Again, our past president, Duncan Allison, scans the agricultural scene with observations, insights and connections.
FARMING NOTES – FEBRUARY 2016
Sustainability – Sometimes it might seem as though we are not making progress towards a more sustainable future. Yet Field to Market (FTM), the consortium of 70+ companies, universities and non-profits that are funding large scale projects in several key states to find the most sustainable practices for corn, cotton, potatoes, rice, soybeans and wheat, has found reason for optimism. Their recent report focused on five environmental indices – land use, soil erosion, irrigation water applied, energy use and greenhouse gas emissions per unit of production. In the six crops studied they were able to demonstrate real progress across these indices during the period 1980-2011. The consortium hopes to engage 20% of productive acres of U.S. commodity crop production in its supply chain sustainability program by 2020. To measure progress against these goals, outcomes will be measured and reported based on a five-year rolling average. These FTM organizations will have a solid basis for the claim that their products are produced sustainably according to this set of critical indices.
Changing attitudes to how food is produced and livestock treated – According to Phil Lempert’s SUPERMARKETGURO “Target recently announced that it will source 100% of its eggs from cage-free chickens by 2025. BJ’s Wholesale announced it will switch to 100% cage-free eggs by 2022. The moves echo similar announcements from Costco, McDonald’s, Kellogg’s, General Mills, Unilever, Mondelez, Burger King, Starbucks, Aramark, Sodexo and many more. It’s a shift that comes as American consumers ask more questions about how their food is produced – especially with regard to animal treatment.” Factory farming is the derogatory term used to describe modern farming and even the term confinement implies uncaring treatment.
How can we change this image of an industry that has been adapting to the need to produce more affordable meat, dairy and poultry products? Let’s remember that farmers receive 16 cents out of every dollar spent on food – down from 31 cents in 1980. Farm size has got bigger for all livestock and poultry species just the same as in other farming segments. Scale combined with higher productivity can only be achieved by paying close attention to livestock needs so they can perform at their best.
Dairy industry – I was amazed to find out that as recently as 1940 there were 4.7 million dairy farms in the US with an average of 5 cows but by 2012 there were only 64,098 dairy farms with 49% of farms with more than 1,000 cows. In Chester County there were almost 3,000 dairy farms in 1940 and this number had been reduced to 275 by 2012, varying in size from 30-50 dairy cows with several farms over 700.
In general dairies have become much larger but the milk market has been very challenging with all milk prices in Pennsylvania varying from $27.40/cwt in September 2014 to $17.60/cwt in August 2015. Since 40-50% of dairy costs are feed, our farmers have more control of their costs than dairies in California and the Southwest where feed is purchased. Large producers have little option except increasing milk per unit but smaller dairies are growing produce during the summer and selling at farm stalls, farmers markets and the popular Oxford Produce Auction –particularly the Amish/Plain Sect, producing artisan cheese and in Chester County and we have several dairies that have successful year round farm stores.
Tough words from Danny Klinefelter at Texas A&M University: “The function of a competitive market is to drive the economic return to the average farmer to breakeven through supply and demand responses in both farm inputs and farm outputs. “This means that top farmers are profitable, average farmers just barely get along, and bottom farmers are losing money and will go out of business. This is the economic reality. It means that your farm success and survival depends on your continuous improvement to stay in the front of the pack. “If you don’t constantly improve, then you will just barely get along or go out of business. You are in competition with other dairy farms locally, nationally and internationally. You have to improve your management faster than other farmers improve their management to stay in business. Maintaining your status quo will lead to failure.”
USDA 2016 forecast – “Both net cash and net farm income are forecast to decline for the third consecutive year after reaching recent highs in 2013 for net farm income and 2012 for net cash income. Net cash farm income is expected to fall by 2.5 percent in 2016, while net farm income is forecast to decline by 3 percent. These declines are moderate compared to the 27- and 38-percent reductions in net cash income and net farm income, respectively, that occurred in 2015…A drop in overall production expenses is forecast for 2016…” DAA 2/16/2016