WEEKLY NEWS HIGHLIGHTS

COMPILED BY THE RED RIVER FARM NETWORK

USDA Leader Looks at Ag Economy — Agriculture Secretary Ed Schafer says farm profitability has disappeared, but that situation could improve in time for spring planting. "Today, if you look at the cost of inputs and the cost of commodity products, farmers are upside down when they go into the field; in other words, their cost of inputs is more than the return they're going to get from selling their crops." Schafer says the energy market and its relationship to input costs will change by spring and "then we can be back in a positive territory."

Farm Profitability Challenges — One of the biggest challenges for farm profitability is the real estate market. Approximately 50 percent of farmland is rented and National Corn Growers Association Chairman Ron Litterer says the combination of declining commodity prices and strong land costs is a worry. "I think a lot of the rents that have been established though for 2009 are based on pretty high expectations and maybe higher than what we might realize in the marketplace." A larger supply and lower corn prices are reality. In an AgriMarketing magazine webinar, Litterer questioned where this market would stabilize. "We knew that $7 corn was too high; it wasn't sustainable; our end-users couldn't buy it and make a profit in their businesses," said Litterer, "It's just like $147 dollar crude oil wasn't sustainable; I think the question here is where do these prices come out at (and) where do they stabilize and that's the big unknown."

Budget Reconciliation — The new economic environment is putting more attention on all federal budget outlays. On Capitol Hill, that has renewed talk that budget reconciliation will be necessary. Under this process, congressional committees with authority over mandatory spending, which includes the agriculture committees, are required to find budget savings.

FCS Strong — The Farm Credit System is in good financial shape. The Office of Examination and the Office of Regulatory Policy reports the system is meeting the significant credit demands from farmers and cooperatives. Chief Examiner Tom McKenzie says asset quality remains high, although examiners expect to see a slight deterioration in the coming months.

Don't Do What You Did Last Year — "Don't do what what worked last year." That's the word from Richard Brock, president of Brock Associates. "What worked last year was don't sell grain and buy your energy and fertilizer inputs early." The growers that bought inputs early, particularly fertilizer and fuel "and didn't sell any grain, they're going to have a severe financial squeeze this year." Brock is recommending farmers delay their input purchases as long as possible.

Tighter Lending Policies Expected — Bower Trading President Jim Bower expects bankers to tighten their lending policies. "Those producers who are compliant, who are very accurate in their numbers, who are very direct in dealing with the lending institutions and bankers and are on a very strong relationship-type basis, I think they'll be fine, but I think the ones who have kind of fudged a little bit on what is right and what is wrong and haven't been real compliant with their issues; I think those days are over and I think we're going to go into a much more audited, much more scrutinized market structure and lending structure." Bower says that will be difficult for many farmers, "but the ones that do it right, do it correctly, do it on time; I think they will actually benefit in the end."

October Report — USDA's corn and soybean crop forecasts are up from last month, and above pre-report estimates. While the grain trade expected slight declines, USDA raised its corn production estimate by 130 million bushels, to 12.2 billion. The soybean number is up 50 million bushels, to almost 2.99 billion bushels.

Time for Soil Sampling — While the harvest is going very slow, Centrol crop consultant Dennis Berglund says his team is busy with soil sampling. "The fertilizer prices are close to a dollar per pound of plant food, so there's been a lot of interest in regular soil sampling and also in zone management and zone sampling; farmers really should get their field signed up for soil sampling to get it done; it doesn't take much of a fertilizer savings to pay for it this year."

Fertilizer Shortage Cuts into Brazilian Crop Prospects — Recent rains have improved seeding conditions, allowing farmers to begin planting soybeans in parts of Mato Grosso, Brazil. Farmers now face another problem, the lack of fertilizer. Even farmers with access to credit have not received their fertilizer due to a distribution delay. A Cuiaba newspaper reports that one producer who normally plants about 15,000 acres of soybeans will plant 10,000 this year because he did not receive enough fertilizer.

Gas Price Drop — Over the past two weeks, the price of a gallon of gas took its biggest ever drop. According to the Lundberg Survey, the average price for regular unleaded gasoline was $3.30 per gallon on Friday, down from $3.65 two weeks ago. West Fargo has some of the lowest prices in North Dakota this morning at $2.65. In North Dakota, the average price is $3.07; down from $3.65 one month ago. The average price in Minnesota is $2.84. A month ago, the average was $3.70 per gallon.

Food Costs, Food Safety and Animal Welfare — According to the Center for Food Integrity 2008 consumer survey, the rising cost of food is among the three greatest consumer concerns in the United States today. "Economics, no surprise, are the overriding concern for consumers today; whether it's the rising cost of energy, the rising cost of food or their personal financial situation, that clearly overrides every other concern for consumers in today's market," explains Charlie Arnot, CFI chief executive officer, "The other two things that were somewhat surprising are the growing concern over food safety and the decreasing confidence in food safety in the US, and also, the decreasing confidence in the treatment of food animals; we saw both of those drop significantly in a statistical manner over the last year." The survey showed 60 percent of the respondents are more concerned about food prices than they were a year ago. Arnot says consumers are looking for ways to cut their food bill.

Monsanto Defends Pricing Strategy — Monsanto Chief Financial Officer Terry Crews says the company's ability to price to value is a valid concern for its investors. Crews feels comfortable with Monsanto's price levels for its seeds and traits products for the coming season. "From 1996 to today, average corn yields have increased at a pace of about 2.6 bushels per year, creating about 32 bushels of new yield per acre for farmers; using a commodity price in the range of $2.00 to $4.00, that's approximately $60 to $125 per acre in new value created," said Crews, "Even though seed costs more than it did 15 years ago, a farmer is getting an average return of $1.50 to $3.00 for every dollar he's spending on seed because of the value of this technology."

Biotech Acres — The popularity of biotech seeds continues to grow. Monsanto Company says US farmers planted 72.5 million acres of Roundup Ready soybeans this year, an increase of over 11 million acres from last year. Total Monsanto corn trait acres are put at 73.3 million, six million acres more than last year.

Biotech Regs Get an Update — USDA is updating its regulation of biotech crops. A new biotech event will be dependent on its potential risk to crops and noxious weeds. USDA is also listing possible consequences for non-compliance, including the loss of future and existing permits and financial penalties.

Kraft Cuts — Kraft Foods is cutting 400 jobs from its North American workforce. That is equal to one percent of the company jobs. The cuts are part of a three-year plan to improve sales and lower costs.

Grain Equity Tool — Cargill AgHorizons and Wells Fargo have launched a new grain contracting program. EliteHEDGE offsets the hedging costs of a contract until the grain is delivered. Using a Wells Fargo line of credit, producers can underwrite the higher costs of forward contracting grain. The grain must be delivered to a Cargill-approved delivery point.

Simplot Takes Ownership Stake in Fresno Fertilizer Firm — The J.R. Simplot Company has acquired majority interest in Britz-Simplot Grower Solutions. This is a newly formed company which owns and operates the business formerly controlled by Britz Fertilizers of Fresno, California. The deal was announced in April and finalized this past week.

 

 

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