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Global Food Security; Climate Change; Biofuels; and Animal Agriculture

Global Food Security

Bloomberg writer Alan Bjerga reported yesterday that, “Global agricultural production must rise to curb surges in grain prices, even as the world financial crisis temporarily reduces demand, executives from Deere & Co., Bunge Ltd. and Syngenta AG said.

“Corn, wheat, rice and soybeans, which rose to records in 2008, may climb again after larger crops and lower demand pushed prices down, the executives said today at the World Agricultural Forum in St. Louis. Output will need to double by 2050 even as climate change, soil degradation and scarcity of arable land reduce it by 25 percent, the United Nations said in February.

“‘We need to grow more from less’ as the world’s population rises and the amount of farmland declines, David Morgan, the president of Syngenta Seeds Inc., said at the biennial conference, which brings together corporate executives, government agriculture ministers and nongovernmental organizations to discuss sustainable methods of boosting food production.”

The article indicated that, “U.S. net farm income is expected to fall 20 percent to $71.2 billion as exports from the world’s largest food-shipping nation decline 17 percent to $95.5 billion, according to the USDA. Bob Young, the chief economist at the American Farm Bureau Federation, said the reduced income may cause farmers to delay purchases of such products as AgCo Corp. tractors, Agrium Inc. fertilizer and Monsanto Co. seeds.

“Still, long-term prospects worldwide for farm investment remain strong, according to J.B. Penn, the chief economist for Deere, who also spoke at the forum’s opening day.”

Meanwhile, an update posted yesterday from the World Agricultural Forum at AgWired.com, stated that, “[President of the American Farm Bureau Federation, Bob Stallman] says agriculture needs to figure out how it will feed the 9 billion people who will live on the planet by the year 2050… on basically the same amount of land used to feed about 6 billion today (including the nearly 3 billion who now don’t get enough to eat).” The link included audio comments made by Mr. Stallman at the St. Louis Forum.

In related news, an update posted on Friday at the UN Food and Agriculture Organization Online noted that, “Europe remains firmly committed to help poor countries boost agricultural production, FAO said today, welcoming a historic €106 million ($144 million) donation from the European Union in support of farmers hardest hit by the global food crisis.

“The signing today in Brussels of an assistance package to ten countries in Africa, Asia and the Caribbean who suffered most from the 2007-2008 food price crisis is a major boost to efforts to turn the tide of worsening food security, expected to deteriorate even further this year as the financial and economic crisis deepens in developing countries.

“‘This is the biggest agreement ever signed between the EC and FAO,’ said FAO Director-General Jacques Diouf. ‘We are extremely pleased that in these times of turmoil, Europe shows an unwavering commitment to the plight of around one billion people who go to bed hungry every night.’ Diouf added that even though international food commodity prices have gone down recently, high and volatile food prices continue to plague developing countries.”

And Philip Brasher reported in Sunday’s Des Moines Register that, “Congress has largely stayed out of the battles over genetically engineered crops, but that could change with a foreign aid bill that could target research money to agricultural biotechnology.

“The bill, approved by a Senate committee earlier this spring, is aimed at boosting spending on foreign agricultural development and nutrition programs from $750 million in 2010 to $2.5 billion by 2014. The bill spells out that the money can go to ‘biotechnological advances appropriate to local ecological conditions,’ including genetically modified seeds.”

Mr. Brasher added that, “But critics of biotechnology are angry that the increased U.S. aid could be used to promote the use of genetically engineered seeds, and they’re pushing lawmakers to strip the provision from the bill.”

As concerns about global food security garner attention in the aggregate, longer-term perspective, more narrowly and in the shorter-term, attention has also began to focus on the planting of this year’s crop in the United States, which could have an important impact on commodity prices.

DTN writers Susanne Stahl and Anthony Greder reported yesterday that, “Sixty-two percent of the U.S. corn crop is in the ground, according to USDA’s latest Crop Progress report.

“That compares with last year’s progress of 70 percent and a five-year average of 85 percent.”

The DTN writers also noted that, “The soybean crop is 25 percent planted, right on pace with last year but lagging the five-year average of 44 percent. The Illinois crop is 1 percent planted, compared to a five-year average of 50 percent, and the Indiana crop is 6 percent planted, compared to 49 percent.”

An with respect to spring wheat, yesterday’s DTN writers pointed out that, “Spring wheat plantings are still running well behind schedule with 50 percent of the crop in the ground compared to last year’s pace of 92 percent and the five-year average of 90 percent. North Dakota’s crop is 31 percent planted, compared to a five-year average of 87 percent, and Minnesota’s crop is 34 percent planted compared to a 90-percent pace for the five-year average.”

An item published yesterday by University of Illinois Extension (“Is the Corn Market Too Complacent About Planting Delays?,” by Darrel Good) stated that, “At this time of year, corn prices are typically dominated by planting progress and production expectations for the U.S. The USDA’s Crop Progress report showed only 48 percent of the crop planted as of May 10, equal to last year’s slow pace and behind the 5-year average of 71 percent (which includes the slow pace of last year). So far, the corn market has had only a modest reaction to the planting delays. December 2009 corn futures prices are a bit lower than in early April and only about $.50 above the low of the past four months.”

Yesterday’s article referred to an economic model that provides some assistance in “quantifying the potential impact of late corn planting.”

After providing more perspective and explanation with respect to this model, yesterday’s article stated that, “[T]he model can be used to forecast the 2009 Illinois average yield based on actual precipitation from September 2008 through April 2009, the assumption of average weather for June through August, and the percent of the crop likely to be planted after May 20. With only 10 percent planted as of May 10 and a small window of opportunity for planting last week, it appears that a large percentage of the crop will be planted after May 20. Assuming 75 percent is planted late, the model forecasts a state average yield of 157.4 bushels per acre, almost 22 bushels below the 2008 yield. These results might be typical in Indiana and Ohio as well. These three states account for 25 percent of intended corn acreage this year. That magnitude of reduction is generally consistent with the yield penalties estimated from planting date experiments. Each one percent change in the percent of the crop planted after May 20 changes the yield forecast from our model by about 0.3 bushels per acre. The yield penalty could be larger if a substantial portion of the crop is planted after May 30. A generally drier forecast for the remainder of the month, however, suggests planting could be completed by month’s end.

“Actual summer weather could offset part of the yield impact of late planting or could contribute to further declines in yield potential.”

Concluding, yesterday’s report stated that, “While not enough is yet known to confidently forecast the 2009 U.S. average corn yield, it appears there is risk of the average yield falling below current expectations even with rapid planting progress in Iowa, Minnesota, and Nebraska. The corn market currently appears to reflect a very low risk of such a shortfall.”

In addition to planting delays for key program commodities, Lauren Etter reported in today’s Wall Street Journal that, “The credit crunch is trickling down to the farm as agricultural lenders tighten credit standards, leaving some farmers short of money to feed their animals or put in crops as the planting season nears its end.

“Deepening slumps in the livestock, dairy and ethanol industries have contributed to mounting troubles for rural lenders. That is making it harder for some growers to borrow money they need to buy seed, fertilizer, equipment and animal feed.”

Ms. Etter explained that, “Borrowing is important to farmers this time of year as they try to finish up planting before it’s too late — generally by mid-June, depending on the region. Fertilizer and other costs remain high; farm-production expenses this year are expected to make up 79% of gross farm income, an increase from last year, the Agriculture Department said.

“Lending woes are an about-face for the agriculture sector, which has remained a relative bright spot in the economy. Over the past two years, high grain prices and rising global demand for food and the biofuel ethanol lifted farmers’ profits and helped rural businesses and banks. Debt-to-asset ratios for farmers are still at all-time lows.”

Today’s Journal article added that, “The Federal Reserve Bank of Kansas City said Friday that ‘turbulent agricultural and macroeconomic conditions’ are contributing to ‘tightened agricultural credit conditions’ in its seven-state region. The Minneapolis Fed said much the same in an assessment of its six-state region last month.

“The Kansas City Fed said a record percentage of agriculture lenders surveyed in the first quarter reported raising their collateral requirements, a key indicator of credit standards. The same group of respondents reported the lowest farm-income and capital-spending levels in six years, a sign that farmers are tightening their belts.”

As U.S. agriculture faces the challenges of increasing food production in the longer-term; coping with planting delays in the short-term; and managing more turbulent financial conditions, Congress has set to work on marking up a climate change bill that could have a substantial impact on the economic fundamentals of farm operations in the U.S.

Climate Change

Keith Johnson reported yesterday at the Environmental Capital Blog (The Wall Street Journal) that, “There wasn’t much show of bipartisanship at the markup hearings on the big Waxman-Markey energy and climate bill today in the House.

Democrats on the committee, led by Henry Waxman and Edward Markey, praised the bill for tackling the twin challenges of energy security and climate change.”

Republicans stuck largely to a single script: The bill is too expensive and will wreck the economy,” Mr. Johnson said.

And yesterday’s Journal Blog update stated that, “And don’t bother sinking your teeth into that 932-page bill released Friday; the House just released the 946-page amendment that would substitute it entirely.”

Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “A key committee in the U.S. Congress on Monday kicked off what promises to be a rollicking, week-long climate change debate as Democrats aimed to advance a bill to slow global warming and Republicans maneuvered to kill a central part of the plan they say will hurt the U.S. economy.”

The article added that, “[Henry Waxman (R-California), the Chairman of the Energy and Commerce Committee] said that with its mandate to reduce emissions of carbon dioxide and other greenhouse gases 17 percent by 2020 from 2005 levels, the bill would shore up the U.S. economy with new high-tech jobs while also avoiding the ecological disasters some scientists forecast because of global warming.

“But Representative Joe Barton, the senior Republican on the committee, warned Waxman, ‘You are about to embark on an episode of putting the entire American economy, which is the world’s largest, through an absolute economic wringer.’”

A brief montage of audio clips compiled by FarmPolicy.com from yesterday’s hearing can be heard by clicking here (MP3-5:30).

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Though the National Corn Growers Association has talked up the prospects of carbon offsets in a climate bill, the group right now could not back the legislation being debated in the House Energy and Commerce Committee because its lacks any carbon sequestration provisions for agriculture.

“After studying the climate-change bill offered Friday, the National Corn Growers Association sent a letter to Committee Chairman Henry Waxman, D-Calif., outlining what NCGA stated would be ‘the potential for negative economic impacts to the agricultural sector if a cap-and-trade system is not structured properly.’

“The legislation doesn’t provide a mechanism for farmers to sell carbon credits, NCGA noted. Instead, the bill would likely lead to increased input costs without offering farmers any specific opportunities to offset those costs with a carbon market.”

Mr. Clayton noted that, “Congressmen in the Energy and Commerce Committee began opening statements Monday afternoon in Washington on Waxman’s bill. Democrats largely argued the bill would create green jobs and help reduce greenhouse-gas emissions while Republicans portrayed the bill as leading to higher energy costs and lost manufacturing jobs. Reports in Washington state that Republicans could offer more than 400 amendments to the bill this week. Ranking Member Joe Barton, R-Texas, said Monday he plans to offer a substitute for the entire bill.”

In a news release from yesterday, the American Farm Bureau Federation indicated that, “Climate change legislation unveiled last week (H.R. 2454) ‘ignores the complex needs of a very diverse U.S. agricultural industry’ and will draw opposition from the American Farm Bureau Federation.”

And Amanda DeBard and Stephen Dinan reported in today’s Washington Times that, “Congress’ chief scorekeeper says the global warming bill moving through Congress will either be scored as a major tax increase or a massive expansion of the federal government – and either one could give opponents substantial ammunition to complicate Democrats’ efforts to pass a bill.

“The Congressional Budget Office (CBO), in a letter sent last week to House Energy and Commerce Committee Chairman Henry A. Waxman, said Democrats’ approach of creating allowances for emitting greenhouse gases requires developing from scratch a market worth hundreds of billions of dollars.

“Whether the allowances are sold, as President Obama wants, and scored as a tax increase, or given away, as House Democratic leaders have suggested, and scored as ‘cash grants’ to businesses, opponents are lining up to use CBO’s conclusions as ammunition in the public relations battle over the bill.”

The House Energy and Commerce Committee markup will continue this morning at 10:00 Eastern.

Biofuels

Reuters writer Charles Abbott reported yesterday that, “Blending more than 10 percent ethanol into U.S. gasoline will result in more air pollution and more damage to engines, said an environmental group and a boating industry trade group on Monday.

“The Environmental Working Group (EWG) and the National Marine Manufacturers Association (NMMA) said evidence weighed against allowing a blend of up to 15 percent ethanol in gasoline.

“The groups will forward their findings to the U.S. Environmental Protection Agency, which is accepting comments until July 20 and has until December 1 to make a decision.”

Animal Agriculture

Rod Smith reported recently at FeedStuffs Online that, “A law that requires all eggs sold in Arizona to be produced by hens housed and managed in systems that meet the animal welfare guidelines of the United Egg Producers (UEP) will become effective in October, Arizona egg producer Glenn Hickman told UEP members attending the group’s spring board meeting in Washington, D.C., last week.

“Hickman said his company pushed the legislation after Arizona voters adopted a ballot initiative in 2006 that makes gestation stalls for sows and stalls for veal calves illegal in 2013.

He said his company first invited Arizona Gov. Janet Napolitano to tour the company’s hen houses and see how hens were housed and, afterwards, got her endorsement for the legislation, which then was introduced in the Arizona legislature.”

The FeedStuffs article added that, “Hickman said the law represents a major opportunity for the Arizona industry to demonstrate to consumers that a ballot initiative regulating the care and housing of hens in the state is not necessary, although an initiative, were it passed, would take precedence over the law.”

Keith Good