Keith Good: ‘Doom and Gloom’ for Farmers? Not So Fast, Economist Says

    Crop Watch

    Grant Gerlock reported yesterday at The Salt blog (National Public Radio) that, “U.S. farmers are bringing in what’s expected to be a record-breaking harvest for both corn and soybeans. But for many farmers, that may be too much of a good thing.

    “Farmers will haul in 4 billion bushels of soybeans and 14.5 billion bushels of corn, according to USDA estimates. The problem? Demand can’t keep up with that monster harvest. Corn and soybean prices have been falling for months. A bushel of corn is now worth under $4 — about half what it was two years ago.”

    The update noted that, “That means a glut of corn and soybeans and the lowest prices in at least five years. To make matters worse, the oil boom in North Dakota is tying up the railways used to ship grain. Trains for things like coal or imports are also running behind. Bruce Blanton at the U.S. Department of Agriculture says the wait means some of the harvest could go to waste… . [S]ome farmers will have so much grain to sell, they’ll still manage to make some money. Others will lean on saving or subsidized crop insurance. Low prices could even trigger a new set of government safety nets in the Farm Bill.

    “Cory Walters, an agricultural economist at the University of Nebraska-Lincoln, says rising costs for everything from seeds to fertilizer make these low commodity prices harder to handle.

    ‘Does that mean we’re going to have multiple years of low prices and it’s all doom and gloom? No, I don’t buy that right now,’ Walters says. ‘Because there’s a lot of changes could happen from year to year on acreage, weather.'”

    Jesse Newman reported yesterday at The Wall Street Journal Online that, “Informa Economics on Tuesday projected record U.S. corn and soybean production for the 2014/2015 season, despite lowering its yield estimates for both corn and soybeans.

    “Corn output was pegged at 14.493 billion bushels, surpassing the 2013/2014 season’s record crop, on yields of 174.4 bushels an acre, Informa said in a report.

    “Soybean production was projected at 3.991 billion bushels on yields of 47.9 bushels an acre, also a record, the agricultural research company said.”

    More broadly, Reuters writer Dominique Patton reported yesterday that, “More than 40 percent of China’s arable land is suffering from degradation, official news agency Xinhua said, reducing its capacity to produce food for the world’s biggest population.

    “The rich black soil in northern Heilongjiang province, which forms part of China’s bread basket, is thinning, while farmland in China’s south is suffering from acidification, the report said, citing agriculture ministry statistics.”

    In trade news, Justin Sink reported yesterday at The Hill Online that, “President Obama will embark on a weeklong trip to Asia days after a midterm election that could cost his party the Senate. … [I]t will also give him an opportunity to pursue a transpacific trade deal that could become the cornerstone of his work with Republican leaders in the Senate — if they seize control of the upper chamber.

    “Obama will head first to Beijing, where he’s expected to participate in the Asia-Pacific Economic Cooperation (APEC) summit. While there, he and Chinese President Xi Jinping are expected to jostle for influence over their competing trade proposals.”

    The Hill update explained that, “The Obama Administration is pushing the Trans-Pacific Partnership, a free trade agreement between a dozen regional countries.

    “But China, which is not included in the TPP talks, is expected to push its own rival free-trade agreement during the gathering of Asian nations. And Obama has so far struggled to sell the deal in the U.S., with top Democrats — including Senate Majority Leader Harry Reid (D-Nev.) — opposing the deal.”

    Victoria Guida reported yesterday at Politico that, “White House Press Secretary Josh Earnest said that he does not ‘anticipate that there will be a significant breakthrough in trade talks while the president is traveling in Asia,’ echoing the message conveyed by [U.S. Trade Representative Michael Froman] last week. But Earnest added that the White House would rely on a ‘bipartisan majority’ to get the deal through Congress once it is finished.”

    Policy Issues

    University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdocDaily blog (“2014 Harvest Prices for Crop Insurance“) that, “Harvest prices used in crop insurance payment calculations for corn and soybeans grown in Midwest states equal the average of settlement prices on futures contracts during October. Since October is over, harvest prices have been determined. Harvest prices are $3.49 per bushel for corn and $9.65 per bushel for soybeans. Both harvest prices are well below 2014 projected prices. As a result, farmers may receive crop insurance payments even if their yields are relatively high.”

    Christopher Doering reported in yesterday’s Des Moines Register that, “Congress should resist the urge to change a law requiring meat products to carry country-of-origin labeling until the White House decides whether to appeal a recent international trade panel ruling that criticized the controversial measure, a pair of Midwest lawmakers said Monday.

    The World Trade Organization ruled last month that the United States has not done enough to fix a law that requires steaks, pork chops and other meat to carry labels that identify where animals were born, raised and slaughtered. It was the second time the trade panel has ruled against the measure. The WTO determined the latest country-of-origin labeling (COOL) rule provided less favorable treatment to livestock from Canada and Mexico than from the United States.

    “The Obama administration has 60 days to decide whether to appeal the ruling. In the meantime, some lawmakers have said they may try to use the lame-duck session after the election to change the labeling measure. But Sen. Chuck Grassley, R-Iowa, and Sen. Tim Johnson, D-S.D., said Congress should wait to see how the Obama administration responds.”


    Todd Neeley reported yesterday at DTN (link requires subscription) that, “Scott VanderWal commonly tiles beneath spots of standing water on his fields in the prairie pothole region near Brookings, S.D. Standing water often hits planting season hard enough to hurt the bottom line.

    “His corn, soybean and cattle operation is just 2 miles from the Big Sioux River and sits smack dab in the Big Sioux River watershed.

    “The pending Clean Water Act rule has him worried about the isolated, standing waters on his farm, which could conceivably be part of a significant nexus including larger bodies of water under the proposed rule. Ag tiling itself is exempt from the Clean Water Act, but draining actual wetlands would be considered a violation, potentially making tiling projects less feasible.”

    The DTN update noted that, “After more than a decade of confusion regarding the reach of federal authority on water regulations, EPA and the Army Corps of Engineers proposed an immense, 107,416-word rule last spring to clarify which bodies constitute waters of the United States. Despite EPA’s insistence that there are agricultural exemptions and the green-lighting of conservation practices, farmers and agribusinesses have become some of the most ardent opponents of the rule, which could become final sometime next spring.

    “In this series, ‘Web of Water,’ DTN looks at some of the concerns farmers have about the rule, and what this rule will mean for agriculture. In this second story, DTN takes a closer look at how the proposed rule could make it more difficult for farmers to drain low spots on the land.”


    Leslie Josephs reported yesterday at the Money Beat blog (Wall Street Journal) that, “The plunge in oil prices to multi-year lows could have a sour aftertaste for Brazilian sugar processors.

    “Mills in the country-the world’s largest grower of sugar cane-have already been hit by low prices for the sweetener due to consecutive years of a global sugar glut.

    “The drop in crude prices may spell even more trouble for one of the mills’ two chief products: ethanol. Processors have ramped up production of the biofuel as a way to generate revenue as sugar prices plunged. But now that alternative may lose its luster if cheap gasoline gets in the way. Ultimately, it may push more sugar on the market.”

    Ms. Josephs pointed out that, “If ethanol becomes less attractive in the face of lower-cost gasoline, it could push sugar prices down even further since processors would use more cane to make the sweetener instead of the biofuel, adding to a global surplus, said Arnaldo Luiz Corrêa, a director at Archer Consulting in Santos, Brazil

    “Brazil’s state-controlled oil company Petróleo Brasileiro SA subsidizes gasoline, forcing ethanol producers to set prices lower to remain competitive.”


    Ramsey Cox reported yesterday at The Hill Online that, “Sen. James Inhofe (R-Okla.) said an international climate change report was ‘extreme’ and would ‘cripple’ the global economy.

    “‘The idea that our advanced industrialized economy would ever have zero carbon emissions is beyond extreme and further proof that the IPCC is nothing more than a front for the environmental left,’ Inhofe said Monday.

    “His comments came in reaction to the release of the International Panel on Climate Change’s (IPCC) Fifth Assessment Synthesis Report, which said climate change is a global threat that must be addressed through carbon regulation.”

    On the other hand, Cristina Marcos reported yesterday at The Hill Online that, “Rep. Eliot Engel (D-N.Y.), the top Democrat on the House Foreign Affairs Committee, said the U.S. should strengthen research for renewable energies in light of a United Nations report on climate change.

    “The U.N.’s report stated that climate change is caused almost entirely by humans and that greenhouse gas emissions are the ‘highest in history.’ The report further warned that the effects of climate change will be ‘severe, pervasive, and irreversible’ if nothing is done to combat them.”

    Political Notes

    David A. Fahrenthold reported in today’s Washington Post that, “Republicans scored a stunning electoral rout in the midterm elections, taking control of the U.S. Senate after a bitter campaign in which anger at Washington gridlock was turned against a president who took office promising to transcend it.

    “By early Wednesday, Republican candidates had won at least 10 of the day’s 13 closely contested Senate races. They took seats held by Democrats in Iowa, Colorado, Arkansas, Montana, South Dakota, West Virginia and North Carolina — more than enough to seize control of the Senate for the first time since 2007.

    “In addition, Republicans won at least 10 more seats in the House, adding to their majority. And GOP candidates won gubernatorial races from Florida to the high plains, including those in deep-blue Maryland and Massachusetts.”

    In key races with respect to agriculture, Kyle Cheney reported yesterday at Politico that, “Sen. Pat Roberts fended off a challenge Tuesday from independent Greg Orman and will represent Kansas for a fourth term.

    “With 70 percent of precincts reporting, the Associated Press called the race for Roberts, who led Orman 52 percent to 44 percent.”

    And the AP reported yesterday that, “Minnesota’s most senior member of Congress, Collin Peterson, has won his 13th term.

    “Voters in western Minnesota’s 7th District are sending Democrat Collin Peterson back to Washington after he withstood a vigorous challenge from GOP state Sen. Torrey Westrom.

    “Peterson is an influential voice on agricultural issues and helped craft the 2014 farm bill. He touted during his campaign the benefits of his 24 years in office and his position as the ranking Democrat on the House Agriculture Committee.”

    Allison Sherry reported today at the Minneapolis Star Tribune Online that, “Peterson was helped because of his status as the most powerful Democrat on the House Agriculture Committee. He is responsible for a number of components in the farm bill that benefited local farmers — especially sugar beet operations.

    “Peterson on Tuesday said he was eager to see the farm bill implementation through in his next two years.”

    Also, Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “For agriculture, a GOP-led Congress could push back on environmental regulations. Agriculture and business groups also could see a needed break in gridlock in Congress over trade-promotion authority that would allow the Obama administration to cut key trade deals that at least some leaders in the president’s party have opposed.”

    Mr. Clayton pointed out that, “In a critical race for the Senate Agriculture Committee, Sen. Pat Roberts, R-Kansas, fended off a tough re-election campaign. Roberts is considered a likely candidate to chair the Senate Ag Committee next year because Mississippi Sen. Thad Cochran may opt to chair another committee.”

    The DTN update added that, “In the House, the one major surprise was Rep. Steve Southerland, R-Fla., a member of the House Agriculture Committee, losing the 2nd District in Florida. Southerland lost to Democrat Gwen Graham, the daughter of Bob Graham, a former governor and senator in Florida.

    “Southerland was one of the few defeats among Republican incumbent House members. However, in Nebraska, eight-term incumbent Rep. Lee Terry, was down in a tight race late in the evening.

    “Among Democrats on the House Ag Committee, Rep. William Enyart of Illinois lost to Republican Mike Bost, a state legislator. Among the full House caucus, at least eight incumbent Democrats lost.”

    John D. McKinnon, Kristina Peterson and William Mauldin reported in today’s Wall Street Journal that, “American businesses are hoping the dust will settle from Tuesday’s GOP takeover of Congress with new attention on corporate taxes, immigration, trade and energy, top priorities that have eluded breakthroughs in recent years.

    “A post-election landscape that includes a more sharply divided government is likely to lead to continued frustration over some items on businesses’ wish list. At the same time, a reshaped political landscape could lead Congress and the White House to seek legislative breakthroughs on some economic issues before the 2016 election season heats up.”

    The Journal article added that, “Senate Republican leader Mitch McConnell of Kentucky, who won re-election Tuesday night and stands to become majority leader, and other GOP lawmakers have expressed interest in working with Mr. Obama on issues of mutual interest, including a tax overhaul and trade policy. Added Republican votes also could put pressure on the administration in sensitive areas such as the Keystone XL pipeline, which has been blocked so far.”

    Rebecca Shabad reported yesterday at The Hill Online that, “If Republicans win control of the Senate, their first priority in the next Congress will be passing a budget, Republican National Committee (RNC) Chairman Reince Priebus said Tuesday.

    “On MSNBC, Priebus was asked what the GOP could accomplish if his party wins the majority in the Senate.”

    And Peter Baker reported in today’s New York Times that, “But in a hyperactive, deeply polarized time in history, Mr. Obama now faces a daunting challenge in reasserting his relevance in a capital that will soon enough shift its attention to the battle to succeed him. If the hope-and-change phase of his presidency is long over, he wants at least to produce a period of progress and consolidation to complete his time in the White House.

    “He will kick off that effort on Wednesday when aides expect him to hold a news conference seeking bipartisan accommodation on issues of mutual interest, and he plans to host Republican and Democratic leaders at the White House on Friday. At the same time, aides said, Mr. Obama is eager to throw off the constraints of a campaign that he did not direct and begin to defend his record in a more robust way.”

    Meanwhile, John M. Glionna reported last night at the Los Angeles Times Online that, “Voters in Colorado on Tuesday were rejecting a grass-roots measure that called for new labeling laws for genetically modified organisms, while a similar initiative in Oregon was too close to call.

    “With 84% of the vote in, Colorado’s Proposition 105 was losing 68% to 32%.

    “In Oregon, the divide over Measure 92 was far narrower — 51% against and 49% for — with 68% of the votes counted.”

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