The annual rite of spring for grain farmers is in full swing. While corn and soybean plantings are well behind last year farmers are still waiting for Congress to pass what is now the 2013 Farm Bill. Planting decisions were made in the void that is an extension of the 2008 bill but hope springs eternal.

The third attempt at creating the nearly half-trillion dollar, 5-year budget has been going on behind the scenes for some time.  This week, both Agriculture committees took up the legislation. Many of the compromises in the last versions of the bill remain. The 1-in-7 who receive benefits from the alphabet soup of assistance programs are likely to see plenty of changes.  In fact, nearly 80 percent of the money allocated for the omnibus bill is spent on those needing a helping hand.

Meanwhile, farmers are caught in the middle. It’s a political game that has gone from “hide and seek” to “wait and see.“

Sen. Debbie Stabenow: The Senate Committee on Agriculture and nutrition is called to order. We’re here today of to mark up our committee bill for the 2013 Farm Bill.”

Officially dubbed the “Agricultural Reform, Food and Jobs Act of 2013” it is similar to legislation written last year that passed the Senate 327 days before this hearing, but later died without any floor debate.

Sen. Debbie Stabenow, D - MI: “We saw last year undeniable proof that farming is the riskiest business in the country.”

Sen. Thad Cochran, R – MS: “The bill reflects fiscal responsibility but provides a workable and strong safety net for families and producers of food and fiber we hope they never need.”

Sen. Pat Roberts, R – KS: “However as it stands today, I do not believe this is a reform bill. I believe it is a rear-view mirror bill.”

Both bills claim victory in slashing spending, but from where the savings originate will likely cause the biggest debate.

Iowa Senator Charles Grassley, a Republican, says the two pieces of legislation contain essentially the same language as last year’s versions of the measure.

Sen. Charles Grassley, R – IA: “The one thing that is bad in this bill that wasn’t there last time, is more leaning towards southern agriculture. And moving back towards something we haven’t had in 15 years, moving back to target prices for peanuts and rice.”

House members spent a lot of time debating the Supplemental Nutrition Assistance Program, or SNAP –formerly known as food stamp program. Assistance programs like SNAP make up 80 percent of the budget for both versions of the bill.

Under provisions in the House version, a $2 billion annual savings would be created by eliminating automatic renewal of SNAP benefits when recipients are signed up for other assistance programs.

Both chambers remain deeply divided but there are few places where there is some agreement.

Reductions in SNAP benefits would be made by giving higher food stamp benefits to those in states that pay lower amounts for heating bill assistance.

Direct payments to farmers would be phased out for a savings of $5 billion annually. Previously, direct payments drew ire as payouts were made every year regardless of crop prices or yield.

Federally subsidized crop insurance would receive a boost and a new program would be created to cover smaller losses on planted crops before crop insurance kicks-in. The provision would favor Midwestern corn and soybean farmers who use crop insurance more often than most.

Crop insurance critics contend administrative costs have tripled since 2001, with taxpayers subsidizing more than 60 of the premiums and the growing exposure of the government to harvest-price guarantees.

And both of the bills would raise target prices for some crops. Certain subsidies would kick-in if prices drop to specific levels, meaning farmers will only receive a payout if prices are low. Many of these subsidy programs have lain dormant for years because of high commodity prices, but remain part of the safety net for producers. A special provision in both measures favors peanut and rice producers with higher price targets.

In the next three decades, the world population is expected to grow by 30 percent from 7 to 9 billion people.  The challenge of feeding a burgeoning population on the same or – potentially -- a fewer number of acres will be one of the greatest challenges faced by farmers in the future.  

The spirit of solidarity in facing a global challenge only goes so far when your closest competitor may also be your neighbor. But one agricultural group -- whose goal is increasing profitability -- is combining the efforts of several hundred farmers to find the balance between cash and chemicals. Paul Yeager reports.

In the last 80 years there has been a 6 fold increase in U.S. corn yields.  The gains are attributed primarily, to better hybrids and the advent of chemical fertilizers.     Weather, however remains the key ingredient in agriculture’s recipe for success and in 2012 drought had a decidedly negative impact in the Corn Belt.  USDA estimates a lack of precipitation caused last year’s corn harvest to be nearly 20 percent less than the 2011 average of 147.2 bushels per acre. 

With corn at $6.00, even a two bushel per acre difference on a 300 acre farm can lead to a profit or loss of $3,600. While farmers can’t control the weather, new technologies, like precision farming, are enabling growers to maximize yields and minimize costs through the strict management of inputs.  

Tracy Blackmer, Iowa Soybean Association Director of Research: “If we just assume we know what were doing in a field we can go out and very accurately apply the wrong amount of anything anywhere.  If we didn’t know any better.”

Tracy Blakmer is the Director of Research for the Iowa Soybean Association or ISA.  Because the ISA’s members raise soybeans and corn in rotation, the association funds over 30 research projects on both crops.  Its goal is to find ways of increasing yields and production efficiency, while protecting the environment. 

Tracy Blackmer, Iowa Soybean Association Director of Research:  “I don’t know a farmer that wants to buy nitrogen they’re going to loose or don’t need.  But there’s also a lot more restrictions coming down to restrict how much you can apply. So the more we can collect more and more data that will also have the impact of improving management but also perhaps influencing future policy and regulation on fertilizers.  It would really help everybody.  It would help the environment, the government in spending and efficiency and it would help the grower.”            

Thanks to yield monitors and GPS tracking, farmers can tell exactly what part of a field is producing well and where there is room for improvement.  But those tools alone can’t determine if more nitrogen is needed, where less nitrogen is needed, or if nitrogen is even a factor.    

Ken Lund, Polk City, Iowa:  “It’s more of trying to put the dollar of fertilizer in the right place in the field and do a better job.  I don’t want to put more than what I need to grow on that crop.  But I don’t want to have a shortfall either.”

To find out how he might realize increased yields while reducing input costs, Ken Lund, who farms 2,800 acres in central Iowa, enrolled both a corn and soybean field in the ISA’s Nutrient Management Benchmarking Survey in 2011.  More than 400 farmers enrolled over 900 fields to have their soil and crops analyzed for essential nutrients and a number of micronutrients.  Because the data was shared by farmers across the state, growers could learn not only what was right or wrong in their fields but also in their neighbors.    

Tracy Blackmer, Iowa Soybean Association Director of Research:  “Growers aren’t necessarily known for being neighborly and their biggest competitor is within 50 miles.  This is a project that’s going the opposite way.  This is where growers are working together.  They’re collecting that data, they’re all benefiting from it, they’re increasing profitability on it and I believe that’s one of the competitive edge right now for US Ag.”

The first step in the Nutrient Management Benchmarking Survey involved Digital Aerial Imagery, or DAI.  Aerial photographs were taken of land enrolled in the survey to identify one “Non-stress and one “Target-stress” area in each field.  Growers took soil samples and tissue samples from crops in each area so nutrient levels could be analyzed and compared.   

Ken Lund, Polk City:  “This field has been continuous corn now for six years now and I’m interested in seeing what’s going on a little more and it’s patterned tiled.  I has tile every forty feet in it.  I’m concerned what that’s doing to my nutrients.  The soybean field was just more of a representative field of what I’ve got, a more normal field, just more representative of all of mine.”

The study allowed farmers to select the fields they wanted enrolled in the program.  It also offered growers latitude in selecting problem areas under the assumption that nobody knows a tract of land as well as the person who farms it.

Ken Lund, Polk City, Iowa:  “When I went and took the samples in the leaf tissues, I did not go to a spot in the field that was real sandy where I would have those kind of issues.  I tried to stay in a representative part of the field where the nutrients are going to make a difference.” 

As part of the program, growers met with other farmers in their area to compare notes allowing participants to not only gain knowledge about their own farming practices, but to also gain insight as to what was or wasn’t working for other farmers in the region.    

Since the study was statewide it established a benchmark that will lead to a better understanding of how weather and soil types affect the uptake of macro and micro nutrients.  And there was the added benefit that it got growers out in the field, taking tissue and soil samples, an important step towards better nutrient management.   

Tracy Blackmer, Iowa Soybean Association Director of Research:  “If every grower did just one trial in Iowa that would be over 4,000 to pick from.  Most growers agree they can find at least one thing they can do better.  But they’re doing what they’re doing because they think it’s the right or they wouldn’t be doing it.  How do you find that one thing better?  So, as were getting down to the point of trying to fine tune within a few bushels for each management practice, we’re finding out that a lot of things we thought twenty years ago, aren’t necessarily true today, with better information.” 

The smooth passage of the Water Resources Development Act on a 83-14 vote was in sharp contrast to the last time Congress took up a WRDA bill in 2007, when President George W. Bush vetoed it and the Democratic-led Congress retaliated with the first veto override of the Bush presidency.

Unlike the 2007 bill, which was laden with hundreds of earmarks or special projects sought by individual lawmakers, this bill has no earmarks. But critics questioned approving any new water projects when the Army Corps of Engineers is already saddled with some $60 billion in projects it hasn't yet completed.

The newest version of WRDA met resistance from the Obama administration. While stopping short of a veto threat, the administration faulted the measure for speeding up environmental reviews, increasing federal obligations to projects and doing little to address the Army Corps' construction backlog. The bill, which now goes to the House, also was criticized by some environmental and fiscally conservative groups.

The legislation would sanction more than 20 new Corps projects, some aimed at making ports more accessible in line with 2015 completion of a widened Panama Canal. It would ensure that more money in the Harbor Maintenance Trust Fund, financed by user fees, actually goes to harbor improvements. It sets up a new program to promote levee safety and inland waterway projects, takes steps to expedite the environmental review process and sets up a commission to make recommendations on defunding old, uncompleted projects.

"We focus on flood control. We focus on ports and environmental restoration projects where the Corps has completed a comprehensive study," said Sen. Barbara Boxer, D-Calif., chair of the Environment and Public Works Committee. She said it took a while to reach consensus on the bill because "we had to deal with changing the culture of the Senate away from earmarks."

The top Republican on the committee, David Vitter, a Louisiana conservative whose state is a main recipient ofWRDA projects, said he and the liberal Boxer had been able to work together because of their agreement that water resource projects are jobs producers. "Ultimately that core, that theme, that common goal is what brought us effectively together."

The American Farm Bureau Federation noted that 95 percent of U.S. agriculture exports and imports move through U.S. harbors, supporting more than 400,000 jobs. "However, unless WRDA is approved, the inland waterway system is at risk of becoming a potential detriment to the nation rather than a comparative strength."

But fiscally conservative groups such as Taxpayers for Common Sense and Citizens Against Government Waste wrote senators that with the Corps already burdened by a $60 billion backlog in projects, "we cannot simply pile more projects on the to-do list."

"The plate has been full for over 25 years," said Sen. Tom Udall, D-N.M. "Project authorizations far exceed the money to pay for them."

The Congressional Budget Office estimates that the new projects authorized by the legislation would cost more than $12 billion over the next decade if the funding is approved in the annual appropriations process and the projects are initiated.

A final obstacle to completing the bill was removed when Vitter and fellow Louisiana Sen. Mary Landrieu, a Democrat, were blocked in their effort to impose a five-year delay on premium rate increases on those who already have government-subsidized flood insurance. The rate increases were part of a law passed last year to make the National Flood Insurance Program fiscally solvent.

Despite lackluster economic reports, a slower inflation rate served to push investors into action.

Consumers opened their pocket books in April moving retail sales numbers up by .1 percent. The rise calmed those concerned that federal tax increases and spending cuts might slow economic growth.  When the automobile sector is taken out of the equation retail sales were off .1 percent.

The Consumer Price Index – a measure of consumer goods and services -- fell .4 percent this week hitting a four year low.  When the cost of fuel is excluded – the so-called Core CPI -- rose a scant 1.1 percent – the lowest in 2 years. This is below the Federal Reserve’s 2 percent cap allowing the independent body to continue its efforts to pump up the economy.

The Dow Jones Industrial Average took the week to digest the news and hit all-time highs closing above 15,350 on Friday.

Part of the make-up of the trillions invested in the economy are billions put into research and development of genetically engineered crops. What began more than a decade-and-a-half ago as a curiosity has blossomed into a multi-billion dollar industry that comprises almost all of the commodity seeds sold in the United States. The sales of the new seeds came with technical agreements prohibiting the saving and use of any offspring.  But there are always a few willing to push the envelope. And one Indiana man, who believed the agreement had a limited scope, found himself in legal trouble.  This week, the highest court in the land rendered its decision.

The U.S. Supreme Court upheld lower court rulings this week which favored Monsanto and protection of its patented Roundup Ready seeds.  For several years the agri-business giant has disputed the actions of an Indiana soybean farmer.   Vernon Hugh Bowman was a regular customer of the St. Louis, Missouri-based company, whose policy prohibits saving or reusing seeds once the original crops have grown. 

Under the contract, new Roundup Ready seeds must be purchased for each growing season.  Once harvested and sold, the commodity seeds are intended for human or animal consumption.  But for several years, Bowman took a late-season gamble and replanted a second crop using leftover seeds he bought from a local grain elevator. 

VERNON HUGH BOWMAN, Defendant – Bowman v Monsanto: “So I just looked at it that when they dumped it in there that they had abandoned their patent. If they want to protect their patent, then it looks to me like it would be required -- they'd be required to have to separate it at the elevator and keep it separate.”

 In a statement, Monsanto’s top lawyer responded to the verdict: “The Court’s ruling today ensures that longstanding principles of patent law apply to breakthrough 21^st century technologies that are central to meeting the growing demands of our planet and its people.”

The unanimous decree was also noted for its scope, which is limited to the case of Bowman versus Monsanto only.   Court observers are quick to point out that no sweeping decisions were made about the intersection of intellectual rights and scientific modification.  Parallels have been drawn between aspects of this case and upcoming deliberations on the high court’s docket, which deal with genetic patents, regenerative medicine and computer software.

Pearson: This is the Friday, May 10th, 2013 version of the Market Plus segment.  Joining us now are Walt Hackney and Virgil Robinson.  Gentlemen, welcome back.

Hackney: Thank you.

Virgil: Thanks, Mike.

Pearson: We're excited to have you both here.  We've got a lot of great questions being sent in via Twitter and Facebook this week.  Josh and Amanda in Tama, Iowa are asking a corn question that a lot of producers have been asking.  And I was hoping you could give us sort of a general sense of what to expect.  They're asking, how low can corn grow, corn go with a good crop this fall looking at the sort of demand destruction we've seen, the export reductions?  What is the outlook out there if this weather gets back to normal?

Robinson: Hard to quantify a price, Mike, but please understand if we do increase U.S. and global corn coarse grain supplies as was projected today the job of the market will be to discourage production and/or increase consumption.  If you discourage production you do it via price which means you drive the price significantly lower.  Markets have a tendency to accentuate those types of situations, both moving lower and moving higher.  So prepare yourself for what could be something at or around $4 a bushel.

Pearson: Alright, especially if we begin to attract the managed money again or create a compelling story and see some big swings again in the market.

Robinson: Yeah, you know, directional funds really are not terribly interested in the market direction per se, they just want to be a board whether it's up or down.  So as mentioned, futures markets have a tendency to accentuate price moves so prepare yourself accordingly.

Pearson: Certainly.  Now one of the factors, as we talk about the market determining the best, the highest and best use of the grain, as we look at potentially large corn production this year and we look at ethanol plants, which scaled back production last year, so far this year ethanol production has basically been replacing the exports.  How much corn can we anticipate shifting into ethanol production if we get down into that low $4.00 to $5.00 range?

Robinson: Well, you have a blend issue, Mike, you know, mandated use and what capacities will allow are two different subject matters.  So please understand the department and for the purpose of transparency and acknowledgement we'll use their number.  You know, they're talking about an increase year over year of a couple hundred million bushel to approach about 4.8 billion bushel in the '13, '14 crop year.

Pearson: Okay.  Alright.  Now turning over to soybeans, as we look as producers are getting pushed back farther and farther into May with this it seems to be perpetually wet weather here in central Iowa, are we going to see many acres shift to soybeans?

Robinson: I think the prospect of seeing some is yet on the table.  Weather is the X factor here, Mike.  If we happen to catch a two week period of open weather we can plant a lot of corn.  Should that come to fruition I think a lot of ground has been prepared for corn, I think a lot of corn sits in sheds at this point in time.  So I'm not convinced tonight there's a mass exodus from corn planting to soybean planting.  Could there be a million to two million acres?  Yes.  Once we get past about the 20th of May then that problem becomes more acute.

Pearson: Okay.  Alright.  We've got Brad in St. Joseph, Illinois and he's asking, do you think the new crop and old crop, corn and soybean spreads, will increase or decrease?  What is your general thought there?

Robinson: Well, he hasn't defined a time window.

Pearson: No, I'm assuming over the summer into harvest.

Robinson: Um, I would guess the inverses will continue to move higher, Mike, and as we converse tonight the old crop, new crop soybean inverse is as strong as I can remember.  Now that doesn't mean there hasn't been higher but it's as strong as I can remember.  So, again, as long as there's demand for the old crop product, be it from an ethanol facility for corn, be it from a processor for soybeans they're going to have to try and source that product.  I think the product has pretty well moved out of the country elevator systems.  Those people hedged grain and when the basis appreciates they sell the grain.  It's not a flat price scramble for them.  So I think the only sizeable source of old crop corn and/or soybeans is on the farm.  And those producers that still own old crop I think, one, are not in need of cash flow, I think their balance sheets are strong, there's no need to move the grain to acquire cash for any specific reason.  Two, they might be adjusting their acreage this year and as a result of that adjustment may want to retain the old crop as kind of a hedge against fewer acres of what they intend to grow this season.  So there are a lot of reasons why that inverse will remain as strong as it is and perhaps yet grow stronger.  But be advised when it stops and we make the transition into the availability of new, those inverses will give way over the course of time and work towards carry.  It has happened numerous times in my career.

Pearson: And that's what we'll see.

Robinson: So this is a dangerous play, this old crop, new crop play, but at present I still think the odds are in the favor of ownership, at least tonight.

Pearson: Alright.  Thank you, Virgil.  We're just going to talk a little bit to Walter.  We've got a lot of questions regarding cattle.  It's been a hot topic this week.  As you alluded to earlier in the show there's a lot of issues at play in the market.  We've got Ben in Cedar Rapids and Troy in Avoca, they're both asking what to expect.  As we look at those issues you outlined, as we look at the cash price and the cash price and the box beef price and the low number of cattle out there, what is your take on this market in a broad sense.  As a man who has been in this industry a long time, Walt, what are you thinking the cattle market?  What are we going to be seeing?

Hackney: Under normal conditions you would naturally expect to have the Mercantile give you an opportunity to negotiate a positive basis to the Merc and contract the cattle on that kind of a marketing system to a given packer.  The issue as we speak is the Mercantile is not providing a vehicle when it's sitting there $4 to $6 a hundred weight less than the cash value of cattle and the cash value of cattle, Mike, isn't at a break even high enough to support a profit.  So the producer can't go down $4 to $6, negotiate any kind of a sensible basis which might be from par to one or two over the Merc.  That will get him nothing except a little less loss than what it would currently do taken the cash trade.  So the availability of market extension isn't there as we speak.  And I know that's a rough statement for a person sitting out here with a pen full of cattle that are losing a couple hundred bucks a head or somewhere potential might be there if this market continues to collapse like it did from last week to this week.  So we have no qualified answer unless a person has got a very, very knowledgeable broker that can set up an imaginative type of a scenario of marketing using a series of puts and calls to take him through the possibility of the cash market responding a little and leaving him alone then or letting the Merc respond all for some unknown reason and give him an opportunity to get back part of this $4 to $6 disparity between the cash and the Mercantile.  Right now it isn't there unless it's through a very imaginative type of a hedging system through a good, knowledgeable broker.  I want to emphasize that because you go grab someone off the street for a local bucket shop and you could be in a lot of trouble.

Pearson: Going to take some creativity, informed creativity. 

Hackney: Exactly.

Pearson: Alright, now we do have a question from Greg in Omro, Wisconsin.  And it's interesting.  I was hoping we could get your take on this.  He is asking, is the culling of milk cows keeping the cattle price depressed?  It seems every dairy in his area is culling due to lack of feed, now we've got the winter kill of alfalfa up in Minnesota and Wisconsin.  Is that going to have any significant impact on cattle prices?

Hackney: Certainly it will on the economy cut beef and we killed 66,000 cows in a four week period of time through April and projected that we could easily continue that kind of a cow kill, which is very significant.  If that is continued and if the known shortage of dress beef coming out of the feedlots continue, if that imbalance continues to become more and more personified then that economy cut of beef is going to come back at us with this historic high primal value of the cut out that we have, as we speak, this economy cut to the grocer, or if you will, to the retailer, is going to become highly, highly attractive to the shopper.  Even though it's not your prime cut and the like of that it is beef and people are going to opt for what would be more of an economy and if cow beef is in that volume, which I believe it's heading that way, then it could be a real factor.

Pearson: Alright.  So people just looking for something to throw on the grill, looking for beef might be a value option for them there.

Hackney: I think so.

Pearson: Alright.  Before we let you go, Walt, we didn't get a chance to talk about hogs very much on the show.  Could you talk about what we're seeing on the international demand, export demand?  How does that look for the hog market?

Hackney: Well, we had huge anticipation back three months ago that the Asian bins, possibly the China market, which is a real big target on pork exports for us, was going to materialize given the right set of circumstances.  What we failed to identify was the Chinese government was subsidizing their producers in sow numbers on the hog units to produce enough extraordinary pork, extraordinaire pork that they would become more self-supportive and not be so reliant on the extra export or import of our pork.  What happened is we went to cold storage with record tonnage of pork, which is still there.  The export has went to practically nothing going to China and doesn't appear it's going to and China is sitting over there right now with the lowest pork price in history. They've got more volume they know what to do with and they're certainly not looking to import more of our pork.

Pearson: So in order to get rid of that cold storage we need to get folks out there grilling.

Hackney: You're going to have to --

Pearson: We've got to eat it.

Hackney: There's no real solution other than precisely what you say, Mike.  We've got to domestically utilize that overage of pork that we have in storage.

Pearson: Alright, hopefully the weather will warm up a little bit and we can get to that.

Hackney: Exactly.

Pearson: Thank you gentlemen, really appreciate you being here with us today.  Hope you have a great week.  And thanks to all of you for watching us here online.  Continue to do so, continue to please send us your questions via Facebook and Twitter and we'll continue to get experts to answer them for us, for you and us, for everybody.  Thanks for watching.  Hope you have a great week.  Take care.

Grain prices tumbled this week as the combination of a stronger dollar and bearish supply and demand reports dampened prices.  For the week, July wheat lost 17 cents, while the nearby corn contract moved more than 25 cents lower.  Old crop soybeans bucked the bearish trend as the July contract posted a weekly gain of 12 cents. Nearby meal prices traded sideways with an upward weekly move of 30 cents per ton.  In the softs, cotton eked out a weekly gain of a nickel per hundredweight.  In the dairy market, June Class III milk lost 21 cents while the July contract moved 15 cents lower.  Over in livestock, the June cattle contract lost $1.37. August feeders were off nearly $1. And the June lean hog contract declined by $1.67.  In the financials, the Euro lost 127 basis points against the dollar. Crude oil gained 43 cents per barrel. Comex Gold declined by $27.50 per ounce. And the Goldman Sachs Commodity Index moved fractionally lower to settle at 630.30.

Pearson: Here now to lend us their insight on these and other trends are two of our regular market analysts, Walt Hackney and Virgil Robinson.  Gentlemen, welcome back.

Robinson: Thank you.

Hackney: Thank you, Mike.

Pearson: Virgil, I'd like to start with you.  We did have the supply and demand estimates from USDA out today and I'd like for you to talk to us a little bit about what happened.  The numbers roughly reflected trade estimates.  How are these estimates going to impact wheat production and producers going forward?

Robinson: The U.S. wheat production was actually forecast to decline year over year, Mike.  However, globally that's not the case.  Increases in major exporting countries, the likes of Canada, Australia, Argentina and others more than compensated for the loss or the reduced production here.  Hard red winter wheat is an interesting study in my mind.  Production is forecast to decline year over year.  Condition reports at least initially indicate the sum of good and excellent wheat through the southwest, one of the lower levels of many, many years.  So I think the theme there will be probably an unusually strong basis all year long, Walt, in an effort to try and source fewer bushels of higher protein wheat as well as less carry.  Globally, however, wheat supplies will be ample and it is likely that global prices will decline, Mike, over the next several months.

Pearson: So this does put U.S. wheat producers in a bit of a tough spot when you're looking at the lower production estimates that we're faced with in the country versus increased global supply.  What is your best advice to producers out there in terms of trying to make a profit in this market?

Robinson: Well, I hope they've done some selling or forward contracting or some type of price risk management prior to tonight, Mike.  In the event they have not there will yet be, in my mind, some weather instilled rallies at which point they'll be given the opportunity and the opportunity to make a decision on price and I'd use those, Mike, to price physical product or certainly at a minimum create some kind of price floor below that production.

Pearson: At least be able to ensure some margin as the season progresses.

Robinson: Yeah, I think that is right.  And, again, you know, often times when we've seen that this year in both corn and soybeans the strength in the market is really a manifestation of the local basis and lack of carry and that certainly is the case in several commodities tonight.

Pearson: And it's certainly true in corn.  Could you talk to us a little bit about the USDA's estimates in corn and what effect that's going to have going forward?

Robinson: Yeah, you know, the theme was pretty well established back in February regarding year over year or the increase in year over year supplies here in the U.S. as well as in the world.  So I don't think that comes as a big surprise.  I think we mentioned, Mike, last time we visited that this is one of those years if you accept the recent S&D at face value where storage hedges, having on-farm storage, the wherewithal to make a short hedge, then capture the carry normally in the fall of the year and then look for basis levels to appreciate in the spring of 2014, there will be some attractive storage hedge opportunities in corn.  I think we'll improve price well beyond what corn is worth tonight for fall delivery.  So that's an opportunity.

Pearson: It's an opportunity.  And for folks with old crop production still in bins, what does the situation look like there?  Are we going to see tight supplies all summer?

Robinson: There will be a point in the calendar where we make the transition from the assumed or the legitimate tight stocks to much more adequate supply.  At what point in the calendar I can't tell you, Mike.  Much will depend on how we plant the balance of this corn crop.  We're not likely to have the kind of supply we had last year as early as we did so certainly that is a factor.  For those that still own old crop corn tributary I think the ethanol facilities, tributary to feedlots, tributary to rail shippers, I think they probably should continue to look for opportunities at price levels above tonight's market.

Pearson: Okay.  Let's take a look at beans.  Again, nothing too exciting in the report that came out today.  What does that tell you?  What is the market interpreting from the report today?

Robinson: Well, again, much like the February forum the theme here is in a year's time we swing from unusually tight stocks of soybeans in the U.S. to what is projected to be more comfortable supplies.  That was, I think, accentuated by the fact that global supplies are forecast to increase significantly season over season.  So please understand and acknowledge that as you think about your new crop should you have little or nothing priced.  At face value tonight's supply and demand estimates are bearish for new crop corn, new crop beans.

Pearson: Alright.  Thank you, Virgil, appreciate your thoughts there.  Now I'd like to talk to Walt a little bit.  Building on what Virgil has talked about we're in a very interesting time in the cattle market, particularly in the live cattle market.  I was hoping you could sort of shed some light on what packers and producers are experiencing when we're seeing record retail prices for beef cuts and high cash prices but we're not seeing it on the board.  Could you give us a little bit of an insight into this market?

Hackney: There's so many factors, Mike, that are influencing this beef, livestock trade as we speak.  And you hit on the majority of those factors.  Why would the Mercantile be sitting there as we speak varying by the month in reference but from $3 to $5 or $6 dollars a hundred weight under the cash market.  That is a kind of a new occasion for a lot of the traders.  The other occasion we have is last week we sold fat cattle from Colorado through the Corn Belt, particularly the northern plains at $1.31.  We sold those same cattle out of the west Texas, Kansas and Oklahoma country at $1.28 which isn't uncalled for.  The fact remains dressed beef was more or less a sideways affair.  It didn't really in the cut out values do much price variation during that up of $4 to $6 a hundred weight in the value of the cattle last week. This week we've lost from $4 to $5 a hundred weight in the price of our feedlot cattle, we've gone from $1.31 to $1.26, we have gone from a dressed price of last week of $2.07 to $1.98 to $2.00 this week.  We have in the value of the choice beef cut out went to all-time historic highs this week and appreciation of a little over $4 a hundred weight.  These are all questions to be answered.  The industry as we speak, Mike, is in more of an undecision type of a position than I personally have ever seen it.  There is no real definition to the questions that are coming out of this price market.  We've got packers short in their kill this week particularly with the rise in the dress beef market.  They're not in the market to buy out of necessity or, if you will, a forced affair.  They're sitting there bidding steady money at lower prices expecting that sometime today, as we speak, they will in fact own cattle instead of $1.28 where some of the cattle are being priced they'll be able to own them at $1.25 or $1.26 and they're trying to wait out the cattle feeder.  The shortest inventory of finished cattle we've had in years yet they feel comfortable in waiting it out and being able to dictate where the price of this product is.  Where is the profits?  No one will want to put a figure on it but retail has got some phenomenal profit in their market, in their structure.  Packers have got a decent profit.  For a moment a week ago the cattle feeder had a glimpse of profit.  This week we're right back to the 250 to 200 plus loss in the fat cattle.

Pearson: So we saw fat cattle producers see a little bit of black ink last week. What are you seeing on the feeder side?  What are feeder cattle producers seeing?

Hackney: Well, you've still got a historic shortage of feeder cattle availability nationally because we've got the lightest number of beef cow herd in the nation.  We've got the lightest number we've had for over 60 years.  We've got availability of summer cattle to go to grass that's nearly impossible to get out and find the adequate numbers the ranchers are wanting.

Pearson: Walt, we've got to go real quick to your thoughts on lean hogs.  What is your take there?

Hackney: I think the lean hog market versus some of the commentary, I think the lean hog market is due to see an increase in availability of market hogs back to 2,200,000 head a week compared to some of the projections under 2 million head due to price of corn, as Virgil has discussed, and all of that, feed costs and losses are astronomical in the hog industry.

Pearson: Tough situation.  Thank you very much gentlemen, really appreciate you having being here with us tonight.  That wraps up this edition of Market to Market.  But if you'd like more information from Walt and Virgil on where these markets just may be headed visit the Market Plus page at our website.  You'll find expanded market analysis, audio podcasts and streaming video of our program as well as links to our Twitter feed and Facebook account all free at the Market to Market website.  Be sure to join us again next week when we'll examine efforts to maximize yield through effective nutrient management.  So until next time, thanks for watching.  I'm Mike Pearson.  Have a great week.

Drought and other factors took a heavy toll on the livestock industry last year, according to a new study from South Dakota State University Extension.

According to SDSU’s Center for Farm and Ranch Business Management, high feed prices dramatically reduced profitability in 2012 – particularly in the dairy sector.

According to the study, the average South Dakota dairy producer endured losses of $398 per cow in 2012, after enjoying profits of $707 per head in 2011. Cow-calf operators fared better, but still reported an average loss of $27 per head last year, compared to gains of $88 per head in 2011. So far, 2013 isn’t looking much better. And -- as fate would have it – feed costs are rising now not because of drought, but because conditions are too wet for farmers to plant.

As livestock producers cope with financial losses it may seem odd to consider the conditions endured by the animals. But that’s exactly what’s made one scientist a household name in livestock circles. And for Temple Grandin, paying attention to the details pays dividends for producers, processors and consumers. David Miller explains.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “Things have gotten better at slaughterhouses. I’m not going to call them harvest plants that’s just PR BS. I used it in Hollywood and they didn’t have a problem with it.”

Dr. Temple Grandin, author, feedlot designer, industry consultant and animal scientist, is speaking to a gathering of farmers at an annual Iowa Farm Bureau meeting.  Grandin arguably is one of the most outspoken and influential leaders in the industry.  The results of her work are evident from the feedlot gate to the packing plant stun-line.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “You need to open the mystery sheds.”

 For nearly four decades, Grandin has worked to increase awareness of how proper animal handling in the feedlot and at the packing plant is good for animals as well as the bottom line. She has combined innovative facility design, lectures and hands-on classroom work to achieve her goals of efficient and humane treatment of animals. But achieving that goal was anything but easy.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “Breaking into a man's world was really difficult but there were some enlightened, good people in the industry.  And they were some of the people that hired me.  Actually, I found selling the design actually was quite easy.  The thing that was hard was getting people to not beat up the cattle.  Oh, the handling of cattle in the 70s was so awful.  I would work at places when we'd put in new facilities and they do atrocious things to the cattle in the new facility.  People would buy the thing but they wouldn't operate it right.”

 Grandin’s designs protect animal and handler while reducing stress for both. In the feedlot, her curved chute design takes advantage of the tendency for cattle to circle back to where they started. Races are just wide enough for one animal to easily walk towards a squeeze chute and one-way back-stops prevent any attempts at retreat.  Elevated walkways and trap doors give employees escape routes.

At the packing plant, holding pens have angled sides instead of square corners and alleyways have non-slip surfaces.  As animals approach the stun-line, they are herded into to a long serpentine chute. The curved walkway relaxes the cattle and allows them to follow each other nose-to-tail.

When the animals approach the stun-box they are supported by a center-track restrainer system designed by Grandin.

Her research -- and real world results – have proven the animals are easier to handle and produce a better product.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “Now, today, we've got a lot more interest in good handling.  And I worked with McDonald's Corporation back in 1999 on implementing animal welfare auditing.  And when I did that, I saw lots of change happen because now the plants had to do it if they wanted to stay on the approved supplier list.” 

To stay on the list, suppliers had to pass Grandin’s animal welfare audit with high marks. That meant 95 percent of the animals had to be stunned on the first attempt, no more than 1 percent could fall on the way to the stun-line, no more than 3 percent could be mooing or bellowing and 75 percent had to move through the line without the use of an electric prod.

Grandin has autism and she has devoted a good portion of her life to helping others with the same affliction.  She tells people with autism to avoid thinking that their disability comes first, but instead to identify themselves as a person who has unique qualities that happens to have autism. Grandin will be the first to tell you that because of her autism she thinks in pictures.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “When I was very young I thought that everybody thought in pictures.  I didn't know that my thinking was different.  I didn't know that other people thought more verbally.  So the very first work I did with cattle was to get down into the chutes to see all the stuff that the cattle were seeing like shadows, reflections on puddles, a coat on a fence, a vehicle parked next to the fence and I noticed that these things would make the cattle flock and nobody had noticed it before but since I thought in pictures it seemed obvious to look at what the cattle were seeing. It was obvious to me.”

Her direct, off-the-cuff style has earned accolades from a wide range of groups – who rarely agree on anything. They range from the American Meat Institute to PETA.

Grandin believes the veil needs to come off the meat industry and she is adamantly opposed to ag-gag laws that make it a crime to shoot undercover video at packing plants or on farms.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “I think the ag-gag bills are the stupidest thing that ag ever did because when that hit the editorial page of the New York Times, and I was in New York the time that happened, that just looked like cover up, cover up, cover up.  You know, when you get bashed you need to be opening the door, not shutting it.”

In the interest of transparency, Grandin is working with the American Meat Instituteto take the mystery out of what happens inside a packing plant.

Bill Couser owns the 5,200-head Couser Cattle Company near Nevada, Iowa. The design of his feedlot was inspired by a lecture Grandin gave almost 25 years ago.

Bill Couser, Couser Cattle Company: “Well, after seeing her speech that many years ago, we came back home and went to work because now we understood why animals weren't moving correctly and why we were seeing the stress.”

Recently, Couser built a handling facility based on Grandin’s design. Couser considers the half-million dollar investment well worth the money.

Bill Couser, Couser Cattle Company: “I've seen a dramatic change in my employees, especially my feedlot manager.  It used to be when we would get multiple loads of cattle in, um, you kind of tried to put it off a little bit.  You know, it wasn't something that you looked forward to.  ...And it's nothing to come in here and process them.”

In December of 2012, Couser got to meet with Grandin and express his gratitude.

Bill Couser, Couser Cattle Company: “...it was such an experience, a thrill and an honor to sit this close to a woman that has meant so much to all of us in this industry, livestock industry.    01;05;51;12...and when she says something, I mean, you're just writing it down in your brain as you go because it's almost gospel when you're listening to her because you believe what she says.”

Grandin’s work goes beyond being a spokesperson for low stress animal handling. Since 1990, she has been a professor of animal science at Colorado State University in Fort Collins, Colorado. For more than two decades, she has taught a short course on feedlot design, animal handling and general problem solving. Many among this next generation of ranchers, feedlot owners and veterinarians travel long distances just to learn from Grandin.

Pleased to no longer be a lone crusader, Grandin believes there are several reasons why it is easier for her to get the average person to listen to her message.

Dr. Temple Grandin, Author, Animal Scientist, Agricultural Consultant: “I think some of this is, you know, big customers demanding it and the other thing I think is every phone is a video camera now with an instant Internet hookup and I think that's another factor.  Because I've had a saying I've had for a long time, heat softens steel.  And then reformers like me can bend it in to pretty grill work.  And the thing is I want to bend it in to pretty grill work, not just have a mess.  We've got to do practical things that are going to work.”

Crude oil prices declined by more than 2 percent in early trading Friday, as the U.S. dollar posted significant gains against foreign currencies and OPEC announced rising production in April.

Benchmark crude for June delivery fell 2.7 percent in morning trading on the New York Mercantile Exchange.  Since oil is traded in dollars, a stronger greenback makes crude -- and other commodities – more expensive for investors with other currencies.  The dollar also pressured the Euro this week and broke above 100 yen for the first time in four years. 

Meanwhile, OPEC announced its crude production gushed to a 5-month high in April of 30.5 million barrels per day.  But the U.S. average price for a gallon of gasoline ROSE a penny on Friday, to $3.56. That’s about 4 cents higher than a week ago, but it’s also 18 cents lower than in May of 2012. 

OPEC noted Friday that global crude supplies increased 450,000 barrels per day last month as production from non-OPEC nations like the U.S. and Canada also rose.

And against that backdrop the battle continued this week over a controversial plan to build the Keystone XL pipeline. 

Jerry Heithoff, Elgin, NE:"If I could say, ok, go ahead and put this pipeline through.  But oh by the way, could you keep 75 or 80 percent of that refined product in the United States?  That would be no...because they want to export it."

 The waiting game is far from dull where the Keystone XL pipeline is concerned.  Though the door has closed on the public comment period in response to the U.S. State Department’s Environmental Impact Statement, another has opened.

For several years, TransCanada Corporation has sought a U.S. Presidential Permit to deliver oil sands crude from Canada to refineries in the Gulf of Mexico.  But American landowners, national environmental groups and grass roots opposition have opposed the plan every step of the way.

Jerry Heithoff, Elgin, NE:"This is some of the soil that are our natural resources that we don't want to be contaminated."

 TransCanada claims the $5.3 billion project will require 9,000 skilled American workers to construct portions of the 1100-mile pipeline.

Though assembly of the conduit is already underway in some states, the Nebraska portion has met the most resistance.  Because of the route’s proximity to environmentally sensitive areas, many voices in the Cornhusker State have come together to be heard.

Bruce Boettcher, Nebraska Sandhills Rancher: “What the hell is the matter here?  We are being asked to accept a pipeline and jeopardize our environment for a measly 35 permanent jobs.  The generations that live here and work this land have created more economic growth and more jobs than this pipeline ever will.”

 While Nebraska’s leadership approved a revised route early this year, opponents held out hope that  President Obama would reject TransCanada’s request.  But a March report by the State Department, involved because the route crosses the border with Canada, found “no significant impacts” to Nebraska’s environmental resources.

Those for and against the pipeline were on hand in Grand Island, Nebraska last month to voice their opinions of the State Department’s environmental analysis.  

Andy Black, CEO, Association of Oil Piplelines: “Right now trains carrying bitumen from the Canadian oil sands are headed to the Gulf Coast.  Keystone XL should take many of those barrels off of rails and onto pipelines, which again, are the safest method of transporting them.”

 On the final day of the public comment period, the Environmental Protection Agency weighed in, calling the State Department’s findings “insufficient”.  Under the National Environmental Policy Act, EPA could promote the interagency dispute to the White House Council on Environmental Quality, setting the stage for even more legal wrangling.

For its part, Congress has been working on legislation to circumvent the President’s authority and push forth efforts to green-light the project.  In a memo to Republican Congressmen last week, House Majority Leader Eric Cantor outlined a May legislative agenda which pushes forth the Northern Route Approval Act. Cantor said the bill would ensure the pipeline is built without any further delay.

Brad Stevens, Americans For Prosperity: "There are three pipelines in Nebraska that have gone across the aquifer and have done so for over 50 years.  And they've done so safely.  I mean when you start looking through the logistics of that argument...of having an export pipeline that's going through the Gulf of Mexico, it doesn't make economic sense.  It doesn't pass the common sense smell test.”

 Jerry Heithoff, Elgin, NE: "Yeah there's thousands of pipelines across Nebraska.  I realize that.  But you know, life's all about change.  And we have to change the way we're doing things."