FarmPolicy

November 17, 2019

Backgrounder: Cotton oilseed and the 2014 Farm Bill

Categories: Farm Bill

In December of last year, House Agriculture Committee Chairman Mike Conaway (R., Tex.), along with 100 of his colleagues, made a formal request to Secretary of Agriculture Tom Vilsack to “use legal authority provided under the 2014 Farm Bill” to provide additional federal assistance to struggling cotton farmers.

The depression in cotton prices was highlighted at a House Agriculture Subcommittee hearing in December, while earlier this year, an economist from the University of Georgia noted that cotton producers “can expect prices to remain low for their crop until worldwide demand improves.”

Specifically, Chairman Conaway requested “that the Secretary use his authority under the Farm Bill to designate cottonseed an oilseed, allowing farmers who produce cottonseed to access the same risk management tools available under the Farm Bill to other oilseed farmers.”

Reporter Rick Kelly has explained that, “If cottonseed oil is designated an oilseed, cotton growers will be eligible for federal programs that could help farmers in the event of catastrophic weather, or provide protection from losses due to commodity price drops. Canola oil and flax seed oil producers already have that safety net.

Without those federal guarantees, and with cotton prices bottoming out below 60 cents a pound, some growers are worried they won’t be able to obtain financing to plant this spring.”

Media reports subsequently indicated that Secretary Vilsack had concluded that he did not have the authority to designate cottonseed as an oilseed.

In a statement released in early February, Chairman Conaway noted that, “The Department has not only the legal authority to designate cottonseed as an ‘other oilseed,’ but the responsibility to act…”

After receiving an official denial of the cottonseed request from Sec. Vilsack, Chairman Conaway sent a letter to USDA  that included a detailed rebuttal to the Secretary’s conclusion. Chairman Conaway also noted that, “Given the increasingly dire conditions farm families face in the cotton belt and the grave consequences of failing to act, I have little choice but to continue to press for the same kind of responsible, urgent, and meaningful response that has always been taken to address emergencies impacting producers of other commodities.”

An update posted on February 24 at AgWeb (“Vilsack Explains Why Cotton Can’t Qualify for ARC/PLC”)  included this explanation from Secretary Vilsack:

“Just before the holidays, I received a request from the cotton industry to designate cotton as an ‘other oilseed’ in order to qualify for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments. We examined the laws closely—the 2014 Farm Bill, the 2016 Appropriations law, and other authorities—and after close scrutiny, we determined that such a designation is not authorized under the 2014 Farm Bill. The reason is very clear: The Farm Bill expressly removed eligibility of cotton for such payments, as cotton is no longer listed as a ‘covered commodity.’ In other words, the Farm Bill intended to exclude cotton from ARC and PLC payments and USDA was provided with clear direction that it would not be included nor covered. Instead, at the request of the cotton industry, the Farm Bill created two new programs for cotton as an alternative to ARC and PLC: STAX, or the Stacked Income Protection Plan, and the Cotton Transition Assistance Program (CTAP).”

University of Illinois Clinical Assistant Professor Jonathan W. Coppess explained to me that, “So the whole reason cotton is not a covered commodity under the 2014 Farm Bill is because of the World Trade Organization dispute with Brazil over cotton support policies that date back to 2002 until 2014, about 12 years this dispute had ran. In the end, Brazil won overwhelmingly before the WTO against American cotton support policies, programs, the old countercyclical program and those sort of things.”

Mr. Coppess added that, “And so Brazil won. They then won on appeal. They then won the right to retaliate. They won on appeal on the right to retaliate against American exports. And, that got a lot of attention in 2009, 2010. Somewhere around 2010, I believe it was, USDA settled kind of a temporary agreement with Brazil to hold off on retaliation.”

“But the Secretary made it clear that the administration couldn’t change farm programs, Congress had to do it, so they basically held Brazil in abeyance, they sort of held off retaliation pending Congress rewriting the farm bill in 2014,” Mr. Coppess said.

In addition, Mr. Coppess pointed out that, “Brazil was very adamant that cotton supports be changed in the farm bill, and so they were. So you can imagine that aside from the sort of legal arguments about whether the Secretary could do this, there’s another whole set of questions about how Brazil would look at and react to this, and what that would do in the WTO situation, so it raises a lot of questions.”

With respect to the situation cotton producers are in, Mr. Coppess observed that, “The challenge is they don’t have that ARC or PLC program. Cotton does continue to have the Marketing Assistance Loan program, so they can take out loans on cotton and get LDPs or marketing loan gains. The 2014 Farm Bill did create a new insurance program just for cotton, but there is not that sort of long-term price until you get into the marketing loan situation. And that’s where they’re concerned and have had issues, which is where this has come about.”

In his explanation at AgWeb, Sec. Vilsack added that, “In addition to this assistance provided through the Farm Bill, USDA began to explore other ways to provide support to struggling cotton producers as we’ve done in the past. This has been done in two ways, historically: first, provide temporary assistance to cotton producers facing low prices through a Congressional action or, second, administratively use either Section 32 (of the Act of August 24, 1935) or Section 5 of the Commodity Credit Corporation (CCC) Charter Act to provide some level of support. Unfortunately, these administrative options have been severely limited by the law that funds the government, also called the Appropriations Act.”

At a House Ag Committee hearing on February 24, Sec. Vilsack and Chairman Conaway discussed this issue in more detail. A transcript of this portion of the hearing is available here.

Sec. Vilsack stated that, “First of all, in putting together the ARC and PLC program, there was obviously a decision to remove cotton from those programs. I think everybody acknowledges that. Within the law, essentially there’s provisions that define the opportunity for the Secretary to include additional oil seeds as crops as they evolve. That listing of other oil seeds includes a variety of other oil seeds. It includes sunflower seeds, rape seeds, canola seeds. Clearly Congress could have also included cottonseed in that list. They did not. That’s an issue.

Secondly, the industry came to us, when we were crafting the risk management program under STAX, and requested oilseed to be included in that risk management program. So those two facts—Congress didn’t include it in the list, and the industry asked us to include it in the risk management program—indicate what the intent was at the time. Now, if Congress wants to reopen the farm bill, then obviously you’ll have to deal with the issue of the cost, which I think is one of the motivating reasons why all of this was established.”

With respect to the oilseed provision, Chairman Conaway asked, “Are you arguing that the list of oilseeds included is exclusive and that you have no discretion?”

Sec. Vilsack pointed out that, “What I’m arguing is that that list and that provision is set up for oilseeds that arise during the course and between farm bills… Not seeds that have existed, Mr. Chairman, but seeds that have come up in between farm bills to allow us the flexibility.”

Going forward, Mr. Coppess of the University of Illinois explained that:

“Then the question becomes without that authority, then the only thing left would be for Congress to somehow step in and basically grant the Secretary the authority. Like they’re going to have to do something that would say, you know, in this case, you’re allowed to do it, or we’ll write cottonseed in as a covered commodity. Whether Congress would open a farm bill at this point to do that is obviously another big question.

You know, we’re still dealing with budget scenarios, so that would mean figuring out how to pay for it, you know, in a standard baseline discussion. To add something in like that that’s going to cost, that’s going to have to be paid for somewhere, so that’s another challenge.

The Brazil response clearly is another challenge; getting retaliation against American exports did not go unnoticed by the American manufacturing industry, by the intellectual property right questions that came up with cross retaliation. I mean, it opens a whole lot of that. I think everybody is realistic about what Congress could do, even in a good year, and then you add onto it this is probably not a good year, we don’t expect to see Congress do much.”

Meanwhile, an update posted on February 25 at AgWeb (“Agriculture Secretary Can Relieve Crisis in Cotton Country”) Chairman Conway noted in part that, “The Secretary argues that Congress removed cotton from Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) in the 2014 Farm Bill and, thus, his hands are tied. Here’s what Congress actually did in the 2014 Farm Bill: As a result of a WTO settlement with Brazil, Congress effectively removed cotton lint from ARC and PLC. Cottonseed has not historically been a covered commodity, and Congress never discussed adding cottonseed to the list of covered commodities. Rather, Congress left intact the Secretary’s authority to designate any oilseed as an ‘other oilseed.'”

Chairman Conway added that, “The Secretary has also argued he cannot designate cottonseed as an oilseed because the provision is reserved for ‘emerging oilseeds.’ That is also not the case. The Farm Bill defines an oilseed as ‘a crop of sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, or any other oilseed designated by the Secretary.’ The Farm Bill does not restrict this authority to ’emerging oilseeds.’ The Secretary imposes this limitation on himself.”

Agricultural Prices- Key Crops Down From Year Ago Levels

The USDA’s National Agricultural Statistics Service (NASS) released its monthly Agricultural Prices report today, which noted that, “The corn price, at $3.66 per bushel, is up 1 cent from last month but is down 16 cents from January 2015.”

The NASS report added that, “The soybean price, at $8.71 per bushel, decreased 5 cents from December and is $1.59 lower than January a year earlier.”

http://farmpolicy.com/wp-content/uploads/2016/02/crn.png

And today’s update also stated that, “The January price for all wheat, at $4.82 per bushel, is up 11 cents from December but is $1.33 below January 2015.”

http://farmpolicy.com/wp-content/uploads/2016/02/crn.png

With respect to livestock, the NASS report stated that, “At $43.60 per cwt, the January hog price is up 80 cents from December but is $13.80 lower than a year earlier. The January beef cattle price of $130.00 per cwt is up $8.00 from the previous month but $34.00 lower than January 2015.”

And Purdue University agricultural economist Chris Hurt observed today at the farmdoc daily blog that (“Weekly Outlook: Pork Industry – A Little Profit for 2016“), “The outlook for the pork industry has turned somewhat more optimistic in recent weeks. The sources of that optimism include a $2 to $4 increase in spring and summer lean hog futures prices since the first of the year and slightly lower new-crop soybean meal prices. A bit higher hog prices and a little lower cost add to the potential for a profitable year.”

The farmdoc update also included this graph:

http://farmpolicy.com/wp-content/uploads/2016/02/crn.png

Keith Good

Backgrounder: Cotton oilseed and the 2014 Farm Bill

Categories: Farm Bill

In December of last year, House Agriculture Committee Chairman Mike Conaway (R., Tex.), along with 100 of his colleagues, made a formal request to Secretary of Agriculture Tom Vilsack to “use legal authority provided under the 2014 Farm Bill” to provide additional federal assistance to struggling cotton farmers.

The depression in cotton prices was highlighted at a House Agriculture Subcommittee hearing in December, while earlier this year, an economist from the University of Georgia noted that cotton producers “can expect prices to remain low for their crop until worldwide demand improves.”

Specifically, Chairman Conaway requested “that the Secretary use his authority under the Farm Bill to designate cottonseed an oilseed, allowing farmers who produce cottonseed to access the same risk management tools available under the Farm Bill to other oilseed farmers.”

Reporter Rick Kelly has explained that, “If cottonseed oil is designated an oilseed, cotton growers will be eligible for federal programs that could help farmers in the event of catastrophic weather, or provide protection from losses due to commodity price drops. Canola oil and flax seed oil producers already have that safety net.

Without those federal guarantees, and with cotton prices bottoming out below 60 cents a pound, some growers are worried they won’t be able to obtain financing to plant this spring.”

Media reports subsequently indicated that Secretary Vilsack had concluded that he did not have the authority to designate cottonseed as an oilseed.

In a statement released in early February, Chairman Conaway noted that, “The Department has not only the legal authority to designate cottonseed as an ‘other oilseed,’ but the responsibility to act…”

After receiving an official denial of the cottonseed request from Sec. Vilsack, Chairman Conaway sent a letter to USDA  that included a detailed rebuttal to the Secretary’s conclusion. Chairman Conaway also noted that, “Given the increasingly dire conditions farm families face in the cotton belt and the grave consequences of failing to act, I have little choice but to continue to press for the same kind of responsible, urgent, and meaningful response that has always been taken to address emergencies impacting producers of other commodities.”

An update posted on February 24 at AgWeb (“Vilsack Explains Why Cotton Can’t Qualify for ARC/PLC”)  included this explanation from Secretary Vilsack:

“Just before the holidays, I received a request from the cotton industry to designate cotton as an ‘other oilseed’ in order to qualify for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments. We examined the laws closely—the 2014 Farm Bill, the 2016 Appropriations law, and other authorities—and after close scrutiny, we determined that such a designation is not authorized under the 2014 Farm Bill. The reason is very clear: The Farm Bill expressly removed eligibility of cotton for such payments, as cotton is no longer listed as a ‘covered commodity.’ In other words, the Farm Bill intended to exclude cotton from ARC and PLC payments and USDA was provided with clear direction that it would not be included nor covered. Instead, at the request of the cotton industry, the Farm Bill created two new programs for cotton as an alternative to ARC and PLC: STAX, or the Stacked Income Protection Plan, and the Cotton Transition Assistance Program (CTAP).”

University of Illinois Clinical Assistant Professor Jonathan W. Coppess explained to me that, “So the whole reason cotton is not a covered commodity under the 2014 Farm Bill is because of the World Trade Organization dispute with Brazil over cotton support policies that date back to 2002 until 2014, about 12 years this dispute had ran. In the end, Brazil won overwhelmingly before the WTO against American cotton support policies, programs, the old countercyclical program and those sort of things.”

Mr. Coppess added that, “And so Brazil won. They then won on appeal. They then won the right to retaliate. They won on appeal on the right to retaliate against American exports. And, that got a lot of attention in 2009, 2010. Somewhere around 2010, I believe it was, USDA settled kind of a temporary agreement with Brazil to hold off on retaliation.”

“But the Secretary made it clear that the administration couldn’t change farm programs, Congress had to do it, so they basically held Brazil in abeyance, they sort of held off retaliation pending Congress rewriting the farm bill in 2014,” Mr. Coppess said.

In addition, Mr. Coppess pointed out that, “Brazil was very adamant that cotton supports be changed in the farm bill, and so they were. So you can imagine that aside from the sort of legal arguments about whether the Secretary could do this, there’s another whole set of questions about how Brazil would look at and react to this, and what that would do in the WTO situation, so it raises a lot of questions.”

With respect to the situation cotton producers are in, Mr. Coppess observed that, “The challenge is they don’t have that ARC or PLC program. Cotton does continue to have the Marketing Assistance Loan program, so they can take out loans on cotton and get LDPs or marketing loan gains. The 2014 Farm Bill did create a new insurance program just for cotton, but there is not that sort of long-term price until you get into the marketing loan situation. And that’s where they’re concerned and have had issues, which is where this has come about.”

In his explanation at AgWeb, Sec. Vilsack added that, “In addition to this assistance provided through the Farm Bill, USDA began to explore other ways to provide support to struggling cotton producers as we’ve done in the past. This has been done in two ways, historically: first, provide temporary assistance to cotton producers facing low prices through a Congressional action or, second, administratively use either Section 32 (of the Act of August 24, 1935) or Section 5 of the Commodity Credit Corporation (CCC) Charter Act to provide some level of support. Unfortunately, these administrative options have been severely limited by the law that funds the government, also called the Appropriations Act.”

At a House Ag Committee hearing on February 24, Sec. Vilsack and Chairman Conaway discussed this issue in more detail. A transcript of this portion of the hearing is available here.

Sec. Vilsack stated that, “First of all, in putting together the ARC and PLC program, there was obviously a decision to remove cotton from those programs. I think everybody acknowledges that. Within the law, essentially there’s provisions that define the opportunity for the Secretary to include additional oil seeds as crops as they evolve. That listing of other oil seeds includes a variety of other oil seeds. It includes sunflower seeds, rape seeds, canola seeds. Clearly Congress could have also included cottonseed in that list. They did not. That’s an issue.

Secondly, the industry came to us, when we were crafting the risk management program under STAX, and requested oilseed to be included in that risk management program. So those two facts—Congress didn’t include it in the list, and the industry asked us to include it in the risk management program—indicate what the intent was at the time. Now, if Congress wants to reopen the farm bill, then obviously you’ll have to deal with the issue of the cost, which I think is one of the motivating reasons why all of this was established.”

With respect to the oilseed provision, Chairman Conaway asked, “Are you arguing that the list of oilseeds included is exclusive and that you have no discretion?”

Sec. Vilsack pointed out that, “What I’m arguing is that that list and that provision is set up for oilseeds that arise during the course and between farm bills… Not seeds that have existed, Mr. Chairman, but seeds that have come up in between farm bills to allow us the flexibility.”

Going forward, Mr. Coppess of the University of Illinois explained that:

“Then the question becomes without that authority, then the only thing left would be for Congress to somehow step in and basically grant the Secretary the authority. Like they’re going to have to do something that would say, you know, in this case, you’re allowed to do it, or we’ll write cottonseed in as a covered commodity. Whether Congress would open a farm bill at this point to do that is obviously another big question.

You know, we’re still dealing with budget scenarios, so that would mean figuring out how to pay for it, you know, in a standard baseline discussion. To add something in like that that’s going to cost, that’s going to have to be paid for somewhere, so that’s another challenge.

The Brazil response clearly is another challenge; getting retaliation against American exports did not go unnoticed by the American manufacturing industry, by the intellectual property right questions that came up with cross retaliation. I mean, it opens a whole lot of that. I think everybody is realistic about what Congress could do, even in a good year, and then you add onto it this is probably not a good year, we don’t expect to see Congress do much.”

Meanwhile, an update posted on February 25 at AgWeb (“Agriculture Secretary Can Relieve Crisis in Cotton Country”) Chairman Conway noted in part that, “The Secretary argues that Congress removed cotton from Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) in the 2014 Farm Bill and, thus, his hands are tied. Here’s what Congress actually did in the 2014 Farm Bill: As a result of a WTO settlement with Brazil, Congress effectively removed cotton lint from ARC and PLC. Cottonseed has not historically been a covered commodity, and Congress never discussed adding cottonseed to the list of covered commodities. Rather, Congress left intact the Secretary’s authority to designate any oilseed as an ‘other oilseed.'”

Chairman Conway added that, “The Secretary has also argued he cannot designate cottonseed as an oilseed because the provision is reserved for ‘emerging oilseeds.’ That is also not the case. The Farm Bill defines an oilseed as ‘a crop of sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, or any other oilseed designated by the Secretary.’ The Farm Bill does not restrict this authority to ’emerging oilseeds.’ The Secretary imposes this limitation on himself.”

Keith Good

Livestock Producers Listening To “Consumer Votes”

Wall Street Journal writer Jacob Bunge reported earlier this week that, “Perdue Farms Inc. plans by June to eliminate antibiotics used in chicken it sells as nuggets and strips in supermarkets across the U.S., significantly escalating a nascent industry response to concerns about such use.

“Perdue expects the change to roughly triple the no-antibiotic portion of such precooked and seasoned products at U.S. supermarkets. Converting Perdue’s name-brand lines of chicken products will make it the largest grocery-store supplier of poultry raised without antibiotics, the Salisbury, Md. company said.”

The Journal article noted that, “A growing number of other chicken producers have also announced plans to curb antibiotic use, and restaurant chains including McDonald’s Corp., Chick-fil-A Inc. and Subway have said they would reduce or eliminate antibiotic use by their suppliers.

“‘Consumers have voted,’ said Eric Christianson, head of marketing for Perdue. ‘We’re embracing it, because it’s what the consumer wants.'”

Mr. Bunge pointed out that, “Tyson Foods Inc., the largest U.S. meatpacker by sales, last year announced plans to largely eliminate antibiotics used in humans from its chicken supplies, as did Foster Farms, another major producer. Tyson added that it will explore making similar changes in its hog, cattle and turkey operations. Pilgrim’s Pride Corp., the second-largest U.S. chicken processor, has projected that by 2019 one-quarter of its chicken would be raised without antibiotics.”

Keith Good

“Off-Farm” Income for U.S. Farm Households

Recall that earlier this week, USDA Chief Economist Robert Johansson indicated at the Department’s annual outlook forum that, “[A] stronger U.S. economy provides improved off-farm income opportunities for a large majority of U.S. farm households. Since the latest recession ended in 2009, median farm household income has grown faster than U.S. median household income. Between 2010 and 2016, median farm household incomes are forecast to have increased by more than 50 percent. Most of that growth has come from improved off- farm income opportunities. Off-farm income and on-farm income for median farm households are all projected up in 2016. That is true for both smaller residential farm households as well as larger commercial farm households.”

Jim Puzzanghera, citing a Commerce Department report from yesterday, indicated in today’s Los Angeles Times that, “Incomes rose in January for the 10th-straight month and the 0.5% increase was the best since June. Personal income was up 0.3% in December.”

On the down side, today’s article added that, “The Commerce Department also reported Friday that the economy grew at a tepid 1% annual rate in the fourth quarter of last year.

“The figure was revised up from an initial estimate of just 0.7% growth. But the pace still was much slower than the 2% growth in the third quarter.”

Keith Good

New York Times Against Food Labeling Bill

Categories: Biotech

Recall that the Senate Agriculture Committee was scheduled to consider a bill today, “that would prevent states from requiring labels on genetically modified foods.”

The Committee subsequently delayed the scheduled hearing, but The New York Times editorial board offered an opinion on the topic in today’s paper.

The Times stated that, “The Senate could soon join the House to try to make it harder for consumers to know what is in their food by prohibiting state governments from requiring the labeling of genetically modified foods. This is a bad idea that lawmakers and the Obama administration should oppose.

In July, Vermont will become the first state to require the labeling of genetically modified food. Many food companies and farm groups say such laws are problematic because they could dissuade consumers from buying foods that federal regulators and many scientists say pose no risk to human health. But that is an unfounded fear and states should be free to require labels if they want to.

“The Senate Agriculture Committee is considering a bill by its chairman, Pat Roberts, Republican of Kansas, that would prohibit state labeling laws. The committee is likely to approve it, primarily with Republican votes. The House passed a similar bill last summer along party lines.”

Today’s editorial indicated that, “There is no harm in providing consumers more information about their food. A study published in the journal Food Policy in 2014 found that labels about genetic modification did not influence what people thought about those foods. Some companies are deciding on their own to increase the information they provide to consumers without fear of losing sales. Campbell Soup said last month that it would begin voluntarily disclosing whether its soups, juices and other products had genetically modified ingredients. Around the world, such labeling is commonplace, with 64 countries requiring it, including all 28 members of the European Union, Japan, Australia, China and Brazil.”

Concluding, the Times said: “Usually, Republicans in Congress are eager to give states more power to set policy in areas like environmental protection, health care and social services when they think that legislatures and governors will weaken regulations or cut spending to help the poor. In this case, however, they want to take power away from states that want to impose new rules that their residents support. The only thing these lawmakers seem to favor consistently is protecting corporate interests.”

Keith Good

The Outlook for U.S. Ag- USDA Chief Economist Robert Johansson

USDA Chief Economist Robert Johansson provided an outlook for U.S. agriculture today at the at the Department’s annual Agricultural Outlook Forum in northern Virginia.

In part, Dr. Johansson indicated that, “U.S. economic growth is expected to be near 3 percent in 2016 and 2017 before gradually moving to a longer term growth rate of 2.3 percent…[and]…the real value of the dollar increased substantially in 2015 relative to competitor and customer currencies and that growth is expected to continue through 2017.”

Does that mean a stronger U.S. economy and strong U.S. dollar adversely impacts the U.S. agricultural economy? Clearly, a stronger dollar means it is more difficult to sell products to countries with weaker currencies, such as Egypt and Nigeria (major wheat importers) and it is easier for countries, such as Canada and those in the EU, to sell their agricultural products abroad, making for an extremely competitive trade environment. However, a strong economy also helps U.S. producers in several ways. First, it is easier for U.S. buyers to import goods, such as fertilizer, from countries with weakening currencies, such as Canada, Russia, and Ukraine.

“Second, a stronger U.S. economy provides improved off-farm income opportunities for a large majority of U.S. farm households. Since the latest recession ended in 2009, median farm household income has grown faster than U.S. median household income (see figure 9). Between 2010 and 2016, median farm household incomes are forecast to have increased by more than 50 percent. Most of that growth has come from improved off- farm income opportunities. Off-farm income and on-farm income for median farm households are all projected up in 2016. That is true for both smaller residential farm households as well as larger commercial farm households.”

(more…)

Value of Corn, Soybeans Declined in 2015

Today, the USDA’s National Agricultural Statistics Service released its annual Crop Values Summary.

The value of corn and soybeans in the U.S. declined in 2015.

The price of corn has dropped from $4.46 in 2013 to $3.60 in 2015. The value of corn production was also lower, falling to $49,038,819,000 last year, down from $52,951,760,000 in 2014 and from $61,927,548,000 in 2013.

Similarly, soybeans sold for $8.80 per bushel last year, down from $13.00 in 2013. The value of soybeans was down to $34,535,320,000- off from $39,474,861,000 last year, and $43,582,901,000 in 2013.

Keith Good

Senate Ag Committee- GMO Labeling Bill Delayed

Categories: Biotech

Farm Credit Conditions Tighten

Reuters writers P.J. Huffstutter and Justin Madden reported today that, “As the U.S. farming sector enters the third year of a downturn caused by a global glut of grains and slumping commodity prices, bankers across the Midwest are starting to tighten lending conditions and even cutting some clients off.

Many corn and soybean farmers already are trying to adjust by selling off grain stockpiles, begging landlords to reduce rents and pleading with bankers to restructure debt and give them more time to pay it back.

“But bankers are worried about the potential of loan defaults as incomes fall, prompting farmers to take on more debt. U.S. farm debt, adjusted for inflation, is now at the highest levels since the nation’s agricultural crisis in the 1980s, when scores of rural banks failed.”

The article noted that, “But bankers now are saying no to clients they may have backed during the recent boom times, according to farmers, economists and interviews with nearly three dozen lenders.

“Some are requiring customers to put more cash down for land or equipment purchases; others have suggested farmers update their resumes.”

On Wednesday, the House Agriculture Committee will hold a hearing on the state of the Rural Economy.

Keith Good

Minnesota Farm Land Values Soften

Tom Meersman reported yesterday at the Minneapolis Star Tribune Online that, “Farmland prices in Minnesota continue to soften as prices for corn and soybeans remain relatively low and the outlook for 2016 appears to offer marginal profits for many crop growers.

“The changes are part of a pattern of falling values for farmland in much of the central U.S., according to several reports published within the past week.

“An analysis by the University of Minnesota Department of Applied Economics found that the average median price of farm real estate in Minnesota dropped 5.5 percent during the first nine months of 2015, from $4,878 to $4,611 per acre. The median is the price at which half of the transactions are higher and half are lower, and is considered a good measure to gauge price trends at the state or regional level.”

Mr. Meersman explained that, “Cash payments for Minnesota corn generally have stuck between $3.25 and $3.60 per bushel in recent months, below the cost of production for many farmers.”

Keith Good

Key Ag Hearings this week on Capitol Hill

There are several key agricultural related hearings taking place this week on Capitol Hill.

On Wednesday morning, the House Appropriations Ag Subcommittee will hear budget related testimony from Kevin Concannon, the Under Secretary for USDA’s Food, Nutrition, and Consumer Services.   Al Almanza, USDA’s Deputy Under Secretary for Food Safety will testify before the Ag Subcommittee on Wednesday afternoon, while the Food and Drug Administration’s Acting Commissioner  Stephen Ostroff will be before the Subcommittee Thursday morning.

Jason Weller, Chief of USDA’s Natural Resources Conservation Service will finish the week in front of the Ag Subcommittee where he will testify on budget related matters Friday morning.

Meanwhile, the House Ag Committee will hold a hearing Wednesday morning where the full Committee will explore the state of the rural economy; Ag Secretary Tom Vilsack will provide testimony at this briefing.  Related background regarding the condition of the U.S. ag economy is available here.

And on Thursday, the Senate Ag Committee will hold a business meeting to consider the Chairman’s Mark on Biotechnology Labeling Solutions- background on this bill, which “would prevent states from requiring labels on genetically modified foods,” is available here.

Also this week, USDA’s Economic Research Service will update its monthly Food Price Outlook on Thursday, and Wednesday, USDA’s National Agricultural Statistics Service will release its Crop Values Annual Summary.  This report contains the marketing year average prices and value of production of principal crops.

Keith Good

Ag Economy: Ag Committee Hearing, and USDA Reports

On Wednesday, the House Agriculture Committee will hold a hearing on the state of the Rural Economy.

Chairman K. Michael Conaway (R., Tex.) indicated that, “Against the backdrop of deteriorating conditions in farm country, Secretary of Agriculture Tom Vilsack will testify on the state of the rural economy. This hearing will examine the extent to which current farm policy is helping address the estimated 56 percent decline in net farm income since 2013, the largest 3-year percentage drop since the Great Depression.”

For additional background on the difficult economic circumstances currently impacting the farm economy, see this outlook from January, as well as reports on land values and income from the St. Louis and Kansas City Federal Reserve Districts, and the Chicago and Dallas Fed Districts.

Additional reporting on the ag economy, and the impacts of lower commodity prices, have recently appeared in The Financial Times.

And Bob Tita reported in today’s Wall Street Journal that, “Deere & Co. trimmed its sales and profit forecast for 2016 as it continues to trudge through the worst slump in U.S. farm machinery demand in 15 years.”

The Journal article noted that, “After an extended stretch of elevated demand for farm equipment that was aided by U.S. tax breaks for equipment investments, farmers have scaled back their purchases as lower prices for corn, soybeans and other commodities squeeze farmers’ incomes.”

Charley Grant pointed out yesterday at the Journal’s MoneyBeat blog that, “Deere’s financial outlook gave no sign that the downturn in the global farm economy is letting up.”

Mario Parker and Shruti Singh reported yesterday at Bloomberg that, “Farm income is suffering as an oversupply of crops and meat depresses prices for agricultural commodities and farmland. Nebraska’s Creighton University said Thursday that about 37 percent of Midwest and Great Plains bank chiefs who participated in a survey saw their local economy in recession.”

The Creighton report also quoted Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, as saying: “The strong U.S. dollar and global economic weakness have pushed grain prices down by 11 percent and slaughter cattle prices are 22 percent lower over the past 12 months. These weaker prices have discouraged farmers from buying additional agriculture equipment and have negatively affected the agriculture equipment dealers and manufacturers in the region.”

***

Meanwhile, in its monthly Cattle on Feed report yesterday, USDA’s National Agricultural Statistics Service (NASS) stated that, “Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on February 1, 2016. The inventory was slightly below February 1, 2015.”

Also yesterday, NASS indicated in its monthly Milk Production report that, “Milk production in the 23 major States during January totaled 16.6 billion pounds, up 0.3 percent from January 2015.”

The report added that, “The average number of milk cows on farms in the United States during 2015 was 9.32 million head, up 0.6 percent from 2014. The average number of milk cows was revised up 2,000 head for 2015.”

Keith Good

GMO Labeling Bill- Senate Ag Committee

Categories: Biotech

AP writer Mary Clare Jalonick reported yesterday that, “A Senate committee is moving forward on legislation that would prevent states from requiring labels on genetically modified foods.

“Vermont is set to require such labels this summer. Senate Agriculture Chairman Pat Roberts of Kansas released draft legislation late Friday that would block that law and create new voluntary labels for companies that want to use them on food packages that contain genetically modified ingredients. The Senate panel is scheduled to vote on the bill Thursday.”

The AP article explained that, “The bill is similar to legislation the House passed last year. The food industry has argued that GMOs, or genetically modified organisms, are safe and a patchwork of state laws isn’t practical. Labeling advocates have been fighting state-by-state to enact the labeling, with the eventual goal of a national standard.

“Senators have said they want to find a compromise on the labeling issue before Vermont’s law kicks in.”

Keith Good

USDA- Farms and Land in Farms

Yesterday, USDA’s National Agricultural Statistics Service (NASS) released its annual Farms and Land in Farms report.

In part, NASS stated that, “The number of farms in the United States for 2015 is estimated at 2.07 million, down 18 thousand farms from 2014. Total land in farms, at 912 million acres, decreased 1 million acres from 2014. The average farm size for 2015 is 441 acres, up 3 acres from the previous year.”

NASS pointed out that, “A farm is ‘any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the year.'”

Keith Good

USDA’s 10-year Projections

Yesterday, USDA released its Agricultural Projections to 2025.

In part, the report explained that, “Prices for most crops have fallen from highs of recent years as U.S. and global supplies have rebounded from relatively low levels. In response to the associated lower producer returns, planted area for major field crops in the United States has fallen from the highs of 2012-14 and is projected to continue to decline. U.S. planted acreage for eight major field crops (corn, sorghum, barley, oats, wheat, rice, upland cotton, and soybeans) averaged almost 257 million acres in 2012-14 and is projected to fall below 250 million acres by 2017. Wheat, corn, and cotton account for most of the decline between these years.”

More specifically with respect to prices, yesterday’s report noted that, “Larger global production of grains and oilseeds in response to high prices in recent years has raised world supplies and lowered U.S. prices for corn, wheat, and soybeans. Following these near-term price declines, the continuing influence of global growth in population and per capita income along with biofuel demand underlies moderate gains in these prices and keeps them above pre-2007 levels.”

The USDA report added that, “Corn prices are projected to decline through 2016/17 and then increase marginally over the next decade as ending stocks-to-use ratios fall somewhat due to growth in feed use and exports and continuing demand for corn for ethanol production.

Prices for soybeans also initially fall through 2016/17 as continued high soybean acreage keeps supplies and stocks high. Soybean prices rise moderately through the rest of the projection period, reflecting a reduction of soybean plantings, increasing demand for soybeans and soybean products, and declining stocks.”

In a look at livestock variables, USDA stated that, “The U.S. livestock sector is projected to increase production over the next decade, an expansion that reflects several factors. Feed costs have fallen from recent highs and are projected to rise only moderately over the next 10 years. Also, demand for meats and dairy products in both the domestic market and for export is projected to be strong. As a result, total U.S. red meat and poultry production rises over the projection period. Milk production also increases over the next decade.”

And on the issue of U.S. farm income and federal government payments, yesterday’s report explained that, “Net cash income and net farm income initially fall from recent record highs. Net cash income declines through 2019 before generally rising over the latter part of the projection period. Net farm income, which through 2015 fell more sharply from its peak, generally rises after 2016…[T]otal direct Government payments are projected to increase to more than $13 billion in 2016 and 2017, largely reflecting lower crop prices that push up payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs of the Agricultural Act of 2014. Government payments then fall in 2018 and 2019 as commodity prices begin to rise. Government payments are projected to increase again in 2020 before falling over the remainder of the projection period.”

Keith Good


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