As customers locked in fall 2008 LP and RF needs we saw an unprecedented downward move in energy prices. This downward move was one that we have not seen in 25 years. For those who contracted, myself included as I use LP to heat my home, it’s frustrating that the risk management tool of contracting that we have all come to rely on from year to year has worked against us. The best thing to do is look back to the previous years when the contract saved us some significant money.

No doubt some will express more caution when contracting in the future, but as one person told me years ago ,"it’s better to take a position than to sit back and speculate".

Looking forward, I see crude oil averaging in the $50.00 mark for 2009. My gut tells me that when the Obama Administration occupies the White House, work to stimulate the economy will slowly have an impact on energy prices as the economy gradually recovers and demand picks back up. As many have said "it will probably get worse before it improves", it appears filling your barrels for spring like I have mentioned in the past, seems to be your best option. Spring contracts are available and locking in a % of your needs would allow you to buy around a dollar cheaper than a year ago.

Moving forward with the merger February 1, Lynn Sheets will reside as the Energy Manager. I will work alongside Lynn to see to it the transition is as smooth as possible in the Energy Department. The talent the company will have in the Energy Department post merger should allow the company to continue the core value in being a customer service oriented company which is here to give you sound, intelligent information so you can make the best marketing decisions which will result in you, the customer, being successful.

While we have had a good spell of cold weather, some have rekindled the importance of good maintenance of your on-the-farm storage for refined fuels. Technical Services personnel continue to remind me each year that 90% of fuel related winter issues are due to lack of maintenance on fuel storage. Please remember you should drain the water, which has formed from condensation, out of your storage tanks in the spring and fall. Also, replace fuel filters twice a year and make sure you are putting a filter on which is the correct micron. My understanding is some new tractors have a 2 micron fuel filter on them. Be sure you are filtering out of your tank enough so that your equipment does not have a problem. It is important in the winter that you fill your equipment at night when you are done using them so condensation in the tank is not an issue. Another good idea is to keep your barrels full to eliminate the threat there as well.

I wish everyone a successful 2009.

SCE’s feed department is primarily geared towards the swine integration business. Currently, they have a high speed mill in Grinnell that is making approximately 1,000 ton per day of swine feeds. Their income from that business model is generated through service income.

Here at Gilbert, we are a traditional mill that caters to multiple species doing smaller batches, offering pelleting, bagging, and local manufacturing of Land O’ Lakes products.

By sharing, not combining, these two business models we will be able to focus on what each of us do best.

With the pressure that was put on the livestock industry in the last 30 months or more has put a real hurt on the livestock producers which, in turn, makes it more difficult to be financially viable when operating a traditional feed company. I believe since we have merged these two companies, our producers will be able to count on their feed mill operating for their needs now and into the future.

Article from PMI Nutrition, Purina Mills Pet Food:

Winter brings a variety of situations, including cold temperatures, wind, rain and snow, which affect the comfort and well-being of your outdoor pets. There are steps you should take to prepare your pets to weather the season in optimal health and comfort.
Your pet should have a house or other protected area that has solid walls on at least three sides and a slanted, overhanging roof that will allow snow and rain to run off. The house should be placed in an area protected from blustery winds and heavy precipitation. Straw, shavings or other bedding in the house will provide extra warmth, but it must be kept clean and dry. It is very important that your pet have a dry environment. Damp surroundings have little insulation capacity and will contribute to chilling and immune stress, which in winter can easily result in serious illness. Besides, cold animals are miserable, and we all want our pets to be comfortable. While well-protected, the house should still have adequate ventilation to keep your pet breathing fresh air. In very cold climates, a 40-watt bulb inside the house (mounted in a safe and protected spot) will help your pet stay warm and cozy.
Water is very important in the winter. It is critical to keep your pet’s water clean and not frozen. In very cold weather, this may necessitate checking the water several times a day or providing a heated waterer. If you use the latter, be sure to still clean it regularly to inhibit bacterial growth and keep the water appealing. Also be sure that the cord cannot be chewed by a bored or curious pet.
Expect your pet to eat more - maybe lots more! The colder it gets, the more an animal must eat in order to stay warm. All animals have what is called the "thermoneutral zone". This is the ambient temperature range at which the animal does not need to expend energy to maintain an ideal body temperature. For most adult dogs, this zone is about 59 to 72 degrees Fahrenheit (young puppies will be comfortable at higher temperatures) and is affected somewhat by breed (for instance, Siberian Huskies with their thick coats are much more cold-tolerant than other breeds). This zone is probably broader at the upper end for cats. Below 59 degrees, the animal must expend energy by raising its metabolic rate in order to stay warm. The colder the environment, the more energy the animal expends, and therefore the more energy it needs to avoid losing weight. Energy comes from food, so expect your pet to eat a lot more in the winter than it does during warmer times of the year. This increase in feed intake even has a fancy name: thermostatic appetite control. The animal’s appetite automatically adjusts to meet its energy needs in different temperatures. If your pet does not have access to adequate food, it will be hungry, cold, lose weight, and may get sick. If the situation becomes dire, death could result from illness or hypothermia. However, an animal can only eat so much food, so in very cold environments housing becomes extremely important in keeping your pet comfortable and healthy.
If you provide your dog or cat with warm, dry housing, plenty of food, and lots of fresh, clean water, your pet will stay comfortable and healthy through even the longest winter!

Another larger issue hanging is the quality of this year’s crop and the storability issue. We are still shipping and drying corn from our locations that do not have driers, as this past harvest is the gift that keeps on giving as far as drying is concerned. Also, we are already seeing some problems showing up across the scale with corn going out of condition and it is not just wet corn stored; even corn that was dried has had problems. So I guess what I am trying to say is CHECK YOUR BINS WEEKLY!!!!

Some of the battles in the market now are the struggle over acres between beans and corn. As most producers have said the corn price needs to be higher to be profitable enough to grow. Then you have the demand side such as ethanol producers saying if ethanol prices do not improve, then the corn price needs to drop or there will be additional losses on the demand side. The world economy continues to wreak havoc on the export demand.

So, as the old saying goes, "high prices take care of high prices" then the other side is also true that low prices take care of low prices. Sounds like the pendulum effect or cycles to me. But regardless, we are probably going to have to work through this with an eye on the past, and not just the last couple years but back into the 1980’s, as there are lessons to be learned in history or at least not repeat the same mistakes. The million dollar question to be asked is whether or not the six and seven dollar corn was a bubble caused by the funds and overall market frenzy, or was it a true reflection of limited stocks and excess demand? Maybe a look back at 1995-96 and the outcome of the $5 plus corn price and what all occurred before during and after that will help put things in perspective. Then, throw in the early 1980’s just for some additional comparison value.

Now what does all the earlier gibberish actually mean? Mostly just that we need to keep things in perspective as far as the prices are concerned and that we need to look at the overall worldwide economy as well as our own backyard. We will also need to keep an eye on the new administration’s ag policies and what all will be potentially changed.

But all these issues are also opportunities and just need to be handled as such.

As far as the merger with SCE and HOIC, the Grain Department should be pretty seamless and you should not notice any big differences from January 31^st to February 1^st when the merger takes effect. Also, we would like to thank everyone for voting on the merger and your patronage this past year.

Check your bins and check them often, and remember this is coming from an agronomy guy. Seriously, the moisture levels that this crop came in at will struggle to stay in condition once we hit a warm stretch. Don’t over-estimate your aeration capacity to keep up with wetter than normal grain that got little or no chance to air dry with the late harvest. Grain quality is also significantly lower than we have seen in quite a while, so pockets of FM may start more hot spots than we are accustomed to. And as I alluded to earlier, some of this crop may need to move sooner than normal. This will require some planning on marketing and logistics. The prices still might not move as fast and as high as we would like, but the paper won’t go out of condition.

The late harvest and early freeze-up also abbreviated an already anemic season for fall anhydrous. We only got about 25% of the typical amount of anhydrous out the door. The same holds for most everyone North of I-80. Areas further North have even less done, and areas South of I-80 are anywhere from 1/2 to 2/3’s done. In a nutshell, that means significantly more NH3 needs to move this spring than can possibly happen. No dealer has enough tanks or toolbars and more importantly, no terminal has enough capacity or trucks. It’s a square peg that needs to go through a round hole. I’m sure we will drive it through there, but it’s not all going to make it.

The way we are planning to handle the limited NH3 capacity is to prioritize the fall contracts that were rolled to spring first followed by the spring contracts. We certainly don’t want to limit how much goes into the ground, but we all need to be realistic about how much can happen before planting. Once the equipment is in the field, it will ultimately come down to allocations from the terminals and waiting on trucks to show up so we can refill nurse tanks.

What doesn’t go out as NH3 will end up going out as 32% or urea. I am confident that HOIC has unmatched capacity to get either 32% or urea on the ground as timely as possible. We have the most experienced and capable agronomy team that I know of. Your veteran application crew averages over 15 years of experience in your fields. That means timely, efficient, accurate and professional application. Our number one priority in the spring is to get your crop planted under the best conditions possible.

Many of you are aware that the market free-fall that has occurred in every sector of the economy has also occurred in crop nutrients. Heart of Iowa has been securing fertilizer throughout this past spring and summer to take care of your operational needs just as we do every year. Unfortunately, the market has dropped after much of this product was purchased. There is currently a lot of press urging the retail sector to write down their inventory costs to bring crop nutrient pricing in line with the current spot markets. This would be the same logic as telling you to bail out of the stock market while it is at or likely near the bottom. Lock in the loss and start over. That would have a catastrophic effect on you just as it would on us. Virtually every crop nutrient dealer in the business is in the same position. The few that aren’t were definitely not thinking about your needs when they sat on the sidelines throughout last spring and summer. The other compelling reason for them to stay out of the market during traditional buying periods is that they didn’t have the financial strength to participate.

To overreact to the current marketing conditions would put us in the same type of debacle the financial industry is facing. I am fairly certain we don’t have much chance of receiving a government bailout either. We are committed to maintaining our financial strength during these volatile times. We must continue to provide the membership with a secure place to transact business, to purchase inputs, and to sell grain, while maintaining the people, facilities and equipment necessary to service your operational needs in a timely manner.

We will continue to take a long term approach to the business. We will continue to do everything we can to make the most profitable decisions possible for your operation. In the end, your success is our success. I can’t stress enough the importance of continuously working through your cropping plans with your agronomist. Working closely together through these volatile times will ensure the best results possible for the 2009 crop.