" I heard it through the AgLine"

December 1, 2011

 

 

·       US farm income tops $100B for first time

·       Unusual coalition lobbies for FDA funding

·       GM technology spawns global trade clashes

·       Modern technology and Africa’s food future

·       Snakes alive! Upset farmers target tax office

 

 

US farm income tops $100B for first time

 

(Reuters) – Record-high prices for crops and livestock will lift U.S. farm income 19 percent this year, which for the first time will top $100 billion, the government estimated on Tuesday.

 

Another buoyant year is also in sight in 2012 for a agricultural boom that started in 2006, according to the U.S. Department of Agriculture.

 

Rising demand for food around the world, tight supplies and favorable exchange rates have boosted U.S. commodity prices and attracted investors, both in futures markets and in farmland.

 

While farmers are also seeing soaring land values, the rising fortunes could make the sector a bigger target in Congress where some lawmakers have been calling for a sharp cutback in farm subsidies.

 

Reformers say Congress should begin by ending a subsidy that pays grain, cotton and soybean growers $5 billion a year regardless of need.

 

Receipts from sales of crops are projected to rise by 16 percent this year, with corn, wheat and cotton seen up more than 30 percent and livestock revenue up nearly 16 percent.

 

"The 2011 forecasts, if realized, will mean record or near-record sales and price levels for many crop and livestock categories and represent substantial increases over last year," said USDA's Economic Research Service in a quarterly update.

 

CLOUDS ON THE SUNNY SECTOR

 

But the rate of gain for farm income was slower than in 2010, when net cash income rose by 21 percent, compared to this year's 19 percent. And USDA's forecast of 2011 net cash farm income, at $109.8 billion, was lower than the $114.8 billion estimated on Aug 31.

 

One reason was rapidly growing production costs -- up 12 percent this year at a record $320 billion, compared to a 2 percent rise in 2010. In August, USDA estimated costs would rise by 11.4 percent.

 

"Every expense except labor and electricity is forecast to increase in 2011," said USDA, with feed, fertilizer and fuel up by more than 20 percent each.

 

Analyst Mark McMinimy of Guggenheim Partners said higher costs "may tend to mitigate at least some of the projected higher crop and livestock product prices on net cash farm income" in the new year. An Iowa State University analysis said corn growers could face a 15 percent rise in production costs, aside from land, in 2012, said McMinimy.

 

Continued high farm income and full-throttle production will mean more business for processors such as Archer-Daniels-Midland Co, equipment makers such as Deere and Co and seed companies such as Monsanto Co .

 

RISING LAND VALUES MAKE LOAN EASIER TO CARRY

 

Growers in almost every region of the country will have higher incomes this year, thanks to the record-high prices for major crops and some livestock.

 

Farm land and building values are forecast to rise by an average 6.8 percent this year, following a 6.6 percent gain in 2010, said USDA. In two major regions, the rise is stratospheric -- up 25 percent in the Great Plains and in the Midwest, according to the Federal Reserve bank surveys.

 

"The three most important factors driving higher asset values (including farm real estate) are higher expected income from production assets, favorable borrowing costs, and expected growth of future returns on these investments," said USDA.

 

While assets are rising, farm debts are expected to decline slightly. Debt on real estate would drop by 3 percent. Overall, real estate debt is up 22.3 percent in the past five years as land values increased by 22.2 percent.

 

"Farm operators appear willing to pay up to maximum values for land based on expected profits accruing from the land's best use," said USDA.

 

Debt-to-asset and debt-to-equity ratios -- two key indicators of financial stress -- are expected to decline this year, "indicating that the farm sector overall is more solvent than it was in 2010," said USDA.

 

The debt-to-asset ratio was estimated at 10.4 this year, compared to 11.3 in 2010 and 11.8 in 2009. The debt-to-equity ratio was forecast for 11.6 this year, vs. 12.7 in 2010 and 13.3 in 2009.

 

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Unusual coalition lobbies for FDA funding

 

(The Washington Post) – An unusual alliance of consumer advocates and industry groups won a victory this month when they helped persuade Congress to boost funding for the Food and Drug Administration, while most other programs paid for by a newly passed agriculture spending bill had their money slashed.

 

That alliance engaged in an old-style shoe leather campaign to prevent spending cuts for the FDA as the agency prepares to carry out a landmark food safety bill that was adopted by the previous Congress. The effort included at least four dozen visits to congressional offices and grass-roots events in the districts of key lawmakers involved in spending decisions, as well as advertisements in Capitol Hill newspapers.

 

This month, after weeks of haggling, Congress increased the agency’s funding by nearly 3 percent from last year’s level to $3.8 billion. Of all the additional money FDA secured, the new food safety program captured the largest amount: $39 million.

 

“Having consumers who were directly affected by food-borne illnesses standing shoulder to shoulder with the food industry sent a powerful message,” said Erik Olson, director of food programs at the Pew Health Group. “It’s not every day that a member of Congress sees somebody from a large food company come in with a consumer group to ask for more resources.”

 

Just as unusual is that industry, which has often battled against increased government oversight of its businesses, is chasing after any money at all for the agency.

 

“At a time when some industries are trying to handcuff their regulators, the food industry is advocating for a stronger regulator with more powers and more resources,” said Scott Faber, a vice president at the Grocery Manufacturers Association.

 

GMA, the American Frozen Food Institute, the Snack Food Association and the Produce Marketing Association were among many groups that made their case in an advertisement sponsored by the Alliance for a Stronger FDA. The ad said that “a science-based and predictable FDA” helps industry to innovate and create high-paying jobs. The products regulated by FDA account for more than 20 percent of U.S. consumer spending.

 

There are plenty of other dollars-and-cents reasons for industry to support a stronger FDA, experts who track the industry said. Major recalls linked to food-borne illnesses exact real and reputational costs by shaking consumer confidence.

 

Demand for spinach took years to recover after the 2006 E. Coli outbreak, with total retail expenditures on bagged spinach dropping about $202 million in the 68 weeks after the recall, according to federal data. Kellogg said that it cost roughly $70 million for it to recall some of its peanut-containing products in the wake of a deadly salmonella outbreak linked to one of its suppliers, a peanut processing plant in Georgia. More recently, a listeria outbreak tied to cantaloupe from one Colorado farm destabilized the entire melon industry.

 

“I mean God forbid to have another recall like this. .?.?. It just froze the market,” Mohammad Abu-Ghazaleh, chief executive of Fresh Del Monte Produce, said this month in a call with analysts after his company released its quarterly earnings.

 

Such high-profile recalls can also have a chilling effect on U.S. food exports. The United States exports more food than it imports in part because a growing middle class in emerging markets such as India has boosted demand for U.S. products, Faber said. Having foreign consumers trust U.S. foods is key.

 

“We’re competing with manufacturers all over the world,” Faber said. “Maintaining and burnishing FDA’s reputation helps us open doors in those markets.”

 

The illnesses and recalls of the last decadedamaged that reputation. In response, Congress adopted the Food Safety Modernization Act late last year — the first major change in food safety laws since 1938.

 

That law empowers the FDA to prevent food-borne illnesses instead of simply reacting to them. To that end, the legislation would require companies to adopt internationally recognized strategies that would help them spot and consistently test for potential food hazards. It would dramatically increase inspections at food processing plants and farms as well as grant the agency access to companies’ internal records — all of which will require hundreds of new FDA hires.

 

“You need to put controls in place, validate their effectiveness and monitor that they’re actually working over time,” said Mike Taylor, the FDA’s deputy commissioner for foods. “That’s a system that’s evolved in the food industry but has been adopted piecemeal.”

 

The law also requires that food imported into this country must meet the same safety standards as food produced domestically, another reason that the U.S. industry pushed hard for FDA funding. About 15 percent of the nation’s food is imported, including nearly two-thirds of fruits and vegetables and 80 percent of seafood, according to the FDA.

 

“A lot of the motivation for this reform is creating a level playing field,” Taylor said.

 

Yet, after the legislation was enacted late last year, its funding remained uncertain.

 

In June, House Republicans cut millions from the FDA’s budget, citing the need to lower the national deficit. Axing the money prompted industry and consumer advocates to redouble their lobbying efforts on behalf of funding the new food safety law.

 

Ultimately, the cuts were rejected when Senate and House lawmakers met to negotiate differences between their respective agriculture bills, which also determined the funds for USDA and rural development. The FDA got the single largest increase in discretionary spending. Its programs were among only a half dozen that got a year-over-year funding boost.

 

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GM technology spawns global trade clashes

 

(NASDAK.com) BUENOS AIRES -- Backers of transgenic and cloning technology in major farming countries such as Argentina are likely to face trade friction with the European Union in the coming years as Europeans continue to drag their feet in approving new strains.

 

"There are a number of areas for potential trade difficulties...and the [ agricultural] industry and [European] importers are worried," Lars Hoelgaard, European Commission agricultural special adviser said in an interview Tuesday.

 

"There's no obvious resolution in sight...and I'm not optimistic here," Hoelgaard said at a conference in Buenos Aires.

 

The Argentine government is pushing an ambitious 10-year plan aimed at lifting total agricultural production by 60% between now and 2020. The plan aims to increase grain output by 50% to 150 million metric tons from the record crop harvested during the 2010-2011 season.

 

Biotechnology is seen playing a key role in raising yields. Few countries have embraced genetic modification of plants and animals as enthusiastically as Argentina. The country is the world's no. 3 soybean exporter and no. 2 corn exporter, with virtually all of those grains grown from transgenic seeds resistant to pests and herbicides. The country is also a major beef exporter.

 

Argentina also is pushing forward with livestock cloning, and the descendents of clones are expected to be widespread in the food chain in the coming years.

 

"In five to six years, Argentina will be the world's largest exporter of cloned and transgenic products [but] we need to get past EU resistance," said Alejandro Silva, chief of staff at Argentina's agriculture ministry, in a recent interview.

 

However, Argentina is taking a cautious stance, waiting to approve new transgenic traits until it is sure that Europe, a leading buyer of the country's soymeal and beef will take the goods, Lorenzo Basso, Argentina's agriculture secretary, told Dow Jones Newswires Tuesday.

 

"We're pushing for the European Union to approve the new technology faster," Basso said.

 

While the European Commission always has backed approval of transgenic crop imports, it frequently faces opposition from member countries, with residents of the continent split on backing the imports, Hoelgaard said.

 

A clash is also likely on the way over the offspring of clones starting to enter the food chain either as meat or through dairy products.

 

The European Union is preparing restrictions on the sale of meat derived from cloned animals.

 

The European Commission is working on a proposed ban or strict labeling scheme for the import of meat, dairy and other products from the descendants of cloned animals, EU officials have said.

 

Such an EU move is sure stoke tensions with major beef exporters like Brazil, Australia, Argentina and the U.S., which are each experimenting with cloning and have joined together in encouraging other governments to support the practice.

 

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Modern technology and Africa’s food future

 

MILAN (Reuters) - Africa will rely on non-transgenic crop breeding to boost food output to feed its rapidly growing population in the coming decades but will also need genetically modified products (GM), the head of a pan-African farm think tank said on Wednesday.

 

The world needs to boost cereals output by 1 billion tonnes and produce 200 million extra tonnes of livestock products a year by 2050 to feed a population projected to rise to 9 billion from about 7 billion now, the United Nations estimates.

 

Africa's population is expected to double to about 2 billion people by 2050 and the continent would need to double its food output by that time with some countries having to triple food production, Monty Jones, executive director of Forum for Agricultural Research in Africa (FARA), told Reuters.

 

"Our future growth is through conventional breeding approach and through the use of biotechnologies which come up with high yields but are not transgenic," Jones said in an interview on the sidelines of an international food and nutrition forum.

 

"What we need in Africa is our own, unique "green revolution" calling for interventions in several areas, in crops and livestock. We must learn from mistakes of India," he said.

 

The so-called green revolution in the 1960s and 1970s in India and other developing countries boosted farm production yields through intensive practices and new seed varieties drawing praise for helping reduce the number of hungry people and criticism for making farmers dependent on GM seeds.

 

African countries should use the best results of conventional breeding and "modest", or non-transgenic, biotechnologies to boost crop yields and make plants resistant to increasing heat and dryness as climate changes, Jones said.

 

Nerica (New Rice for Africa) rice, a non-GM cross between a high-yielding Asian variety and a hardy African variety has higher yields, shorter growth cycle and more protein content than its parents.

 

Farmers cultivating Nerica in western and eastern Africa in the past 10 years have doubled and even trippled their yields to up to 4 tonnes per hectare (ha), depending on efficiency of their farms, Jones said.

 

"YOU CAN'T SAY NO TO GM CROPS"

 

Jones, who has worked in international agricultural research for the past 24 years, has stopped short of ruling out GM organisms (GMOs) as means to resolve Africa's hunger and said their use would rise slightly in the coming decades there.

 

"I don't think we should exclude genetically modified products. If they help to increase yields, have stable yields, why not? ... You cannot say "No, I don't want GMOs" while your people are dying," he said.

 

Even if developing countries double food output by 2050, one person in 20, or about 370 million people, would still risk being undernourished, most of whom would be in Africa and Asia, the U.N's Food and Agriculture Organisation estimates.

 

GM crops are widely used in major agricultural producers, such as the United States and Brazil, but face staunch opposition in Europe where they are largely seen as potentially risky for human health and environment.

 

Africans also worry about health problems that GM crops could trigger but so far there has been no evidence of such problems, Jones said.

 

The spread of GM products in Africa would remain limited in the near term because only six countries on the continent have passed regulations to allow their use and just three of them, Egypt, South Africa and Burkina Faso, commercialise GM crops, Jones said.

 

The global seed leader Monsanto is the main supplier of GM seeds to those countries but other biotech companies are also active there, he said.

 

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Snakes alive! Upset farmers target tax office

 

(AP) LUCKNOW, India — Two farmers fed up with alleged bribery demands emptied three bags filled with slithering snakes in a busy tax office in northern India, an official said Wednesday.

 

The 40 or so snakes of different sizes and species — including at least four deadly cobras — sent clerks and villagers climbing atop tables and scurrying out the door to escape the office in Basti, about 186 miles (300 kilometers) southeast of Lucknow, said Uttar Pradesh state official Ramsukh Sharma.

 

“Snakes started climbing up the tables and chairs,” he said. “There was total chaos. Hundreds of people gathered outside the room, some of them with sticks in their hands, shouting that the snakes should be killed.”

 

No one was bitten or injured in the incident Tuesday afternoon, and police and forest officials captured the snakes.

 

The farmers had been asking for tax records for their land in nearby Narharpur village, but tax officials withheld the files for weeks while allegedly demanding bribes.

 

Sharma said their method of protest was unacceptable. Police are searching for the farmers, who were identified as Hukkul Khan and Ramkul Ram. Khan is known locally as a snake charmer.

 

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