Again, our member, Duncan Allison, provides information and insights on agriculture in the new year.

FARMING NOTES – JANUARY 2014

 

First Happy New Year –I hope that the year will be healthy and happy for you and your family. Surely the Farm Bill will eventually get passed. The American Farm Bureau Federation is hopeful a Bill will pass in January. The recent years of high commodity prices appear to be definitely over as global stocks are at much higher levels and the USDA expects that global production of corn, soybeans and wheat will rise to record levels in 2014. Prospects for an Immigration Bill do not appear very promising, but there seems to be some hope that the House may eventually pass the bill crafted by the Senate and passed in June “and then negotiate a comprehensive package with the Senate.” (The Business Journals Dec. 31, 2013). Three gripes! There are three common criticisms of agriculture that I wish we could dispel. Please forgive this very basic primer. Please suggest upgrades. Factory farming – seems to be the term often used to describe modern agriculture. Farming is recognized as the oldest industry in the world when the first farmers decided to plant seeds and domesticate animals so they could produce enough for themselves and have surplus to supply others. This allowed others to build, educate and produce goods and still obtain food. Everyone needs food every day. Power was one of the limiting factors and it took time for machines to replace human labor and oxen/horse power so that more land could be farmed to produce more food, feed and fiber. Today one farmer in the US is producing enough food for 155 people. Like other industries farmers use mechanization, advances in science and more recently computers and software programs. Why should farming be any different from any other industry where the same influences are at work? Back to hand labor and horses? Disregard scientific advances? Modern farming not factory farming. Government handouts – Certainly government plays a critical role in agriculture not just in the US but in every other country. The need for food is universal yet both plant and livestock production is hugely influenced by weather and markets.Since market forces establish prices for most crops in the US, the availability of our perishable goods is affected by supply and demand. While demand is increasingly affected by global markets, prices tend to decline when there is oversupply. Just last year corn dropped 38% in price, the most of any traded commodity, wheat was 19% lower on the CBT and only soybeans managed to lose only 6.9%. In 2012 the drought was so serious that 6.8 million acres of wheat were planted but never harvested. Corn yields had reached 164.7 bushels per acre but were down to 123.4 in 2012 due to high temperature and droughty conditions. Yields for 2013 are back up to 160.0 bushels. Farmers invest in planting a crop without understanding what sort of harvest they will have and the price they will get for the crop. Crops and livestock can be destroyed or severely reduced by many factors totally outside the control of the farmer. The biblical Joseph in Egypt understood the serious drought conditions prevailing in Egypt and stored grain in silos so that critical food supplies could be released later when local stocks were running out. Food is basic and farmers need to stay in business so governments usually provide some safety net to ensure that farmers can survive bad harvests and low prices. In 2013 “Government payments are expected to represent a relatively small share (4%) of projected gross cash income of $440 billion. In contrast, government payments represent 9% of net farm income of $120.8 billion; however, the importance of government payments as a percent of net farm income varies nationally by sector and region.” USDA. We must conclude that government must play a role in providing a safety net as well as providing the critical research and extension services. The Farm Bill will likely depend more on crop insurance than subsidies. Government is not a crutch but a vital safety net and stimulant for productivity and conservation. Corporate farming – Perhaps one of the biggest areas of ignorance is regarding farm ownership. The table indicates the situation in 2011 for the U.S. Small farms are those with annual sales of less than $250,000.

 

Description	% of Number of farms	% of value of production	% of total assets
Small family farms	87.2	15.1	56.7
Large family farms	10.1	70.2	35.9
Non-family farms	2.7	14.7	8.4

 

96.4% of crop farms are family farms. “Larger crop farms continue to realize better financial performance: average rates of return on equity increased with farm size in five major commodity categories analyzed in this report (corn, soybeans, wheat, fruits, and vegetables). In turn, larger farms utilize labor and capital more intensively, which provide them with the primary source of their financial advantage.” USDA report. Much the same picture in livestock – the vast majority of hog farms are family-owned even though they may be under contract to one of the major processors. The farms (700,000 or more) that provide the beef calves far fattening to the feed lots are family-owned and 87.9% of the broiler producers are under sole/family proprietorship (USDA) – again usually under contract. “Why is the perception of corporate farming as widespread when actually almost all of the country’s food is being grown or raised by family operations?” (Tom Philpott, Sept. 2013). Conservation practices are significantly reducing the amount of nitrogen, sediment and phosphorus leaving cultivated cropland according to a new USDA NRCS report on the Chesapeake Bay. The estimates indicate that these practices applied by farmers and landowners are reducing nitrogen by 48.6 million pounds each year or 26% and phosphorus by 7.1 million pounds or 46%. Sediment or eroded soil has been reduced by 15.1 million tons or 60%. The voluntary conservation practices have been made possible by conservation programs which have been part of the Farm Bill – now expired. The report concluded that some form of erosion control has been adopted on 97% of cropland acres in the Chesapeake Bay Watershed. Cover crops increased from 12% in 2006 to 52%. Pennsylvania is a leading state in adopting no-till – on 62.5% of cropland in 2013 varying from 73.2% in soybeans to 28.6% in oats. Corn and the other major crops are all over 60% no-till.

DAA 01/06/2014