Keith Good: Plunging Corn, Soybean Prices May Strain Farm Budgets

    Crop Watch

    Bloomberg writer Megan Durisin reported on Friday that, “Corn futures fell to a five-year low as farmers started harvesting the largest-ever crop in the U.S., the world’s top grower, reducing costs for livestock producers and grain processors… . Corn futures for December delivery dropped 0.9 percent to close at $3.23 a bushel at 1:15 p.m. on the Chicago Board of Trade.”

    The article added that, “Soybeans tumbled to a four-year low, and wheat yesterday touched the lowest since 2010. Cattle and hog futures have rallied to records this year, sending retail beef and pork costs to all-time highs.”

    Donnelle Eller reported yesterday at The Des Moines Register Online that, “Rapidly declining corn and soybean prices are sparking difficult discussions across Iowa about how much growers should pay to rent farmland next year, experts say.

    “Those negotiations could make or break farmers’ future bottom lines.”

    Ms. Eller indicated that, “Some farmers already may be looking at losses this year, with a record harvest driving corn prices down nearly 40 percent.

    “It’s unlikely corn and soybean prices will rebound within the next year or two, pinching farm profits, Chad Hart, an Iowa State University farm economist, has said. It could push some farmers into the red — and push some of them out of farming.”

    Bill Alpert reported on Saturday at Barron’s Online that, “The price of corn has fallen by two-thirds in two years. Justin Crownover sold half his crop in May, when a bushel traded at a still profitable level of five bucks. Four months later the season’s corn supply is looming like a tsunami and the price is down around $3.25. While the Texas Panhandle farmer hopes for a rally, he’s thinking of ways to spend less on machinery and fertilizer.

    “‘Are we concerned?’ he mused earlier this month as he moved some cows down the road. ‘Definitely.'”

    Meanwhile, Reuters writer Theopolis Waters reported on Friday that, “The U.S. hog herd continued to shrink during the June-August quarter as a deadly pig virus lingered on farms, but the decline was less than expected, a U.S. Department of Agriculture report showed on Friday [related graph].

    “The data also showed that producers least affected by the Porcine Epidemic Diarrhea virus (PEDv) added to their herds, encouraged by cheaper corn and higher prices for their animals, analysts said.”

    The article noted that, “Friday’s hog herd total, as of September 1, was the smallest for the period since the 62.915 million head in 2006.”

    More specifically on transportation issues, a news release Friday from Rep. Kevin Cramer (R., N.D.) stated in part that, “Today [Rep. Cramer] officially called on the Canadian government to let the grain shipment performance mandates it is imposing on rail companies permanently expire. In a set of individual letters to Canadian Ambassador Gary Doer, U.S. Trade Representative Michael Froman, U.S. Secretary of Agriculture Tom Vilsack, U.S. Secretary of Commerce Penny Pritzker, and the U.S. Surface Transportation Board (STB), Cramer outlined his growing concerns about the mandates and the recent fines levied by Canada against Canadian National Railway (CN).”

    Farm Bill

    On Friday, Don Wick, of The Red River Farm Network (RRFN), spoke with Secretary of Agriculture Tom Vilsack about Farm Bill issues. An audio replay of the RRFN discussion can be found here, while an unofficial transcript of the conversation with Don Wick and Sec. Vilsack is available here.

    In part, Sec. Vilsack indicated that, “As you know, direct payments, Don, are gone, replaced by a real focus on crop insurance and these new safety net programs, the Agricultural Risk Coverage program and the Price Loss Coverage program. Producers will have, starting Monday, the opportunity to reallocate–I should say the owners of the property have the opportunity to reallocate base acres and to adjust yields, and they’ll have that opportunity from September 29th to February 27, 2015. Starting on November 17, 2014, and continuing at least until March 31st of 2015, they’ll have the opportunity to make the election as to which of these safety net programs is best for their operation.

    “To aid them in making that decision between now and the time they make the decision, we are also announcing the availability of an online tool that has been developed by several land grant universities and food policy councils that will allow producers to plug in numbers that are very specific to their own operation.”

    Sec. Vilsack explained that, “The election date is new. And to clarify precisely what we’re dealing with here, we felt that it was important to give folks at least a month and a half to consider the possibility of reallocating base acres before we started the election period.  And we also are cognizant that people are in the fields and they’re going to be awfully busy between now and then.

    “Owners have the opportunity to make the decision about reallocated base acres and yields. Producers, who could include, but not necessarily always include owners, but producers will have the election between ARC, individually and county, and PLC, and they have from November 17, 2014 to at least March 31st of 2015 to make that election.”

    In response to a question from Don Wick about farmers and landowners, Sec. Vilsack pointed out that, “Well, I think it is important because if they have a cash rent basis, then the owners are not really going to participate in that election, but will obviously be impacted by that election, because if prices are down and these programs are triggered, it’s going to make it a little bit easier for producers to make their financial commitments. So the owners have sort of a stake, but they may not have a voice in that particular decision. But if they have a crop share lease, then they clearly are producers, and they’ll clearly be participating in that decision, and the decision has to be unanimous by all producers who are involved in that land, so it is important to start that conversation now.

    “But I think the most important point to be made is that people need to take their time.”

    And with respect to transportation issues and rail challenges, Sec. Vilsack noted that, “Well, unfortunately, it’s already having an impact on producers in terms of what they’re able to get from the market for product that’s been harvested or will be harvested. And that’s why we’ve continued to put pressure on the rail system in this country to step up and to do what they need to do to make sure that product gets to market efficiently. I think the Burlington Northern is making a good faith effort. We’re seeing their wait list being reduced every week. Canadian Pacific I think needs to step up a little bit more than they have. So it’s a concern.”

    Also on Friday, Robin Reid, Mykel Taylor, and Art Barnaby of Kansas State University provided two new papers related to the 2014 Farm Bill: “Reallocating Base Acres,” and “Updating Payment Yields.”

    Also, Kansas State will host a webinar on October 2, 2014 that will deal with these and other Farm Bill issues.

    Meanwhile, Dave Bergmeier reported recently at the High Plains Journal Online (“APH Adjustment Option uncertainty has caused uneasiness“) that, “As wheat farmers plant their 2014 fall crop they are doing so with some angst because of uncertainty about one of their risk tools.

    “On July 1, the Risk Management Agency (RMA) announced it would not implement the Actual Production History Adjustment Option until the 2016 crop year. Congress approved the 2014 farm bill this past winter.”

    The article noted that, “Max Claybaker, a Blackwell, Oklahoma, farmer and insurance agent, said commodity organizations and other agriculture-related organizations have also pressed USDA and RMA to expedite the process so this fall’s planted crop would be included.Incorporating the APH Adjustment Option this fall would be beneficial, he said.

    “‘We sure could use it,’ he said.

    “In parts of southern Texas and Oklahoma in recent years, including 2014, losses were devastating where yields of 10 to 12 bushels and even worse were common instead of 50 bushels to the acre. This shows at a practical level the importance of crop insurance, Claybaker said.”

    The article stated that, “[G.A. ‘Art’ Barnaby, a professor in agriculture economics and an expert on crop policy at Kansas State University] was surprised by the RMA’s decision to delay the new option.

    “‘USDA provided the response to the CBO (Congressional Budget Office) that rated this rule as a budget saving compared to the alternative,’ he said. ‘So someone in USDA knew about this rule change.'”

    In other developments, a news release on Friday from USDA stated that, “[USDA] today announced a new peanut revenue policy that will be available for eligible peanut producers. The policy, approved by the Federal Crop Insurance Corporation (FCIC) Board of Directors, paves the way for USDA’s Risk Management Agency to make it broadly available to producers for the 2015 crop year in all counties where yield-based insurance coverage is currently offered.”

    And, Stephanie Strom reported in today’s New York Times that, “The United States Department of Agriculture plans to announce Monday that it will spend $52 million to support local and regional food systems like farmers’ markets and food hubs and to spur research on organic farming.”

    Ms. Strom pointed out that, “Farmers’ markets are proliferating around the country, increasing 76 percent to 8,268 since 2008, according to the Agriculture Department, but they have trouble marketing themselves. And few consumers are aware of a website the department created to help them find a farmers market in their area.

    “‘These types of local food systems are the cornerstones of our plans to revitalize the rural economy,’ Tom Vilsack, the agriculture secretary, said in a telephone interview. ‘If you can connect local produce with markets that are local, money gets rolled around in the local community more directly compared to commercial agriculture where products get shipped in large quantities somewhere else, helping the economy there.'”

    Also note that Patrick McGreevy reported on Friday at the Los Angeles Times Online that, “Gov. Jerry Brown said Friday he has signed a group of bills aimed at promoting the ‘farm to fork’ movement in California that seeks to bring fresh produce and other foods closer to consumers, including many not served by grocery stores.

    “Brown signed seven bills, including a measure that creates a state Office of Farm to Fork to promote food access and increase agricultural products available to schools and under-served communities. Assemblyman John Perez (D-Los Angeles) authored the bill, which puts the new office within the California Department of Food and Agriculture.”

    With respect to dairy issues, University of Illinois agricultural economist John Newton penned an update on Friday at the farmdocDaily blog titled, “Basis Considerations with MPP-Dairy.”

    An update on Friday at WILX- TV (Lansing, Mich.) Online (with video clip) stated that, “Senator Debbie Stabenow [D., Mich.] wants Michigan to rethink how it’s handling the Heat and Eat assistance program. The Farm Bill changed the rule letting people get more food benefits if they get at least a dollar a year of heating assistance. Now those people have to get at least $21 in heating help to keep the same food benefits. Sixteen states participate in Heat and Eat. Only Michigan and three others aren’t paying the difference to help people keep the extra benefits, which means around 150,000 Michigan families could lose about $75 a month. ‘The states have the option of coming in and filling the difference, and so the state I think has to look long and hard at that,’ Senator Stabenow told”

    And Justin Sink reported on Friday at The Hill Online that, “First lady Michelle Obama said it was ‘natural’ that kids are ‘grumbling’ over new requirements for schools to fill vending machines and lunch lines with healthier food, but that it would not deter her from improving child nutrition.

    “‘Change is hard,’ the first lady said in an interview with Channel One. ‘And the thing about highly processed, sugary, salty food is that you get addicted to it. I don’t want to just settle because it’s hard.'”

    Bloomberg writer Shannon Pettypiece reported last week that, “New diabetes cases in the U.S. have leveled off after years of sharp increases in a surprising sign that health officials may be starting to get America’s obesity epidemic under control.”

    Trade News

    Mitsuru Obe reported on Saturday at the Real Time Economics blog (Wall Street Journal) that, “Japanese Prime Minister Shinzo Abe began and ended a trip to New York this week with bold pledges to help advance stalled talks on an ambitious pan-Pacific free-trade pact. But mid-week, his chief negotiator walked out of a Washington session with his American counterpart, after U.S. officials accused Tokyo of moving too timidly on opening up Japan’s agriculture market, leaving the agreement’s fate as uncertain as ever.

    “‘We entered the negotiation with a flexible attitude, but it turned out that we were not on the same page,’ a Japanese government spokesman said in a phone interview, explaining the latest breakdown in the talks over the Trans-Pacific Partnership.”

    The Journal update stated that, […Japan’s chief negotiator, Akira Amari, rebuffed American demands on opening up Japan’s beef market, and proposed only a modest reduction in tariffs for beef imports. Mr. Amari also requested in exchange a highly punishing safeguard measure, which would allow Japan to raise tariffs once imports reached a certain level, according to people familiar with the negotiations.

    “The proposal was viewed by the U.S. as an attempt to maintain the status quo, and U.S. officials threatened to retract an earlier offer to eliminate a 2.5% tariff on Japanese auto parts. The removal of these tariffs could bring major benefits to Japan, given the huge size of the U.S. auto market.

    “According to Americans officials familiar with the discussions, Mr. Amari abruptly walked out of the negotiation just one hour into the meeting Wednesday – leaving behind stunned U.S. trade negotiators, and 40 sandwiches they had prepared. Americans were planning to hold discussions through lunch and the afternoon, and if necessary, through the evening to move the talks forward.”

    Reuters writers Krista Hughes and Linda Sieg reported on Friday that, “Japan wants to protect sensitive goods, including beef, pork, rice and dairy, which are important to its farming sector. But with U.S. midterm elections looming, many U.S. farmers and lawmakers have warned against a deal that does not significantly open Japan’s markets and say Japan should be cut out of the talks if it does not give ground.

    “U.S. pork producers cheered Washington’s firm stance. ‘The Japanese have been, and continue to be, holding up the entire negotiation. They’ve got to fish or cut bait,’ National Pork Producers Council Vice President Nick Giordano said.”

    Vicki Needham reported on Friday at The Hill Online that, “Top U.S. and Japanese leaders agreed Friday that they must resolve their differences quickly and wrap up work on a massive Asia-Pacific trade deal.

    “Vice President Biden and Japanese Prime Minister Shinzo Abe met in New York and agreed that they ‘need to resolve outstanding bilateral issues’ in the Trans-Pacific Partnership (TPP) talks, including on agriculture and automobiles, as soon as possible, the White House said in a statement.”


    Reuters writer Carey Gillam reported on Friday that, “Monsanto Co’s experimental genetically engineered wheat, never approved for sale, has been found growing in a second U.S. state, and regulators said on Friday they could not explain how the plants escaped field trials that ended almost a decade ago.

    “About a year after discovery of the company’s unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has also been found in Montana, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service said on Friday.

    “APHIS launched an investigation into the Montana discovery on July 14, said Bernadette Juarez, director of investigative and enforcement services for APHIS.”

    Bloomberg writers Alan Bjerga and Jack Kaskey reported on Friday that, “The USDA said it was unable to find the source of the Oregon wheat, which showed up eight years after St. Louis-based Monsanto temporarily ended field tests of biotech varieties. The agency published about 13,000 pages of investigation documents on the web today.

    “‘While we believe our compliance program is best in class, we continuously review our processes and procedures to improve them, including site selection, field trial isolation, and verification and auditing of field trial locations,’ Philip Miller, Monsanto’s head of regulatory affairs, said in an e-mailed statement today.”

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