University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Prospects for Grain Farm Incomes in 2014”) that, “Average grain farm incomes in 2014 likely will be much lower than 2013 incomes. Corn prices near $4.20 per bushel combined with above average yields could result in average incomes on grain farms in Illinois around $45,000 per farm, slightly below the average for the years from 1996 through 2005. A scenario that would result in average incomes near $134,000 per farm, the 2013 level of average income, would be above average yields combined with corn prices near $4.80 per bushel. This is a large range ($45,000 to $134,000), and it represents the likely range of average grain farm incomes over the next several years, with lower incomes possible if low commodity prices occur [related graph].”
Yesterday’s update noted that, “While grain prices and yields are far from certain, most current projections of prices and yields result in much lower incomes for 2014.”
In conclusion, yesterday’s farmdoc update indicated that, “Corn prices in the low $4.00 range likely will result in incomes below $50,000. Corn prices in the high $4.00 range will result in average incomes above $100,000. If corn prices average around $4.50 over the next several years, average incomes likely will be in the above range for the next several years. Lower incomes are possible with corn prices below $4.00 per bushel.”
An update yesterday from Kansas State University Extension noted that, “Kansas farmers took a one-two punch with drought and lower grain prices in 2013 and the result was a drop in average net income to its lowest level since 2009, according to data from the Kansas Farm Management Association’s annual PROFITLINK Analysis.”
The Kansas State item noted that, “The average price of U.S. corn in 2013 was $4.50 a bushel, down from $6.89 in 2012, according to the U.S. Department of Agriculture. The average price of soybeans last year was $12.70 per bushel, down from $14.40 a bushel in 2012…Last year’s lower grain prices meant trouble for grain growers, but gave livestock producers a boost.”
And the AP reported yesterday that, “The price of corn dropped as weather conditions remain favorable for the crop.
“Corn for July delivery dropped 1.5 cents, or 0.3 percent, to $4.43 a bushel.
“The price of the grain has plunged in the last two months as rains in the corn growing regions of the U.S. have been light and temperatures remained moderate. The U.S. Department of Agriculture is forecasting a record crop this year.”
Also, Emiko Terazono reported yesterday at The Financial Times Online that, “Will he really arrive? There has been a change in tone over the development of El Niño – ‘little boy’ – from some of the world’s leading meteorologists. And the shift matters for commodities prices.
“In its closely watched latest bulletin the Australian Bureau of Meteorology has maintained the strong likelihood of El Niño, a warming of parts of the Pacific Ocean, developing this year. But it also noted that ‘in the absence of the necessary atmospheric response, warming has levelled off in recent weeks.’
“The bureau added that the areas of warm water in the Pacific were counter to typical patterns for the weather phenomenon.”
And, the House Ag Subcommittee on Livestock, Rural Development, and Credit will hold a hearing this morning titled: “A review of credit availability in rural America.”
In other news, Hannah Kuchler reported yesterday at The Financial Times Online that, “By the end of walking round and round his fields in Illinois seven times, hunting for pests, fungi and sickly plants, Aaron Sheller wanted to give himself the sack.
“Instead, he turned to drones. The farmer teamed up with a drone hobbyist about three years ago to see if the small unmanned aircraft could scout the crops more easily and efficiently, saving farmers money.”
The FT article stated that, “Big technology companies such as Amazon, Facebook and Google may have made headlines for their recent forays into drones – with the ecommerce company working on delivery by drone and the latter two looking at how to beam internet from the sky.
“But drones are already being used in agriculture, construction and mapping. These industries are likely to be able to expand their use of unmanned aircraft the fastest, because it mainly involves flying over unpopulated areas, while regulation, particularly in the US, is focused on restricting flight in more built-up locations. This enables farmers to use drones on their own land.”
In trade related developments, Nirmala Menon reported yesterday at The Wall Street Journal Online that, “Chief negotiators from the dozen countries aiming to create a free-trade zone spanning the Pacific Ocean will gather in Ottawa early next month in a bid to advance the talks toward a deal.
“Officials from the U.S.-led Trans-Pacific Partnership are meeting in the Canadian capital from July 3 to July 12, according to a person familiar with the plan. No other details were immediately available.”
Regulations: EPA Issues
Todd Neeley reported yesterday at DTN that, “As critics contend a proposed Clean Water Act rule will extend EPA’s authority over water in ditches and that the rule will be open to inconsistent enforcement, one agriculture industry representative told a House subcommittee Tuesday that at least one EPA region already is looking closely at ditches as point-sources in need of CWA permits.”
The DTN article pointed out that, “Although an EPA official told Congress recently that upland waters that flow into ditches would not be regulated in the new rule, a number of witnesses testifying before the House Subcommittee on Power and Water continued to raise concerns that the proposed rule will be left wide open to interpretation.
“Randy N. Parker, chief executive officer of the Utah Farm Bureau Federation, said based on a conversation he had with officials at EPA’s Region 8 — covering Montana, North Dakota, South Dakota, Wyoming, Utah and Colorado — agriculture producers in those states should be concerned about ag return flows into ditches. When it comes to water that runs across a farm, through a ditch and to a stream, Parker said Region 8 is ‘interested in it as a point-source.’
“When asked by the subcommittee if he could think of examples of waters that would be exempt from the new rule, Wyoming State Engineer Patrick Tyrrell said, ‘I can’t off the top of my head.’”
Philip Brasher, the Editor of CQ on Agriculture and Food, tweeted yesterday that, “@ChuckGrassley ‘no doubt’ that amendment blocking #WOTUS rule [Waters of the U.S.] would pass Senate with simple majority.”
And Timothy Cama reported yesterday at The Hill Online that, “The House Science, Space and Technology Committee voted Tuesday to advance a bill that would require the Environmental Protection Agency (EPA) to disclose the data it uses to write regulations.
“The committee’s bill is intended to stop what Republicans said is widespread use at the EPA of ‘secret science’ to make rules.”
Farm Bill- Policy Issues
An update yesterday at USDA’s Economic Research Service (ERS) Chart Gallery webpage stated that, “The 2014 Farm Act adds crop insurance premium subsidies to the list of benefits that could be withheld for noncompliance with conservation provisions, further supporting farmer incentives for environmental stewardship.”
The ERS update noted that, “On average, the Federal Government pays roughly 60 percent of crop insurance premiums, and about 80 percent of acreage for all major commodity crops is now covered by crop insurance. In 2012, crop insurance premium subsidies were roughly $6.7 billion or about 60 percent as large as commodity, conservation, and disaster assistance payments combined [related graph].”
Anne L. Kim reported yesterday at Roll Call Online that, “An Agriculture Department loan program designed to foster deployment of broadband in rural areas has been criticized at times over issues such as providing loans in areas near big cities, and the scrutiny continues: A recent Government Accountability Office report says that more than two-fifths of all approved loans have been rescinded or defaulted upon.
“The report says that the Rural Utilities Service (RUS) is tasked with administering a loan program targeted at encouraging more broadband investment in rural areas, but the program ‘has experienced mixed results. For instance, over 40 percent of approved loans are no longer active, with many having not resulted in new or improved broadband services.’”
In nutrition related news, Jake Grovum stated earlier this week at USA Today Online that, “Thousands more students could be eating school lunch completely free starting next fall, thanks to a four-year-old federal program that is finally expanding to all 50 states.
“The expansion comes through the so-called Community Eligibility Provision, passed by Congress and signed into law by President Barack Obama in 2010 as part of a broader school nutrition measure. It opened the door for districts with free or reduced-price lunches to offer the meals to every student at the school, at no cost to them — no application necessary and regardless of household income.”
And Sumathi Reddy reported in yesterday’s Wall Street Journal that, “Childhood obesity might be a bigger problem than we thought. A new study finds that the commonly used body-mass-index measure may fail to identify as many as 25% of children, age 4 to 18 years, who have excess body fat. The meta-analysis, scheduled for publication online in the journal Pediatric Obesity on Tuesday, reviewed 37 separate studies involving a combined 53,521 participants.”
Jacob Bunge reported yesterday at The Wall Street Journal Online that, “Agricultural conglomerate Cargill Inc. is banking on its global footprint to give it a leg up in blunting the impact of climate change.
“Technology and expertise Cargill uses to raise livestock and track crop production in places like Southeast Asia can apply to regions of the U.S. that may grow hotter over coming decades, said Cargill Executive Chairman Gregory Page, who helped advise on a new report weighing climate change’s potential impact on U.S. business.”
The Journal article pointed out that, “‘Risky Business,’ as the report released Tuesday by a bipartisan group of former U.S. cabinet officers, lawmakers and corporate leaders is called, estimates that higher average temperatures, rising sea levels and harsher weather events could cost U.S. companies tens of billions of dollars as storms deal harsher damage to coastal areas and hotter weather strains electrical grids.
“For agriculture, where hospitable growing conditions and investments in infrastructure have made the U.S. a global leader, the effects could be severe if businesses don’t respond, according to the report. A 10% drop in crop yields over the next five to 25 years is possible due to floods and droughts, according to the report, while the research showed that livestock production eventually could drop by 3% to 5% due to shifting weather, Mr. Page said.”
Commodity Futures Trading Commission- CFTC
Andrew Ackerman and Michael R. Crittenden reported yesterday at The Wall Street Journal Online that, “The House of Representatives signed off on legislation Tuesday to scale back the Commodity Futures Trading Commission’s ability to impose swaps rules abroad, a bill critics warned would make it easier for banks to circumvent tough U.S. rules.
“The vote was 265-144, largely along party lines, with some Democrats and the White House warning the measure would hamstring the CFTC. A companion measure has yet to be introduced in the Senate.”
The Journal article explained that, “As part of the bill, the CFTC’s staff wouldn’t be able to impose regulation through last-minute ‘guidance,’ as the agency did last year for rules on swaps trading overseas. Instead, commissioners would have to sign off on formal policy. The CFTC also would be directed to recognize overseas swaps rules as more comparable to its own than it now does.”
Cristina Marcos reported yesterday at The Hill Online that, “The measure includes provisions that would require electronic confirmation of customer fund account balances held at depository institutions. It would also prohibit firms from moving customer funds from one account to another without informing regulators.
“Democrats objected to language in the bill that would require the CFTC to conduct cost-benefit analyses of its proposed regulations. They argued it would slow down implementation of the agency’s rules.”
House Ag Committee Chairman Frank Lucas (R., Okla.) indicated yesterday that, “This legislation reauthorizes the Commodity Futures Trading Commission through 2018 and ensures that the agency is working in the most efficient and effective way. It also cements key protections into law for futures customers, such as our nation’s farmers and ranchers, and reduces the regulatory load on end-users who represent 94 percent of American job creators. I am hopeful that the Senate will take up this wide-ranging, bipartisan bill in a timely fashion so market participants have the certainty they deserve.”
Rep. K. Michael Conaway (R., Tex) noted yesterday that, “This common sense, bipartisan legislation prevents the Commodity Futures Trading Commission from imposing burdensome regulations on end-users who do not present a systemic risk to our financial system. These end-users did not cause the financial crisis and they should not be treated like financial entities.
“This bill also includes a provision that I authored which would require the Commission to quantify the costs and benefits of a rule when it is first proposed.”
Rep. Randy Neugebauer (R., Tex.) stated yesterday that, “I am pleased the House acted today to protect our farmers and ranchers from more runaway regulations. This common-sense bill reauthorizes and improves the CFTC to make it more accountable for those who rely on the futures markets to protect against risk associated with their business. Farmers and ranchers in West Texas and the Big Country use the futures and commodities markets as a business tool to help manage the inherent risks that they face, and this bill will allow them to continue doing so without being burdened by the cumbersome regulations of a one-size-fits-all CFTC.”
Sen. Ag Committee Chairwoman Debbie Stabenow (D., Mich.) pointed out yesterday that, “[W]e have 21st century markets and we need a 21st century regulator to match. We must make sure the agency responsible for protecting these markets has the resources, authority, staff and technology it needs to be effective – especially in the wake of the 2008 global financial collapse which left 8 million Americans without jobs and devastated hard working families across the country. It is disappointing that the bill provides no additional funding mechanism and adds new layers of administrative burdens, hindering the agency’s ability to do its job and effectively regulate these markets.”
Also yesterday, Walt Lukken, President and CEO of FIA [Futures Industry Association] noted that, “As derivatives markets are adapting and responding to major regulatory changes, they need stability and certainty to thrive, and the House Agriculture Committee leadership recognized this as they developed H.R. 4413. I commend Chairman Lucas, Ranking Member Peterson, Subcommittee Chairman Conaway, and Ranking Member Scott for working together in a bipartisan fashion to reauthorize the CFTC and make targeted changes to the Commodity Exchange Act.”
Kyle Trygstad reported yesterday at Roll Call Online that, “[Senate Ag Committee ranking member] Thad Cochran [Miss.] overcame the odds Tuesday to win a contentious Republican runoff and is now favored to win a seventh term.”
And an update yesterday at The Oklahoma Farm Report Online indicated that, “Oklahoma Third District Congressman Frank Lucas has cruised to an easy victory on Tuesday evening as GOP voters give him over 83% of the votes- propelling him into the November general election where he will be a prohibitive favorite to win reelection.
“Congressman Lucas has served this current term as the Chairman of the House Ag Committee, leading the efforts to write what turned out to be the 2014 Farm Law. His opponents used arguments against the Chairman that the Farm Law was too expensive and heavily laden with unnecessary subsidies for American agriculture. In comments with Farm Director Ron Hays, Lucas thanked the voters of the Third District for vindicating his bipartisan work on bringing to a successful conclusion the multiple title farm bill. Lucas says, ‘It’s nice when your neighbors demonstrate that they understand what you were trying to do for them and with them- I’m very pleased with the vote from good folks from the third district.’”