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Change Worth Noting

January 10, 2009
By: Jeanne Bernick, Top Producer Editor
 
 


The energy and excitement surrounding a new administration and Congress were evident during the 12th Farm Journal Forum, held in Washington, D.C., in December. The event, part of the Food and Agriculture Policy Summit, took on an electrifying air as Cabinet-level officials, agribusiness leaders and farmers gathered to examine how political and economic change will impact American agriculture.

USDA chief economist Joe Glauber set the stage for the event with an outlook on agriculture in the midst of uncertain economic times. "I feel like I'm in the eye of a hurricane, trying to forecast where agriculture is going to be [next year]," he said.

U.S. farmers will plant around 90 million acres of corn in 2009 and cut back on wheat, while soybean plantings will be stable, Glauber predicted. Grain and soybean prices will remain volatile because of tight supplies—corn stocks are a half billion bushels less than they were going into 2008, he said.

The growth of China, which is 70% dependent on soybean imports, shows the importance of American soybeans for protein meal and biodiesel, Glauber added. Demand from the Asian sector should increase U.S. beef trade, although downturns are expected for pork and poultry exports.

Much could change for the export picture once President-elect Barack Obama and his administration are in place, said Jim Wiesemeyer of Informa Economics. Wiesemeyer pointed out that Obama has talked about opening trade to Cuba.

The Obama team will no doubt face unique challenges with agricultural trade, said former trade officials Joe O'Mara and Allen Johnson. In these uncertain economic times, however, the U.S. must not resort to protectionist measures, O'Mara warned.

"The main challenge for the Obama administration is to develop a centrist approach for sound support of expanding trade, which all the data show will benefit the economy," O'Mara said.

It's critical that the new administration focus on enforcing current trade agreements before ushering in new trade negotiations, Johnson added.

Agriculture has to make sure it is front and center with the Obama administration when forging new agreements.

Volatile market. The 2008 Forum, sponsored by Monsanto Company and the United Soybean Board (USB), came at the end of a wild market year. A panel discussion provided perspective on the market situation.

Mike Dunn, a commissioner of the Commodity Futures Trading Commission, said it is still hard to define whether the record-high commodity prices of the past year stemmed from market fundamentals or speculators.

Gregg Hunt, a market analyst with MF Global, called the 2008 market a "passing fad" and said he doesn't expect to see Wall Street money returning to the commodity arena anytime soon.

In regard to credit volatility, Emily French, associate director, Treasury and Commodities Group, Macquarie Bank Limited, said the past year is a taste of what farmers will see in the next three to five years. "For the spring of 2009, farmers should expect to see no more access to liquidity," she warned.

Transportation. The Obama team will inherit several challenges related to America's transportation system. Ken Eriksen, Informa Economics transportation specialist, said that while legislation has moved forward to improve river infrastructure, there are funding problems that need to be dealt with. "A lot of environmental aspects are linked to infrastructure upgrades, which has tied up funding," he said.

Obama's plan to rebuild infrastructure as a way to get jobs back into the economy may help. However, the government is already behind its general funding for infrastructure by about 40% annually, Eriksen added.

A new challenge for the nation's transportation system is moving the growing volume of ethanol. Jeff Broin, CEO of Poet, the nation's largest ethanol producer, gave his perspective on the future of ethanol growth as it relates to grain use and production.

Broin also noted ethanol's impact on the importation of foreign oil. If domestic ethanol were a country, he said, it would supply the second largest amount of gasoline in the form of Btus to the U.S., even more than Saudi Arabia.

Given projected yield increases, Broin estimates there will be enough surplus grain during the next 40 years to produce 48 billion gallons of ethanol while still increasing the amount of food supply. "We are going to need to use that grain for ethanol because if we don't, we will see extremely low crop prices," he said.

Food and fuel. On the topic of production, Jim Stillman, a farmer and vice chair of the USB domestic marketing committee, said the nation can produce enough food and fuel without sacrificing one or the other. "The production challenges of 2008 tested producers like never before," he said. "Yet we still produced nearly 3 billion bushels of soybeans, which is the fourth largest crop ever in the U.S."

Meanwhile, the 5% to 7% growth in developing markets bodes well for world demand for U.S. corn and soybeans, said Brett Begemann, Monsanto executive vice president, Global Commercial. "I believe we should give agriculture the opportunity to both feed and fuel the world," he said.

Several former USDA officials had advice for the incoming ag administration. Bill Lesher, USDA chief economist under President Ronald Reagan, and Jim Webster, a USDA official during the Jimmy Carter administration, both suggested that the new administration forgo trying to reorganize the behemoth USDA.

"You can start reorganization, but you will not finish it in the first four years of your administration. There are special interests behind every agency in a department," Lesher said.

Farm bill issues. A key issue moving forward is the continued expansion of conservation programs via the 2008 farm bill. Both Sarah Gallo of the National Farmers Union and Dan Wrinn of Ducks Unlimited expressed a hope that the Obama administration will continue the "cooperative conservation" efforts of the George W. Bush administration. Incentives, not penalties, are the biggest asset to get farmers to be more conservation-minded, they agreed.

Outgoing Deputy Secretary of Agriculture Chuck Conner suggested that U.S. agriculture focus on the issue of payment limits, which caused much of the holdup in the recent farm bill.

"In light of the budget pressure facing the next administration, debate over income and payment limits is going to come back," Conner said. "It is something we ought to fix ourselves within the agriculture family. If we don't, someone else is going to fix it for us."

As for the livestock sector, Chandler Keys of JBS Swift and Dr. Jennifer Greiner of the National Pork Producers Council noted the growing focus on production practices. Echoing the sentiment of USDA's Conner that agriculture needs to take charge, Greiner and Keys agreed the burden falls to U.S. livestock producers to explain their industry to the general public.

In short, this year's Forum fleshed out many of the key issues for U.S. agriculture and the country that await a new Congress and a new administration. So, let the transition begin!









You can e-mail Jeanne Bernick at jbernick@farmjournal.com.

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FEATURED IN: Farm Journal - January 2009
RELATED TOPICS: Policy, Farm Journal Forum

 
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