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Issue # 608
October 29, 2008
Forage Focus: Rethinking Pasture and Hayfield Lime Application - Rory Lewandowski, Extension Educator, Athens County
One of the major agricultural limestone providers in Athens County recently announced a big increase in the cost of delivering/spreading limestone. At $50/ton the price has doubled compared to a year ago. Comments from several farmers regarding the economics of lime application prompted me to read through the liming section of the Ohio Agronomy Guide, and to send some questions off to Dr. Robert Mullen, OSU Extension soils specialist, about soil testing and lime application in pastures and hayfields.
Before I get to the questions I posed to Dr. Mullen and his response, let's review some of the basics about soil sampling and lime recommendations. From the onset we need to understand that soil testing is not an exact science, but it's the best tool we have available to give us some information related to soil fertility and soil pH. Soil test information can be made more reliable by doing a good job of soil sampling. Good soil sampling involves taking numerous sub-samples within a given pasture/hayfield that are each sampled at a consistent depth. A representative soil sample is then pulled from the combined sub-samples. Ideally, soil samples in any given pasture or hay field will be taken at the same time of year each time a soil test is done. Fall and spring are both good times to sample soil, just make sure that a field sampled in the fall continues to be sampled in the fall across years and that fields sampled in the spring continue to be sampled in the spring across years.
The soil pH is a measure of the active soil acidity or alkalinity based on a scale from 1 to 14. A simple explanation of soil pH is that it is a measure of the concentration of hydrogen ions in the soil. The higher the concentration, the more acidic the soil is. On the pH scale, 1 is very acidic and 14 is very alkaline. Many of you have seen the chart that shows the availability of elements essential to plant growth at different soil pH levels. Some of the macro elements such as nitrogen, potassium, sulfur, and calcium, don't become fully available to the plant until the soil pH is 6.0. Some elements such as phosphorus and magnesium need a soil pH of 6.5 before they are fully available. Most of the grass species found in pasture and hay fields do best in a soil that is above 6.0 on the pH scale. Legumes prefer a soil pH closer to 6.5.
The lime requirement is based not on the actual soil pH, but rather on the buffer pH or the lime test index. Lime neutralizes hydrogen ions, causing soil pH to increase. Not all soils respond to a given lime application in the same way. Some soils have the ability to buffer (or resist) changes in soil pH by releasing hydrogen ions that are held on soil particles. Other soils have a lower capacity to release hydrogen ions. Soils that have a higher buffering capacity require more lime to reach a certain, desired, soil pH level as compared to soils with a lower buffering capacity. All lime recommendations are given in terms of agricultural limestone needed in tons/acre to increase soil pH to some desired level or soil pH goal. The tons/acre recommendation is based on a limestone material with an effective neutralizing power (ENP) of 2000 lbs/ton. This recommendation is also based on an 8-inch depth soil sample.
All limestone materials are not equal. Some limestone materials have a higher ENP than others. Some limestone materials are dolomitic, meaning that they also contain magnesium. In Athens County, since our soils tend to be low in magnesium, a dolomitic limestone material should be applied. Do not assume that the limestone material you are applying has an ENP of 2000. It is common that limestone materials have lower ENP values. This means more of the material will have to be applied to satisfy the lime recommendation. Your lime supplier should be able to provide you with a tag that contains the ENP value. Sometimes they will provide a total neutralizing power (TNP) value along with a fineness grade that provides a percentage of the limestone material passing various mesh sizes. The ENP can be calculated from the TNP and fineness grades. Remember, the TNP does NOT equal the ENP. A material could have a TNP of 100 and be equal to an ENP of 2000 or less. There are limestone materials that have a TNP of 105 with an ENP of less than 2000.
Let's consider an example of 2 limestone suppliers in the Athens County area. Both can provide dolomitic limestone materials. Supplier A provided me with a tag that stated a TNP value of 105 and fineness grades of 97% passing an 8 mesh screen, 85% passing a 20 mesh screen and 60% passing a 60 mesh screen. From this tag information, I calculated the ENP at 1620. This is 81% of a 2000 value ENP. Supplier B provided me with tags from 2 different dolomitic limestone materials that had TNP and ENP values. Both materials had TNP values of 100, but the ENP value of the coarser material was 1088, while the ENP value of the finer material was 1450. The material with an ENP value of 1450 is 72.5% of a 2000 value ENP and the material with an ENP of 1088 is 54.4% of a 2000 value ENP. Suppose we had a lime recommendation for 2.0 tons/acre. Remember that the recommendation is based on a material with an ENP value of 2000. To meet this recommendation it would take 2.47 tons/acre of the limestone from supplier A and 2.76 tons/acre of the finer limestone material from supplier B. If the coarser limestone material from supplier B were used it would take 3.68 tons/acre to meet the lime recommendation. Once the cost of limestone materials are calculated on a per pound basis and multiplied by the actual application rate, it might turn out that cheaper materials are not the best bargain.
All right, now it is time to get back to the questions I posed to Dr. Mullen that I mentioned at the beginning of this article. When I read the section on liming in the Ohio Agronomy Guide, I noticed that the section that dealt with no-till fields said to take two separate soil samples. One sample should be at a 0 to 4 inch depth for the lime requirement and the other sample at the 0 to 8 inch depth for the phosphorus and potassium recommendation. I asked, in an email to Dr. Mullen, if soil sampling from pastures and hayfields should follow this same guideline. Specifically, should each pasture paddock or hayfield be represented by a soil sample from the 0 to 4 inch depth to reflect soil pH and provide a lime recommendation, as well as include a soil sample from a 0 to 8 inch depth to reflect soil phosphorus and soil potassium levels? Dr. Mullen's response back to me was:
"Absolutely. Treat pastures and hay fields just like a no-till production soil."
On one hand this means more work and expense to properly soil sample. On the other hand, this will provide soil test information that is better suited to pasture and hay fields. Also, since the soil pH sample will be from the 0 to 4 inch depth, the lime recommendation will be one-half of the lime recommendation chart contained in the Ohio Agronomy Guide, which will result in some economic advantage.
In these challenging economic times, with increasing input costs, beef producers need to get the best possible production from pasture paddocks and hay fields. Rethinking how soil samples are gathered and how recommendations are made will allow good economic decisions to be made regarding limestone applications.
Cattle Markets Caught up in Financial Crisis - Chris Hurt, Extension Economist, Purdue University
U.S. agriculture is caught in the web of uncertainty being created by the financial crisis of 2008. The cattle industry is no exception, as both domestic and foreign demand for beef is related to consumer incomes. Where the U.S. and world economies go is expected to plot the direction for cattle prices. As a consequence, beef supply fundamentals seem less important to prices, at least for now.
It is no mystery that concerns over a downturn in the U.S. and world economies has been the headline news from Wall Street to Main Street to RFD America in the past three weeks. The stock market, as measured by the S&P 500 index, was down 23 percent from September 26 to October 17. The impact on the cattle market was robust as well, with December live cattle futures falling 10 percent and the price of finished cattle falling $8.50 per live hundredweight.
The recent financial losses for the cattle industry were particularly large for feedlots that did not have finished cattle forward sold, especially those who had purchased high priced calves and high priced feed this past summer. The most likely group in this category is small farmer feedlots as many large commercial feedlots have a greater tendency to have cattle forward sold. The negative financial impacts on cow-calf producers has been somewhat less in recent weeks as November feeder cattle futures fell only 7 percent.
Looking forward, the current decline in feed prices has been a huge advantage in reducing costs of finishing cattle and helped to keep the declines in calf prices more moderate. Feed prices have fallen by a much larger percentage than have cattle futures. During the last three weeks, December corn futures fell by 25 percent, with December soybean meal futures down 20 percent.
Beef demand and cattle prices are directly impact by consumer incomes. The current financial crisis may reduce those incomes and therefore cattle prices. The magnitude of the decline in incomes will influence the magnitude of decline in cattle prices. The last two recessions in the U.S. were very mild. This recession may be more severe, more like the recessions of 1974 and 1975 and again in 1981 and 1982, when real Gross Domestic Product (GDP) dropped near 3 percent. A drop of that magnitude this time could have a $4.50 to $5.00 per hundredweight negative impact on live cattle prices, not as much as prices have already dropped.
This would suggest that the live cattle futures decline of $10.25 per hundredweight over the past three weeks is too much. That probably is true if real GDP drops only 3 percent or less in a coming downturn. However, as many supposed experts have stated to the media, "this is the worst financial crisis since the great depression." These statements suggest the possibility that the downturn will be much greater.
The leading indicator for the cattle sector right now is probably the stock indexes. If there is a general improvement in global financial concerns, those will be quickly reflected in stock prices. Indicators today say that the credit crisis is easing somewhat and money flow between banks is beginning to improve somewhat. The odds of a financial collapse are now somewhat lower as the governments of the world's major economies have pledged to make sure the collapse will not occur.
What should people in the cattle industry do now? The first message always is not to panic. Odds favor a recession and not a depression. Understanding of the magnitude of the recession is unfolding now as the impacts of the past few weeks affect consumer spending, business investment decisions, and trade. Markets often anticipate the worst, and if the worst does not occur, there is some recovery. That may well be the direction for the cattle markets as well. If so, this would enable cattle prices to recover several dollars per hundred, but feed prices would be expected to rise as well.
Buying feed at this time is a consideration with both harvest and a financial crisis weighing on grain prices. But that has to be done with a view to the risk bearing ability of the individual firm. In these uncertain times, locking in feed costs without pricing output leaves one in a vulnerable position if the recession is worse than anticipated. Taking positive margins by establishing both input and output prices is always the more comfortable strategy in uncertain times.
For cow-calf operations, a similar no-panic attitude is probably the best path. The feed price highs are probably behind the industry, at least for now, and the world economic crisis may not come to fruition. The world's governments have administered a huge amount of stimulation to economic activity both by infusions of capital and in monetary policy. That large stimulation will probably have the result of moderating recessionary pressure now, but also in stimulating more inflation in commodity prices over coming years.
Recovery in finished cattle prices to the low-to-mid $90s would seem to be the most likely possibility in coming months. A recovery of $5 to $7 per hundredweight might be appropriate to expect for feeder cattle and calf prices as well.
Risk Management in Increasingly Risky Livestock Markets - Derrell S. Peel, OSU Extension Livestock Marketing Specialist
I don't want the title of this article to get anyone's hopes too high so be clear: this article is more about what NOT to do than what to do. Cattlemen in the stocker or feedlot business are very accustomed to thinking about the cattle business as a margin business. Overall price level is less important than the margin between the buy price and the sell price of an animal. At the cow-calf level, producers have been more inclined to think about price levels because production costs were generally more stable and fixed so risk is a matter of the sell price level relative to production costs.
Over the last two years, we have seen huge increases in input costs and tremendous volatility in prices of feed, fertilizer, fuel, etc. It is increasingly apparent that input price movements, up and down, are risky. There are now several examples of industries where locking in an input price at too high a level is just is financially detrimental as locking in an output price at too low a level. We have seen this with electric utilities that hedged high priced natural gas, airlines that hedged high priced jet fuel and, most recently, with ethanol plants that hedged high priced corn. When both input and output prices are volatile, it is more important to manage the margin between both than to manage the price risk of either individually.
For cow-calf producers, this means developing more of a margin approach to risk management. The market may offer an opportunity to forward price both the calves (or feeders) and feed but pricing either one without the other may actually increase risk. It is quite impossible to outguess the short run volatility of markets but there are opportunities, often fleeting, where decent margins are offered by the market.
Unfortunately, market uncertainty and the very issue addressed above makes it more difficult for many market participants to utilize forward pricing tools. For example, the boxed beef market and meat markets generally have experienced increased volatility and made it more difficult for buyers and sellers to be willing to forward contract product at a time when they need to do more of it. Increased short run cash market volatility has increased basis risk and made futures less reliable as risk management tools. We generally think about speculative traders trading the spreads between various markets but many producers today should think about if and how they can lock in the spreads, be it in cash or futures markets, rather than focus only on locking in a price level.
Weekly Roberts Agricultural Commodity Market Report - Mike Roberts, Commodity Marketing Agent, Virginia Tech
LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up Monday except. OCT'08LC futures were up $1.075/cwt at $88.925/cwt but $0.900/cwt lower than a week ago. The October contract will expire on October 31. The DEC'08LC contract closed at $88.775/cwt up $1.225/cwt but $3.300/cwt lower than last Monday. A good showing on Wall Street today and chart-based trading were supportive. February/December and April/December spreading was a feature in the market. USDA put the Choice Boxed Beef price at $141.52/cwt; off $1.39/cwt from a week ago. The USDA 5-area average cash price for October 24 was placed at $89.79/cwt, up $0.51/cwt. According to HedgersEdge.com, the average packer margin was lowered $24.40/head to a negative $38.40/head based on the average buy of $89.55/cwt vs. the average breakeven of $86.60/cwt. It might be a very good idea to buy up another 20%-30% of the 2009 feed needs on the down corn-days this week.
FEEDER CATTLE at the CME were up on Monday except for the October contract. OCT'08FC futures closed at $95.900/cwt, off $0.250/cwt but $2.750/cwt lower than a week ago. Long liquidation ahead of deliveries pressured the October contract. The NOV'08FC contract finished at $95.550/cwt, up $1.725/cwt but $3.050/cwt lower than this time last week. Feeders were supported by spillover from live cattle and a better Wall Street day. Cash feeders in Oklahoma City gained $1-$3/cwt amid an increased demand for calves as wheat pastures were looking better. The CME Feeder Cattle Index was placed at $97.43…97.61/cwt; off $0.42/cwt from Friday but up $0.18/cwt from a week ago. If you have the pasture, hold feeders to a little heavier weight.
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BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.
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