Volume 21 Issue 3 May 2011

OFFICIAL PUBLICATION OF CROP QUEST AGRONOMIC SERVICES, INC.

Ethanol Production Helps Keep Corn Prices Strong

The driving question for farmers right now is: How long will corn prices stay high? And, Will corn prices stay high enough to offset the skyrocketing cost of production? Whether corn prices impact ethanol production or ethanol production impacts corn prices is an ongoing debate. However, it is clear that increasing demand for alternative fuels and projected $5 per gallon gasoline prices have pushed corn prices up globally. The global demand for corn - for ethanol, livestock feed and human consumption - combined with poor harvest in many areas of the world have pushed corn stocks to near record lows. Corn stocks in all positions at the end of 2010 stood at 6.52 billion bushels, below what traders expected. To keep stocks at current levels, corn producers will need to average 160 bushels per acre, if they plant 92.2 million acres. According to veteran commodities marketer, Mick Lewis, President, Ft. Lewis, Inc., in Dodge City, KS, corn is a solid cropping choice for this year. When you contract 4.5 billion bushels of corn to ethanol production out of the 13+ billion bushels were projecting to grow in 2011, its a solid market driver. However, just like all things that look too good to be true, the ethanol market has its risks. Lewis adds, The big risk farmers face is a downturn in the economy due to high fuel and food prices. We could see an economic downturn later in the year like we saw in 2008. The problem we saw there and could possibly see in 2011 was that the price for corn dropped a lot faster than the input costs to raise the crop did. If the price of crude oil suddenly drops, the higher cost of ethanol production will come into play and will hurt corn prices. For that exact reason Lewis is working with producers to buy fuel and fertilizer for the next three years right now. Were doing this because we are expecting the worst, but hoping for the best. However, we feel this is a solid move to assure future profitability. Troy Dumler, a Kansas State University economist located in southwest Kansas, says there is no doubt the combination of ethanol and high gasoline prices has been instrumental in pushing corn prices up and keeping them up going into the 2011 season. Corn acres were up last year, and I expect more acreage this year. How much of an impact ethanol demand will have on increasing corn acreage is open for debate, but when you are using 35%- 40% of the total crop for ethanol, clearly there is an influence on price. If ethanol wasnt a factor and we produced the same amount of corn we produced the past 3-4 years, prices would be at historic lows, or around $2.00- $2.50 a bushel, Dumler contends. The rate of increase in ethanol production has slowed in recent years in response to high corn and grain prices over the past two to three years. I dont really see much expansion in ethanol production largely because of uncertainty surrounding grain prices. The other determining factor is oil prices. These prices will determine overall ethanol profitability. The price of the end product will dictate how much ethanol producers can spend on corn and remain profitable, Dumler says. Can I say with any degree of certainty that ethanol will remain competitive with gasoline in either the near or distant future? Id have to answer, no, because there are just too many factors involved and too much volatility on the side of both gasoline and ethanol prices, he says. If gasoline prices continue to increase, Dumler says he expects consumers will do the same thing they did last time prices jumped to $4 per gallon they will cut consumption. If that happens, both ethanol and
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C C o o p QQ u e s t P P e s s p e c i v v e s 1 1 rr p uest errpectti es

2011 Cotton Demands Careful Farm Planning

Cotton prices are high, acreage is up, seed may be scarce and the King of Crops is expanding outside its traditional boundaries. Mark Hatley, a Crop Quest agronomist in Dumas, TX, says intentions are high for planting more cotton, but Mother Nature isnt cooperating. We are really dry and have very low soil moisture. If weather patterns stay dry, I dont know whether we will plant as much as some people think, Hatley says. A big issue in west Texas and across the Cotton Belt is the availability of seed not so much the overall supply, but the supply of specific varieties. The end result is many growers are going to be planting varieties with which they have no experience growing. Having to go to the second, third or fourth choice of cotton varieties can leave a grower not knowing exactly what to expect in terms of water utilization and susceptibility to a number of stress-related problems. Finding early maturing varieties with the growth characteristics and yield potential has been a problem. Its going to be critical for us to properly manage these unfamiliar varieties, Hatley says. We can manage earliness by limiting water, increasing water, or with growth regulators. Knowing what youre doing with these different varieties is going to be a challenge for some growers in west Texas, Hatley stresses. We dont have a long growing season here, and its going to be critical that growers stay on top of things throughout the season to be sure they can get the crop in and get it stripped on time, the Crop Quest agronomist concludes. Its also going to be critical to keep weed competition down, he adds. On our irrigated cotton, we are doing a lot of pre-watering to get ready for pre-plant herbicides. By the first of May, we will be planting cotton if we can keep fields clear of weeds and get enough subsoil moisture to plant. "As long as we utilize these herbicides well ahead of planting, the herbicides of choice are 2,4-D and glyphosate. So far, we havent seen much resistance to glyphosate, but we know its coming," Hatley says. How much cotton will be planted in 2011 is still just a guess. The USDA Crop Planting Intention Survey released March 31, called for 12.6 million acres. Cotton leaders are quietly projecting more than 13 million acres across the cotton belt. This has led Oklahoma, Crop Quest Agronomist Howard Bartel to tell his growers, If youre not absolutely sure you have the pickers lined up, dont plant the crop. If we plant as much cotton as growers intend to plant, getting it out of the field on time and finding a place to put it are going to be important concerns, Bartel says. The seed issue is also a problem in Oklahoma. I urged all my growers to buy their seed back in December. Those who waited until January or February found supplies picked over, and those who waited until the last minute may not find seed of any variety. Those who bought early will be OK, if what they ordered gets delivered. Those who waited may get seed they have little or no experience growing, Bartel notes. Bartel works out of Weatherford, OK, which is in Mark Hatley the west central part of the state. If they get enough moisture to plant cotton, they are looking at a 25% increase in dryland acreage and as much as 50% increase on irrigated cotton. Im expecting to see a lot of cotton planted double crop behind barley and wheat under pivot. You better manage it aggressively and you better know what youre doing, or you might not have a crop to harvest, Bartel cautions. Even with good management, sometimes planting cotton in a double crop situation comes down to, ' How lucky do you feel?' he adds. We really need our growers to go into the planting season with a clean field. We have a couple of weeds that are tolerant to glyphosate, so we need to manage these weeds from that standpoint. More importantly we need to keep weed competition down to keep yields up, so farmers can capitalize on the high prices they can get for cotton, Bartel explains. The veteran Crop Quest agronomist says he is a stickler for early season insect control. Between emergence of cotton and match-head square, you can be sure Im going to be encouraging my growers to make multiple applications for early season insect management, Bartel states. I want to get early season fruit set, load that plant up early, and let it go, he says. "Keeping cotton Howard Bartel weed-free and insect-free are critical issues in getting the crop up and growing quickly, he adds. This will be a year in which growers will need to plan ahead before planting their cotton crop. A good consultant, with experience growing cotton, is clearly going to be a major asset for the 2011 cropping season.

gasoline prices will be impacted, he adds. From the farmers decision-making perspective, I think the best route to take is to keep track of current market prices and what expectations are heading into the next year. The market is still going to play the critical role, not whether ethanol blender credits are in place or not. Going into the 2011 growing season, the ethanol industry, especially in the U.S. appears to be on a winning streak. In the first quarter of 2011, the EPA just announced a decision that allows for the expanded use of E15 gasoline (gasoline blended with up to 15% ethanol). With this ruling, the EPA has effectively expanded the size of the market for ethanol-blended gasoline by allow2 Crop Quest Perspectives

Ethanol Production

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ing the use of E15 in cars manufactured after 2001. According to many industry experts, ethanol production at 2011 levels puts production very near maximum capacity. Most ethanol plants are running full out and much of the commercially viable idle capacity that dates back to 2008 is back on line. The K-State ag economist says ethanol may play a role in a farmers decision on whether to plant corn, but not the only role. We are in such tight supply for several commodities right now not just corn. It will be a host of factors that will likely influence what farmers plant, Dumler notes. If U.S. farmers plant the 92.2 million acres the USDA estimates in their Planting Intentions Survey and growers have a good year yieldwise, that wont make much of an impact on carryover stocks of corn. There is demand for cotton and soybeans, which also have tight supplies globally, and that bodes well for continued high corn prices, Dumler concludes.
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Harvest:
Do It Yourself or Hire Custom Cutters?
With commodity prices near record highs, many crops in 2011 should be more valuable than in recent years. Making sure you get them out of the fields as efficiently and timely as possible can be a headache especially when other critical management steps are ongoing like irrigating, spraying weeds and other fieldwork that needs to be done. The question then is, do I harvest the crop myself, or do I hire it done? Crop Quest Agronomist Dwight Koops says some growers like to harvest their own crop because they have control over when their crop is harvested. For others, cost and availability of custom cutters is an issue. If a farmer has always had his crop custom cut and does not own harvest equipment, I would encourage him to continue to use a custom harvester, Koops notes. A producer needs to weigh the cost of purchasing and maintaining expensive equipment and manpower needs against hiring the crop cut, he adds. Kansas State University Ag Economist Kevin Dhuyvetter cautions farmers to be aware of the differences in buying, leasing and renting combines when calculating whether to use their own harvest equipment versus custom combining. Cost for custom combining of wheat for 2011 is expected to go up due to higher fuel prices. Dhuyvetter says, Custom harvest rates tend to have a fixed rate per acre and an extra charge per bushel for yields above some fixed level. It also includes a hauling charge per bushel. These custom harvesting rates are projected to be up about 9% compared to 2010. Of course, farmers that harvest their own crops will also have highers costs, he points out. These projections were made back in January, based on our best estimates of what 2011 fuel prices would be at harvest time, he adds. Subsequently, he has built an economic cost calculator that allows producers to enter their fuel prices and thus modify the January estimates. The calculator can be found at: http://www.agmanager.info/farmmgt/machinery/Tools/ CustomRates.swf. RENTING COMBINES AS AN OPTION Mark Gabrick, Director of Marketing for Machinerylink in Kansas City, MO, says growers need an option to leaving a piece of expensive equipment sitting in the farm yard for most of the year. His company provides wheat and grain harvest equipment to both farmers and custom cutters. In 10 years of business, Gabrick says time is always an issue, and he adds they have never missed a deadline on delivering a combine when its needed. The whole concept of Machinerylink is framed around the combine being one of the most expensive and least utilized pieces of equipment on the farm. We give growers access to the latest harvest technology without investing in a $300,000 to $400,000 piece of equipment that wont be used 10 to 11 months a year, Gabrick explains. COST ALWAYS A FACTOR "The growers can have full freedom of operating the combine however they like. Typically, a thousand acre wheat operation would rent a combine for 15 days, and they can use the equipment however they chose during that time frame. If it takes longer, there is a day-to-day rate that will apply," Gabrick explains. "The grower can do things pretty much on his schedule and not worry about the cost in either money or time to winterize, store, maintain, repair or deal with the year-around headaches of owning a combine," he stresses. Often the company meets with custom cutters over the winter and they develop a use plan. The custom cutters typically know about how many acres they will cut and a contract is made for the equipment needed. If the custom cutter picks up a last minute customer, they can add equipment as needed. USED COMBINES AS AN OPTION Depending on the size of the operation, if you can buy a used combine for a reasonable price and you have the labor to harvest your own crop, maybe its a worthwhile investment. On the other hand, buying new equipment is not cheap, and its going to sit around the farm unused for most of the year, Koops states. All of those costs need to be evaluated to decide if it is a good investment. LABOR CAN BE AN ISSUE Finding and managing labor is often difficult and almost always cuts into a farmers time, usually when multiple crops need attention. Tying up all or part of that labor is a big factor in whether to cut the crop yourself or hire somebody to harvest it for you, Koops adds. At the end of the day, whether to have your wheat crop custom combined or invest in the equipment to do it yourself comes down to some fairly basic economic considerations. While that might sound obvious, I have seen folks compare the cost of renting a combine per acre with the cost of hiring a custom harvester and obviously it will be less, but that doesnt necessarily mean it is the most economical when all costs are accounted for, Dhuyvetter stresses. Bottom line, make sure you are comparing apples-to-apples as you consider your alternatives. TIMING IS A CRITICAL FACTOR Timing is a critical issue with wheat, because when its ready to be cut, it is about the same time a farmer is irrigating summer crops, side-dressing corn, and maintaining fallow ground. A big part of how well a farmer is satisfied with a custom cutter often is centered on whether the cutter can get there when the farmer needs him there, Koops notes. Timing, labor and the economics of owning equipment are the major deciding factors when choosing to do your own harvesting or hiring custom cutters for the job.

Crop Quest Perspectives

We are approaching the time of year when postemerge herbicide treatments are applied to our row crop fields. We are all aware that resistance is a growing issue in weed control. Resistance is a problem not confined to just one specific chemical, or mode of action. There are many confirmed cases of herbicide resistance for numerous chemicals, and resistance is possible with any herbicide or mode of action if not managed properly. Over use is probably the main culprit for building resistance. Sub-lethal doses and applying a single mode of action are other large contributing factors to building resistance. We have control over all these factors, and it is in our best interest to monitor and manage the use of all available herbicide choices.
Dwight Koops- Regional Vice President

Mix Those Modes!

As you choose the best program to control weeds in your fields this season, follow a few simple guidelines: 1) Always have at least two compatible modes of action in the tank. 2) Remember, Dose Kills, so use proper rates. 3) Look at historical records and avoid using the same products on the same fields year after year. 4) Use proper adjuvants, additives and carriers for good coverage and enhanced efficacy. The same guidelines should be followed when treating insect pests. Insects can become resistant to pesticides just as weeds become resistant to herbicides. Consult with your Crop Quest Agronomist for assistance in making the best pesticide choice for your fields this summer and reap the benefits of being good stewards of the products available.

CROP QUEST WORKING FOR YOU

Ron and Mary O'Hanlon with U.S. Congressman Tim Huelskamp (center), First District Kansas, in Washington, D.C. discussing ag issues that are a concern to our farmers.
Mission Statement

Crop Quest is an employee-owned company dedicated to providing the highest quality agricultural services for each customer. The quest of our network of professionals is to practice integrity and innovation to ensure our services are economically and environmentally sound.

Crop Quest Agronomic Services, Inc. Main Office: Phone 620.225.2233 Fax 620.225.3199 Internet: www.cropquest.com cqoffice@cropquest.com

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Crop Quest Board of Directors

President: Director: Director: Director: Director: Director: Ron OHanlon Jim Gleason Dwight Koops Cort Minor Chris McInteer Rob Benyshek