The Top Producer Top 25

December 5, 2008 08:04 AM

Path to the Future

You don't know where you're going if you don't know where you've been, because the past is our future path.

Think back on the big stories of the last few years and ponder how long it took for them to develop. For example, when Richard Nixon traveled to China in 1972, who could imagine that visit would lay the groundwork for tremendous economic growth and a boon for U.S. corn and soybean producers—nearly 40 years later?

When then vice president Al Gore started talking about the earth's warming atmosphere in 1994, would you have thought it could lead to a new industry? Combine today's global warming discussions with the quest to break free of foreign oil: could that be the basis of a new green economy?

Many pundits think so.

Connecting the past's dots with today's situation leads to many more questions, but it also points us in the direction we're heading. The lessons of our past are the windows to our future.

As we close the 25th year of publishing Top Producer, this special section is designed to help you see where we've been and maybe offer some insight into agriculture's paths of tomorrow.

As agriculture was struggling to emerge from the 1980s farm crisis, Farm Journal editors saw the need to serve a new and growing audience: agriculture's Top Producers.

Since that time, the industry has suffered through two 500-year Midwest floods and numerous droughts, and a bevy of groups have popped up for the sole purpose of protesting big agriculture.

On the positive side, events like China becoming a major market for U.S. commodities and record exports throughout the world in recent years have brought good times to farmers. The development of production technologies like herbicide-resistant traits and GPS made farmers' jobs easier and changed the face of an industry.

The pages inside this special section show what led to the path we're on and point the way for the next 25 years of your career—and Top Producer. —Greg Vincent

The Beginning 1984–1988

Farm economic woes. In 1983 and 1984, 46 ag banks close their doors; in the last quarter of 1984, one fails every six days; 118 fail in 1985. Farmland prices continue a multiyear decline. In 1985, farmers seek a federal debt restructuring plan.

The Farm Credit System loses $1.7 to $2.9 billion in one year. It is bailed out in 1986 and restructured; Farmer MAC is born.

By 1987, farmland begins to look attractive and investors enter the market.

Farm programs. Despite widespread financial stress throughout farm country, the Reagan Administration seeks to cut farm spending and payment limits are born. Programs include the Acreage Reduction Program, Payment in Kind, Conservation Reserve Program, Dairy Herd Buyout and Export Enhancement Program. Boll weevil eradication programs are introduced. Crop insurance comes of age.

Trade. By mid-1985, exports are weak and protectionism talk is strong. Clayton Yeutter is named U.S. Trade Representa-tive for the General Agreement on Tariffs and Trade (GATT) negotiations. In 1986, a trade war rages between U.S. and EC-12. Corn, soybean and wheat exports are casualties.

The computer. Top Producer features a department entitled "Computers" in its first publishing year. A February 1987 article on modems marks the rise of the Internet.

The Trade Years 1989–1993

The first Iraq war led by the first President Bush dominates the news of Top Producer's second five years, but international trade agreements capture ag headlines. The North American Free Trade Agreement is negotiated and passes through Congress in 1993.

In 1992, Brazil makes a production breakthrough as Mato Grosso opens up (in 2008, the state raises 14.5 million acres of soybeans).

The American Soybean Association wins a critical GATT dispute over European oilseed subsidies that reputedly costs U.S. producers as much as $50/acre in lost markets. The subsidy battle is far from over, however.

Weather woes: Drought wallops the South in 1990. Yields in some areas are cut by two-thirds. In Dooly County, Ga., crop income falls 82%. On the other extreme, the Midwest suffers through the first 500-year flood in 15 years. On July 11, 1993, Saylorville Reservoir north of Des Moines reaches a record stage of 892.03 feet above sea level.

Animal rights grab headlines October 2, 1989, when about 40 protesters assemble on the National Mall across from USDA in Washington, D.C., for World Farm Animals Day to "manifest, memorialize and mourn the abuse and destruction of billions of innocent, feeling animals in U.S. ‘factory farms.'" Few notice the demonstration.

Biotech. Agracetus/W.R. Grace and Mycogen Corp. get patents for inserting foreign genetic material in plants in 1991. Calgene receives FDA approval for the Flavr Savr tomato in 1994.

Policy. The new "greener" farm bill in 1990 expands conservation programs, tightens restrictions on wetlands and requires additional records on restricted-uses pesticides. The bill puts more cropping decisions in farmers' hands. Soybeans get a marketing loan for the first time.

Controversy. CBS-TV's "60 Minutes," with Ed Bradley reporting, hammers California's San Joaquin Valley farmers over their use of subsidized U.S. Bureau of Reclamation water.

In commodities, Ferruzzi U.S.A., the American subsidiary of the Italian soybean processor, tries to corner the soybean market. The Chicago Board of Trade, concerned about market chaos, asks all traders to reduce investments in soybean futures contracts. The American Agriculture Movement claims the situation cost U.S. farmers $2 billion.

Freedom to Farm 1994–1998

Land prices surge. Prime Corn Belt land tops $3,500 an acre in 1996, the highest in 15 years. Paul Prentice, president of Farm Sector Economics, says, "We still usually can't tell if something is overvalued until it's too late."

Biotech for the masses. Biotech finally becomes reality for major crops. Bt corn hybrids and cotton varieties hit the market, as does Roundup Ready technology. Entomologists warn about possible insect resistance to Bt after Bt corn is planted on 14 million acres. They urge farmers to maintain refuges to reduce the likelihood of resistance.

Objections. Europeans voice displeasure to genetically modified crops in 1998. Greenpeace, the environmental group, eventually manages to erect barriers to any grain shipments to Europe that might contain GMOs.

The Freedom to Farm Act of 1996 promises a predictable economic cushion as farmers shift strategies to accommodate changes in government programs and the marketplace. Farmers who enrolled in farm programs in three of the past five years can sign seven-year contracts with no crop restrictions, dropping target prices and crop supports.

In 1997, the Federal Crop Insurance Corporation offers Crop Revenue Coverage in selected states.

In January 1999, Kansas wheat grower Alan States and British grower Oliver Walston jokingly face off about who gets more subsidies at Top Producer Seminar.

Checkoff. By a 54% vote of 86,000 farmers in 28 states, soybean farmers OK a national soybean checkoff in 1994; it is rejected only in Illinois and Indiana. The United Soybean Board is launched. Worldwide soybean demand surges to 130 million metric tons in 1995, continuing a 15-year uptrend.

FMD and BSE. Taiwan wipes out more than 2 million of the nation's 14 million hogs when foot-and-mouth disease is found in 1997. At the time, it is the world's sixth largest pork-producing country and the third largest exporter behind the European Union and the U.S. About the same time, Holland's pork exports are shut down by a bout of hog cholera and the Dutch discover BSE (mad cow disease) on some dairies.

Who's the rat? The Endangered Species Act threatens agriculture in Kern County, Calif., which has almost $2 billion in annual ag sales, when farmer Taung Ming-Lin is arrested for disturbing habitats of the Tipton kangaroo rat, San Joaquin kit fox, and blunt-nosed leopard lizard. He was disking a field to plant 20 acres of bamboo and allegedly ran over five of the endangered rats.

The New Millennium 1999–2003

Fertilizer surges. The year 1999 marks the beginning of costly fertilizer as the price of natural gas heads skyward. By 2004, domestic fertilizer supplies dry up and the U.S. is a net importer. Today, fertilizer prices are nearly five times the price in 2001.

The other white meat. Smithfield Foods, the nation's largest hog producer and world's top pork processor, effectively gobbles up Murphy Family Farms, the number two producer. The 1999 acquisition engages debate over laws preventing packers from owning hogs.

Computers. Nothing epitomizes 2000 more than the Internet and e-commerce. A 2000 survey of 500-plus-acre Midwest corn growers shows more than half use the Internet to price and purchase both farm-related and personal items.

FMD stays away. After Britain discovers foot-and-mouth disease in February 2001 (forcing the slaughter of more than 100,000 animals), USDA moves to prevent livestock diseases from entering the U.S. Today, the Department's Animal and Plant Health Inspection Service mans 126 U.S. ports of entry.

Lost freedom. While the 1996 farm bill included provisions commonly referred to as the "freedom to farm," the 2002 farm bill effectively reverses those with significant increases in domestic subsidies for U.S. farmers.

MTBE ban forces ethanol. How quickly ethanol production turned from a trickle into a gusher is evidenced by state bans on methyl tertiary butyl ether (MTBE) in 2002 and mandates to replace the fuel oxygenate with ethanol. California is the first to rule MTBE must be pulled from the pumps.

CAFO rules. Tougher guidelines for permitting concentrated animal feeding operations (CAFOs) impact up to 36,000 farms and create estimated annual compliance costs from $2 to $240/livestock animal and 1¢ to 80¢/poultry animal, according to the Environmental Protection Agency's own estimates.

BSE: Ugly Christmas present. The announcement of the nation's first case of bovine spongiform encephalopathy, or BSE, comes on December 23, 2003. The U.S. beef industry loses beef exports during 2004 worth $3.2 billion to $4.7 billion. The industry continues to lose $2.5 billion to more than $3 billion a year in export opportunities.

Globalization 2004–2008

The perfect storm! From 2006 to 2008, various storm fronts line up perfectly, some to the farmer's benefit and others not. Commodity prices shoot through the roof, but they also bring unrest as the stakes suddenly get higher for farmers. Inputs soar just as dramatically, and we see demand destruction for most major commodities.

Real storms, too. On August 29, 2005, Hurricane Katrina strikes the U.S. Gulf Coast and devastates New Orleans, creating havoc for shipping on the Mississippi River.

In 2007 and 2008, the South can't buy a rain, forcing some farmers to abandon 2008 planting in some areas.

On the other hand, the Midwest has too much of a good thing as it suffers the second 500-year flood in a decade and a half. The wet weather delays planting across the Midwest, forcing many farmers to switch to soybeans and fueling debate over the ethanol mandate.

Energy. Congress spends much of this five-year period looking at energy plans, while producers are forced to develop strategies for dealing with increased energy costs. The Energy Independence Act of 2007 calls for 36 billion gallons of renewable fuels by 2022. Of that total, 16 billion gallons must be from cellulosic materials, and the corn-based ethanol mandates increase steadily and top out at 15 billion gallons through 2015.

Aggressive expansion. The 2003 Purdue University Commercial Farmer Survey promises significant growth for the nation's largest farmers over the next five years. And do they ever grow! Strong competition leads to red-hot cash rents. In the spring of 2007, 14% of the respondents in a Top Producer survey say they have lost farms to other area farmers, proving the intense competition. The highest rate confirmed by Top Producer is $476/acre in Illinois, but we have reliable reports of $500-plus in the state.

Pop goes the bubble. Top Producer posts the "10 Signs of an Economic Crisis," by retired Iowa State University economist Neil Harl, on its Web site on October 17, 2007. About one year later, the crisis hits.

On October 2, 2008, ag stocks take a tumble after Agriculture Secretary Ed Schafer pontificates that the looming financial crisis may mean farmers won't get financing for their 2009 plantings.

Click here to see the web extras for this story.

Top Producer, December 2008

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