Page 1

A MILAN FARMER returned Wrigley Field to its original condition, with improvements, after the University of Illinois-Northwestern game was played there. ...................5

DESPITE AN INDUSTRY slowdown over the past year, the biodiesel industry should be ready to meet the federal renewable fuel standard (RFS2) mandate. .............7

STRONG HOG PRICES for much of 2010 and a generally bullish price outlook this year should allow many producers to turn a profit for 2010 as a whole and possibly 2011. ......9

Monday, January 3, 2011

Two sections Volume 39, No. 1

A look at the 112th Congress

More EPA scrutiny, less money for ag? BY MARTIN ROSS FarmWeek

Periodicals: Time Valued

Coming off what he deemed a key policy victory, U.S. Rep. John Shimkus is cautiously optimistic about 2011 as a year for bipartisan progress on Capitol Hill. The Collinsville Republican hopes passage of the recent compromise tax bill (see page 4), endorsed by President Obama and Senate Republicans, marks a political turning point. “This was a big move by the president — to reach out trying to get the bipartisan compromise,” Shimkus told FarmWeek. “His party was not real pleased, but it was the right thing at the right time. “But I think the jury’s still out. We’re getting ready to hit the ground running in January. (New House Speaker John) Boehner’s (R-Ohio) been here a long time — he’s seen the failures of both parties. He wants to move (legislation) in regular order and in open process with open rules, through subcommittees and full committees to the floor.” That said, Shimkus sees a “repeal or replace” of the previous Congress’ health care law

as one of the Republicancontrolled House’s first priorities. He noted dissatisfaction with the sweeping health care initiative was a Rep. John key campaign Shimkus plank for many of the House’s 87 new freshman Republicans. Further, Shimkus maintained House leadership will demand “constitutional justification” for proposed measures that would impose new federal

mandates or regulations. “Where’s it say we should be involved in many of these areas that might affect the agricultural arena?” he posed. As the new House Energy and Commerce Committee’s Environment and Jobs Subcommittee chairman, he will address issues under U.S. Environmental Protection Agency (EPA) purview, from drinking water safety to landfill/nuclear waste concerns. Shimkus pledged scrutiny of “EPA on the farm” and backed Sen. Jay Rockefeller’s (D-W.Va.) move to delay EPA greenhouse gas (GHG) rules for two years

or until Congress sets regulatory parameters to ensure the agency doesn’t “ride roughshod.” That will not include any form of GHG “cap-and-trade” legislation, he said. However, Shimkus sees “a large role” for low-emissions nuclear power in the nation’s energy portfolio, and his subcommittee could help answer nuclear waste concerns that have stalled new plant development. New Energy and Commerce Committee Chairman Fred Upton (R-Mich.) favors waste “reprocessing” — French-driven technology that enables plants to reuse 90 percent of

nuclear waste. That, according to Shimkus, could generate “great-paying jobs.” At the same time, he stressed “we are fiscally in such a wreck,” noting widespread pressure for federal belt-tightening. While he hailed extension of biofuels tax credits, Shimkus warned that given the budget environment, “my producers better be prepared for less governmental intervention in agricultural markets and subsidies.” With less money on the table, the existing ethanol industry may be forced in the near future to See Congress, page 4

‘Bumper’ tax year features several changes University of Illinois Extension tax specialist Gary Hoff termed 2010 a “bumper year” for tax legislation, with Congress addressing six major bills that affect farmers’ taxes. Some of the more significant changes — including a new $5 million estate tax exemption kicking in after 2010’s “death

ment has to be available for service. “If you go out and purchase a combine, you need to have it on the farm (within the tax filing year). It doesn’t mean you had to have run any beans or

corn through it, as long as it’s been there, available.” Producers also can use 50 percent bonus depreciation for new assets. Bonus depreciation can be applied to up to “20year property,” including farm

buildings — a farmer could write off $150,000 for a new $300,000 building. Some producers may qualify for a special depreciation See Tax, page 4

STEPPING TOWARD SAFETY

FarmWeekNow.com Listen to Gary Hoff’s comments about the latest tax changes at FarmWeekNow.com.

tax” hiatus — didn’t occur until mid-December. The recent White Houseendorsed tax compromise (see story on page 4) affects producers moving forward, but Hoff cites several earlier changes that can benefit producers filing 2010 tax year returns. For example, producers can take Section 179 direct expensing for up to $500,000 on new or used equipment purchased and placed into service in 2010 — a doubling of the past maximum deduction. “It’s an excellent way for many producers to reduce their income tax,” Hoff told FarmWeek. “The key is, equip-

Rory Frick holds one version of his multi-function ladder — a Farm Bureau Idea Exchange innovation for which a patent is pending — while a second is leaning against the rear of the combine. The “UniLadder,” as he has dubbed it, offers a non-skid tread, and no matter at what angle the ladder is positioned, the treads remain parallel to the working surface and offer improved safety. See story on page 6. (Photo by Ken Kashian)

FarmWeek on the web: FarmWeekNow.com

Illinois Farm Bureau®on the web: www.ilfb.org


FarmWeek Page 2 Monday, January 3, 2011

OUTLOOK 2011

Quick Takes GOOD OUTLOOK FOR WIND ENERGY –The new year is expected to be good for the growing U.S. wind energy industry, according to Denise Bode, chief executive officer of American Wind Energy Association (AWEA). Bode called lawmakers’ decision to extend tax credits for renewable energy projects “a great holiday present.” President Obama signed legislation that included a one-year extension of the investment tax credit for developing renewable energy sources, including wind power. Bode noted wind energy is producing more of the nation’s electricity, while manufacturing of wind energy components and construction of wind farms already have created jobs, and more are anticipated as demand grows. “With the industry expansion, this extension will incentivize, we’re going to be making a whole lot more affordable, homegrown electric power in the years to come,” Bode said. NO SALE? — E15 will not be offered at gas stations owned by or licensed from Valero Energ y, Marathon Oil, and Tesoro because of fears that the blend would damage unapproved vehicles or void engine warranties, the companies have stated. “There’s no warranty protection from engine and equipment manufacturers for E15 (15 percent ethanol gasoline). We’re not going to sell a product we can’t guarantee,” Valero spokesman Bill Day said. The Renewable Fuels Association acknowledged that despite the U.S. Environmental Protection Agency’s partial waiver on E15, the blend’s rollout is still “a bit of a waiting game.” Labeling requirements for E15 are due out this month. SOY TO AFGHANISTAN — Illinois soybean farmer Bill Wykes, Yorkville, was part of a team participating in recent shipment of soy flour to Afghanistan. Wykes and other representatives from the American Soybean Association’s (ASA) World Initiative for Soy in Human Health (WISHH) and U.S. Department of Agriculture (USDA) were on hand in Portsmouth, Va., to see the 3,525 50-pound bags of soy flour off at the Port of Virginia. The high-protein soy will benefit 5,000 women and their families. “We applaud USDA for putting soy to such good use,” said Wykes, who serves as a WISHH director and an Illinois Soybean Association (ISA) director. “Soy is a great way to help improve individual lives through nutrition, as well as the economies of developing countries,” he said.

(ISSN0197-6680) Vol. 39 No. 1

January 3, 2011

Dedicated to improving the profitability of farming, and a higher quality of life for Illinois farmers. FarmWeek is produced by the Illinois Farm Bureau. FarmWeek is published each week, except the Mondays following Thanksgiving and Christmas, by the Illinois Agricultural Association, 1701 Towanda Avenue, P.O. Box 2901, Bloomington, IL 61701. Illinois Agricultural Association assumes no responsibility for statements by advertisers or for products or services advertised in FarmWeek. FarmWeek is published by the Illinois Agricultural Association for farm operator members. $3 from the individual membership fee of each of those members go toward the production of FarmWeek.

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1st Farm Credit Services CEO: Farmer borrowers ‘well-positioned’ for 2011 BY MARTIN ROSS FarmWeek

The year 2010 was “a good one for agriculture in the state,” particularly in the cash grain sector, according to Gary Ash, CEO of 1st Farm Credit Services (FCS). The association, which serves 42 northern counties, posted roughly $68 million in earnings through Nov. 30, and Ash expects 1st FCS to finish the year at nearly $89 million. That’s compared with $53 million in 2009 earnings. Interest rate declines enabled Farm Credit to generate added earnings, he noted. As a result, AgriBank, 1st FCS’ regional funding bank, has increased its patronage to the Illinois association. With a projected $600 million in capital by year’s end, 1st FCS continues what Ash described as “a long track record in growing capital.” He anticipates a “fairly significant” increase in February association stockholder patronage. “As we look into 2011, we do think things will probably slow down a little bit,” Ash told FarmWeek after visiting with the Illinois Farm Bureau Board of Directors. “But we feel really good about the outlook for our clients. They’re ending 2010 on a high note and are very well-positioned for 2011.” The cash grains sector accounts for 44.5 percent of 1st FCS’ client base, with landlords the second largest segment at 14.5 percent. Ash said a “tremendous amount” of

Illinois farm acres is owned by absentee landlords, and pegged landlord lending as a key tent pole in supporting the association’s “traditional farmers and commercial farmers.” Ash sees the next farm bill playing a crucial role in future borrower stability. He urged Congress to bolster risk-management protections such as crop insurance that safeguard revenue and production “and give (producers) more flexibility in marketing a product when they want to market it.” Cuba producer and 1st FCS board Chairman John Baylor suggested “we may have to give up something in the direct payments” in 2012 farm bill negotiations, but emphasized the need to preserve insurance

subsidies, conservation payments, and other “green” ag supports favored by the global trading community. Baylor stressed the need to “educate” Congress about Farm Credit’s performance in anticipation of possible reforms focusing on it and other financial “government-sponsored entities” (GSEs). “There’s quite a difference between the Farm Credit GSEs and the GSEs supporting the housing industry,” Ash said. “We are a co-op — our stockholders own us, and we retain all of our portfolio. We know the risk we’re taking on when we make loans. That’s different than the other GSEs, and Congress needs to recognize that difference.”

Farmers enter 2011 with confidence Farmer confidence about economic conditions currently is strong, although there is some concern about the future, according to a recent survey. The DTN/The Progressive Farmer Agricultural Confidence Index rose from 140 in September to 151 in December, mainly fueled by the increase in commodity prices, reported Mary Rose Dwyer, DTN product manager for the index. A neutral score for the index is 50, so anything above that is considered optimistic. The 500 American producers surveyed for the latest index were extremely positive about current conditions, with an overall rating of 215, com-

pared with 180 in September. USDA recently estimated U.S. net farm income increased 31 percent in 2010 compared to 2009. And crop prices in recent weeks surged to two-year highs due in part to tight supplies, strong demand, and growing concern about a crop shortfall in South America because of dry conditions. In general, producers’ expectations for 12 months from now are more cautious, though, with the Index at 117 vs. 118 in September. The number of farmers who expect input prices to improve in 2011 dropped, while the number expecting inputs to be the same or worse rose modestly.

Weather issues intensify in Argentina BY DANIEL GRANT FarmWeek

Crop conditions worsened last week in key production areas of Argentina as the temperature at some locations soared above 100 degrees. Bryce Anderson, DTN ag meteorologist, last week reported the temperature in parts of the southern third of Argentina’s central crop belt peaked at 106 degrees. “It’s not looking very good at all in Argentina,” Anderson told the RFD Radio Network. The recent heat added more stress to crops that have struggled with dry conditions at many locations. Much of Argentina’s central crop belt from Oct. 1 through last week had received less than half the normal rainfall for that time of year. “This is really starting to hurt corn pollination in Argentina and it’s also hurting

development of the soybean crop,” Anderson said. “This is a real key focus right now for the market.” Elsewhere, previously frigid temperatures in Illinois warmed up late last week and were accompanied by rainfall at some locations. “It could help replenish the soil profile ahead of spring

tillage,” Anderson noted. The pattern shift also interrupted a run of very snowy weather in parts of the state. Portions of Central Illinois as of last week had received more than 19 inches of snow for December, nearly four times the normal amount for the month.

IFB seeks applicants for market study tour Illinois Farm Bureau is seeking 16 farmers to participate in its 10th market study tour. The tour this year will be held March 8 to 15 in Panama and Colombia, where the focus will be on transportation infrastructure, ag exports, and free trade agreements. Participants will visit grain terminals, container shipping facilities, the Panama Canal, major shipping companies, government agencies, farms, and markets. Those interested in applying for the tour should contact their local county Farm Bureau. The deadline for applications to be received by county Farm Bureaus is by 4 p.m. Friday, Jan. 14. For more information, contact Tamara Nelsen, IFB senior director of commodities, at 309-557-3112 or by e-mail at tnelsen@ilfb.org.


Page 3 Monday, January 3, 2011 FarmWeek

ECONOMY

Farm Credit Services invest $2 million in ag programs 1st FCS gives $1 million to ag programs

Farm Credit Services (FCS) of Illinois Chairman Jack Hastings, second from left, a Louisville farmer, chats about the FCS of Illinois endowment for Illinois Farm Bureau-related programs with, left to right, Jennifer Smith, Illinois Farm Bureau Young Leader manager; Darrin Storm, vice chairman of the IFB Young Leader Committee; Troy Uphoff, IFB director and member of the IAA Foundation board; and Susan Moore, IAA Foundation director. The two IFB programs were among eight recipients that shared a $1 million endowment awarded last week. (Photo by Kay Shipman)

FCS of Illinois gives $1 million endowment BY KAY SHIPMAN FarmWeek

Farm Credit Services (FCS) of Illinois last week invested in the future of agriculture by distributing endowments totaling $1 million to eight agricultural programs. “We’re counting on all of you to nurture the future leaders of agriculture,” Jack Hastings, a Louisville farmer who chairs the FCS of Illinois board, told the programs’ representatives. “I feel these eight (programs) are the backbone of developing future leaders of ag.” Each recipient will set up a permanent endowment with its share of the $1 million. The Mahomet-based FCS of Illinois ser ves the state’s southern 60 counties. Two programs with Illinois Farm Bureau ties were among the recipients. Illinois Agriculture in the Classroom received a $125,000 endowment. The IFB Young Leader Committee received a $50,000 endowment. Hastings noted he once chaired his county

Gary Ash, right, president and chief executive officer of 1st Farm Credit Services (FCS), discusses an agriculture-related history book used for ag literacy programs with Kevin Daugherty, center, Illinois Farm Bureau education director. Looking on is John Baylor, a Cuba farmer who chairs the 1st FCS board of directors. The Normal-based FCS, which serves the northern 42 counties, recently presented IFB with a $1 million contribution to the IAA Foundation. (Photo by Cyndi Cook)

1st Farm Credit Services (FCS) has donated a $1 million gift to the IAA Foundation for Illinois agriculture education, youth, and leadership programs. Farm Bureau Young Leader CommitJohn Baylor, a Cuba farmer who chairs the 1st FCS board, and Gary Ash, 1st tee. FCS chief executive officer, presented the gift to Illinois Farm Bureau President The other recipients and their Philip Nelson, who chairs the IAA Foundation Board of Trustees, during IFB‘s amounts were: University of Illinois December board meeting. College of Agricultural, Consumer, The Normal-based 1st FCS will work through a donorand Enviadvised fund with the IAA Foundation. The cooperative Farm Credit Services of Illinois ronmental serves 42 counties in the northern half of Illinois. and 1st Farm Credit Services last month Sciences, First FCS’ commitment will ensure programs, which $50,000; U each gave $1 million to agriculture proare dedicated to ag education, youth, and leadership, will of I agrigrams that educate young people, train continue to receive donations for several years. cultural future agricultural leaders, and support “This is a way for us to make a long-term commitand conhigher education agriculture. ment to the future of Illinois agriculture and industry sumer ecoEach donation is being handled differleaders,” Ash said. “We have a vital interest in supportnomics ently, but both will help provide a stable ing, sustaining, and growing the agriculture industry now departsource of funding for the future. and in the future.” ment, Potential benefactors include $350,000; such programs as Illinois 4-H, Illinois FFA, Illinois AgriSouthern Illinois University College of culture in the Classroom, Illinois Agricultural Leadership Agricultural Sciences, $125,000; IlliFoundation, and higher education institutions with agrinois Agricultural Leadership Foundaculture programs such as the University of Illinois, Illinois tion, $200,000; Illinois Association State University, and Western Illinois University. FFA, $50,000; and Illinois 4-H Youth “This fund allows for our commitment to stay strong Development, $50,000. for years to come, and not be impacted by the volatility Dave Owens, FCS of Illinois chief of the marketplace,” Baylor said. executive officer, noted the overall “We will be able to donate more dollars through this agriculture industry has been strong, fund, and benefit farmers, their families and the future of although some individual sectors have the industry in Illinois,” Baylor added. gone through stressful times. “The IAA Foundation is thrilled to help 1st Farm Agriculture programs, too, have Credit support our state’s agricultural strength through experienced financial stress, Owens this significant gift,” said Susan Moore, IAA Foundation said. director. Annual donations are great, but 1st FCS was able to establish the fund after several years of record earnings programs face challenges during tough that were made possible by the thriving agriculture economy. economic years, Owens added. Currently, 1st FCS provides donations to many of the groups that will benefit After completing an exceptional from this fund. The association will continue other forms of giving, such as corfinancial year, “we’re here today to porate donations to other agriculture industry groups and through scholarship make permanent donations,” Owens programs. said.

Farm Service Agency marks 25 years of Conservation Reserve Program success Farm Service Agency (FSA) State Executive Director Scherrie Giamanco last week noted the impact the Conservation Reserve Program (CRP) has had in protecting the nation’s natural resources for the last 25 years. CRP, which is administered by FSA, was part of the Food

Security Act of 1985. “CRP has a 25-year legacy of successfully protecting the nation’s natural resources through voluntary participation,” Giamanco said. Although CRP was designed to address soil erosion, it has become a major conservation program

that continues to provide significant economic and environmental benefits, she added. When CRP was introduced, soil erosion nationwide exceeded more than 3 billion tons per year, wetlands were being drained, water quality was deteriorating, and wildlife popula-

tions experienced loss of habitat. CRP has helped landowners reduce soil erosion by 622 million tons, provide natural habitats for wildlife, restore more than 2 million acres of wetlands, and remove millions of tons of carbon dioxide

from the air. CRP is a voluntary program that encourages landowners to convert highly erodible cropland or other environmentally sensitive land to vegetative cover. To date, 31.3 million acres nationwide are enrolled in CRP under nearly 738,000 contracts.


FarmWeek Page 4 Monday, January 3, 2011

GOVERNMENT

Johnson new chairman of broad-based ag panel BY MARTIN ROSS FarmWeek

Farm state lawmakers face a “real battle” in protecting ag funds this session, according to House Ag Committee member Tim Johnson, an Urbana Republican, who has been newly named chairman of a subcommittee. Johnson, who represents what he calls “one of the pre-

“We have a tough battle to do, and I’m prepared to do it. Chairman Lucas has said, and I agree, that we have to make sure people understand how critical

Ag Committee. Rep. Frank Lucas (R-Okla.) succeeds Collin Peterson (D-Minn.) as committee chairman. In Johnson’s view, the greatest single challenge in crafting a new farm bill is “the whole fiscal condition we face as America.” He warned “everything from soup to nuts” is on the table as congressional appropriators seek

U.S. Rep. Bobby Schilling

‘ We have to make sure people understand how critical and unique the agricultural sector is — the fact that we feed the world.’ — U.S. Rep. Tim Johnson Urbana Republican

eminent agricultural districts in the United States,” will chair the wide-ranging Rural Development, Biotechnology, Specialty Crops, and Foreign Agriculture Subcommittee. Illinois could play an unusually influential role in 2012 farm bill debate: Freshmen Republicans Bobby Schilling of Colona and Randy Hultgren of Winfield also have been named to the

ways to rein in a growing federal deficit. “I’m a strong advocate of our farm programs,” Johnson told RFD Radio last week. “But as people from various parts of the political spectrum take aim at where they can save money, where they can cut expenditures, they’re going to be looking, among other things at commodity payments.

and unique the agricultural sector is — the fact that we feed the world.” The Midwest is well represented in Ag Committee leadership. In addition to Johnson, Rep. Jean Schmidt (R-Ohio) will head the Nutrition and Horticulture Subcommittee; and Rep. Jeff Fortenberry (RNeb.) will chair the Department Operations, Oversight, and Credit Jurisdiction Sub-

committee. Farm programs fall to Rep. K. Michael Conaway (R-Texas), General Farm Commodities and Risk ManU.S. Rep. Randy agement Subcommittee Hultgren chair. Rep. Tom Rooney (R-Fla.) will chair the Livestock, Dairy, and Poultry Subcommittee, while Glenn Thompson (R-Pa.) will head Conservation, Energy, and Forestry. Beyond the farm bill, Johnson sees his subcommittee playing a key role in improving community sewer, water, broadband, and other services critical

to “the maintenance of rural America.” He noted an “ongoing battle with metropolitan counties” for federal resources. At the same time, the panel’s biotech/ag science scope should have a significant impact on his district’s three major universities and community colleges. The subcommittee also will focus on ag trade issues, particularly export promotion. A White House-authorized bipartisan National Commission on Fiscal Responsibility and Reform has targeted the popular Market Access Program for potential cuts, along with direct farm payments and the Conservation Stewardship (formerly Security) Program.

Congress Continued from page 1 “go alone,” with future incentives being directed largely toward next generation cellulosic ethanol, Shimkus suggested. He nonetheless was confident corn ethanol “will continue to have a market” under the federal renewable fuels standard. Farm bill debate also will require tough decisions, he said. Shimkus’ friend, House Ag Committee Chairman Frank Lucas (R-Okla.), has defended producer direct payments, but Shimkus maintained “the fiscal issues are the fiscal issues.” “In bad times, you have to start saying no, and I think, at least on the House side, we’re going to start saying no,” he said.

Taxes present and future: Relief for the new year The tax compromise signed recently by President Obama and supported by Farm Bureau: Estate tax • Establishes an estate tax exemption of $5 million per person and top rate of 35 percent for two years (2011-2012). • Indexes the estate tax exemption for inflation. • Reinstates stepped-up basis for farm estates, enabling heirs to take fair market value of an estate for capital gains purposes and pay capital gains tax on the difference between the net sales price and that stepped-up basis once they sell assets. Estates of those dying in 2010 can opt for the new exemption and rate or 2010 law (no estate tax and modified carryover basis). • Provides for a spousal transfer of any unused estate tax exemption amount (2011-2012). Capital gains • Extends lower capital gains tax rates for two years (2011-2012). Biofuels • Extends biodiesel tax incentives for two years (2010-2011). • Extends tax incentives for ethanol and the tariff on imported ethanol for one year (2011). • Extends the alternative fuels credit fuel tax credit for liquid fuels derived from biomass and other sources for one year (2011). • Extends the tax credit for alternative fuel refueling property such as flex-fuel pumps for one year (2011).

Alternative minimum tax • Extends alternative minimum tax relief for middle-income taxpayers for two years (2010-2011). Income tax • Extends lower income tax rates for two years (2011-2012). Farm business • Extends higher Section 179 Small Business Expensing provisions for two years (2011-2012). • Allows businesses to immediately deduct 100 percent of purchased property through 2011 and for 50 percent bonus depreciation in 2012. • Extends for two years the additional standard deduction for real property taxes (2010-2011). • Extends for two years the deduction of state and local general sales taxes (2010-2011). • Extend for two years the provision encouraging contributions of conservation easements (2010-2011). • Extends the enhanced charitable deduction for farm food contributions for two years (2010-2011). • Extends for two years special rules for paying unrelated business income taxes (2010-2011). The rural economy • Extends for two years the 50 percent credit for short line railroad maintenance (2010-2011). • Eliminates for two years (2011-2012) the tax on Health Service Corps Scholarship program awards, which encourage medical professionals to practice in underserved areas.

Tax Continued from page 1 allowance for certain qualified property acquired after Dec. 31, 2007, and placed in service before Jan. 1. Check eligibility for asset deductions with a certified public accountant or other farm tax consultant. Changes in health insurance tax provisions offer a “big, big benefit” for farm businesses. Previously, producers could deduct insurance premiums for themselves and their families, reducing total federal income tax payments, but were required to pay full selfemployment taxes on their farm schedule. But 2010-year filers can take an additional deduction on their Schedule SE — forms printed before Congress approved the deduction do not explicitly specify the insurance deduction, but it can be applied on Line 3, labeled “Other,” said Hoff. Reducing self-employment tax by 14.13 percent can be a substantial tax savings, he advised. Congress voted to extend 2010 alternative minimum tax (AMT) exemptions for another year, saving farm families and a variety of other middle-income taxpayers from AMT liability in 2011. But while Congress resolved a variety of farm tax issues in December, prospective Internal Revenue Service 1099 reporting rules remain an issue for farmers. Businesses must issue a federal tax Form 1099 to unincorporated service and goods providers to whom they pay more than $600 during a tax year. Beginning in 2012, producers also will have to issue 1099s to corporations as well as individual who provided goods or services exceeding $600, covering virtually every ag “vendor” transaction. The new rule (according to Hoff, a provision devised to fill a federal “tax gap”) takes in fertilizer dealers and even retail farm suppliers. More recent interpretation suggests landlords will be required to issue 1099s for services on rented land, such as outside maintenance of Conservation Reserve Program ground. “There will be millions more 1099s filed than in the past,” Hoff said. “On top of that, to help enforce it, they’ve increased the penalties tremendously. If you fail to file at all, the penalty’s $250 per 1099. There is a max of $1.5 million (in total penalties).” — Martin Ross


Page 5 Monday, January 3, 2011 FarmWeek

NICHE MARKET

Milan farmer gives Wrigley Field a new carpet Turf industry offers farmers a market niche BY DANIEL GRANT FarmWeek

Chicago Cubs fans probably won’t think twice about the appearance of the playing surface at historic Wrigley Field, built in 1914, when the 2011 baseball season opens. But converting the baseball field back to its normal state actually was quite an undertaking for Steve Bush, a Rock Island County Farm Bureau board member, and his company, Bush Sports Turf of Milan. Wrigley Field in November was transformed into a football stadium for the first time since December 1970 — when the Chicago Bears last played there — to host the 104th football game between the University of Illinois and Northwestern University (the two teams prior to Nov. 20 hadn’t played at Wrigley since Oct. 27, 1923). When the most recent game ended, a 48-27 victory for the Illini, Bush and his company went to work. “We started the Monday of Thanksgiving week, and it took less than two weeks (to complete the baseball field) even though we had snow, ice, and all kinds of weather to contend with,� Bush said.

Bush Sports Turf specializes in rebuilding sports fields to exact specifications. The company previously had installed sports fields at numerous colleges, minor league baseball stadiums, and two years ago renovated the field at Dodger Stadium in Los Angeles for the World Baseball Classic. “We have the most sophisticated technology (including global positioning sysSteve Bush tems and lasers) in the industry,� said Bush, who also puts his U of I degree in agronomy to work in the turf industry. “We mapped the field and did a lot of soil analysis at Wrigley (which led to the addition of a clay material when the new sod was installed),� he noted. “The field should play better next season.� Bush farms with his wife, Julie, but the turf company has grown to about 80 percent of his business. He entered the turf business when he bought a grass seeder and started doing small, residential jobs. “I was just looking for an alternative way to supplement my income,� Bush said. “In college, I had no idea this occupation even existed.� Bush’s big break came when

his company was selected to install sod for the TPC Deere Run golf course in Silvis, which is the site of the John Deere Classic PGA tour event. THE TURF INDUSTRY also turned out to be a great way for Freeman Seed Co. of Woodson in Morgan County to expand its business. “Our family has grown certified seed since the 1940s,� said Jon Freeman, owner and operator of Freeman Seed Co. and president of the Cass-Morgan Farm Bureau. “In the early 1980s, we put in a condiJon Freeman tioning plant and started selling grass seed.� Freeman Seed Co. sells a full line of pasture seed, seed mixes for Conservation Reserve Program ground, and native grasses in addition to corn, soybean, and wheat seed. The grass seed business has

Workers strip the old sod off the playing surface at Wrigley Field during recent renovation work. Bush Sports Turf of Milan mapped the field and put in new turf after the field was used to host a college football game Nov. 20. Workers prior to the pigskin game between Illinois and Northwestern stripped 1.75 inches of skin off the infield, removed three rows of seats, and filled in large areas with sand to set up the football field. Bush Sports Turf with its precision equipment returned the field to its baseball specifications less than two weeks after the football game. (Photos courtesy of Bush Sports Turf)

grown to represent about 30 percent of the operation. The turf grass seed mostly is grown out of state, but Freeman sells all of the seed in its Illinois territory. “It’s another service we

have along with corn, beans, and wheat,� he added. “It works out pretty well.� The seed industry also provided an opportunity for Freeman’s son, Jacob, to return to the family farm/business.

A worker with Bush Sports Turf of Milan drives a tractor pulling GPS-controlled grading equipment during the renovation work of the Wrigley Field playing surface.

Extension plans soil fertility workshop University of Illinois Extension will host a soil fertility workshop Feb. 15 in the Tazewell County Extension office, Pekin. The pre-registration deadline is Feb. 8. The program will run from 9 a.m. to 2 p.m. Speakers and topics include: Fabian Fernandez, U of I Extension soil fertility specialist, micronutrients for corn; Peter Scharf, University of Missouri Extension soil specialist, supplemental nitrogen; Matt Mont-

gomery, U of I Extension, the potash cycle; Robert Bellm, U of I Extension, phosphorus needs of major crops; and Mike Roegge, U of I Extension, nutrient deficiencies. The registration fee is $40 per person. After Feb. 8, the fee increases to $50. Late registrations will be accepted only by calling the Mason County Extension Office at 309-543-3308. To register for the workshop, contact your local Extension office.

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FarmWeek Page 6 Monday, January 3, 2011

AFBF MEETING

Portable safety at crux of new Farmer Idea Exchange winner BY MARTIN ROSS FarmWeek

Challenges often fuel farm innovation, from a desire to improve the financial bottom line to that niggling little need no manufacturer or supplier has bothered to address. Rory Frick was motivated to make the farm just a little safer, literally one step at a time. Frick’s lightweight, multifunctional ladder was one of this year’s two Farm Bureau Farmer Idea Exchange winners and will be highlighted at the American Farm Bureau Federation annual meeting next week in Atlanta, Ga. Frick hopes to offer the portable ladder commercially by mid-2011. The Aledo man works at

General Grind and Machine, which manufactures shafts and other parts for Case-IH, Deere, and Caterpillar. He also assists his father, brother, and a neighbor in their farming operations. Frick was loading and unloading a flatbed truck when

FarmWeekNow.com Learn more about AFBF’s Idea Exchange program at FarmWeekNow.com.

the need for an easier way to do the task surfaced and his Farmer Idea Exchange idea dawned 2 1/2 years ago. His ladder is designed largely for farm equipment entry and exit and other general tasks, but

because falls rank among the top causes of grain-related fatalities, Frick’s ladder, which adjusts to various heights, could provide farmers a more surefooted ascent than the current fixed, vertical ladders. No matter at what angle the ladder is placed, the treads remain parallel to the working surface and offer greater safety. But getting into the bin is only half the story, according to Frick. “This could offer a solution to keep children from having access to these types of places” because the ladder is easily removed, he told FarmWeek. “Here in the farming sector, as the average age of the farmer rises, this is going to immensely

assist these farmers. “Accidents happen every day on these equipment access ladders. In addition, this can assist the physically challenged.” IFB also recognized repeat Idea Exchange inventor Richard Layden of Hoopeston, who developed a vented drip-free pour spout for hydraulic fluid, antifreeze, or other substances. New Holland co-sponsors the annual exchange. To make his concept a reality, Frick approached Kirk Nelson of Missman Stanley and Associates, a Quad Cities-based engineering firm. Nelson, a structural engineer, recalled seeing “a ton of applications for this thing,” and he and Frick refined design details and

developed practical working models in an attempt to develop a marketable product. Frick and his son welded the prototype in their garage, using about $200 in materials. Nelson added touches needed to ensure the ladder complied with U.S. Occupational Safety and Health Administration (OSHA) standards. For example, under OSHA rules, a ladder rated as safe for a 300-pound load must be designed to bear four times that weight. At the same time, Nelson has worked to reduce the product’s overall weight, to ensure it is “truly portable,” the engineer said. The ladder can be folded to a roughly two-inch height and transported using add-on creeper wheels. The original ladder was fabricated from aluminum, but Frick and Nelson are eyeing fiberglass and other materials for even greater portability. “We’ll let the application dictate materials used,” Frick suggested. Fiberglass offers another key advantage over aluminum, especially around stored grain. Electrocution is another major hazard in and around bins, and OSHA has pushed contractors to replace metal with non-conducting materials in equipment used around power lines. Despite the apparent simplicity of Frick’s ladder, its inventor sees it as a big idea for larger farming operations. “As the equipment gets larger and taller, there’s just a huge need for something of this nature,” Frick maintained.

IMPA to host dairy meetings A new educational dairy program, “Strategic Solutions,” developed by the Illinois Milk Producers Association (IMPA) is available to dairy producers. The program will be offered on three dates at three different locations throughout the state. Producers may attend on Tuesday, Jan. 25, at Kaskaskia College in Centralia; Wednesday, Jan. 26, at the IAA Building in Bloomington; or Thursday, Jan. 27, at Highland Community College in Freeport. Registration for all meetings will begin at 9:30 a.m. The meetings will run from 10 a.m. to 3 p.m. Speakers will include Mike Hutjens, Dave Fischer, Mark Tegeler, Jim Fraley, and a panel of dairy experts. Commercial exhibits will be on display. Registration is $12 before Jan. 14 or $15 after that date. To register, contact Nicole at IMPA at 309-557-3343. For more information, go to {www.illinoismilk.org}.


Page 7 Monday, January 3, 2011 FarmWeek

MARKETS

USDA economist: Food prices poised to rise in 2011 BY DANIEL GRANT FarmWeek

The run-up in food prices the second half of 2010 may be just a taste of what consumers can expect in 2011. Ephraim Leibtag, senior economist with the USDA Food Markets Branch, believes food prices this year at the very least will return to normal inflationary rates of between 2 and 3 percent after a down year in 2010. “We’re projecting a return to the normal range (of food price inflation),” Leibtag told FarmWeek. “But

there is potential for going above that if factors experienced in 2008 begin to reform. That’s the upside risk we face.” Food prices in June 2008 shot to historic highs due in part to crop shortfalls in some parts of the world, strong demand, and a spike in commodity prices that briefly pushed corn futures above $7 per bushel and crude oil to an all-time high of $147 per barrel. At least part of that scenario seems to be playing out again. Commodity prices in recent months have trended

Biodiesel industry primed to gear back up BY MARTIN ROSS FarmWeek

With federal biodiesel incentives finally back on track, the industry is working to ensure fuel blenders of all sizes can meet the new year’s biofuels targets. Congress last month retroactively restored the $1-per-gallon biodiesel blenders tax credit that expired a year ago, making biodiesel use once again competitive relative to the cost of petroleum diesel. National Biodiesel Board (NBB) spokesman Kaleb Little told FarmWeek that despite an industry slowdown over the past year, the industry now should be in a “good position” to meet new demand under the federal renewable fuel ‘We think the standard (RFS2) program. The U.S. Environmental Protection biodiesel industr y has the proAgency set an 800-million-gallon RFS2 goal for “biomassduction capacity.’ based” biodiesel use in 2011. The industry generated nearly that volume from soy and — Alicia Clancy other sources in 2008, and “we Renewable Energy Group think the biodiesel industry has the production capacity and the ability to produce that much product,” said Alicia Clancy, whose Renewable Energy Group runs a Danville biodiesel facility. Just prior to Christmas, a Washington U.S. district appeals court denied a National Petrochemical Refiners Association/American Petroleum Institute petition challenging RFS2 implementation. The ruling “sends a clear, unambiguous signal to the marketplace that the common-sense renewable goals established in the RFS2 program will be met,” saids NBB Vice President for Federal Affairs Manning Feraci. Clancy sees biodiesel producers further recouping through eligibility for EPA’s separate 1.35-billion-gallon “advanced biofuels” target. That category eventually will include green fuels from feedstocks beyond corn and beans, but biodiesel today is the only commercial option for fuel suppliers seeking to fulfill advanced biofuels obligations. That, combined with Illinois’ tax benefits for use of 11 percent biodiesel fuel, offers diesel distributors “multiple opportunities for profit,” Clancy said. At the same time, as surviving plants prepare to ramp up production to at least pre-2010 levels, Little suggested supplies could be somewhat tight, especially in early 2011. “We urge petroleum industry leaders who are looking to blend biodiesel in 2011 to make those decisions earlier rather than later,” Clancy told FarmWeek. “As we go forward and large obligated parties look to make large-volume purchasing decisions, we want to make sure that the middle-sized distributors — especially those distributors in Illinois — get the product when and where they need it.”

higher and last month reached two-year highs above $6 per bushel for corn

The Food Price Index measured by the United Nations’ Food and Agricul-

‘Prices already are rising in various meat categories, and they probably will continue to do so in 2011.’ — Ephraim Leibtag USDA economist

futures and $91 per barrel for crude oil. “That (higher commodity prices) had an impact on food prices the last few months,” Leibtag said. “Prices already are rising in various meat categories, and they probably will continue to do so in 2011.”

ture Organization (FAO) from October to November increased seven points and was just seven points shy of its record high of two years ago. The rise in the index, which measures the prices of an international basket of commodities, was driven in large

part by higher prices of sugar and oils, according to the FAO. Higher commodity prices may have the biggest impact on meat at the retail level. USDA recently projected retail prices this year could increase by 3 to 4 percent for pork and 2.5 to 3.5 percent for beef. The livestock industry currently is facing higher feed, input, and transportation costs. Smaller herds and a jump in U.S. meat exports also could keep pressure on meat prices. Overall, food prices in 2010 were weaker than expected due to a sluggish start to the year as many countries still were battling or recovering from economic recession, according to Leibtag.

IDOA administering new pet info law The Illinois Department of Agriculture (IDOA) is administering a new law that took effect Jan. 1 and protects consumers by requiring pet stores, animal shelters, and animal control agencies to disclose certain information before dogs or cats are sold or adopted. “Consumers have a right to know where an animal was bred or whether it has chronic medical problems before they buy it,” said Illinois Agriculture Director Tom Jennings. Last year, Gov. Pat Quinn signed HB 5772 that requires pet stores, animal shelters, and animal control agencies to post the following

information on or near an animal’s cage: • Breed, age, date of birth, sex, and color; • Details of vaccinations and health history; • The breeder’s name, address, and identification number; • Details of any inoculation or medical treatment received while at the facility Consumers also must receive a copy of the information at the time of purchase. The law takes into account the fact that animal shelters and control agencies may not have an animal’s complete medical history and allows estimates of some information.


FarmWeek Page 8 Monday, January 3, 2011

FROM THE COUNTIES

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ROWN — The annual meeting will be at 6:30 p.m. Wednesday, Jan. 19, at the Knights of Columbus Hall, Mt. Sterling. Retired Judge David Slocum will be the speaker. Tickets are $6.50 and are available at the Farm Bureau office. Call the Farm Bureau office at 217-773-2634 for reservations. UREAU — Bureau and Lee County Farm Bureaus will sponsor a bus trip Thursday, Jan. 27, to Chicago. Tours will include the Chicago Board of Trade, Federal Reserve Bank, Willis Tower, and the Cook County Sheriff Department’s greenhouse project. Cost is $55 for members and $60 for non-members. Call the Farm Bureau office by Monday, Jan. 10, for reservations or more information. HAMPAIGN — Illinois Farm Bureau District 12 Young Leaders will host the seventh annual Illini Farm Toy Show Jan. 7-9 at the Holiday Inn, Urbana. Open room trading, farm toy consignment live auction, and a sanctioned kiddie tractor pull are among the events. Adult admission is $3 (cost includes admission for Friday and Saturday), child admission ages 6-12

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is $2, and children under the age of 6 are free. Free admission is available on Sunday with a free-will donation for local Ag in the Classroom programs. For more information, contact Alan Chesnut at 217247-2644 or Kurt Wolken at 217-202-2730 or the Champaign, Douglas, or Vermillion County Farm Bureaus. More information can be found at {www.ccfarmbureau.com}. OLES — The Coles County Farm Bureau annual meeting will be Monday, Jan. 17, at 5:30 p.m. at the East Harrison St. Church of God. Cost is $8 per person. The meal will be catered by Cody’s, and Wes Wheeler will provide the entertainment. Contact the office at 345-3276 or your township director by Jan. 10 for tickets or more information. • Family bowling will be held on Saturday, Jan. 22, at the Charleston Lanes, 1310 E Street, Charleston. Registration will begin at 3 p.m. with bowling to follow. The cost for is $2.50 per game, and shoe rental is $2 a pair. Contact the office at 345-3276 by Jan. 20. ASALLE — An informational meeting on

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organizing a Women’s Committee will be at 7 p.m. Thursday at the LaSalle County Extension office. Call the Farm Bureau office at 815-433-0371 for more information. EE — Lee, Ogle, and Whiteside County Farm Bureaus, and Sauk Valley Bank will sponsor a family farms transition dinner program at 6 p.m. Tuesday, Jan. 25, at the Post House, Dixon. Ron Hansen, University of Nebraska, will be the speaker. Call the Farm Bureau office at 8573531 or e-mail leecfb@comcast.net for reservations by Friday, Jan. 14. • The Young Leaders will attend a Rockford Ice Hogs hockey game Saturday, Feb. 5. Tickets are $11. Call the Farm Bureau office at 857-3531 or email leecfb@comcast.net by Friday, Jan. 14, for reservations or more information. ERCER — The Marketing Committee will sponsor its winter market outlook program at 7 p.m. Thursday, Jan. 13, at the Farm Bureau office. Dale Durchholz, AgriVisor LLC, will be the speaker. Call the Farm Bureau office at 309-582-5116 for more information.

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• The annual meeting will be at 5:30 p.m. Thursday, Jan. 27, at the VFW Hall, Aledo. A pork chop dinner will be served. Cost is $3. Call the Farm Bureau office at 309-5825116 by Friday, Jan. 21, for reservations or more information. • A variety of nuts and candy is available at the Farm Bureau office. TARK — The annual Young Farmers’ blood drive will be from noon to 6 p.m. Friday, Jan. 14, at the Toulon Congregational Church. Donors and volunteers are needed. Call the Farm Bureau office at 2867481 for more information or to volunteer. ERMILION — The seventh annual Illini Farm Toy Show will be held Jan. 7-9, at the Urbana Holiday Inn. Show hours are 5–9 p.m. Friday; 9 a.m.–5 p.m. Saturday; and 9 a.m.–2 p.m. Sunday. Special events on Saturday include a farm toy consignment live auction at 9 a.m., and a sanctioned pedal tractor pull at noon. Contact Alan Chesnut at 217-247-2644 or Kurt Wolken at 217-202-2730 for exhibitor or auction information. • The Market Outlook Seminar, sponsored with WITY, will be Monday, Jan. 17, at 9:30 a.m. in the Farm Bureau auditorium. Panelists Paul Coolley with ADM Investor Services, Pete Manhart with Bates Commodities, and Matt Payne with The Andersons will give their outlook on the markets for the coming year. AYNE — The Wayne County Farm Bureau will sponsor an ag contracts

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seminar on Tuesday, Jan. 25. Laura Harmon, Illinois Farm Bureau senior counsel, will be the featured speaker. Harmon will cover farm leases, utility rights-of-way, mineral rights leases, and other topics. The program will be at 1 p.m. in the meeting room of the Wayne County Farm Bureau. Pre-registration is requested by calling 618-842-3342. Go to {www.waynecfb.com} for more information. HITE — The 90th annual meeting of the White County Farm Bureau will be Saturday, Jan. 15, at 10:30 a.m. in the meeting room of the White County Farm Bureau Building. Call 618-3828512 by Friday to register. Go to {www.whitecfb.com/press/an nualmtg.html} to read the notice of the meeting. OODFORD — A Young Leader meeting will be at 7 p.m. Tuesday, Jan. 11, at the Farm Bureau office. The meeting is open to all Farm Bureau members 35 years of age or younger. Call the Farm Bureau office at 4372347 for more information. • An informational meeting on the spill prevention, control, and countermeasurers ruling regarding oil and fuel storage will be at 1 p.m. Wednesday, Jan. 12, at the Farm Bureau office. Don Herring, Evergreen FS, will be the speaker. Call the Farm Bureau office for more information.

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“From the counties� items are submitted by county Farm Bureau managers. If you have an event or activity open to all members, contact your county Farm Bureau manager.

Webinars to guide direct farm businesses through legal maze

MAZIMIZING EVERY ACRE

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University of Illinois Extension offices across the state will host the “Managing Legal Risks in the Direct Farm Business� webinar from 6 to 7:30 p.m. Jan. 25 with a follow-up session from 6 to 7:30 p.m. March 3. A. Bryan Endres, U of I associate professor of agricultural law, and attorney Nicholas Johnson developed the webinar to clarify some of the unique legal issues pertaining to direct farm businesses and to guide direct farm business owners through the maze of laws. Webinars will be held at 20 locations across the state. For a complete list and to register, go online to {https://webs.ex-tension.uiuc.edu/registration/default.cfm?RegistrationI D=5162}. Information also is available by contacting the U of I’s Deborah Cavanaugh-Grant at cvnghgrn@illinois.edu or 217968-5583.

Webinar presenters will look at general business topics such as taxation; labor and employment; business planning and setup; and rules and regulations that apply to such specific direct farm business products as dairy, eggs, grains, honey, livestock and poultry, fruits and vegetables, and organic produce. They also will touch on other legal issues that may arise in the context of establishing and operating a direct farm business. The follow-up webinar March 3 will address questions that surfaced in the first webinar and provide participants an opportunity to ask additional questions. The webinars are sponsored by the Illinois Council on Food and Agricultural Research (CFAR), North Central Risk Management Center, and the U of I Extension.


Page 9 Monday, January 3, 2011 FarmWeek

COMMODITIES

U.S. swine inventory declines, margins tighten BY DANIEL GRANT FarmWeek

Margins for hog producers have tightened to the point that many currently are in red ink. But strong hog prices for much of 2010 combined with a generally bullish price outlook this year should allow many producers to turn a profit for 2010 as a whole and possibly 2011, according to ag economists who last week took part in a teleconference hosted by the National Pork Board. “It’s been a good year (despite recent losses tied to higher feed costs and lower hog prices),” John Nalivka of Sterling Marketing in Vale, Ore., said last week after

release of the USDA quarterly hogs and pigs report. “Margins for producers (in 2010) averaged $22 to $23 per head, and at the same time packers averaged nearly $11 per head.” Strong hog prices for much of this year had U.S. producers as of last week on track to make a total of $2.3 billion in 2010 compared with $2 billion in losses in 2009. Margins this year could be cut in half as the breakeven price could move from an average of about $63 per hundredweight in 2010 to $75. But Nalivka still believes producers this year could make about $10 per head despite the fact that

Turf/forage sales projected to grow The grass could be greener in the new year for sales of turf and forage products. Dave Gentry, forage/turf retail products manager for GROWMARK, recently predicted sales of turf and turf-related products will grow this year as economic conditions improve in the U.S. “The economy has taken a hard toll on the turf business in general,” Gentry said. “But I think we’ll see some improvement (this year).” Many private landowners and municipalities the past two years reduced or eliminated fertilizer and weed control programs for everything from private lawns and parks to sports playing fields to save money, according to Gentry. As a result, many of turf-related products could be in high demand. GROWMARK carries a full line of seed, fertilizer, pesticide, erosion control, and soil amendment products. “A lot of lawns are in very bad shape,” Gentry said. “We anticipate an improvement in seed and fertilizer sales as many homeowners, schools, and park districts get their lawns or fields back into condition.” The National Association of Realtors last month reported existing home sales rose 5.6 percent in November, which resumed a growth trend since the market bottomed out in July. It predicted the uptrend in home sales will continue this year, which could help boost sales in the turf industry. Those returning to the turf and turf products market should find a good supply. “We’ve gone through a couple years of limited usage,” Gentry said. “So the inventory is good, and prices are as good as they’ve been in three or four years.” There is limited grass seed production in Illinois as most is sourced from Oregon. GROWMARK also sources grass seed from Minnesota, northern Idaho, and eastern Washington. — Daniel Grant

USDA offers conservation funding to organic, transitioning farmers USDA again will provide funding to help organic farmers and those transitioning to organic production implement resource conservation practices on their agricultural operations. Applications are being accepted on a continuous basis, but the first cutoff is scheduled for March 4. This is the third year of USDA’s Organic Initiative, and up to an aggregate $50 million is available for farmers to plan and implement conservation practices that address natural resource concerns that are consistent with organic production. The funding is provided through the Environmental Quality Incentives Program (EQIP), a voluntary conservation program administered by the Natural Resources Conservation Service (NRCS). Eligible farmers include those certified through USDA’s National Organic Program, those transitioning to certified organic production, and those who meet organic standards but are exempt from certification because their gross annual organic sales are less than $5,000. Farmers interested in applying for funding must submit applications through their local NRCS service center.

corn futures last week were above $6 per bushel. Joe Kerns of the International Agribusiness Group in Ames, Iowa, agreed. “I’m looking for a slight profit (this year) based on strong prices in the summer months,” he said. Nalivka, Kerns, and Karl Skold of Westside Economics in Omaha, Neb., projected hog prices this year could average between $73 and $75 per hundredweight in the first quarter, $84 and $90 in the second quarter, $84 and $90 in the third quarter, and $73 to $80 in the fourth quarter. The strong hog price projections were based in part on solid demand and tightening supplies. USDA last week reported the inventory of all hogs and pigs in the U.S. as of Dec. 1 totaled 64.3 million head, down 1 percent from last year. The breeding herd inventory (5.78 million head) and market hog inventory (58.5 million head) also were down 1 percent, which is about what traders expected. The only surprise of the

report was that intended farrowings were projected to decline 1 percent in the first quarter and 2 percent in the second quarter. Pre-report estimates called for a slight increase in farrowings. “We aren’t going to see much growth with an extremely tight feed situation,” Skold said. “If

anything, feed prices could go up.” The trend was different in Illinois, though, as the inventory of hogs and pigs as of Dec. 1 (4.3 million) and the number of market hogs (3.82 million) each was up 1 percent compared to a year ago. The number of breeding hogs in Illinois was steady in the latest report at 480,000.


FarmWeek Page 10 Monday, January 3, 2011

PROFITABILITY

Market outlook: Energy price volatility likely in 2011 BY RANDY MILLER

Welcome to 2011! I wonder what surprises lie ahead in the new year? From a heating standpoint, winter feels like it should be half over, but officially it’s just getting started. In 2010, crude oil prices traded between $70 and $90 a barrel for the most part, the smallest range in a number of years. It doesn’t seem as though energy price Randy Miller volatility has changed much, even if the numbers show differently. With respect to propane, demand continues to be a roller coaster ride with the lack of grain drying and above-normal temperatures this fall stifling demand. However, looking at heating degree days, December has broken the string of warmerthan-normal months. This December was the coldest in the Midwest in the last five years. Chemical industry demand for propane was strong in 2010; however, demand has been declining as the industry takes advantage of other feedstocks. World demand likely will keep exports at a record pace in 2011. The National Weather Ser-

vice released its weather prediction for the remainder of the winter, January through March, suggesting near-normal temperatures for the Midwest with below-normal temperatures in the West. If the forecast is correct, the South promises to be above normal. With this in mind, current propane inventories should be adequate to get us through the winter season. Propane

BY DANIEL GRANT FarmWeek

It appears Illinois cash rental rates in 2011 will continue an upward trend. And that means farmers likely will have to absorb or manage more risk moving forward, according to Nick Paulson, University of Illinois ag economist. “There has been a shift away from share rental agreements to cash rent agreements in Illinois, resulting in greater farm-level risk exposure,” said Paulson, who was a featured speaker recently at the Illinois Farm Economics Summit in Bloomington. The portion of Illinois crop acres in share rental agreements declined from 48 percent in 1997 to 37 percent in 2009 while the portion of acres in cash rent agreements increased

Feeder pig prices reported to USDA*

Weight 10 lbs. 40 lbs. 50 lbs. Receipts

Range Per Head Weighted Ave. Price n/a n/a n/a n/a n/a n/a This Week Last Week n/a n/a *Eastern Corn Belt prices picked up at seller’s farm

Eastern Corn Belt direct hogs (plant delivered) (Prices $ per hundredweight) This week Prev. week $70.17 $67.15 $50.48 $48.49

Change 3.02 1.99

USDA five-state area slaughter cattle price Steers Heifers

This week $106.35 $106.35

high level for the season. World crude demand appears strong, and forecasts for 2011 call for continued demand growth. Volatility looks to be back in the energy picture. What to do? Forward contracts continue to be the best tool to manage volatility and uncertainty in today’s marketplace. Also, taking advantage of your retailer’s even-payment plan helps your cash flow by spreading your costs

evenly over the entire season. If you’re not already enjoying these services, be sure to follow up with your local FS member cooperative this spring for its contracting and even-pay programs, and take the worry out of next year’s heating season. Randy Miller is GROWMARK’s director of propane operations. His e-mail address is rmiller@growmark.com.

Risky business: Cash rents projected to climb

M A R K E T FA C T S

Carcass Live

inventories have just recently fallen below five-year average levels. December demand caused U.S. total propane inventory as of this writing to fall by 7 million barrels to 57.5 million, while Midwest stocks have fallen 5 million barrels over the same period to 24.8 million barrels. All this being said, look for propane prices to follow crude. Both crude and propane ended 2010 near their

(Thursday’s price) Prv. week Change $103.34 3.01 $103.36 2.99

CME feeder cattle index — 600-800 Lbs. This is a composite price of feeder cattle transactions in 27 states. (Prices $ per hundredweight) Prev. week Change 119.48 2.85

This week 122.33

Lamb prices Slaughter Prices - Negotiated, Live, wooled and shorn 115-180 lbs. for 130165 $/cwt., dressed, no sales reported.

Export inspections (Million bushels)

Week ending Soybeans Wheat Corn 12-23-10 23.3 17.5 32.6 12-16-10 52.4 25.8 30.9 Last year 63.3 11.4 31.6 Season total 756.9 636.4 541.8 Previous season total 712.9 481.9 519.6 USDA projected total 1570 1250 1950 Crop marketing year began June 1 for wheat and Sept. 1 for corn and soybeans.

‘ U n d e r a c a s h r e n t a gr e e m e n t , t h e far mer bears all the production and price risk.’ — Nick Paulson University of Illinois ag economist

from 25 percent to 40 percent during the same period. The increased use of cash rent agreements along with higher prices — the average cash rent payment in Illinois from 1990 to 2010 increased by about 70 percent — has made farming an even riskier business despite higher commodity prices, according to the economist. “Under a cash rent agreement, the farmer bears all the production and price risk,” Paulson said. “While economic theory suggests farmers should earn a premium for taking additional risk, lower farm returns have been linked to Illinois farms which cash rent a significant

portion of their total acreage.” This year Paulson predicted cash rents will climb due in large part to historically high land prices and commodity futures prices that last week rallied to two-year highs. Land prices have more than tripled since 1990, Paulson said. “Generally, in a period of increasing land values, we see cash rents increase,” Paulson said. But what about the economics of aggressive cash rent bids as high as $300 to $400plus per acre when land costs already represent about 30 percent of total production costs?

“Are these levels justified from a producers’ perspective,” Paulson said. “In 2011, it looks like the income may be there to support those.” However, higher cash rents in the long-term could set farmers up for significant financial stress. Gary Schnitkey, University of Illinois Extension farm management specialist, believes current commodity prices are an extreme rather than the new norm. “Don’t base long-run cash rent and land purchase decisions on current (commodity) prices,” Schnitkey said. “2011 looks pretty good for (farm) income, but in the longer run I don’t look for prices to stay where they’re at.” Schnitkey believes the new plateau for crop prices is closer to $4 per bushel for corn and $10 for beans. Paulson suggested farmers in the future attempt to negotiate variable cash rent or some form of hybrid leases with landowners to spread risk between both parties.

U of I ACES sees first graduates from new science master’s program College of Agricultural, Consumer, and Environmental Sciences (ACES) students recently were the first University of Illinois graduates from a new professional science master’s (PSM) program that combines study of science and business. Three students graduated with master’s degrees in agricultural production, two in food science and human nutrition, and six in bioenergy. They graduated from ACES in cooperation with the U of I Graduate College. The non-thesis program enables students to gain graduate training in a scientific discipline with a business component. The business curriculum includes such courses as technology management, marketing,

entrepreneurship, and people and technology at work. “We’re excited to have the first students to graduate from this new program that combines a superb education in science with training in management, business, and professional leadership,” said Laurie Kramer, ACES associate dean for academic programs. Students complete the program in 16 months of full-time study on the Urbana-Champaign campus and complete a summer internship with a relevant business or organization. “The PSM has provided me with enough general knowledge about bioenergy to be able to compare and evaluate different technologies and focus on what I believe is most viable,” said

Derek Latil, a bioenergy graduate. “With a huge amount of courses to choose from, any possible aspect of the bioenergy system is covered.” In August, a PSM program in technical systems management will be launched. Students will be prepared to solve problems in systems that involve the application, management, and marketing of ag engineering technology. Applications are available at {http://psm.illinois.edu}. For more information about the program, including admissions requirements, go to {http://psm.illinois.edu/} or contact Natalie Bosecker, the program’s coordinator, at natalieb@illinois.edu or 217-244-9273.


FarmWeek Page 11 Monday, January 3, 2011

PROFITABILITY Corn Strategy

C A S H S T R AT E G I S T

Long-term cycle lows looming Amid the prevailing bullish optimism at the end of 2010, one needs to recognize longterm price cycles in a number of markets suggest those trends may not follow through in 2011. The pending three-year and nine-year lows on the CCI (Continuous Commodity Index) may be the most important cyclic feature, especially the nine-year one. Usually when that index has risen as far as it has, and there’s a major low on the horizon, it has a significant break into that low. Currently, that index of commodity prices is at 617, slightly higher than the 2008 peak at 615. Just six months ago, it was at 447, and it was at 323 when the three-year cycle last bottomed at the end of 2008. The fact that a nine-year low is due for this index, along with the three-year low, makes the risk of commodity prices turning down sometime in the early part of 2011 even more

Basis charts

ominous. And once it does, there’s little technical support until it gets near the 504 high it had to start 2010. That implies a significant decline in commodity prices, grains included. A lot of commodities other than grain contributed to the rise in commodity indices in 2010 — coffee, sugar, lumber, copper, gold, silver, cotton, and cattle, among others. Still, grain markets played their part in the rise with corn, soybeans, and wheat all rising nearly 50 percent from where they started 2010. And all three have long-term cycle lows due in 2011 as well. Of them, the lows for the 5 1/2-year cycle for corn, and six-year cycle for wheat may be more important than the two- and three-year cycle lows for soybeans. The corn/wheat lows tend to be more dynamic. On soybeans, sometimes the price implications of the two shorter cycles can somewhat offset each other. But, having said that, if commodity prices in general decline, soybean prices will as well. And the relatively close proximity should have both exerting a downward pull on prices. An unknown is whether markets will make new highs before they turn down, and how long any strength might last before the cycles pull prices lower. At some point, though, commodity prices will turn lower. On the graphic, we’ve laid out potential timing for the lows on these longer-term cycles, but the actual low can be as much as 10 percent early or 10 percent late compared to the actual bottom. On the three-year cycle, that’s a sevento eight-month-wide window. AgriVisor endorses crop insurance by

AgriVisor LLC 1701 N. Towanda Avenue PO Box 2500 Bloomington IL 61702-2901 309-557-3147 AgriVisor LLC is not liable for any damages which anyone may sustain by reason of inaccuracy or inadequacy of information provided herein, any error of judgment involving any projections, recommendations, or advice or any other act of omission.

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2010 crop: Behind outside influences and Argentine weather, the corn market was able to move to new highs of the year. But in the process, the action may have positioned it to complete the move up off 2009 and 2010 lows. With futures above $6, price any bushels you still have other than “gambling bushels”. It still looks like hedge-to-arrive contracts (HTAs)for winter/spring delivery may be the best marketing tool, but check returns against storage costs. 2011 crop: There’s a possibility December futures could move near $6 before it peaks, but if it does, plan to use that to add to sales. Current prices, and gross income per acre, are too high to not make a sale. Get caught up now. Fundamentals: Argentine weather is the primary fundamental focus of the trade. Weather has been hot and dry. If the pattern doesn’t change, that could have serious implications with the crop entering the pollination phase. The latest forecasts suggest some relief is ahead, but forecasters still don’t indicate the pattern is changing.

Soybean Strategy 2010 crop: The soybean market has moved to a level that includes a number of price objectives. Further gains may be mostly dependant on Argentine weather. Use current prices to sell soybeans, other than what you want to gamble with. 2011 crop: There’s still a chance new-crop prices could move as high as old-crop prices, but that may not come, if it does, until late winter/spring. Because November futures may have completed the move up off the summer low, we urge you to get caught up now. Fundamentals: Argentine weather is the primary ingredient supporting soybean prices. The latest forecasts include a possible shift, but traders won’t react to that until a change is more certain. Chinese demand continues to garner some attention, but there are an increasing number of negatives cropping up in that sector. Meanwhile, U.S. crush margins remain

extremely poor, making that sector a drag on the ability of prices to move higher.

Wheat Strategy 2010 crop: Outside market influences and persistent weather concern for the Southern Plains are holding wheat prices at the year’s highs. Major fundamental influences have not changed much. Production for 2011, here and in the world, is the biggest unknown. You still should wrap up sales if you have inventory. Because of the big futures carry, HTA contracts for winter/spring delivery still appear the best tool.

2011 crop: Use prices above $8.30 on Chicago July 2011 futures for catch-up sales. We’d even consider adding sales because of price, but believe it is too early to go beyond 50 percent. If basis is wide on cash contracts, use a HTA contract. Fundamentals: If winter wheat crops around the world get through winter without having significant winter kill, the prospects for a larger crop will increase, undermining interest in buying wheat at these prices, new crop included. There are pockets of concern, but nothing yet of great significance.


FarmWeek Page 12 Monday, January 3, 2011

PERSPECTIVES

Here’s to our successes in 2010 and to the future ones in 2011

Taste of the future

Sara Lee gives student intern food industry, science insights Editor’s note: : U niversity of Illinois students in the College of Agricultural, Consumer, and Environmental Sciences embark on internship experiences across the county, state, and even the world. As future leaders of the agriculture and food industry, they have agreed to share some of their experiences with FarmWeek readers. Sara Lee Corp., Downers Grove, is more than baked goods; it’s also meats. As a research and development intern, I recently received a food science education and had a wonderful experience. Not only did I gain knowledge about the meats and food industries, but I also made connections with important people who could become my future boss DIANA PEZZA and co-workers. I learned how to guest columnist operate and run new product through the production lines. My internship project involved reformulations of ham and turkey lunch meats. It kept me very busy because I had to reformulate and test many different variables along the way. At the end of my time, my teammates and I presented our project to the leadership board. This was a great real-world experience because we had to be ready to convey as much information as we could about our project and be knowledgeable in all aspects of it. I gained scientific knowledge from simply assisting other research and development scientists. I also developed a better perspective on what the industry is like, discovering challenges along the way that can be thrown at you at any point. I learned whatever can go wrong, will go wrong. In this job — and in life — I learned that I needed a plan B or even a plan C just to get my work done for the day. I had to plan my day around other scientists’ experiments, and if something went wrong with their projects, it caused a ripple effect into

mine. At first, that was frustrating. But I soon realized how important preparation and planning were for every small step of the way. Then it became rewarding and exciting! Without my U of I animal science background, I would not have had such a smooth transition into this internship. Because of my experience in meat science specifically, I stepped right into production with an understanding of how the machines operated, how ingredients function in food, and how to follow standard operating procedures in the Sara Lee test kitchens. My professor, Dr. Tom Carr, had encouraged me to apply for the Sara Lee internship program. I was drawn in by Sara Lee’s diversity and global approach. The company has employees from all over the world. That helped me gain a greater appreciation for other nations’ backgrounds and how they prepare students to enter into this industry. Sara Lee’s employees have many different levels of education from bachelor’s degrees to doctorates. Because of this internship, I have been inspired to try classes outside of my concentration of study. I recommend this experience to anyone interested in the meat or food industry. For me, it was amazing to see how an extremely large and profitable company was run from all aspects of production. Another bonus was taste testing all of the Sara Lee bakery products. Nothing beats a hands-on learning experience. You simply can’t learn everything you’ll need to know in life from a textbook.

As you’ve heard many times before (with an emphasis over the last year), it is extremely important that your voice is heard and that you are engaged in the issues helping to define the future of agriculture. As the current sessions of the Illinois General Assembly and Congress come to a close, we reflect on our many successes. It is your diligence and commitment to agriculture that we attribute to those successes. The recent victory on the estate tax is a model on the effectiveness of your engagement in the issues. The estate tax has been a priority for our organization for a number of years. With the reality of the potential reinstatement of the estate tax at a lower exemption and a higher tax rate, it was time to put the pressure on our U.S. senators in September with a large number of phone calls. Even though there was not a specific piece of legislation or vote scheduled at that time, our message was heard and the foundation had been laid. With the lame duck session convening after the elecTERRY tion, it was time to turn our focus on the actual vote. POPE With such a fluid issue and many unknowns in the legislative process, it is often a quick turnaround to activate the grassroots levels at the right time to the right individuals with the right message. The e-mails to Sen. Dick Durbin and Sen. Mark Kirk reinforced the importance of this issue to their constituents. Then it was time to focus on the House of Representatives. There were several nuances that went into the strategy for this action request. For example, there were four outgoing congressmen with no e-mail communication. Several congressmen already had expressed their support, and several were unsure of their vote. Your efforts were successful, and I commend you! I strongly encourage you to send thank you messages to Senator Durbin and Senator Kirk. If your congressman supported the legislation, please send him or her a thank you also. There are many challenges that are facing us. I also strongly encourage you to begin preparations for the next Illinois General Assembly and Congress. • If you are not a member of FB ACT, please contact your county Farm Bureau or visit {www.ilfb.org/fbact} to learn more about how you can make a difference. • Contact the district offices of your state and federal elected officials and introduce yourself. Take time to get to know the legislative aide or the office manager. • Put the district office phone numbers for your elected officials in your cell phone or post them where you can find them. • Sign up for text alerts for action requests on the FB ACT website. With your commitment to a higher level of engagement, we can achieve much success as we start a new year with new legislative sessions!

Diana Pezza, a senior studying animal sciences, was a Sara Lee intern in Downers Grove.

Terry Pope, an Illinois Farm Bureau director from Burnside, chairs the Illinois Farm Bureau Policy Implementation Working Group.

LETTERS TO THE EDITOR Offers solution for global warming Editor: I was pleasantly surprised to read the two articles in the Dec. 6, 2010, FarmWeek concerning reports by scientists on the causes and projected consequences of climate change, especially in Illinois, at the recent University of Illinois AG Masters Conference. They said that global warming is occurring and is due primarily to increasing levels of carbon dioxide in the atmosphere. They further predict that these conditions will cause problems for Illinois farmers. One scientist, Don Wuebbles, said, “It is clear there is climate change . . . and our children and grandchildren will have to deal with it.” To that I would add: Our generation should do all that it can to slow climate change. I

suggest that the best way for Illinois industrial farmers to do their part is to convert to organic farming, which uses less fossil energy than industrial farming, and thus produces less atmospheric carbon dioxide, and in addition sequesters more of it in the soil. In the same issue of FarmWeek, Chuck Spencer addresses nutrient management by farmers. He concludes, “The appropriate approach should be how we use fewer nutrients per unit of harvest yield.” His answer? “We can all work together to discover the answer to that question.” I suggest that we know the answer to his question. Finally, Daniel Grant in that issue has an article that discusses “Farmer risk grows as costs rise.” I assume that these costs are mainly increasing prices for fertilizers, pesticides, and GMO seeds. I

found no solution offered. I suggest organic farming to greatly reduce these input costs and improve farmers’ profits. HERMAN BROCKMAN, Congerville

Questions need for equine census Editor: The federal government admitted that premises identification (PID) is unworkable. If the government is now interested in “trimming pork,” a good start is PID. When the last equine slaughter plant in the country was forced to close, the feds officially labeled equine as pets. Since pets are not generally considered as food in this country, the question of why any pet would fall under agricultural rule by a government entity has been conveniently ignored. Now we find that Illinois

Farm Bureau delegates have voted to waste tax dollars to perform an equine census. My guess is that a mob of new government employees will be put on the payroll to conduct this census. After the census is over with, new “jobs” will have to be created so they appear to be busy. If equine owners are to be singled out for this census, what about all other pet owners? This mandate reeks of a covert taxation agenda. And it will all be disguised under concerns for animal health. What about all the equine that have been turned loose by owners who can no longer afford to care for them and have virtually no market in which to sell? Common sense tells us if any equine health problem occurs, it will initiate in the feral herd. I recommend you begin your census there, if you

are genuinely concerned about equine health. CHET PEUGH, Chadwick

Letter policy Letters are limited to 300 words and must include a name and address. FarmWeek reserves the right to reject any letter and will not publish political endorsements. All letters are subject to editing, and only an original with a written signature and complete address will be accepted. A daytime telephone number is required for verification, but will not be published. Only one letter per writer will be accepted in a 30-day period. Typed letters are preferred. Send letters to: FarmWeek Letters 1701 Towanda Ave. Bloomington, Ill., 61701


FarmWeek January 3 2011  

FarmWeek January 3 2011

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