Wilson Weekly

Low-lin soybeans face yield drag debate

2006-05-19T16:29:00.000-05:00

Last week I told you how low-linolenic soybeans are helping food companies retool their recipes to rid products of trans fats. That's because as of January 1, 2006, a new FDA labeling law went into effect that forced companies to explain levels of trans fats, saturated fats and cholesterol in food products. And since food companies don't like to scare their customers, they're looking for ways to pretty up their ingredient labels.

Trans fats occur when manufacturers add hydrogen to vegetable (soy) oil - a process called hydrogenation. They do this to increase shelf life and flavor stability. Consumption of trans fat and dietary cholesterol raises low-density lipoprotein (LDL), or "bad" cholesterol, levels, which increases the risk of coronary heart disease (CHD).

Fortunately the soybean industry saw this coming and has worked with researchers to create low-linolenic soybeans that reduce the need for partial hydrogenation of soybean oil. Thanks to the backing of food companies like Kellogg and hefty premiums to contract growers, at least 750,000 acres of low-lin soybeans will be planted this spring across the United States. Many more will go into the ground next year.

Saving U.S. soy?
A lot of people are looking at identity preserved beans like low-lin and seeing the savior of the American soybean grower. "Putting stuff in a pile and waiting for the government to send a check is not agriculture's future," says John Diehl, who runs DF Seeds, the largest non-GMO seed processor in Michigan, out of Dansville, Mich. "Brazil does not have the storage or transportation infrastructure to do this. We're going to have to go to low lin to save soy production in the U.S. long term."

But one of the knocks against low-lin - at least from a grower perspective - is yield drag. That issue is being debated by both growers and soybean policy leaders.

"The perception in the past, is that every time farmers were offered a premium there was a yield drag," says John Becherer, CEO of the United Soybean Board, the soybean industry's checkoff arm. "In this case that's not true. Once farmers start growing (low-linolenic) and realize there's no yield drag, this will all come along."

But John Forrell, a contract grower who farms in Charlotte, Mich,, disagrees. "I've had three years of experience growing low linolenic and it does not take stress very well," he says. "This year root health was a problem. It was dry in my area and my longer season beans died out."

Forrell says the low lin just has a little weaker plant strength, so it's important to give growers a premium to offset the profit risk. "The yield risk is too high," he says. "If they don't offer a premium of at least 10%, I really question whether it would be worth growing it."

John Forrell, Charlotte, Mich., has raised low-linolenic soybeans three years now. "I see IP (Identity Preserved) beans preserving the market, but I don't know if it's a savior," he says.

So far this year he's seen premiums of 60 cents per bushel. "If you really want people to grow them, a buck per bushel would do it," he says. "As long as the companies that process low lin keep the premiums up, I think you will see a lot of farmers go to them. Obviously when varieties get developed and the yield drag is not there, premiums won't be so high."

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Low-linolenic soybeans take center stage

2006-05-12T11:51:00.000-05:00

Here's a feel good story for every soybean farmer who ever wondered if his or her checkoff money was being spent wisely.

As you know, food companies everywhere are scrambling to lower trans fats in their products. That's because as of January 1, 2006, a new FDA labeling law went into effect that forced companies to explain levels of trans fats, saturated fats and cholesterol in food products.

Naturally, food company execs have nightmares about consumers who actually look at those labels. So they want to get those numbers down - fast.

This situation might cause a panic among soybean growers. After all, trans fats occur when manufacturers add hydrogen to vegetable (soy) oil - a process called hydrogenation. They do this to increase shelf life and flavor stability. They're turning oil into shortening. Think: creamy goodness inside an oreo cookie.

Consumption of trans fat and dietary cholesterol raises low-density lipoprotein (LDL), or "bad" cholesterol, levels, which increases the risk of coronary heart disease (CHD). Here come those health-conscious consumers and the food exec nightmares.

But here is a case where the soybean industry had its ear to the ground and was able to look far enough ahead to make major changes to keep market share and help food companies address consumer concerns.

"We began planning for this in earnest in 1998, with ongoing research to create the basis for low-linolenic and mid and higher linolenic product oil," says John Becherer, Chief Executive Officer for the United Soybean Board, the group charged with wisely spending a $27 million soybean checkoff budget. I talked to Becherer at USB headquarters in St. Louis last week.

"The labeling rules started January 2006, but we knew food companies were working to eliminate soy oil that was partially hydrogenated from their product lines," he says.

Enter low-linolenic soybeans
Low-linolenic acid beans, introduced three years ago, will reduce the need for partial hydrogenation of soybean oil, helping food companies reduce the presence of trans fats in their products.

According to Becherer, the United States uses about 17 billion pounds of soy oil for food uses - frying, baking, fast food, or salad oil on grocery shelves. About 2 billion pounds are at immediate risk with the trans fat issue - we'd lose that 2 billion pound market if we don't change the nature of that oil.

"When Kellogg announced it would source low-lin soy oil, it really created reaassurances for farmers that this was real and that there was a market for that product," says John Becherer, CEO at United Soybean Board.

Thanks to the backing of food companies like Kellogg and hefty premiums to contract growers, at least 750,000 acres of low-lin soybeans will be planted this spring across the United States. Many more will go into the ground next year.

"By 2007 we should have over 1 billion pounds of oil available from low-lin," Becherer says. "It takes a long time in research, but we were lucky enough to know this in advance. Having the checkoff avilalable to do the research allowed us to worked with the seed industry and tech companies. We were able to put these oils into the marketplace."

More traits in the pipeline
More good news: Low-lin is just one of several health-oriented traits in the soybean research pipeline. "We're also looking to fill other market niches, such as mid-oleic, 50% oleic acid, a 3- billion pound market," says Becherer. "That fills another need. Now you're looking at 5 of the 17-billion pound market."

The next big hurdle facing the food industry is saturated fats. Becherer says the industry is developing a low saturated fat oil made from soybeans as we speak. No wonder he's confident about the future.

"We're putting products out there and meeting consumer needs in the future," he says. "I would hope the food industry understands that we're looking at their needs for the long run."

Next: What's it like growing low-lin soybeans? I'll share with you a visit I had with a Michigan grower who is doing just that.

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Life of a farmhouse

2006-05-05T11:16:00.000-05:00

We packed up the old farmhouse in northern Illinois on a blustery day in April. It was one of those days that teases you with the promise of Spring...but in my case, mixed with heady sentiment for days gone by.

My father died last year and his wife, my stepmother, was moving out. This was the last day any of my family would spend in this house.

My father and our family had lived there, as did my grandfather's family, and Wilson families before, dating back to the late 1800s. They all raised kids and crops and watched the country grow through depressions and good times, wars and peace, good times and droughts. They scraped a living out of the soil with strong backs and sharp minds and a focus on education, thanks to so many women in my family who were schoolteachers. Even my dad spent a few years as an ag teacher before giving in to his hopeless addiction to farming.

The old farmhouse: surviving teenagers, tornadoes...and now, a new tenant.

Many firsts
That house survived tornadoes and teenagers, and bore witness to many firsts. My dad would delight in telling us all about the day electricity came to the country and grandma could retire her old lamp lanterns. Families got water from an outdoor well and windmill that sat in the front yard for so many years before indoor plumbing.

I grew up exploring a dank, musty basement with a monster-like coal furnace. I recall vividly how cool it was when the coal truck came around and those black bricks came tumbling down that chute in an avalanche of soot and dust. I'd come home from kindergarten on a cold December day and sit next to a living room register to feel the heat rise up from below. Then, one day electric heaters appeared in every room, and the furnace went cold.

We were nearly finished packing when my stepmother mentioned that the phone would be turned off at 4 p.m. My mind drifted back again. That phone number - our phone number - had been in this family since before I was able to walk. I remember being six or seven and listening in on the 'party line.' You could just pick up the phone and hear your neighbors talking about Aunt Kate's gout or the Church picnic or the new baby chicks that arrived the other day. Whatever happened to party lines, anyway? My 10-year-old daughter will see an 'old' movie and ask how those funny round dials made the phone work.

Like most farm kids, I wanted to get out and see the world when I grew up. And that's exactly what I did, coming back to the farm to see my dad when I could, but for the most part, making a life and family of my own in the city. And now, the older I get, the more I wish for those simple days back on the farm.

Growing up, you didn't realize you were learning something about values when you watered the cows, or plucked chickens with grandma, or went to the field to help with the harvest. You just did it. Now I wish my daughter had that chance.

We worked all day to pack up that house, sifting through the little bits of memory and history. I wish I had a good excuse to move back there. Maybe I will…someday.

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Trade's cleanup hitter gets benched

2006-04-30T17:28:00.000-05:00

Another critical trade deadline passed quietly this weekend while farmers were busy in the fields. By April 30, World Trade Organization (WTO) leaders were supposed to have put numbers on formulas to open global markets and reduce domestic farm subsidies. This was one of those important early steps that would open the way for substantive trade decisions later in the year.

Rob Portman is moving on to Office of Management and Budget at a critical time in world trade talks.

The fact that it didn’t happen is just another sign the Doha Development round of WTO talks, so important to U.S. agriculture, may never go anywhere this year. Or ever, for that matter.

Perhaps another sign is the mysterious decision by President Bush to move U.S. Trade Representative Rob Portman over to head the Office of Management and Budget (OMB).

Pulling our clean up hitter in the bottom of the ninth inning is a sign the manager thinks the game is over.

I got a chance to see Portman work up close when I attended the WTO trade meetings in Hong Kong last December. Not only was he cool under pressure, he gave the United States a definite advantage going up against the European Union and the high-pressure G20, a group of less developed countries led by Brazil and India pushing for ambitious ag reforms among developed countries.

When EU trade Commissioner Peter Mandelson, himself a steely-eyed negotiator, roundly criticized the United States food aid programs in Hong Kong, Portman deflected the heat and turned the tables on the Europeans. He deftly steered the discussion back to the issue at hand: the Europeans' lack of backbone in opening up their own markets.

Susan Schwab, Portman's deputy trade rep, is stepping in as Portman's replacement. I think she'll surprise some people in Geneva. She's got one heckuva resume, as Carla Hills, U.S. Trade Rep from 1989 - 1993 notes.

"She will come to the job highly prepared on the substance of trade policy," noted Hills in a recent letter to the New York Times. "It is impossible to overstate how much this will matter at the bargaining table. For nearly 30 years, she has demonstrated that she is a thoughtful policy expert and a tough and effective negotiator who has accomplishments to show for it."

Portman agrees. "It really is going to be a seamless transition," he told reporters in an online briefing last week. "We will not miss a beat at USTR. Susan Schwab… was in place and she's fully conversant on all the issues, including Doha.”

Some of the criticism of Schwab is that she lacks experience on Capitol Hill. Portman begs to differ. "She has more Hill background I think than any USTR has had until I came along, and it will serve her well," he says. "She's well respected on the Hill. She understands the need fora bipartisan trade agenda. I'm really excited about the President's decision to promote Susan. She's absolutely qualified."

Bee hive
Schwab is stepping into a bee hive right now. The USTR office is in the middle ofa dozen bilateral negotiations, as well as two very intense WTO accession negotiations, not to mention the all-important Doha negotiation. They're also dealing with China enforcement actionsand a number of other specific issues.

"We've got plenty on our plate, and it was really important to me to have somebody who could come in immediately and handle all those issues," says Portman. “Susan and I are both committed to the round. There's no backing off.”

The Doha round of trade talks was supposed to lower global farm subsidies and open up new markets so farmers could get more income from the marketplace. The goal was to help lift millions of impoverished people out of hunger and misery. The World Bank forecasts that 63 percent of the income gains for the world's poor will come from agriculture trade reforms, and 93 percent of that will depend on improved market access. The same is true in manufacturing.

One Senior U.S. Trade official says the only real deadline is the end of the year, "when we’ve got to get something done so we can package it up to send it up to Congress for the TPA (Trade Promotion Authority) deadlines."

Portman, Schwab and USDA Secretary Mike Johanns will still meet with ministers of the G-20, G90 and the Cairns Group this week in Geneva. Meanwhile, some political leaders want to extend TPA, possibly coupling it with a one-year farm bill extension.

Portman insists the United States continues to be committed to an ambitious result. “We believe this should occur across the board from domestic support to reductions in tariffs and all goods, from computers to corn,” he says. “That's been our position since the start and six months ago wereaffirmed that commitment with a very specific proposal calling for a substantial reduction in our trade distorting domestic support.

“We didn't just meet the Doha requirement, by the way, we exceeded it,” Portman notes. “AndI know that put a lot of pressure on some of our trading partners to do their part which is to provide the market access that will provide most of the development gains.”

If Doha is to survive, we’ve got to have some really serious progress in the next couple months, including some basic agreement by the summer. We’ll need to start converting agreements on formulas into schedules, and converting schedules into concrete agreements.

Let's hope our new cleanup hitter is up to the task.

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The world according to Flinchbaugh: "The federal budget is irrelevant to the farm bill"

2006-04-21T14:34:00.000-05:00

You can stop fretting about the federal budget deficit forcing spending cuts in the 2007 Farm Bill. It won't happen, according to Barry Flinchbaugh, well-known farm policy guru at Kansas State University.

"It's that time again to scare the hell out of farmers and agribusiness," he says. "I've heard this same story every farm bill cycle since 1968, and I've heard it especially in those years when we've had huge federal deficits: 'There won't be enough money, this bill is going to be cut drastically.' Don't believe it."

Sure, Congressmen will go home to tell that story. They will talk about how we've got to spend money on the war and Katrina relief. But lo and behold, they always find the money for farm programs, he says.

"I've seen it every farm bill year," he adds. "I'm going to make a bold statement: The federal budget is irrelevant to the farm bill."

Flinchbaugh has a track record when it comes to making such sweeping statements. He has been working on farm policy for 35 years, spending time with past USDA Secretary Earl Butz. Flinchbaugh played a key role in the 1996 farm bill, and is known around the world for his colorful speeches to thousands of farm groups.

"When I was 30 years old I believed what the earth needed was youth and vigor and new ideas," he told an audience of agri-marketers at a meeting last week in Kansas City. "Now that I'm 65, what the world needs is experience and wisdom."

History lesson
So why won't the federal deficit matter in this next debate? Look at history for clues, he says. The 1985 farm bill was to cost $42 billion through its life, but ended up costing exactly double that amount. In the last year of the 1996 farm bill, the cost jumped from an expected $4 billion to $16 billion.

"It's what is appropriated that is important, not what is authorized," explains Flinchbaugh.
So when you hear that there will be less money authorized in the 2007 farm bill than in 2002, don't panic, he adds. "So what? It's what's appropriated that counts."

Even so, expect some changes in how farm money is spent, especially in light of WTO negotiations that may end up phasing out market distorting programs like countercyclical payments and marketing loans.

"2007 will be the beginning of the end for traditional farm programs," he predicts. "2012 will be when we really change direction. Then we will double the decoupled fixed payment, pass farm savings accounts, fully fund the CSP (Conservation Security Program) and put a minimum of $2 million into energy programs.

Warning on market distortion
"The upcoming debate will be about how to put a safety net under farm income with a minimum of market distortion," he adds. "Yes, we're debating this issue at the same time we're debating WTO, but it's a myth that the WTO is going to force us to cut farm programs."

That's because we can simply change the way we compensate farmers - if there's enough political will to do so. Remember decoupled payments from the 1996 farm Bill?The European Union has already moved to a system of compensating farmers with decoupled payments. These have been found to be less market distorting in WTO talks. There's no reason why the United States could not return to the same system we had 10 years ago, flaws and all.

"The WTO has no authority and isn't asking for authority on how much we spend on farm programs," Flinchbaugh concludes. "It's not how much we spend, it's how we spend it."

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World's largest indoor cornfield

2006-04-17T14:22:00.000-05:00

Last week 1,600 of biotech's biggest companies gathered in Chicago to show off their latest hot research and products at Bio2006, the annual meeting sponsored by the Biotech Industry Organization (BIO). Over 18,000 people came and surprisingly. very few protesters showed up. Maybe they've moved on to other causes.

Discussions and presentations during the convention covered a vast array of topics, ranging from how biotechnology can be used to fight diseases, help prevent terrorism and improve the environment, to applying biotechnology to provide food security, improve food nutrition, enhance industrial processes and accelerate development and production of new medicines.

But of all the bio-based super-cool research on display, the one thing people oohed and aaahed over most was the tiny one-fifth acre plot of corn plopped down in the middle of McCormick Place, Chicago's massive indoor trade show arena.

Most participants at last week's Bio2006 meeting in Chicago weren't sure these plants were real or synthetic. (Answer: real).

Dubbed as the world's largest indoor cornfield, it represents a microcosm of the 222 million acres of biotech crops planted by some 8.5 million farmers worldwide. According to whybiotech.org, 1.25 acres feeds one person for a full year. To make the case for genetically modified crops, whybiotech claims $5.7 billion worth of crops are destroyed globally by corn rootworms and corn borers - two pests that can be stopped by genetic manipulation of seed.

In 2005, U.S. farmers grew more biotech crops than any other country - 123 million acres, or 55% of the world's biotech plantings.

"People come by the corn field and stop to touch it to see if it's real," a spokesperson for whybiotech told me.

New seed trait deal
Several companies used Bio2006 as a launching pad to announce new biotech deals. Seed company Pioneer Hi-Bred International Inc. and rival Switzerland-based biotechnology company Syngenta AG announced a joint venture, GreenLeaf Genetics LLC, that will license the sale of newly developed corn and soybean seed genetics and biotech traits. This will provide farmers in Canada and the United States access to some newly developed seed with specific genetic traits for weed and insect control and improved yields.

The two companies also agree to cross-license certain corn and soybean traits that each company will market independently under their own seed brands. The agreement includes rights for Syngenta to market the new Optimum GAT glyphosate tolerance trait recently developed by DuPont.

Some observers note that the move targets a specific competitor - Monsanto. "Are we competing with Monsanto? You bet," says Mike Mack, chief operating officer, Syngenta Seeds. "We're going to jointly look forward to driving Optimum GAT and for Syngenta alone, we're excited and enthused about this technology. In 2009, when introduced, it will be the leading technology for soybeans, and Roundup Ready will have the No. 2 spot."

Jeff Cox, Syngenta's Head for global corn and soybeans, told me the companies' seed division is core to future growth strategy. Right now they have 13 to 14% market share in the United States, and the new deal with Pioneer is a way to grow that business.

Jeff Cox, global head of Syngenta's corn and soybean seed division, says the company is working on drought-tolerance, nitrogen utilization, and special corn hybrids designed for ethanol.

"If we do the right things on the grower level, they will reward us for that," he says. "Our objective is to become the number one choice in the market. We have no aspirations to stay a follower in the market."

Changing marketplace
"Our job now is increasing yields, and growing crops in an environment where they did not grow as well before," he says. "We're expanding traits in drought tolerance, better Nitrogen utilization, and how to produce more in a sustainable manner."

Cox notes that while corn and soybeans are plentiful at the moment, increasing use of biofuels will cause more intense competition between crops.

"That's the challenge going forward," he says. "How do we produce more of these crops in a sustainable way in different parts of the world? However, we've got more acres where we can grow, plus upscale breeding and the use of GMOs, so it's a promising outlook."

Another challenge, says Cox, is channeling crops into proper markets, without co-mingling. "It's going to be a continuing issue," he says. "Even though (GMOs) have been shown completely safe, we're going to have to find ways to manage this, to be sure our farmers continue to thrive."

He envisions a 'channel industry' serving particular markets, "but it will only happen with the proper incentives in place," he adds. "It will only occur when the markets are small and easy to differentiate or large enough to justify on an economic basis.

Food companies are driving more and more planting decisions. Case in point: low linoleic soybeans, which will reduce the need for partial hydrogenation of soybean oil, helping food companies reduce the presence of trans fatty acids in their products. You may have only heard whispers about low lin by now, but in three years acreage will likely be in the millions.

To get to that point, farmers must be given incentives to plant crops that so far, have not proven to be consistent yielders. "There's a lot of facilities, grain elevators, ready to do this and a lot of farmers are already doing this," says Cox. "But there needs to be value for the growers.

"One day you'll wake up and people will grow these crops consistently," predicts Cox. "The industry is moving that way, towards more consistent yields, but to get it to a commercial volume it takes a 5 to 8 year transition."

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The coming crop rotation war

2006-04-06T15:04:00.000-05:00

With a big carryover going into planting season and fresh memories of corn mountains at local elevators last fall, the mere suggestion that we may someday need more corn acres - millions of them - may sound a bit daft. But hear me out before you start calling the loony bin.

Let's start with ethanol, the 800-pound gorilla in corn demand these days. Iowa alone already has 20 corn processing plants that produce ethanol and other products, plus three more plants just across state lines that draw corn out of Iowa. In total, these plants eat up an annual 920 million bushels of corn - nearly half the state's corn crop. But Iowa and regions just across state lines have at least 27 new or expanded plants under construction or in the planning stage, for an additional 960 million bushels.

Iowa appears to be the most aggressive, but the trend is also happening in other Corn Belt states, along with a number of plants under construction or in the planning stage outside the Midwest. They will all need corn from somewhere.

The planned new plants give Iowa a potential 1.88 billion bushels of ethanol processing capacity. Last year, the state produced around 2.16 billion bushels of corn. When you add up corn for feed, other uses, export, and the additional new ethanol plants, the state is looking at a 350 to 400-million bushel deficit by year 2008 or 2009, says Bob Wisner, Ag Economist at Iowa State University.

"If proposals currently being considered in Congress to mandate 15 billion gallons of ethanol and 2 billion gallons of biodiesel fuel by 2010 or 2012 materialize, there is likely to be quite a tug of war between corn and soybeans for acreage," he says.

Wild card: China
Now throw in the wild card: exports, particularly to China. If China decides it needs our corn instead of being our second or third largest competitor, the market explodes. We might need to supply many of China's customers as well as its own needs.

If this happens we would need to see a large shift in crop rotations, predicts Wisner. In 2005, Iowa had a 56% corn-44% soybean rotation; by 2010, with China in the market, that rotation may well need to shift to about 71% corn-29% soybeans.

In 1995-96, the booming Asian economy and strong U.S. livestock markets gave buyers the ability to just keep paying up for corn. The result: $5 corn. Today Asian economies are doing pretty well, but showing some signs of stress, and bird flu is an on-going concern. Will they keep buying no matter what?

The market has already started hedging this bet, as prices for December 2008 futures have been exceptionally strong this winter.

"A substantial number of counties across the Corn Belt will be -or already are - shifting from surplus corn supply to deficit supply areas that require a large amount of corn to be hauled in from some distance away," Wisner says.

Bottom line
U.S. energy officials are already worried we won't have enough ethanol this summer. Long-term is anyone's guess. Unless corn yields increase faster than trend, the ethanol expansion slows dramatically, or an economical break-through occurs in converting biomass to ethanol, we may well need 10 to 14 million more corn acres over the next 6 years.

That's figuring in no major droughts, continued export demand and lower yields from 'unretired' CRP acres and corn-after-corn acres.

We're finally seeing every farmers' dream: unrelenting corn demand. Let's hope the dream doesn't turn into a nightmare.

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Land prices headed for a fall? Six factors to watch

2006-03-31T14:43:00.000-06:00

Farmland values may be headed for a fall, if a simple economic indicator is any clue. The value-to-rent ratio for farmland - a price-to-earnings (PE) indicator, if you will -- has jumped to near historic highs of 1982, just before land values took a nosedive.

"On a price-earnings ratio basis - land value divided by income or rent - it looks like the PE ratio for land nationwide will move up to 21.5 times the income this year," says Mike Fritz, editor of Farmland Investor Letter. "The historic high was nearly 25 in 1982. By comparison, the PE ratio for the broad stock market is around 18.

"If the farmland PE ratio continues at this level for the next few years, it signals that land values are getting over extended," he says. "I'm not suggesting we're going to see a sharp contraction in farmland values, but I think the likelihood that farmland will continue going up at the pace it has been is highly unlikely."

Factors push prices
USDA is forecasting that farm real estate values will rise 6.5% this year, off modestly from last year's figure of 6.8%. Here are six key factors to watch going forward:

Stock market The stock market blew up six years ago, in part due to the tech stock bubble, corporate malfeasance, and a general trend among investors who wanted to move into hard assets like farmland.

No one has measured the amount of money that moved out of stocks, but with the market bumping up against 4 1/2 year highs, there are clear signs that money is flowing back into stocks again.

"Memories fade, and greed does take over eventually," says Fritz. "When the stock market comes back, that will take some of the wind out of demand for farmland."

Farm income USDA's ten-year baseline projections forecast farm income to decline compared to the last three years. Net farm income was more than $82 billion in 2004 but is now forecast to drop this year to around $56 billion, which is average. "The run up in farmland values coincided with this three-year period of historically high farm profits," notes Fritz.

Supply and demand Farmers remain the main buyers of farmland. Their balance sheets are very strong right now, but the reason is because of the run up in farmland values. Over 80% of their assets are farmland, notes Fritz. Meanwhile, edgy land owners have been testing the market.

"There is no firm statistic on number of land listings, but anecdotally, we've heard listings are at record levels," he says. "A lot of land owners have seen the run up in land and a lot of land has gone on the market. That supply is getting out of whack with demand." Even so, there is still strong demand for good quality land.

1031 exchange In Illinois, tax deferred land buyers made up just 22% of farmland buyers in 2002; by last year the number had surged to 56%.

"You can see this wave in tax deferred exchange money that's moved into farmland," Fritz says. "It's coming from Chicago primarily, but also from St. Louis and Indianapolis, and it's becoming more popular nationwide. A lot of brokers have jumped on the bandwagon to promote them, particularly on large parcels."

Commercial real estate Historically, farmland values do not move parallel to commercial real estate values, housing values or timber. That's why institutional investors were attracted to farmland, because it moved differently than commercial property. But in the last several years, those bands have narrowed considerably. These days when housing, timber and commercial property values go up, farmland values go up too. It may be valuable to watch the commercial real estate market for clues to farmland movement.

Farm bill The farm bill will eventually be overhauled in the next two years. Studies show farm program payments get capitalized into farmland values. Meanwhile, huge deficits have provoked increasing pressure to cut farm subsidies, especially if the United States is forced to make changes to its farm programs based on a new WTO trade agreement.

"We all get caught up in the frenzy of concern over farm program payments," says Fritz, "but I think it's a bit overblown. They will be rationed down and probably moved toward environmental programs, but I tend to think the money is still going to be there.

"However, tilting the farm program toward conservation practices could result in a redistribution of payments from farmland with a history of producing certain crops to farmers or landowners who can deliver larger environmental benefits. "

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Part two: More tips for a smooth farm transition

2006-03-24T14:39:00.000-06:00

Last week I told you about some successful ways farmers are able to bring the younger generation into the farm business. Here's the rest of my interview with Joe Kelsay, who farms with his brother Russ and dad Merrill on a 500-cow dairy farm south of Indianapolis near Whitehead, Ind.

Tip no. 5: Let the farm's business plan drive decision-making
Running a company with managers from different generations can be difficult. The same is true of farms where sons may think differently than fathers. Conflicts arise. So how do you keep it together?

"We may disagree some times, but it's not always along generational lines," says Joe. "Deep down, we each understand we're making decisions for the good of the family. We sometimes want to go in different directions, but we're all very much aware that everyone is making decisions to help improve everyone's livelihood; so that helps us temper any conflicts between us.

"We're very fortunate that the personalities represented in our family mesh well together," he adds. "Where one person is weak or uncomfortable in an area, another person shines, so there's a lot of complementing each other. That means we can be ourselves and it helps to mitigate our conflicts."

Tip no. 6: Respect each other
There's a lot to be said for experience. Most farming sons do respect their fathers and what they have achieved on the farm.

Likewise, fathers need to respect the younger generation and what they bring to the business.

"You have to have respect for those who have more experiences, but I think it's valuable for the older generation to understand that today is a different day than 5, 10 years ago," says Joe. "Globalization, technology - there's thousands of differences and sometimes a wise older generation will understand the limitation of some of their experience and the opportunities that inexperience can offer."

Tip no. 7: Commit to the plan
If your goal really is to move the farm to the next generation, don't just give it lip service. Make a plan and stick to it. Otherwise, you might see the younger generation leave the farm because they feel disenfranchised, because they have no ownership in the operation.

With farmland and estates appraised at higher and higher levels, you can't afford not to start early. "With estates valued at higher and high levels, the government will try to attach itself or claim as much of that as they can get away with," says Joe. "If you have to pay 30, 40 50% in taxes, profit becomes an impossibility. The house of cards collapses and the next generation no longer has any opportunity."

Tip no. 8: Keep planning strategically
Joe admits that while the succession plan has worked, the future is still murky. He's very candid about the need for strategic planning for the farm to continue its success story.

"Every operation needs a roadmap and strategic plan for where they are going in the next five to ten years," he says. "That needs to be revisited here, especially someone my age. I'm married now with children, so all the dynamics change in my vision of what the farm should be, compared to my brother Russ, who is a single young adult, and my dad who is closer to retirement.

"I don't know what the right size is for this farm," adds Joe. "We can afford some time away from the farm on business related trips and leadership activities, which are invaluable. But for whatever reason - maybe it's because we haven't focused on it yet - we haven't been able to formally sit down and hash out a strategic plan. Informally, it happens every day; we talk about goals and what we want to accomplish every day or week. But sitting down and put it in writing, having a retreat, we have not done that. We all would like the time to do that, but it doesn't seem like there's ever enough time."

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Smooth transition: The right way to bring young farmers into the fold

2006-03-17T09:12:00.000-06:00

One of the most difficult management challenges for most farmers is not what crop to plant or which tractor to buy, but how to bring sons or daughters into the business.

That's because so many things can go wrong between the time your kid calls to say, "I'm coming home," and the time you actually hand over the keys to the machinery shed. Someone could change their minds; a landlord could change tenants; prices could tank, or the city could eat up those neighboring acres you had been counting on.

It's a long list of potential traps, all right. But farm succession can work. Just ask the Kelsay family of Whiteland, Ind.

I spent an afternoon with Joe Kelsay, 29, one of two sons who shares management duties with father Merrill on a family dairy farm just south of Indianapolis. Today the farm milks around 500 cows and supports these three families along with 11 employees' families.

Here are some tips I gleaned from my visit with Joe:

Tip no. 1: Start early
Joe and his brother Russ always planned to farm since they were youngsters in high school. Joe, who graduated from Purdue University in 1999, says one experience as a high school freshman helped him decide what he wanted to do with his life.

"We went on a little cruise with my mother and met a lot of people who were all complaining about their jobs and how they hated work," he recalls. "So I thought about that and I said to myself, I really can't wait to get back to my chores and family and lifestyle. This is enough justification for me to make the commitment."

Knowing his sons' interest in farming, Merrill decided to hold a family meeting - back when the boys were still teenagers. "He said if you're ready to make a commitment with this kind of operation in mind, we have to look to the future and plan for it," recalls Joe. "That's when we started putting in place expansion plans throughout the 90s."

The Kelsay family met with a lawyer and accountant and drew up a plan 10 years ago. They established Kelsay Farms LLC, partnerships and a mix of business entities. Then they started a very systematic process of how to transfer entities to the next generation. The Kelsays' advice? You can never start too early putting a plan like this in place.

Tip no. 2: Give them a stake in the business
Most of this was done for estate planning purposes, but also to help bring the ownership levels up for the younger generations. Now, instead of cows and equipment, all three have ownership shares in the farm.

Passing on ownership is mostly a tax avoidance issue, but it bumps up against a fundamental problem: a sense of loss by the older generation. One of the toughest problems for Joe and Russ was being sensitive to their grandfathers' (now deceased) feelings of losing a foothold in a farm he spent his lifetime building.

"My grandfather was concerned about losing ownership in something he had invested his entire life, every waking minute," Joe says. "We could certainly understand that. As I get older, I understand it even more because I've got a lot more invested, even at my age."

Working through that issue requires extreme foresight by everybody. "If the goal is to continue the operation through generations, you have to look at the tax implications early on instead of waiting for someone to pass on to solve these issues," says Joe.

"My best advice for people my age is we all need to understand the difficulty that the older generation has to commit themselves to in order to provide this younger generation with ownership and transfer," he adds. "Appreciate that, because it is quite a commitment."

Tip no. 3: Give yourself time to expand
The Kelsays began to build the dairy herd, adding new heifer barns and moving from a double six parlor to a double sixteen parlor. The Kelsays expanded feed storage by moving from upright to trench silos, and added a commodity shed which allowed them to get in semi loads of commodity feeds instead of complete feeds. "We had been blending feed ourselves for quite some time but we never had semi truck storage," Joe explains.

Tip no. 4: Give the youngsters responsibility
One of the worst pitfalls farmers fall into is making their sons into permanent hired hands. That may be okay for a few years at the outset, but the younger generation must be given a chance to run the operation if you expect them to do so after you're gone.

In the Kelsays' case, Joe handles the dairy, Russ handles crops and equipment, and Merrill is general manager.

"I have to compliment my father and grandfather, who both allowed Russ and I to come in and take on a lot of responsibility, make mistakes and not be micromanaged by their experiences or biases," says Joe. "Both of them would let us take the reins. You knew they were dubious, but they still allowed it. Some of our decisions were winners, some so-so and some were complete losses, but looking back, Russ and I had those opportunities and my grandfather and dad allowed that.

"I have friends from college whose father won't allow any new ideas; whatever the dad says, that's the way it's going to be and there's no room for new ideas. They can't participate in the process outside of a labor role. The sons will be sixty years old before they get to make a decision. It's sad and unfortunate." Next week: Four more tips for a smooth farm transition.

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The heart of Andy Markwart

2006-03-03T11:12:00.000-06:00

This eulogy was given by Mike Wilson at the funeral of Andrew J. Markwart, who died of cardiac arrest at the age of 43 on February 24, 2006. Markwart, editor of The Furrow magazine, was a friend and former Farm Progress Co. colleague.

How do we measure the life of a man when his days here on this earth are complete? Is it by the number of years? His economic and professional success? Or do we measure it by the emptiness in the hearts of the people he left behind?

After all, the human heart is why we’re here today: The man with the biggest heart in this room has left us. His broken heart left all of us with broken hearts, too. Beyond our shock, beyond our sorrow, we move on to celebrate Andy Markwart's life and try to find the meaning in this loss.

Andy Markwart: a friend's friend who shared his laughter and spirit with everyone.

I knew Andy for more than 20 years, but I feel like I knew him all my life. I loved him like the brother I never had; sometimes I felt he knew me better than I knew myself.

Andy was my best friend. And to his credit, a lot of people here will say the same thing. Look around and you’ll see hundreds of Andy’s best friends. That’s just who he was – he was a friend’s friend and he shared his laughter and spirit and heart with everyone.

We spent many days together early in our friendship, as FFA National Convention photographers. It was at one of these gatherings in the early '90s that my wife Molly and I introduced Andy, my buddy, to Thelma Schoonmaker, her buddy. It has been a joyful blessing to watch their love grow over the years and celebrate the birth of our children together.

Andy had many loves in his life. He loved to golf. Sometimes we'd come back from a round of golf and, to our wives' dismay, sit there and rehash every single shot, sifting through the wreckage of a mediocre round of 96, to proclaim one as "shot of the day." As some of you know, he and I, along with Rich Dunn and Chris Feaver, would take a long weekend each year and go on a golf road trip. It was dubbed "The Odyssey," and the quest was to golf in every state. Okay, the quest was also to drink beer and play poker in every state, too - but golf was the main objective. For the record, we made it to 31 states, plus Canada.

Some of our happiest times were on a golf course. Sometimes, when it was just Andy and I, we would make silly bets. But never for money. It was usually something ridiculous, like, “if I make this putt, you walk off the green on your knees barking like a dog.” For the record, Andy barked a lot more than I ever did.

In fact, he was a sucker for a wager. I know a lot of people made friendly wagers with Andy, and it usually had to do with their alma mater against his, the mighty Michigan State Spartans. One time Andy and I bet on a football game between Michigan State and University of Illinois - that’s my alma mater - and the bet was, whoever lost had to use the name of the team mascot somewhere in a future issue of their magazine. I lost, and that’s why in the May-June 2005 issue of Farm Futures - if you read closely enough - you’ll find the word spartan somewhere in the magazine. But I got him back last fall. We bet on the World Series and I took Chicago. So if you're reading the most recent issue of The Furrow and you happen to come across a reference to the Chicago White Sox under Andy's byline, well, let's just say that was no accident. To his credit he wrote it in a way that made perfect sense to the reader.

Andy with the ag editor band "Quasimojo," at last summer's Agricultural Media Summit in Milwaukee. Son Owen loved to stand next to Andy when he played music.

Language was another of Andy’s loves. He was a gifted writer and he loved to stretch his writing skills. He also loved to rhyme. Once, when we were working in side by side offices at Prairie Farmer magazine, we decided we would only speak to each other in rhyme - all day. This is no simple task, especially if you’re in a hurry. We’d shout through the doorway, “I need a new headline, can you write it before deadline?” or, “It’s almost noon and just a hunch, but I’m getting hungry so let’s break for lunch.” Just silly things that made work fun, because that’s what Andy loved.

Andy also loved music. We shared a passion for rock and roll and blues and anything performed by Van Morrison. We had endless debates over the musical worthiness of just about every rock star who ever walked the planet. Some of the happiest times were playing and singing with Quasimojo, a band we put together with other ag editors. And he was so proud of his lifelong band mates in the Pinheads, from his college days.

Once, on a golf trip with Rich and Chris, we spent hours deep in discussion over Van Morrison's greatest hits. We ended up putting together a compilation of the songs we liked most, and called it "Vanthology." One of those songs, In the garden, is on Andy’s Top 15 "songs that matter," a compilation of songs he liked most that we are sharing with everyone today at the funeral. We talked often about the meaning of that song, which tells a story of a lost soul, filled with sorrow and great sadness, followed by joy, rapture and redemption. Another Van song we loved is, Whenever God shines his light on me. Perhaps today we can take some comfort in the words of the first verse:

When I look up, in the darkest night
I know everything's gonna be alright
In deep confusion, in great despair
When I reach out for him, he is there
When I am lonely, as I can be
I know that God shines, his light on me

I really believe that God is shining his light on Andy today.

Andy had a lot of special gifts. For one thing, he was an entertainer. He was our Elvis. That boy could make us all laugh until we cried. He could do a mean Mick Jagger. His cockney accent was 'spot on.' The banter was electric. But he certainly wasn’t just rock and roll and good times. He had a tender side. He was a poetic champion. He wrote funny lyrics, and he wrote beautiful lyrics for weddings and his children. He would often become philosophical late at night when the party began to wane.

Andy had a gift for making others feel good about themselves. He knew how to build people up, and he did it effortlessly. When Andy was in a room, people gravitated to him because of the lively conversation, his self-deprecating wit, or one of his irreverent, spontaneous comic bits. If you had just met Andy, soon enough you found yourself laughing at his stories and making a new friend.

But to me, Andy’s greatest gift was this: He made ‘nice’ cool. He was cool because he was always true to himself. He was both James Dean and Jimmy Stewart, rolled into one tall skinny guy.

He never took himself too seriously, and maybe that was the greatest lesson I learned from our friendship. He used to say he was just a ‘go along, get along’ guy, and he really was. Sometimes we would look at each other before speaking at a meeting or playing a song for a crowd and he'd say, "Make it nice for the people." And that’s what he did.

Andy (right) rocking out with blog author, Mike Wilson, for a gathering of agricultural journalists in The Netherlands in 2003.

So now, our Elvis has left the building. The love we have for Andy can’t change how much we will miss him. There were more songs to sing, more stories to tell. All of you have your Andy stories, and I hope you will tell them often. Because when you do, they will certainly make you and everyone else who hears them laugh and smile.

I know Andy is in a better place right now. Despite this empty feeling we all share, he is somewhere right now, making the music in heaven even sweeter. If he were with us today he would certainly say something to lighten the mood and ask us to get on with the business of living because after all, that is what he did best. I have no doubt we will all see Andy again when we make the same journey.

Andy’s star blazed brightly for his short time on this earth, but it cast a powerful, amazing light that lifted us all. We were so lucky to have him in our lives.

And as it turns out, the measure of a man’s life has nothing to do with the number of his days, or the dollars in his bank account. It’s about the fullness with which it is lived. Andy packed more living into his 43 years than any of us will in a lifetime. Today we honor our friend, husband, brother, son, father, and band mate, with the memory of how he lived every day.

That is how he would want to be remembered, and remember him we will.

Click on the comment link to share your ideas on this topic. When the comment screen comes up select "other" or "anonymous" to post a comment. The "other" choice will ask for a name and Web site, but that is optional. We look forward to hearing from you.

Inside the mind of the European farmer

2006-02-17T12:41:00.000-06:00

In one of those delicious ironies, the United States and Europe continue to square off against each other in a war of words of future trade decisions. At the same time, farmers on both sides share so much in common. European farmers are just as concerned about rising input costs and profitability. They are just as passionated in defending their own country's trade proposals in WTO. And they are just as concerned about how to shift away from government payments to more market-oriented agriculture.

Tim Bennett, British farmer: "I don’t think it’s about protectionism in Europe."

I talked with English farmer Tim Bennett while in Hong Kong last December for the WTO negotiations. The cattle farmer from South Wales is president of the National Farmers Union in Great Britain and vice president of COPA, the umbrella organization for European farm organizations.

After listening to his views, I could have imagined some of the exact same quotes from an American farm leader. See what you think:

Farm Futures: The United States and European Union seem to be playing the blame game again. What would you say to the Americans if you were doing the negotiating?
Bennett: In the European Union, we’ve reformed the CAP (Common Agricultural Policy) in quite a radical way, which I don’t really think the world has appreciated. CAP used to be well over half of the total EU budget. It’s just over 40% at the present time and will be 30% by 2012.

Effectively 90% of our CAP budget has gone into the green box (non trade distorting subsidies). It’s a massive change if you look at the CAP going back to the early 1990s. In the United Kingdom, we have no production support left at all from 1 Jan. 2005. Any support we get is decoupled. As long as you look after your land a certain way, the water resources, traceability and animal welfare – a whole list of things you have to comply with – then you will get a decoupled payment (from the government).

The payment in the UK is 90% of historic income provided you’ve endeared to the rules, then you got a 10% acreage payment. By 2012 it will all be based on an acreage payment, so that has brought more acres into the programs - so now it’s about land management, not about food production support. After 2013 we don’t know, but we’ll be under pressure. Agriculture in the EU will have a static budget – it’s been agreed to until 2012. So it’s possible we’ll have a cut in payments across Europe if new countries are coming into the EU.

The frustration we have is that the European offer, by historical standards, is quite sensational. We’ve agreed to let less developed countries in duty free; we’ve put 90% of our payments in the green box; we’ve offered to eliminate export subsidies as long as others do the same, and quite a big offer on market access through lower tariffs. So we feel others should now try to match that.

FF: What are the main concerns of European farmers these days?
Bennett: You’ve already got pressure on prices because of market access, duty free access to less developed countries as of 2009, no matter what the WTO says. So the pressure is on price.

The real issue back in Europe is that retailers, including Wal-mart, are very dominant and it’s almost impossible to get cost increases through the supply chain. We’ve lived in a deflationary environment for food prices for the last 15 years. Consumers get a good deal but retailers are getting a bigger percentage of the supply chain. In fresh milk, the retailer share has probably increased from 15% to 40% in the last five years, and that’s because they are very powerful and can beat down suppliers.

In Europe the regulators are very keen to add costs so they have very strict regulations on food safety, traceability and the environment. That adds quite a lot of cost to our production methods and of course, our labor costs are very high. So we tell regulators, you want to free up trade, that’s fair enough, but if you want that you have to reduce the costs on us. Either that, or the WTO has to recognize that, but it doesn’t.

FF: What about the complaint that the EU needs to provide better market access? We heard that all week at WTO.
Bennett: I don’t think it’s about protectionism in Europe. It’s about whatever the trading conditions are. Our consumers do expect our products to be produced to the standards they are used to. That means imported food stuffs are brought up to the standards that we’re legally obliged to produce at.

For example in New Zealand, they were complaining about costs growing in lamb production, because they supply a chilled lamb product into the UK market. The customers have said it has to be up to a high standard. It’s still a good market for them. There are examples around the world where people have created a market and their standards are comparable to the Europeans.

FF: Are European consumers different than in other parts of the world?
Bennett: We’ve had a lot of genuine food scares, and some that are media hype. Consumers are very sensitive. If you get a scare over food brought in or not produced to a standard, that affects consumption of the domestic product as well, so we farmers have an interest in making sure consumers are very content. It’s very important to us.

European farmers know that the only way we’re going to survive is to actually produce exactly what the consumer wants and to be sensitive to the consumer needs. If we don’t, we won’t have a market. In other parts of the world I’ve heard farmers say we produce it and it doesn’t matter what the consumers say. That’s not possible in Europe.

BSE in 1996 was the start of consumer sensitivity. Foot and mouth was not a food safety or a consumer issue, but it did have an impact on the consumer - the fact that we lost so many animals and so many had to be slaughtered to get rid of the disease. Our consumers take an interest in what we do.

FF: Are European consumers any more at ease about food safety now compared to 10 years ago?
Bennett: Food safety was probably the number one concern 10 years ago. I think we’ve been successful in reassuring the consumer since then, because that concern is not at the top any more. They feel comfortable with the procedures we do, and that’s a real success story. But you can never become complacent about it.

Consumers demand safe, traceable food. But there’s another agenda that’s growing – the nutrition and obesity agenda as the population becomes more overweight. I think there will be a swing back away from processed foods toward natural foods for some of the population. The governments, as well as consumers, will look to reduce sugar and salt in diets.

The challenge for us once again will be to produce the right product for that new market that’s emerging over the next few years. I see it as a good opportunity.

FF: What’s ahead for European agriculture?
Bennett: Farmers are very uncertain about the future. We’ve got a lot of change because of the CAP, and concern about the impact of the WTO agreement. And there’s real financial pressure with incomes as tight as they’ve been in many years. This year costs have gone up - the price of gas has gone up four times this year.

However, we’ve got some great success stories in agriculture. It’s tough, but people are developing good businesses. We’ve got world class performers in all our sectors. We’ve got new markets emerging to help the family farmers as well. The market for local foods is growing very quickly. There’s evidence consumers want choice outside of the retail empires. It’s a small market but it’s growing very quickly, so if it continues to grow in ten years time it will be very large for us.

Because of the healthy eating agenda, the government procurement programs for schools and hospitals are targeting and demanding fresh food now rather than over processed food, so that’s an opportunity if you’re close to the supply point. If you live in that area you can get your supply in.

It’s tough out there, and we’re losing farmers, about 4-5% a year through retirements or consolidation. We’re getting larger farms and smaller part time farms. Medium sized people are being squeezed.

Great Britain probably already has the best farm structure compared to the rest of Europe. France is losing farms faster than the UK. They have a policy of keeping as many people on the land as possible, but it’s obviously failing.

British farmers envy the fact that the French consumer prefers to buy French products. We haven’t got that loyalty. Some consumers buy British because they want British, but most buy value, so you have to supply the right product at the right price.

FF: What kinds of skills will the European farmer need to survive?
Bennett: We’re very short on labor, for example, in poultry and meat processing. A large percent of that labor will be imported. Even on a dairy farm now, if the farm employs labor, they’re increasingly using foreign labor. Labor availability is a big issue.

The marketplace will become more and more important and the direct payments will become a smaller part of the income. We have a long way to go. Now, some sectors have never had support, they’ve had to innovate and develop the skills to survive; the other sectors such as dairy, beef, cereals (feed grains) have to go through that skill transition and it’s quite a change for them.

FF: What is the European attitude toward the American WTO proposals?
Bennett: We do feel the U.S. counter cyclical payments are market distorting. It encourages production in commodities because you always know you have a backstop on payment. On the American side, countercyclical payments and a genuine parallel deal on export subsidies is critical. We’ll be lobbying the European commission to not accept a deal until others change. But it’s not just the Americans. The wheat board in Canada is another example. You have to take out all the distortions.

FF: What do European farmers really think about free trade?
Bennett: Free trade on the wrong terms is very worrying for our farmers. It’s certainly going to be better to have a sensible WTO arrangement with a decent set of trade rules. That’s better than to go into the next few years with lots of bilateral, regional free trade arrangements that are frankly not subject to international trade rules. Frankly that will cause more distortion and probably make it quite difficult.

If this round fails, what you will probably see is literally hundreds of deals around the world. It will make the next round nearly impossible.

If WTO fails now will it ever regain credibility?

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Alexander Graham Bell would be amazed

2006-02-10T14:41:00.000-06:00

What's the most amazing new gadget to come to the farm these days? GPS? Autosteer?

How about the latest generation of wireless e-mail gadgets and global smartphones?

"I've been with cell phones since day one, but this is a whole new world," says Dave Weber, a grain and cattle farmer near Geneseo, Ill.

Weber's 'new world' is a tiny but powerful communications tool he got for Christmas: A loaded i930 Motorola Nextel global phone that he figures will come in very handy during spring planting.

"A lot of good friends told me they liked it for the walkie-talkie (push-to-talk) feature," he says. "When I'm working in the field it’s a good option to be able to press a button and have the phone flip open."

His phone is equipped with Windows CE - Microsoft's operating platform for handheld devices - so he can read his Wall Street Journal online subscription and receive e-mail briefings on his phone. "With windows the phone calls are clearer, and the keypad works faster than my old model," he says. "Plus, as soon as you put it in the cradle to recharge, it automatically synchs with your home computer. When you have an appointment coming up it will beep to remind you."

Weber also has DTN mobile, a service that provides market information over his phone. "You also get night quotes, which are more and more important," he adds. His phone is equipped with GPS and My-Cast, "one of the best weather programs I've found."

"Even when you're in a place where one of you doesn't have time to stop and talk, you can always read messages quicker," says Ken McCauley, with his Blackberry model 7100 device (suggested retail: $300).

The biggest drawback, says Weber, is that his phone doesn't have Bluetooth, a wireless earpiece feature. "I thought that would be really good if you were in your tractor, but I don't know if I need it because Nextel has such a good speaker phone," he says.

Weber considered buying a model 7100 Blackberry, another hand-held device that combines e-mail, web-browsing and cellular phone technology. "But the biggest reason I didn't get it was that the data package was $45 a month, plus your phone package," he says. "With this Motorola I-930 through Nextel, you get unlimited data for $10 a month."

Faster e-mail
For Ken McCauley, who farms 4,000 acres of corn and soybeans with son Brad and wife Mary near White Cloud, Kansas, the Blackberry works just fine.

"It's vastly improved over my old cell phone," he says. "We don't have very good cell service because the terrain here is so hilly, but it doesn't take near the signal to have the Blackberry receive messages. I've had messages sent to both my home computer and Blackberry and I will get those messages on Blackberry probably an hour before they appear on my home computer."

McCauley says in addition to monthly cell phone charges, it costs him about $25 more per month for the data package that enables e-mails and web access. "Rather than getting on the web, I'd like to be able to get marketing information on e-mail every half hour," he says. "That would be a lot better for me because e-mails come quick and that browser takes awhile."

As president-elect for the National Corn Growers Association (NCGA), McCauley can get important (yet silent) text messages from his son back on the farm while he's attending meetings. "I can get right back to him without having to leave a meeting," he says. "That's a big deal. A lot of people don't realize that if they have text messaging on their phone they never have to actually answer the phone to get the message."

McCauley synchs his Blackberry, which is Bluetooth enabled, to his home PC to use as a calendar, appointment and address book. He also hopes to be able to use it with web cams placed around his farm so he can literally see what is going on in the shop or at the grain dryer when he's away on NCGA business.

About 3 million Blackberry users in the United States are waiting anxiously for the outcome of a court battle involving RIM, makers of the Blackberry, and another company over patent infringement. Worst case scenario: RIM may have to shut down or alter its Blackberry e-mail service.)

Another well-known PDA/phone device is the Treo, made by Palm, Inc. The company's newest model, the Treo 700w, is 'Bluetooth enabled' and provides e-mail, web and organizing tools that easily rival the Blackberry. It also features 'touch and tap' technology - using a stylus, you can touch numbers and other icons on the screen to move more quickly through applications. Treo's 'smartphone' technology allows you to easily navigate multiple conversations at one time. Or, you can touch someone's on-screen photo and the phone will dial the number.

Alexander Graham Bell would be smiling if he could see what his simple invention has become. Click on the comment link to share your ideas on this topic. When the comment screen comes up select "other" or "anonymous" to post a comment. The "other" choice will ask for a name and Web site, but that is optional. We look forward to hearing from you.

Why care about farm exports?

2006-02-02T11:32:00.000-06:00

"We've really got a sales job to do in the countryside when it comes to trade," says Leon 'Len' Corzine, past president of the National Corn Growers Association. It's a crisp winter day and Len and I are swapping stories from our recent visit to Hong Kong for the WTO talks in his comfortable farm office near Assumption, Ill.

Trade is never far from Corzine's mind these days. As past President and now chairman of NCGA, Len was packing to attend NCGA's "Trade School," a first-ever two-day event held outside Chicago to help farmers learn about and appreciate trade. A second event is scheduled for March 30-31 at the Des Moines Marriott in Iowa.

"Long-term, we have to believe we can produce things the world marketplace will want," says Len Corzine, chairman and past president of the National Corn Growers Association.

Putting on a 'trade school' for farmers is a sign the farm orgs are worried their members aren't paying attention to this issue. Even with WTO talks making headlines, it seems farmers don't really see trade as important. Why? I have a theory: the ethanol craze is making trade seem irrelevant.

After all, the President, himself an oil patch veteran, trumpeted the virtues of ethanol to the nation in his State of the Union speech. The president of Ford Motor Co. talks enthusiastically about E85 vehicles in nationally televised commercials. Suddenly renewable fuel is 'in,' swept along by pricey imported fuel and our patriotic self-consciousness over oil dependency.

Two success stories
To be sure, ethanol growth is U.S. agriculture's greatest success story of this new century. As Mike Krueger points out in a recent issue of World Perspectives , the latest information indicates there are now approximately 94 ethanol plants in operation with another 30 or more under construction; it is impossible to know how many more are in the late planning stages. "Corn used for ethanol has risen from 600 million bushels just a few years ago to 1.6 billion bushels this marketing year and is quickly headed for two billion bushels a year," he says.

On the other side of the coin, there's… trade. Ho-hum. It is agriculture's other great success story, but it's a tough issue to get your head around. It's the MEGO phenomenon - My-Eyes-Glaze-Over - and it washes over people when trade comes up in conversation. It's a lonely subject, much like the ocean-going vessels carrying your grain to far away ports.

Why worry about those bullies in Brazil and Europe when we've got these fast-growing ethanol and biodiesel markets right here in our back yard?

Here's why: Take four quarters out of your pocket. Now, throw one out the pickup window. That's what happens to your income if trade goes away. And that's why it's particularly smart for folks like Corzine to keep focusing on trade, even now when it would be so easy to ride the ethanol bandwagon.

"Where would we be without trade?" he asks philosophically. "We'd have to have land retirement programs, and they hurt rural communities. We have hard evidence of that. It hurts Churches, schools, fire departments, businesses - the whole community is impacted by a 15% setaside.

"Domestic markets are not the cure-all, silver bullet," he adds. "We've got to help people realize that we cannot build walls, or we'll go back to setasides. If we do, India, China and other countries won't go hungry. That would just help Brazil and China grow their ag sectors faster and replace us."

Go ahead: love your ethanol plants. Bask in the glory of a job well done by corn grower organizations on both state and national levels. But remember trade. Please.

Those quarters add up.

Click on the comment link to share your ideas on this topic. When the comment screen comes up select "other" or "anonymous" to post a comment. The "other" choice will ask for a name and Web site, but that is optional. We look forward to hearing from you.

Pumped up land prices hurt future farmers

2006-01-27T12:39:00.000-06:00

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Who will farm the land in 20 years? When you think of all the obstacles they face, it's a wonder beginning farmers are out there, gutting it out, waiting for their chance.

But Ron Regenwether is gutting it out. The 35-year-old crop and cattle farmer near Spragueville, Iowa is hanging in there like so many others of his generation, despite land prices that make it nearly impossible to get a financial foothold in farming.

Regenwether is taking over his retired father's farm, and already has mortgages on two farms. Unlike so many farmers in their 30s, he does not hold an off-farm job. His wife has a good job in town with health care benefits for both of them.

Still, farmers like Regenwether feel squeezed as land prices spiral higher, fueled by generous government program payments, outside speculators and 1031 exchanges. The 1031 allows anyone to exchange like-kind property within 180 days of a sale to avoid capital gains taxes.

"I have a farm just kitty corner from me that sold in a 1031 exchange a couple years ago for $300 to $400 an acre more than it was worth," he says. "The 1031 exchange is killing us young guys."

Now non-farm investors are getting in on the act and driving up prices as well.

"I'm biased," Regenwether admits. "I don't want these guys out here. Outside investors are playing with these farms like they are stocks. Let me tell you, my farm is not a stock.

"It really scares me when I hear these outside investors wanting to invest in land. If I had their cash, I don't know if I would be putting it in this ground. I don't know if it correlates to tech stocks in the late 90s, but it's getting closer."

A Certificate of Deposit at a bank might provide a more attractive and stable return, he suggests. Regenwether says he can get a 3.29% CD and not worry if farm subsidies get phased down in a WTO-driven farm policy shift next year.

"None of us know what's going to happen with the new farm bill, but we all agree there's going to be less money all around."

Farm program time bomb
Anyone - young farmers, investors, your grandmother - who is thinking about investing in farmland should first bone up on farm programs. They should know that the federal budget deficit, coupled with trade-compliance measures coming down from the World Trade Organization could make farmland much less attractive in the next two years.

Not long ago Regenwether saw Mike Duffy, Iowa State University economist, give a presentation at his local bank. Duffy showed a map of Iowa, with each county broken down by percent land value based on farm subsidies. In Regenwether's county it's 42%; some of the counties were as high as 78%.

Do government payments impact farmland values? A study by Kansas State University in 2004 shows a wide range of value shifts directly related to farm programs. For example, the study shows 2004 land values in Iowa overall would have been 22% lower if government payments were eliminated. That figure jumps to 45% in Oklahoma and 36% in Kansas.

Regenwether is also concerned about Conservation Reserve Program land. "The government's already stated that two-thirds of the ground that's in the 10-year CRP will not be renewed for another 10 years," he says. "There's going to be a lot of land right there coming back into production. I don't think people understand the amount of ground that's going to come into production with CRP land coming out."

People wonder who will farm the land in 20 years. It's the people who have foresight to look ahead and manage their business for the future.

"Of course these guys are a thorn in my side, butthe day will come when they will go away. I'm in it for the long haul and I'm diversified with cattle," he says. "I have to be bullish if I'm going to stay in it. I see ethanol and biodiesel as something that could possibly help us when we start missing income from government programs.

"There's going to be a lot more corn and soybeans coming on to the market and we have to do something with it," he adds. "We're not going to be able to export all of it. I think we will need more ethanol production just to keep up with increases in yields and acreage increases."

Who will farm the land in 20 years? People like Ron Regenwether, that's who.

Do you know your magic number?

2006-01-20T14:01:00.000-06:00

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Planter: inspected, check. Seed: ordered, check. Look to see if the neighbor's in the fields? Check.

Yeah, you've been cooped up all winter. You've got more cabin fever than a flight attendant on a 16-hour leg to Singapore. Like the proverbial political candidate, you are tanned, rested and ready to go.

But before you jump on the tractor let me suggest one more management exercise - something that could save the whole year. Are you ready for this? Get out the books (not again!), sharpen your pencil, fire up the calculator and - are you ready? - nail… down… those… production costs. Find the magic number. Memorize it.

Did I just hear all the air go out of the machinery shed? That's no fun, you say. Besides, you've already spent as much time as you can stand with bookwork. You don't figure on sitting at a desk until at least November.

Sorry, this one is important. With cash rents, fertilizer and fuel at all-time highs, knowing your production costs can be a beacon in what might become a frightful growing season.

It sounds like a simple exercise. Yet, only one fourth of commercial farmers in Iowa can actually tell you what their production costs are, claims Iowa State Ag Economist Mike Duffy.

"This is so important with the recent increases in fuel and fertilizer," he says. "We never used to think about energy before - it was there and it was cheap. After we saw what happened with the hurricanes and price rises, it's going to be in everybody's best interest to watch their costs this year.

"I'm not sure farmers do have a good appreciation for their costs," Duffy continues. "They do a good job on year-end matters, but they could do a better job on costs by individual fields, or by crops."

Fiscal ignorance
A lot of farmers won't admit it, but they get by on a kind of fiscal ignorance when it comes to knowing how much money they spend. Some figure if the bills are getting paid, it must have been a profitable year. Most have a good idea what they spend, but couldn't nail it down to an exact figure.

That won't cut it in today's business climate. This year could be the one that separates the survivors from the has-beens.

"Without knowing your costs, you'll never truly know your business," says Dale Nordquist, Farm Management economist at University of Minnesota. "Now more than ever you need to know the impact of an increase in fertilizer costs. If you know where you've been historically in your cost of production, then it's pretty easy to figure out what a $20 per acre increase is going to do to the bottom line. You need that information to react to opportunities and changes."

Nowhere is that more important than marketing. Your breakeven cost is the starting point to begin locking in sales.

"In marketing, you've got to set goals on where you start pricing your crop," Nordquist says. "You need to know at what point you're making money."

Often you hear of farmers who were afraid to lock in a price before harvest. "It's always tough to pull the trigger, but it's tougher if you have uncertainty about where your profit margins are," Nordquist says.

Production costs can be used to benchmark your operation - compare your costs vs. others. But it's more powerful for a producer to use those records to compare costs on a year to year basis.

Breaking down your costs can help determine which practices actually help the bottom line. Your calculations may lead you to conclude there's no way you can continue certain activities, like recreational tillage. Or, let's say your fuel bill per acre is 20% higher this year. Is it simply higher fuel price or did adding that 80-acre field 2 miles down the road contribute? Can you modify field operations to combat that increase?

Last year's record yields may have saved the farm, but don't use them to figure this year's costs. For one thing, bankers won't let you get away with that. Second, you'll lull yourself into poor management decisions. Use 5-year average yields to calculate costs per bushel.

Based on Iowa Farm Business Association records, the top third most profitable farms made money in every year except 1981. "What that says is, every year someone is making money," says Duffy. "So it's important to know what you're costs are, where you're spending money and what kind of return you're getting - and that's where your better managers come in."

And you'll sleep better at night knowing exactly what you need to do to beat the magic number.

U.S. subsidies at risk

2006-01-13T04:30:00.000-06:00

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During WTO talks in Hong Kong three weeks ago, it was easy to cheer on the U.S. position as it pushed for bold and dramatic changes in world farm subsidies in exchange for greater market access in countries where high tariffs keep out cheaper farm goods. The U.S. has proposed cutting its farm subsidy programs deeply in exchange for deep cuts in tariffs, thus opening up markets worldwide and allowing farmers to get more income from the marketplace.

As part of its offer on lowering tariffs, the United States has asked for much less protection of politically sensitive commodities than the European Union. The EU wants to preserve tariffs on roughly 8 percent of its products compared to the U.S. proposal of 1 percent. Last week, both USDA Secretary Mike Johanns and U.S. ag trade negotiator Richard Crowder called on the EU to do better. The groups are locking horns again later this month and on into spring, trying to find some compromise by the end of the year.

In Hong Kong, it appeared the EU was squirming under relentless pressure. But time and distance have changed my perspective. Judging from the opening comments at GreenWeek, Europe's international food and agriculture exhibition held here in Berlin, Germany, I'm nearly certain of two things: First, the EU will not budge on its trade stance, and two, the U.S. position is extremely weak.

More export opportunities
Without more opportunity to export farm products, the Bush administration says it would not agree to the reduction in government supports that would be part of an agriculture pact, along with elimination of export subsidies.

That only makes sense. A FAPRI analysis of the U.S. position shows that U.S. farm income would be more at risk, as domestic subsidies fade out but riskier world markets come into play.

The problem now is, Europe has already reformed its Common Agricultural Policy (CAP), shifting in 2003 to decoupled payments as a way to compensate its farmers. That means those subsidies are no longer 'trade distorting' in the eyes of WTO. As of January 1, the five EU countries that had not yet done so have implemented the CAP 2003 reforms, notes Mariann Fisher Boel, EU Agriculture commissioner.

"By the time the reforms are up and running, some 90% of direct payments to farmers will be decoupled from production," she told a group of reporters at GreenWeek. "This is a major achievement. It will support farmers while encouraging them to react to market signals. It also helps us in the current round of world trade talks."

On the other hand, the U.S., with its 2002 Farm Bill, moved itself perhaps unwittingly into a vulnerable position by bringing countercyclical payments into play. These kinds of subsidies will likely be found to be trade distorting in the eyes of WTO. You can expect to see countries file suit against the U.S., and if so, they will very likely win.

So even as Mike Johanns and Richard Crowder call for the EU to "improve their offer," it favors the EU to do nothing. Soon enough, the U.S. and its counter-cyclical payments will be in the hot seat. And we risk losing those farm programs and getting nothing in return for them.

The EU sees its offer to cut tariffs by half as "reasonable," says Boel. And in fact the EU did agree to end export subsidies by 2013, one of the few decisions reached in Hong Kong. But the Europeans say market access is hindered by export subsidies, such as our cotton programs. "Trade-distorting domestic support…also limits access to markets," says Boel. "With this in mind, we expect our trade partners to commit themselves to meaningful disciplines in these areas, as we are ready to do."

When you hear the Europeans say "as we are ready to do" it usually means they already have the programs in place. So, with their reformed CAP and decoupled payments, it's easy for Boel to make those statements. Export subsidies for both the EU and the U.S. have been dropping anyway; most of the world wanted an end date of 2010 for export subsidies, so the EU probably considered the final agreement of 2013 a victory.

Back door protectionism
The EU shouldn't worry much about dropping its tariffs anyway. Both the EU and the U.S. find ways to keep products out through other channels, usually under the guise of "quality standards" or "consumer safety concerns."

Even so, I was amazed this week to talk to European journalists who told me Brazil was flooding Europe with cheap beef, despite the high tariffs designed to keep it away. I was surprised there was no food quality or safety issue that the Europeans could use to keep Brazilian beef out. After all, they're still using the old 'growth hormone' issue to keep U.S. beef out.

At GreenWeek, Fisher Boel talked about the EU position on labeling food products entering the EU. The EU has insisted throughout these trade talks on country of origin labeling, or 'geographical indications (GIs).'

"Some people criticize GIs and other kinds of regulated labeling as protectionism introduced through the back door," she says. "We see them as a lubricant for rational trade. Better-informed consumers send clearer market signals when they make their purchases."

I have to agree with her on this one. If the U.S. opens its markets along with the Europeans, U.S. consumers need to know where food originates, especially with our own unique safety concerns (think: 9/11). But when does such labeling become excessive? I was surprised at her answer.

"We should avoid allowing high standards to become obstacles to trade, where possible," says Fisher Boel. "On the other hand, we have those standards in the EU because our consumers have asked for them, very clearly.

"We can't fully resolve this tension between consumer protection and free trade. But we must make sure that we keep it in view, and always ask ourselves carefully whether a given new standard or label is really necessary."

Such comments make me think the EU is starting to warm up to allowing more products in through lower tariffs. We'll see.

Next week: Reasons why globalization through free trade may fail.

Show time with Max and Orion

2006-01-06T14:45:00.000-06:00

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"He's got a face for radio!"

That's an old joke among us media folks, a comment usually heard over beer and gossip among farm broadcasters and us print types. Guys like me, who have toiled for years behind a typewriter or computer, sometimes wonder what it's like to work in TV or radio, especially when we get a chance to peek behind that curtain. We got that chance this week when my colleagues and I visited the set of This Week in Agribusiness.

Max Armstrong and Orion Samuelson, two of the most recognized faces and voices in farm broadcasting, launched this new venture in late November, and the show is now seen in 29 million homes over the RFD-TV network.

I met my colleagues Willie Vogt, Farm Progress Co. Editorial Director, and Tom Bechman, Editor of Indiana Prairie Farmer, at the AgBiz studios in Shaumburg, Ill., just outside Chicago. Max was in the studio doing the news. He and Orion still do 17 news reports on WGN Radio from 5 a.m. to 11 p.m. each day.

On the set of "This Week in Agribusiness:" from left, show host Max Armstrong, with Farm Progress editors Tom Bechman, Mike Wilson and Willie Vogt. The show airs on RFD-TV on Saturday at 7 a.m., Saturday afternoon at 5 p.m., Sunday night at 7 p.m. and Monday mornings at 8 a.m., Central Standard Time.

Max is an old friend to most of us at Farm Progress, instantly putting you at ease when you meet him even if you haven't seen each other in ages. He's like that with everyone he meets. That easy-going voice you hear on radio, or the easy-going personality you see on television? That's exactly who he is in real life, too.

A producer checks Max Armstrong's wireless microphone before airtime.

He and Tom began to swap "Hoosier stories," since both hail from Indiana and have probably been on every farm in that state over the past three decades. Orion, who is in his 46th year of broadcasting from Chicago, has earned every accolade you can imagine in the broadcasting business. He was on vacation this week.

Green room jitters
Max took the three of us into the 'green room' (the waiting area for guests) to talk about the show and questions he would ask. Max wanted to break the show into five segments: input costs, the Farm Bill, weather and markets, energy opportunities, and a short wrap-up.

These were topics we could sink our teeth into, as all of us had been writing about these hot button issues over the last few months. But actually getting to talk about them on the show? First it was off to the make-up room to get our noses powdered. This experience gave each of us ample opportunity to make wisecracks at each others' expense. "Can you do anything about my hair?" I asked the nice lady with the makeup kit. No luck.

Next we moved to the set, where a host of young producers began clipping wireless microphones to our ties and burying little black boxes in our suit coat pockets. All this time Max is making small talk, trying to keep us loose. This was no problem for Willie. Even though he's worked in print journalism for over 20 years, he has a knack for soundbites, and a radio voice to match it. Tom and I are more old school, so it was good to let Max show us how this process worked.

After what seemed like ages of sound checks, we were finally ready to do our first segment. But by then Max had to go read the news for WGN back in the studio.

Max Armstrong takes time away from the show to give the news for WGN radio listeners.

"Five years ago I built a studio in my home just so I could do these from there if needed," he says. He and Orion gather all the news from wire reports and check headlines all day as breaking news comes through.

Finally, we were able to do the first segment - Max peppering us with questions, each of us throwing in our two cents. And this first five-minute segment flies by. Then, a meek voice from behind a camera says there was a technical problem, and we'll have to do the whole thing over. Eventually we get through it again, and we're off to the next topic. Between segments I ask Max about the new show.

"We're trying to deal with an update of agriculture issues every week - we're going to be doing a lot of traveling and visiting with a lot of producers," he says. "We like the idea of doing a show people can see." The show airs four times a weekend on RFD-TV, which most people can get through DirectTV, Dish Network and some MediaCom cable operators across rural America.

The great thing is, you can see it during daylight hours - even prime time. That's a challenge for many farm-oriented television shows. This show airs on Saturday at 7 a.m., Saturday afternoons at 5 p.m., Sunday nights at 7 p.m. and Monday mornings at 8 a.m., all Central Standard Time.

Producer Ryan Ruh checks a camera angle during the recording for "This Week in Agribusiness."

The new show is a partnership Orion and Max formed with High Yield Productions, the folks who bring you those videos of antique and classic tractors - a topic near and dear to Max Armstrong's heart.

After the initial glitch, we spin through the other topics with no troubles, trying to make precise comments about important subjects in five minutes or less. For a print journalist, this is frustrating. We know we're leaving something out. We work in a format where we believe every reader will read every bit of prose we spin out on the page. It's a bit of a fantasy, I know, but it keeps us going.

After some quick good byes and thank yous, Max is off to do news again, and we're headed back to our lives on the printed page. Life in front of a camera? A place I'd like to visit, but I don't think I could live there. I've got a face for…farm magazines.

Cloudy future for trade talks

2005-12-30T11:12:00.000-06:00

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With smaller issues settled, market access remains the one sticking point in the WTO talks. There is little optimism that this issue can be resolved, although anything can happen between now and June 2007, the 'drop dead' deadline for the round.

In the short-run U.S. farmers may be better off without a WTO agreement. But if talks fall apart altogether the long-term outlook is less certain. Protectionist tariffs, trade-distorting subsidies and a confusing maze of less-efficient, bilateral trade deals won’t bode well for richer countries. The U.S. faces more and more challenges to its current farm programs.

"We're going to lose marketing loans and counter-cyclical payments," predicts Robert Thompson, noted University of Illinois ag policy expert. "We can give them up in negotiations and get something for them, or we can let the round fail, lose them in litigation and get nothing for them."

Short-term, Leon Corzine, past president of the National Corn Growers Association, says the WTO issue must be resolved before the next farm bill is written. "Otherwise, we're shooting in the dark," he notes. "We have always said we want to get our income from the marketplace and not the government," he adds. "It's not there yet. We still have to have a safety net, with agriculture working at the whims of weather and foreign governments. And younger producers are more highly leveraged, so they need that safety net."

It is very likely that any multilateral agreement made in WTO will not be great for U.S. farmers. But no agreement will probably be worse. Brazil has already brought a case against U.S. cotton programs, and won. The same formula may be used by other countries. If we lose programs like counter-cyclical payments in litigation, we gain nothing. Negotiation is the greater of two evils.

Globalization is all about helping countries benefit from their comparative advantage – what they grow or produce better than farmers in other countries. Like it or not, globalization is linking our economy with others in the world, including protesting farmers in South Korea. How the U.S. comes out in WTO will have a big impact on who else is protesting at the next WTO meeting.

What farmers say about the WTO

2005-12-22T13:35:00.000-06:00

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For a video view of the Hong Kong event, you can check out video provided by Australia-based Rural Press Reporter Michael Thomson. You can look at that video by clicking HERE.

Top negotiators took the spotlight last week during the WTO meeting in Hong Kong, grinding through sleepless nights to come up with an agreement that was just enough to keep the talks going through next year.

Throughout the week the U.S. was criticized for putting forward a proposal that was too ambitious in terms of market access (lowering protectionist tariffs) and the EU was criticized for not going far enough with its own proposal. The U.S. offer would force farmers to take less money in subsidies in exchange for better access to markets, particularly in Europe. The Europeans believe they have already done enough, after reforming their subsidy programs to decouple payments from production.

The closed-door meetings did produce a last minute compromise to end ag export subsidies by 2013. Members now face intense pressure in the new year to complete "full modalities" in agriculture and non-agricultural market access by the new deadline they have set themselves - April 30, 2006.

The U.S. may have had to sacrifice cotton for the sake of future gains elsewhere. For cotton, elimination is accelerated to the end of 2006 with cotton exports from least-developed countries allowed into developed countries without duty or quotas - eventually.

I talked to several farmers at the Hong Kong meeting. Sometimes as Americans we forget there's a whole lot of folks who have a horse in this race. See if you can tell where they hail from by the tone of their comments:

--Peter Corish, farmer, President of National Farmers Federation in Australia.

"Look at the example of Australia and New Zealand in regard to our (unilateral internal) reform. Look at the productive capacity of key ag industries as a result of those changes. I would strongly say to our European farmer colleagues, don't be frightened of trade reform. While there is some pain involved, the benefits of a free and open market trading situation leads to sustainable, more competitive agriculture industries longer term. In a competitive environment, those that are efficient have a much better chance of not only surviving, but prospering."

Listen to more comments from Corish by clicking HERE.

--Tim Bennett, farmer, President of National Farmers Union, Great Britain

"We feel the Europeans have made a very bold offer. I know that’s not seen that way by the rest of the world, but we would hope that others would reciprocate. In developing countries they can’t expect agriculture access if they don’t drop their restrictions on services and technology.

"The frustration we have is that the European offer, by historical standards, is quite sensational. We’ve agreed to let less developed countries in duty free; we’ve put 90% of our payments in the green box (non trade distorting); we’ve offered to eliminate export subsidies as long as others do the same; and made quite a big offer on market access through lower tariffs. So we feel others should now try to match that.

"Why should we give up our export subsidies if the U.S. won’t give up their distortions on export credits and the food aid programs and the counter cyclical payments?"

--Bob Stallman, farmer, President of American Farm Bureau Federation

"Our whole goal in WTO is to make sure market access benefits from the European Union were enough to offset domestic cuts (in the U.S). We have to have equivalency in terms of cuts in domestic (U.S.) support and gains in market access elsewhere. Why would the U.S. agricultural industry support any agreement that doesn't bring positive benefits to the industry?

"The EU spin strategy is to focus on anything but market access. We expected the EU to reject our proposal - it didn't surprise me. If you look at their agricultural structure, the only way they can keep agriculture viable there is to keep market access closed. My hope was that the EU could gain measures elsewhere enough to be more ambitious in market access for agriculture."

--Rudolf Schwarzböck, Austrian farmer, President of COPA, the umbrella organization for European farmers

"The European Union has put forward a substantial offer on the table in the WTO: a 70% cut in domestic support, a cut in tariffs of up to 60% with an average cut of 46% and the complete elimination of export subsidies.

"For European farmers this offer already goes much too far. They have been through substantial reforms of their agricultural policy over the past decade, suffering cuts in prices and production in the process, in order to meet trading partner’s demands in the WTO.

"We think the U.S. offer is a sham because it has no support in the Congress and the Senate. We have heard the Farm Bill will be prolonged until 2011 and that the position of the U.S. government is that this (U.S. trade proposal) will not be adopted."

--Sparky Weilnau, farmer, Milan, Ohio

"It's difficult to tell (U.S.) farmers they should give up their cash from subsidies in exchange for better market access - a benefit that is at most, a promise, and in reality, just a potential benefit."

WTO: Sound and fury, little else

2005-12-16T11:11:00.000-06:00

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This will be my last report to you from Hong Kong. After five days of briefings, press conferences, interviews, sleep deprivation and spicy Thai satay, I'm ready to come home.

Travel halfway across the world and it's easy to lose track of time. Suddenly I realize, it's a week before Christmas. I look out the window of the sparsely-filled hotel dining room where I'm writing this, and I see massive 40-story skyscrapers decked out top to bottom with glittering Holiday lights. There's some cheesy elevator music playing and I think, this could just as easily be Chicago.

All around Hong Kong you see the positive impact of globalization: bustling, clean streets, magnificent public transporation, a thriving economy, multicultural, well-educated people. This shining jewel of free trade, where hundreds of multinational companies call home, is a city on the move.

Unfortunately that was not the case with the WTO this week. The United States came to this crucial ministerial meeting armed with an ambitious proposal to make deep cuts in protectionist trade barriers worldwide. That proposal never came close to passage; The European Union made sure of that. Watching the EU and U.S. bicker this week was like watching your kid brother and sister go at it. Amusing on one hand and just a little disconcerting on the other.

While WTO negotiators got nowhere inside Hong Kong's massive Convention Center, Korean farmers outside were protesting. The activists were worried that global trade rules might force them to open up their protected rice markets and allow cheaper rice to be imported. Japan and Korea have put tariffs on rice imports that make it impossible to sell rice in to those countries.

After all, it's not easy to get two people to agree on something. It's not easy to get one company to agree with another on a business deal. Now, try getting governments together to agree on things. Try 150 of them. That's one thing farmers don't think about when they hear these frustrating no-result reports from these meetings. Believe me, the folks like U.S. Trade Representative Rob Portman are very serious about getting some kind of agreement this week. They were stuck in those rooms until 3 a.m. each night, hammering at each other. He and Secretary of Agriculture Mike Johanns were earning their paychecks.

Political baggage
Governments have a lot of political baggage to contend with when they come to the negotiating table. They can't simply say yes, we agree with that. They have people to consult, positions to take, limits they must stick to. They have more baggage than a Samsonite store.

I'm not defending the lack of will power that was demonstrated this week in Hong Kong. But it is a reality nonetheless.

No matter. The two sides will pick up the pieces and go on. There's another meeting set for Geneva in March.

Buy time
I've learned many things this week, but the most important may be this old adage: When you have no solution, buy time. In the United States, we're used to jumping on a problem and fixing it. In world trade talks that's a huge disadvantage. Take your time. Maybe the problem will just go away.

To some extent, agreements are entered into without ever solving the really tough issues. They are purposefully left vague so that the courts can decide on them later. Sometimes you simply have to let things be vague to avoid political gridlock.

Let's also admit that the WTO may never provide the answers we want - free and fair rules that allow efficient multilateral trade to flourish across the world. We won't be able to force the Europeans into doing anything they don't want to do. Even if you could move them off their current position of limiting access (with high tariffs) to their markets, those folks are the masters at non-tariff trade barriers - you know, inventing some kind of standard that you can't possibly meet so therefore don't even try to sell your goods there. Think: beef growth hormones, GMO food, and other "standards" hidden under the guise of consumer quality and safety demands.

They didn't have a very good week this time around, but they still hold the upper hand. Both the U.S. and the EU can only move forward if they move forward together. That's like tying two elephants' legs together and asking them to get moving.

The experience at Hong Kong was an eye-opener. Building a better world economic engine through trade sure has a shiny sound to it. But the reality is much darker. Of all the people I met this week, I could count the idealists on one hand. All the others fall into the following categories: pragmatic, realist, skeptical, cynical, and downright jaded.

It appears the more of these meetings you come to, the farther down that list you move.
Next week: reaction from farmers who came to Hong Kong

Pepper spray and riot gear

2005-12-14T07:39:00.000-06:00

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I'm here in Hong Kong this week for the crucial WTO ministerial conference, talking to farmers and experts about the dwindling prospects for a successful trade deal. But for a little while yesterday the world's attention was instead focused on 4,000 protesters out on the streets.

These are the folks who will protest free trade while wearing their tennis shoes made in Indonesia and shirts made in India. They will chant anti-WTO slogans and watch themselves on the news, later, on a television made in Malaysia. They will while away the long hours between demonstrations drinking a beer brewed in a far off country or listening to an Mp3 player made in China.

The city of Hong Kong has done an outstanding job training its police force to be helpful and courteous to visitors while handling protesters with a minimum of violence.

Every two years or so, the world's trade activists drop whatever it is they do to earn a living, drum up some cash for an air ticket, and make their way to wherever the WTO holds its ministerial trade talks.

Some people apparently don't have enough to do.

These WTO meetings are a magnet for the anarchists of the world. Since these folks were able to break up the meetings in Seattle in 1999 they have found a world spotlight for their cause. These days if you go to a WTO meeting, expect pepper spray and riot gear. And since the actual trade talks are closed to the media, guess where the press photographers hang out?

South Korean farmers warned they might try to kill themselves in order to disrupt the meetings, according to a story in yesterday's South China Morning Post. Most of the demonstrations were peaceful, with folks carrying coffins including "WTO - Rest in Pieces" signs (clever). Some of the activists launched a floating protest, throwing themselves into the murky waters of Hong Kong Harbor. The atmosphere became tense when lines of police - there are 27,000 of them in Hong Kong this week - confronted protestors outside the convention center yesterday, but no one was seriously hurt and the protesters have said they will save their energies for the last day of these sessions, Dec. 18.

Some protesters made their way inside the opening session, shouting down WTO Director-General Pascal Lamy as he addressed the ministers representing 149 countries. "The WTO and the crowds in and outside these buildings will remind us, with some sound and fury, that WTO is not the most popular international organization around, to say the least," he said.

Brazilian Foreign Minister Celso Amorim with WTO Director-General Pascal Lamy (right).

Misguided passion
Some so-called 'farmers' were carrying signs that said "WTO kills farmers." I admire their passion, even if wildly misguided.

This meeting aims to lower trade barriers that would in effect help all countries, including the poor, but that doesn't seem to register with these folks. Admittedly, WTO is still somewhat of a rich country club, and yes, free trade might cause short-term hardship for some of the world's farmers. But those who understand their business and make good strategic decisions will thrive in a business climate free of artificial market signals (subsidies and protectionist tariffs).

And free trade will, if done correctly, lift millions of people out of poverty - the stated goal when this round began in 2001.

The protesters want the world to believe WTO is a big faceless international organization brutally twisting the arms of weaker countries to come up with a trade agreement that will destroy their local agriculture. But let's face facts. Farmers in wealthy South Korea still lead a peasant existence in part because their country's protectionist policies never allowed them to learn how to modernize and make decisions based on market signals. Now the South Korean farmers fear trade rules that will allow less expensive rice in from other countries.

I believe these so-called farmer-protesters are simply inefficient producers who have no motivation to modernize. They have strong political power in their home countries. They can still make money because their governments protect them with unbelievable tariffs. You want to import rice into Japan? Go ahead, you'll pay 700% tariff for the privilege.

"Japan is a byword in the world for inefficiently produced and costly rice," notes South China Morning Post's columnist Jake van der Kamp. South Korea is not far behind.

Even Frenchman Jose Bove, the rock star media-darling of the anti-global movement, was able to make an appearance here on behalf of the protesters. This is a guy who is not happy unless he is in handcuffs with a microphone shoved in his face. Raised by Berkeley-educated parents, Bove is a small farmer who has been in and out of jail after wrecking a McDonalds restaurant back in his home country. He was briefly detained upon arrival here yesterday and told to take the first plane back to France. Instead, he called a French radio call-in show on which Lamy, the WTO's director General, was being interviewed. Lamy contacted Hong Kong officials and had Bove released.

Jose Bove, the French radical activist farmer, was able to wiggle out of detention at the Hong Kong airport long enough to join his protester friends at the WTO trade meeting.

Bove repaid the kindness by making this statement in a BBC television interview hours later: "We want to have our own agriculture feed our own population, and we don't want to export our surplus, which is dumping on developing countries," he told reporters. Huh? Guess they don't teach Econ 101 at Berkeley.

In any case, Bove and his pals may get their way, as it looks very bleak for a trade breakthrough this week. Lamy acknowledged the uphill battle with a positive twist. "Reaching agreement in the WTO is difficult because it is done bottom-up — and it is good this is so," he said. "It takes more time, it is more burdensome and cumbersome, but I am convinced it remains the best way to take decisions that impact directly the lives of billions of people."

Even so, the world risks much if this trade round collapses. It could signal a shift to bilateral and regional deals, which are much less efficient in building prosperity. And if no deal is reached by the 2007 deadline, a deal may never be reached. That's the year President Bush will surely lose his "trade promotion authority," the power to negotiate trade deals with an up or down vote from Congress.

Worse, a collapse in the Doha round could bring a series of suits against the U.S. for a broad array of questionable trade policies, including rice, corn and soybean programs, much like the successful case Brazil brought against U.S. cotton. The U.S. would then risk losing those programs without getting anything in return via a fair, worldwide deal.

"If we don't fix the agriculture problem - if we don't find a way to provide real market opportunities for farmers around the world, especially farmers in the developing world - this round is not going to advance," says John Murphy with the U.S. Chamber of Commerce.

That's an outcome Jose Bove might enjoy, but American farmers certainly would not.

WTO: This is what deadlock looks like

2005-12-13T10:23:00.000-06:00

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It seems oh so ironic that the World Trade Organization (WTO) has come to Hong Kong, an iconic city of free trade, with no apparent chance of making it the cornerstone of a historic new deal on free trade.

I arrived here last night after a grueling 13-hour flight to Tokyo, topped off by another 5 hour flight into Hong Kong. The news leading up to this meeting has been bleak, at best; expectations are low. Watching the European Union and the United States bark at each other this first day is both amusing and disconcerting. The EU, feeling pressure from the farmers back home, has refused to offer more than an average 39% cut in tariff barriers, and that has been blamed by many farm goods exporters, most notably Brazil and the United States, for a stalemate in talks, the lynchpin of the WTO’s Doha trade round.

The streets of Hong Kong were peaceful last night, despite the thousands of protesters who made their views heard at the WTO meeting held here this week.

Today EU leaders tried to change the subject, criticizing the U.S. for its food aid to poor countries. "The large structure of U.S. in-kind food aid is designed, in reality, to give support to U.S. agricultural producers," claimed European Union Trade Commissioner Peter Mandelson. "It distorts trade and depresses local production." U.S. Trade Representative Rob Portman would have none of it. “I sense there is an obsession in the EU about how do we stop food aid. It’s a bit misplaced,” he said. The real issue, he said at a morning briefing, is market access. Translated: the EU must lower its protectionist trade policies.

“We’ve got to have a breakthrough in market access here,” he says. “It’s not about the EU market but the global market. It’s not just for our economy – the analysis shows the U.S. may or may not benefit. The World Bank says 93% of any gains in trade will come from market access. Market access… should be something we all want."

With no trade deal in sight, the United States and European Union took shots at each other. Here, U.S. Trade Representative Rob Portman (second from left) takes exception to an earlier EU criticism of U.S. food aid.

With no real deal imminent, the EU is also trying to redirect discussion to focus on U.S. export subsidies in cotton. There's also talk here that the developed countries might sign off on an agreement that would allow the 32 poorest countries to have quota-free, duty-free trade with some exceptions for certain products.

U.S. political leaders back home hope those things won't become the focus of the talks.

"I understand that those issues are important to some WTO members, and the United States is willing to negotiate on those issues as part of a comprehensive package," said U.S. Senator Chuck Grassley (R-Iowa). "But in the end, the least developed countries, other developing countries, and developed countries will all benefit from the lowering of tariffs on all agricultural products. We need to keep the focus on market access for agriculture."

Stumbling block
In the United States, agriculture accounts for less than 1% of economic activity; in the EU the figure is just 2.2%. Yet, agriculture is the stumbling block now as always, so trade ministers are left looking for scraps of good news - anything to tell the folks back home that it was worth bringing together 8,000 visitors from all over the globe for a five day meeting.

Even if the WTO can't come up with a deal this week it hasn't put the good people of Hong Kong off from making an impression. I was met at the airport by several friendly volunteers who helped me find my way to my hotel downtown, not far from the convention center where the talks were being held. Nearly everyone here speaks English, thanks in part to this city-nation's British colonial heritage. China assumed control in 1997, but this city champions capitalism and all its glory. There's even a new Hong Kong Disneyland!

Hong Kong is compact, with just 6.8 million people, but its surging economy - the government is looking at 8.2% growth this year - is proof that free trade works. Hong Kong is consistently rated in surveys as the world's freeest economy. Red tape is minimal, taxes are low and the flow of capital and currency is unrestricted. . Over 1,000 international companies have set up regional headquarters here, and that number will only grow as China continues to flex its economic muscle.

The WTO goes all out to accomodate the media. This room holds around 400 high-speed, internet-connected flat-screened computers. Nearby I walked past cubicles for the world's mainstream press, including Al-Jazeera.

Well-intended
The WTO set out on this, its latest round of negotiations, shortly after the terrorist attacks of 9/11 in a well-intended attempt to answer critics who said the organization was nothing more than a rich countries' fraternity. In fact these talks are called the Doha Development Round, set to explicitly focus on the needs of developing countries. The agreement on agriculture is to focus on three pillars: market access; domestic support (subsidies and other programs including those that raise or guarantee farm gate prices and incomes); and export subsidies.

Unfortunately talks in Cancun two years ago broke down and all the good will seemed to escape like air hissing from a balloon. Then this July, WTO ag trade ambassador Tim Groser (who has since gone on to land a seat in New Zealand's parliament), managed to work out what seemed to be a last-ditch agreement. The U.S. unveiled a dramatic proposal that would reduce domestic subsidies in exchange for better market access, but the EU's trade leader Mandelson, after scathing criticism from French farmers, has since said it can't go any further.

So, this is what deadlock looks like. And despite the beautiful Hong Kong skyline, it's not a pretty sight.
Tomorrow: The activists throw a party.

And now, on to Hong Kong

2005-12-09T10:31:00.000-06:00

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One night during a dairy tour through Argentina last month, our tour organizers from DeLaval took us to the Swedish Embassy in Buenos Aires. There, Swedish ambassador Arne Rodin was our host. Rodin is an elegant aristocratic kind of guy, who first fell in love with Argentina as a 19-year-old traveling the world in the Swedish Navy. In between all that he made a career for himself at the United Nations and later, as lead trade negotiator for Sweden. We enjoyed pleasant conversation until I mentioned I was going to be in Hong Kong for WTO.

"You know, I was in Seattle in 1999," he said casually. If you remember, that was the year the WTO talks were destroyed by every anarchist, protester, malcontent and anti-globalist who could buy a ticket to the great Northwest. The world's negotiators went there to try to hammer out a deal on world trade and the talks were a miserable failure to say the least.

"I recall it was like a reunion of the flower power hippies," Rodin said. "One time I went out in to the crowd with my WTO badge on and they spit on me. They actually spit on me."

I was soaking this up, thinking about my own journey to Hong Kong next week when the WTO holds its crucial ministerial meeting to hammer out a new trade agreement.

Agriculture has always been the hangup in these talks, and Hong Kong will be no different. The posturing this week has been nearly comical, with press releases blistering the email in-box.

Lately the big battles have been between the European Union and the United States over market access and farm subsidy programs; the so-called 'amber box' (trade distorting) policies that wreak havoc among the world's ag exporters. I expect the LDC (Lesser developed countries) to play a big role in the discussion next week as well.

High-level talks
I asked Rodin what it was like to sit down at high-level negotiations and stare down your 'trade partners.' Some of the discussions dragged on forever, he said. "Of course, you go in there knowing exactly what you can give up and where the line is you can't cross," he added. "And you always start at a certain point, knowing the outcome will be something else altogether."

The French, said Rodin, were the toughest negotiators. They had certain things they would not give on, he added. He recalled how every few minutes the French negotiator would ask to leave the room so he could call President Jacques Chirac back in France.

"Do you think WTO negotiations would succeed if the French were not part of the discussion?" I asked him. "Of course," he responded. (Even so, I don't blame the French for wanting to keep their protectionist trade policies. They have a wonderful food culture, and wealthy consumers who don't mind paying high prices for quality, locally-grown food).

It does seem frustrating, though, that so much of the world's ag trade decisions can be thwarted by one country.

Poorer countries learned during the last WTO meeting they can have an impact on rich countries through the power of the WTO vote. The LDCs will be a factor next week.

Just this week the FAO issued a report saying that the benefits of trade reform may not reach the poor unless urgent complementary policies and investments are made.

The State of Food and Agriculture 2005 examines agricultural trade and poverty, seeking to answer the question: Can trade work for the poor?

According to SOFA 2005, the answer is yes, but trade liberalization alone is not enough. Policies and investments must be put in place to allow the poor to benefit from trade opportunities and to protect the vulnerable against trade-related shocks. “Agricultural trade and further trade liberalization can unlock the potential of the agriculture sector to promote pro-poor growth, but these benefits are not guaranteed,” the report states.

The FAO report says that industrial countries have the most to gain from agriculture trade liberalization, because their agriculture sectors are the most distorted by existing policies. Consumers in currently protected markets and producers in countries with low levels of domestic support would tend to gain the most.

Well, that's just a sample of the reports that come out just before a big meeting like this. The next time you hear from me I should be reporting to you from Hong Kong. Stay tuned.

Argentine stockyard is one of a kind

2005-12-02T11:39:00.000-06:00

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A 7:30 a.m. bell signals a new day as hundreds of sleepy-eyed cattle brokers gather on a maze-like catwalk high above a sea of cattle. In rapid fire Spanish, an auctioneer calls out bids through a bullhorn as gauchos on horseback, reins in one hand and cell phone in the other, wait below. The rap of the auctioneer's stick on metal fence signals another sale.

In a land known for cattle and cowboys, the two come together seamlessly here at Liniers Livestock Market on the outskirts of Buenos Aires, Argentina, the world's largest livestock market. This grand old stockyard, established in 1901, auctions off 12,000 to 18,000 cattle a day. This morning 13,740 cattle will be sold within two hours at this 80-acre outdoor facility.

I'm here wrapping up my tour of Argentina with DeLaval, the milk equipment company. Along the way we've seen impressive evidence of how Argentina is becoming a global player in the milk sector.

But today we're learning more about beef, one of Argentina's long-time specialties. Liniers houses 55 auction houses, 99 slaughter houses and employs nearly 4,000 workers at auctions four days a week. Sellers pay a 3% commission to auction cattle. Cattle are also sold via television and internet, but if you want the real flavor of Argentina's beef trade, come see the auctions first hand. Animals come in and go out live, directly to slaughterhouses. This is like a working livestock farm in the city.

Liniers Livestock market is the major livestock trade center for Argentina, a place where buyers and sellers meet to haggle and bid on nearly 18,000 cattle, four days a week.

Argentineans love their beef - nationwide this country slaughters 12 million head annually and consumers eat 132 pounds of beef per person per year. Livestock trade was first started in 1607 during colonial times, with the settlement of a cattle market built in a location that is now considered downtown Buenos Aires. On May 1, 1901, the National Cattle Market was founded here in a neighborhood nearby the city outskirts. Nearly 20% of Argentina's daily cattle sales go through Liniers. The remaining cattle go through local auctions or direct from farmer to packer.

Besides its 450 entry and exit pens for cattle, the market boasts 40 automatic scales, 2,000 small exhibition pens for broker’s firms, and rooms for several television and radio broadcasts, besides government offices for commercial, fiscal and sanitary control.

After each lot is sold, guachos move the cattle to scales. The animals are sent to the different broker’s pens, where they are classified and weighed. Each batch is painted with the buyer’s identification number. Then, cattle are transported to the corresponding slaughterhouse about 15 to 30 miles away.

Anyone interested in livestock must make Liniers a 'must stop' if they visit Argentina.

And now, on to Hong Kong
Argentina isn't the only place where globalization is impacting agriculture. Next week I'm headed to the World Trade Organization (WTO) meetings in Hong Kong. Agriculture is the main sticking point in world trade negotiations. All the pre-meeting hype suggests this meeting will fail, in part because the richer countries are not willing to give enough on trade protectionist policies and subsidies.

Even so, I'll be blogging from there to bring you the insider story.

Next week I'll give you a preview of what's at stake, should these talks fail.

Exports drive Argentina's dairy future

2005-11-25T06:47:00.000-06:00

You can make a comment about this post by scrolling to the end and clicking on the "comment" link.

In many ways, exports are fueling the upgrades on Argentina's dairy farms. I got a chance to see this first hand a few weeks ago during a media tour with DeLaval (www.delaval.com), the milk equipment company, visiting processors and dairy farms in this South American country.

China and India have replaced England as important export markets, but Argentina is now selling to at least 40 countries worldwide.

Juan Bautista Pedrana, General Manager at Las Taperitas, Latin America's largest dairy farm: 'The farm had to upgrade quality standards to meet export demands.'

"The difference is, China and India are not world powers as England was, but it is the first time in a long time that Argentina is a player in the world," notes Argentinean economist Enrique Szewach.. "They demand our products without restrictions.

"This is an important opportunity," he adds. "It's the reason behind increased demand for land and foreign investment."

What Argentina needs now is to continue the stable, export-friendly monetary policy it currently has in place.

“By 2010 Argentina will produce 12 billion liters (25.3 billion pounds) if the same monetary policy exists,” predicts Williner Co. president Alfredo Curiotti. Williner is a privately-held dairy firm processing over 380,000 tons of milk per year converted into a complete line of dairy products.

It also owns Las Taperitas, Latin America’s largest dairy farm in Santa Fe province. Las Taperitas milks 10,000 to 12,000 cows in 37 milking parlors and ships out 465,000 pounds per day. Seven of every 10 cows are Holstein with the balance a Holstein-Jersey cross. They average 47.5 pounds per day with rations of grass, corn silage supplements and 16-18% protein concentrate made in their own plants.

“We’re seeing 27% profit margins, not including land costs,” notes Juan Bautista Pedrana, General Manager at Las Taperitas. “In the next five years, we’re planning for annual 10% increases in revenue and production.”

Each of the 37 milking parlors range from 150 to 670 cows, and the farm expects to add three more parlors and 1,000 cows in the next five years.

Processors like Williner demand high quality raw milk from suppliers like Las Taperitas.
International standards must be met, notes Pedrana. “Exports helped us update technology and attract investors," he says. "The farm had to upgrade quality standards to meet export demands."

While Argentina doubled its milk product exports over the last 10 years, Williner moved even more aggressively. The company now exports half of its entire production - mostly cheese and milk powder - to 40 countries (primarily Brazil, Venezuela, Algeria, Mexico, Canada, South Africa, Bolivia and the United States). “Overall the growth of dairy product exports is up 20% in the last two years,” says Curiotti.

That growth is not without obstacles. Last summer the Argentine government, worried about inflation, increased export taxes on milk powder from 5 to 15% on processors to keep domestic prices down. Milk processors are hoping the government will remove the tax in late January. Even so, more and more dairy processors are looking for profits overseas. In 2004, 66% of all dairy exports were sold in the form of whole milk powder.

"We expect record exports by 2010, up from 25% to 29.1%," says Argentine dairy market consultant Jose Quintana "We're projecting 5-6% growth per year over the next 10 years in terms of milk production.

"We think we have a great opportunity in dairy with high production and low costs," he adds. "We can grow so much more than that 5% per year, but we have to watch profitability first."

How Argentina survived 'the perfect storm'

2005-11-17T16:39:00.000-06:00

Argentina is in a great position to become a major player in milk exports. But it had to survive the 'perfect storm' in order to get to this point.

From 1998 to 2001 the country had what can only be described as an economic meltdown. Not only did it suffer through the Asian crisis, but Brazil, its biggest trading partner, devalued its currency. Argentina also suffered from the strong U.S. dollar, the Russian currency crisis, and high inflation.
Argentine economist Enrique Szewach: "Part of the Argentine population wants to compete globally and the other part is insecure, thinking we can't compete, so let's crawl into a shell and protect ourselves."

"You can't be a big debtor nation with high inflation," says well-known Argentine economist Enrique Szewach. "That was a huge problem."

One thing to remember about Argentina is that it exports what it eats. Unlike Taiwan, which exports computer chips but eats rice, Argentineans eat dairy, beef and grains, and there is pressure on local food prices when those exports increase.

Another problem for Argentina is that it needs more investment in its energy industry, but since energy prices here are decoupled from the world, in an environment where energy prices are growing, there is no incentive to increase production.

"Argentina is an oil producer, but since we do not recognize the international price of oil, we are actually reducing production," says Szewach. "The world price of oil is $65 a barrel, but here it is $35 per barrel. An investor here has no incentive to invest in more oil production."

Since 2001 the economy is in full recovery. High real exchange rates favor exporters and imports. Argentina has experienced a recovery in employment and wages; a freeze on public utility prices given the over-investment of the 90s; and a fiscal surplus due to an increase in revenues from export taxes, allowing for debt restructuring.

Opportunity costs
All of the good economic news has helped transform the dairy industry, which can best be described as a blend of New Zealand grassland and U.S.-style 'stored feed' production, with typical rations of 67% grass, 11% corn silage and 22% concentrate. When milk prices go up, the Argentines use more corn silage and concentrate; when milk prices fall, they feed more grass.

Milk price in Argentina is around $17.50 per cwt. Profit margins on average are $5.10 per 100 liters, or $2.41 per cwt., without land costs. Profits average around $1 per cwt. when you factor in land.

A key economic indicator is the relationship between corn and milk prices. "Usually you can buy 1.5 to 2 kilograms of corn per 1 liter of milk," says Jose Quintana, a leading dairy market consultant in Argentina. "During the economic crisis in 2002 the ratio was 1 to 1, but today you can buy 2.5 kilos of corn per milk liter, so farmers are feeding a lot more corn to their cows right now and that's improving production."

Soybeans still remain a part of the dairy equation. Here, tillable land rents for around $60 to $80 per acre. Opportunity cost is calculated based on the maximum profit potential for soybeans, another rapidly growing commodity.

"Opportunity cost of the land is important here," says Sean Scally, president of DeLaval for Latin America. "Two-thirds of farmers own their own land, and dairy farming competes with other production alternatives. You're always competing with corn, soybeans and wheat."

The Argentine soybean market is export oriented and the milk business has been domestic, adds Quintana. "In the past, the soy market has been good business and much more profitable than dairy, because international buyers can pay more for soybeans but the internal consumer cannot pay more for milk."

During Argentina's economic crisis milk production fell to its lowest level in years, at 16.7 million pounds in 2003. Now it's back up to 20.5 million pounds in 2005. "This is a result of more milk production per cow," notes Quintana. Dairy farm numbers are steadily falling and around 10,160 dairy farms remain in Argentina.

Now Argentina is putting the past in its rearview mirror. The question is, can it forget the past long enough to capitalize on future opportunities?

"We had a crisis, we had recovery, now we need to grow," Szewach says. "We have to look again at the international scenario. It was very favorable for Argentina in the last few years, with higher commodity prices and lower interest rates."

Most important, Argentina no longer sees itself as a victim of globalization.

"For the first time in many years economically, we are doing well," says Szewach. "The problem is, we do not understand that from the local viewpoint. Part of the Argentine population wants to compete globally and the other part is insecure, thinking we can't compete, so let's crawl into a shell and protect ourselves."
Next: How exports are changing Argentina's dairy sector.

Argentina: Painful past, unbridled potential

2005-11-10T10:53:00.000-06:00

The first word you must learn as a gringo traveling in Argentina is, Cabaleros. That's Spanish for "second-born sons," but the Argentines also use that word for… the men's room. Walk into the room marked "Damas" and you will surely be thrown out on your "nalgas."

Thus began my education here in this beautiful, windswept country famous for its gauchos and tango dancers. Second in South America only to Brazil in size and population, I am traveling with several agricultural journalists on a dairy tour sponsored by DeLaval, the global milk equipment maker, to witness a success story in the making as Argentina revamps its milk production and sets its eyes on the global dairy market.

But while there's great promise for Argentina's milk industry, there's nothing guaranteed about the outcome, thanks to Argentina's bewildering past and political peculiarities.

"Argentina," as one economist quipped during our tour, "never misses a chance to miss a chance."

Checkered past
And you have to appreciate Argentina's past to really get a sense of what they are up against if they expect to succeed in an increasingly globalized agricultural world. Argentina was one of the richest countries of the world in the late 19th century, but today half of its population is below the poverty line. Past military juntas, economic collapse, strikes and political upheaval remain an open wound on this beautiful land.

It can't seem to get away from this checkered past, either. Politically, it is still obsessed with Juan Peron, the army general who came to power after WWII and whose colorful wife Evita was the champion of the working class (she was also the subject of a bad Madonna movie, but that's another story).

Three years ago Argentina devalued its peso, which had been pegged to the dollar for a decade. The devaluation plunged the banking industry into crisis and wiped out much of the savings of the middle class, plunging millions of Argentineans into poverty. The Argentine peso is now three to one U.S. dollar.

Argentina's economy has been rebounding since this near collapse, with an impressive growth rate of about 8% since President Nestor Kirchner took office.

Weak institutions
Politically and economically, Latin America is very different from Europe or America. But sociologically, Argentina is in another universe - even compared to other Latin American countries.
"We aspire to have a country engaged with the world, not isolated," says Argentinean political science professor Vicente Massot.

To understand Argentina's delicate state of being you must understand that here, people value political personalities and sentiment over government and economic institutions explains Vicente Massot, executive director of the Newspaper La Nueva Provincia. He is also a professor and holds a PhD in political sciences.

"Wherever you have weak institutions, political upheaval is a problem," says Massot. "Argentina has had 5 presidents in the last 15 years and the Supreme Court has been changed several times since then.

"We have a constitution and laws of course, but they are always subordinated to the president," says Massot. "Countries with weak institutions tend to be governed by providential men, who can be honest or dishonest, leading good governments or bad, but they can do so because we have weak institutions, in either case."

If the country's politics seem schizophrenic, you can trace it back to Peron and the political movement that has dominated this country in the past 60 years. "Peronism has been the most powerful, important movement in Argentine politics since it was created in 1945," Massot says. "Peronism is a difficult movement to explain ideologically. In the extreme left, the people who call themselves Peronists are basically Marxist; but on the right, people who are fascist will also define themselves as Peronists. There is no other example in the world."

The other problem here, says Massot, is a very tolerant society. "It's hard to get society to react against bad things," he says. "The president, if he is very powerful, can do absolutely anything, and I'm not exaggerating. If you look at this country over the last five years you will see this."

Argentina's unemployment is 12-15%, but president Kirshner's main challenge these days is to whip inflation. He is trying to keep a cap on domestic prices, in part by placing an export tax on goods when prices get too high. In fact, that was a contentious issue during our visit to Argentina. In the last six months, the government placed a 15% tax on all milk product exports, in an effort to hold down domestic prices.

Some Argentinean agricultural leaders want the government to eliminate the tax and let Argentina become an export juggernaut. The new milking systems I saw, vertically integrated with the growing milk processing companies, already supply milk to several countries. They could easily begin supplying products to growing populations in China or India. If the European Union lets down its protectionist trade policies, Argentina could be selling tons more cheese and milk powder there.

Argentina certainly has the potential for such growth… if it can only get out of its own way.

Next week: Why the future looks bright for Argentina's milk revolution

Argentina's milk revolution

2005-11-03T09:03:00.000-06:00

There's a revolution going on here in Argentina, and thankfully, it has nothing to do with the military or the ghost of Juan Peron.

It's a milk revolution of sorts, and it's nothing but good news if you're an Argentine producer. New milking systems with several thousand cows are replacing the antiquated systems of the past. A new emphasis on technology and changes in this country's currency policy have lifted Argentina into the modern milk world, putting them on the cusp of becoming an important player in the world dairy market.

Ruben Vandoni, milk manager for Las Liebres Co., inspects the cow herd at the farm in Lujan, Argentina. Las Liebres was put together by a group of investors, part of the increasing shift to modernize dairy farms in this South American country. Las Liebres has 550 cows that produce 26 liters of milk per day, about 20 percent higher than the national average.

I'm here on the outskirts of Buenos Aires, traveling with DeLaval, the milk equipment company, and a pack of European agricultural journalists. Over the last four days we visited grassland dairy farmers who are every bit as modernized and committed to quality production as their counterparts in the United States.

At Las Taperitas, in Capitan Sarmiento, we visited the largest dairy farm in Latin America, with 37 milking parlors serving 11,500 milking cows which give an average of 22.5 liters (50 pounds) per cow per day. This farm churns out 200,000 liters of milk per day!

As DeLaval's senior dairy consultant Stefan Bergstrand says, Argentina is going through changes as part of a wider globalization of dairy farming systems. "Wherever you are, whatever climatic conditions, whatever system - grassland or freestall - people are targeting 20,000-23,000 pounds of milk per cow per year and trying to utilize the cows as much as they can."

Globalization is causing world dairy systems to become more systematic, driven by world standards in technology and professional techniques. "It will bring new opportunities for countries that can produce to certain costs on the world market," Bergstrand says. "Argentina has a chance to become a major player in that market, but currency exchange rates here play just as big a role as WTO negotiations."

Over the next week or so I'll be sharing the story of Argentina's milk revolution. I'll take you inside the big dairy farms and processors. You'll hear their strategies for competing on the world market and what may happen in the future. Check back here frequently.

Adios for now!

Winning the battle with livestock activists

2005-10-27T14:59:00.000-05:00

(Feel free to react at the end of this commentary)
Ethanol is the queen of the prom these days. An Energy Bill mandating more renewable fuel justifies growth from an economic standpoint, and high pump prices provide the emotional rallying cry to produce more home-grown fuel.

Even so, the pure economics of ethanol production relies more on four-legged critters than anything else. DDGs (distillers dried grains), an ethanol production byproduct, makes nice cattle and hog feed. Ethanol only makes economic sense when its byproducts can be marketed.

Unfortunately, activist pressure has forced livestock off many midwest farms, even as more ethanol plants go online. Groups who oppose modern livestock farming are making their mark.

The Lincoln Star Journal reports that despite attractive pork prices and cheap corn prices, Nebraska's hog inventory has declined nearly 25% since 1996, from 3.65 million head to 2.75 million. The state’s Department of Environmental Quality has issued just nine construction permits for swine operations in the first nine months of 2005 compared to a record 140 in Iowa. Those who know say Nebraska’s decision to give counties control of where new livestock farms can be located has stifled the state’s hog industry.

We applaud new business startups in practically any other industry. But when a new business is being considered in livestock farming, the NIMBY folks come out of the woodwork.

Who cares?
For those of you who just said, 'hey, I grow grain, why should I care?' we have news for you. Over half your grain is fed to livestock, if not in your state, then elsewhere. There is no crop agriculture without a viable livestock sector, including ethanol. The two are joined at the hip.

Some activists would like nothing more than to see America's livestock industry revert to the '50s, or worse, dismantled altogether. How farmers respond goes straight to the battle for public perception.

So no matter what you grow, you need to know how to face up to the activists. How?

Stop calling them wackos. Sure, it's easy to dismiss groups like PETA and others for their zany, misguided attempts to sway consumer opinion. But by dismissing them as crazies, farmers don't take their cause, or the damage they do, seriously. PETA has 700,000 members, 100,000 of which are schoolteachers. They're not going away. Treat these groups seriously no matter how extreme their antics.

Clean up your act. No one is perfect. Accidents will happen in any industry, livestock farming included. But make sure your management practices are environmentally sound. Bad apples spoil the whole bunch, and manure spills and sloppy management fuel the activists' cause. Be squeaky clean in your management practices and establish strong ties with your neighbors.

Connect emotion with science. For several years now, farm groups have gone to meetings, armed confidently with scientific studies and charts…and been blown out of the water when it comes to consumer perception. These well-intended spokespeople, with their powerpoint slides and case studies, quickly find themselves face to face with an audience struck by MEGO (My Eyes Glaze Over).

Instead, be able to talk about how you and your family follow proven guidelines to contain manure safely and that it is used as nutrients to grow healthy food. Tell them you wouldn't feed your family any food if you didn't believe it was safe.

Okay, too many italic words, but you get the point. Follow every scientific fact with the human element. Consumers still have plenty of empathy for farmers. Be armed with science, but be ready to use emotion to tweak consumers' heartstrings. Why shouldn't you? Your activist opponent does.

Get on the same team. Activists must figure livestock is an easy opponent. After all, how many other industries speak with so many opposing viewpoints? Why on earth would grain farmers in your county work against new hog farm sitings? Every American farmer must understand that over half of their grain goes into the mouths of livestock, either here, in other states, or in other countries.

Farm organizations must spend more on public image building. That means groups like Farm Bureau and commodity organizations must begin setting aside a significant part of their budgets to engage activists. That may mean taking resources away from something else, but it must be done. Keep doing things the way you've always done them, and you risk becoming irrelevant.

Get involved. Too many farmers watch from the sidelines. Maybe the activists haven't come to your county - yet. We need an army of Paul Reveres, ready at a moment's notice to attend county zoning meetings, to refute the activists at every turn, to be in their face, to work with media, to establish new relationships in city, state and federal levels. You have to be ready to call them out in the local paper and TV station.

Get involved with groups like the Coalition to Support Iowa's Farmers. CSIF recently funded an Iowa State study that showed, among other things, that crop and livestock farming employs one in 15 Iowans, and that 25 percent of all Iowa industrial output leaves the state in the form of agri-food sector outputs.

If you want to read some real shocker stories about the great lengths groups like PETA will go to, check out CSIF's activist news section.

When livestock producers who know their facilities and their motives for raising livestock inside and out have given serious thought to why people oppose them, they are very effective spokespeople.

More voices need to be heard on issues affecting agriculture. The world is run by those who show up. You have to be ready to show up.

If farmers do not stand up to those who would damage their industry, who will? Are we willing to allow livestock agriculture to leave the Midwest, or the country altogether? South America has a lot of crop protein and their beef and hog sectors are flourishing. Next week I will be reporting to you from Argentina's fertile Pampas region, heart of the country's beef and dairy belt.

I doubt if we'll meet any activists there.

Food for thought
To succeed in politics, it is often necessary to rise above your principles.

We have met the enemy, and he is us

2005-10-20T14:40:00.000-05:00

(Feel free to react at the end of this commentary)

You're wrapping up harvest and still smarting from high diesel prices and now it's time to start thinking about next year's crop budgets. The boys in the ivory towers have already been running the numbers, and what they're finding is not pretty.

According to University of Illinois farm management specialist Gary Schnitkey, variable costs for corn are projected to be $55 per acre higher in 2006 than in 2002 on Illinois grain farms. Similarly, variable costs for soybeans will be $20 per acre higher in 2006 than in 2002. In percentage terms, cost increases are 33% for corn and 19% for soybeans over the four-year period. You can read his entire report here

That's going to mean some tough choices when it comes to projecting costs. Smart managers will need to factor all expected costs into an equation and then figure out if there is any wiggle room - namely, cash rent or crop share leases.

We heard rumors earlier this fall that some of the big operators - those who farm 25,000 acres or more in the Corn Belt - would be looking for decreases in cash rents from landowners. Even so, tight times means the competition for land could boil over this winter.

It's another stark reminder that, while U.S. farmers feel threatened by their South American counterparts, they may be missing the point. At the farmer level, we don't compete with Brazil. We compete with each other. And the higher your production costs, the thornier the competition for land.

Crazy cash rents
Sure, what happens in Brazil probably drives down prices closer to their cost of production. In the long run it does influence who farms the land here and which crops get planted. But crazy cash rents - now that's lethal.

Let's say you raise soybeans and yield 50 bushel per acre on 2,000 acres. You sell them for $5 per bu., gross $250, subtract about $100 in direct costs, another $50 in depreciation, netting you $100. You split that on a crop share lease, so you and the landlord take $50 each. That, times your 2,000 acres, gives you a net income of about $100,000.

Most folks would be willing to raise 2,000 acres for that kind of salary. You'd probably be happy with quite a bit less.

But then comes cash rent, and farmers competing for land, or overspending on machinery, forcing them to bid cash rents higher to broaden their land base. And there goes net income. Pay $190 per acre for the farm rather than crop share, and you end up $180,000 in the hole for the year.

Same land, same farmer, same yield, same costs, different result. Brazil has nothing to do with all of that. This is all of our doing.

Farmers want to expand so they are willing to pay a little bit more, then a bit more, and more.

It all seems rational, but we end up with irrational decisions and lousy consequences. You spend more than you really can afford, hoping to make it up elsewhere somehow. You start cutting corners on important long-term stewardship decisions related to soil and conservation. You start gambling instead of managing risk.

The only way to play this game is to pencil out realistic projections for production costs and expected yields on your farm. That's the only way to determine what you can afford for land in 2006.

Eventually, Brazil's production costs will come level with our own. Their land values will increase and we'll compete on a more even playing field.

Until then, it's your neighbor down the road you really need to keep an eye on.

Food for thought
A conclusion is the place where you got tired of thinking.

EU, U.S. back to their old catfights

2005-10-14T13:22:00.000-05:00

(Feel free to comment at the end of this article)

Just when you think the United States and the European Union have found a tiny bit of common ground in WTO trade negotiations, the two mighty trade blocs start pulling out the boxing gloves again.

Or maybe all this is quite predictable. I mean, we haven't really heard a peep from either side for months. But a key ministerial meeting is set for December in Hong Kong, and the negotiators are hunkered down right now in Zurich, trying to agree on something…anything. And it's not going anywhere. They're stuck.

So last week the U.S. Trade Representative Rob Portman made a bold move and put forward a proposal that would slash U.S. farm subsidies 60%. The U.S. proposal calls for reform in two stages. The first would be substantial reductions of trade-distorting support measures and tariffs, along with the elimination of export subsidies, to be phased in over a five-year period. Five years after implementing the first stage, an additional five-year phase-in period would eliminate the remaining trade-distorting policies in agriculture.

Portman wants to "move, and move aggressively, by supporting a 60% cut in amber box support - the most distorting subsidy types - over the next five years." He says the U.S. is willing to reduce by half the agreed cap of blue box payments from 5% to 2.5% (production-limiting policies that base payments on fixed yields and acreage fit into this category).

60%! You'd think that would make the EU happy - except that the proposal asked for similar cuts on the European side. And since the EU has larger subsidies than the U.S., those cuts would come in around 83% of what the Europeans spend on trade-distorting subsidies.

U.S. proposal a 'sham'
And that's when the gloves came off. Actually, 'sham' was the nicest word to come flying back from the European side once they saw the U.S. proposal.

COPA (Committee of Professional Agricultural Organisations) which is made up of 53 organizations from the 25 countries of the European Union, plus a few others in Bulgaria, Romania, Iceland, Norway, Switzerland and Turkey, represents both the general and specific interests of European farmers. COPA President Rudolf Schwarzböck called the U.S. proposal a "mirage."

"Once again the US is trying to impose its own type of farming and values on the rest of the World," he notes in a press release. "In fact the U.S. would have to make virtually no
cuts at all. All it amounts to is an offer to cut subsidies included in Box A on condition that they can put one of their biggest subsidies in Box B. It’s like promising you will cut back on fizzy drinks providing Coca-Cola is not called a fizzy drink."

Well, sometimes the meaning gets lost in translation.

Schwarzböck, along with other European ag advocates, likes to point out that the average subsidy a US farm receives is nearly 3 times higher than the one a EU farm receives. Huh, maybe that's because the farms in Europe are about one-tenth the size of the American farms. Nevertheless, both sides know how to spin statistics to their advantage.

The U.S. proposal seeks progressive tariff reduction, with developed countries cutting tariffs by 55-90%. The lowest tariffs would be cut 55%, and the highest as much as 90%.

The European response? "The US makes no effort to hide the fact that their sole aim in these negotiations is to expand their agricultural exports – to the EU market but also to developing countries’ markets," scoffs Schwarzböck. "How on earth can they claim in the same breath that they are promoting prosperity and opportunity for all nations. The poorer nations of the world need to build up their own agricultural base to feed their own people – not import more and more from the U.S., whether it be in the form of food aid or trade."

Farm Bill forces
Congress, meanwhile, is worried that the USTR proposal, driven by a directive from President Bush to lower market-distorting tariffs within 10 years, will drive the discussion on the 2007 Farm Bill. Congress does not want to be left out of this debate, and if you're a farmer, you don't want them left out either. Those folks need votes and they don't want to be blamed if you lose farm supports.

And you also have USDA Secretary Mike Johanns, crisscrossing the country, trying to gauge voter whims on the next Farm Bill. Johanns is one savvy dude. Unlike his predecessor, who spent most of her time in her office, Johanns is out there, pressing the flesh all summer and fall, making himself available to the masses at dozens of "listening sessions." Although USDA can't and won't write the next Farm Bill, the feedback Johanns can claim to have collected will be impressive firepower when the debate starts to really sizzle on Capitol Hill next year.

So you have WTO, USDA, and Congress - and no one is really sure yet which of these forces will drive the Farm Bill debate forward.

Why worry about the Europeans when you've got a free-for-all brewing on your own doorstep?

Confusion over Nitrogen rate recommendations

2005-10-06T15:08:00.000-05:00

(Feel free to comment below)

Looking for relief from astronomical increases in Nitrogen fertilizer costs, farmers may have been happy to read a recent report suggesting the old recommended rates of 1.0-1.2 Lbs. Nitrogen per expected corn yield were no longer relevant.

In a recent news release, University of Illinois researcher Richard Mulvaney, using the Illinois Soil N Test (ISNT), says balanced fertility, crop residues, plant populations and other factors make the yield goal recommendation "scientifically indefensible." Several articles in the print media urged farmers to "throw their yield goals away."

But don't throw those yield goals away just yet, say University of Illinois extension agronomists Bob Hoeft and Emerson Nafziger.

"Statements like, 'forget what you know about N,' without a carefully-drawn and clear alternative, are without any merit whatsoever," writes Hoeft in a recent University of Illinois Integrated Pest Management bulletin.

"The recent release by Dr. Mulvaney asserted that the yield based approach was not accurate and that it was not based on data," Hoeft notes. "I can assure you that the '1.2 is the most you should do' system was based on many years of research conducted in the mid to late 60's.

"We applaud efforts to try to find ways to predict how much N the soil will supply to the crop each year," the report goes on. "Such an approach could help us to know better how much fertilizer N we need. We are not yet there, however."

Hoeft has said for years that the yield based recommendations system was a guide and would not likely be precise - but it would, for the most part, generate a recommendation that would be close.

One of the problems with any N recommendation system is the fact that the soils contribute a significant amount of N to the crop and the amount they contribute each year depends on the weather, namely temperature and moisture.

"Since we are unable to predict either of those in advance, we are unable to predict the amount of N that will come from the soil in any field."

Test debate
One of the problems appears to be the accuracy of the Illinois Soil N Test (ISNT) Mulvaney uses to conduct his research.

"While the ISNT appears to measure in part the amount of N that will be easily mineralized, it cannot predict the weather and thus cannot predict for any year the amount of N that will be released," notes Hoeft, who was "extremely positive" on the ISNT when it was first being developed.

"In the first years, the test appeared to be near perfect in predicting fields that would not respond to N," he says. "But in more recent years, there have been a number of fields where the test predicted no need for additional N, but when N was applied, corn yield was increased significantly. Such a failure will not be accepted by farmers."

A truly accurate and reliable test to help with N recommendations has been a dream of scientists for over a half century, "but it hasn't happened," adds Hoeft. "The fact that N reactions in the soil are so dependent on climatic conditions may mean that we will never have a system that is precise for every field every year, or maybe for any field any year. "

Case in point: a study University of Illinois conducted at Monmouth, Ill., showed that the amount of N released in one year from the soil was approximately 40 lb. per acre. On the same plot in another year, the release was near 100 lb. per acre. "Mother Nature controls the release," Hoeft adds.

Nothing foolproof
The truth of the matter is that none of the proposed N tests are fool proof.

"The stalk nitrate test will tell you what you should have done that year, i.e. it is post mortem, but does that really mean that is what you should do next year?" notes Hoeft. "The PSNT (Presidedress N test), ISNT(Illinois Soil N Test), and PPNT( preplant N test), have all been shown to have some relationship to N need, but they have also all had failures in accurately predicting the amount of N needed in the more humid part of the Corn Belt.

"The success rate for most of these tests has been better on manured fields than on fields that have not had manure for years."

Scientists at Iowa, Illinois, Minnesota, Wisconsin, and Indiana are working together with a pooled set of data from all states to develop a new system of recommendations. Most likely they will not be yield based, which would be fine with Hoeft.

"I am hoping that the system will be developed for the 2007 crop year," he says. "I have no problem giving up the 1.2 system when we identify a new system that works better."

Swiss consumers grumble over subsidized food

2005-09-20T15:35:00.000-05:00

(Feel free to comment at the end of this column).

Last week I told you how farmers in Switzerland enjoyed protection from global market forces while nearly three-fourths of their income comes from federal subsidies.

That's one reason why, inefficiencies aside, a small farmer in this bucolic wonderland can still make a good income.

Bear in mind, this is a small country that stayed out of WWII but still felt the sting of Europe's hunger to some degree. The concept of Swiss farmers providing food for the homeland is part of this country's national conscience.

As the United States prepares for serious debate on the Farm Bill, it may be revealing to see how farm policy works in a country that has no qualms about protecting its borders and paying its farmers with tax dollars. And while the United States provides much less in subsidies to agriculture, some of the same things happening in Switzerland are happening in America.

Ag: too expensive?
Yet, more and more Swiss consumers are questioning the $3.18 billion from their federal government spent to subsidize farmers each year. According to a recent survey by the Zurich Federal Institute of Technology, 52% of consumers believe agricultural policies cost too much.

When Switzerland changed its farm policy to become more WTO-compliant, it began compensating farmers with direct payments. And since those are transparent and not tied directly to production, consumers began to grumble. Like the United States, fewer Swiss have direct ties to farming - and less sympathy toward agriculture.

Claudia Wirz is an editor who covers Swiss agriculture with the daily newspaper Neue Zuericher Zeitung. She asked her fellow journalists in the economics department what they thought of farmers. The response: "Old-fashioned, grabbing, constantly complaining, always against any sort of reforms, gobbling up public subsidies," she says. "Not one colleague saw farmers as businessmen. The agricultural idyll that was promoted in Switzerland for political reasons in the second half of the nineteenth century has lost a good deal of its gloss."

Wirz says the public sentiment has done a 180-degree turnabout. "It is no longer the farmer who feeds the population but the exact opposite – the taxpayer who feeds the farmer through the unshakably high subsidies he receives," she says. "People are becoming increasingly aware that Switzerland has not become a rich country through the efforts of the farmers."

In the public media here, farmers have been increasingly forced into a defensive position. Subsidies are no longer sacrosanct – neither for the media nor the Federal Government – but have become a subject for debate across Switzerland.

"In my opinion, this debate is likely to become more heated as the economic environment
becomes more difficult for everyone and cuts in funding become more common," says Wirz. "We are going to have to deal with the effects of fighting for a piece of the state’s financial pie."

That sounds eerily familiar to anyone following the current 2007 Farm Bill debate.

In another large-scale survey the Swiss population was asked where, in view of the poor state of the federal coffers, they would most like to cut costs. Their answer: the armed forces… and agriculture.

Wirz believes the take-home message is this: Agriculture is becoming increasingly dependent on the benevolence of the tax-payer and for this reason should not be getting bad press. "Farmers need to understand that they must cultivate a good relationship not only with consumers but also tax-payers," she says. "In future, Swiss tax-payers – and journalists – will only agree to high subsidies for farmers if they can see a genuine added value in Swiss products."

It's a good lesson for American farmers.

A subsidy fantasy land

2005-09-12T16:41:00.000-05:00

(Feel free to comment at the end.)

Wildflowers waft gently in the breeze as the cool alpine air mixes with bright sunshine to create a heady brew for the senses. We're in Thun, Switzerland, one of the most beautiful places on earth, for the annual meeting of the International Federation of Agricultural Journalists (IFAJ).
Here, journalists from 30 countries mingle to talk shop and learn more about Swiss agriculture. The rural landscape is intoxicating. Every farm field looks like a painting. This is also one of the most heavily subsidized farm sectors in the world. According to the OECD (Organization for Economic Co-operation and Development), 74% of a Swiss farmers' paycheck comes from their government.

In 2002 agriculture and food production here was subsidized to the tune of $3.18 billion, which may not seem like a lot of Swiss cheese until you consider it's 8% of their federal budget, spread among only 67,000 farms with an average size of nearly 40 acres. The U.S. by contrast spends less than 1% of its federal dough on farmers.

It is how a Swiss farmer with 40 acres and a few cows can still make a good income of $70,000 or more per year. Economies of scale are not at play here.

Market forces from the surrounding European Union have forced the country to reform its ag policies to ensure WTO trade-enabling status. There's an ongoing debate here as to whether Switzerland should drop its legendary neutral status and join the EU.

But with a farm sector like this, why would they?

Major reform
Not that our country is headed in this direction - quite the opposite. But as the United States begins to seriously debate its own farm policy future, it might be helpful to see how it's done in a country that makes no apologies for protecting its agriculture.

In 1951, to ensure food security, Switzerland passed a law to begin price supports and guarantees to purchase home-grown food. Unfortunately this led to high food prices and overproduction. In 1992 the country began a major by switching from market-oriented subsidies to direct payments, says Manfred Bötsch, Director, Swiss Federal office for agriculture. After an intensive political debate, an overwhelming majority of the Swiss electorate voted in favor of a new constitutional mandate for agriculture.

The buzzword here is "multifunctionality" - in other words, agriculture exists for more than just food production. According to the Swiss constitution, its agriculture now must also contribute substantially to conserve natural resources, keep up rural landscape and keep people in the countryside with jobs. "So the Swiss government had to come up with a policy mix to ensure that agriculture can fulfill these multifunctional tasks," says Bötsch.

The reform’s main feature so far has been a dramatic shift away from the internationally-criticized market support instruments towards direct payments not linked to production.

I recall the first time I visited a Swiss farmer back in the mid-80s. I went with him to sell his wheat at the local elevator. The check he received was approximately $20 per bushel. I had a hard time convincing him that the price for wheat on the world market was around $3.

Market support payments hidden in the prices farmers receive overall are now less than 20% and will go down further in coming years, says Bötsch. All guaranteed or minimal prices were abolished as well as all forms of intervention systems linked to minimal prices. Quota systems for sugar or oilseeds were abolished. The one for the dairy sector will be phased out in 2009.

"The price reductions vary," says Bötsch. "For example 20% for beef cattle, around 30% for milk and up to 40% for cereals (grain). In total, the gross returns dropped from around 13 billion to 9.5 billion Swiss Francs (-27%). This despite the fact that border protection in general remains quite high."

Meanwhile the share of direct payments to farmers increased since the beginning of the reform, from 29 to 71% of the Swiss farm budget. There are basically three types of direct payments, all contingent on the fulfillment of strict cross compliance conditions such as regular crop rotation, nutrient balance, a 7% setaside and periodic soil analysis.

All Swiss farmers get $386 per acre in direct payments right off the top, in two payments every six months. But that's just for starters. In addition, mountain and hill farmers can get up to an additional $386 per acre, depending on altitude and slope of the farm. Finally they can have –additionally – up to another $477 per acre for growing special crops like grapes and organic products.

There are also other subsidies - for instance, up to $94 per cow if the farmer runs an animal-friendly farm.

Farmers can also get low-interest loans or grants for structural improvements
and in the mountains and hills, construction or renovation grants for farm buildings used for stabling roughage consuming animals.

Bötsch says average incomes remain considerably lower than those in non-farm sectors. However, the best 25% of the farms in the plains and hill regions reach an income comparable to city folks.

And despite the "difficult" income situation, farmers are – in general – as satisfied with their standard of living and their job as people in other professions, says Bötsch. The number of farmers who quit farming has increased compared to before the reform but remains at around 2.5 % per year, "a socially acceptable level," he says.

One of the benefits of direct payments is that the government can be more specific about the hoops it makes farmers jump through to get paid. Bötsch says the reform has forced farmers to treat the environment better. For example, Nitrogen soil surplus decreased by more than 25% and the Phosphorous surplus has been lowered by far more than 50% compared to pre-reform, a result no doubt of tighter controls on fertilizer applications. More than 10% of the country's farming area is now organic.

While the Swiss public did vote to approve the reform 13 years ago, consumers have been grumbling about the cost of late. The reform brought direct payments to farmers' pocketbooks, and that transparency paints a clearer picture for taxpayers, who may question how their money is spent.

I'll tell you more about that next week.

Coping with $500 per ton anhydrous

2005-08-26T11:13:00.000-05:00

(Feel free to respond at the end of this commentary)

The farm price for anhydrous ammonia has increased 70% since its 1999-2000 average of $245 per material ton. This spring the cost was $416 per ton. Now that price is starting to look pretty good. This fall, with ammonia hovering at $500 per ton, many farmers are rethinking fertility programs this fall.

At least one farm manager has decided to stretch N dollars by abandoning some fall application in favor of sidedress variable rate N next spring.

"I don't think we can apply Nitrogen like we have over the last 10 years," says Jason Webster, farm manager at National Bank, Pontiac, Ill. "We're trying to cut our rate of N significantly because of the cost. It's just too wasteful - especially at $500 a ton."

Webster's bank is using a 10-foot toolbar that sends electric current three feet into the soil. Every second the tool measures organic matter, cation exchange and water-holding capacity of the soil. The result: better correlation between organic matter and crop yields. Bank managers log electro-conductivity (ECC) data with GPS and create management zone maps for more site-specific Nitrogen applications.

Webster is cutting N rates on the best soils and increasing N on poorer ones, based on the ECC data. "We think it takes more N to make a bushel of corn on poorer ground than better ground," he says. "We've made a lot of progress finding those areas in the last two years."

Webster will also use a new N soil test from University of Illinois to help dictate site-specific rates. "The U. of I. test is a pretty good predictor of how much you need to apply in specific areas," he says. "In some cases we may just put a small maintenance rate on."

Webster also believes economic conditions are right for lower applications of DAP (di-ammonium phosphate) and Potash. "This fall we've got surplus (of nutrients) in the soil from the drought, $2 corn and much lower yields and income levels. Going into 2006, I look for fewer dry applications."

Webster hopes to use the ECC toolbar on 10,000 acres by the end of the year. "Most of our farm tenants are fine with this because all of our variable rate sidedressed N will be custom applied," he says.

Fast facts
--Did you know fertilizer production accounts for 28% of the total energy consumed on U.S. farms? Natural gas is the primary feedstock used in the production of virtually all N fertilizers. A $1 increase in theprice of natural gas translates into a $33 increase in the cost of producing ammonia.

--Today, the domestic nitrogen industry supplies only about 55% of U.S. farmers' N fertilizer needs. The rest is being shipped in.

--Total output for dry urea production has fallen from 5.6 million tons in 1999 to an estimated 3.5 million tons for 2005. Imports during this time increased by more than 60%.

--The largest increase in U.S. imports has come from the Middle East countries of Saudi Arabia, Kuwait, Qatar, Bahrain and the United Arab Emirates.

--The U.S. Department of Energy projects that by the year 2010 the nation's demand for natural gas will increase by 30% and by 2020 Americans will consume 62% more natural gas than they do today.

--Petroleum Industry Research Foundation estimates demand for petroleum products grew 4.6 million barrels per day in 2003 and 2004, while refinery capacity grew only 700,000 barrels per day. That's a classic bottleneck.

--From 1981 to 2004, 54% of U.S. refineries have closed. In 1981 there were 324 refineries. Today there are 148. No new refineries have been built since 1976.

Food for thought
Bills travel through the mail at twice the speed of checks.

Big is better? Not always

2005-08-16T13:49:00.000-05:00

(Feel free to react at the end of this commentary)

Last week I told you I'd give you a follow-up on my road trip to Purdue for the Top Farmer Crop Workshop held in late July. One of the highlights was a gentleman who makes a great case for farmers who don't feel the need to expand their farm operation. At 1,140 acres, Tom Milligan thinks his farm is just fine the way it is.

Milligan, from Dana, Ind., was in front of this crowd of 150 or so farmers mostly because his old mentor, Howard Doster, kept preaching about big farms at past meetings. (Doster is a well-known retired farm management professor at Purdue and an organizer of the event).

"Howard would say, 'You get better, you get bigger, you get better, you get bigger,'" Milligan says. "I went home and it took some time to get over that. I believe not one system fits everybody. I have no desire to farm in two states. I have no skill for employee relations. Why would I do something if I have no desire or skill for it?"

Look closer at Milligan's profile and you can see why he make sense. He has kids who have no intention of coming back to the farm. But more important, he's benchmarked his farm's performance and can say with satisfaction that he's already doing a pretty good job with his 1,140 acres. Milligan, who farms along the Indiana Illinois border, uses Farm Business Farm Management, a farm management decision-making service operated by the University of Illinois, to compare his farm profitability against others his size.

"My FBFM field man says, 'You have a profitable operation, why worry about expanding?'" Milligan says.

Here's why. First, Milligan's yields are the envy of his neighbors and last year was no different. His 2004 average was 210 bu. corn per acre compared to 181 -190 bu. for cooperating farmers in nearby Edgar and Vermilion counties. The same trend held true for soybeans.

Next, he checked his costs and discovered his fertility and pesticide costs were much lower than farmers of similar size. His seed costs are much lower even though he buys half of his corn from local seed companies. He no tills, so his power and equipment costs are $46 per acre compared to $56 to $66 per acre at similar size farms.

It's not like he's doing all this with 20-year-old equipment, either. He uses a 16-row planter, STS combine, a self-propelled sprayer and he just bought his second tractor trailer. He operates most of the equipment except during harvest when his wife drives combine.

"I think I can be competitive at my size, and here are the records that prove it," he says. "The bottom line is, my management return is higher than average."

Can't argue with that.

Go slow on ethanol investments
University of Minnesota economist Vern Eidman gave a cautionary tale for those who may want to invest in ethanol plants. While the new Energy Bill may be an encouraging sign for farmers thinking about investing, producers still should be prudent about any new investment, especially value-added agriculture that involves their own commodities.

Volatility is the number one factor in ethanol production today, Eidman says. Very small changes in corn and ethanol prices can have very dramatic impacts on ethanol plant profits.
Eidman teamed with fellow economist Douglas Tiffany to write a paper, "Factors Associated with Success of Fuel Ethanol Producers," a must-read for anyone thinking about investing in ethanol. To find the paper, go to the Agricultural Marketing Resource Center Website, click on Commodities and products, click on energy, then click on ethanol. You'll find dozens of research documents on the subject. Scroll down to 'Processing and manufacturing' and click on "Success of fuel ethanol producers." Here you can also find a spreadsheet that helps determine ethanol plant profitability.

The paper was written before this year’s ethanol price decline, notes Eidman.

"The higher profits we've heard about in the last few years are not there today," he cautions. "The ethanol price in this new market is likely to be lower than what we've seen in the last few years."

Eidman suggests looking critically at location, size of plant, and a proposed plant’s ability to compete in an evolving industry. "Almost all the plants in Minnesota have expanded," he notes. "A number now are being built in the 80- to 100-million gallon range. Investors from Wall Street want larger scale plants to be operated efficiently and competitively. Those kinds of people are coming in to the industry."

Look also at the management and track record of the builder. "Their ability to meet a construction schedule and bring a plant online quickly is critical to short-term profitability," says Eidman.

Farming in Brazil
Later that day Phil Corzine, an Illinois farmer and frequent contributor to Farm Futures magazine, switched the tone of the meeting south - way south. Corzine is general manager of South American Soy, a venture attempting to carve a niche for U.S. farmers in Brazil’s northern frontier. He listed the top five challenges to Americans farming in Brazil:

1. Exchange rate - the weak dollar is playing havoc against a strong 'real,' the Brazilian currency. "That makes inputs cost more in Brazil and makes beans less valuable," Corzine notes. "It means the price is so low that there won't be a lot of new land being cleared in Brazil for the time being. The Brazilian economy is doing quite well and that's part of the problem."

2. Input costs - a greater challenge than most American farmers might expect, he says. His total costs from 2003 to 2005 have jumped from 1,000 real per hectare (2.48 acres) to 1,789 real per hectare. "We use gypsum to try to neutralize top layers of soil, make two applications of rust prevention applications, and all of it adds up to profitability issues," he says. "If you're an ongoing operation and you can't budget profit, it's a concern. The Brazilian producers marched on the Capitol and had a tractorcade to protest and try to get some relief."

3. Infrastructure - "There are some really bad roads in Brazil," says Corzine. "Some are clay, and there's lots of potholes." Some areas have no grain storage, so the farmers dumped soybeans on a plastic tarp one day, then scooped them back into a truck by hand later on. "There's a lot of infrastructure needed, but everywhere I've been there is improvement," he adds.

4. Bureaucracy - Corzine's company, SAS, hired a local farm manager who must spend a tremendous amount of time working with government officials and regulators. Every truck has to have a permit, and if you don't estimate weight accurately you'll get fined. "We're always going to the municipality to write out permits," he says. "Every time you go through a different state you have to stop and pay a tax. Every time you buy something there's a value-added tax."

Corzine tries to smooth the way by cultivating as many relationships as possible with local officials. "We try to be active in the local community, so they can see the value of us being there," he says. "I know how I would feel if a bunch of whoevers came in and bough land next to me. People tend to get hard feelings when that happens."

5. Culture - Most people figure language is the biggest challenge to an American farming in Brazil. But actually, the culture is a lot harder to pick up. "It's totally different than the states," says Corzine. "In Brazil you have to do the cultural stuff first, then you go talk business. Some times it seems like it's moving at a snail's pace. You get yourself established where people know you and you know them - more like how the Midwest was back in the 60s.

"You still run into herds of cowboys along the road, running cattle, bumping along the side of your truck," he adds. "Brazil is a Latin culture and so they move at a slower pace. Don't count on something happening tomorrow, even if they say it will."

Travels with Mike

2005-07-27T10:41:00.000-05:00

(Feel free to react at the end of this commentary)

Road trip!

Last week I went back to school to see what farmers were learning at the annual Top Farmer Crop Workshop at Purdue University. The workshop is a hands-on feast of seminars on everything from grain monitors to marketing. It's one of the few workshops that seamlessly blends university, private, and farm industry experts into one three-day event. Here are some highlights:

Farm records: priceless?
What if the last five year's of your farm records disappeared tomorrow? Could you put a price on their value?

Farmers at the workshop were asked to do just that. In what can only be described as an intriguing social experiment, Purdue ag economists asked volunteer farmers to bid on the least amount of money they would be willing to accept from Purdue in exchange for their financial records. Through a silent auction, farmers could 'sell' up to the last five years of their financial records.

According to Dana Marcellino, a Masters Student in the Ag Econ Department and coordinator of the event, the auction's 34 participants filled out an inventory sheet of what records they were willing to sell, including balance sheets, statements of cash flow, income statements, statement of owner's equity, checkbook registers and tax records. The farmers then were asked to decide on a price they were willing to sell their records in exchange for cash.

In theory, farmers who intentionally overbid stood little chance of winning, and those who grossly underbid would regret not asking for more if they came out on top.

"We asked the farmers to really think critically at what price they would be indifferent between having their financial records to use in their farm operation or having X dollars in cash," says Marcellino.

Bids ranged from $1,500 to $10 million, reports Marcellino. Over a third of the farmers bid $50,000 or less, while 18% said no amount of money was worth giving up their records.

"The most valuable types of records to farmers were the balance sheet, the income statement, and tax records," she says. "The least valuable was their statement of owner’s equity."

According to Christine Wilson, assistant Ag Economics professor, the process is a real eye-opener for farmers. "In our other auctions, what we've found is that when we get done the producers found it to be really enjoyable and enlightening as to how valuable their records are to them." Adds Marcellino: "From our summary statistics we can tell that while bookkeeping might not be a farmer’s favorite task, it is crucial to their farming operation according to the values farmers place on their individual records."

Nitrogen wisdom
Tracy Blackmer, research director at the Iowa Soybean Association, told the group how to rethink their traditional Nitrogen strategies. Good thing, too, with anhydrous prices going through the roof. He pointed out that with Nitrogen, the biggest factor is how much rain you get. Blackmer was keen on remote sensing - evaluating your crops from hundreds of feet in the air. Remote sensing shows spatial patterns in N levels that won't show up on a yield monitor, he says.

"If there's one simple thing to pull out of this conference, it's that you can rent a plane for $100 an hour and evaluate a whole lot of things over thousands of acres," he adds.

Blackmer urged farmers to do more on-farm testing and site-specific applications. "The universal truth is, most farmers could do a better job and save money with better on-farm N testing," he says. "There are too many factors going into this to give a blanket recommendation for Nitrogen. When we don't have nitrogen in our soils, it ends up in our rivers. More and more we have to be better at applying and being accountable."

Partner up
Two farmers from Linden, Ind., told how they put away their independent hats and began working together. David Virgin and Scott Odle are two very different personalities, as they both will readily admit. "Our community took bets on how long we'd be together," Scott quips.

But they realized they would be good for each other, as Scott brought years of marketing experience to the marriage while David brought equipment handling and agronomic skills. "I didn't really adjust the planter a lot once I got it set," Scott says. "I did know I was losing a little yield doing those things. And I knew David was the best corn planter in the county."

This kind of deal gets into strange territory for most farmers. For example, Dave owns a planter - but he doesn't own a tractor big enough to pull it. That takes trust - and guts.

"Our goal was to become lean and mean with our equipment," David says. And that's what they did. David sold his combine so the two could use Scott's 9760 John Deere combine with autosteer. David used the money to buy two heads for the combine. He also sold his 450-bushel grain cart and got a semi truck for the partnership. "Basically, I rolled my capital into other areas," he says.

"Because we farm together, we look like a 3,600 acre farm, so we bring input costs down," says Scott. The partners see value in added timeliness, too - now they can work 150 - 175 acres a day during busy times. Another factor is quality workmanship - Dave has a knack with equipment, and that's worth something to the farm's repair bill. "When Dave came in and said maybe we ought to change the air filters once a year, that was a revelation to me," Scott says with a laugh.

Another advantage is that they can make joint decisions. "We're cheap consultants to each other," says Scott. "There's a lot of decisions to be made when you think about precision farming, insurance, computers, software, chemicals, fertilizers, seed, machinery, land lord management - that's a lot to think about."

And the results surprised even these two opposite characters.

"As much as you might believe the forming of a partnership can reduce your independence and freedom, what we've found is it's allowed us to have more freedom with less stress," says Scott. "I have a lot more free time. There's a lot less stress in our operation."

I'll tell you more about my road adventures next week.

Should we protect U.S. farms?

2005-07-11T16:29:00.000-05:00

(Feel free to react at the end of this commentary)

Save our family farms? That’s a silly question. Who would say no? Yet, over the past two decades, nearly 350,000 farms have vanished from the American landscape. American farm policy has done anything but save family farms.

Of course, U.S. farm policy may not be the cause of consolidation. But it doesn't seem to be stopping consolidation, either.

Farm Futures' May/June cover story, 'Farm Bill on the chopping block' really hit a hot button with some readers. Many of you passionately believe we need to keep farm subsidies coming - that without them you'd never survive financially.

But there's real change ahead in U.S. farm policy. Some will see those changes as a disaster, and some will see them as opportunity.

Three forces are acting against the status quo.

First, we're about to begin deliberating a new Farm Bill. The last one, written for 2002, was developed when this country was flush with cash - a nice federal budget surplus. Today we are looking at a $422 billion deficit. There will be much less money for agriculture. The pie will be smaller.

Second, President Bush said last week at the G8 summit that he wanted to "work with the EU (European Union) to rid our respective countries of agricultural subsidies.'' The president's call to end subsidies is the most explicit statement yet by a political leader of a major industrialized nation, going beyond the proposals now being considered within the WTO.

Which happens to be point number three: World Trade Organization negotiations will eventually force the United States to change how it gives money to its farmers. It will also, in all likelihood, force you to open markets to production from poor countries so that those countries can lift themselves out of poverty.

Bush said he hoped the Doha Round (of WTO talks) would achieve the objective of getting rid of subsidies by 2010.

That means that farm production from countries with cheaper inputs and land - like Brazil, Argentina and China - will make it tougher and tougher for U.S. farmers to compete globally.

EU: Where protection works
A protectionist ag policy like the one that blankets the European Union (EU) seems to be saving family farms there, although recent efforts to reform Europe's CAP (Common Agricultural Policy) are having some impact. European farmers now get decoupled payments and WTO agreements have ratcheted back export subsidies.

Protectionism - that’s where Americans get hung up. That whole idea of protectionism seems to go against our free market mentality. But the Europeans, until now, anyway, have been able to keep more farms viable through both subsidies and artificial trade barriers. (Even with no scientific evidence and the EU itself saying otherwise, some countries in Europe still manage to ban GMO food. In Europe, "GMO" stands for "Greenpeace Membership Opportunity.")

The very idea of artificial trade barriers was once sacrilege here in the United States, where economists demand we view food production like any other business -- an industry that grinds along on the brutal cogs of supply and demand. That was before a Canadian cow with BSE showed up on our doorsteps last Christmas. Since that time forces within U.S. agriculture have proven they are quite happy to use non-scientific scare tactics to keep Canadian live beef out. Protectionism lives, even here in the good ol' USA.

In Europe, agriculture is more than numbers on an efficiency chart. It’s part of the social fabric. As an American, it’s impossible for me to fully grasp the mindset behind European farm policy. All I can tell is that as an outsider looking in, it would seem the EU’s policy reflects the belief that family farms have value, so they’re worth saving -- even if it means subsidies and a false economy that runs less on free markets and more on social ideology.

It's a place where family-based agriculture thrives - something we don't have, at least, not if you base that judgment on U.S. farm policy and the number of farms going out of business.

Why should Americans care, as long as food costs only 10% of their disposable income?

Needed: Value shift
A market-oriented agriculture seemingly has no room for values or sentiment. Yet, food is not steel or gasoline or computer chips. It’s the most basic of necessities and one of the most intrinsic pleasures of life.

Americans must begin to look at food production with more than just a shopping bag mentality. Otherwise, family farms become just another small business forced to industrialize - just footnotes leading toward the new economy, "like the little diners that got left behind on Route 1 when the interstates came in," wrote North Dakota Senator Byron Dorgan.

More and more, farm policy here will be shaped by forces beyond a farmers' control: WTO deal-makers in Geneva, the budget-balancers in Washington, and a lame duck White House with very little appreciation for who got their man elected in 2004.

If Congress is unwilling to make the needed changes to help U.S. farmers compete globally, maybe it’s time to revamp American farm policy with more emphasis on rural values and less on free markets.

Maybe protectionism isn't such a dirty word after all.

Food for thought
A conclusion is the place where you got tired of thinking.

Have your say at Farm Bill forum

2005-06-28T15:34:00.000-05:00

(Feel free to react at the end of this commentary)

I don't like crass commercial pitches any more than you do, but I've got a good story to tell here. And it includes a free meal.

Farm Futures, the magazine I work for, along with the University of Illinois, is holding a Farm Bill Forum on August 8 at Richland Community College, the home of the 2005 Farm Progress Show. That's in Decatur, Illinois.

Our May-June cover story, "Farm Bill on the chopping block" got a lot of attention, despite coming smack in the middle of planting season for farmers. That's because big changes may be coming when Congress begins tinkering with the bill. A new one is scheduled for 2007.

Several readers called our office to voice their opinions about how much, or how little, the government should be involved in agriculture. And all of you will have the same chance when we hold our Farm Bill Forum Aug. 8.

Pure fantasy
A wise old farmer told me several years ago that the idea of getting government out of agriculture was pure fantasy. Being a conservative, free-market kind of guy, I couldn't believe my ears. Sure enough, he was right on. We've had all sorts of schemes and programs over the years to change how government impacts crop production, supplies, trade - you name it. We've had PIK (Payment-in-kind), FTF (Freedom to farm), decoupling, market transition payments - and there's no sign of the government 'getting out' of agriculture. Now I'm convinced it'll never happen.

Some countries, like Australia and New Zealand, have gone cold turkey and stripped away all government subsidies to agriculture. They've had mixed results. But at least the farmers in those countries are better equipped now to compete in an increasingly global marketplace.

A farmer won't change his or her business plans or become more competitive if government programs motivate them to do the opposite. "Government subsidies have stifled incentives for entrepreneurship among grain farmers by relieving financial pressure for them to adapt," notes Gary Blumenthal, President, World Perspectives, a think tank in Washington, D.C.

Our next farm bill must create competitive advantages rather than protect old ones. But this will be much more difficult if policymakers continue to emphasize income subsidies instead of strategic investments, adds Blumenthal.

Our farm policy is full of ironies. For example, shouldn't a food policy promote better nutrition? Yet, we subsidize excess sugar and have to import fruits and vegetables. Shouldn't our farm policy promote rural development? Yet, most people agree that commodity subsidies fuel higher land prices, making it more difficult for young farmers to buy land and get established.

Our Farm Bill Forum addresses the changes that may be coming in 2007. Dr. Robert Thompson, the distinguished expert on farm policy at the University of Illinois, will kick it off. Visitors will also have a chance to tour the Farm Progress Show site (the show itself takes place Aug. 30-Sept 1).

Click on the button at the top of our home page to learn more about the Farm Bill Forum. We'll look for you there.

Food for thought
When everything's coming your way, it usually means you're in the wrong lane and going the wrong way.

Positive vibes on trade

2005-06-14T08:24:00.000-05:00

(Feel free to react at the end of this commentary)

I escaped the country last week and headed to Denmark to help the ag journalists there celebrate the 100-year mark of their association. A trip to Europe is both fun and sobering, especially when it comes to farm trade and policy matters. This meeting boasted some of the highest-level European ag officials, including EU Ag Commissioner Mariann Fischer Boel and Tim Groser, the top ag man at WTO.

This was a good chance to see where things stood in global trade matters. It's usually clear as mud if you're trying to keep score at home.

I always get a deeper understanding of world issues when I hang out with the Europeans. As my Irish pal David loves to say, "I've got trees in my back yard older than your country."

I found myself at a fine dinner at the Tivoli Gardens, a famous Copenhagen amusement park, next to Groser, chairman of the WTO ag committee. The Danes have a nifty little custom during official dinners and meetings: a sing-along. There we were, about 170 or so journalists and political leaders, half Danish and half, um, mixed breed, mumbling our way through these Danish folk songs.

Groser, a Scottish-born politician from New Zealand, wasn't much help, so we ended up humming along for mutual support. But he is as smart as a whip when it comes to ag trade, and was thoroughly impressive during the meeting.

"The Doha round will not fail," he said with conviction, referring to the ongoing trade talks within WTO. "You should assume it will succeed." He predicted completion by end of 2006.

This was refreshing. Usually when I meet with European ag officials I get a good tongue-lashing over the hypocrisies of U.S. farm policy, as if I'll hurry home and scold the boys in Washington on how things should be. This time the buzz focused on France rejecting the European constitution. There was a lot of hand-wringing over how the Europeans can't get their own act together, perhaps deflecting the usual anti-American criticism.

Still, if history is any lesson, Groser's confidence will be challenged. Dating back to the days of GATT (General Agreement on Trade and Tariffs, replaced by WTO 10 years ago), ag has always been a stumbling block.

"GATT and WTO can be relied on to do the right thing, at the wrong time, in the wrong way," noted Groser ruefully.

Globalization: No gimme
No one believes the rejection of the EU constitution by French and Dutch voters earlier this month will smash the Union. But it does send a message that globalization, especially among the world's farmers, is not necessarily an accepted fate.

Just over half of the French populace did vote 'non' to the proposed constitution; but 70% of French farmers voted against it, according to an exit poll. The farmers' strong rejection is being interpreted in Europe as a signal that, in addition to being concerned about the general direction of the EU, farmers are not pleased with changes to the European Union Common Agricultural Policy - the European version of our own Farm Bill.

That might leave EU trade negotiators with little room to make further cuts in European farm programs in the Doha round negotiations. And we're all going to need wiggle room if we expect this thing to succeed.

As Groser pointed out, 87% of world trade is not in agriculture. But that 13% is political dynamite, because it involves dated programs, tariffs, subsidies, and most sensitive of all, market access. In effect, the northern, 'rich' countries worry about a flood of cheaper goods from developing countries. It's already wiped out the textile industry in this country. But it's the only way to help developing countries crank up their economies.

China's modernized industrial infrastructure should scare the pants off all of us. The positive spin, though, is that China will need our food as its economy prospers and its population upgrades its diet.

"Letting down protectionist walls will be difficult in Europe," Groser notes. "We're not clear how to move it forward."

The EU and the United States approach WTO differently, Groser told me. "The United States makes their own farm policy and then changes the policy as needed to fit trade deals. The European Union does the exact opposite."

European farmers now embrace decoupling - government payments separated from production. This shift to decoupled support is a new world for European farmers, whose government policies once sent false economic signals and encouraged them for years to produce more and more food, which led to mountains of grain and beef. Sound familiar?

"Decoupling was designed to support farmers, but not farming," says Groser. "Producing vast amounts of food for which there is no market is not sustainable."

At least we can all agree on that point - and there's nothing wrong with singing from the same songbook, especially when it comes to ag trade. (What's your opinion on ag trade? Post your comments here).

The measure of a man

2005-05-27T08:47:00.000-05:00

My thanks to so many who poured out their hearts when I relayed the story of my father's passing ("A farmer's life," Friday May 13, 2005). Through many emails, letters and phone calls, you shared many great memories of your own fathers' lives.

Elwyn Wilson

Based on what you've told me over the last two weeks, this truly was The Greatest Generation.

As one colleague told me, losing a father is something one never really gets over. A High School teacher of mine told me at Pop's visitation, "You never really feel like an adult until your parents are gone, because you could always go back home and be someone's kid."

Based on your feedback, my father was a lot like so many other hard working farmers who lived and died with dirt under their nails. They lived great lives, with little fanfare. They never made a headline, and they never wanted the limelight. But their steady judgment propped up tiny farm towns and helped farms and families flourish. That was their legacy.

"As I read that story, I saw my father in almost every word," recalls Tom Bressner, General Manager at Assumption Cooperative Grain Company, Assumption, Ill. "Today my Dad is a retired farmer living in Pontiac. Mom and Dad have worked hard through the years, and to see them enjoying a simpler life together is a joy. Dad has had a heart attack, and has fought arthritis for years, but the joy and the optimism he radiates shows no pain to anyone."

And there was a note from Harlen Persinger, a farm photographer friend from Milwaukee, Wis. "Everything you wrote reminded me of my father, who we called Dad," recalls Harlen. "It was like I was reading about him. They were so much alike."

Harlen's dad, Francis, of Grundy Center, Iowa, graduated from Iowa State, served four years in the war, never took a vacation and loved the Registered Holsteins and Suffolks like his own kids, Harlen says.

"He had the same gestures for making hay and was a guru with livestock," Harlen recalls. "I had him for 46 years, although for the first two he was in the war and only had a picture to know what his son looked like. He was in Paris the night it was liberated and was in the second wave on Omaha Beach."

Francis got lung cancer - although he never smoked or drank a day in his life - in 1990. He passed away on June 14th, Flag Day, at home on the farm.

Stan Bird, a consultant friend in New Brighton, Minn., told me about his father, who was 99 years and 8 months old when he passed away.

"My father was around for the great depression(s), lost a child in 1934, and suffered with four other kids' illnesses and peccadilloes and made sure those kids all stood for American values and Methodist morality," Stan says.

"My dad had very limited education - a half year of high school - before my grandfather became bed-ridden," notes Stan. "But he was later able to attend the University of Wisconsin's Farm and Industry Short Course for two winters and received his FISC degree there in March, 1920.

"He was so impressed with the opportunity to advance his education, he strongly suggested that both my brother and I attend this ag opportunity and now we also hold FISC degrees," recalls Stan. "We both then farmed with my father until illness and injury forced both of us out of farming." (Stan later returned to University of Wisconsin to obtain a degree in Agricultural Journalism).

"My dad stood with the giants of the community, state and nation. He once turned down Adlai Stevenson's request to run for Congress. He came up with the concept of allocating gasoline stamps for agricultural operators during WWII."

Stories like these make people think back on what they miss most in life. If your father is still with you, stories like this will make you cherish every day together.

At the end of the day, the measure of a man is not in the gold left in his hand, but the love in the hearts of those he leaves behind.

"The things our Dads taught us (and what my Dad continues to teach me) on and off the farm have more value to us than any amount of formal education," concludes Tom Bressner. "May God Bless Farm Fathers Everywhere."

A farmer's life

2005-05-13T12:32:00.000-05:00

Editor's note: You can add your comment to this article using the link at the end. What do you think about this week's commentary?

My father passed away this week. He was 81.

My dad spent his life raising kids, crops, cattle and sheep on our fifth-generation farm in northern Illinois. His name was Elwyn. We called him Pop.

My dad loved his family and his early years as a high school ag teacher, but the farm was his bride. He was born there and wanted to die there. He loved it and never seemed to want anything more. He couldn't wait to get outside to feed livestock or jump on the tractor and hitch up an implement. Although he was the hardest working man I ever knew, it just wasn't work to him.

He believed in leaving the land better than the day he took it over from grandpa. He treated the farm like a business long before people had to do so in order to survive. Corn, sheep and cattle were mainstays, but he added a sow operation and feeder pigs in the 60s and 70s to help put us three kids through college.

A sixth sense
Pop knew every wet spot, broken hinge and foxhole. If the neighbor called to say our cattle had broken out of the pasture or timber, he knew right where to find the escapees and the hole they broke through. He could breathe life into a struggling, newborn calf or an aging, sputtering tractor.

Looking back, I am still in awe. How does a guy know how to do all this stuff? He was larger than life. My two older sisters and I thought he was John Wayne.

He could scare away a feed salesman, or give my sisters' 'cool' boyfriends a panic attack. Mostly, though, he would put visitors at ease. His friends and neighbors would stop in and say hello and he would always stop what he was doing, for even though my dad loved the solitude of farming, he loved people, too. He might have been self-conscious and reserved, but he also loved to laugh.

You learn a lot about life growing up on a farm - things you take for granted until you move away to the city. Only then do you realize what a treat it was to be raised in the country, and especially so by loving, caring parents who appreciated the lifestyle. My father was content on the farm. After he graduated from the University of Illinois and spent time in the service during WWII, he never had much interest in traveling elsewhere.

But my mother must have convinced him we needed to get out more, because we did take a family vacation to Florida when I was around 10 years old. Stopping at a truck stop late at night, I saw my father in friendly conversation with a passing truck driver, who sauntered to the back of his semi, opened it up and presented me with a heaping fistful of baseball cards. My dad and I were both die-hard Cubs fans, so that was a pretty good night all around.

He was the steady voice of reason in a sea of constant change. He was the school board president who would reserve judgment until all had their say, but he had little patience for folks who talked a lot and said nothing. When he did speak, people listened. His quiet leadership and common sense helped our community through more than one crisis.

Hard times
When I was 14, high winds ripped down the old machinery shed, and the two of us chased livestock in the pouring rain. Eight years ago another tornado ripped apart the large red barn that housed the sheep and hay, leaving a pile of debris and dead livestock. He seemed to lose his zeal for farming after that catastrophe. That barn was the mainstay of our farm.

In the late 70s, my father cared for my mother as she battled cancer. He left me to take care of the farm so he could be at her side every moment. When she died in 1978, it took most of the life out of him, too. My two older sisters had moved away and I was about to leave for college. His rheumatoid arthritis made every day a painful experience. At age 55, his outlook seemed bleak.

But things changed at my wedding six years later, when Pop met my new mother-in-law - a much-younger, single, west-coast businesswoman. You would think these two had nothing in common. You would have been wrong. My wife and I were so busy getting married we didn't notice the sparks flying on the other side of the room.

That night at the reception I saw something I'd never seen before: My father, in suit and tie wearing his Cub hat, drinking champagne from a woman's shoe! It was the first time I'd seen him laugh in a long time. This was one of those moments when you realize your father has a life of his own to think about. They got married the next year. And she was at his side when he died last week. I am so thankful they found each other.

Memories
As a kid, I remember going with him to livestock auctions, sitting with the other farmers, listening to their conversations, and waiting all morning for the chance to go to the "Patty wagon" and get an auction house hamburger.

We would spend sweltering days loading and unloading hay. He would emerge from a haymow in 100-degree heat, his shirt soaked through with sweat. Sometimes I would drive the tractor and he would load, or we'd switch places. The trick for me was trying to figure out his hand signals - two palms down meant ease back the throttle, because the swath of hay was too dense; a vigorous circular motion meant 'rev it up.'

He loved bridge, country music, square dancing and reading westerns. My dad would get into watermelon seed spitting contests with our exchange students, or demonstrate to them the fine 'art' of eating corn on the cob. He would orchestrate these miniature 'cattle drives,' and position us kids at the neighbor's driveways when we moved the cows from the barnyard to the fresh grass in the timber a mile or two down the road. We were 'blockers,' and you sure didn't want bossy to get around you and cause a stampede. Most of the time the cows went where they were supposed to.

While taking photos at the FFA Convention in 1995, my wife informed me we would be having a baby. I called to report the news. He was dubious: "I'll believe it when I see it." Sure enough, granddaughter McKenna was born June 25, 1996. He spent hours and hours with her on the farm, and I'm thankful now she got a chance to know him. I think his love for the farm will rub off on her.

Pop tried to retire from farming 10 years ago. He had put some land in the Conservation Reserve Program, but even so, that spring he was out feeding bottle lambs and planting corn. When I asked him about it, he said farming was in his blood. He told me that in his mind, the perfect way to die would be out on the farm somewhere.

I realized then, retirement would probably kill this man. He needed to be doing the thing he loved best.

Shortly afterwards he began suffering heart attacks and strokes. Each time, he recovered - we called him the comeback kid - but 60 years of smoking eventually caught up with him.

It became difficult to get out to ball games we once enjoyed together. So I would call him from my cell phone whenever I was at an event he would have enjoyed, like a Fighting Illini basketball game last fall or a Cubs' playoff game in Wrigley Field in 2003.

The most damaging stroke put him in the hospital two weeks ago, rendering him speechless. They moved him to a nursing home last week. He was miserable there, and he told us so even though he could barely utter a sentence. Another heart attack ended his life May 11, 2005.

A lot of people knew my dad. I was lucky enough to know him all my 46 years.

He was a simple, decent man who loved life and did his best for his family and community.

If only the rest of us could leave such a legacy.

Five trends mean bigger farms ahead

2005-05-06T13:26:00.000-05:00

Editor's note: You can add your comment to this article using the link at the end. What do you think about this week's commentary?

Is size - farm size, that is - an issue? That depends on if you like the idea of bigger and bigger farms.

The United States is headed for dramatic changes in farm size, contends Kansas State extension farm management economist Kevin Dhuyvetter.

Regardless of where you are on the 'size' issue, these five trends merit watching:

Crop farm consolidation. Consolidation is just another way of saying more business is being handled by the same amount of firms. Just look at how many equipment dealers or meat packers we have today compared to 20 years ago. We've already seen rapid consolidation in poultry, swine and dairy farms - are crop farms next?

"We think there are things in place that mean we could have rapid consolidation in the crop sector in the short term," Dhuyvetter says. "Instead of farms growing at 3 to 5 percent a year, we could all of a sudden start seeing more 10,000-acre, 20,000 or 40,000-acre farms. It's hard to see too many things stopping it."

More technology that is not scale-neutral. New farm technology is being adapted quite rapidly, but it wasn't always that way. If you look back at how tractors replaced horses, for example, that adoption took 40 years, Dhuyvetter says. More recent technology adoption cycles have been dramatically faster - Roundup Ready soybeans took only seven years to go from non-existent to over 80%.

More important, the technologies being adopted now are not size-neutral, so "they will very much increase the potential for consolidation," he adds. "Many of these are driven by economies of size. I can't justify a high dollar autosteer system for 500 or 1,000 acres, but can I for 5,000 acres? You bet. So once again, we've got technologies coming along that are not scale neutral, and that will increase consolidation."

Dhuyvetter advises farmers to look closely at technologies that may not show obvious immediate payback. Why? Because their advantages are not already built in to the market. With Roundup Ready, for example, farmers had to adapt it just to keep up with their neighbors. But when technologies are more slowly adopted, "you actually get some profit during that adoption phase because you're ahead of the curve," he says. "Sometimes it's better not to wait before something is proven."

More non-production investments. That's a trend that's not going away, he says. "Our city folks are looking for opportunities to come to the country, for hunting or recreation…. or, maybe you have an opportunity to invest in an ethanol plant. There's all kinds of opportunities for us as farmers to be more involved with non farming sectors - either bringing people on to our farms, or sending our money off the farm."

Dhuyvetter cautions folks to keep their own farms in close consideration for those dollars. "If you want a successful farm and you recognize that your farm has to grow if you want to be viable in the future, you might want to seriously consider if you want to send money off the farm, because your farm needs that capital as well."

Increased emphasis on business skills. "We can still enjoy farms as family operations but we have to treat them like a business," he says. "Accrual based accounting, evaluating crop insurance, looking at buying or leasing land or machinery - these are things we've heard about for years that may be boring, but boy, are they important. The payoffs for these skills will be more important in the future than in the past."

Outsourcing. As businesses keep growing operators must identify the need for specialized skills, information and analysis. "We've always relied on people with specialized skills like accountants for taxes or veterinarians for livestock, but as our operations get larger and larger, we will need to do that more and more," he says.

However, at some point when these operations get to a certain size, some of these outsourced functions are brought back 'in house.' "So, rather than hiring an accountant to do taxes, some of these large operations will just hire the accountant as an employee, and maybe part of the year they'll actually be doing some fieldwork, who knows," Dhuyvetter says. "Successful farmers will recognize when to micromanage and when not to."

How not to settle a law suit

2005-04-29T16:26:00.000-05:00

When you receive money in a class action lawsuit, it usually means the issue is settled.

But the Starlink settlement may be the first case in history where the way a case was settled was more annoying than the case itself.

Last year farmers began receiving payments for damage to their markets after Starlink corn, which was not approved for human consumption, was discovered in the nation's food chain five years ago.

Starlink was genetically modified to combat corn borer. It was approved for feed use, but not food - scientists were still sorting out potential allergic reactions. But then oops, it got mixed in with some corn intended for food or export back in 2000.

Remember what happened? Food companies recalled products, corn prices dropped, and farmers sued Starlink's developer, Aventis. And eventually it became a class action suit, which paid out about $75 million to non-Starlink producers.

The way the case was settled made a lot of farmers unhappy.

One of them is Richard Rayburn, a Prairie Farmer Master Farmer from Dewey, Ill. He was one of those who received money in the Starlink class action settlement.

Complicated distribution
The way the law firm handled the settlement distribution seemed complicated right from the start. "A court must have approved the settlement, but the mechanics of the distribution were very arbitrary," he says.

Initially they announced that the settlement would amount to maybe $1 per acre for those not planting the offending seed corn. It was recognized that there had been damage to the market system because of loss of buyers and reduced confidence in U. S.-produced corn. Buyers felt it might be contaminated.

I use the word "contaminated" almost tongue-in-cheek here. Rayburn and most farmers like him agree. "The fact that I and most farmers do not believe that crops that have undergone gene alternations are a risk to produce or consume is not important," he says. "The important fact is that some of our customers believe it. And this damaged sales."

Rayburn received $3.31 per acre in the settlement, far more than the estimate, indicating that everyone did not apply for the settlement. "I suspect that of those who did, many were denied," he adds.

In total, 72,076 claims were approved across the United States, representing over 25.8 million acres - about 36 percent of the 72.4 million corn acres planted in 2000, according to the University of Illinois.

The file Rayburn submitted for the land that he owns and also owned by his mother grew to be an inch thick. The process started with a letter from the company indicating that they had used an FSA (Farm Service Agency) list or some official source. It did not include all his acres, but he persisted until everything was included.

This must have been a great burden for the FSA to comply with these requests.

"Many of the forms were returned asking for more information, which was the same information that I had already sent," says Rayburn. So it was back to the FSA for more copies. "I persisted and sent documents by registered mail, return receipt requested. I don't know if that made any difference."

Visa to the rescue
And the payment? Those who received a settlement got a Visa debit card with an added incentive: a 10% discount at Tractor Supply Company (TSC).

In an online article , Adam Levitt, of Chicago, and one of the lead attorneys for the plaintiffs, said this was negotiated as an additional benefit to the class members and that it was the first time where a class-action settlement resulted in a cash-plus settlement.

That's creative. I guess checks are old fashioned.

Not that there's anything wrong with the deal TSC made. I'm sure the company saw this as a good way to build its customer base. But I'm sure it also raised some eyebrows in the countryside.

"Any number of retailers would have jumped at the chance for that advantage, and I suspect that there was monetary value to the law firm doing the settlement to arrange it like they did," Rayburn says.

Cards were mailed late last October and early November. Rayburn received four Visa debit cards in his name - cards that were to be divided between three individuals (owners and tenants have one claim per farm and the person making the claim is responsible to distribute the funds).

When his cards arrived, the envelope looked very much like the many other unsolicited credit card offers, saying he was "already approved for credit."

Surely many farmers threw away these debit cards along with the other junk mail they receive.

The letter with the debit card did not mention Starlink or how much value was on the card---to know that, you had to go back to your own file. No where on the card or letter does it say anything about Starlink Settlement.

"I know of instances where people did not even remember getting the cards and no doubt threw them in the waste basket with the other unsolicited cards," says Rayburn. "I took mine to the bank to get a "cash advance" to deposit in my checking account for distributing to the others that I needed to share with."

To make matters worse, he doesn't even have a TSC in his shopping area.

The balance of funds from unredeemed claims were supposed to be distributed to charities, schools, community food banks and organizations like the National FFA Organization.

"Maybe there could be a fund established to create a watchdog on the law firms that take on class action suits to help us file claims," quips Rayburn.

Food for thought
The problem with the gene pool is that there is no lifeguard.

Ethanol on a roll

2005-04-06T09:14:00.000-05:00

My, how times have changed.

If you've been around the track long enough, you'll remember 20 years ago when the big oil companies were duking it out with corn farmers over the merits of ethanol, a fledgling, 'boutique' fuel additive.

Back then some of the oil companies put 'no alcohol' stickers on their pumps, implying to consumers that the fuel would harm vehicles if they used ethanol. I was a young punk know-it-all at the time, so I wrote a column suggesting farmers should cut up any credit cards from fuel companies that bad-mouthed the renewable fuel.

Nearly got fired for that one.

These days, ethanol is on a winning streak. Processing plants are sprouting up like June seedlings. The oil companies and farmers are friends (sort of). Sure, the oil companies don't want to give up market share. But they're feeling the heat from consumers over imported oil and high gas prices.

When the average retail price of gasoline hit a record $2.15 per gallon in late March, wholesale ethanol prices averaged $1.39 per gallon, a price differential of more than 75 cents per gallon. And ethanol prices have declined because of record supply. Ethanol is starting to look like a great deal.

Ethanol will consume about 18% of U.S. corn (15 million acres) this year. Petroleum refiners blended more than 3.5 billion gallons of ethanol into the gasoline supply in 2004.

Energy gain
Ethanol has been surrounded by questions from both environmentalists and economists. But at least the economic questions should now be quieted. A recent study by Argonne National Laboratory found that ethanol generates 35% more energy than it takes to produce, reinforcing the fact that production of the corn-based fuel yields a net energy gain.

"We believe (the study) has laid to rest some long-held misunderstandings about ethanol and its important role in reducing America’s reliance on imported oil and our greenhouse gas emissions," Department of Energy (DOE) officials stated in a summary of the study. "In terms of key energy and environmental benefits, cornstarch ethanol comes out clearly ahead of petroleum-based fuels…"

A USDA study released in 2004 found that ethanol may actually net as much as 67% more energy than it takes to produce.

Now biotechnology will make ethanol's future even brighter. That's one thing I learned at the NCGA's Second generation Ag Biotech conference, held March 15, 2005 in Washington D.C.

According to Jeff Stein of Syngenta Seed, the company is building a better corn for ethanol.

Typically a powdered form of enzyme, amylase, is introduced into corn during ethanol processing. Syngenta is building a genetically modified plant with the enzyme already built in - a self-processing crop, so to speak - to make a more rapid ethanol production process, says Stein, Director of Regulatory Affairs.

By using high amylase corn, improved efficiency could lead to substantial savings in the cost of producing ethanol. "This process increases the efficiency of converting the corn starch into ethanol, and it should also reduce costs," he says.

The enzyme is introduced and expressed solely in the corn kernels and is impossible to tell apart from conventional corn. In side by side evaluations with conventional corn they're finding a substantial boost in ethanol production and maximizing the yield of ethanol per acre of corn, says Stein.

Early on Syngenta conducted a feed trial on poultry and found no problems with net energy values. It's now being fed to other livestock.

What about safety? Production of amylase in corn is safe, Stein says. "Amylases are ubiquitous in nature, occurring in plants, bacteria and human saliva. The Syngenta amylase is nearly identical to an amylase that is approved by the FDA for use in food processing."

Syngenta is seeking the typical approval process for full food and feed approval from FDA and USDA.

I'll let you in on a few more tidbits I learned from the Ag Biotech conference next week. Look for Mike Wilson's column in each issue of Farm Futures magazine.