I. Commodity Prices
II. China
III. Obesity

I. Commodity Prices

Yesterday, the U.S. Department of Agriculture’s National Agricultural Statistics Service (N.A.S.S.) released the December Agricultural Prices report.

New York Times Photo

The N.A.S.S. report indicated that, “The preliminary All Farm Products Index of Prices Received by Farmers in December, at 121 percent, based on 1990-92=100, increased 1 point (0.8 percent) from November. The Crop Index is up 6 points (4.9 percent) but the Livestock Index decreased 3 points (2.6 percent). Producers received higher commodity prices for lettuce, corn, grapes, and broccoli. Lower prices were received for turkeys, cattle, hogs, and tomatoes.”

More specifically, N.A.S.S. estimated that, “The December all wheat price, at $4.59 per bushel, is unchanged from November but $1.06 above December 2005…The corn price, at $3.01 per bushel, is up 14 cents from last month and $1.09 above December 2005…The soybean price, at $6.14 per bushel, increased 7 cents from November and is 36 cents above December 2005.”

With respect to livestock, the report noted that, “Compared with a year ago, prices are lower for cattle, milk, turkeys, calves, and hogs but higher for broilers and eggs.”

The report also contained a helpful graphical depiction of price trends, click here to view the Prices Received chart for corn and wheat; and click here to view the ten-year pattern of cotton and soybean prices.

The prices of these and other program crop commodities will have various impacts on the overall agricultural economy, and will also be a contributing factor in the debate over the future direction of U.S. farm policy.

An Associated Press article posted yesterday at BusinessWeek Online stated that, “A record run of hog profits in Iowa could end as early as this winter because of higher corn prices and record numbers of hogs on farms, analysts said.”

On Wednesday, N.A.S.S. released their Quarterly Hogs and Pigs Report, which noted that, “U.S. inventory of all hogs and pigs on December 1, 2006 was 62.1 million head. This was up 1 percent from December 1, 2005, but down 1 percent from September 1, 2006.”

A report posted yesterday at the Brownfield webpage provided an analytical look at the N.A.S.S. swine estimates.

The Brownfield update noted that, “Ron Plain, [Professor of Agricultural Economics at the University of Missouri] says that if he takes a contrarians approach to the report, what may be the most surprising is the fact that while pork producers have had a very good run (Iowa State reports that November marked the 34th consecutive month of profits that Iowa pork producers have enjoyed. The longest profit period since Iowa State began issuing the monthly report back in the mid 1960’s) they are beginning to cut back. ‘History says we need to pile up some red ink for awhile before you start seeing a cut back in the breeding herd,’ said Plain. ‘In this case, we haven’t got to that point, we’re still making money, yet it looks like we are well on our way to cutting back.’

“And the number Ron Plain points to as the most surprising in the latest report is the half percent increase in the spring farrowing intentions. ‘A lot of people were sort of anticipating that, that with higher feed prices we were going to see producers cut back,’ Plain said. But what’s surprising he says is how quickly and how drastically the cut back is happening as indicated in the Hogs and Pigs report.”

To listen to a Brownfield interview with Dr. Plain, just click here (MP3).

Dow Jones writer Gary Wulf reported yesterday that, “The expanding U.S. ethanol industry is poised to alter the look of the land across the grain belt, possibly prompting farmers to plant more of their 2007 acreage to corn than any other time since World War II.

“‘I’ve been suggesting that we may have to push acreage up to 88-89 million acres of corn,’ said Purdue University agricultural economist Chris Hurt. ‘That would be a 10 million acre increase from 2006 and would put us at the highest acreage planted to corn in the United States since 1946,’ covering a total area approximately the size of Montana.

“U.S. corn plantings peaked at 113 million acres in 1932, but post-war development of higher yielding corn hybrids and commercial fertilizer made it possible to grow more corn on fewer acres, just as soybeans were introduced.

“But the nation’s expanding biofuels industry is now threatening to return rural America to its appearance of several generations ago, featuring field upon field of tall-standing corn, rather than fluffy cotton, grassy wheat or bushy soybeans.

“‘There’s no question at this point that we’re going to need a massive increase in corn acreage for 2007,’ Hurt said. ‘That increase is driven primarily by ethanol, but we also have very strong export demand.’”

A Dow Jones article posted yesterday at DTN (link requires subscription) stated that, “Following recent gains in Chicago Board of Trade corn futures prices, Nebraska farmers are considering killing off wheat they sowed this fall to make way for corn to be planted in the spring, agricultural economists said.

“Nebraska likely saw producers plant 15 percent more wheat acres this fall to take advantage of high futures prices, said Bob Klein, a cropping systems specialist for the University of Nebraska-Lincoln Extension. But wheat prices have since declined, while corn futures are showing continued strength.

“To clear the planted wheat, producers would spray it out with herbicide, Klein told Dow Jones Newswires.

“‘If the corn price stays up and the wheat price stays where it is, it’s pretty attractive to consider,’ he said.”

The article also included a link to this University of Nebraska online decision tool for producers, which provides an assessment of whether corn or wheat might be a more profitable crop to plant.

Andrew Martin, writing in today’s New York Times, in an article datelined from Denison, Iowa, reported that, “With some restaurants and even the city of New York swearing off trans fat, Monsanto recently sent representatives here with a mission: persuade farmers to grow a special kind of soybean that produces a valuable alternative to frying oil laden with trans fat.

“The company and its local soybean processor offered the farmers doughnuts and a simple pitch: an extra 35 cents a bushel to grow the special soybeans, instead of regular ones, and seemingly unlimited demand. The special soybeans contain less of the fatty linolenic acid than other soybeans.

“Some liked the offer, but others were not so sure, given the extra work involved and the allure of planting high-priced corn instead to feed the ethanol boom.”

Mr. Martin added that, “A strange twist to the current supply squeeze for trans-fat-free soybean oil is that the seeds were created more than a decade ago, but for years, there were no buyers. One seed company, Pioneer Hi-Bred International, finally stopped research on new varieties in 1999 because of the dismal prospects.

“‘We waited and waited,’ said Russ Sanders, marketing director at Pioneer, which is now part of DuPont. ‘Now the market is expanding faster than we can keep up.’

“As a result, seed companies and oil manufacturers are offering farmers 21 cents to 80 cents a bushel extra to grow the low-linolenic soybeans.

“Monsanto has made arrangements with 14 processing plants across the Midwestern corn belt to process the beans next year, and it has held several meetings with neighboring farmers at each plant to make their sales pitch.”

In conclusion Mr. Martin reported that, “Kenneth Fawcett, 57, of West Branch, Iowa, said he, too, is the exception in his part of eastern Iowa. He has planted low-lin soybeans for three years and collected premiums as high as 80 cents a bushel because his soybeans are not genetically modified to be herbicide-resistant, and thus can be sold at a higher price.

“But he said most of his neighbors are more likely to plant corn or regular soybeans because low-linolenic soybeans are too much work. In addition to the need to keep them separate, he said, the processing plant accepts them only a couple of days each month.

“‘I think a lot of people want to grow the beans because it’s the right thing,’ Mr. Fawcett said, but, ‘the economics have to be there to reward them.’”

II. China

Tracy Zheng and Victoria Ruan, writing in today’s Wall Street Journal, reported that, “China’s economy is likely to have expanded 10.5% in 2006, the chief economist of the National Bureau of Statistics said yesterday.

“The estimate is in line with the government’s recent forecast. China’s gross domestic product grew 10.2% in 2005.

“Yao Jingyuan, the senior official of the statistics bureau, said at a financial forum that the combined value of China’s imports and exports likely rose 25% in 2006 to $1.7 trillion.

“Mr. Yao’s forecast suggests economic growth slowed slightly but remained rapid in the fourth quarter. The economy surged 10.7% in the first three quarters from the same period a year ago.”

For a more detailed look at what population and income growth in developing countries like China could mean for agricultural exports, see this Brownfield interview with Dr. Bob Thompson, Gardner Professor of Agricultural Policy, University of Illinois.

Brownfield’s Dave Russell noted that, “But Dr. Thompson gets even more excited about the market opportunities China offers when he digs deeper into the numbers. ‘When you see that almost half the population in China is still living on less than $2.00 per day, and realize that most of the economic growth that has occurred has been in the coastal provinces, we could really see all the impact China has had on the global market demand double from what it has been to date.’”

To listen to the Russell / Thompson interview, just click here (MP3).

III. Obesity

Chicago Tribune writer Jeremy Manier reported yesterday that, “More than a third of disadvantaged 3-year-olds in Chicago and other major U.S. cities are overweight or obese, according to a new study that supports the notion that the struggle with obesity often begins in early childhood.

“Hispanic children from low-income families were most at risk, with 44 percent either overweight or obese, compared with 32 percent for white and African-American children from similar households.

“The study’s authors at the University of Wisconsin-Madison also identified several practices that may protect kids from excessive weight gain, including breast-feeding for at least six months and not allowing children to take a bottle to bed.”

Mr. Manier added that, “Although some nutrition experts hailed the results as a call to action, some have questioned the foundation of the research. Even using the terminology of obesity to describe the very young is contentious.

“The federal Centers for Disease Control and Prevention does not refer to those under age 20 as obese because rapid growth early in life makes it difficult to compare desirable weights for children with adults’. Instead, the CDC uses the terms ‘overweight’ and ‘at risk of overweight’ for children at the upper end of their age group’s body-mass index, or BMI, a number used to gauge the relationship of weight to height.

“In contrast, the American Obesity Association holds that the same terminology should be used for children and adults, in part because heavy children are more likely to become obese adults and face a range of health problems such as diabetes and high blood pressure.

“Despite such differences, both organizations agree that more children are becoming overweight, creating a national health threat. The percentage of U.S. children meeting the definition of obesity has more than doubled over the last two decades, to nearly 19 percent in 2004.”

-Keith Good

Additional news regarding farm subsidies and agricultural trade is now available at the German Marshall Fund’s Trade & Development wepbage.

Today’s update, “Farm Subsidies: Focus on Africa, Rice and Cotton,” can be viewed by clicking here.

Photo by Juliane Von Reppert-Bismarck, The Wall Street Journal.

-Keith

I. Food Safety
II. Water Runoff
III. Ag Lending
IV. Disaster Aid
V. Livestock Report

I. Food Safety

Ricardo Alonso-Zaldivar reported in Monday’s Los Angeles Times that, “Recurring outbreaks of food-borne illness from contaminated produce are ‘unacceptable’ in today’s society, the government says. But when it comes to preventing new occurrences, the Food and Drug Administration hasn’t done much of the basic research that would let it write regulations to fix the problem.

“Six years after the FDA first issued general guidance to the produce industry on how it might prevent contamination from microbes such as E. coli 0157:H7, experts say federal regulators still can’t answer key questions.

Associated Press Photo

“For example, does water used for irrigating crops have to be clean enough for people to drink? And since cow manure is a common source of E. coli, how far from a cow pasture does a spinach patch have to be? Across the road? A quarter-mile away? A mile?

“‘There are no specific criteria for producers to follow, no specific criteria that can be enforced,’ said Michael R. Taylor, who as head of the Agriculture Department’s Food Safety and Inspection Service in 1995 launched a testing program for E. coli that led to major sanitary improvements at meatpacking plants.

“Without such specifics, FDA talk of regulations to protect consumers from more outbreaks like the recent ones involving fresh spinach and Taco Bell restaurants may be little more than bureaucratic saber-rattling.”

The L.A. Times also noted that, “‘The idea of sending inspectors out right away is fairly useless, because without the basic science to set workable standards, you can’t know what will work,’ said William Hubbard, a former FDA associate commissioner for policy, planning and legislation.

“One reason for the lack of data from the FDA seems to be that its funding has not kept up with increased responsibilities and the rising cost of maintaining its professional staff.”

Concluding, the article stated that, “The incoming Democratic chairwoman of the House committee that oversees FDA funding said she was baffled that the agency had not asked congressional budget writers for more money for food safety. Rep. Rosa DeLauro (D-Conn.), said she planned to make food safety the topic of her first hearing next year.

“‘We have to find out where we are falling down here,’ said DeLauro. ‘Is it resources, is it management, is it a combination of the two?

“‘We have to be able to prevent these outbreaks,’ she added, ‘and not just have a good response when they occur.’”

II. Water Runoff

Bettina Boxall, writing last week at the Los Angeles Times, reported that, “A dozen wild bird eggs plucked from nests on the west side of the San Joaquin Valley show how easily things can go awry when trying to clean up the region’s tainted farm drainage.

“The eggs, collected last year in fields that are part of a treatment project, contained the same lethal levels of selenium that poisoned migrating waterfowl more than two decades ago at the Kesterson National Wildlife Refuge near Los Banos.

“The 2005 egg contamination was the worst detected in five years of monitoring at the project, which recycles selenium-laced agricultural drain water by using it to irrigate crops.

“The results, reported to the U.S. Bureau of Reclamation this summer, come at a time when the agency is considering greatly expanding such reuse areas as part of a massive proposed drainage program on the valley’s west side.”

The article also noted that, “The acreage devoted to such reuse areas could grow significantly under proposals in the final stages of review by the reclamation bureau.

“The agency is under court order in a long-standing lawsuit to solve the drainage problem on about 379,000 acres of west-side farmland with a high water table. The bureau, which supplies the area with federal irrigation water, was supposed to have made a final decision this summer on how to proceed. But negotiations to settle the case have left the matter up in the air.

“In documents released this year, the reclamation bureau outlined a variety of options, favoring a complex solution that would cost nearly $1 billion. It revolves around taking most of the poorly drained land out of irrigation and converting it to dryland farming or fallowing it, a step that could cost federal taxpayers more than $700 million.

“The proposal also calls for treating drainage from land remaining in irrigation through a combination of 7,500 acres of reuse areas, high-tech filtration and nearly 1,300 acres of selenium-spiked evaporation ponds.

“But it’s likely that either a settlement or the agency’s final decision would retire less land than the Los Angeles-size chunk the bureau has proposed. Most of the acreage lies in the huge, politically powerful Westlands Water District, which opposes extensive land retirement.”

And Kenneth R. Weiss reported in Monday’s Los Angeles Times that, “Urban runoff is the fastest-growing source of ocean pollution. The storm water discharge, combined with partially treated sewage, agricultural waste, and pollution from smokestacks and vehicle tailpipes, is changing the chemistry of the seas.

“Industrial civilization is overloading the oceans with nutrients — compounds of nitrogen, carbon, iron and phosphorous. Algae, jellyfish and other primitive life-forms are thriving in this new environment, while corals, marine mammals and many fish species are struggling.

“Scientists say society has only recently begun to grasp how what happens on land affects the sea. It has taken decades to get to this point, they say, and it could take just as long to reverse the trend.”

With a more specific look at agricultural production and water issues, the L.A. Times stated that, “Dykstra Dairy is in the vanguard of a movement to clean up waste from livestock compounds. The goal is to keep the nitrogen-rich waste out of creeks, rivers and ultimately oceans.

“It’s an unusual chore on a dairy farm otherwise preoccupied with maximizing milk production, said Lambooy, the co-owner. Nowadays, he said, ‘there is a lot more attention on the rear end of the cow.’

“A great deal more attention is being paid to all types of agricultural runoff. That includes the stuff that washes out of feedlots in rainstorms and off farms.

“One of the toughest tasks has been to discourage the excessive use of cheap chemical fertilizer, which is manufactured by stripping nitrogen out of the air and altering its chemistry.

“Although such fertilizer has brought America an unprecedented bounty of corn and other crops, it has also caused serious damage to the oceans by creating ‘dead zones.’”

Andwith respect to Midwestern grain production, the article indicated that, “Midwestern farmers worry that springtime conditions may be too wet to allow them to apply fertilizer and work the land.

“Farmers know that too little fertilizer — just like too little water — can limit the growth of their crops. To reduce their risk of decreased corn yields, they apply more fertilizer than crops need. That increases the amount of nitrogen that comes off their land.

“None of this is a surprise to the EPA, which spent four years developing a plan to shrink the ‘dead zone.’ The plan was finished in 2001. But little progress has been made putting it into action.

“The EPA has the power under the Clean Water Act to mandate reductions in agricultural and urban waste entering the Mississippi — something it has been reluctant to do.”

Near the end of the article, Mr. Weiss linked up the environmental concerns with the debate of U.S. domestic farm policy, explaining that, “One way to ease the effect of agricultural waste on the oceans would be to restore some of the millions of acres of marshes and streamside forests that absorbed and recycled nitrogen before the land was cleared for farms.

“Scientists in Ohio and Louisiana estimated that if just 2% of strategically located farmland in the Mississippi drainage basin were returned to wetlands, it would significantly reduce the nitrogenthat races into the Gulf of Mexico.

“The U.S. Department of Agriculture encourages such restoration, and the idea has proved popular with farmers. Yet thousands of those willing to set aside wetlands or plant buffers of grass and trees are turned away each year because of a shortage of funds.”

III. Ag Lending

Steve Jordan reported in Tuesday’s Omaha World-Herald that, “The American division of a Dutch banking cooperative tried to take a giant step into the Midwestern agriculture market two years ago, without success.

“Since then, Rabobank Group has quietly built a force of 30 loan officers in Nebraska and Iowa. Its corporate lenders seek out large agribusinesses, including ConAgra Foods and Valmont Industries in Omaha. Its California bank is equipping some Midlands farmsteads with electronic banking devices.

“And the company, which bills itself as the premier U.S. agriculture bank, keeps its wallet open in case an attractive farm-oriented bank comes up for sale in the agriculture-rich region that stretches from Texas to the Dakotas.

“‘Every banker wants to do business with Midwestern farmers,’ said Cor Broekhuyse, head of U.S. operations for Rabobank. ‘They’re very good operators. They have nice balance sheets.

“‘In thelong term, we believe in agriculture in the Midwest.’”

Mr. Jordan also noted that, “Broekhuyse isn’t negotiating to buy a Midwestern bank and has no timetable or geographic target for a purchase. In California’s agricultural areas, by contrast, Rabobank has acquired two banks since 2002 and has another pending.

“‘You always look at Iowa, you look at Nebraska, Missouri, that area,’ Broekhuyse said. ‘But we have a lot of Texas clients as well. It’s a bit hard to say.’

“For other banks, a retail Rabobank in the Midlands would simply add to the competitive agricultural market, said Mark Hesser, president of the Midlands’ largest ag-specialty bank, Pinnacle Bank of Papillion.

“‘Pinnacle always welcomes smart competition,’ Hesser said. ‘We’d welcome Rabobank to the market, as they have a respected operation. I have no fears, I have no reservations, that would result from Rabobank acquiring a bank that’s already in our market.’”

IV. Disaster Aid

On December 22, Senator Ben Nelson (D-Nebraska) posted an update at The Hill Blog, where he stated that, “Establishing a system to mitigate the damage of drought is an exciting step forward for our farmers and ranchers. Unfortunately, the past damage of this droughtstill lingers in many areas of the country and I will renew my efforts to pass a needed multi-billion dollar emergency drought assistance package in the upcoming 110th Congress.”

V. Livestock Report

The editorial board at The New York Times noted yesterday that, “When you think about the growth of human population over the last century or so, it is all too easy to imagine it merely as an increase in the number of humans. But as we multiply, so do all the things associated with us, including our livestock. At present, there are about 1.5 billion cattle and domestic buffalo and about 1.7 billion sheep and goats. With pigs and poultry, they form a critical part of our enormous biological footprint upon this planet.

“Just how enormous was not really apparent until the publication of a new report, called ‘Livestock’s Long Shadow,’ by the Food and Agriculture Organization of the United Nations.

“Consider these numbers. Global livestock grazing and feed production use ‘30 percent of the land surface of the planet.’ Livestock — which consume more food than they yield — also compete directly with humans for water. And the drive to expand grazing land destroys more biologically sensitive terrain, rain forests especially, than anything else.”

Concluding, the Times stated that, “There are no easy trade-offs when it comes to global warming — such as cutting back on cattle to make room for cars. The human passion for meat is certainly not about to end anytime soon. As ‘Livestock’s Long Shadow’ makes clear, our health and the health of the planet depend on pushing livestock production in more sustainable directions.”

-Keith Good