Keith Good: Southwest Cotton Growers May be Forced to Cut Acreage

    Farm Bill

    AP writer Betsy Blaney reported yesterday that, “Cotton growers in Texas and other southwestern states plagued by years of drought may plant fewer acres next season because of a bureaucratic delay in implementing a provision of the farm bill.

    “The U.S. Agriculture Department was supposed to calculate production yields for all commodities by county in time for the 2015 crop year. But it now says the department’s Risk Management Agency can’t do that until the 2016 crop year.

    “The delay is expected to reduce the amount of crop insurance available for purchase by growers because they won’t be able to exclude years of eroded production caused by the last decade of drought. Farm lenders use such production stats in determining loans.”

    The AP article noted that, “Lawmakers said they will continue to pressure U.S. Agriculture Secretary Tom Vilsack to get the calculations done on time.

    “‘I’m unpersuaded with the reasons they’ve told me so far why they can’t get this done,’ said U.S. Rep. Mike Conaway of Midland, a member of the House Agriculture Committee. ‘They can go through and triage this issue’ for drought-ravaged regions.”

    Ms. Blaney pointed out that, “Vilsack called the agency’s inability to do the county calculations a ‘staffing challenge,’ and noted that the farm bill provided additional funding to allow some of the work to be done by outside contracts.

    “‘It’s about priorities,’ Vilsack said last month. ‘This is not as simple as it may appear at first blush.'”

    Crop Watch

    On Friday, USDA’s National Agricultural Statistics Service (NASS) released its Crop Production report, which indicated that, “Corn production is forecast at 14.5 billion bushels, up less than 1 percent from the previous forecast and up 4 percent from 2013. Based on conditions as of October 1, yields are expected to average 174.2 bushels per acre, up 2.5 bushels from the September forecast and 15.4 bushels above the 2013 average. If realized, this will be the highest yield and production on record for the United States [related graph].”

    The NASS report added that, “Soybean production is forecast at a record 3.93 billion bushels, up slightly from September and up 17 percent from last year [related graph]. Based on October 1 conditions, yields are expected to average a record high 47.1 bushels per acre, up 0.5 bushel from last month and up 3.1 bushels from last year.”

    Also on Friday, the World Agricultural Outlook Board (WAOB) released its monthly World Agricultural Supply and Demand Estimates (WASDE) report, which incorporated the NASS production report.

    The WASDE report included this overview table of corn supply and demand variables, and stated that, “Corn ending stocks are raised 79 million bushels to 2,081 million. The projected range for the season-average farm price is lowered 10 cents on each end to $3.10 to $3.70 per bushel.”

    Likewise, Friday’s WAOB report included this overview table of soybean variables, and explained that, “U.S. soybean exports and crush for 2014/15 are unchanged this month. Soybean ending stocks are projected at 450 million bushels, down 25 million on reduced supplies.Prices for soybeans, soybean oil, and soybean meal are unchanged.”

    With respect to wheat, Friday’s WASDE update added that, “The projected range for the 2014/15 season-average farm price is narrowed 5 cents on both the high and low end to $5.55 to $6.25 per bushel.”

    In addition, Reuters News reported on Friday that, “The U.S. government on Friday raised its pork production forecast for the calendar year ending September 2015 that shows pork surpassing beef for the first time since 1952 as hog farmers rapidly recover from a deadly pig virus.”

    AP writer David Pitt reported on Saturday that, “A virus that killed millions of baby pigs in the last year and led to higher pork prices has waned thanks to warmer weather and farmers’ efforts to sterilize their operations. And as pigs’ numbers increase, sticker shock on things like bacon should ease.

    “Already, hog supplies are on the rise, with 5.46 million baby pigs born between June and August in Iowa, the nation’s leading producer — the highest quarterly total in 20 years and a record 10.7 surviving pigs per litter, according to a U.S. Department of Agriculture report.”

    The AP article noted that, “This year’s anticipated record-breaking corn and soybean harvests are playing a role in increased producer profits as well, because of a drop in the cost of feed.

    “U.S. producers will end 2014 with an average profit of about $60 per animal, by far the best year ever, Purdue University ag economic professor Chris Hurt said. Over the past 25 years, average profits have been $10.50 per animal, Hurt said.”

    Jesse Newman reported on Friday at The Wall Street Journal Online that, “U.S. corn and soybean prices tumbled Friday, after government forecasters predicted harvests will be even larger than the record levels previously expected.”

    Ms. Newman explained that, “The report comes as the nation’s harvest swings into full gear following months of near-perfect weather throughout the U.S. Farm Belt that has fueled expectations for bumper crops. The prospect that U.S. farmers will reap a huge harvest just a year after collecting the largest corn crop in history and the third-largest soybean crop has in recent months pushed prices to more than four-year lows.

    “Corn futures for December delivery slid 10.75 cents, or 3.1%, to $3.34 a bushel. Prices are down nearly 21% this year after a 40% drop last year.”

    The Journal article added that, “Soybean futures for November delivery fell 19.5 cents, or 2.1%, to $9.2250 a bushel.”

    Derek Sullivan reported on Friday at The Post-Bulletin (Rochester, Minn.) Online that, “University of Minnesota Extension released a report in late 2013, which put the cost of corn production for an average family farm at between $4 and $4.30 per bushel for corn. An Iowa State University study said the cost of soybean production for a middling farm was roughly $11 per bushel.

    “While cost production varies from farm to farm, Lisa Behnken, an agronomist and educator for University of Minnesota Extension, said many farms will soon operate at a loss.

    “‘It’s not a good situation,’ Behnken said. ‘You just hope that a lot of farmers contracted ahead.'”

    The article noted that, “Behnken said many farmers have crop insurance to help with low prices, but much like selling ahead of time, she said most farms can’t insure their entire crop.”

    With respect to harvest variables in parts of the Corn Belt, an update by Illinois State Climatologist Jim Angel on Friday indicated that, “The statewide average temperature for October so far in Illinois is 56.5 degrees, 1.4 degrees below average. The statewide average precipitation for October so far is 2.5 inches.”

    “Most of Missouri has seen amounts of 3 to 6 inches or more as well as parts of Indiana and Michigan. It was a little drier in the Minnesota, Wisconsin, Iowa, Ohio and the rest of Indiana where amounts of 0.5 to 2 inches were common [related map].”

    The National Weather Service Weather Prediction Center tweeted this precipitation expectation map yesterday and noted that, “#Heavy #rain expected in the MS and TN Valleys during the next few days.”

    In other news, Dan Voorhis reported on Friday at The Wichita Eagle Online (“Farmland prices stay up as crop prices fall”) that, “And because it’s sticky, because farmers really like to own land, prices for Kansas crop land have remained strong this fall, even as the land’s ability to generate income is falling along with crop prices.

    “Farmland prices in Kansas rose an average of 17.1 percent per acre in 2014, compared to a year ago – nearly the highest increase of any state in the country, according to the U.S. Department of Agriculture.”

    Meanwhile, yesterday’s Des Moines Register contained several articles highlighting variables impacting the agricultural economy in China and the U.S., including an article by Lynn Hicks, which appeared on the front page of yesterday’s paper.

    The Register article indicated that, “Chinese agriculture, long dominated by lawn-sized plots of land harvested by hand, is rapidly growing larger. Farmers and entrepreneurs are acquiring more land and buying modern equipment. High-tech, mega-sized pork, dairy and poultry operations are replacing backyard production. And China is considering whether to allow farmers to plant genetically modified corn seeds.

    “These big dreams mean big opportunities for U.S. and Iowa agribusinesses. The rapid change in farming also could mean major environmental, political and economic risks for China, which has a fifth of the world’s population and could soon have the world’s largest economy.

    “President Xi Jinping and other leaders debate how much China should feed itself, and how much it should turn to the U.S. and others for help. Those decisions will ripple around the world, down to board rooms, farm fields and dinner tables in Iowa.”

    A separate article in yesterday’s Register (“Feeding China: High-tech hog farms“) reported that, “Chinese hog farms are notoriously inefficient, unsafe and environmentally damaging. Chinese production costs are at least double those in the U.S. because of high feed costs and disease problems, Iowa State University agriculture economist Dermot Hayes estimates.

    “The push to expand has sparked a massive wave of consolidation that is swallowing up smaller farmers in China. Some compare it to Iowa’s farm crisis of the 1980s: Before then, most Iowa farms had pigs, but producers quickly had to go big or get out.”

    Another article in yesterday’s Register reported that, “China produces most of the pork it needs now, but Dermot Hayes calls that unsustainable. He sees ‘unbelievable potential’ for U.S. pork producers if China opens its doors.

    ‘This opportunity could transform the U.S. pork industry and Iowa agriculture,’ said Hayes, Iowa State University’s Pioneer chair of agribusiness.”

    The article noted that, “Now, China is the fifth-largest U.S. export market for pork, behind Japan, Mexico, Canada and South Korea, U.S. Department of Commerce data show. Trade barriers — such as China’s ban on a feed additive — have blocked more sales.

    “If China completely opened up, Hayes said, more efficient producers around the globe would step in, and China’s domestic production would fall to 50 percent or below. If the U.S. got only one-third of this new market, that would be 18 million tons of pork — twice as large as the current U.S. pork production.

    “The number is staggering, and Hayes isn’t predicting it will happen, mainly because Chinese leaders don’t want to depend on another country for the nation’s most popular meat. But he says ‘it is only a matter of time’ before the Chinese government must consider a more open market because of high food costs, pollution, disease fears and other problems associated with pork production.”

    Also with respect to China, Ian Johnson reported in today’s New York Times that, “From a bedrock of traditional culture, and an engine of the post-Mao economic boom in the 1980s, agriculture has become a burden for China.

    “Farm output remains high. But rural living standards have stagnated compared with the cities, and few in the countryside see their future there. The most recent figures show a threefold gap between urban and rural incomes, fueling discontent and helping to make China one of the most unequal societies in the world.

    “The nation’s Communist leaders have declared that fixing the countryside is crucial to maintaining social stability. Last year, they unveiled a new blueprint for economic reform with agricultural policy as a centerpiece. But the challenge confronting them resembles a tangled knot.”

    The article stated that, “It begins with the fact that farms in China are too small to generate large profits, about 1.6 acres on average, compared with 400 acres in the United States. Yet it is difficult to consolidate these farms into larger, more efficient operations because Chinese farmers do not own their plots — they lease them from the government.

    “Privatizing farmland would allow market forces to create bigger farms. But that would be a political minefield for the Communist Party. It would also risk exacerbating inequality, by concentrating land ownership in the hands of a few while leaving many rural families without farms to fall back on if they hit hard times in the cities.”

    In transportation related news, David Gelles and Alexandra Stevenson reported in today’s New York Times that, “The Canadian Pacific Railway recently approached CSX, the big Florida-based rail line, about a merger that would create a company worth more than $60 billion, people briefed on the matter said on Sunday.

    “While the two companies have begun to discuss the possibility of a transaction, CSX was cool to the idea, and it is too early to tell whether they will pursue one, these people said.

    “If completed, a deal would unite two of the biggest railroad operators at a time when rail traffic in North America is soaring because of the energy boom, snarling Amtrak traffic and tying up other freight.”

    In trade news, Shawn Donnan reported on Friday at The Financial Times Online that, “The top US trade official has accused Japan of not living up to its promises and putting both its own promised structural reforms and a 12-country Pacific Rim trade pact in jeopardy.

    “The intervention by Mike Froman, the US trade representative, comes as Washington is pressing to close the deal on the Trans-Pacific Partnership at a summit of Asia-Pacific leaders in Beijing next month.”

    The FT article added that, “‘When Japan asked to join the TPP negotiations last year, it expressed a bold vision that matched the ambitions of the United States and its 10 other Asia-Pacific partners,’ Mr Froman wrote in an opinion piece for the Financial Times timed to coincide with this week’s annual meetings of the International Monetary Fund and World Bank in Washington.

    “‘Today, the world is still waiting for that bold vision to be translated into forward-looking positions at the negotiating table,’ he wrote. ‘What’s on the line is nothing less than the success of Japan’s structural reform efforts, its capacity to pull itself out of two decades of stagnation and its ability to play a leadership role in the region and the global trading system.'”


    Todd Neeley reported on Friday at the DTN Ag Policy Blog that, “Since the release of the proposed waters of the U.S. rule, the EPA has maintained it is simply codifying those waters that already are jurisdictional, and that it narrows down the scope of those waters covered with new definitions, and farmers have nothing to fear if they don’t already need permits.

    “A group of governors and state attorneys general are unconvinced. As thousands of comments continue to pour in on the proposed rule — at last count exceeding 400,000 — governors and state attorneys general from across the country have asked the EPA to withdraw the rule in public comments submitted to the agency Wednesday.”

    Tom Steever reported late last week at Brownfield that, “Missouri Congressman Blaine Luetkemeyer says the EPA extended its comment period for their Waters of the U.S. rulemaking proposal because they’re getting pushback.

    “‘If they come out with a ruling and make it hard and fast prior to election there will be a backlash,’ the Third District Republican told Brownfield Ag News Thursday. ‘It’s not just an isolated industry that this affects, it affects every single industry out there practically, if not directly, indirectly.'”


    news release on Friday from Sen. Chuck Grassley (R., Iowa) stated that, “[Sen. Grassley], Ranking Member of the Senate Judiciary Committee, said today that President Barack Obama should consider the harmful effects on American workers before moving forward on executive action on immigration policy.

    In a letter to the President, Grassley reiterated that circumventing Congress on immigration policy would be an abuse of authority and would diminish the programs put in place to protect American workers and visa holders. Grassley added that the country needs, ‘A President who is a champion for policies that protect(s) American workers.'”

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