THIS WEEK ON U.S. FARM REPORT
FEBRUARY 4-5, 2012
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. We are pleased today to introduce the newest member of our Farm Journal Media team. Tyne Morgan joins us to handle a wide range of reporting duties. Tyne hails from Missouri and has made a career of Ag communications both academically and within the agribusiness community. She adds much needed expertise and flexibility to our line-up and we are sure you'll find her contributions a valuable addition. With that let's get to the news...welcome aboard, Tyne.
CHILD LABOR REDO: Thanks John. The labor department is having second thoughts on proposed changes to child labor laws for farming operations. The department says it will take more time to consider changes to the so-called 'parental exemption'. The proposal will now have broader exemptions for children whose parents own or operate farms, or have a substantial interest in the operation. Critics say the original rules would impact how children learn the business from their parents and relatives.
WHEAT CONDITIONS: The winter wheat crop is holding strong in most areas - but not all. The Ag Department says about half the crop in both Kansas and Oklahoma is rated good to excellent. Scattered showers and unseasonably warm temps have pushed the crop along. In Texas - it's another rough start...just a quarter of the crop is in the top category.
TEXAS COTTON: Change is in order for the Texas cotton crop. State extension agents predict there will be more cotton in dry land this year versus irrigated acres. They're attributing the potential shift to higher irrigation costs and water shortages.
TP SEMINAR: With hundreds of producers on hand, attendance hit a new high at the top producer seminar held this week in Chicago. A highlight of the event was the naming of North Dakota potato grower Gregg Halverson as the Top Producer of the Year. Halverson is owner and CEO of Black Gold Farms in Fargo, North Dakota. The family-owned business farms 20,000 acres in eleven states. It’s also the top provider of potatoes to Frito-Lay.
ROUNDTABLE: With three veteran market experts at the Top Producer Seminar this week, I began by asking Bob Utterback about the about the nearly unthinkable possibility of another disappointing corn crop in 2012. What happens is prices will stay in the upper $6 range. Maybe even $7. I would challenge you I will revert back to that we have kind of fallen in love with the high profit levels we'd seen in the marketplace. What's not to love, Bob? It's not normal. It's abnormal to have all this over production costs. I would say if you look at historical averages, 50 to 70 dollars is more the norm. And I think we're on a supply growth curve over the next three to five years, where the demand curve is starting to flatten out. Ethanol usage is not going to explode. I would suggest to you exports are going to be good but not at a heavy rate. So we're coming to a time period where the profit margin will have a period of being squeezed in the 2013-2014 time period. I don't have to say you have to have low prices. I think the profit margins are going to be squeezed and this is something we have to address. What about you, Mark? Are you concerned about the demand side of it? I'm certainly concerned about demand out here. Greg is kind of an expert out here, on China, but from what I see, we see them backing off the last couple months, so that concerns me. It's been --we've never in this down there I had three years of increasing trend-line yield, so it would be unprecedented to have the third year. If we do something in these markets that's unprecedented, we could have an unprecedented reaction and price. I would say that we might have to go a little higher. But I believe that, I was taught in the University of Illinois, in Ag School, many of you might remember Tom and he always used to say, Mother Nature takes care of excesses and Mother Nature takes care of deficits. I hope Mother Nature takes care of the deficits. What about China, Greg? What's your outlook? We're talking about a percent off of 10% growth. I think the Chinese leadership is more interested in control. They just announced the other day that they'll increase crushing capacity another 12 million metric tons. So their biggest thing will be civil unrest and having their food inflation, keeping that at bay, that will be the number one task for them. But the control factor is starting to ring loud and clear. People that have been selling in china, I think they're going to be squeezed out and you'll see the state-run grain companies probably expand in a tremendous way over the next three to five years. We talked this career how there used to be a famed battle for acres. If it is a battle, it's one of the quietest ones I've ever seen. New crop does not seem to be reflecting a whole lot of urgency compared to old crop. How are you reading it? I've heard statements in the past couple of days showing new profits going to about 2.2, but that's going to draw acres out of corn back into beans. I think that's nonsense. I think if you can plant the corn, if you get the weather, you're going to plant the corn. Until we get that corn-bean ratio somewhere north of 2.5 we're not really going to have a strong incentive to switch acres. You guys love corn. I really believe we're going to see somewhere between 95, 96 million acres of corn planted if Mother Nature cooperates. Give me a number real quick. 95, 96? I'm more 96.35 officially. I think if there's any error to be aired, it's more acres than less, if mother nature cooperates. But also, I think there's an argument that trend line is probably too high. Probably 161 is probably -- because of the expansion in the corn belt. Well, we'll have to leave it there. We'll be back in a moment. When we continued the questions on this week's round table, I turned to Gregg Hunt to update the developments in the MF Global bankruptcy. I know when they went to trading publicly, they obviously, you know... I think a lot of people didn't realize they changed. But I keep it real simple. They apparently stated they audited MF Global on Thursday and Friday was the day before they went bankrupt that Monday morning. I can't wrap my arms around why it's taken this long to find this money, with the vast amount of resources they're using right now. It's just incomprehensible to me. That said, a lot of people, when this happened, you know, knew that a lot of the money came with a small amount of the margin, and for about two weeks, everybody was on pins and needles thinking, well, they're going to blow this guy out, or that guy out. We had that report coming up two days later that could have really caused a lot of pain to some clearing firms on top of it that were financially right. But I think it's settled down now. There's other issues out there that are driving the way money flows that are far more apparent than what's happened in MF Global. It hasn't changed the attitude all up and down the market, didn't it? What I see, the main flux of news has certainly settled down. Some guys are even saying that 100% of the money as of last night, that the two trustees are fighting over releasing the information and it's a mess. I think what's important for you as American farmers is, what is the impact on you? You have to make a decision in your life, do you want to use the markets, even though maybe money and funds aren't guaranteed anymore, that just the transactions are guaranteed? Is the money safe? I'm doing a breakout session in a little bit on the whole lessons of this global situation but i think the key thing you have to ask yourself is, do you have more risk in not using the market or using them? I would say clearly the risk for the American farmer is far greater if you don't use these markets than if you use them. When we see in years past, with ethanol plants going out of business, when a local grain elevator may go out of business, that was a shock to you, the farmer. You didn't get paid. The bankrupts hit. Did that stop you from being in the grain business? No. It made you look more closely at who you're doing business with. We'll get into specifics later on, but I believe there's far greater risks in not using these markets than using them. I think the risk now is a lot more clear-cut than we saw before. We haven't talked much about soybeans. Is there a possibility that we could reach a soybean --you know, if no more rain happens for the rest of February in Brazil, that we could reach a soybean that could truly threaten growth, notwithstanding what Mark said? I think soybean acres are going to drift up, not as much as corn. The high was 77.04 in the last few years. I think you're probably drifting toward 76. I think in areas you're going to see soybean growth increase, I've been hearing a lot of yield response, in the Missouri area, Arkansas, the dryer areas, you're going to see those areas shift more to beans and that's my response. Also, I would want to build upon the comment, one other thing on MF Global, is the third-party agreement risk, that farmers now assume, if we do see the European bank crisis continue and we have a monetary crisis, the third-party agreements are increasing. When the ethanol plants imploded, these are risks that you're going to have to manage. You mentioned a new risk. Is there a new risk on the horizon that we simply have not been covering? Because it seems like another one pops up. Is there anything we need to check up? We just have a few seconds here. There's always the potential of a black swan out there. If any of us had a clue what it was --we could certainly tell you. They're unpredictable. Manage the risk today to be in position today for whatever happens tomorrow. I think that's something that has held our customers pretty well. That's it, from the Top producer Seminar in 2012. We'll be right back.
JOHN’S WORLD: At the most recent meeting of the Federal Reserve open market committee a decision was announced to leave interest rates at effectively zero until late 2014. Not only was this a new policy of disclosure, but it marks a historic duration for any fed rate policy. In case you had forgotten, the fed first dropped the rate to zero in December 2008, and ever since then those of us who borrow money to operate businesses have rejoiced at rates as low as 3-4%. Too many of us remember paying 19% back in the '80s. This policy has now gone on long enough for it to seem normal. It is anything but. In fact, because of the time delay in savings deposits, the full effect of a zero interest rate is just now being felt. As longer-term savings certificates mature, investors are watching 5 or 6% yields, for example being replaced with rates under 1%. Even with no payoff, the world cannot seem to get enough U.S. government debt. After accounting for inflation, investors are actually paying 1-2% to loan the U.S. money. The reason has been hard to for me to grasp. There is simply enormous wealth available to invest, and fewer even modestly safe assets to buy. Despite repeated warnings of skyrocketing rates any time now, it is clear we have entered a time when cash is not king. Let us know what you think.... Send emails to firstname.lastname@example.org or call and leave us a voice mail.
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I’m John Phipps. The growing attention in the medical community on obesity is certainly providing ample news fodder. But it is also starting to affect government policy, consumer sentiment, and industry reactions. Our gigantic food industry, which starts on our farms, is beginning to send financial signals to meet these consumer expectations. This is trickier than it sounds, since we often say one thing and eat another. It is at such moments of change that opportunities emerge for entrepreneurs along the food chain to anticipate and exploit long term payoffs. We'll try to spotlight these pioneers as we see them emerge. Let's get started with the headlines and the newest member to the Farm Journal Media team Tyne Morgan...
FLORIDA FOOD STAMPS: Thank you John. Florida lawmakers are taking steps to prevent people on food stamps from buying junk foods. Florida is just the latest state to try this measure as a way to reduce obesity. This week a Florida state senate committee passed a bill that would make snacks and fast-food off-limits to people on food assistance programs. Some of the items include sweetened soft-drinks, salty and sugary snacks. It would also prohibit the use of food stamps at fast-food restaurants.
COLORADO SCHOOL FOODS: Meanwhile, Colorado is taking aim at junk food in school cafeterias. State lawmakers are considering a ban on all foods with trans fats. And it's not just the food served in the cafeteria. The measure would ban trans fats found in vending machines and after-school bake sales. Several states already limit trans-fats in school cafeterias, but none that impacts before and after school programs.
LSU FOOD SCIENCE: The desire to find safer, fresher and healthier products pushes many food scientists to their labs every day. In this report provided by LSU, Tobie Blanchard tells us researchers are working on ways to "up" the nutrition content on many popular foods.
HEARTLAND: Spirit of the Heartland takes us to the rolling hills of Maryland to meet a dairy producer recognized as one of the nation's best. The dairy farm Donna Myers runs with her husband is not one of the biggest. But their attention towards genetics makes the farm stand-out. Clinton Griffiths has our story. Thanks Clinton. The World Dairy Expo is now accepting nominees for the 2012 awards which include Dairy Woman and Dairy Man of the Year, Industry Person and International Person of the Year. The winners will be honored at the Expo this October in Madison, Wisconsin.
BAXTER BLACK: The shortage of rural veterinarians is well documented...with that in mind, Baxter Black has some tips for taking care of your local vet. When we come back, Tractor Tales features a classic Moline plus we'll have our Country Church Salute...please stay with us.
TRACTOR TALES: Welcome back...Tractor Tales comes to us this week from northern Illinois. This Minneapolis Moline UB was one of many "vision-lined" tractors created by the Moline Company. The first tractor with this feature was manufactured in 1937 with the model "Z". Don't forget - if you'd like to watch Tractor Tales head to our home page... www.usfarmreport.com...or find us on Facebook. You can also download these segments as podcasts from iTunes. Just search for "Tractor Tales" at the iTunes store.
CHURCH SALUTE: Our Country Church Salute heads to Elliston, Ohio where the Trinity United Church of Christ is celebrating its 150th anniversary. When the congregation was formed in 1862, it was made-up of mostly German immigrants. They met for worship whenever the traveling missionary pastor was available. Today many descendants of the original families still worship in the same church. The building has been updated several things, but the original structure still stands. Our thanks to Tracy Dresser for sharing the history of Trinity United. As always we want to learn about your home church as well... Salutes can be sent to the address on the screen. Stay with us - the mailbag is next.
MAILBAG: Time now for our weekly look inside the farm report mailbag....A viewer objects to my stand on global warming because it fails a humility test: "Maybe humanity is simply arrogant enough to assume they have the intelligence and power to be responsible for every good and bad thing that happens on the planet." - Tom Lingbloom, Minneapolis. This attempt to reframe a scientific debate as a philosophical or religious disagreement is a familiar response. However, for me it fails on multiple grounds. First belief in anthropogenic global warming does not automatically mean or even imply I think humans cause every good and bad thing on the planet, to use your words. Nor did I say that. Second, while it is easy to see one human as puny compared to the vastness of our environment, multiplying that one person by 7 billion at the very least adds several zeroes to the results. In fact our species can point to significant environmental impact. We have erased several species from wooly mammoths to passenger pigeons from the globe. We have changed to courses of rivers and converted vast swathes of grasslands in central Asia and Africa to desert by overgrazing. Trivializing human environmental impact undercuts the relentless efforts of farmers around the world to conserve precious topsoil farm by farm and millimeter by millimeter. It is not arrogance in my opinion to accept responsibility for our environmental impact. In fact, it is just the opposite. As always, we want to hear from you, send comments to email@example.com or leave us a voice mail at 800-792-4329.