Corn

If you have bought feed in the last month or have paid close attention to your grocery bill, you have noticed a significant increase in cost.  In response to the drought of 2012 and the lowest projected corn yield in 17 years, the price of corn has risen to all time record highs. Given that the economic role of high prices is to ration demand, the question facing stakeholders in the grain industry (speculators and commercial interests) is whether the current price of corn is high enough to have accomplished that task? That is, has the recent escalation of corn prices been adequate to curb the quantity demanded down to match expected levels of supply? Or can we expect prices to go even higher because use has not been reduced enough? This paper examines the supply/demand balance of the U.S. corn crop in light of the 2012 drought and a look at each of USDA’s major corn use categories.

Drought

Since the beginning of May, as drought conditions have worsened across the Corn Belt, USDA’s estimate of 2012 corn production has fallen from 14.790 billion bushels to 10.779 billion, the smallest crop since 2006.  The national average corn yield has fallen from a projected 166.0 bushels per acre in May to 123.4 bushels per acre. The last time corn yields were this low was the 113.5 bushel per acre average in 1995. In response, the monthly average of the nearby futures price for corn has risen from $6.01 per bushel in May to $8.02 thus far in August, a 33 percent increase.

Exports

The projected corn use cuts USDA made in each of the categories it uses to monitor corn consumption vary.  The category with the greatest elasticity of demand is exports. The own price elasticity of demand measures the quantity response for a given price change. More elastic demand means that quantity changes more for a given price change. Typically, the quantity exported is more responsive to price than other uses of corn. While the United States is the largest exporter of corn in the world at about 45 percent, its market share of the world corn market is on the decline, down from over 80 percent in the mid-1990s. USDA has lowered its estimate of U.S. corn exports from 1.9 billion bushels in May down to 1.3 billion bushels, a 33 percent decrease. In response to the high U.S. price of corn, foreign corn users will certainly see lower corn use estimates of their own, seek corn supplies from other exporters, and substitute other grains for corn where possible. Another important factor in export projections is the exchange rate of the dollar in world currency markets. A stronger dollar makes our export products more expensive in world markets while a weaker dollar makes U.S. exports more affordable. With the financial and economic instability in Europe, the dollar has, of late, been relatively strong. In addition to the effect of the drought on yields, quality may have also been affected. That may leave even smaller supplies of export quality corn.

Feed Use and Residual

USDA has cut estimated feed use for 2012/2013 from 5.450 billion bushels in May to 4.075 billion bushels, a 25 percent reduction. Since the biofuel era began in 2007, the United States has seen a contraction of its livestock sector. As measured by grain consuming animal units, this number peaked in 2007 at 95.118 million head.  The estimate for 2012 is 92.931 million, down 2.3 percent from 2007. Perhaps more importantly and with longer range implications, the amount of energy feed consumed per grain consuming animal unit is on the decline. As the livestock industry has increased efficiency and made feed substitutions where it can, energy feed per grain consuming animal unit is down.  This number includes distillers grains added back to feed use.

Short term livestock adjustments triggered by high feed costs and reduced profitability have taken several forms over the last few weeks. Dairy cow slaughter has increased sharply over the last month, with weekly slaughter 13 percent over the same period last year.  Weekly dairy cow slaughter is the largest for late July-early August since 1996. Sow slaughter has increased 6 percent from year ago levels over the last month.  Adjustment in livestock markets also takes the form of lower prices for feeder weight animals. Feeder pig prices have declined 60 percent in over the last 2 months, while feeder and stocker calves are down more than 20 percent in the Southern Plains.

Food, Seed, and Industrial Use (Ethanol)

Corn for fuel use is now projected at 4.5 billion bushels in 2012/2013, down from 5.0 billion bushels in May (-10 percent). High corn prices have forced the closure of several corn ethanol plants around the country and ethanol blenders can use credits from ethanol use in previous years to offset some of the current blending requirements.  Ethanol use in 2012 is running below that of 2010 and 2011 and ethanol stocks above those same time periods. The 2012 monthly ethanol stocks to use ratio is above last year by about 6 percent.  Food use is the smallest and most price inelastic of all corn consumption categories. For the last five years food use has ranged from a high of 1.407 billion bushels to a low of 1.276 billion bushels, a range of 131 million bushels. For 2012/2013, USDA cut food use from 1.425 billion bushels in May to 1.350 billion bushels, a 75 million bushel, or 5 percent, decrease.

Constraints to Adjustment

The ability of businesses and people to adjust and the speed of adjustment to higher prices are larger in the longer run. In economic terms, the short run (a few months) is more price inelastic than the longer run that allows people more time to adjust. Given more time, greater adjustments to high prices can be made. Some constraints that slow the short run adjustment in corn use include the industry structure of corn users, the financial capacity of the industry players, the ability to adjust refinery gasoline blends, the ability to reduce animal breeding schedules and finished weights, contracts for production delivery that are already in place running well into next year, and the reaction of consumers to higher prices for finished products made with corn.

Summary

While this paper has focused on quantity demand adjustments by users, the other market role of high prices is to increase production. It is likely that the December 2013 futures corn price of $6.55 per bushel (as of this writing) will cause more acres to be planted in 2013 than the 96.4 million estimated planted acres in 2012.  It will encourage more corn acres to be planted in South America, as well. And it might buy more acres into other feed grains. Combined with changes in corn use and efficiencies forced on users by high prices that are slow to change back, increased future production is very likely to have a larger negative effect on corn prices in the future.  Based on USDA’s current use projections, it appears high corn prices have adequately reduced corn use to match current supply estimates. If production declines further, there appears to be some slack in the consumption categories to allow for further tightening. Of course, a significant revision downward in production (below 10 billion bushels) or quality concerns that limit use (i.e. aflatoxin, low test weights) could provide the impetus for another leg up in prices.

Private Applicator Training

A Private applicator training and test has been scheduled for Thursday, September 20 at 9 a.m. at the Wise County Extension office located at 206 S. State St., in Decatur.  The $65.00 registration fee includes the study books and lunch.  This class is for those individuals who do not currently have a pesticide applicator license, but would like to get one.  Individuals who have a license that has been expired less than 1 year are not eligible to take this class.  The class is limited to the first 20 paid participants.

As defined by law, a private applicator is a person who uses or supervises the use of a restricted use or state-limited-use pesticide or a regulated herbicide for the purpose of producing an agricultural commodity.  The licensed private applicator is responsible for assuring that persons working under his or her direct supervision are knowledgeable of the label requirements governing the use of the pesticides they are using.

Licensing as a private applicator requires practical knowledge of pest problems and control practices associated with agricultural operations.

Licensed private applicators are required to re-certify every five years by obtaining 15 continuing education units (CEU’s) by December 31 of the year preceding license expiration.  That includes two (2) credits in laws and regulations and two (2) credits in integrated pest management.  Up to 10 CEU’s may be obtained through TDA- approved home study programs.  Check out the Texas Department of Agriculture’s website for more information. www.agr.state.tx.us/pesticide.

 Private applicators may earn the required credits by passing a 200-question re-certification exam administered by TDA.  The license cost $60.  Please come by the Extension office to sign up or call for more information 940-627-3341.

Preparing for the Unexpected

There are continuous reminders that disasters can happen at anytime and any place and that each event is unique. Disasters can have natural causes, as well as disasters caused by accidents or terrorists.  Whatever the cause, being prepared can help lessen the effects of the crisis.  Although we can’t prevent disasters, we can reduce the risk of injury and even death by becoming informed.  First, each family should establish its own plan, which includes:

• Escape routes:  Know how to escape from each room of the house as well as from the neighborhood.
• Family communication:  Know how to contact each other in case of separation, and have a designated contact out of town/state whom everybody knows to call.
• Communication with emergency personnel:  Know who to call and keep their numbers near each telephone and cell phone.
• Utility shutoff and safety:  Know how to disconnect the home’s utilities in case of gas leak or fire.
• Insurance and other important records:  Keep copies of valuable personal papers in a safe place and a remote location.
• Special needs:  Know what extra steps to take for family members who are very young, very old or ill.
• Safety skills:  Learn how to administer cardiopulmonary resuscitation and first aid.
• Pet care:  Have a plan for emergency pet care.

Second, each family member should keep a disaster supply kit within easy reach.  Each kit should contain such items as:

• Water:  for at least three days and at least one gallon of water per person per day.
• Food items that require no refrigeration or preparation, such as peanut butter, nuts, dried fruits and protein bars.
• Clean air items:  nose and mouth protection masks with N-95 rating, plastic sheets and duct tape.
• Extra clothing:  at least one change of clothes per person, plus shoes and blanket.
• First aid kit: 
• Emergency items:  flashlight and extra batteries, battery-operated radio, whistle, shovel and basic tools, baby wipes, toilet paper, plastic garbage bags and maps.
• Special needs items if necessary:  baby food and formula, diapers, powdered milk, baby wipes, medications and supplies for dentures and/or contact lenses for adults.

            Maintain your kit.  Replace batteries every six months and replace food items according to expiration dates.

            Some disasters mean evacuating to a safe place.  Each family should pre-determine their options in that situation.  However, if local officials ask you to evacuate, do so immediately.  The authorities will not ask you to leave unless they determine that lives may be in danger.

            In Texas, help can be just a phone call away.  Keep these numbers close to each phone, including cell phones:

• Emergency 911:  the universal emergency telephone number in the U.S.
• 211:  Texas First Call for Help, for non-emergency information and referrals.
• Texas Poison control Center at (800) 222-1222.

            The publication, “Preparing for the Unexpected,” (B-6178) can be ordered on Extension’s online Bookstore at http://tcebookstore.org.

            It’s never too early to start preparing for unexpected events, adding that these steps might mean the difference between life and death.

Save the Date for "Friend to Friend"

To help women have a better understanding of breast and cervical cancer and the best way to prevent these cancers, Texas A&M AgriLife Extension Service in Wise County will conduct a Friend to Friend party on Tuesday evening, October 16, 2012 at the newly opened Weatherford College-Wise County Campus.  The party will include a presentation on breast and cervical cancer by a medical professional. There will be a discussion of the obstacles women may encounter when trying to access mammograms and Pap tests locally. Participants will have an opportunity to visit with exhibitors that conduct these screenings, and the exhibitors will have staff members available to make screening appointments for participants. Information will be available on how those who qualify can access financial assistance if the cost of the screening prevents them from getting a screening.

Cervical cancer is the easiest female cancer to prevent. A Pap test, which screens for cervical cancer, can help prevent cervical cancer or find it early. It is one of the most reliable and effective cancer screening tests available. With a Pap test, the doctor is looking for any cell changes on the cervix that might become cervical cancer if they are not treated appropriately.

So, who should be screened and when should they be screened? According to the American Cancer Society’s guidelines, women between ages 21 and 29 should have a Pap test every 3 years. The doctor may also suggest an HPV test if there are abnormal Pap test results. For women between the ages of 30 and 65, it is preferred that they have a Pap test plus an HPV test every 5 years, but it is also okay to have a Pap test alone every 3 years. If a woman is over age 65 and has had regular cervical cancer testing with normal results, she should not be tested for cervical cancer. However, women with history of a serious cervical pre-cancer should continue to be tested for at least 20 years after that diagnosis, even if testing continues past age 65. If a woman’s uterus and cervix were removed for reasons not related to cervical cancer and she does not have a history of cervical cancer or serious pre-cancer, she also should not be tested. Women with a history of serious pre-cancer will need to visit with their doctor about their screening needs.

            Don’t forget to make plans to join other women for food, information, and fellowship at the Friend to Friend party. For more information, contact the Wise County AgriLife Extension office at 940-627-3341.

September - October Newsletter

Back to School Lunch Planning!!!

Last week we focused on the importance of breakfast for our school age children, but we don’t want to forget about planning for a nutritious lunch as well. According  to the new USDA standards for school meals, lunches will have more fruits and vegetables and more whole grain foods. They will offer only low-fat or fat free milk, and they will be lower in unhealthy fats and salt. That should be incentive for parents to encourage their children to eat the school lunch.

However, for parents whose children do not want to eat the meals served at school, providing a well-balanced, healthy, and appetizing selection of foods that can be kept cool until eaten can be a challenge. To help answer the question, “What can I pack that won’t spoil by lunchtime and contains healthy foods that my child will eat?” here are a few tips: 

            Introduce children to a variety of whole-grain breads and rolls. If your child doesn’t like sandwiches, try an unassembled one they can eat in stages: like reduced-fat cheese cubes, lean meat slices, tomato bites and whole grain crackers. Try “planned-overs” like hearty soups, chili, or spaghetti from the night before.

Pack cheese sticks by cutting your own. Children need calcium each day, so include cheese even if milk is served. Veggies and dip are always a hit. Cut up carrots, cucumbers, broccoli, or cauliflower and pack with a small container of your child’s favorite low-fat dressing.

Offer beverages like water and low-fat milk; 100 percent fruit juice should be an occasional beverage. Minimize the salty and sweet treats in the lunch bag. Items like chips, “fruit” roll-ups, and cookies in the lunch bag fill kids up and make it tough for small stomachs to eat the healthier foods that provide the nutrients needed for good health and growth.

Include a favorite item along with new foods. This way if the child doesn’t care for the new item, he or she will still have the old favorite. Involve children when planning lunch bag menus. They’ll look forward to lunchtime knowing they’ve helped create the menu. 

It is also important to consider food safety. Keep cold foods like meat, eggs, lunch meat, cheese, milk, cut fruit and cooked pasta, vegetables, and rice cold. Use ice packs, freezer gels, or frozen juice boxes. Keep foods like soup and chili hot with a wide mouth insulated bottle; pour boiling water into the bottle to heat the inside. Then heat the food to 165 degrees F. Drain the boiling water from the bottle and replace with the hot food.

Foods that are safe at room temperature include nuts and peanut butter, unopened containers of pudding, juice boxes, unopened canned meat, dried and canned fruit and chips and whole fruits.

For more information on packing a safe and healthy lunch, contact the Wise County  Extension office at 940/627-3341/