Tuesday, March 27, 2012
Keith Good Farm Policy: Few Farmers Expect Repeat of 2011 Profits
By Keith Good
Katie Micik reported yesterday at DTN that, “Farmers are coming off one of their most profitable years in history and few expect a repeat, according to the latest DTN/The Progressive Farmer Agriculture Confidence Index.
“They remain cautiously optimistic, with an overall survey value of 108.5, but show great divides when asked about their present situation and their expectations for the future. Farmers assess their present situation at a strongly positive value of 140.2, while expectations for the next 12 months notch a pessimistic low at 87.4.
“A value of 100 is considered neutral with higher values indicating optimism and lower values indicating pessimism. DTN surveyed 500 farmers and ranchers across the country between Feb. 27 and March 9. DTN conducts the survey before planting, before harvest and after harvest.”
The article noted that, “Weaker new-crop corn prices and steady to higher input costs have farmers looking at a price squeeze even though commodity prices are still at strong levels. USDA predicts farm income will fall $6.3 billion to $91.7 billion for the upcoming crop year.”
“‘Anybody that’s farmed for say, 20 years has seen the 1980 bust in the farm economy and how it just tore families up. Those memories are still there. If they’re younger than that, then their parents will tell them about it because it’s not always like this,’ [Jim Gill, who farms with his brother outside of Bloomington, Ill] said.”
Ms. Micik added that, “David Duprel grows soybeans and rice in Greenville, Miss. He said he worries about the cost of diesel and electricity to run his irrigation pumps.
“‘In January, I got a tank load of diesel at $3.14, now it is over $4. In a month, they expect it to be $5,’ he said. And ‘it’s difficult to get fertilizer. The Midwest is using it all. The barge loads of fertilizer all go up the Mississippi River.’”
The DTN item indicated that, “But land is the big one squeezing farmers’ profit margins.”
In other news, Owen Fletcher reported yesterday at The Wall Street Journal Online that, “Soybean futures rose to a fresh six-month high Monday, fueled by concerns about a smaller South American crop and expectations for small growth in U.S. planting.
“Soybeans for May delivery ended up 13¾ cents, or 1%, at $13.79½ a bushel at the Chicago Board of Trade, the highest closing price for the front-month contract since Sept. 13.”
The Journal article noted that, “U.S. soy futures have rallied this year as analysts have steadily reduced their expectations for soy output in Brazil and Argentina due to drought. Those concerns continued to boost futures Monday, as Brazilian commodities consultancy AgRural further cut its forecast for Brazil’s 2011-12 soybean production.”
The article pointed out that, “The USDA on Friday is due to issue updated national acreage and inventory forecasts for grains and soybeans. Analysts on average expect the USDA to forecast soybean plantings of 75.5 million acres this year, up slightly from 75 million acres last year, according to a Dow Jones poll.”
University of Illinois Agricultural Economist Darrel Good indicated yesterday (“March USDA Reports and Beyond”) that, “The Prospective Plantings report will contain important information about the potential size of the 2012 crops even though actual plantings may deviate from intentions. First, in combination with the report of winter wheat seedings released in January, the report will provide an indication of the magnitude of total planted acreage in 2012. With substantial prevented plantings last year, acreage intentions this year could be much larger than actual plantings last year. High commodity prices, generally favorable early planting conditions, and a reduction in CRP acres could contribute to that increase. Second, the report will obviously reveal planting intentions for individual crops, providing more insight into prospective crop size. There is general consensus that corn plantings will increase by 2 to 3 million acres, but less consensus about acreage of other crops. A larger percentage of planted acres will also be harvested in 2012 than in 2011 if weather conditions this summer are more normal. Third, the report will reveal the geographic location of intended changes in acreage of individual crops which might influence expectations about the potential U.S. average yields. Surprises in the report should be expected, with the magnitude of total planted acreage having the largest potential for a surprise.
“Beyond the March 30 reports, spring weather and planting conditions will be important. Early planting (or more correctly, lack of late planting) of the corn crop could have some yield implications, but may be more important for the timing of harvest in the Corn Belt.”
Meanwhile, Liam Pleven, Margaret Coker and Benoit Faucon reported yesterday at The Wall Street Journal Online that, “Iran is ramping up imports of wheat, including rare purchases from the U.S., in a sign Tehran is building a strategic stockpile of grain in anticipation of harsher sanctions or even military conflict.
“The country has bought wheat from the U.S., Australia, Brazil, and Kazakhstan in the past few months, and is in talks on what could be a major wheat buy from India, according to market watchers and official data.”
The article stated that, “Access to wheat is crucial for the country, enabling it to prevent spikes in the cost of bread, a key staple among its 78 million citizens. Such spikes have in the past led to social unrest in Iran and elsewhere in the Middle East.”
Neena Rai reported yesterday at the Source Blog (Wall Street Journal) that, “Weather forecasters are expecting above average temperatures until June across the European continent except in the U.K., Spain and southern parts of the region at a time when the area’s wheat crop is already parched from a lack of rainfall.”
The update explained that, “Last year, the U.K. joined a string of other European wheat producing nations in the midst of a drought crisis such as France and Germany whose wheat yields witnessed severe declines to their crops last year.
“Drought in some areas of the world also kept world food prices near record levels last year, threatening the food supply for poorer, food-importing countries, according to the United Nations.
“Joachim Attefjord, head of soft commodities at GFI Group Inc. in London said current warnings from forecasters come at a time when Europe’s crops are already weak because of a lack of moisture. And he warns: ‘This could put pressure on the price of milling wheat.’”
Domestically, Holly Setter reported earlier this week at The Times Herald Online (Mich.) that, “Area wheat fields have gone gangbusters after two weeks of 70- and 80-degree temperatures.
“‘This is different than any other year that I can remember,’ Martin Nagelkirk, a field crop extension educator with the Sanilac County Michigan State University Extension office, said. ‘Right now our wheat crops are about three weeks ahead of schedule and things are awful positive.’”
The article pointed out that, “But with the chance for a great season also comes the risk of catastrophe, Nagelkirk warned.
“‘If it gets up there 6, 7, or 8 inches tall and temperatures drop below 20, we could see some significant loss,’ he said. ‘Until that point, a frost or freeze might singe some leaves but it won’t hurt anything. But as the wheat develops, it become more sensitive to cold weather.’”
With respect to specialty crops, the AP reported yesterday that, “Anxious farmers in fruit-growing regions of the Great Lakes, Northeast and even parts of the South kept misters, smudge pots and helicopters in their arsenals as a cold front approached from Canada, threatening to freeze trees and vines overnight that had budded early amid record-setting warmth.
“At risk are this season’s harvests of wine grapes, apples, apricots, cherries, pears, peaches and possibly strawberries. If the freeze causes damage, consumers would likely notice it on a regional scale at farm stands, farmers’ markets and other local outlets.”
While Bloomberg writers Jim Efstathiou Jr. and Alan Bjerga reported yesterday that, “An unseasonably warm winter and early spring has exposed New York’s iconic McIntosh apples to a potential crop-killing freeze as temperatures across the state are expected to plunge tonight.
“Apple and apricot trees, berry bushes and grape vines have emerged from winter dormancy about three weeks ahead of usual, according to Jim Allen, president of the New York Apple Association in Fishers. That leaves buds on fruit in New York and other northeastern states vulnerable to temperatures that are forecast to drop to as low as 20 degrees Fahrenheit (minus 7 Celsius) tonight.”
In a much broader look at an issue regarding agricultural production, Javier Blas reported earlier this week at The Financial Times Online that, “The UN has proposed that countries set limits on the size of agriculture land sales to regulate the growing trend of so-called farmland grabs.
“The new voluntary guidelines won the consensus of nearly 100 countries this month after three years of negotiations and are now set to be ratified in May at a special session in Rome of the UN’s Food and Agriculture Organisation.”
The FT article added that, “The voluntary code is the first attempt to regulate investment in farmland deals, which often involve rich countries such as Saudi Arabia and South Korea investing in overseas farming in Africa and Latin America to boost their own food security.”
Ken Anderson reported yesterday at Brownfield that, “Fast food chain Wendy’s has announced that it will require its U.S. and Canadian pork suppliers to outline plans to phase out the use of sow gestation stalls.
“In a statement on its web site, Wendy’s says that confining sows in gestation stalls is not sustainable over the long term and that ‘moving away from this practice is the right thing to do.’”
The Arizona Republic editorial board indicated today that, “Egg farmers and animal-rights activists. Not exactly a marriage made in heaven.
“One group says the techniques of modern agriculture are safe and humane. The other group believes the inherent needs of animals are being sacrificed for efficiency.”
The opinion item noted that, “Not much room for compromise.
“But together these two apparently opposing interests have come up with legislation that is mutually agreeable. Neither side got everything. Both sides got something.”
The Republic explained that, “The Egg Products Inspection Act Amendments of 2012 doubles the size of cages for laying hens, adds features that appeal to a chicken’s natural instincts and gives egg producers 15 years to replace the old-style battery cages with the hen-friendly new variety.
“The bill was the product of meetings brokered in Arizona that brought together Wayne Pacelle, president of the Humane Society of the United States, and Chad Gregory, vice president of Georgia-based United Egg Producers, according to reporting by The Republic’s Edythe Jensen.”
“What’s more, such laws on a state-by-state basis could lead to egg producers congregating in states that do not have such laws or simply locating out of the country, where consumers would have no control over the conditions in which the birds live. Yet consumers have shown a desire for egg- production methods that respect animals as sentient beings,” the editorial said.
The Republic item concluded by noting that, “House Resolution 3798, which has 52 sponsors, including Arizona Democratic Rep. Raul Grijalva, is a compromise that responds to the concerns about animals with requirements that the egg producers can accept.
“In today’s hyperpolarized world, that’s not just a victory. It’s an example of the way things should work.”
In other news, Shirley Pulawski reported yesterday at The Observer Online (Dunkirk, N.Y.) that, “Senator Chuck Schumer announced legislation this month to help New York dairy farmers meet increased demand for milk due to the rise in popularity of yogurt products.
“Schumer said he wants New York dairy farmers poised to ‘milk that new yogurt phenomenon,’ referring to the ‘amazing rise in popularity and demand for Greek yogurt products.’
“‘After a long period of trauma triggered by the economic collapse in 2008, the emergence of the Greek yogurt market, which requires intense amounts of high-quality milk, is a bright light at the end of the tunnel for New York’s long-suffering dairy farmers, and I will do all I can to make sure they benefit from this very positive new market,’ Schumer said.”
Also yesterday, Bruce Edwards reported at the Rutland Herald Online (Vt.) that, “It’s the essence of Vermont — a seemingly endless view of fields, pastures and white clapboard villages, cradled by the Green Mountains. But those fields and pastures that make up a Norman Rockwell image of the state are anchored to the livelihood of the state’s dairy industry. It’s an industry that continues to face challenges: Wild swings in the price of milk and escalating costs have forced more of the state’s farmers to get out of the business.”
The article stated that, “Sens. Patrick Leahy, Bernard Sanders and Rep. Peter Welch back a plan to extend the Milk Income Loss Contract at current levels for another year. When the price of milk falls below $16.94 a hundredweight, farmers receive 45 percent of the difference between that price and the current milk price. Feed costs are a factor in triggering payments under the MILC program. Unless extended, the safety net program expires on Aug. 31.”
Meanwhile, Paul C. Barton reported yesterday at the Statesman Journal Online (Salem, Ore.) that, “The movement to promote locally grown food wants help from the next farm bill, and two Oregon lawmakers want to see that it gets it.
“Rep. Chellie Pingree, D-Maine, has introduced the Local Farms, Food and Jobs Act, legislation to address the production, marketing, processing and distribution needs of farmers and ranchers who target local and regional customers, such as schools and those who shop at farmers’ markets.
“Included is language that directs federal farm credit programs to do more to serve them. Another major provision would allow federal food stamp recipients to use their debit cards at farmers’ markets. Among its 68 House cosponsors is Oregon Democratic Rep. Peter DeFazio, while Sen. Ron Wyden, also a Democrat, is cosponsoring a similar Senate bill.”
And, Rosalind S. Helderman reported yesterday at the 2chambers Blog (Washington Post) that, “House Democrats have released an election year budget proposal they say would begin to curb deficits without making major changes to growing entitlement programs like Medicare and Medicaid. by pairing spending cuts with higher taxes on the wealthy.”
The Post update added that, “The plan includes $80 billion in proposed new reductions to mandatory government programs, like agriculture subsidies but does not outline reductions to major entitlement programs that most experts believe will have to be a part of any bipartisan deal to significantly reduce the debt.”
The four page budget Democratic budget summary document stated that, “The budget also includes mandatory budget savings from such things as reductions in agriculture direct payments,” and the document added that, “The Democratic budget fully funds SNAP [food stamps] and supports the President’s proposal to continue certain benefits added because of the economic downturn. Nearly three-quarters of people served by SNAP are in families with children, and one-quarter are in households with someone who is elderly or disabled. In contrast, the Republican budget slashes SNAP funding relative to anticipated levels.”
Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The House on Monday evening approved two bills that tweak the 2010 Dodd-Frank financial reform law.
“By a 357-36 vote, members approved H.R. 2779, which will ease regulations for inter-affiliate swaps.
“And by a 370-24 vote, members approved H.R. 2682, which will exempt companies with a legitimate need for derivatives, such as hedging against price increases, will be subject to less regulation than that applied to speculators.”
A news release yesterday from the House Agriculture Committee stated that, “Chairman Frank Lucas of Oklahoma issued the following statement after the U.S. House of Representatives passed H.R. 2682, the Business Mitigation and Price Stabilization Act and H.R. 2779, in a bipartisan vote, 370-24 and 357-36, respectively.
“‘These are common sense bills that ensure the very businesses we’re relying on to add jobs to the economy are not needlessly subject to new regulations that harm job-creating efforts. H.R. 2682 recognizes that end-users use swaps to hedge against risk and they should be able to continue that practice without costly margin requirements. H.R. 2779 acknowledges that affiliate swaps do not pose systemic risk, and provides a clear exemption from redundant regulatory requirements. Combined these two bills represent sound policy to encourage job creation and economic growth,’ said Chairman Frank D. Lucas.”
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