" I heard it through the AgLine"

July 19, 2011

 

 

·       Meet the new breed of gentleman farmer

·       Irrigation based on smart-grid technology

·       E-Verify moving ahead despite concerns

·       Pesticide pathways into the atmosphere

·       Ag’s unheralded $250 billion workforce

 

 

Meet the new breed of gentleman farmer

 

(AP via SFGate.com) – Braden Janowski has never planted seeds or brought in a harvest. He doesn't even own overalls.

 

Yet when 430 acres of Michigan cornfields was auctioned last summer, it was Janowski, a brash, 33-year-old software executive, who made the winning bid. It was so high — $4 million, 25 percent above the next-highest — that some farmers stood, shook their heads and walked out. And Janowski figures he got the land cheap.

 

"Corn back then was around $4," he says from his office in Tulsa, Okla., stealing a glance at prices per bushel on his computer. Corn rose to almost $8 in June and trades now at about $7.

 

A new breed of gentleman farmer is shaking up the American heartland. Rich investors with no ties to farming, no dirt under their nails, are confident enough to wager big on a patch of earth — betting that it's a smart investment because food will only get more expensive around the world.

 

They're buying wheat fields in Kansas, rows of Iowa corn and acres of soybeans in Indiana. And though farmers still fill most of the seats at auctions, the newcomers are growing in number and variety — a Seattle computer executive, a Kansas City lawyer, a publishing executive from Chicago, a Boston money manager.

 

The value of Iowa farmland has almost doubled in six years. In Nebraska and Kansas, it's up more than 50 percent. Prices have risen so fast that regulators have begun sounding alarms, and farmers are beginning to voice concerns.

 

"I never thought prices would get this high," says Robert Huber, 73, who just sold his 500-acre corn and soybean farm in Carmel, Ind., for $3.8 million, or $7,600 an acre, triple what he paid for it a decade ago. "At the price we got, it's going to take a long time for him to pay it off — and that's if crop prices stay high."

 

Buyers say soaring farm values simply reflect fundamentals. Crop prices have risen because demand for food is growing around the world while the supply of arable land is shrinking.

 

At the same time, farmers are shifting more of their land to the crops with the fastest-rising prices, which could cause those prices to fall — and take the value of farms with them. When the government reported June 30 that farmers had planted the second-largest corn crop in 70 years, corn prices dropped 8 percent in two days.

 

And even if crop prices hold up, land values could fall if another key prop disappears: low interest rates.

 

When the Federal Reserve cut its benchmark rate to a record low in December 2008, yields on CDs and money market funds and other conservative investments plunged, too. Investors were unhappy with earning less, but they were too scared about the economy to do much about it.

 

As they grew more confident — and more frustrated with their puny returns — they shifted money into riskier assets like stocks and corporate bonds. To many Wall Street experts, this hunt for alternatives also explains the rapid rise in gold, art, oil — and farms.

 

Those who favor farms like to point out that, unlike the first three choices, you can collect income while you own it. You can sell what you grow on the farm or hand the fields over to a farmer and collect rent.

 

In Iowa, investors pocket annual rent equivalent to 4 percent of the price of land. That's a 60-year low but almost 2.5 percentage points more than average yield on five-year CDs at banks. That advantage could disappear quickly. If the Fed starts raising rates, farmland won't look nearly as appealing.

 

For now, though, investors can't seem to get enough of it.

 

At a recent auction of 156 acres in Iowa, the 50 or so farmers who showed up withheld their bids out of respect for a beloved local farmer who had rented the land for two decades and wanted to own it. But his final bid of $1.1 million was topped by a California insurance executive. In Iowa, 25 percent of buyers are investors, double the proportion 20 years ago.

 

"They were angry, but what are they going to do about it?" says Jeffrey Obrecht of Farmers National, the brokerage that ran the auction. He told the farmers they shouldn't worry because some of the new investors will find a new way to make money in a few years and start selling their land.

 

Other dangers lurk for investors. In Iowa, corn prices are high partly because corn is used to make ethanol, a fuel additive subsidized by the federal government. The U.S. Department of Agriculture expects 40 percent of the nation's corn crop this year will go to factories that make it. But with Washington running up record deficits, it's anyone guess how long the subsidy will remain.

 

As with stocks, U.S. farms can swing wildly in value along with the economy. Despite the fragile recovery, though, farm prices are nearing records now, capping a decade of some of the fastest annual price jumps in 40 years. In Iowa, farm prices rose 160 percent in the decade through last year to an average $5,064 per acre, according to Iowa State University.

 

Concern that farm prices may be inflated is serious enough that the Federal Deposit Insurance Corp. held a conference for farm lenders in March titled "Don't Bet the Farm." Thomas Hoenig, head of the Federal Reserve Bank of Kansas City, oversaw dozens of bank failures when a farm boom turned bust 30 years ago. Today, he suggests prices may be in an "unsustainable bubble."

 

Veteran bond trader Perry Vieth doesn't think so. Vieth, the former head of fixed income investments for PanAgora Asset Management in Boston, started buying farms with his own money five years ago, when buyers with no farming experience were rare.

 

"Agriculture was sleepy," he says. "People looked at me like, `What are you doing?'"

 

Now he's buying for 71 wealthy investors. Ceres Partners, his 3 1/2-year-old private investment fund, owns 65 farms, almost half bought since November. He says he's returned 15 percent annually to his investors overall.

 

Though Vieth says prices in some places have climbed too high — he won't buy in Iowa, for instance — he says the price of farms elsewhere will rise as big money managers start seeing them as just another tradable asset like stocks or bonds and start buying.

 

"When Goldman Sachs shows up to an auction, then I'll know it's time to get out," he says.

 

Janowski, the Tulsa software executive, is bullish for other reasons. A self-described serial entrepreneur, he has built four companies, including a software developer that he sold for $45 million three years ago.

 

Listen to him speak, though, and you'd think he was an economist. He'll talk your ear off about how inflation could rage out of control, and how farmland is more likely to keep up with inflation than other assets. Janowski sold all his stock in April.

 

He plans to move most of his money into farms and has clearly done his homework. In the past five years, he has flown to more than a dozen farms up for sale, often with an agronomist in tow. Before bidding on that Michigan farm last summer, he visited five times to walk the property, which includes a house and land for commercial development as well as tillable fields.

 

The day of the auction, which drew more than 100 bidders to the Century Center in South Bend, Ind., he didn't leave anything to chance. Janowski arrived two and a half hours early to get a seat near the entrance so he could size up rival bidders as they walked in.

 

Then he kept quiet as an auctioneer carved the farm up into lots numbered 1 through 40 and began taking bids for each. After 30 minutes, Janowski broke his silence with an offer to buy the whole thing: "One through 40 ... $4 million." For the tillable parts, he figures he paid about $6,000 an acre.

 

"I'm probably on the fringe of being a nut job," he says. "But as each month goes by, I become less nutty."

 

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Irrigation based on smart-grid technology

 

(AP via The Seattle Times) BURBANK, Walla Walla County — People are arriving home from work in the late afternoon, turning on their washers, dryers and ovens. Demand for power is peaking, so a utility puts in a call to a big farm: "Can you postpone irrigating your hay for a couple of hours?"

 

Usually, that would be a tough sell for any farmer. Workers would have to be sent out to the fields to turn off pivots and pumps one by one.

 

Simplot, a powerhouse in the Northwest agriculture industry, instead installed a system that allows it to adjust its water-pumping schedule — on request — from the shady, air-conditioned confines of an office to take advantage of fluctuations in the power supply. A worker monitors the system on a computer monitor and strikes a few keys to adjust the flow of water, enabling easy shutdown and ramp-up as needed.

 

It's all part of a pilot project by the Bonneville Power Administration (BPA) this year to examine the benefits of such a system, with the goal of improving flexibility in the power demand-and-supply chain and reducing costs for its customers.

 

It's not quite smart-grid farming, but it's close.

 

"In a smart-grid world, the laundry would start itself in the middle of the night," said Tom Osborn, a mechanical engineer for energy efficiency and renewable energy for the BPA, a Portland-based federal agency that sells electricity wholesale to public utilities in the region.

 

"Could we do something similar in agriculture, with all these 120-acre fields and crop managers ordering water every day?" he asked. "It's worth finding out."

 

"Smart grid" has become the buzz of the electric-power industry. Rising demands for electricity have utilities looking to customers to respond to that demand, such as home thermostats and individual appliances that adjust automatically based on the cost of power.

 

Customers stand to benefit, gaining detailed information on electricity costs and the ability to choose when and how much power to use at any given time.

 

Experts say there's potential for large farm operations to benefit as well.

 

Peak power use in the Northwest typically is in the winter, when residents need to heat their homes, while agricultural peak use is in summer. Rising demand, however, is forcing everyone to consider changes.

 

It's not an entirely new idea. Utilities in California and Idaho have paid farmers to put off irrigating to off-peak hours. But in the Pacific Northwest, there could be added significance to better managing the load.

 

This spring, the BPA curtailed wind turbines — mainly at nights and on weekends when demand is low — because the large volume of melting mountain snowpack left the region flush with hydropower from Columbia Basin dams.

 

If irrigators can shift their power usage to when wind power is available and the BPA needs a place to send it, power generators, utilities and farmers could all win. That will especially be true next year, when the BPA changes its rate structure to reward those who use power when there's less demand.

 

"Is there a way that they could change the timing, which would benefit Simplot with a lower power bill and would also help BPA because we like to move power from on-peak to off-peak times?" Osborn said. "That's kind of what this is doing right now when we ask them to push the button."

 

Simplot farms thousands of acres of grain, hay and corn in south-central Washington. The volume of water needed to irrigate all those crops is huge, as is the amount of power needed to move that water. To improve efficiency, the company has invested more than $1.5 million in an automated irrigation system.

 

As soon as Osborn heard about it, he wondered if there was a way the system could be used to aid the electricity grid by altering the irrigation schedule to meet power supply. He then worked to get the funding to demonstrate whether the idea works.

 

"Now the question is whether we can expand it. I don't know how many farms could do this — maybe on smaller scales — but every little bit helps."

 

The pilot project cost about $30,000, with two-thirds of that paid by BPA and the rest picked up by Columbia Rural Electric Association (REA), the local utility, and Simplot.

 

"If, in the future, they want to expand this up and down the river system, you have to have support and buy-in from farmers," said Doug Case, energy efficiency specialist for Columbia REA. "Simplot is one of our members who's taken a lot of incentives to control and monitor usage in terms of agriculture."

 

Alan Weaver, Simplot's farm manager there, said he was initially reluctant to participate because he realized the work that would go into it. The project involved developing software to make Simplot's system perform to the utilities' energy-management needs.

 

"After it's all done, I'm quite excited that we did it, because when they change their rate structure next year, we're going to be set up to deal with it," Weaver said. "Any farm in the future is just going to have to be there, too. It's the nature of the future."

 

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E-Verify moving ahead despite concerns

 

(California News Service via Recordnet.com) WASHINGTON - California Republicans are pushing a bill that would require employers to electronically verify the immigration status of potential hires, despite warnings from farmers that it will devastate their work force.

 

The Legal Workforce Act, which will head to the House Judiciary Committee this month, is aimed at using a system known as E-Verify to prevent undocumented immigrants from taking jobs away from legal workers.

 

The bill is co-authored by Rep. Elton Gallegly, R-Simi Valley, and co-sponsored by nine fellow California Republicans. None of the state's 19 Republicans have expressed opposition to the bill.

 

Farmers say the bill could be particularly troublesome in California, where the agriculture industry relies on an estimated 315,000 to 360,000 undocumented immigrants as its labor force.

 

"No question California should be worried, and our country should be worried, about rushing to the E-Verify structure without addressing agricultural needs," said Jack King, manager of national affairs for the California Farm Bureau Federation.

 

"We recognize the impetus to pass a bill, but we're trying to sound the alarm that in California it will be a job killer. We have a lot of jobs tied to agriculture - some 1 million-plus. That's a key reason, probably because we have the biggest stake in it," King said.

 

Carl Bergquist, policy advocate for the Coalition for Humane Immigrant Rights of Los Angeles, said the devastating effects of the bill would be twofold: California families would lose jobs, and businesses would suffer without workers.

 

"That would carry on to the state and lead to further budget cuts ... by driving people underground, lowering tax revenue," Bergquist said.

 

The aim of the bill is to open up low-paying jobs, mostly in the fast food and other service industries which employ a large number of undocumented immigrants. However, agriculture will suffer consequences as hundreds of thousands of potential workers may no longer be available.

 

Nonetheless, even Republican members from California's largest agriculture districts - such as Gallegly, who represents Ventura County, and House Majority Whip Kevin McCarthy, who represents Bakersfield - favor the bill.

 

"The profit in the agriculture industry does not trump American rule of law," said Rep Brian Bilbray, R-San Diego. "Just because employers have broken the laws over the past 10 years doesn't give them the right (to continue)."

 

An electronic system is now available to businesses, but most states do not require its use.

 

The immigration issue pits the state's Democrats against Republicans. Democrats oppose the bill because they say E-Verify doesn't work, places unreasonable burdens on workers and would kill jobs at a time when the state has the nation's second-highest unemployment rate.

 

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Pesticide pathways into the atmosphere

 

(USDA-ARS) – When soil moisture levels increase, pesticide losses to the atmosphere through volatilization also rise. In one long-term field study, U.S. Department of Agriculture (USDA) scientists found that herbicide volatilization consistently resulted in herbicide losses that exceed losses from field runoff.

 

Agricultural Research Service (ARS) soil scientist Timothy Gish and ARS micrometeorologist John Prueger led the investigation, which looked at the field dynamics of atrazine and metolachlor, two herbicides commonly used in corn production. Both herbicides are known to contaminate surface and ground water, which was primarily thought to occur through surface runoff.

 

Gish works at the ARS Hydrology and Remote Sensing Laboratory in Beltsville, Md., and Prueger works at the agency's National Laboratory for Agriculture and the Environment in Ames, Iowa. ARS is USDA's chief intramural scientific research agency, and this work supports the USDA priority of promoting sustainable agriculture.

 

Many experts believed that volatilization was not a contributing factor to water contamination because atrazine and metolachlor had a low vapor pressure. However, the monitoring of both herbicide volatilization and surface runoff at the field-scale over multiple years had never been done.

 

So the team set up a 10-year study in an experimental field in Beltsville that is equipped with remote sensing gear and other instrumentation for monitoring local meteorology, air contaminates, soil properties, plant characteristics, and groundwater quality. This allowed the team to carry out their studies on a well-characterized site where only the meteorology—and the soil water content—would vary.

 

Prueger and Gish observed that when air temperatures increased, soil moisture levels had a tremendous impact on how readily atrazine and metolachlor volatilized into the air, a key factor that had not been included in previous models of pesticide volatilization. When soils were dry and air temperatures increased, there was no increase in herbicide volatilization, but herbicide volatilization increased significantly when temperatures rose and soils were wet.

 

Most surprising was that throughout the study, herbicide volatilization losses were significantly larger than surface runoff. When averaged over the two herbicides, loss by volatilization was about 25 times larger than losses from surface runoff.

 

Results from this work were published in the Journal of Environmental Quality.

 

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Ag’s unheralded $250 billion workforce

 

(The Canadian Press) MONTREAL - What salary would you expect to pay a force of internationally diverse workers who toil harmoniously — without pension plans, paid overtime or the threat of union action — to produce 87 per cent of North America’s food supply?

 

How about... nothing?

 

Concordia University biologist Melanie McCavour is seeking greater recognition of the economic value of work done by bees and other crop-pollinating creatures.

 

She presented this issue to the North American Commission for Environmental Cooperation in the presence of the continent's three federal environment ministers last month in Montreal.

 

The issue is one of the conundrums currently before the commission as part of its ongoing mandate to monitor the environmental impact of the North American Free Trade Agreement.

 

"We want to not only protect pollinator diversity under NAFTA," said McCavour, "but we're also asking for a study to determine the exact dollar amount of these pollinators to our economy."

 

Current estimates of the value of global annual agricultural production provided by natural crop-pollinators are in the neighbourhood of $250 billion.

 

Assigning a tangible monetary value to the pollination service is the first step in establishing a protocol for protecting its workers. The logic goes that if people realize the labour value of bees, bats, birds, beetles, and butterflies, policy-makers will be likelier to develop better environmental and agricultural policies.

 

Any alternative to natural pollinators — such as having untold numbers of human beings manually spread pollen with paintbrushes and Q-tips — would be economically unfeasible, not to mention physically implausible.

 

With a decline in bee populations, McCavour called for major changes in pollination and agriculture practices.

 

The European honey bee has long been credited with bearing the bulk of the pollination burden, but there are actually more than 20,000 separate bee species which spread pollen, along with a host of other winged creatures.

 

Among the most effective are Africanized bees, which provide a 50 per cent higher produce yield than standard apiary honey bees. However, there are common fears about introducing the non-native species.

 

McCavour wants to challenge those fears.

 

"A lot of invasive species are pollinators," McCavour later explained in an interview.

 

If insects are considered contributors to an overall pollination service, she said losing a species is not necessarily a bad thing if the new species does the same, or a better, job.

 

Lessons learned from using a variety of pollinators can also be applied when sowing the crops themselves — including the lesson that diversity is good.

 

Experimental agricultural plantations have revealed that farming an array of food crops side by side will result in a higher overall produce yield due to variations in the pollinators they will attract.

 

This is in direct opposition to the current practice of wide-scale orchard plantations, which may be contributing to the alarming decline of the honey bee population in North America.

 

California's almond growers occupy more than 800,000 acres and produce 80 per cent of the world's almond crops. These crops are pollinated entirely by commercial beekeepers who ferry the bees out to the orchards by the truckload.

 

"We are overworking the (honey) bees so badly," McCavour said in the interview. "They're out on the road from February until the fall."

 

Pollination of the almond crop in the California agricultural belt uses virtually every available commercially owned honey bee in the United States — and McCavour says it's still not enough.

 

She suggests a simple solution: designating strips of land within the plantations to diversify the crops would attract wild pollinators to the area and reduce the honey bees' workload, she says.

 

Another roadblock to work out under NAFTA is the use of pesticides — specifically neonicotinoids — which are harmful to both bees and bats.

 

The Environmental Protection Agency had approved their use but the state of New York challenged the ruling and won, rendering pesticides containing the ingredient illegal in the United States. However, they can still be legally obtained in Mexico and Canada.

 

"It creates a lot of problems when you're trying to come up with a cohesive pollinator protection plan that applies to the three countries," said McCavour.

 

Though McCavour believes it's important to maintain overall high biological diversity, she doesn't believe we need to continually preserve the exact same species. "In fact it's impossible, under evolutionary terms."

 

"We also need to focus more on using ... wild pollinators," said McCavour, adding such a move would diminish some of the concern over colony collapse disorder.

 

"Overall high biodiversity is important so we shouldn't stress about where the diverse species originates, as long as it doesn't take over completely."

 

She said colony collapse is only a critical issue for farmers as long as they depend solely on one species for pollination — suggesting that even the most productive company might benefit from a diversified workforce.

 

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