DTN Ag Headlines

By Joel Reichenberger
Progressive Farmer Senior Editor

There's so much more now than there was -- more people, more traffic, more buildings -- but Glenn Arnold, 84 years old, stands on a ridge above his family's old homestead in Steamboat Springs, Colorado, and can only focus on what is gone.

"On the corner, that's where our house was," he said on a cool afternoon in autumn, pointing to the edge of a nearly empty parking lot. "There was a small stone building that was a milk house and a couple of cowsheds."

There was a granary, a corral, two chicken coops, and a barn, a towering wooden structure with a green-painted tin roof. It was his family's pride when it was completed in 1928, built by his father, Walter Arnold.

Now, there's a ski resort less than a mile from where the Arnolds' old front door opened, and the spot is surrounded by condos, vacation homes and skier parking. Glenn left to find work in 1958, and, ready to retire after a lifetime battling the Rocky Mountain winters, his family wasn't far behind. His parents sold the land to the burgeoning resort in 1961.

Those old farm buildings eventually vanished. The farmhouse was dismantled, and, soon, the milk house, the cowsheds, the fences and everything else were gone, everything but the barn, which slowly deteriorated as the city and resort expanded and surrounded the lingering reminder of the area's agricultural heritage.

The tin roof began to peel up, and the snow and rain crept inside. Rotting wood fell away from the building's flanks. For a decade, the structure seemed one snowstorm away from collapse.

But, it still stood last autumn when Arnold made his observations, and, thanks to a major local preservation effort, it will continue to stand, not on its foundation of 90 years but 1,000 feet up the road on ground the family used to farm. Now, it will serve as an iconic entryway into the resort.

"Unbelievable," Arnold said after watching crews hoist the barn on a trailer and drive it oh-so-carefully up the road to its new home. "I couldn't have ever imagined this."


A battle to preserve barns is being waged across the country, though measuring the size of the fight is difficult. There's no practical way to count "old" barns, said Jeffrey Marshall, vice president of the National Barn Alliance. Among the thousands that surely do exist, there are no reliable metrics to use in deciding which may be historic and which forgettable.

"The first thing we look at is whether or not the structure is no longer of the current style of what's being built, and, therefore, can it tell us something about our past?" Marshall said.

The National Register of Historic Places lists 656 entries under "barn," including nine in Colorado. To make that list, someone first has to nominate a building, and, generally speaking, it needs to be roughly 50 years old or older. The structure's story can mean much more than its age, however.

Did something significant happen in the barn? Was it a local landmark or otherwise relevant to the local community? Was it built by a noteworthy craftsman or architectural master? Did George Washington sleep there?

Even without any of that history, a structure can still be important.

"These buildings are a part of a cultural landscape," said Marlin R. Ingalls, an architectural historian with the Office of the State Archaeologist at the University of Iowa. "So many people put up steel buildings now, but they don't mean anything. Barns were handmade."

But, catching the interest of a barn enthusiast isn't enough to save a barn. Most are on private property, and even basic restoration or preservation work can be expensive. Often the land could be put to more efficient use.

"I've learned the hard way it's very hard to justify spending the money on a building that's just a big lawn ornament," Marshall said.


The Arnold Barn in Steamboat Springs is not on a list. The Arnold boys -- Glenn, and his two brothers, Harold and Gerald, both deceased -- spent many hours hauling their farm's milk into town to be dropped on the front stoops of houses, but the barn didn't play an overly significant role in the region's history.

It's not even the only notable old barn in town within half a mile. There are two others, both well-preserved. Still, the community would miss it, said Arianthé Stettner, co-chair of the City of Steamboat Springs Historic Preservation Commission and a leader in saving the Arnold Barn. Barns of such an age are vanishing both nationally and in the region. Locally, one collapsed in a 2018 windstorm, and fires destroyed two more during the summer.

"And, we nearly lost this one, too," Stettner said. "It's so wonderful we were able to preserve it."

She helped bring together public and private interests for the cause. Ownership and responsibility of the barn had fallen into legal limbo but was transferred back to the resort in 2017. Private donations and some public money helped first stabilize the structure then facilitate its move, made necessary as development had turned its original location into a marshy wetland.

On regular trips back to Steamboat Springs, Glenn Arnold watched his old family farm slowly disappear. Someday, he assumed, the barn would be gone, too.

He never imagined he'd see the nearly century-old family treasure lifted from its foundation and trucked up the road. In a perfect world, maybe it would have been preserved in its original spot, where the Arnold family milked their cows, but their barn is still standing, and in the world of old barns, that counts as a victory.


Want to save your barn? The experts have some advice:

-- Put any money available into the roof. Nothing will lead to deterioration faster than letting in the rain and snow. "The roof is the building," said architectural historian Marlin R. Ingalls.

-- Consider getting it registered. Many states have barn-preservation organizations, but few have any money. It's not easy getting a building added to the National Register of Historic Places, but that avenue at least allows the potential for grants.

-- Find a use. It's hard to justify keeping an empty, useless building standing, but if that building is generating revenue, it's a different story. Perhaps the neighbor needs to park a boat for the winter? Or, someone is looking for general storage? Check zoning in the area, and, with some refurb work, a barn can be everything from a house to a wedding venue.


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Tom Schwieterman, who grows 750 acres of corn and soybeans near Burkettsville, Ohio, said he had heard about the size of Brazilian soybean farms for years, but didn't understand it.

"You can look in any direction and see wide-open land and planted crops," Schwieterman said. "At home, every place you look you see a house, a barn, a silo. Out there, you just saw wide-open spaces. It's just baffling to see something that huge. It's actually bigger than I thought it would be."

DTN joined a tour of U.S. farmers through parts of Amazonia, Mato Grosso and Parana states in Brazil during the first two weeks in February. Farmers touring Mato Grosso and Parana repeatedly noted their soybean yields were lower than expected, but they had shifted to their second crop, which was either cotton or corn.

After a week touring around the state of Mato Grosso, Brazil, Schwieterman and other Midwest farmers said their eyes were opened to the scale of production, state of technology and the value of U.S. infrastructure at home.

Yaro Chmelar, a Washington, Iowa, farmer and former director for the Iowa Soybean Association, had been in Brazil in 2003 and recalls the expectations then to increase soybean production. "They don't care about out-producing the United States, but want to see everybody sell more to China and more to Europe, and that's what we need to do," Chmelar said.

Chmelar noted the efficiency of Brazilian farmers and their workers moving from harvest to planting a field. "They move quickly from soybeans to corn, or cotton, how they move from harvesting to replanting in 10 days, which we can't do," Chmelar said. "The equipment is humungous, just huge. I'm not a big farmer, but I'm just impressed with the equipment, and I'm also impressed with the people."

Bill Wehmeyer, a retired farmer from Flint Hill, Missouri, who farmed for 37 years in north-central Missouri, also said his immediate takeaway was the size of the farm areas. "I'm sure there are not that many areas of the world that have that much good farm land without some rough areas beside it," Wehmeyer said. "It's impressive. The roads, not so much."

Wehmeyer compared some of the roads to being a bit like "75 years ago in Missouri," given so many were unpaved stretches.

For the volume of product that Brazilian farmers move, Schwieterman was surprised at the lack of railroad crossing Mato Grosso to help more efficiently move commodities to port. "You would think somebody would catch on," Schwieterman said. "When you can pull 100 cars and not just two, it seems to me somebody is missing out on a good thing."

Bob Cook, a farmer from Elkhorn, Wisconsin, who farms continuous corn in the southeast part of the state, said infrastructure was actually better than he expected, noting the roads weren't great but passable. The lack of rail throughout most of Mato Grosso also leads to a vast trucking system that agriculture has created. "They have plenty of freight to move the crop," Cook said. "I always heard it was a seven-day turn to get to port and always wondered how you come up with enough trucks to do that. I got to see how they came up with enough trucks to do that."

"No. 1, they are hauling 2,000 a bushels a crack, and No. 2, there is an abundance of trucks like I have never seen in my life," he said.

Looking at the opportunity for younger farmers to come to Brazil, Cook said he doesn't think there is a huge benefit because quality land is a premium in both the U.S. and Brazil.

"I don't think it's a huge advantage," Cook said. "Probably the only benefit down here is they do have a barter system."

Brazilian farmers talked about the ability to pay for inputs and other products mainly by committing a volume of production to the seller. "All you have to do is worry about how many bags (bushels) per acre you are going to have to produce to cover your input costs," Cook said. "I see that as a huge advantage for someone who doesn't have any capital."

Cook credited Brazilian farmers for stewardship as the country has expanded production by having legal reserve requirements on farms, which vary from state to state and when farm ground was purchased.

"Being here gives me a whole perspective of what it really is," Cook said. "I couldn't wrap my head around it without being here."

The availability of more farmland is there under some scenarios. Native tribes own 1 million hectares (2.47 million acres) of prime ground in parts of Mato Grosso. Brazilian farm experts indicated the tribes are looking more seriously at revenue from putting that land into production.

John Takacs, a hay and straw farmer from Wellington, Ohio, said he got a different view of Brazilian agriculture after expecting to see older combines and technology in the fields. "It's the complete opposite. They are doing everything that we are doing. The organization, the size of the farms, it's all there."

Takacs was also surprised at the scope of the reserve acreage and the emphasis some farmers placed on sustainability practices. At least one farm provided a detailed explanation of its sustainability measures and the importance of those practices to selling soybeans and other commodities to Europe.

"They have some viewpoints that are ahead of us in many ways," Takacs said. "They were all talking about their carbon footprint. It seems like they are well into their sustainability focus."

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

Follow him on Twitter @ChrisClaytonDTN


By Dan Miller
Progressive Farmer Senior Editor

The legend of American agriculture has been one of farmers turning west for new ground -- always west. Mark Lange looked east.

His land, near O'Neill, Nebraska, lay at the edge of the state's Sandhills region. His crops were irrigated by an aquifer in decline. The state already had imposed water restrictions in other counties. Lange was convinced water regulation was coming his way. When that day came, there was no doubt his land value would take a hit. It was time to pick up his stakes and move. He did. Lange found better soils in Iowa.

He was able to sell his 1,500 acres and buy a similar number in west-central Iowa. After the 2012 harvest, the Langes packed up their entire operation and moved to Bagley, Iowa. "For the future of our farm, we thought we should move to a state where we weren't so reliant on irrigation," says Joel Lange, Mark's oldest son. "If we didn't get the inches of water we needed, we weren't going to grow crops." Mark rented the land to Joel and younger brother, Stephen.

Lange Farms Precision Ag was born.


That Joel moved to Iowa or even chose to farm as an adult was not preordained. He had no clear career path back to it. He had enlisted in the Marine Corps Reserve after high school. But, he soon longed to be his own boss -- something a Marine is not.

"I decided I missed the farm," Joel says. His father was eager to see him come back. Mark began to turn over day-to-day operations in 2008.

Joel's goal was straightforward: to farm better. That didn't mean buying a lot more land (the brothers have added 300 acres of their own).

Perhaps it is for the lack of family ties in central Iowa that the Langes feel a bit landlocked. Rents are high around Bagley, and any land that does come up for sale won't likely first come to the attention of the Langes.

But, improving the productivity of the soil they did own might prove to be a better choice, Joel says. "We love taking an average piece of ground and turning it into a high-producing farm."

Iowa rates farm ground by a Corn Suitability Rating (CSR). Joel's Greene County has an average CSR of 75. His actual farm averages 87. In wet years, county and farm yields are close. But, in dry years, his farm averages 30 to 75 bushels per acre above the county average.


So, then, in Joel's mind, "expansion" does not mean he has to farm more acres. "We can expand by making our land more productive," Joel says. "Better water infiltration, high organic levels and better biological activity will get us there." Lange Farms is planning a more aggressive crop rotation plus cover crops to achieve those goals.

Compared to Nebraska, Iowa has significant advantages -- rainfall, heat and humidity. In 2013, 2017 and 2018, the Iowa farm had stretches of 45 to 60 days without rain. Yet, the corn still yielded 200 to 250 bushels.

In Nebraska, irrigation made the Langes' sandy ground productive. In Iowa, pattern tiling and irrigation -- where it can be deployed productively -- turns even marginal ground into significantly higher productive ground. On good ground, 80 CSR and above, Joel finds that pattern tiling increases his yields 15% to 20%.

"With irrigation, we can double production in lower-quality fields," Joel says. Perhaps more than that, really. One farm the Lange brothers purchased had a CSR of 66, well below the county average. They added irrigation to most of it. Dry weather in 2017 hammered the nonirrigated portions of that farm. Yields averaged 30 bushels. Irrigated corn yielded up to 300 bushels.


In addition to close management of production practices, Lange Farms corn and soybeans goes only to value-added markets. "None of our grain goes to an elevator; it all goes to an end user," Joel says. Within 40 miles of the farm, there are four ethanol plants and one tortilla plant. The farm grew non-GMO soybeans last season. My non-GMO beans are going to the SoyPlus facility, in Ralston, Iowa, to make high-bypass protein for dairy feed. "It's giving us a nice $1.50 premium for our crop," Joel says. "That helps a lot when times are tough."

Joel and his wife, Tanner, have four young children, two sets of twin -- three boys and a daughter. If they wish to farm, Joel will preach healthy soils.

He will tell them, "pay attention to the land. Learn more about the land than just about what seed to buy or what equipment to own. Pay attention to soil health. Improve the land that you have. Increase its production. Make it better for the next generation." As he is now.

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

Follow him on Twitter @DMillerPF


Editor's Note:

The Progressive Farmer's Contributing Editor Jim Patrico contributed to this article.

This is the fourth of five profiles of our ninth class of DTN/The Progressive Farmer's America's Best Young Farmers and Ranchers. They represent the future of agriculture through their sense of tradition, use of new technology and business acumen.

To see videos of all the 2019 winners, and for an application for next year, see https://spotlights.dtnpf.com/…


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- The 60-day public comment period for the newly proposed waters of the United States, or WOTUS, rule launched Thursday with the EPA and U.S. Army Corps of Engineers publishing the rule in the Federal Register.

The new rule moves forward while the 2015 rule under the Obama administration remains in legal limbo and essentially in effect in 22 states.

EPA and the Army Corps are on track to finalize the new rule by September, which is likely to trigger a new round of legal challenges.

The publication of the new rule already has drawn praise and outrage from a number of interest groups. The public comment period closes April 15.

In a statement to DTN, American Farm Bureau Federation President Zippy Duvall said the group supports the proposal.

"Today's release of a new draft Clean Water Rule is a major step toward fair and understandable water regulation on America's farms and ranches and other working lands," Duvall said. "We haven't yet examined every word of today's proposal, but even a quick look shows many of the previous rule's worst problems are on their way out."

Agriculture and other industry groups raised concerns that the 2015 rule expanded federal jurisdiction of water and land, leading to a series of lawsuits.

Waters Advocacy Coalition, a lobbying coalition championing the new WOTUS rule, said the process in creating the new rule has been transparent.

"Over the past two years, the EPA and Army Corps have engaged with state, tribal, and local officials as well as affected stakeholders to propose a new clean water rule," spokesman Arjun Mody said in a statement. "This proposed new clean water rule provides clarity on the scope of federal authority under the Clean Water Act and recognizes the primary responsibilities of states and tribes to manage their land and water resources."

In a news release, the Waterkeeper Alliance calls the proposed rule a "treacherous strategy" to eliminate Clean Water Act protections.

"The Trump administration's proposal to eviscerate the Clean Water Act is a gift to polluters and an attack on the civil right of American citizens and our children to live in a safe nation free from exposure to dangerous toxins," Waterkeeper Alliance President Robert F. Kennedy Jr. said in a statement. "History and science have proven that we cannot control pollution or protect our waterways without broad federal protections, and it is imperative for citizens to be able to hold polluters accountable for their misdeeds."

The National Wildlife Federation urged the EPA to rethink its proposed rule, in a news release.

NWF President and Chief Executive Officer Collin O'Mara said the rule represents the "most significant attempt to remove protections" to streams and wetlands.

"At a time when communities across the country are facing drinking water and flooding crises exacerbated by climate change, we call upon the EPA to rescind this misguided proposal that would make it easier to damage our streams and wetlands, destroy fish and wildlife habitat, threaten our communities with increased flooding, and pollute our drinking water," O'Mara stated.

Read the proposed rule here: https://www.federalregister.gov/…

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

Follow him on Twitter @toddneeleyDTN


By Todd Neeley
DTN Staff Reporter

ORLANDO (DTN) -- As the EPA races the clock to complete a rule allowing year-round E15 sales ahead of the summer driving season, if the rule isn't done by June 1, the agency may have to resort to a plan B, USDA's second in command told reporters on Wednesday.

Following a speech to the ethanol industry at the National Ethanol Conference in Orlando, Florida, USDA Deputy Secretary Stephen Censky said his agency had approached EPA and suggested that, if the rule isn't completed in time, EPA could use discretion in restricting E15 use come June 1.

"We really do need -- and again EPA is still working hard and is very committed to getting a final rule in place and having that announced so that can be in place for the summer driving season to allow year-round sales of E15 -- but in the event that they aren't, I know that's one of the things of using enforcement discretion or announcing that the EPA is not going to be forcing folks [to stop selling E15 in several states, and] that the retailers are not in danger of having enforcement actions taken against them," Censky said.

Ethanol and gasoline are both low volatility. When the two fuels are mixed, the volatility spikes, but only at blends just below E10. As more ethanol is blended with gasoline, the vapor pressure decreases, which essentially means E15 reduces vapor pressure.

For years, the ethanol industry has called on the EPA to equalize the Reid vapor pressure (RVP) regulations for E10 and E15 during the summer driving season. Because of those requirements, E15 has largely not been available to some wholesale suppliers and retailers during the summer. The industry has contended that adding 5% more ethanol in the summer would actually reduce tailpipe emissions.

Ethanol increases the RVP, which measures the release of volatile organic compounds into the atmosphere. The RVP for gasoline is the lowest, or most stringent, during the summer months when the weather is hot. E10 currently receives an RVP waiver, which keeps the fuel in compliance with RVP requirements year-round. However, E15 is not given the same waiver, so it can't be sold in the summer.

The EPA regulates RVP for gasoline and gasoline-ethanol blended from June 1 to Sept. 15, restricting the retail sale of ethanol blends above E10.

EPA Acting Administrator Andrew Wheeler has stated the agency intends to have the rule allowing year-round sales of E15 completed by June 1. That also includes the reforms to the biofuels credit market in the same rule.

Ethanol interests have asked EPA to release two separate rules so as to finish E15 by June 1.


Censky told reporters that if EPA elects to use discretion on E15 or finish a final rule, for practical reasons it would need to be completed even earlier.

"I think the exact nature of what that would take coming from EPA, that's really EPA that would issue that," he said. "But from a lot of the conversations we've had in the industry, a lot of the contracting for fuel begins around 30 days ahead of time. In our view, whether you have a final rule or you have some sort of announcement, that has to be coming around by May 1."

Though using discretion on E15 may be a fallback, Censky said it is not the preference.

"That's kind of a plan B. But again, I think the first priority and the preference of everybody, including the EPA, would be to get the rule done," he said.

The recent partial government shutdown, Censky said, makes it even more challenging to complete an E15 rule. That's why the discretion possibility has been raised.

"Certainly, the shutdown set our rulemakings within USDA back, it set EPA rulemakings back," he said. "They have to make up for lost time. We always knew it was going to be a heavy lift to try and get things done by the summer driving season, even before the shutdown. I think the lapse in appropriations and that work was not able to continue in those 35 days does have an impact."

As trade negotiations with China continue, the Chinese have purchased agriculture commodities, including soybeans. But, so far, China's market for U.S. ethanol effectively remains closed and the Chinese have not agreed to ethanol purchases at this point.

"We would like to see them buy ethanol," Censky said. "My guess is they are waiting to see how the negotiations and the proceedings are turning out."

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

Follow him on Twitter @toddneeleyDTN


By John Harrington
DTN Livestock Analyst

Beauty is in the eye of the beholder.

This ancient proverb may not exactly be the key to wealth and fame, but who among us has not found it to be the perfect ticket in avoiding unnecessary controversy and tension. To all but the most stubborn defenders of absolutes, it's an invaluable tool of cooperation and peaceful disagreement.

Nothing like it shrinks the distance between, say, Van Gogh's "Starry Night" and a paint-by-number portrait of an angry clown on black velvet. Or, for that matter, helps to mitigate conflicting preferences between royal wedding protocol on one hand and a free pasta buffet at the Elvis Chapel on the other.

As strange as it may sound, I owe these thoughts on the relative nature of "beauty" to the harsh winter reality of the polar vortex and a rather foolish drive through Nebraska's Platte Valley in late January. Cutting my way through freezing temperatures and subzero wind chill, the magnificence of nonstop vistas (or so it seemed) of black cows on blond stalks often made it difficult to keep the truck safely focused between icy ditches.

In terms of life-giving heat, the winter sun proved as useless as a broken radiator. Yet its high-noon rays only seemed to sharpen the black-and-blond contrast, especially against the white etchings of freshly fallen snow. Here was a breathtaking combination of animal and landscape that urban sightseers could never imagine.

To be sure, the beauty I beheld that day was skewed by a country eye long trained on the cyclical pattern of beef production. It had developed the pleasant habit of blinking from calving to turnout to roundup. So seeing a kind of splendid artwork even in the rawest of winter nurseries should not be surprising.

Perhaps more important, the black noses aggressively rooting through trampled cornfields were much easier to admire given anonymous ownership. Beautiful or skinny packages of humps and bumps; brave warriors against extreme elements or under-hayed scavengers on last legs -- they were not my cattle.

Indeed, I was regularly reminded of this fundamental fact through the wintry day as frostbitten producers were seen breaking tank ice, unloading round bales, fixing fence, gathering strays and even dragging lifeless carcasses toward the nearest rendering plant.

Given such grueling and costly chores, the idea of beauty, as well as any pleasing palate of black and blond, can dissipate faster than a short January thaw. Believe me, I'm fully aware of how this bitter-cold winter is steeling the eye of actual cattle ownership. The unforgiving economy of animal husbandry always trumps isolated, albeit inspiring, moments of art appreciation.

Yet it would be misleading to dismiss my brief black-cow survey as stemming from nothing more than scenic in nature. Knowing what I knew about the vital role Angus cattle and crosses had played in herd expansion over the last quarter century, gathering signs of beauty and ongoing production potential somehow went hand in hand.

Of course, black cows have not always been the dynamic wheelhouse of cattle herd growth. Longhorn libido in the wake of the Civil War represented the first bullish catalyst of herd expansion. As the ranching industry spread north and urban beef demand compounded, English breeds became more important building blocks in terms of environmental endurance and meat quality.

There are some cattle historians who like to credit the Hereford cow for winning the West, praising her dependable selfishness in regularly dropping a live calf and getting rebred. I've always thought such thinking was a bit simplistic, yet not entirely beyond logic.

And we all remember the dangerously phony and counterproductive war against fat waged by food scientists and retailers throughout the 1980s. The unscientific linking of better heart health with the consumption of lean beef sounded like sexy sirens to the continental bloodlines of Europe, eventually funding a U.S. slaughter mix long on carcass size and increasingly short on meat quality.

Where were the brave enemies of fake news when we needed them?

As the lean nightmare gradually started to evaporate in the 1990s, black cattle began to assert a new herd dominance, highlighting meat case quality and taste. The uneven march of cow herd numbers between 1990 and 2018 (i.e., three-to-five-year fits and starts of approximately 3 million head) can be characterized as a broken accordion in constant need of repair, yet each time emerging from the shop with a few more black keys.

Put another way, the scrambled pattern of liquidation and expansion (mostly the former) documented since the late 20th century reminds me of an old revolving door in bad need of a grease gun. The liquidation swing side for continental breeds (e.g., Limousin, Chianina, Simmental) pushed easy enough, but the expansion push for black cattle seemed to take more market muscle. Of course, the good news of this inequity has been the growing concentration of blacks within the beef production core.

I certainly don't mean to suggest that the U.S. cattle bloodline is anything close to monolithic. From the Atlantic to the Pacific, more than 70 distinct breeds can be identified. That said, less than 20 breeds make up the majority of the genetics used in this country for commercial beef production. More to the immediate point at hand, a recent survey indicates that at least 60% of commercial ranchers pull yearly calf crops from black or black-based cows.

Personally, I would want the "overs" on any bet in that regard.

Needless to say, after emerging from the economic recession of the last decade, the beef herd has been in expansion gear since 2014. Surely, it goes without saying that black genetics have continued to lead the vanguard. Although USDA enumerators never report annual cattle numbers by breed, in a normal working year, official statisticians should now have the industry fully updated through Jan. 1, 2019.

Unfortunately, the early year government shutdown made "normal" bean counting of this sort as meaningless as the calving rate of Scottish Highlanders.

As you know, last month's nonsensical spit-balling between the White House and Congress forced USDA to take a crowbar to its report calendar, completely eliminating the Jan. 1 Cattle on Feed survey and rescheduling the Cattle Inventory from Jan. 31 to Feb. 28. (Most private analysts now assume official numbers would have confirmed the following changes: on-feed Jan. 1, up 2%; placed in December, up 2%; marketed in December, down 1%.)

Yes, we are facing the possibility of another glitch in the federal time-clock this Friday, yet another open-ended shutdown that might necessitate still further delays in the critical distribution of livestock and meat data.

For what it's worth, I don't think either side wants to go down that expensive and counterproductive road again. At this time, it sounds like some kind of border security deal will be made, one that leaves neither Trump nor Democratic leaders very happy, but at least a sloppy consensus with enough wiggle room to keep government lights turned on for the foreseeable future.

Actually, if there's one cattle report that routinely rolls off Washington's press with a high degree of predictability, it is the Jan. 1 herd count. Barring a major blunder in monthly slaughter data and/or sad examples of math dyslexia, only cross-eyed number-crunchers are likely to completely miss the USDA ballpark.

Specifically, whatever the fickle fate of official enumerators and economists turns out to be through the end of February, the vast majority of beef producers and market watchers now believe that the Jan. 1 herd will eventually be documented around 95 million head, roughly a half percent larger than the start of 2018.

Without a doubt, the rate of expansion is slowing. Yet speeding trains take some time to stop, and the larger calf crops of recent years continue to overshadow accelerating chain speed. My guess is that the 2018 calf crop totaled a bit over 36 million head (i.e., maybe 1% larger than the prior year), enough to marginally offset last year's increases in heifer and cow slaughter.

Finally, I think few serious students of the industry doubt that, given enough time, duly-compensated employees of the ag department will officially mark the Jan. 1 beef cow package as containing approximately 31.8 million pieces, a half percent or so greater than the year before.

Can they be equally confident regarding the color of the additional hides? Maybe not.

All I know is that many late-winter stalks look beautifully familiar to me.

John Harrington can be reached at harringtonsfotm@gmail.com


By Chris Clayton
DTN Ag Policy Editor

TANGARA, Brazil (DTN) -- A tour bus full of Americans bounces like a carnival ride traveling downhill, coming off a plateau on a narrow clay, unsurfaced and seemingly unmaintained road in the middle of a steady downpour while maneuvering around semi-trucks likely loaded with soybeans going the opposite direction.

It's just another afternoon during harvest in Mato Grosso in Brazil.

Mato Grosso has some farming advantages, such as its vast acreage -- the state is the size of Illinois, Indiana, Iowa, Minnesota, Nebraska and Ohio combined (with room to squeeze in Delaware and Rhode Island). Also, Mato Grosso farmers can grow soybeans in the rainy season, then plant a summer crop like corn, cotton or sunflowers.

Agriculture, after all, makes up 75% of the economy of Mato Grosso.

Nevertheless, the Achilles heel in Mato Grosso is infrastructure for all those crops and livestock. And, for all its size, Mato Grosso lacks people and overall tax base with a population of just 3.4 million, of which more than 600,000 live in and around the city of Cuiaba.

The Institute for Mato Grosso Economics of Agriculture (IMEA) projects it costs $80.51 a ton to get most soybeans and grains to port for farmers in the state. That equals roughly $2.20 for each bushel of beans.

Mato Grosso farmers take significant basis discounts because roughly 60% of Mato Grosso's soybeans, more than 700 million bushels, go direct to export at ports that can be 1,800 kilometers (1,118 miles) away. With the wait time at port, it's a seven-day round trip for each semi-load of beans, typically two 25-metric-ton trailers of beans, or roughly 1,836 bushels each trip.


"Freight is a challenge every year, and it takes up to 30% of our prices compared to the price at the port," said Ricardo Silva, a farmer near Tangara in south-central Mato Grosso.

Trucks hauling beans dominate the roadways. That gave truckers enough influence last year to halt traffic throughout the country last May and early June as truckers demanded higher pay to go along with higher diesel prices. Just as Brazilian farmers were getting more for their beans because the U.S-China dispute was heating up, the trucker strike took some of that away. While truckers are still waiting for legislation to confirm their gains from the successful strike, some of the largest commodity haulers such as Amaggi Group, Cargill and others started buying trucks and increasing company-owned trucking fleets. Amaggi ordered 300 new trucks in December.

Mato Grosso has one railroad that runs from Rondonopolis in the southeast corner of the state to the Santos Port at Sao Paulo. There are always discussions about carving out other major rail lines, and "planned" expansions show other future links to a major north-south rail line east of Mato Grosso owned by the mining company Vale SA, which runs to ports in both the Amazon to the north and in southern Brazil. Vale SA had been looking to run a rail line through Mato Grosso, but those plans are now likely derailed after a mining dam accident in December that will likely be costly for the mining company financially.

The Brazilian government also has been working for years to build a 1,100-km (683-mile) railroad, Ferrograo, which would run from Mato Grosso to the Miritituba Port in Para State on the Tapajos River. Both a group of U.S. and Brazilian agribusinesses were bidding for the project, estimated to cost $4.3 billion, as were state-owned Chinese firms. Reuters reported last month that the Brazilian government wants to have the Ferrograo railroad bid out late this year or early 2020. It will take at least 10 years to build.


Antonio Cesar Brolio, president of the Rural Syndicate, a Farm Bureau-type organization in Brazil, in Campo Novo de Parecis expressed disappointment in the Mato Grosso state government over its lack of action on infrastructure. The state implemented a tax on farmers specifically for infrastructure improvement, but then the state government diverts roughly 30% of the revenues to deal with other funding issues outside of infrastructure. The tax revenue also goes up with higher production.

"We would like to see the money we are paying the tax used for infrastructure as was promised in the beginning," Brolio said.

Silva added, "We have some anger at the state government but (are) confident the federal government will focus on infrastructure."

BR 163 is the main north-south highway splitting Mato Grosso, but even it has areas that need completing to connect the state's trucking system. Earlier this month, the new minister of infrastructure emphasized that the new government under President Jair Bolsonaro will finish a 50-km (31-mile) stretch of Highway BR 163 from Sinop, Mato Grosso, to Miritituba Port, by the Tapajos River. It is sometimes called the Itaituba Port, a city on the other side of the Tapajos River, but it is the same port.

"Last week, the new minister of infrastructure -- he's a guy we know from Mato Grosso and he knows what he's doing -- he rode in a truck and said he would have the army pave the last 50 km this year," Silva said. "That is the promise of this new government and we are very confident."

Farmers in other parts of Brazil may not have the scale of production they do in Mato Grosso, but they do not bear as much of the transportation cost. Domingos Trevisan, who manages a 1,768-hectare (4,367-acre) farm near Itaipulandia in Parana state, told DTN that buyers come to his farm to pick up soybeans and corn that typically goes to port about 700 km away. His basis, though, is narrower, normally running about 10% to 15% under the prices on the Chicago Mercantile Exchange for the front month. Parana, with a larger population base and tourism, also has a more modern overall road system than much of Mato Grosso.

"We don't have the kind of road issues they have in Mato Grosso," Trevisan said.

Mike Steenhoek, executive director of the Iowa-based Soybean Transportation Coalition, noted Brazil has a long track record of intentions not becoming outcomes. But it's apparent if Brazil wants to give a shot of economic boost to the rural areas of their country, the odds of success with infrastructure are high if Mato Grosso farmers can be linked to more ports.

"All they have to do is make progress and our competitive advantage starts to erode," Steenhoek said.

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

Follow him on Twitter @ChrisClaytonDTN


By Todd Neeley
DTN Staff Reporter

ORLANDO (DTN) -- Ethanol margins continue to be depressed at the start of 2019, as evidenced by the losses DTN's hypothetical ethanol plant continues to experience.

The ethanol industry as a whole is looking and waiting for any kind of good market news.

Pavel Molchanov, senior vice president and equity research analyst for Raymond James and Associates, said during the National Ethanol Conference in Orlando on Tuesday that not only is the worst behind the industry, but there is reason for optimism.

"The good news is that, all over the world, there is more and more implementation of renewable fuel standards," he said. "Let's not lose sight of the fact that there are well over 30 jurisdictions that have a fuel standard. They're not going to be able to get there without ethanol from you. There's not enough ethanol that could possibly be produced in China."

In addition, Molchanov said there are new emerging export markets in Mexico and Ukraine, coming off a record 1.6-billion-gallon export year by the ethanol industry in the United States.

The latest look at DTN's hypothetical 50-million-gallon plant based in South Dakota shows the negative margins have moved little since our last update in January. The plant currently is showing a 31.9-cent loss, down from January's 29.7 cents. This number includes continued debt service.

Most ethanol plants are not paying debt, however. If the hypothetical plant were not paying debt, it would have recorded a 1-cent-per-gallon loss -- a drop from a 2-cent-per-gallon profit in January.

Last month, a $160-per-ton price for dried distillers grains bolstered margins. In our latest update, the price dropped to $141.

The ethanol rack price for this update came in at $1.385 per gallon, up from $1.36 last month. The price of corn paid by the hypothetical plant remained steady at $3.78 -- the Chicago Board of Trade price.


In 2018, Molchanov said, ethanol production grew at a 1.3% clip -- the slowest growth since 2013. He said the growth suffered from the effective closing of the Chinese market.

Molchanov said he expects to see about 1.5% production growth in 2019 and around 2% in 2020.

Ethanol's 2018 closed with a thud, much like the rest of its year.

"Quarter four was one of the worst quarters in the modern era of this industry," Molchanov said. The industry was hurt by a 30% drop in oil prices.

"In any quarter we look at, ethanol production is higher than the year before," he said. "Quarter four was the exception."

Year over year, 2018 fourth-quarter production dropped by 1.5% compared to the final quarter of 2017.

As ethanol futures prices hit some of their lowest levels in a decade in 2018, Molchanov said, ethanol producers benefitted from fairly stable corn prices.

"With corn, the price was a straight line $3 to $4 a bushel," he said. "You would prefer stable feedstock prices. With ethanol at lows, you'd prefer corn to adjust accordingly, but it doesn't."


Even without the Chinese market, Molchanov said, 2018's record United States exports of 1.6 billion gallons show how widespread ethanol demand is around the world.

Even then, the closing of the trade window with China has been a significant factor in depressed U.S. margins.

"It would have been even higher had it not been for the trade war with China," he said. "Ethanol will have to live with whatever high-level political relationship [there is] between our two nations."

That trade window may reopen at some point, he said, placing the odds at better than 50-50 that a trade agreement will be reached with China.

Despite hope going forward, Molchanov said ethanol's market picture for the next six months is "touch and go" and that there is likely to be additional production cuts in the industry.

"The industry has put rock-bottom in the rear-view mirror," he said.


DTN established Neeley Biofuels in DTN's ProphetX Ethanol Edition as a way to track ethanol industry profitability. Using the real-time, commodity price data that flows into the "corn crush" in ProphetX and some industry-average figures for interest costs, labor and overhead, DTN is able to track current profits. It also tracks how much Neeley Biofuels would make or lose under an infinite number of "what-if" scenarios.

DTN uses industry-average figures from Iowa State University economist David Swenson. Included in the figures are annual labor and management costs, transportation costs, debt-servicing costs, depreciation and maintenance costs. Although Neeley Biofuels is paying debt-service and depreciation costs on its plant, many real plants are not in debt.

Also, it should be noted the calculations include all other costs such as chemicals and yeasts, electricity, denaturant and water. While DTN uses natural gas spot prices for these updates, many ethanol plants lock in prices on the futures market, so they are not as vulnerable to natural gas market volatility.

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

Follow him on Twitter @toddneeleyDTN


By Elaine Kub
DTN Contributing Analyst

"There are only 8 cents of carry out to the May futures contract; how am I supposed to go to my banker and justify putting up new grain bins just to get another 8 cents per bushel? That math doesn't work out!"

This question came up at a recent market outlook meeting, and the economic instincts behind the questioner's details were spot on. He was considering funding a project with borrowed money based on the returns offered to him in the current market environment. He was looking at the actual carry in the futures spreads, which can be locked in as real income, instead of looking at some unreliable expectation that grain prices "might" tend to be higher in the spring than they were at harvest when the grain went in a bin.

However, I would encourage anyone considering the construction of new grain storage facilities in 2019 (and I imagine there are many such people, after the scramble to store both corn and soybeans in late 2018) to base their decisions on longer-term expectations. The 8 cents of carry currently offered between the March and May 2019 corn futures contracts (which is still a relatively generous 65% of the full cost of commercial carry) doesn't mean much. Few market participants come into possession of some corn in March that they only intend to store for a couple of months. More typically, someone comes into possession of some corn at harvest time. As an example, this marketing year on Nov. 1 there was 20-plus cents of carry between the December and May futures contracts that could have been used to justify an investment in grain storage. There was 30-plus cents of carry available from the December 2018 to September 2019 contracts for those who were willing to commit to storing the grain for so long.

An expectation of being able to lock in an extra 20 or 30 cents per bushel for one's grain ... now, that's something a person could take to a banker and make a grain storage facility sound like a good investment. But how confident should that expectation be, year after year after year?

Let's look at recent history. There were those wild years -- 2011, 2012 and 2013 -- when corn supplies were extremely tight and nearby futures spreads actually inverted during the spring and summer months (near-dated corn futures were priced higher than far-dated corn futures). That experience jolted many corn producers' internal calibrations about how corn prices are expected to behave seasonally. But, since that time, nearby corn futures have inverted only rarely, briefly and mildly -- in mid-2014 and mid-2016. Mostly, we've been living back in the "normal" world where there is plenty of grain to go around, and the futures markets are structured so that future prices pay more for far-dated grain and reimbursing owners for the costs of keeping the grain in storage and off the physical market.

Since the 2013 corn harvest, if we took a market snapshot on Nov. 1 of any subsequent year to illustrate the harvest-time storage decisions of a farmer with newly harvested grain, we would see that the December-to-May futures spread has offered fairly generous "carry" spreads in each of these past six years: 18 1/2 cents for the 2013 corn crop, 21 1/4 cents for 2014, 14 1/2 cents for 2015, 16 cents for 2016, 22 1/4 cents for 2017 and 20 cents most recently on Nov. 1, 2018.

This is cash money that the futures market offers to owners of grain. If, for instance, a farmer owns some harvested bushels already hedged with a short December corn futures position (perhaps hedged months earlier at a very favorable price), the farmer can choose to "roll" that futures position forward. That is to say: buy back December futures and simultaneously sell May futures. Then the farmer will pocket the futures spread (let's assume 20 cents or so) as cash in a futures brokerage account. Alternatively, a farmer can roll a hedge-to-arrive contract forward within the same marketing year and receive the 20-cent advantage. Alternatively, if the grain hasn't been hedged or sold yet, the farmer can simply choose to sell the grain, at harvest, for a timeframe six months in the future and receive a subsequently higher price in return for agreeing to store the grain until spring delivery.

Note that this opportunity is different from the opportunity to store unpriced, unsold, unhedged grain in the blind hope that prices may be higher in a few months' time. Lots of people do this; lots of people justify their investments in grain storage facilities based on that seasonal expectation for better flat prices in the spring or summer, and lots of people generally succeed most years with this strategy. Over the past six years, the flat price improvement of the National Corn Index from Nov. 1 (harvest time) to the following May 1 (six months later) has been 66 cents in 2013 from $4.03 to $4.73, 10 cents in 2014 from $3.33 to $3.43, 6 cents in 2015 from $3.50 to $3.56, 31 cents in 2016 from $3.06 to $3.37, 61 cents in 2017 from $3.07 to $3.68 and 16 cents, so far, from $3.28 on Nov. 1, 2018, to $3.44 on Feb. 12, 2019.

So, you see, sometimes it works really well. But it's never guaranteed cash-in-hand paid for carrying the grain. Instead, it's a speculative gamble based on pretty sound seasonal market expectations.

There are less reliable opportunities in soybean futures spreads, and of course even less reliable opportunities in storing unhedged soybeans for months past harvest. But if we continue to experience years of overabundant soybean inventories, that math may also change. In any case, a look at the history shows us that -- in a world that expects continued years of abundant grain supply and normal "carry" futures spreads -- yes, it is possible to look at grain storage investments and opportunities with some confidence.

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


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