February 19, 2020

USDA Reports; Biofuels; Land Values; Stimulus; and Trade Issues

USDA Reports

In addition to the USDA reports that were highlighted in Friday’s update, the Economic Research Service (ERS) also released its latest U.S. farm household income forecast for 2009 late last week.

ERS stated that, “Average farm operator household income is forecast to be $85,140 in 2009, down from both the 2007 estimate ($86,223) and the 2008 preliminary estimate ($86,864). Average farm household income is estimated to have been 27.5 percent higher than U.S. average household income in 2007” [related graph available here].

In addition, ERS noted that, “Family farms in California realized the highest average farm household income ($133,419) in 2007. They also realized the highest average farm income, at $52,357. High-value crop farms comprised more than half of California family farms, and crop production contributed about two-thirds of the State’s total value of production.”

Last week’s updated report also indicated that, “In 2007, earnings from farming constituted an estimated 10 percent of the average income of farm operator households. Two-thirds of income is considered earned off-farm income—most is earned from off-farm wages and salary jobs and the rest from nonfarm businesses” [related graph available here].

Meanwhile, USDA’s National Agricultural Statistics Service (NASS) on Friday released its “National Crop Values 2008 Summary.”

The value of production for corn, wheat and soybeans was included on in this table, which can be found in its entirety on page seven of the NASS report.

Corn for grain was valued at 47,377,576 [thousand dollars] in 2008, compared to 54,666,959 in 2007 and 32,083,011 in 2006.

The all wheat value of production was up in 2008 to 16,568,211 [thousand dollars], higher than the 13,289,326 received in 2007 and more than double the 7,694,734 received in 2006.

Likewise, the value of production for soybeans was up to 27,398,638 [thousand dollars] in 2008 over the 26,974,406 value for 2007, as well as the 20,468,267 value for 2006.

A more detailed breakdown of the value of production for corn by state can be found on page 15 of the report, while state breakouts for wheat are on page 19, and the soybean state breakout table is found on page 24 of the NASS report.

In the ERS Feed Outlook report, which was released last Thursday, Allen Baker, Edward Allen, and Heather Lutman offered more insight into how the $47 billion dollars worth of U.S. corn is utilized [related graph, U.S. corn utilization] by providing an update to 2008/09 marketing year corn projections.

Specifically, the ERS authors stated that, “The 2008/09 marketing year corn projections are unchanged this month. In the first quarter of 2008/09, corn used for fuel ethanol totaled 891.9 million bushels, up 39 percent from the same quarter in 2007/08, as new plants have come on line. Corn used for fuel represented 24 percent of total use in the quarter, up from 16 percent in first quarter 2007/08. Use of corn in sweeteners and starch during the first quarter of 2008/09 is down from the previous quarter and first quarter 2007/08. Sweetener and starch use for the first quarter accounted for 6 percent of total corn use, up just slightly from the same quarter in 2007/08.

First quarter exports are 13 percent of total use, down from 17 percent in 2007/08. The projected range for prices received by farmers in 2008/09 is narrowed 10 cents on each end of the range to $3.65 to $4.15 bushels per acre [related graph].”


In more detailed reporting on the issue of corn based ethanol, Reuters news reported on Thursday that, “U.S. corn used to produce ethanol will increase in 2009/10, but beyond that, growth is forecast to slow with demand mirroring changes in gasoline consumption, the Agriculture Department said on Thursday [related graph].

USDA projected 4.2 billion bushels of corn will be used to produce ethanol in 2009/10, an increase from 3.6 billion bushels forecasted for the current year. [Note: a complete breakdown of USDA projections for all corn variables is available in this Excel spreadsheet).

“Overall, ethanol is forecast to command about 33 percent of the corn crop compared to 30 percent in 2008/09.”

On Friday, Reuters news reported that, “Average U.S. ethanol distiller profits returned to slightly above break even this week as prices for corn, the main input cost for producers, fell on worries about the economy.”

The Reuters article explained that, “Ethanol makers have been suffering negative or low margins for months on weak fuel demand, particularly as ethanol prices have traded well above gasoline prices, which discourages oil refiner demand for the renewable fuel.”

Meanwhile, an update posted at the Domestic Fuel Blog on Thursday stated that, “The nation’s corn growers called comments made Wednesday by a coalition of radical environmental groups ‘just another attempt to prevent the ethanol industry from decreasing the United States’ dependence on foreign oil.’

“‘These environmental groups are stirring up fear for the American public at a time when Americans are already struggling due to the faltering world economy, job losses and high costs of food brought on by some food companies’ record profits and greed,’ said National Corn Growers Association President Bob Dickey, a producer from Nebraska.”

And Philip Brasher reported in Sunday’s Des Moines Register that, “A new gene-altered corn promises to make fuel ethanol greener and cheaper.

The corn, developed by Syngenta AG, requires less energy and water to turn into ethanol, and theoretically can produce more ethanol per bushel.

“But the prospect of this designer corn going on the market as soon as next year is giving the food industry indigestion.”

Mr. Brasher indicated that, “Syngenta is pledging to ensure that the corn is grown and stored separate from other types of corn and sold only to ethanol plants. But the food processors fear the Syngenta corn could still get into their grain supplies inadvertently.

They’ve asked the United States Department of Agriculture to delay approving the Syngenta corn.”

And in news regarding cellulosic ethanol production, Mark Clayton reported on Friday at The Christian Science Monitor Online that, “With one foot planted in a pile of corn cobs, Mark Stowers explains how agricultural waste, transformed into ethanol, will turbocharge the US economy, boost its energy security, and help save the planet, too.

This holy grail of biofuels, called cellulosic ethanol, has been ‘five years from commercialization’ for so long that even Dr. Stowers admits it’s become a joke.

“But now the research director for POET, the nation’s largest ethanol maker, based in Sioux Falls, S.D., says that despite bad economic news and major obstacles, cellulosic’s time is near. Other scientists agree.”

Mr. Clayton noted that, “The proof, Stowers says, lies inside a nearby windowless, high-roofed single-story metal building. Filled with a maze of pipes and vats, this $8 million test facility is a miniature cellulosic ethanol plant that pumps out 20,000 gallons a year of nearly clear alcohol extracted from cobs like the ones beneath his feet.

“‘This pilot plant shows cellulosic ethanol is real – that the technology is here,’ Stowers says. ‘Ultimately, cellulosic will allow us to make significant inroads to replacing oil for our nation’s gasoline needs.’”

Land Values

As price variables change in the agricultural economy, corresponding changes in the expected return and value of U.S. farmland also occur.

Dan Piller reported in Friday’s Des Moines Register that, “Interest in Iowa farmland values, always high, has notched up in recent months as corn and soybean prices have plunged from record levels and the ethanol industry has stalled. ‘Agriculture had a crazy year in 2008,’ Iowa Agriculture Secretary Bill Northey said. ‘The first half of the year looked like the 1970s, the second half looked like the 1980s.’

“A rerun of the 1980s has been on the minds of many who remember that era’s steep drop in land prices. Farmland values have more than doubled since 2001 to a statewide average of $4,468 per acre, according to the annual Iowa State University survey released in December.

Jim Knuth, vice president of Farm Credit Services of America, said his research showed Iowa land values rose by just six-tenths of 1 percent in the last six months of 2008. He noted that in the four-state region run out of the FCS Omaha office – Iowa, Nebraska, South Dakota and Wyoming – land auctions that resulted in no sale more than doubled from 100 in 2006 to 208 last year.”

Steve Jordon, writing on Saturday at the Omaha World-Herald Online, reported that, “Farmland value in Nebraska, after increasing steadily since 2005, took a sharp dip in the last three months of 2008, a survey of bankers indicates.

“Values declined 4.6 percent for nonirrigated land, 2.6 percent for irrigated land and 3.5 percent for ranchland, according to the Federal Reserve Bank of Kansas City, Mo.”

In a related article, DTN Special Correspondent Elizabeth Williams reported on Friday (link requires subscription) that, “Tenants are not rushing to their landowners to renegotiate 2009 cash rents decided last fall, before doom and gloom hit the ag markets and the general economy.

“‘I don’t want to jeopardize the good relationship I have with my landowners,’ said Kevin Green who farms in Dewitt in eastern Iowa.

In an informal poll taken at the Iowa Land Expo Thursday, DTN found few operators who were asking landowners to renegotiate 2009 rents. A corn and soybean farmer in west-central Iowa who farms with his brother on 2,100 acres explained he would never ask his landowners for a reduction in rent, because he would not want to upset anyone. However, two of his landowners came to him and asked if he wanted to lower the rent for 2009 in light of the economic situation.”

For more information on cash leases, see “Computing a Cropland Cash Rental Rate,” which was posted this month at Iowa State University Extension Online.


Shailagh Murray and Paul Kane reported in Saturday’s Washington Post that, “With the final vote coming late in the night, Congress yesterday approved a $787 billion stimulus package that aims to spur millions of jobs through massive new investments in energy, transportation, education and health-care projects, while reviving social safety-net programs that have been shrinking for nearly three decades.

“The bill passed the House 246 to 183 and, in a vote held open for several hours, the Senate 60 to 38, both largely along party lines. President Obama is expected to sign it into law early next week.”

Kevin Diaz reported on Friday at the Minneapolis Star-Tribune Online that, “But for Minnesotans in Congress, as for lawmakers nationwide, Friday’s largely party-line votes accentuated old partisan divisions about government spending and how best to get the nation’s moribund economy moving again.

Minnesota’s Collin Peterson joined six other House Democrats in voting against the bill. ‘I hope I’m wrong,’ said Peterson, the only Minnesotan to cross party lines. ‘I hope this works, but I’m skeptical.’”

DTN Political Correspondent Jerry Hagstrom reported on Friday that, “The Agriculture Department received only $50 million to upgrade the USDA Farm Service Agency computer system in the economic stimulus package, but did better than expected in money for the expansion of high speed internet service in rural America.”

Tom Hamburger and Jim Puzzanghera reported on Sunday at the Chicago Tribune Online that, “A $7.2 billion provision in the economic stimulus bill to extend high-speed Internet service to rural and other underserved areas has been hailed in Congress as the 21st Century equivalent of government programs that brought electricity and modern highways to every corner of the country—creating jobs and better lives for millions of Americans.”

The Tribune article added that, “Rural lawmakers squared off against their urban colleagues, each trying to be sure their favored Cabinet department got hold of the purse strings.

“In part, such lobbying is business as usual in Washington, but the stakes were particularly high on the stimulus bill: It’s the biggest single spending bill in memory, and it may be a one-time-only opportunity.”

The Commerce Department will distribute $4.5 billion of the money. The Agriculture Department will distribute $2.5 billion,” the Tribune article said.

Trade Issues

Writing last week at The Wall Street Journal Europe Online (“Now Is the Time to Conclude Doha”), WTO Director-General Pascal Lamy stated that, “Trade inside a system of globally agreed rules has been a multiplier of growth for more than half a century. Moreover, the international trading system, which the World Trade Organization oversees, has been an effective insurance policy against protectionism. Open trade has done much to lift hundreds of millions of people out of abject poverty and has done much to foster better relations between countries.

“But as the longstanding economic paradigm begins to shift, there are reasons to worry that belief in open trade is eroding. Everywhere one goes, political, business and union leaders speak with trepidation of the future. They fear a future of massive job losses, a lack of credit even for relatively safe operations — like trade finance — and a sharp decrease in trade which threatens economic expansion. This latter fear is particularly pronounced in emerging economies, which are heavily dependent on exports for their growth.”

Director-General Lamy added that, “This is also the time to shore up global trade rules, making them more equitable, transparent and relevant. For more than 60 years these rules, which the WTO oversees, have provided a strong foundation for economic growth and development. A conclusion of the Doha Development Round of global negotiations would strengthen these rules and help ensure that trade is part of the solution to the economic downturn. A Doha Round on its own will not lift us out of this deepening recession, but more open trade would provide an important economic stimulus in its own right. It will also send the political signal that, at harsh and difficult times, governments are capable of working together to provide the kind of global answer which is so desperately needed.”

For more commentary on Doha, see “WTO’s Task: Getting Obama To Say Yes To Doha,” which was written by Bruce Stokes and was posted on Saturday at the National Journal Online.

An update posted last week at the WTO Online (“Farm talks start 2009 with rounds of consultations”) stated that, “[Agriculture] Chairperson Crawford Falconer told members on 12 February 2009 that he has started consulting various coalitions and individual delegations, and will continue over the next few weeks in order to find out what issues members want to discuss… He was speaking in the first agriculture negotiations meeting of the full membership since the new year and since he circulated his latest version of the draft ‘modalities’ on 6 December.”

Also, in an audio segment posted at the National Association of Wheat Growers (NAWG) Online entitled, “Comments From Secretary of Agriculture Tom Vilsack to the Board of NAWG and U.S. Wheat Associates, Feb. 9, 2009,” Sec. Vilsack commented on Doha and trade. To listen to a brief clip of his remarks on this issue, just click here (MP3- three minutes).

To hear Sec. Vilsack’s remarks in their entirety, just click here.

Keith Good

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