AP writer David Pitt reported on Friday that, “A mild summer across much of the nation’s heartland has provided optimum growing conditions for the nation’s corn and soybean crops. Pair that with high-yield seeds and other new farming technologies, and the U.S. is looking at busting records come harvest time.
“The U.S. Department of Agriculture already has predicted a record soybean crop of 3.8 billion bushels. And the corn crop, it said in July, would be large but not bigger than last year’s record of 13.9 billion bushels. However, many market analysts and some farmers expect the USDA to revise expectations upward in a report based on field surveys that’s due out Tuesday.”
The article noted that, “‘Illinois has largely been dealt to date pretty close to a royal flush on weather and I’m sure that the yields are going to be very high here,’ said Scott Irwin, a University of Illinois professor of agricultural and consumer economics.
“The expected large harvest has driven corn and soybean prices significantly lower, but it isn’t expected to make much of a short-time difference in consumer food prices. However, since the grains are staples in livestock feed, lower prices could eventually lead to a decline in the cost of beef, pork, chicken and milk.”
The Wall Street Journal reported in Friday’s paper that, “Russia banned imports of a wide range of U.S. and European foods on Thursday in response to Western sanctions.”
See also this short New York Times video from August 7- Dmitri A. Medvedev, the Russian prime minister, and Frédéric Vincent, a spokesman for the European Commission, discussed Russia’s ban on food imports from the United States and other countries. (Image CreditDmitry Astakhov/RIA Novosti Russian Government, via Associated Press).
Below are some recent graphs depicting several economic variables with respect to Russia’s action (click on graphs for larger view).
Paul Sonne and Anton Troianovski reported in today’s Wall Street Journal that, “Russia banned imports of a wide range of U.S. and European foods on Thursday in response to Western sanctions, confronting Russians with a type of economic isolation largely unseen since the Soviet era.
“Prime Minister Dmitry Medvedev outlined the products subject to the one-year ban—beef, pork, poultry, fish, fruit, vegetables, cheese, milk and other dairy products from the U.S., Canada, the European Union, Norway and Australia—in a radical response to penalties imposed on Russia over the crisis in Ukraine.”
Gregory L. White and Laurence Norman reported in today’s Wall Street Journal that, “Russian President Vladimir Putin fired back at Western sanctions on Wednesday, ordering bans on imports of food and other products from the nations that imposed the restrictions, in the latest sign of Kremlin defiance of efforts to force an end to its support for separatists fighting in Ukraine.”
Today’s article explained that, “Several waves of Western sanctions, including last week’s that affected entire sectors such as finance, oil and defense, have helped tip Russia’s slowing economy toward recession and fueled capital flight. But the Kremlin has shown no sign of changing direction. Russian officials said Wednesday they planned to step up food imports from Brazil and other countries that hadn’t joined the sanctions.
“Mr. Putin spelled out his retaliatory measures on Wednesday in a presidential decree ordering partial or complete bans lasting one year on a range of food and farm products, as well as raw materials, from countries that imposed sanctions, including the U.S., the European Union, Japan and Australia. RIA Novosti, the state news agency, quoted a Russian official saying all U.S. agricultural imports and that all EU fruits and vegetables would be banned.
“A final list of banned products is expected to be released in coming days. A Russian official familiar with the plans said they would cover some fruits, vegetables, dairy products and cheese, as well as liquor, meat and poultry.”
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “House Agriculture Chairman Frank Lucas, R-Okla., continues to complain that USDA is not implementing a provision in the 2014 farm bill that would give drought-stricken Southern Plains farmers a break on their crop insurance. This is important for winter wheat producers in Oklahoma who will begin planting the 2015 crop in earnest in September.
“The farm bill, signed into law in February, would allow farmers to boost their actual production history, or APH, by excluding years in which their yields are more than 50 percent below the 10-year average for their county. While USDA officials earlier notified Lucas they will delay implementation due to other pressing matters, Lucas said he has urged them to allow the APH adjustments on a regional basis or for a single crop.”
Purdue University agricultural economist Chris Hurt indicated yesterday at the farmdoc daily blog (“Where Will Beef Cows Expand?”) that, “It is getting to be a well repeated story. Beef cow numbers are at their lowest level since 1962. Cattle and feeder cattle prices are at record highs and feed prices have dropped. Beef consumers continue to eat beef and are rewarding the beef industry with very profitable returns. So when are beef producers going to expand the breeding herd and in what regions of the country will that occur?
“To answer those questions we first look at the areas of the country that had the biggest reductions in beef cow numbers due to drought, high feed prices, and financial losses. Since 2007, beef cow numbers dropped by 12 percent totaling 3.8 million head. The biggest declines were in the region with the most cows-the Southern Plains- which accounted for 1.6 million of the decline. Texas, the big beef cow state, had a reduction of 1.4 million head, an astonishing 36 percent of the nation’s total decline. That region’s expansion opportunities are very mixed due to lingering drought. About one-third of Texas remains in the three highest drought categories, D2-D4. Importantly, parts of cow-dense eastern Texas are now out of drought and the National Weather Service is forecasting some continued drought abatement by this fall for the region. In conclusion, lingering drought in the Southern Plains will tend to mean a slow expansion there.
“The second most important region for beef cows is the Southeast, which had an 822,000 head beef cow reduction since 2007, or 21 percent of the nation’s total. The biggest reductions were in Tennessee and Kentucky and accounted for 59 percent of the region’s decline. The Southeast is generally in good shape for pastures as the impacts of the 2012 drought have passed.”
A news release on Friday from USDA’s National Agricultural Statistics Service (NASS) indicated that, “U.S. farmers spent $367.3 billion on agricultural production in 2013, a 2.0 percent increase from 2012, according to the Farm Production Expenditures report, published today by [NASS].
“Per farm, the average expenditures total $175,270 compared with $171,309 in 2012, up 2.3 percent [related graph]. Crop farms account for the majority of production expenditures in 2013. The average expenditure per crop farm totals $211,659 compared to $143,521 per livestock farm.”
Donnelle Eller reported on Friday at The Des Moines Register Online that, “The cost to farm last year climbed, with Iowa growers spending nearly $30 billion on expenses such as rents, feed, livestock and fuel, the U.S. Department of Agriculture said today.
“It was a 3 percent increase, or $835 million more than 2012, the federal government data showed.
“U.S. farmers spent $7.2 billion more last year, with expenses rising 2 percent to $367.3 billion.”
From USDA’s Economic Research Service (ERS): Current USDA forecasts show declines in U.S. average farm prices for major U.S. field crops—corn, soybeans, wheat, and cotton—of 4 to 19 percent in 2014/15. For corn, soybeans, and wheat, this would be the second consecutive year of declining prices. Soybean prices are forecast to decline the most in 2014/15, based on an expected record U.S. crop, combined with ample supplies from Brazil and Argentina. U.S. corn prices are forecast to fall 10 percent in 2014/15, after a 35-percent decline in 2013/14, also based on a large U.S. corn crop forecast and competition from other exporters like Brazil, Argentina, and Ukraine. U.S. wheat prices are forecast to decline about 4 percent in 2014/15, despite the forecast for smaller U.S. supplies, due to adequate supplies from both traditional and Black Sea wheat exporters. Although smaller cotton crops are forecast for China and India—the top two global producers—a larger U.S. crop is expected to lead to a fifth consecutive year of rising global cotton stocks and a 12-percent drop in U.S. prices in 2014/15. Find additional analysis in the current ERS outlook newsletters: Feed Outlook: July 2014, Oil Crops Outlook: July 2014, Wheat Outlook: July 2014, and Cotton and Wool Outlook: July 2014.
Joseph Serna reported yesterday at the Los Angeles Times Online that, “More than half of California is now under the most severe level of drought for the first time since the federal government began issuing regular drought reports in the late 1990s, according to new data released Thursday.
“According to the U.S. Drought Monitor report, in July roughly 58% of California was considered to be experiencing an ‘exceptional’ drought — the harshest on a five-level scale.
“This is the first year that any part of California has seen that level of drought, let alone more than half of it, said Mark Svoboda, a climatologist with the National Drought Mitigation Center, which issued the report.”
“The bill authored by Rep. Rosa DeLauro (D-Conn.) would amend the Internal Revenue Code to establish an excise tax on the beverage. The revenue would be directed toward prevention, treatment and related public health research.”
A news release yesterday from the U.S. Department of Agriculture (USDA) stated that, “[USDA] today announced continued progress in implementing provisions of the 2014 Farm Bill that will strengthen and expand insurance coverage options for farmers and ranchers. The new Supplemental Coverage Option (SCO), available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility.”
The release explained that, “SCO will be available for corn, cotton, grain sorghum, rice, soybeans, spring barley, spring wheat, and winter wheat in selected counties for the 2015 crop year. Producers should contact their crop insurance agents to discuss eligibility in time to sign up for winter wheat coverage. RMA plans to make SCO more widely available by adding more counties and crops. Information on SCO for 2015 winter and spring wheat is available on the RMA website at www.rma.usda.gov. Selected counties for other commodities will be released later this summer.”
Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “USDA announced on Tuesday where farmers growing winter wheat would be eligible to buy the new Supplemental Coverage Option crop insurance this fall.
“SCO, created in the 2014 farm bill, is a supplemental county insurance that could cover a portion of a farmer’s deductible revenue on a countywide plan. A farmer buys the insurance as an enhancement to an individual policy.
“Winter wheat farmers would effectively be the first ones who get the option of buying SCO for their 2015 crop. However, not every winter wheat farmer will get the option of buying the policy. Farmers in counties reflecting about 80% of the overall winter wheat acreage would get the option of enrolling. Almost all of Kansas, excluding a couple of counties, would be able to enroll, as would farmers in the western half of Oklahoma, southern and western Nebraska, parts of South Dakota, Colorado, Montana, Idaho, Oregon and Washington State would get to enroll, as well as farmers in sections of California, Arkansas, Missouri, Illinois, Ohio, Michigan and Wisconsin as well as a few counties in both North and South Carolina, New Mexico, Wyoming, New York and Pennsylvania. For a full map, go to http://dld.bz/…”
A news release yesterday from Sen. Kirsten Gillibrand (D., N.Y.) indicated that, “United States Senators [Gillibrand], Elizabeth Warren (D-Mass.), and Dianne Feinstein (D-Calif.) sent a letter today to Food and Drug Administration (FDA) Commissioner Margaret Hamburgrequesting information about the FDA’s efforts to curb the overuse of antibiotics in food animal production.
“‘The use of antibiotics in food-producing animals must be reduced as part of the effort to preserve the efficacy of antibiotics,’ the senators wrote. ‘Research has shown that antibiotic resistant bacteria are most likely to develop when antibiotics are used continuously at low doses – the type of regimen used frequently in food animal production.’
“In their letter, the senators noted steps the FDA has taken to begin addressing this issue, including issuing guidance on inappropriate antibiotic use for growth promotion, calling for pharmaceutical companies to voluntarily remove these uses from product labels, and requiring more veterinary oversight of antibiotic use in food animals. The senators explained, ‘While these new policies are important first steps, we remain concerned that they may not be sufficient to effectively curtail the routine use of dangerously low doses of antibiotics for the duration of an animal’s life. . . . The benefits of this change will be negligible . . . if the same animals can continue receiving the same antibiotics at the same doses.’”
The Reuters article explained that, “But drought conditions in California and other states could further drive up prices of fresh produce and beef, the USDA warned.
“The agency forecast wholesale pork prices to jump by 10 percent to 11 percent in 2014, hurt by declining supplies after a virus has killed some 7 million piglets in the past year.
“Wholesale beef prices are forecast to jump by 8 percent to 9 percent in 2014, although rising imports are helping to offset some of the decline in domestic supplies.”
Friday’s article added that, “‘The ongoing drought in California could potentially have large and lasting effects on fruit, vegetable, dairy and egg prices, and drought conditions in Texas and Oklahoma could drive beef prices up even further,’ the USDA said.”
Jesse Newman and Tony C. Dreibus reported in today’s Wall Street Journal that, “Tumbling corn prices [related graphs here, here, and here] are sowing fears that many U.S. farmers will suffer their first losses in years and the agricultural economy could face its first sustained slump in a decade.
“Corn prices have plunged nearly 30% in the past three months to their lowest point since 2010 as near-perfect weather in the Midwest fuels expectations of a second consecutive bumper harvest. Prices of other crops have fallen sharply as well, with soybeans trading near 2½-year lows and wheat near four-year lows.”
Farm Bill Implementation- House Ag Committee Chairman Frank Lucas
Ron Hays, of The Oklahoma Farm Report and Radio Oklahoma Network, spoke yesterday with House Ag Committee Chairman Frank Lucas (R., Okla.) about Farm Bill implementation issues.
An audio replay and summary of the Chairman’s remarks from yesterday can be found here, while an unofficial FarmPolicy.comtranscript of the conversation with Ron Hays and Chairman Lucas is available here.
In part, Mr. Hays queried: “Let’s talk about crop insurance. I know this is kind of a sore point right now. The subcommittee that Chairman Mr. Conaway, under the House Ag Committee umbrella, had Michael Scuse in here just a few days ago [summary of that hearing here, related article from Politicohere], it seemed like the request was pretty clear to Mr. Scuse and to USDA: we need APH, actual production history, for this upcoming crop season, starting with wheat growers when they put the crop in the ground here in a matter of a few more weeks. USDA doesn’t seem to have much intention to get this done.”
Chairman Lucas indicated that, “The response that USDA gave that day, and they’ve given to me personally from the top all the way to the bottom, is they have so many things going on they can’t implement the process. But for our listeners out there, actual production history adjustment is critical when you’ve been through the kind of drought that we’ve been through for multi years in our region.
“What I’ve asked of the Department, what Mr. Conaway made the request of the Department, what I’ve asked of the Secretary is if you can’t implement it for the whole country for this coming crop year, at least look at Oklahoma and Texas and Colorado, California and New Mexico, Kansas, the places that have suffered from the drought. If you can’t implement the whole thing, at least consider doing a partial implementation in the hardest hit areas.
“Producers who have really suffered in recent years, this APH is the difference between having viable crop insurance for the coming year or not having viable crop insurance. And you’re exactly right, it’s going to be time soon to put the wheat in the ground in our region.”