%. Rep. Bob Gibbs, R-Ohio, gauged the economists on the idea, and indicated he wasn't a fan of such a tax. "To trigger a trade war, that would be really devastating to American agriculture," Gibbs said. He added, "I think it's raising a lot of red flags with a lot of people."

Rep. Rick Crawford, R-Ark., brought up the proposal in Mexico to ban corn imports from the U.S. Crawford said he realized the idea was unrealistic, but wanted to know the impact. He added that Mexico also buys 25% of exported U.S. rice. "So while they made that statement on corn, I think it's safe to say they would extend that to the rice industry as well," Crawford said.

Pat Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, noted the importance of Mexico as an export market and the advantages of selling to a neighbor, but he added that corn is a global market. "If you just rearrange trade patterns, the effect on the corn market may not be all that huge," Westhoff said. "We sell products to countries that Brazil has formerly sold things to. The effect on the corn market is not as larger is if Mexico just disappeared from the corn market."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN


Trait Table Update


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- If you are planting Bt corn this year, there's a new tool to help you determine if your hybrids' traits are still effective against the pests they claim to control.

Each year, Michigan State University entomologist Chris DiFonzo produces the Handy Bt Trait Table, which lists which Bt corn hybrids contain which Bt proteins, as well as the insects they target. This year, a new column will also alert growers to traits that may be "locally or regionally ineffective" because of suspected or documented insect resistance.

DiFonzo's trait table has become an invaluable tool for growers, scientists and other members of the ag community as cross-licensing between companies has turned Bt corn products into a confusing tangle of traits and brand names. The table cuts through this marketing maze by showing how just nine Bt proteins are grouped and repackaged among corn hybrids from Dow AgroSciences, DuPont Pioneer, Monsanto, Syngenta and their licensees.

The new column of regionally ineffective traits was inspired by the collapse of Cry1F (the Herculex trait) against populations of the western bean cutworm in parts of the U.S. last year, including the Great Lake states and the eastern Cornbelt, DiFonzo said.

A group of entomologists from those states sent a letter in October to the Cry1F registrants asking them to remove the western bean cutworm from the Cry1F label, where it is listed as an insect the trait controls. (See the DTN story here: http://bit.ly/…)

DiFonzo at first considered simply removing western bean cutworm from the Handy Bt Trait Table's list of insects controlled by Cry1F, but ultimately decided to create a new column for all compromised Bt traits.

"I decided it still is useful for farmers to know what insects the trait is supposed to work against and what it is labeled for, since maybe there are still some [places] where they will see some efficacy or some suppression," she told DTN.

"This column is intended to alert growers and consultants to potential management problems, influence seed selection, and encourage field scouting," the introduction to the table adds.

The new column is based on scientific literature and communications reporting either documented resistance or suspected resistance based on field failures of the trait.

Here are the Bt traits that are currently compromised by documented or suspected resistance in Lepidoptera (moths and caterpillar) populations:

-- Cry1F (Herculex 1) -- fall armyworm, western bean cutworm and southwestern corn borer

-- Cry1Ab (YieldGard Corn Borer) -- corn earworm and sugarcane borer

-- Cry1A.105 x Cry2Ab2 (YieldGard VT Pro) -- corn earworm

-- Cry3Bb1 (YieldGard Rootworm) -- western corn rootworm

-- mCry3A (Agrisure RW) -- western corn rootworm

-- eCry3.1Ab (Agrisure Duracade) -- western corn rootworm

-- Cry34/35Ab1 (Herculex RW) -- western corn rootworm

Note that the western corn rootworm now has documented resistance to all four Bt proteins marketed for its control.

You can find the new 2017 Handy Bt Trait Table here: http://msuent.com. The table now covers all U.S. corn production, thanks to assistance from DiFonzo's co-authors, Texas A&M entomologist Pat Porter and Ohio State entomologist Kelley Tilmon. (Past versions used two tables, one for Southern growers and one for Midwestern growers.)

You can also see the studies DiFonzo used to identify which traits were compromised here: http://bit.ly/…. However, this is not a comprehensive list of all Bt trait failures, and growers should contact their local Extension office to see if insect populations in their region have shown resistance to the Bt traits listed as regionally ineffective in the new trait table.

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com.

Follow Emily Unglesbee on Twitter @Emily_Unglesbee


Best Young Farmers/Ranchers-2

By Dan Miller
Progressive Farmer Senior Editor

The day before Thanksgiving, Lamont Bridgeforth was plumbing 50 acres of drip tape. With that block completed, his family's Darden Bridgeforth and Sons operation would have 700 acres irrigated as insurance against Alabama's fierce summer when rain is as scarce as a cool breeze.

"We can grow a lot of things," Lamont says, of an area sometimes known as Alabama's Cereal Belt. "We just need to have a lot of water."

That was in short supply last fall as rain was non-existent. With no measureable precipitation in three months, much of the state's wheat crop was in jeopardy. Lamont had overseen planting half the family's 1,500-acre crop -- that portion sowed on faith and a climatological history suggesting rain just might fall before wheat planting season ended in December.

"It's pretty bad," Lamont said, picking at the dirt, seed and fertilizer while sitting in powder that passed for soil, as a planter rolled by cloaked in red dust. Another year was coming to a close on the Bridgeforth farm. Another, in a line of the farm's 146 years -- and one more challenged by rain, heat and the state's red, but fertile soils. The Bridgeforth operation is 9,300 acres, with headquarters in the small community of Tanner, south of the Tennessee border and near Huntsville, home to the U.S. Space and Rocket Center. The Bridgeforths are partners too, with a Virginia farmer in a custom operation set up in the Mississippi Delta.


Lamont, and his two cousins, Kyle and Carlton, stand at the cusp of a new farming generation. They will be the fifth generation in an historic family line traced back to pre-Civil War America and slavery.

Lamont's great-great-grandfather George Bridgeforth was born in 1838, a slave on the James Bridgeforth plantation in Tennessee. James Bridgeforth moved to Limestone County, Alabama, in 1855 and served in the Confederate army. George was his personal servant. After the war, and now a freedman, George Bridgeforth improbably became a landowner (likely with help of his former master who may have fronted some of his first land purchases from white owners). Less than one in 10 southern black farmers owned their own land by 1880, Nancy Anne Carden writes in her University of Tennessee master thesis, "A Study of Southern Black Landownership, 1865-1940: The Bridgeforth Family of Limestone County, Alabama." The vast majority of freed slaves became sharecroppers, many working the land of their former masters.

Through ensuing decades, George bought land individually and through black-owned land cooperatives, some he helped to create. By the time of his death in 1922, George Bridgeforth and his wife, Jennie would look out over a family farming business that had grown to hundreds of acres.

Lamont's father and uncle, Greg and Bill Bridgeforth, respectively, are the principle operators and the two youngest of eight sons born to Darden Bridgeforth. "With all the acres we farm, we still work it all together," Lamont says. "We decide what we're going to do, the crops we're going to plant." Decisions are made as a group, but Greg's and Bill's votes count for a bit more than the other three, Lamont admits.

Greg will be 62 this year. "He wants me to shadow him, to share what he knows with me," Lamont says. Formal succession planning has yet to begin.

"The biggest needs I think is that the senior partners help [develop] the readiness of the junior partners," says Lamont. "So when the time comes, Kyle [and Carlton] and I can keep moving without skipping a beat."


Lamont explains that his role in the farm is not specific. On the day of a visit, he was tackling a broken corn drier full of corn. "What we're trying to do is restructure so we have areas of specialization. In my case that would be spraying and planting," says Lamont, an Auburn University graduate with a degree in business administration.

Where cotton was once king, conservation programs and conservation tillage caused the Bridgeforth farm to add corn, soybeans, wheat and sorghum into their rotation. Canola was added about 10 years ago.

"Cotton does well in the hot weather," Lamont says. "But corn does well when it rains." Demand for corn is strong in Alabama with its abundance of broiler and egg operations.

Kyle and Lamont are working to upgrade their farming systems. For example, they're digitizing the farm's recordkeeping and management systems.

"We're trying to incorporate management software that will allow us to have a bird's eye view of our farm, on one page with work orders, cost of production, those types of things," Lamont says.

Labor management has gained Lamont's attention. Finding labor is a challenge. "It used to be you could pick up someone off the street. They had some experience, and you could teach them how to drive the tractor," Lamont says. "But things have gotten so advanced that you can't just put anyone on your equipment. They need to have some computer experience; so that presents a challenge finding new employees."


Hiring Millennials is an even newer wrinkle to the equation. You've got to understand their attitude toward work, Lamont says. "Sometimes they just want time off. They'll sacrifice the money," he says. "So, we don't want to give them money when it's really time they want."

Lamont sees some of the same tensions between himself and his father regarding labor. There are value differences between the generations, he says. The Bridgeforth farm likely survived its early days because of the ability to meet its work demands exclusively with family-supplied labor.

But time is money. "The larger your farm, time becomes more critical," Lamont says. So, he asks, "How do you know when we have enough people? How do you make the tradeoffs? Do I buy a truck or hire someone? You can put a load on five or six people when you need eight or nine, but they get burned out."

Also, the modern farm family may not, or perhaps is unwilling to, do it all for themselves. Lamont is a farmer. He is also a father.

"If we work 14 hours one day, dad would say that's a good day. I might say eight hours is a good day. But when you get home with all that daylight left, it just kills the older generation. But I want to be home for my children."

Dan Miller can be reached at dan.miller@dtn.com


Kub's Den


By Elaine Kub
DTN Contributing Analyst

"Precision agriculture" is a term that is more than just a buzzword, yet is less well-defined than any official field of study. The best definition I could find online put it this way, "managing crop production inputs on a site-specific basis to increase profits, reduce waste and maintain environmental quality."

That's pretty loose, as definitions go, and open to interpretation. Take the site-specific geographical portion out of the definition, and just about anything could be called a precision ag tool. A manufacturer could slap a "Precision Ag!" sticker on any grain auger or rock roller or scoop shovel, for that matter, and no one could really argue.

We could even go so far as to call marketing strategies part of "precision agriculture," as long as they were precise enough. In fact, that's exactly the case I'm going to make -- that farmers who value the ethos and philosophy of precision ag for their production decisions should also adopt that mindset when approaching their marketing decisions.

If we were talking about the field of microeconomics instead of the field of agronomy, the term would simply be called "Cost Allocation," the process of defining how input expenses accumulate on a PER UNIT basis. The precision agriculture philosophy suggests we should calculate an entire field's requirements by first knowing what each individual unit -- each individual seedling -- requires. Knowing that you want each individual corn seed to have 1.45 square feet of soil all to itself is more precise than saying you want 30,000 seeds per acre. Mathematically speaking, you could just dump all 30,000 seeds in a pile in the corner of the field and you would technically have 30,000 seeds per acre, but they would not be precisely distributed. Fortunately, technology exists to place seeds and other inputs precisely, allowing for better decision making and a more efficient use of resources.

The little things do add up, and ultimately, the dollar is the most interesting unit of measurement for all these decisions. Farming decisions can be either agronomic (grain production) or economic (grain marketing). Precise marketing decisions can use the same precision to assign cost allocation by unit, making sure decisions are justified and resources are efficiently used.

Let's tie agronomic and economic decisions together in a couple of examples. First: the classic precision ag investment of a planter with a vacuum seed-metering system, pulled by a tractor with an RTK auto-steering system. For the hundreds of thousands of dollars that such a rig would cost, what improvement in production can the farmer expect? More importantly, what improvement in ultimate revenue can he expect?

Researchers in southern Brazil last year released a fresh study* of randomized trials planted and grown in real-world conditions, that confirmed other university findings from the past decade about precision agriculture -- i.e. that more precise (less variable) seed placement improves plant health and ultimate grain yield. Use of precision planting technology reduced the within-row coefficient of variation by approximately 16 percentage points, and increased corn yield 12% to 17% (depending on the weather stress of a particular trial).

Well, a 15% yield improvement on 160 bushels per acre would be an extra 24 bpa. At $3.50 per bushel, those extra bushels would add an extra $84 of revenue per acre. A thousand acres of corn planted with a precision planter instead of a traditional planter, all other things being equal, would in theory provide an extra $84,000 of revenue to that corn farmer, going a pretty good ways toward paying for the equipment.

Or, because a 15% improvement in revenue from better yield is equivalent in dollar terms to a 15% improvement in revenue from better market prices, we could just say that using precision planting technology would be equivalent to getting an extra 50 cents per bushel. Allocating it back down to the most granular units, the individual plants, that's like getting an extra penny from every three corn plants in a field. Anyway, the lesson is that we should treat production decisions as seriously as we treat marketing decisions, and vice versa.

The little things add up, but the big things add up faster. Sweating over 250 pounds of nitrogen per acre versus 247.65 pounds of nitrogen per acre is perhaps possible with today's technology. However, when fertilizer accounts for only 15% of the total cost pool, and the land price or rent agreement accounts for 25 to 30% of the cost pool, then any adjustments you can make to that bigger line item will obviously affect profitability more efficiently. Negotiating rent prices or any other big-ticket input cost down by $10 per acre would be equivalent to getting an extra 535 individual corn plants producing grain on that acre, at equal yields and market prices.

As long as a farmer manages his projections and receipts on a per-unit basis, knowing his per-acre and sure, even his per-seedling costs and expected revenues, then he'll have the "precision" of information necessary to make optimal decisions ... and not just the agronomic decisions. The foundation of most grain marketing plans is knowing each farm's per-bushel breakeven cost, so that it can be compared to the present prices offered by the market. That's the most important Cost Allocation (a.k.a. Precision Marketing) task of all. I'm confident that many farmers could look at December corn futures near $4.00 per bushel and November soybean futures near $10.25 per bushel right now, and precisely pencil out a profitable 2017.

*Horbe, T. A. N., T. J. C. Amado, G. B. Reimche, R. A. Schwalbert, A. L. Santi, and C. Nienow. 2016. Optimization of Within-Row Plant Spacing Increases Nutritional Status and Corn Yield: A Comparative Study. Agron. J. 108:1962-1971.doi:10.2134/agronj2016.03.0156

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.



Biofuels' Economic Case


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- There remain many other unknowns as to what will become of the Renewable Fuel Standard with the U.S. Senate yet to confirm Scott Pruitt to head the U.S. Environmental Protection Agency.

Pruitt's confirmation vote is expected to come sometime likely Thursday or Friday.

Ethanol interest groups continue expressing confidence President Donald Trump will stand behind the RFS. Trump declared his support for biofuels during the presidential campaign and Pruitt has told various Midwestern lawmakers he would continue to implement the law as written.

"As written" is the key phrase. There has been a fair amount of rumbling in Congress about a need for RFS reform. The proposals range from limiting ethanol content in gasoline to 9.7%, to outright repeal.

Considering Trump's penchant for keeping jobs in America and the electoral support he saw from rural America, perhaps the biofuels industry's best tact is to continue to stress the economic importance of the policy.

Long-time ethanol industry consultant John Urbanchuk, managing partner, Agriculture and BioFuels Consulting, LLP, outlined in a recent study how the industry has driven the economy of the nation's largest ethanol-producing state, Iowa.

Even with industry uncertainty generated by inconsistencies in how the EPA implemented the RFS, Urbanchuk said Iowa biofuels in 2016 continued to be one of the state's most important economic engines.

The biofuels industry in Iowa accounts for about $4.7 billion, or about 3.5% of Iowa gross domestic product. It generates $2.3 billion of income for Iowa residents and supports more than 42,000 jobs -- or about 3% of total employment in the state.

"The ethanol industry provides a significant contribution to the Iowa economy, spending $6.5 billion on raw materials, other inputs, goods and services to produce more than 4 billion gallons of ethanol," the report said.

The majority of that spending is for corn and other grains used as feedstocks for ethanol, distillers' grains and refiners' corn oil. The report said the Iowa ethanol industry currently uses more than 1.4 billion bushels of corn, or 53% of the state's corn crop.

"At 2016 Iowa farm gate prices this amounts to $4.8 billion of revenue to Iowa corn farmers," the report said. "Reflecting lower prices, expenditures for feedstocks (corn) by Iowa ethanol producers fell 13.5% from 2015 levels."

In addition, the study found Iowa ethanol plants in 2016 produced an estimated 13 million tons of dried distillers' grains and 913 million pounds of industrial corn distillers' oil at a market value of about $1.8 billion.


The report said the ethanol and biodiesel industries have the "largest impact on agriculture" through the use of feedstocks produced by Iowa farmers, supporting more than 6,500 direct farm and farm-related jobs.

"Most of the agriculture jobs supported by the ethanol industry are farm workers and laborers associated with grain production," the report said.

"However, a wide range of jobs in support activities related to crop production ranging from farm managers and bookkeepers to farm equipment operators are supported by ethanol production ... The indirect and induced jobs supported by the agriculture output used by renewable fuels amount to an additional 14,500 jobs throughout the entire Iowa economy for a total impact from agriculture of 21,100 jobs."

The U.S. ethanol industry generated record production in 2016, expanding beyond 2015 production by 3.5%. The study said last year's record corn crop "pushed feedstock prices lower throughout the year to the benefit of ethanol producers."

Iowa State University reported that after a slow start to 2016, Iowa dry mill ethanol plant profits recovered in the second half of the year to post small increases above 2015.

"Iowa's ethanol industry posted a 1.5% increase in output during 2016, with the state's 43 operating ethanol plants producing at an annual rate of nearly 4.1 billion gallons," the report said.

"Iowa continued to lead the nation in ethanol production accounting for 27% of U.S. output. Iowa also is the nation's leading biodiesel producer. According to the Iowa Renewable Fuels Association, Iowa's nine operating biodiesel plants produced 297 million gallons of biodiesel in 2016, up 22.7% over 2015 levels."


Iowa did not see the normal economic expansion from the construction of ethanol and biodiesel plants because EPA dropped the renewable volume obligation for 2016 below statute, the analysis noted.

"Farmers have continued their historic trend of producing more output with fewer inputs on fewer acres. Between 2005 and 2013, increases in ethanol production utilized much of the increased corn production, resulting in robust farm gate prices and record farm income. However subsequent increases in corn production outstripped modest growth in ethanol production and declines in feed and export demand so that ending stocks of corn grew and pushed prices down significantly."

When it comes to corn ethanol, the current RFS provides little support for future expansion. The law caps corn ethanol production at 15 billion gallons.

Talk of reform to the law could focus on providing a spark for the development of commercial cellulosic ethanol and advanced biofuels production. The RFS as originally written calls for 36 billion gallons of total biofuels produced by 2022 -- a level unlikely to be achieved in the next five years.

On a global scale, a recent study by Lux Research points to a likely expansion of advanced biofuels production in the next five years.

Lux Research used a database of about 2,000 facilities from nearly 1,500 companies in 90 countries with nameplate capacity data through 2022.

Based on that information the biofuels industry at about a 2.2% clip worldwide by 2022.

First-generation biofuels, which hold a 91.5% market share, will continue to carry the day but is expected to lose nearly 6% of its market share, "as advanced biofuels see rapid growth, nearly doubling capacity to 9.6 billion gallons," the report said.

Lux also said first-generation biodiesel production worldwide would begin to fade as second-generation biodiesel production increases.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow me on Twitter @toddneeleyDTN


EPA Responds

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) - In a point-by-point answer to a number of plaintiffs who filed suit challenging how the Renewable Fuel Standard is implemented, attorneys for the U.S. Environmental Protection Agency contend in a legal brief filed on Tuesday the agency followed the law.

Ahead of oral arguments scheduled for April 24 in the U.S. Court of Appeals for the District of Columbia Circuit, the 165-page brief outlines the agency's defense on a number of fronts. That defense includes the agency's reasoning for denying a petition to change the point of obligation in the RFS, the setting of advanced biofuels volumes for 2017-18, and a number of issues raised by biofuels, agriculture and petroleum interest groups alike.

The agency said in its brief the annual consideration of the point of obligation would be "inconsistent" with the structure of the RFS program.

"Moreover, the (Clean Air Act) act must be read in light of the entire text, structure, and purpose of the statute. Here, to read the act in a manner that requires annual reconsideration of the point of obligation would undermine regulatory certainty and impair the objectives of the RFS program," EPA said.

"As EPA has explained time and again in its annual renewable fuel standard rulemakings, this increased use of renewable fuels over time requires private parties to invest in production facilities and infrastructure to accommodate such fuels. Annual reconsideration of the definition of obligated parties would reduce the regulatory certainty required for private parties to plan for growth."

EPA said it has discretion to "determine when and how" to designate obligated parties.

In recent months, EPA rejected a petition from a number of petroleum interests to change the point of obligation in the RFS from refiners and importers of gasoline and diesel, to ethanol blenders.

The claim is that obligating blenders would spread compliance costs throughout the renewable identification number, or RIN, market. EPA opposed the switch because the agency claims it would make the law more complex by expanding the number of companies required to comply from hundreds to thousands.

The agency pointed to a previous decision by the DC court to reject a point-of-obligation challenge in 2013.

Though Congress may at some point consider changing the RFS, the lawsuit originally filed by Americans for Clean Energy attempts to force the agency to apply the law as the groups believe it was intended.

The group argued in a brief filed at the end of January that the EPA has no statutory basis to control or limit the growth of biofuels. Joining the group is the American Coalition for Ethanol, Biotechnology Innovation Organization, Growth Energy, National Corn Growers Association, National Sorghum Producers, Renewable Fuels Association and the National Farmers Union.

The EPA has faced a wide array of criticism for missing statutory deadlines and about the methods used in setting biofuel volumes.

Monroe Energy LLC, an obligated party in the RFS, in two separate briefs challenged EPA's methods for determining renewable volume obligations on cellulosic ethanol and biomass-based diesel. In addition, Monroe argues the agency did not follow the law by rejecting a petition to change the point of obligation in the RFS. Monroe asks the court to essentially wipe out renewable volume obligations set for a number of years from 2014 to 2017.


In a separate brief filed in January, the petroleum groups challenge EPA's methodology for determining cellulosic biofuel and biomass-based diesel volumes, in particular focusing on 2016.

That brief said EPA has "consistently overestimated" cellulosic production. In 2016, in particular, the agency estimated liquid-cellulosic production would be 10 times greater than in previous years.

In its reply filed this week, EPA said it used cellulosic ethanol companies' own anticipated start-up dates as one element of setting the volumes. This was done, the agency said, to "derive the high end of the production range for facilities expected to generate RINs in 2016 that had not yet achieved consistent commercial-scale production."

However, the agency said this week it also considered the "low-end of the ranges (which were sometimes zero). EPA said those ranges were then aggregated with the ranges of similar facilities.

"Petitioners seem to suggest that EPA should assume that no new liquid biofuel facility will start up in 2016, despite ... evidence that the industry is growing," EPA said this week. "This would improperly produce a significant under-estimation rather than an outcome-neutral projection."


The National Biodiesel Board has challenged EPA's method used in setting biomass-based biodiesel volumes in 2017 and 2018.

Although the industry was poised to produce about 2.6 billion gallons in 2016, the EPA went with its original proposal of 2 billion gallons for biomass-based biodiesel in 2017 and 2.1 billion gallons in 2018.

In the brief this week, the agency said it followed the statute.

"Despite this robust and reasonable analysis, NBB challenges EPA's decision to lower the volumes of advanced biofuel under the cellulosic waiver provision," EPA said in its brief this week.

"In essence, NBB's challenge to EPA's use of the cellulosic waiver provision is grounded in the false premise that EPA's exercise of its discretion is constrained by other waiver provisions in the statute or limited in other specific ways ... NBB's argument that EPA's discretion is constrained in particular ways is foreclosed by clear precedent."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN


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