FarmPolicy

May 21, 2018

Ag Economy; Farm Bill; Trade; Biotech; and Animal Agriculture

Agricultural Economy

Kim Severson and Kirk Johnson reported in today’s New York Times that, “The heat and the drought are so bad in this southwest corner of Georgia that hogs can barely eat. Corn, a lucrative crop with a notorious thirst, is burning up in fields. Cotton plants are too weak to punch through soil so dry it might as well be pavement.

“Farmers with the money and equipment to irrigate are running wells dry in the unseasonably early and particularly brutal national drought that some say could rival the Dust Bowl days.”

The Times front page article indicated that, “The pain has spread across 14 states, from Florida, where severe water restrictions are in place, to Arizona, where ranchers could be forced to sell off entire herds of cattle because they simply cannot feed them.

In Texas, where the drought is the worst, virtually no part of the state has been untouched. City dwellers and ranchers have been tormented by excessive heat and high winds. In the Southwest, wildfires are chewing through millions of acres.

“Last month, the United States Department of Agriculture designated all 254 counties in Texas natural disaster areas, qualifying them for varying levels of federal relief. More than 30 percent of the state’s wheat fields might be lost, adding pressure to a crop in short supply globally.”

The Times writers explained that, “Even if weather patterns shift and relief-giving rain comes, losses will surely head past $3 billion in Texas alone, state agricultural officials said.

“Most troubling is that the drought, which could go down as one of the nation’s worst, has come on extra hot and extra early. It has its roots in 2010 and continued through the winter. The five months from this February to June, for example, were so dry that they shattered a Texas record set in 1917, said Don Conlee, the acting state climatologist.

Oklahoma has had only 28 percent of its normal summer rainfall, and the heat has blasted past 90 degrees for a month.”

Today’s article added that, “The United States Department of Agriculture’s Farm Service Agency has already provided over $75 million in assistance to ranchers nationwide, with most of it going to Florida, New Mexico and Texas. An additional $62 million in crop insurance indemnities have already been provided to help other producers.”

The AP reported yesterday that, “The temperature is stuck on broil this week across the Midwest and South, and Dallas and Oklahoma City have endured 100-degree heat for at least 10 days.

“Forecasters said Monday that the extreme heat could continue for most of the week and perhaps beyond.”

In addition, Gregory Meyer reported on Friday at The Financial Times Online that, “The quality of the corn crop also appeared threatened by heat in a third of the Corn Belt, a stretch of fertile land in the central US. Commodity Weather Group said temperatures of 95F (35C) or more this weekend could put stress on corn as it begins to pollinate, a crucial developmental stage.”

Meanwhile, John Perkins reported yesterday at Brownfield that, “U.S. corn and soybeans are in very good condition but continue to show the impact of late planting and widely variable growing conditions, [according to yesterday’s USDA Crop Progress report].

“As of Sunday, 14% of corn has reached the silking stage, compared to 36% a year ago and the five year average of 26%, with 69% of the crop in good to excellent condition, unchanged from a week ago.

“Twenty-one percent of soybeans are blooming, a big jump from last week but still behind the 38% this time last year and the five year average of 33%. Sixty-six percent of soybeans are rated good to excellent, steady with the previous week and with 1% moving from the good category up to excellent.”

University of Illinois Agricultural Economist Darrel Good indicated yesterday at the FarmDocDaily Blog that, “Corn prices have made a modest recovery following the sharp declines stemming from the USDA reports released on June 30. The recovery has reflected a combination of continued strong corn demand and a few concerns about yield potential.

July 2011 corn futures reached a high just below $8.00 on June 10 and declined to a low of $6.15 on June 30. The price of that contract moved about $.55 higher in the first week of July. Similarly, December 2011 futures reached a high near $7.23 on June 9, declined to $5.75 on July 1, and then moved about $.60 higher by the close on July 8. Corn prices continue to react to a number of factors, including general economic and financial developments. Much of the price strength in July, however, has been associated with indications of continued strong demand and some ongoing concerns about potential yield and production.”

Yesterday’s analysis indicated that, “Corn production prospects were boosted by the USDA’s June Acreage report that projected area harvested for grain at 84.888 million acres, 3.44 million more than harvested in 2010. Using the calculation of expected yield of 158.7 bushels in the USDA’s June 9 WASDE report, the acreage forecast points to a record 2011 U.S. corn crop of 13.472 billion bushels, 1.025 billion larger than the 2010 crop. There is some uncertainty about the harvested acreage forecast due to late planting and extreme weather conditions (flooding and drought) in some areas. That forecast may be revised in the August Crop Production report. In addition to late planting and extreme weather in some areas, corn yield concerns increased with dryness that developed in late June and early July in parts of Illinois, Indiana, Iowa, Ohio, and Wisconsin. However, some precipitation was being received in parts of those dry areas today (July 11). Widespread high temperatures in the first half of July remain an issue. Crop condition ratings remain generally high. As of July 3, 69 percent of the crop in the 18 largest corn producing states was rated in good or excellent condition in the USDA’s weekly Crop Progress report. A year ago, 71 percent of the crop was rated in good or excellent condition. Without considering the potential impact of late planting, current crop condition ratings point to a 2011 U.S. average corn yield well above the current USDA calculation of 158.7. As learned the past two years, however, condition ratings in early July are not always a good indicator of actual yield.

“The USDA’s July WASDE report to be released tomorrow (July 12) will provide additional information about the likely level of stocks at the end of the 2010 and 2011 marketing years. As usual, the USDA’s August 11 Crop Production report will be highly anticipated. Expect pre-report expectations about the size of the 2011 crop to be in a wide range. Until then, corn prices may remain in a relatively tight range compared to that of the past 5 weeks.”

Marshall Eckblad and Curt Thacker reported last night at The Wall Street Journal Online that, “Futures for lean hog carcasses soared after China singled out rising domestic pork prices as a concern, a move analysts say increases the likelihood that the country will continue to boost imports…Coming just days after China made a big corn purchase, the rally further illustrates how the country’s rapid growth and its own internal struggle with inflation reverberate across global commodity markets, lifting food prices elsewhere.”

In other domestic news, Linda H. Smith reported yesterday at DTN (link requires subscription) that, “Few investments can match farmland’s returns in the past five years — it has increased as much as 50% depending on location.

“The strongest growth has been in regions with intensive field crops or livestock production, especially the Midwest. The Chicago Federal Reserve reported farmland in its district was 16% higher in the first quarter of 2011 than a year earlier, the largest year-over-year increase since 2007.

“The Kansas City Federal Reserve also reported first-quarter values up strongly. The areas with slower growth include those with varied agriculture, environmental restrictions or limited water.”

The DTN item added that, “Current agricultural land values appear to be consistent with economic conditions and commodity prices, according to Rabobank economist Vernon Crowder. ‘There is little sign of a land price bubble at present,’ he said.”

From a more global perspective, Bloomberg writer William Davison reported yesterday that, “The number of Ethiopians in need of humanitarian assistance has risen to 4.57 million, 40 percent more than estimated in April, said State Minister for Agriculture Mitiku Kassa.

“The government needs $398.4 million to fund food relief for victims of a drought that has afflicted much of the Horn of Africa, according to a humanitarian assessment report handed to reporters.”

 

Farm Bill Issues: Policy Papers, and Budget Considerations

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “The American Enterprise Institute is touting its ‘agricultural week’ in Washington, which consists of pitching 12 white papers overhauling farm policy to the press and congressional staffers.

“It’s pretty easy to peg where AEI comes down on the farm bill when the group labels its report ‘American Boondoggle: Fixing the 2012 Farm Bill.’”

Mr. Clayton stated that, “I will give you a shorthand version of American Boondoggle. The people who put together the reports on the various sections of farm policy consider farm programs wasteful and, from a social-policy perspective, unfair. Mostly university academics, the professorial crowd on the AEI press calls Monday pontificated greatly about waste in commodity programs, conservation, crop insurance, disaster aid and ethanol. Yet, the academics do feel there are great benefits and gains that could be made by investing a lot more in research.”

In budget developments regarding the debt ceiling negotiations, which could have a substantial impact on farm program spending levels, Lori Montgomery reported in today’s Washington Post that, “Talks between President Obama and congressional Republicans grew increasingly contentious on Monday, as GOP leaders flatly rejected his call to raise taxes on the wealthy as part of a bipartisan agreement to restrain the nation’s mounting debt.

“Dueling news conferences by Obama and House Speaker John A. Boehner (R-Ohio) served as a testy prelude to an afternoon bargaining session that only emphasized the partisan divide, according to people on both sides with knowledge of the closed-door discussions.

“During the meeting, Obama challenged Boehner to buck the anti-tax hard-liners in his party, who, the president suggested, are blocking the path to a landmark compromise to reduce borrowing by as much as $4 trillion over the next decade. Boehner and House Majority Leader Eric Cantor (R-Va.) responded by urging Democrats to settle for a more modest reductions-only deal that would save $2.4 trillion but would not touch tax breaks for the nation’s richest households.”

Carol E. Lee and Janet Hook reported in today’s Wall Street Journal that, “The White House and congressional leaders made no progress Monday toward reaching a deficit-reduction deal that would clear the way for raising the federal borrowing limit in less than three weeks.”

David Rogers reported last night at Politico that, “Talks are to resume Tuesday, and Obama said he will keep calling congressional leaders back each day until an answer is found. But the president’s frustration was apparent: ‘I do not see a path to a deal if they don’t budge, period,’ Obama said at a morning press conference. And he risks seeing the whole process unravel as allies like Senate Majority Leader Harry Reid show increasing impatience with the GOP’s stand.”

And The Washington Post editorial board opined today that, “The president made two points that are worth stressing. The first responds to the phony Republican argument that taxes cannot be raised for fear of harming the faltering recovery. As Mr. Obama noted, ‘nobody has talked about increasing taxes now. Nobody has talked about . . . increasing taxes next year.’ The debate is about raising revenue down the road and right-sizing government for the next decade. So the argument against ‘job-killing tax increases’ in a downturn, no matter how often repeated, remains baloney.

“The second point responds to Democrats who insist that all entitlement benefits must be spared for fear of harming the most vulnerable. In truth, as the president said, entitlement reform — including reform that contemplates benefit cuts — is the truly progressive position.”

In other budget news, Scott Wong reported yesterday at Politico that, “As President Obama hosted congressional leaders at the White House for another round of debt talks, the Senate Budget Committee chairman on Monday unveiled his 2012 budget that aims to slash the deficit by $4 trillion over 10 years through an even blend of spending cuts and tax increases.

“Democratic Sen. Kent Conrad’s blueprint leaves Social Security unscathed and calls for only modest cuts to Medicare and Medicaid. But it targets deep cuts to the Defense Department and other federal agencies, while raising taxes on the wealthiest 1 percent of Americans and closing corporate tax loopholes and shelters.”  [A replay of Sen. Conrad’s presentation yesterday in the Senate is available here– related slides available here].

Mr. Wong noted that, “While Obama and congressional negotiators work to hammer out an agreement to raise the nation’s $14.3 trillion debt ceiling and cut the deficit before an Aug. 2 deadline, Conrad said he hoped the plan by Senate Democrats could play a role in those talks. However, House Speaker John Boehner (R-Ohio) abandoned talks for a large-scale $4 trillion debt deal over the weekend, objecting to Democrats’ insistence on tax hikes like the ones contemplated by the Conrad plan.”

The Wall Street Journal editorial board indicated today that, “[Sen. Conrad] didn’t release an actual budget outline, as he is obliged to do under the law but which he hasn’t done in two years. Instead he trickled out enough details to assess his rough priorities. Of the $4 trillion in alleged deficit reduction over 10 years, about half would be from tax increases, mostly on what he called ‘abusive tax shelters and tax havens’ and families ‘sufficiently fortunate to be earning a million dollars a year.’”

 

Trade

Kate Ackley and David M. Drucker reported today at Roll Call Online that, “If it weren’t for one nagging issue, the fight over three pending free-trade agreements would be the debate of the summer.

“But that one little matter — an unprecedented showdown between Congress and the White House over the nation’s debt limit — has many of the pivotal players on trade occupied with budget politics, leaving K Street scrambling to ensure that the South Korea, Panama and Colombia pacts don’t wither.

“The trade fight itself is not free of its own partisan rancor as Members of Congress and the White House negotiate a deal to provide billions of dollars in federal benefits to people who lose jobs as a consequence of free trade. The talks have been further complicated by a disagreement in the Senate over parliamentary procedure for how that measure, known as Trade Adjustment Assistance, should be considered.”

Today’s article explained that, “There appear to be two major problems holding up smooth ratification of the trade deals, and the partisan spat over TAA is just one of them. Also at issue is how the measure gets voted on. Republicans in the House have decided to vote on TAA as a stand-alone bill.

“But in the Senate, majority Democrats, with the backing of the Obama administration, are pushing for TAA to be included in the Korea pact, resulting in major opposition from the Republicans. The GOP has enough votes to block the South Korea vehicle if the Senate parliamentarian rules that attaching TAA to the legislation makes it subject to a filibuster. Trade pacts are usually simple majority bills that cannot be amended.”

 

Biotech

Andrew Pollack reported in today’s New York Times that, “As recently as a decade ago, farms in the Midwest were commonly marred — at least as a farmer would view it — by unruly patches of milkweed amid the neat rows of emerging corn or soybeans.

“Not anymore. Fields are now planted with genetically modified corn and soybeans resistant to the herbicide Roundup, allowing farmers to spray the chemical to eradicate weeds, including milkweed.

“And while that sounds like good news for the farmers, a growing number of scientists fear it is imperiling the monarch butterfly, whose spectacular migrations make it one of the most beloved of insects — ‘the Bambi of the insect world,’ as an entomologist once put it.”

 

Animal Agriculture

Rod Smith reported recently at Feedstuffs Online that, “In undoubtedly a historic and stunning announcement last week, The Humane Society of the United States (HSUS) and the United Egg Producers (UEP) said they have reached an agreement — following ‘exhaustive’ conference calls and meetings — to jointly petition Congress for legislation to transition the commercial egg industry from one primarily using conventional cage housing to ‘enriched’ colony cages.

“The goal is to have the law in place by June 30 next year and the transition fully implemented by Dec. 31, 2029, according to the announcement.”

Mr. Smith noted that, “Talks between the two parties started after HSUS acknowledged that it could recognize that there are benefits to colonies — reversing a position that it only supported cage-free egg production systems– and after UEP said it supported full industry-wide conversion.

“‘This is a historic, unprecedented agreement … (and) improbable circumstance’ in which adversaries have reached common ground, [HSUS chief executive officer and president Wayne Pacelle] said. ‘It represents a pathway for a dramatic improvement in animal welfare that also considers the economic success of producers.’

“UEP senior vice president Chad Gregory sounded a similar theme, calling the agreement ‘a monumental achievement’ that will ‘dramatically improve’ the welfare of 285 million hens because ‘adversaries are shaking hands.’”

Keith Good

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