Farming Notes – March 2017

Farming Notes – March 2017

Thanks to Duncan Allison for our latest installment of Farming Notes. A great read with lots of important information below.

Federal – New Secretary of Agriculture – Sonny Perdue seemed to sail through his questioning. He is very aware he had no role in the President’s budget proposal “Having not been confirmed, I’ve had no input into the budget, obviously,” he said, but during his time as Georgia governor, he came across budgets he didn’t like, “but I managed within it.” He admitted that regarding immigration reform many farms are highly affected by potential outcomes. “I plan to be a voice to persuade policy makers over this issue…Virtually every state in the nation is affected to some degree.”
Pennsylvania Budget – There is strong resistance to the proposal to reduce the ag allocation from $142 million in 2016 to $109 in 2017 including a massive $30 million reduction for New Bolton Center. On the positive side, the PA Dept. of Ag budget gets a $2.2 million boost. Penn State Ag Research and Extension and Animal Health Commission funding remains unchanged.

Farming prospects in 2017 - Overall there are no signs of any significant improvement in profitability for farming except perhaps slightly higher prices for dairy. In USDA speak “Farm sector profitability measures are mixed for 2017….If realized, net farm income in 2017 will be the lowest since 2002, in inflation-adjusted terms.” A further reflection of the current poor economics was the fewer new introductions of new products at the recent National Farm Machinery Show. Several high profile equipment manufacturers didn’t even exhibit at the 2016 show, hoping for a better environment next year.

Crop forecasts - National USDA forecasts for corn and soybean acreages indicate corn down to 90 million acres and soybeans up to 88 million and the possibility of the first time ever parity with corn. If soybean prices continue to look good, planting intentions may increase even more. Soybeans are the nation’s largest agricultural export and markets in Southeast Asia and Latin America continue to grow in potential as these populations gradually move to a more protein-based diet. Seed companies report late ordering of seed indicating continuing uncertainty of final plans. Cost of production is critical to understand the profitability of each crop. One adviser recommends “It’s important to go into the year with a plan, know breakeven levels for corn and soybeans and avoid putting all eggs in one price basket.”
International land use studies have shown that between 2004 and 2012, land resources have been used more efficiently. Farmers in Brazil, India and China have increased double cropping, expanded irrigation – not expanding production by moving into previously forested or pasture land. Good news.

Infrastructure has been a vital reason why US agriculture has been able to flourish so that crops most suited to the soil and climate can be grown where they do best. In the 19th century our region of Pennsylvania was close to the major population of Philadelphia and so within the range of daily horse drawn wagons. We still benefit by being able to sell fluid milk but other states have been able to produce milk more economically for processing – cheese, powdered milk etc. The combination of optimal conditions and infrastructure has also favored scale. A 2011 Northeast study showed that the largest herds (300 cows or more) were most profitable with net earnings per cow being several hundred dollars higher than dairies with smaller herds. We had 3.5 million US dairy farms in 1950 and only 58,000 in 2012. Recently it has been midsize dairy farms that are most vulnerable. Scale has also been shown to favor soybean, corn and hog farms in Iowa where the production costs for large soybean farms of 900 acres cost 82% per bushel were lower than for 300 acre farms. Similarly the production costs for large corn farms were 38% per bushel lower than smaller acreage farms. Large dairies with more than 2,000 head of cattle produced at a lower cost per gallon of milk than dairies with 30 cows or less. Volume and scale are critical in most industries in terms of cost per unit – why should it be different in agriculture?
YET – major food processing and grocery chains are aware that local and organic food equate with fresh and superior in the minds of Millennials in particular. Organic is still only just less than 5% of total food sales in the US but major food retailers are joining Wholefoods and have had to adapt their supply chains to meet increasing demand.

Brief Notes - Cover crops are being much more widely grown in the US and in Brazil and the research results are clear – reduced erosion, better soil structure etc.
Lowering the cost of healthy foods significantly increases their consumption while raising the costs of unhealthy items significantly reduces their data. Obvious but confirmed by research in many developed countries. How to achieve?

Public gardens, such as Longwood, are cultural attractions that make our region a more attractive place to live in and visit so generating economic value in many ways. 30 garden economic impact study in 11 counties estimated $256 million value, supporting 1,520 jobs. Valuable economic contribution.

More scientific food – “there is no doubt that the next generation of our food supply will have more science than ever as we move from farms to labs and we engineer our foods to be more tasty, healthy, sustainable and nutritious.” Kimbal Musk In Silicon Valley considers opportunity is “at least ten times larger than software.” Concern that most federal funding is directed to food safety and nutrition not innovation so reliance on private enterprise for new food products.
Greenhouse gas emissions (GHG) of corn-based ethanol are about 43% lower than gasoline. Farmers are producing corn more efficiently and using conservation practices. It is expected that the GHG profile of corn-based ethanol to be 50% lower than gasoline by 2022, possibly as much as 76%. DAA 3/24/2017