Agricultural Economy
In news regarding biofuels and corn prices, Gregory Meyer reported earlier this week at The Financial Times Online that, “The US ethanol industry is enjoying bumper profits again, placing it in an awkward position as it battles plans by the Obama administration to scale back government support.
“Plentiful corn, the main US ethanol feedstock, and foreign demand from sugarcane ethanol-rich Brazil have allowed refiners such as Archer Daniels Midland, Green Plains Renewable Energy and Valero to sharply increase output and biofuel incomes. The US is the world’s biggest ethanol producer.
“Their robust financial health contrasts with the bleak tone industry groups have adopted in response to the US Environmental Protection Agency’s proposal to reduce ethanol blending requirements for the first time.”
The FT article pointed out that, “The biofuels division at Archer Daniels Midland, which makes more than 1.7bn gallons of ethanol per year at six plants, swung to a $134m operating profit in the fourth quarter, from a $94m loss a year earlier. ‘We are expecting strong margins going into 2014,’ chief operating officer Juan Luciano told analysts this month.
“Valero, also the biggest oil refining company, reported a $269m operating profit at its ethanol division in the quarter, its highest ever.”
University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdocDaily blog (“Who’s Right about Corn Prices?“) that, “There is considerable difference of opinion about the prospects for corn prices beyond the current marketing year. Those differences are illustrated by the contrast in price expectations reflected in the USDA’s baseline projections released last week and the current price structure in the corn futures market.
“While somewhat dated, the USDA baseline projections suggest that the average farm price of corn will be near $3.50 for the next five years. In contrast, the current futures market points to an average farm price between $4.40 and $4.50 over the next four years. Other price projections are even more extreme than these two examples, particularly on the low side. The USDA projections will be updated at this week’s Agricultural Outlook Forum. The forecast of the average farm price for the 2014-15 marketing year will likely be increased from the projection of $3.65 in the baseline projections due to smaller supply projections. Projected stocks at the start of next year will be smaller than in the baseline projections and the forecast of planted acreage may also be smaller. The smaller supply projection, then, would point to smaller year-ending stocks and a higher average price.”
After a closer analytical look at two specific issues regarding supply, as well as demand factors, yesterday’s farmdoc update noted that, “While a return to the high corn prices of the past three years is not expected any time soon, a combination of more modest trend yields and more responsive consumption suggest that larger crops would not be as bearish as reflected in some of the more extreme price forecasts.”
Marcia Zarley Taylor reported yesterday at DTN (link requires subscription) that, “Farmland values in some states are beginning to show signs of stress cracks, but one of the nation’s largest farm mortgage holders doubts there’s a crash landing ahead.
“AgriBank, the Farm Credit System district bank that sources funds for Farm Credit Associations covering half of the nation’s cropland, still sees wide disparities in farmland appreciation depending on the 15 states within its territory.”
The DTN update noted that, “A recent AgriBank sensitivity analysis concluded that leaner farm incomes are likely to exert much more immediate influence on land values than higher interest rates will over the next few years.
“Farmers already are downsizing their income expectations, which will ultimately affect cash rents and what they would be willing to pay to own land. USDA’s season-average corn price projections have fallen from a high of $6.89 per bushel in 2012-13 to $4.50 per bushel for the current marketing year. AgriBank expects an extended era of lower prices, dropping to $4.12 in 2014-15, then gradually increasing to $4.33 by 2017. All of those levels leave little margin for error in farm budgets.”
The DTN updated pointed to a recent AgriBank study regarding farmland prices, which can be found here.
In other news, Rob Schultz reported this week at the Wisconsin State Journal Online that, “Most milk manufactured in Wisconsin becomes cheese, but it’s also turning into white gold for dairy farmers in America’s Dairyland, because demand has never been higher and prices for it are rising at meteoric rates.
“A dramatic increase in dairy exports and limited milk production have combined to create the near-record high prices dairy farmers are receiving for their milk from customers like cheese producers.”
The article noted that, “Combined with the near-record low prices they’re paying for corn to feed their cows, dairy farmers should see increased profits through this year, a leading dairy economist said.
“‘This is the dairy farmers’ year to enjoy,’ said Mark Stephenson, the director of the UW-Madison’s Center for Dairy Profitability.”
In addition, Lydia DePillis penned an update yesterday at the Wonkblog (Washington Post) regarding dairy production.
In trade related news, Colleen McCain Nelson reported yesterday at The Wall Street Journal Online that, “President Barack Obama will strive to come to an agreement with his Mexican and Canadian counterparts on the Trans-Pacific Partnership as the three leaders meet this week to discuss how the members of Nafta will fit into the new, far-reaching trade pact.
“Mr. Obama, Mexican President Enrique Peña Nieto and Canadian Prime Minister Stephen Harper will tackle a wide-ranging agenda including security, energy and immigration issues when they gather Wednesday in Toluca, Mexico, for the North American Leaders’ Summit. Economic competitiveness and trade also loom large at the one-day meeting, and experts say this is a crucial opportunity for the three countries to resolve to speak with one voice as they continue to negotiate the TPP, a trade bloc that includes 12 countries around the Pacific Rim.”
Farm Bill- Policy Issues
Dan Friedman reported earlier this week at the New York Daily News Online that, “Sen. Kirsten Gillibrand and 71 other congressional Democrats are asking the agriculture secretary to delay a new law cutting food stamps for hundreds of thousands of Americans.
“‘Our states need time to adjust their policies to accommodate this drastic cut and roll out the changes seamlessly,’ the lawmakers say in a letter they plan to send Tuesday to Agriculture Secretary Tom Vilsack.
“Gillibrand lined up the lawmakers to sign off on the letter, which asks Vilsack to delay until next fall a provision in the massive farm bill Congress passed this month that cuts $8 billion in food stamp aid.”
And Jennifer Liberto reported yesterday at CNNMoney Online that, “More military families used food stamps to buy milk, cheese, meat and bread at military grocers last year.
“Food stamp redemption at military grocers has been rising steadily since the beginning of the recession in 2008. Nearly $104 million worth of food stamps was redeemed at military commissaries in the fiscal year ended Sept. 30” [see related graph].
The CNN update indicated that, “The good news is that the growth in food-stamp redemption at military grocers has slowed.
“The 2013 figure was only a 5% uptick from 2012, less the 13% increase in growth in 2012 and the record 70% hike in growth in food stamps use in 2009, according to the Defense Commissary Agency.
“Food stamps has been a hot topic in Washington for months, as enrollment in the anti-poverty program remains at record high levels. Currently, 47 million Americans depend on food stamps. Half of them are children and a quarter of them are seniors.”
Meanwhile, a report yesterday by Mike Hergert on the Agriculture Today radio program (Red River Farm Network) included remarks on the Farm Bill from House Ag Committee Ranking Member Collin Peterson (D., Minn.)- related audio here (MP3- 1:50).
A related update yesterday at the Red River Farm Network Online indicated that, “Speaking at the Q Country Farm Forum Monday in Fosston, Minnesota, Congressman Collin Peterson said it’s a miracle they got the farm bill done. ‘This is the first time that the Senate went first. Because they don’t have the depth we have in the House, they got themselves backed into some corners and it was hard to get them out. Then we had Boehner to deal with, so I had to give up on some of the dairy stuff or we would have never had a bill.’ Peterson says if prices continue to go down, there won’t really be any support from the government. ‘You’ve been able to insure your revenue. When prices were going up or were relatively high, that worked pretty well. When they go down, then the revenue doesn’t work anymore. Then you’re back to buying crop insurance for your crop loss. That helps, but it doesn’t give you any profit. Depending on what happens here, we could be in for some tough times.’ Peterson said he’s not sure there will be another farm bill, but nothing in this bill needs to be changed, so it will likely keep getting extended.”
And Jonathan Knutson reported yesterday at AgWeek Online that, “Urban Minnesota residents generally are supportive of the new farm bill, Sen. Amy Klobuchar, D-Minn., said Feb. 17.
“But passing another farm bill in five years will be more difficult, and the effort will require greater cooperation among farm groups, she said.”
In other news, the latest AgriCast podcast from WGN radio’s (Chicago) Orion Samuelson and Max Armstrong included an interview with former USDA Chief Economist Keith Collins.
An unofficial FarmPolicy.com tran
Dr. Collins, who is now an economic and policy advisory with National Crop Insurance Services, explained that, “The new farm bill, Title 11 is the crop insurance title, and it’s got 28 sections in it. It creates some new products for farmers, like supplemental revenue programs that will be sold by crop insurance companies. It creates a number of new products, like margin insurance or whole farm insurance. There’s specific commodities that will have new products like peanut revenue insurance. And in addition to that there are a number of program changes that are attempts to make crop insurance more flexible, make crop insurance better able to fit the risks of individual farms.”
Dr. Collins noted that, “I mean, what’s been happening over time is farm programs have been shrinking, and with the elimination of countercyclical payments and direct payments in this farm bill, farmers need a safety net, and the safety net that’s being provided now is more crop insurance than anything else.
“So if crop insurance is going to work, and it’s going to work broadly for all commodities and all farmers, then you’re going to have to tune it up, you’re going to have to strengthen it, you’re going to have to put some new features into it, and that’s exactly what the farm bill does.”
Dr. Collins pointed out that, “The nation, the taxpayers and the Congress want to support an industry composed largely of family farmers that produce our food and protect them from the unusual risks they face, whether it’s drought, whether it’s storms, whether it’s floods, whether it’s freezes. And so promoting financial stability for the family farmers to produce our food is in the public interest, and that’s what the farm bill does, and it does it in a very small way. Farm program spending is typically $15 billion a year. The federal government spends three and a half trillion dollars a year. So we’re talking about out of every dollar the federal government spends, less than one half of one penny goes to production agriculture.”
During his WGN discussion with Orion Samuelson, Dr. Collins also discussed broader issues associated with the agricultural economy and added that, “The crop insurance programs will not be implemented until the 2015 crop years. And the reason is we’ve already passed the policy change dates and the contracts are already in place for 2014, so it’s too late to change the policies at this point. But probably most of the programs will be in place for the 2015 crop years.”
Also, The Wall Street Journal editorial board indicated today that, “President Obama took a break from his California golf and diplomatic sojourn late last week to visit the land liberals forgot–the parched Central Valley. Democrats must have told the President he needed to show some concern over the state’s record drought, and so naturally Mr. Obama devoted about a third of his remarks to a lecture on global warming.”
The Journal opinion item stated that, “In fact, there is no scientific consensus that climate change will make California drier, much less that it is the cause of this year’s drought. Even the New York Times felt obliged to point that out after Mr. Obama’s remarks.
“But for environmentalists and many Democrats, climate change has become the all-purpose explanation. In California it helps to divert attention from the fact that state and federal policies favor endangered fish over farmers and retard water projects that would make the Central Valley better able to survive dry years. House Republicans have passed a bill to ease these obstacles, but Mr. Obama is threatening a veto and didn’t even invite Fresno County’s GOP Congressman Devin Nunes to the event.
“Mr. Obama announced that the feds will write $135 million in checks to the region, but what farmers really need is to get the fair-share of water they’d get if it weren’t diverted to help the delta smelt.”
Food Consumption Issues
The OnPoint radio program with Tom Ashbrook (WBUR-Boston) aired a program yesterday titled, “Making ‘Big Food’ Pay For Obesity,” which noted that, “In the 1990s, the American tobacco industry was reined in and made to pay, big-time, for the health consequences of cigarettes and more. An epic quarter trillion-dollar legal settlement in a suit brought by states to make Big Tobacco pay. Now there’s a push on to do the same with Big Food. To make the American food industry pay for the devastating health consequences of soaring American obesity.”
While Annie Gasparro reported yesterday at The Wall Street Journal Online that, “With stagnant sales in many categories, packaged-food companies increasingly have been focused on cutting costs.”
Stephanie Strom reported in today’s New York Times that, “Makers of products that have always been gluten-free, including popcorn, potato chips, nuts and rice crackers, are busy hawking that quality in ads and on their packaging.
“And consumers are responding with gusto. The portion of households reporting purchases of gluten-free food products to Nielsen hit 11 percent last year, rising from 5 percent in 2010.”
The article pointed out that, “Never mind that a Mayo Clinic survey in 2012 concluded that only 1.8 million Americans have celiac disease, an autoimmune disorder that causes the body to attack the small intestine when gluten is ingested and can lead to other debilitating medical problems if not diagnosed … . ‘[T]here are truly people out there who need gluten-free foods for health reasons, but they are not the majority of consumers who are driving this market,’ said Virginia Morris, vice president for consumer strategy and insights at Daymon Worldwide, a private brand and consumer interactions company.”
Animal Production
Marc Lifsher reported in yesterday’s Los Angeles Times that, “California’s egg-laying hens soon will come home to more comfy roosts.
“Voters in 2008 approved a statewide initiative requiring that cages have plenty of room for the birds to lie down, stand up, turn around and fully extend their wings, starting Jan. 1, 2015.”
The article noted that, “After losing several legal attempts to overturn the upcoming henhouse rules, farmers in the Golden State are busy remodeling coops and building so-called cage-free systems, said Debra J. Murdock, executive director of the Assn. of California Egg Farmers. ‘They are making the changes in anticipation of what it means to be an egg farmer on Jan. 1, 2015.’
“Meanwhile, out-of-state farmers aren’t keen on the law. Their backers tried last year unsuccessfully to get Congress to block the statute, and now the Missouri attorney general is challenging its constitutionality in federal court. He contends that California’s law violates interstate commerce protections. Jennifer Fearing, California director for the Humane Society of the United States, said she expects the lawsuit to fail.”
Also, Urban C. Lehner, DTN Editor Emeritus indicated at his blog yesterday (“No Draft Dodgers in the War Against Antibiotic Resistance“) that, “Among the storms battering the food industry and the livestock producers who supply it, few blow more fiercely thanantibiotics. It is, one food industry executive says, ‘the game changer.’
“That’s why Chick-fil-A’s promise to serve only chicken raised without antibiotics is so important. If competitors follow Chick-fil-A’s lead, radical and expensive changes in animal raising loom.”
Biotech
On the issue of genetically modified food, Indre Viskontas recently authored a lengthy and detailed update at Mother Jones Online titled, “No, GMOs Won’t Harm Your Health.”
