Keith Good: Growers Encouraged to Wait in Choosing Farm Bill Program

    Policy Issues

    Marcia Zarley Taylor reported yesterday at the DTN Minding Ag’s Business blog that, “Plunging commodity prices are resetting potential corn payments under various Farm Bill options for 2014. The new calculations also point out how precarious price forecasting can be in assessing which farm program option fits each FSA farm. That’s why so many experts encourage growers to wait until December or January before making a firm commitment to their farm program choices.

    “‘By the end of January, the estimate for 2014/15 spring planted crops will be ‘very’ accurate,’ says Kansas State University economist Art Barnaby. And although USDA hasn’t announced signup dates, it’s unlikely signup will occur before January.

    “Whether ARC or PLC provides better protection is still a moving target. ‘When the Farm Bill was signed last February, it seemed like 2014-crop prices would make [farm supports] largely irrelevant for corn producers. Maybe it would be relevant for wheat and sorghum and solid for rice,’ Brad Lubben, a University of Nebraska economist and director of the North Central Risk Management Education Center in Lincoln, Neb. ‘Six months of bearish price news since then has raised the safety net for corn.'”

    The DTN update noted that, “On a farmdocDaily posting late last week, Carl Zulauf of Ohio State University recalculated expected 2014 ARC-CO and PLC payments per base acre (see online chart), based on the latest USDA crop reports and mid-price projections. Between August and September, USDA’s projected season average price for 2014 dove from $3.80 to $3.50 per bu. That increases the odds that ARC-CO could offer $79/acre payments in his example, up from $41/acre last month. Corn PLC payments suddenly jumped from nothing to $26/acre due to that price shift. What’s more, the lower prices go for 2014 corn, the better PLC looks.”

    Meanwhile, a separate update yesterday from Kansas State University agricultural economist Art Barnaby (“Lower Rates Mean Lower Crop Insurance Cost“) indicated that, “Farmer-paid winter wheat premiums will be lower for 2015, regardless of the Risk Management Agency (RMA) rate changes. The reason for lower premiums per acre is the winter wheat crop insurance price election for 2015 has dropped from $7.02 to $6.30 and volatility has declined from 19% to 17%, an all-time low over the past 17 years. In 2013 the winter wheat approved volatility value was 24%. Those volatilities and prices are set by the market and out of RMA’s control. The third factor for setting a premium is the farmer’s APH, also outside of RMA’s control. RMA does set the rate and the premium cost is then adjusted based on the APH, volatility, and base price.”

    Also, an update yesterday at Kansas State University Extension Online (“Excel Based Farm Program Decision Aid is Publicly Released“) stated that, “Oklahoma State University and Kansas State University have released a computer decision aid to help farmers decide on the best option for participation in the 2014 Farm Bill commodity program. The Farm Service Agency (FSA) has not announced when they will start to take enrollment, but this computer aid will allow farmers to evaluate the program and to start thinking about the option that best fits their farm.”

    In other developments, a news release yesterday from Sen. Dianne Feinstein (D., Calif.) stated that, “Senators [Feinstein], Kirsten Gillibrand (D-N.Y.) and Elizabeth Warren (D-Mass.) today urged the president to include $15 million in his fiscal year 2016 budget request for the National Antimicrobial Resistance Monitoring System (NARMS), which tracks antibiotic resistance in foodborne pathogens.

    “‘NARMS collects samples of bacteria from animals, meat and poultry products, and human cases of foodborne illness and analyzes them for trends in antibiotic resistance,’ the lawmakers wrote. ‘This important data allows the CDC, the Food and Drug Administration (FDA), and the Department of Agriculture to accelerate their response to emerging public health threats. However, due to historic underfunding – only $7.8 million in FY 2014 – NARMS can only conduct sampling of retail meat in 14 states. The FDA informs us that this level of funding restricts the agency’s ability to study trends in antibiotic resistance.'”

    More broadly, David Eldridge reported yesterday at Roll Call Online that, “Say this about the 113th Congress: It’s managed to live down to low expectations.

    “With only a lame-duck, post-Election Day mop-up session left before a new Congress takes office in January, the 113th is on track to be one of the least productive congresses — in terms of laws passed and signed by the president — in 60 years.

    “The 113th Congress, which passed a continuing resolution to keep the government funded through Dec. 11 before heading out of town, has seen just 165 pieces of legislation enacted.”

    David Leonhardt reported in today’s New York Times that, “The Democrats need to find a way to succeed in two red states this year. If they can do that — preventing Republican victories in some combination of Alaska, Arkansas, Kansas, Louisiana or North Carolina — Democrats can pull off a modest upset and keep control of the Senate this year. Otherwise, Mitch McConnell will probably achieve his dream of becoming Senate majority leader.

    “But with six weeks left in the campaign, it’s worth asking a slightly mischievous question: Why does the Senate matter?

    “Regardless of which party controls it, Republicans will almost certainly control the House, and Democrats will hold the White House. Given how far apart the two parties are on almost every major issue — climate, health care, inequality, the long-term deficit, immigration and same-sex marriage, for starters — the odds of major legislation becoming law in the next two years are scant.”

    The Times article pointed out that, “Even if no major legislation is likely in the next two years, the people elected this November will be in the Senate for another four. The 2014 elections could well mean the difference between a Democratic Senate and a Republican Senate in 2017. (The map is more favorable to Democrats two years from now than this year.)”

    And Rebecca Shabad reported yesterday at The Hill Online that, “House Budget Committee Chairman Paul Ryan (R-Wis.) said in a new interview that if Republicans win the Senate, it’ll be easier to pass legislation to reduce the deficit.”

    Crop Watch

    Lucy Hornby reported yesterday at The Financial Times Online that, “China will allow only the bare minimum tax-free imports of cotton next year as it tries to come to grips with a mountain of state reserves, adding to the pressure on global cotton prices already damped by a bumper US harvest.

    “China is obliged to allow its mills to import 894,000 tonnes of cotton tax-free every year, under terms negotiated when it joined the WTO. Normally the country’s central planner also issues additional quotas to textile mills, after some delays designed to force them to purchase cotton grown domestically.

    “For 2015, only the minimum quotas will be issued, Liu Xiaonan, vice director of the economy and trade department of the National Development and Reform Commission, said on Monday.”

    Alexandra Wexler reported yesterday at The Wall Street Journal Online that, “Cotton prices fell to a nearly five-year low on Monday after a Chinese official said the country will sharply curtail its cotton imports next year…[C]otton for delivery in December ended down 2.8% at 62.59 cents a pound, the lowest since Oct. 7, 2009.

    “Futures prices have tumbled 26% this year on expectations that China would curb its imports.”

    Ms. Wexler explained that, “Also adding pressure to prices are expectations for a much bigger crop in the U.S., the world’s No. 1 cotton exporter. The U.S. Department of Agriculture estimates that domestic cotton production will increase 28% in 2014 from a year earlier, as low grain prices caused farmers to switch to growing the fiber.

    “Some cotton traders are worried the steep drop in prices could lead to contract defaults. After prices plunged from a post-Civil War high three years ago, a wave of defaults by mills hit balance sheets at some of the largest cotton traders, sparking a wave of legal battles.”

    Bloomberg writer Lydia Mulvany reported yesterday that, “Soybean and corn futures extended declines to the lowest in more than four years as harvests accelerated in the U.S., the world’s top grower.”

    Cheri Zagurski and Emily Unglesbee reported yesterday at DTN (link requires subscription) that, “Forty-two percent of the nation’s corn crop had reached maturity as of Sept. 21 and 7% of the crop had been harvested, according to USDA’s latest weekly Crop Progress and Condition reports.

    “The maturity percentage rose 15 percentage points in the past week while harvest advanced 3 percentage points. The five-year average for maturity is 54% and for harvest is 15%. Corn condition was basically unchanged at 74% good to excellent.”

    The DTN writers added that, “Soybeans were 45% dropping leaves and 3% harvested compared to five-year averages of 53% and 8%.”

    The National Weather Service in Lincoln, Il. tweeted yesterday that, “Ideal weather on tap this week for harvest and other outdoor activities! Mostly clear, highs in the 70s.”

    And a news release yesterday from Purdue University noted that, “After an unusually cool and wet summer, Indiana might very well see a return to more normal conditions as autumn sets in.

    “Temperatures are expected to rebound to near-normal and then normal for the rest of September and develop into a warmer-than-normal trend for October, according to the Indiana State Climate Office, based at Purdue University. Precipitation should be about normal in October.”

    University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdocDaily blog (“Monitoring Corn and Soybean Consumption“) that, “The corn and soybean markets appear to be expecting the USDA’s already very large U.S. production forecasts to be increased in the October 10 Crop Production report. Larger crop expectations stem from expectations for higher yield forecasts, with some disagreement about the prospects for changes in acreage estimates. The implication of large crops for the magnitude of year-ending stocks obviously depends on the consumption response. As indicated in earlier articles (August 11 and August 25), the markets will continue to monitor the pace of consumption relative to USDA projections in order to form expectations of the magnitude of year ending stocks.”

    After more detailed analysis, yesterday’s farmdoc update pointed out that, “As a whole, current indicators of corn and soybean consumption do not point to 2014-15 marketing year consumption that would deviate much from the current USDA projections. Those projections will be updated on October 10, with the September 30 Grain Stocks report to provide some insight into the recent pace of feed and residual use of corn.”

    With respect to transportation issues, Bloomberg writers Frederic Tomesco and Jen Skerritt reported yesterday that, “Canadian National Railway Co. (CNR) said the federal government should lower a grain shipment minimum because farmers haven’t been sending enough of the crop to allow the railroad to comply with the order.

    “‘Perhaps the level that the government set should be revisited,’ Chief Executive Officer Claude Mongeau said. ‘Perhaps the government should look at demand and corridor capacity constraints, and come to the view that we did everything we can do, and that we should not be facing fines.'”

    Yesterday’s article added that, “Canada’s federal government will fine Canadian National as much as C$100,000 ($90,790) a week, because the Montreal-based railroad ‘was not able to meet the minimum volume requirements,’ Jana Regimbal, a spokeswoman for Transport Minister Lisa Raitt, said Sept. 17 in an e-mail.

    “Raitt and Agriculture Minister Gerry Ritz said last month that Canadian National and Canadian Pacific Railway Ltd. would each be required to move 536,250 metric tons of grain a week between Aug. 3 and Nov. 29 or face penalties. A similar order requiring railways to move 500,000 tons of grain a week was imposed in March after a backlog of as much as C$20 billion of grain was stuck on prairie farms.”

    news release yesterday from Sen. John Hoeven (R., N.D.) stated that, “[Sen. Hoeven] has been pressing Canadian Pacific Railway Company (CP) to come up with a plan to reduce agriculture shipment delay. Friday, CP’s Vice President of Marketing reported that the company is investing additional resources to its North Dakota customers and has implemented a new, more transparent service offering and report to the Surface Transportation Board.

    “‘We will continue to press Canadian Pacific to devote the resources necessary to catch up on agriculture shipments until they are up to date,’ Hoeven said. ‘Last week, a review of their situation showed progress, though clearly they will need to do more in terms of resources and staff to meet the demands of North Dakota’s growing economy. With the harvest in full swing, we need to ensure the railroad is doing all it can to meet not only this year’s needs, but also next year’s.'”

    Also yesterday, Steve Case, writing at The Washington Post Online (“Why innovation and start-ups are thriving in ‘flyover country‘”), pointed out that, “Over the next decade, innovation and investment will accelerate in ‘flyover country’ for five reasons:

    • “Advancements in technology are enabling start-ups to take shape for a fraction of the cost it took just a decade ago.
    • “Increased mobility enables ‘Rise of the Rest’ start-ups to more easily attract talent — often by luring people back to Midwestern cities for lifestyle reasons, and by tapping into expertise all across the world via by leveraging networks.
    • “Lower cost of living enables investment capital and paychecks to go much further. The major start-up expenses such as salaries and office space cost less, and the cost of living is considerably lower for employees.
    • “Local support is building with the creation of accelerators and greater engagement from the leading local companies, universities, and government officials.
    • “Greater access to capital is making it easier for companies to start and scale. Local angel investors are emerging to back start-ups and strengthen their communities. Crowdfunding is widening the circle and enabling entrepreneurs to reach national investors. And venture capitalists in California and New York are starting to pay more attention to what is happening in the other 48 states.”


    news release yesterday from the National Farmers Union (NFU) stated in part that, “[NFU] President Roger Johnson today submitted comments to the U.S. Environmental Protection Agency (EPA) on its proposed rule addressing the ‘Waters of the United States (WOTUS) Definitions Under the Clean Water Act.’ The comments are intended to provide the agencies with advice for drafting a final rule that does not increase CWA jurisdiction and promotes consistent application of EPA policies, which aligns with the agencies’ stated intent.

    “‘These comments should help the agencies avoid using language that could be taken out of context and used to stretch CWA jurisdiction in the future,’ said Johnson. ‘The agencies’ stated intent is to replace inconsistent practices with clear, bright-line tests through this proposed rule. If NFU’s comments are given proper consideration, the final rule will allow the regulated community the certainty it needs to conduct its business free from fear of undue regulatory interference and without sacrificing the agencies’ ability to protect the United States’ water resources,’ he said. ‘The importance of clean water today and for future generations is critical to the well-being of the nation.'”

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