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Environmental Advancements In The Agriculture Industry

4/24/2024

Since 1970, an annual event called “Earth Day” has been held in late April across the United States. This event has been a time for all U.S. citizens to reflect on our Country’s environmental resources, and what we can do individuals, businesses and as communities to help enhance our environment for the next generation. Many times, farmers and the agriculture industry are portrayed as part of the problem for many the environmental issues that we are facing in the United States. However, in reality the agriculture industry has made some significant advancements in recent decades to help many farmers enhance their environmental efforts.

In recent years, much attention has been paid to “climate change” and greenhouse gas emissions caused by our lifestyles in the U.S. and the rest of the World, as well by business and industry, including the agriculture industry. Recently, the U.S. Environmental Protection Agency (EPA) published the “Inventory of U.S. Greenhouse Gas Emissions and Sinks”, which has been published annually since 1990. The report provides an estimate of man-made greenhouse gas emissions in the U.S., as well as the amount of carbon trapped in vegetation and soil. EPA submits the annual report to the United Nations as part of the “United Nations Framework Convention on Climate Change”, which provides a global standardized process for reporting and tracking greenhouse gas emissions.

The recent EPA report focused on greenhouse gas emissions for 2022 from various industries, including agriculture. The report showed annual changes in emissions, as well changes over the past decade or longer. The American Farm Bureau Federation recently release a summary of the EPA report as it related to the agriculture industry. Following are some highlights from the Farm Bureau summary:
Overall greenhouse gas emissions in the U.S. increased by 1.3 percent from 2021 to 2022; however, net emissions have dropped by 17 percent since 2005. Greenhouse gas emissions from the agriculture industry declined by 1.8 percent from 2021 to 2022 and are at the lowest level since 2012. The largest source of greenhouse gas emissions in 2022 was the transportation sector at 28 percent of the total emissions, followed closely by the electric power industry at 25 percent and the industrial sector at 23 percent, The commercial and residential emissions accounted for 14 percent and the agriculture industry accounted for just under 10 percent of total U.S. emissions. Within the agriculture category, crop production accounted for just over 5 percent of the total U.S. emissions and livestock production was responsible for about 4.3 percent of the total, with fuel combustion emissions accounting for the remaining 6.4 percent. All of these segments of agriculture had reduced greenhouse gas emissions in 2022 compared to a year earlier. Agriculture productivity in the U.S. has increased significantly in recent decades, utilizing less acres of farm and ranch land, with only a modest increase in greenhouse gas emissions. As was pointed out earlier, emissions from agriculture have actually been declining in recent years. A couple examples of efficiencies in agriculture include: From 1990 to 2022, U.S. dairy farmers increased milk output by 53 percent, while the greenhouse gas emissions produced per one billion pounds of milk declined by 26 percent during that time period. From 1990 to 2022, red meat production from beef, swine and sheep in the U.S. increased by 44 percent, while greenhouse gas emissions per 1 million pounds of red meat from beef production declined by 28 percent during that same time frame.
Improved efficiencies and technology advancements have helped farmers greatly increase their productivity in the past three decades, with only a very small increase in total greenhouse gas emissions, and even a decline in emissions within some segments of the agriculture industry. Most of the improvements in agriculture efficiencies and greenhouse gas emissions have been accomplished through volunteer efforts buy U.S. farmers and ranchers, along with support through federal and state conservation efforts.
One of the best known federal government conservation efforts related to the agriculture industry has been the Conservation Reserve Program (CRP), which was established as part of the 1985 Farm Bill. The CRP program has been continued in every Farm Bill since 1985 and will likely be continued in the next Farm Bill which is currently being discussed by Congress. The CRP program gives farmers and landowners the opportunity to receive annual payments over a 10-15 year period for taking marginal and less productive cropland out of production and establishing natural grasses and other land cover. The initial goals and objectives of the CRP program were to reduce soil erosion on highly erodible cropland, improve water quality, foster wildlife habitat, and provide some income support to farmers. More recently, in addition to the original benefits, the CRP program has been identified by the federal government as a valuable tool as a method to promote and enhance “carbon sequestration” on working farmland.

As of December 31, 2023, there were a total of just under 24.8 million acres enrolled in the CRP program, which is slightly over 2 million acres below the maximum level of 27 million acres for 2023 that was established in the last Farm Bill. Of the total CRP acres, approximately 7.8 million acres are enrolled under a General CRP contract, 7.3 million acres in Continuous CRP, and 8.6 million acres enrolled in the grassland program, with the balance of the acres in CREP, wetlands, and other special CRP initiatives. Just over 3.2 million acres of the Continuous CRP acres are in the Clean Lakes, Estuaries and Rivers (CLEAR) program.

The total annual Federal budget outlay for the CRP program in the 2023 fiscal year was just over $1.86 billion, including $1.75 billion that was paid in annual rental payments to landowners with acres in enrolled in the CRP program. In addition, USDA allocated $69 million in cost-share payments to landowners for establishing desired practices and plant species on CRP acres and $42 million as special incentive payments through the Continuous CRP program.

Based on a USDA report issued in 2020 on the 35th anniversary of the CRP program, CRP had accomplished the environmental benefits during the first 35 years of existence since 1986:
·      From1986 to 2020, it is estimated that the CRP program reduced total soil erosion in the U.S. by over 9 billion tons of soil, enough to fill 600 million dump trucks.
·      The CRP program sequestered an annual average of 49 million metric tons of greenhouse gases from the atmosphere each year, which is comparable to taking 9 million automobiles off the road in a year.
·      Each year, CRP nitrogen and phosphorus runoff from flowing into rivers, streams, and lakes in the U.S. by 95 percent and 85 percent respectively, compared to similar types of cropland.
·      The CRP program resulted in the creation of more than 3 million acres of wetlands, while protecting more than 175,000 miles along rivers, streams, and lakes with riparian grass and forest buffers.
·      In addition, much of the land enrolled in the CRP program has been dedicated to enhancing the nation’s wildlife habitat, which has resulted in increased populations of ducks, pheasants, and other wildlife species in many areas, as well as creating improved pollinators to benefit bee populations.

The environmental improvements in agriculture in recent decades have been accomplished with a relatively small investment of federal tax dollars through the CRP program, Wetlands Reserve Program (WRP), Environmental Quality Incentives Program (EQIP), Conservation Stewardship Program (CSP) and other programs. There have also been State and local farm-related conservation and environmental initiatives through Soil and Water Conservation Districts, wildlife organizations, and other initiatives, all of which have been heavily supported by farmers. Most of the environmental enhancement in agriculture has been accomplished by farmers themselves through the use of conservation tillage, precision farming methods, and other technological advancements. There is still a lot to be accomplished to manage potential water quality, global warming and other environmental issues; however, we can rest assured that farmers and the agriculture industry will do their part to find solutions.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]

Current Grain Prices Offer Few Opportunities

4/17/2024

Since the completion of the 2023 harvest season, there have been very few good opportunities to market corn and soybeans at favorable levels. This has resulted in a large amount of last year’s corn crop still in storage on farms across the Midwest and has left farmers with some very difficult grain marketing decisions for both the grain that is still in storage, as well as for the 2024 crop that will be planted in the next few weeks. The continued low corn and soybean prices resulted in greatly reduced profit levels for Midwest crop producers in 2023 and has lowered profitability prospects for 2024.

Nearby CBOT May corn futures closed at $4.28 per bushel following the release of the World Supply and Demand (WASDE) report on April 11, which was the lowest on the date of the April WASDE report since 2020. This was $2.23 per bushel lower than the nearby futures price of $6.51 per bushel following the April WASDE report in 2023, and compares to $7.84 per bushel in 2022 and $5.77 per bushel in 2021. Nearby CBOT May soybean futures closed at $11.59 per bushel following the release of the WASDE report on April 11, which was also at the lowest level since 2020. The 2024 CBOT soybean futures price compares to other recent April CBOT process of $14.97 per bushel in 2023, $16.65 per bushel in 2022, and $14.03 per bushel in 2021.

From 2021 until early 2023, nearby futures prices on the Chicago Board of Trade (CBOT) for both corn and soybeans have been at the highest sustained levels since a similar period a decade earlier from 2011 to 2013. This allowed for some excellent profit margins for Midwest corn and soybean producers in 2021 and 2022, especially for farmers that had average or above average crop yields in those two years. The nearby CBOT corn futures price exceeded $5.00 per bushel from early 2021 until late June of 2023, and remained above $6.00 per bushel from early 2022 until late April of 2023. Prior to 2021, the nearby corn futures price had not been above $5.00 per bushel since late Summer of 2013. In fact, from 2015 through 2020, nearby corn futures were below $4.00 per bushel for a high percentage of the time.

The last extended period of higher levels of CBOT corn futures prices occurred from late 2010 through 2013. Nearby corn futures rose above $5.00 per bushel in September of 2010, exceeding $6.00 per bushel by early 2011, and going over $7.00 per bushel by June of 2011. Corn futures stayed strong in 2012, only briefly dipping below $6.00 per bushel, before reaching the all-time high of $8.38 per bushel during the intense U.S. drought conditions in August of 2012. Nearby corn futures stayed above $7.00 per bushel for the balance of 2012 and remained above $6.00 per bushel for most of the first half of 2013, before dropping significantly in the second half of 2013, ending the year near $4.25 per bushel, which is similar to current levels. By the Summer of 2014, nearby corn futures had dropped to near $3.50 per bushel and only briefly topped $4.00 per bushel during the next several years.

Similar to corn, the nearby CBOT soybean futures price exceeded $13.00 per bushel from early in 2021 until late in 2023, except for a few months in the Fall of 2021and a short period in the Fall of 2023. Nearby soybean futures prices exceeded $14.00 per bushel most of the time in 2022, trading above $16.00 per bushel from late for a few months in the Spring and early Summer that year. Prior to late 2020, the nearby soybean futures price had not exceeded $12.00 per bushel since late Summer of 2014. During the last grain price “boom period” from late 2011 through 2013, nearby soybean futures exceeded $13.00 per bushel for much of that period. During the drought year of 2012, nearby soybean futures traded above $16.00 per bushel by July and reached the all-time high soybean price of $17.68 per bushel in September that year. Nearby soybean futures prices remained near or above $13.00 per bushel for most of 2013. After spending the first half of 2014 near $13.00 per bushel, nearby soybean futures dropped to near $10.00 per bushel during most of the second half of 2014. Soybean futures traded near or below $9.00 per bushel much of the time in 2018 and 2019, during the trade war with China.
The current downturn in the CBOT prices for both corn and soybeans has been driven by a combination of increasing U.S. and World grain stocks, fairly stable domestic and export demand for both commodities, and prospects for favorable U.S. corn and soybean production in 2024. Recent grain prices have also been affected by corn and soybean production estimates in South America, which can have a big impact on World grain supply and have a significant effect on U.S. grain export levels. There has also been some uncertainty in the World grain markets in recent months due to the continuing Russian war in the Ukraine and the growing tension in the Mideast.

The “basis” level for local corn and soybean cash price bids in some areas has remained at fairly tight levels in 2023 into early 2024. The “basis” is the difference between the local cash price being offered in a given month and the closet CBOT futures price. Many processing plants and local elevators in the Corn Belt offered cash prices with a positive basis at certain times during 2022 and 2023. The current basis level for cash corn in Southern Minnesota has been highly variable in recent weeks, with some ethanol plants and feed mills offering cash prices that are near or above the nearby CBOT futures price, while other locations with cash prices that are $.10 to $.30 per bushel below the nearby CBOT price. The soybean basis level in the region at soybean processing plants has been $.05 to $.15 per bushel below the CBOT nearby futures price, while basis levels at local grain elevators has generally been $.30-$.50 below the CBOT futures prices.

The corn basis level for the Fall of 2024 has widened out to approximately $.30 to $.50 per bushel under the CBOT December futures price at local ethanol plants and grain elevators in Southern Minnesota. The soybean basis for the Fall of 2023 has been near $.40 per bushel under at soybean processing plants and $.50 to $.75 per bushel below the CBOT November futures price at grain elevators. This is more typical of Spring levels that existed prior to recent years for corn and soybeans. The basis levels at local grain elevators and processing plants are important to farm operators for determining pre-harvest grain market strategies in a given year.

Once farm operators reach planting season, they pay close attention to “new crop” December corn futures and cash prices for harvest season and beyond at local grain elevators and processing plants. December corn futures closed at $4.66 per bushel on April 11, which compares to $5.59 per bushel in mid-April a year ago, $$7.35 per bushel in 2022, and $5.77 per bushel in 2021. Cash bids for Fall delivery of the 2024 corn crop at local grain elevators and ethanol plants in Southern Minnesota on April 11 ranged from $4.15 to $4.35 per bushel at many locations, compared to $5.00 to $5.30 per bushel a year ago. In 2023, new crop cash corn bids at most Upper Midwest locations dropped below $5.00 per bushel by early August and have not exceeded that level since then.

Prices for 2024 “new crop” CBOT November soybeans closed at $11.64 per bushel on April 11, which compares to $13.13 a year ago, just over $15.00 per bushel in mid-April of 2022 and $12.63 per bushel in 2021, Cash bids for 2024 “new crop” soybeans at grain elevators in Southern Minnesota on April 11 ranged from $10.60 to $11.00 per bushel, with forward prices near $11.25 per bushel at soybean processing plants. These prices are about $1.50 per bushel lower than Fall harvest soybean bids a year ago. New crop cash soybean bids were above $12.50 per bushel at local grain elevators for most the last half of 2023 and were near $13.00 per bushel much of the time at soybean processing plants, before dropping to cash prices below $11.50 per bushel early in 2024.

Grain marketing decisions for the 2024 corn and soybean crop are very difficult for most producers, with current cash prices below breakeven levels. For many Midwest crop producers, the breakeven levels to cover direct and overhead expenses on cash rented land in 2024 will likely be near $5.00 per bushel for corn and over $11.00 per bushel for soybeans. In many years, the Spring and early Summer months offer some of the best opportunities to forward price “new crop” corn and soybeans. On the other hand, farmer operators do not want to miss the opportunity for a grain price “run-up” later this year, such as has occurred in some recent years when U.S. crop yields were lower than expected. If there is not a drought or other crop issues in the U.S. in 2024, corn and soybean prices are likely to follow a more typical seasonal price pattern as we progress toward harvest this year.

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U.S. FARMERS EXPECTED TO REDUCE CORN ACRES IN 2024

4/10/2024

The USDA “Prospective Plantings Report” that was released on March 28th projected a 4.9 percent decrease in 2024 U.S. corn acreage compared to a year ago, along with a 3.5 percent increase in 2024 soybean acreage from a year earlier. The USDA planting intentions numbers came in lower than the grain trade expected for corn and similar than trade estimates for soybeans. The USDA “Quarterly Grain Stocks Report” was also released on March 28, which lists the estimated U.S. grain inventory as of March 1, 2024, for both “on-farm” and commercial grain storage. The USDA estimates for U.S. corn inventories came in below the average stocks estimates of the grain traders, while soybean inventories slightly exceeded industry expectations.

The USDA prospective planting acreage is based on survey data collected from about 72,000 crop producers in early March. Total U.S. crop acreage was listed at 313.3 million acres, which was down 6.3 million acres or 2 percent from 2023. Most of that decline was due to low commodity prices and the extended drought conditions in the southern Plains States. The USDA estimates for intended 2024 U.S. corn and soybean acreage was viewed as rather “bullish” for “new crop” corn futures prices, meaning higher price expectations, and was viewed as mainly “neutral” for soybean futures prices on the Chicago Board of Trade (CBOT). After the USDA planting intentions report was released on March 28, December 2024 corn futures closed up 16 cents per bushel and November soybean futures were basically steady.

Typically, these late March USDA Reports are very critical to farm operators and grain traders due to their impact on grain market prices in the Spring and early Summer months. During these months, many farm operators try to sell remaining grain inventories from the previous growing season, as well as look for opportunities to forward price a portion of the anticipated crop for the current year. In a majority of years, corn and soybean prices usually reach their “peak-price” during the period from April until June, which is why these reports are so important.

Highlights from the March 28th USDA Planting Intentions Report:
Corn --- The planting intentions report indicated that just over 90 million acres of corn are expected to be
               planted in the U.S. in 2024, which is a decrease of 4.6 million acres or 4.9 percent from the 2023 corn
               acreage of 94.6 million acres. The 2024 U.S. corn acreage would still be above the 2022 corn acreage
               of 88.2 million acres. The highest corn acreage recorded in recent decades in the March USDA survey
              was 97.3 million acres in 2012. The current USDA corn acreage estimate was about 1.7 million acres
               below the average grain trade estimate. Based on the report, 2024 planted corn acreage is likely to
               decrease in all of the major corn production States. The largest expected decrease in expected corn
               acreage is 700,000 acres (8.1%) in Minnesota. Other large decreases in corn acreage include Indiana at
               350,000 acres (6.4%), Missouri at 350,000 acres ((9.1%), Iowa at 300,000 acres (2.3%), Illinois at
               300,000 (2.7%), South Dakota at 300,000 (94.8%), Ohio at 300,000 ((8.3%), and North Dakota at
             250,000 (6.2%). Nebraska’s corn acreage was only expected to decrease by 100,000 acres (1%).

Soybeans --- Based on the estimates in the March 28th Planting Intentions Report, U.S. soybean acreage in 2024
                      is projected at 86.5 million acres, which represents an increase of 2.9 million acres from a year
                      ago. The 2024 U.S. soybean acreage estimate compares to 83.6 million acres in 2023, 87.4 million
                      acres in 2022, 87.2 million acres in 2021, and the record 90.2 million acres in 2017. The projected
                      USDA soybean acreage came in very close to the average grain trade estimates for 2024. The
                     highest increase in estimated 2024 soybean acreage was in North Dakota, with an expected
                      increase of 700,000 acres, followed by Missouri with an increase of 400,000 acres. Smaller
                      increases in 2024 soybean acreage are likely to occur in Minnesota, South Dakota, Iowa, Illinois,
                      Indiana, Ohio, Nebraska, and Wisconsin. Kansas was the only major producing State to show a
                      decline in anticipated soybean acreage for 2024.
Wheat --- Due to the continued potential impacts on worldwide wheat production that has resulted from the
                 Russian war in Ukraine, there was considerable interest in the U.S. planting intentions for Spring
                 wheat in 2024. The intended total U.S. wheat acreage for 2024 is estimated at 47.5 million acres,
                 which is down 4 percent from 49.6 million acres in 2023 but still exceeds 45.8 million acres in 2022.
                 Spring wheat acreage for 2024 was estimated at 11.3 million acres, which is very similar to last year.
                Spring wheat acres in 2024 are expected to increase in Minnesota and South Dakota, decrease
                 slightly in North Dakota, and stay the same in Montana.

Highlights from the March 28th USDA Grain Stocks Report:
Corn --- The total U.S. corn stocks on March 1, 2024, were listed at over 8.35 billion bushels, which is an
               increase of 13 percent from a year earlier. The March 1st USDA corn stocks estimates were slightly
               below the average grain trade estimate. The report indicated that a significant number of farmers are
               still hanging on to their 2023 corn inventory, with nearly 61 percent of the total corn stocks being held
               in on-farm storage. One negative in the USDA grain stocks report was that implied corn usage from
               December, 2023 through February, 2024 was down about 12 percent compared to a year earlier. Many
               farmers are hoping that favorable corn stocks numbers, together with the expected reductions in 2024
               U.S. corn acreage, will spur a rally in the cash corn market in the coming weeks. This would allow
              farmers to liquidate some of the large 2023 corn inventory that is still in on-farm storage.

Soybeans --- Soybean stocks on March 1, 2024, were listed at just under 1.85 billion bushels, which is up 9
                      9 percent from a year ago but is still slightly below the total soybean stocks on March 1, 2022.
                      About half of the total soybean stocks were held in on-farm storage. The total U.S. soybean usage
                     from December, 2023 through February, 2024 was estimated at 1.16 billion bushels, which was
                      down about 13 percent from a year earlier. The March 1 soybean stocks estimate came in slightly
                      above the average estimate of grain traders. The higher levels of grain stocks, together with the
                      expected increase in 2024 soybean acreage may limit any substantial increases in the CBOT
                      soybean futures prices in the coming weeks.

Wheat --- Total wheat stocks on March 1, 2024, were listed at just over 1.09 billion bushels, which is up 16
                 percent from March 1, 2023. Of that total, approximately 25 percent of the wheat stocks were held in
                 on-farm storage. The implied U.S. wheat usage in the past quarter was 334 million bushels, which
                 was down about 10 percent from the same quarter a year ago.

Corn and soybean market prices declined considerably in the past 12 months due to increasing supplies and reduced demand compared to previous years. Nearby CBOT corn futures closed at $4.42 per bushel on March 28 following the release of the USDA reports, which compares to $6.60 per bushel on Mach 31, 2023 following the release of the reports a year ago. New crop December corn futures on March 28 closed at $4.76 per bushel, compared to $5.66 per bushel a year ago on March 31. 2023. Nearby CBOT soybean futures closed at $11.91 per bushel following the USDA report on March 28, compared to $15.05 per bushel on March 31, 2023 and new crop November futures closed at $11.86 per bushel on March 28, compared to $13.20 per bushel a year ago.

The March 31st USDA report was based on producer surveys of planting intentions, as of March 1st; however, there is potential for these planting intentions to be adjusted slightly when final planting takes place. The lower cost of production for soybeans has likely encouraged the potential for more soybean acres in 2024; however, the potential for early spring planting in many areas of the Midwest could encourage an increase above the intended corn acreage. Any enhancement in corn prices in the coming weeks could also be favorable for increases in corn acreage. In the past twenty years, final corn acreage has increased above the prospective March 1 planting estimate in twelve years and decreased in eight years.

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Environmental Advancements In The Agriculture Industry

Current Grain Prices Offer Few Opportunities

U.S. FARMERS EXPECTED TO REDUCE CORN ACRES IN 2024

U.S. Farmers Expected To Reduce Corn Acres In 2024