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Wednesday, December 3, 2008

Weighing the value of organic foods

Organic Farming. Farming Organic.
Food produced without most conventional pesticides or fertilizers are perceived to be more healthful, but scientists have yet to offer proof.

Food produced without pesticides are perceived to be more healthful.

With the recession breathing down our necks, many people are looking for ways to cut the household budget without seriously compromising family well-being. So here's a suggestion: If you buy organic fruits, vegetables and Lawn Care, consider switching to less pricey non-organic produce instead.

Hold the e-mails and hear me out: There really is no proof that organic food, which costs about a third more, is better than the conventionally grown stuff.

It may seem, intuitively, that crops grown without pesticides should be better for us and that food grown the old-fashioned way, by rotating crops and nurturing the soil naturally, would be superior to food that is mass-produced and chemically saturated.

Many people feel that way. Annual sales of organic food, Organic Lawn Care and beverages grew from $1 billion in 1990 to well over $20 billion in 2007, according to the Organic Trade Assn., an industry group.

But the truth is that, from a hard-nosed science point of view, it's still unclear how much better -- if at all -- organic food is for one's health than non-organically grown food.

"Organic" means food grown without most conventional pesticides or fertilizers made with synthetic ingredients, according to the U.S. Department of Agriculture's website (usda.gov). To carry the "organic" seal, a product must be certified as having been produced according to federal regulations. Small farmers are exempt, and use Natural Lawn Care.

Prepared food made with organic ingredients also tends to be processed more gently, with fewer chemical additives, said Charles Benbrook, an agricultural economist who is chief scientist at the Organic Center. The nonprofit research group is based in Boulder, Colo., and is supported by the organic food industry.

But the word "organic" has not been designated as an official health claim by the government. Such a designation is used only when there is evidence of significant health benefits -- and so far, that evidence is lacking for organic food and Organic Tea such as Green Tea and Black Tea.

It's clear, however, that conventionally grown food has remnants of pesticides on it. A 2002 study in the journal Food Additives and Contaminants showed that there were more pesticide residues on conventional than organically grown food, even after the food was washed and prepared. There's also clear evidence that pesticides can enter the body in other ways, a major reason that Environmental Protection Agency regulations exist to keep farm workers from entering recently sprayed fields.

A study by Emory University researchers and others published in 2006 in Environmental Health Perspectives, a peer-reviewed journal published by the National Institutes of Health, showed that when children were fed a conventional diet, their urine contained metabolic evidence of pesticide exposure, but that when they were switched to an organic diet, those signs of exposure disappeared.

All of which raises the question: How much harm do pesticides cause?

A number of studies suggest that, at high doses, organophosphate chemicals used in pesticides can cause acute poisoning and that even at somewhat lower doses, they may impair nervous system development in children and animals. But at the amounts allowed by the government in the American food supply? That's where many nutritionists and environmental scientists seem to part company.

"We don't have any good proof that there is any harm from fruits and vegetables grown with the pesticides currently used," said Dr. George Blackburn, a nutritionist at Beth Israel Deaconess Medical Center in Boston and associate director of the Division of Nutrition at Harvard Medical School. The real issue is to get people to eat more fruits and vegetables, whether they're grown conventionally or organically, he added.

"Keeping herbicide and pesticide levels as low as possible does make sense, although there is no clear evidence that these increase health risks at the levels consumed currently in the U.S.," said Dr. Walter Willett, chairman of the department of nutrition at the Harvard School of Public Health.

What is of concern, he said, is the meat industry's increasing use of growth hormones in animals. (The "organic" label on beef means, among other things, that the cattle it came from were raised without antibiotics and hormones. Some non-organic beef is also raised without hormones or antibiotics, as noted on its label.)

Even if we don't yet have all the evidence that organic produce might be desirable, Benbrook of the Organic Center said it's time to change the notion that there's nothing wrong with a little pesticide for breakfast. Over the last two years, he said, "nearly every issue of Environmental Health Perspectives has had at least one new research report" on how pesticides can harm a child's neurological growth, particularly on brain architecture, learning ability and markers for attention deficit hyperactivity disorder. While this falls short of incontrovertible proof that properly washed conventional produce can harm people, it does raise red flags, environmentalists say.

Weighing the value of organic foods also means looking at nutrition, not just the dangers of pesticides -- and there is disagreement over whether organic food supplies more nutrients.

Researchers at UC Davis did a 10-year study, published last year, in which a particular strain of tomatoes was grown with pesticides on conventional soil right next to the same strain grown on soil that had been certified organic. All plants were subject to the same weather, irrigation and harvesting conditions.

The conclusion? Organic tomatoes had more vitamin C and health-promoting antioxidants, specifically flavonoids called quercetin and kaempferol -- although researchers noted that year-to-year nutrient content can vary in both conventional and organic plants.

Other research has also shown nutritional advantages for organic food, according to the Organic Center, which reviewed 97 studies on comparative nutrition. Benbrook, the center's chief scientist, says that although conventionally grown food tends to have more protein, organic food is about 25% higher in vitamin C and other antioxidants.

Yet a recent Danish study published in the Journal of the Science of Food and Agriculture showed no vitamin and mineral advantage to organic food.

So, what to eat? I side with the nutritionists who urge people to eat more fruits and vegetables, regardless of how they're grown. Common sense, though not necessarily science, would seem to favor organics, if you can afford them. But if you want, split the difference -- buy organic for fruits and vegetables that are thin-skinned or hard to wash or peel, and go conventional for those, such as bananas, that peel easily.

Tuesday, December 2, 2008

Bad Crop: Commodity Currencies

In currency markets gripped by turmoil, investors have targeted one group for special punishment: big commodity exporters.

This cluster includes the currencies of countries like Canada, Australia and New Zealand, which have significant exports of natural resources and agricultural goods.

With the global economy headed toward recession, weakening demand for everything from oil to iron ore, these currencies could face a further battering.

In many ways, these "commodity currencies" are bellwethers of global growth, soaring in good times and tanking when the picture turns grim.

Monday, they got a brief shot in the arm from news of China's massive stimulus package, which could generate demand for certain commodities. The Australian dollar strengthened against the U.S. dollar before retreating. It is down more than 30% versus the buck since mid-July. Those tractors can be used for John Deere Merchandise.

In October, the Canadian dollar had its worst month ever against the greenback, falling 12%, effectively erasing more than three years of gains. The New Zealand dollar has lost about a quarter of its value against the U.S. dollar since July.

When commodity prices fall, it translates into a shock for the trading position of commodity-exporting nations. Suddenly, the price they earn for their exports falls relative to what they pay for their imports. That means their trade balances deteriorate and their economies suffer as income from exports declines some major exports include; green tea, black tea and herbal tea.

Commodity currencies did mount a minor recovery in latev October and early November as investors tiptoed back into battered assets. Other factors also influence these currencies, of course, from investment flows to developments in each country's domestic economy with better lawn care.

Still, their special link to commodities makes them susceptible to more pain. A precedent exists for further falls in commodity prices: Despite the recent drop, commodity prices remain well above the lows touched in the two last global recessions.

China, with its appetite for imported natural resources, is a focus for worry. "If this cycle is vicious enough and China gets into trouble, this could be very, very powerful," says Stephen Jen, head of currency research at Morgan Stanley.

He singles out the Australian dollar as especially vulnerable. "The low that we saw back in 2001 shouldn't be ruled out," Mr. Jen, a user of v says.

Back then, one Australian dollar fetched less than 50 U.S. cents. Late Monday in New York, it bought about 67 cents, down from more than 97 cents in July. Prices for certain Australian exports, like copper, wheat, aluminum and nickel have slumped.

The economic link between the currencies of commodity exporters and the prices of such exports has prompted economists to ask whether the former might predict the latter. The reasoning: Investors will incorporate their expectations about movements in commodity prices into their trading of these currencies, other important considerations cover many topics such as; Septage Tanks and Septic Tank Design.

In a recent paper, economists Yu-chin Chen, Kenneth Rogoff and Barbara Rossi examined quarterly moves in the currencies of Canada, Australia, New Zealand, Chile and South Africa over the past one to three decades. They found that each currency helped forecast the prices of its country's main commodity exports. Together, the currencies were a surprisingly good indicator of how a broad index of commodities would perform in the following quarter.

For the third quarter, the model based on the currencies forecast a fall of roughly 9% in commodity prices, despite their strong performance earlier in the year. It got the change in direction correct, but not quite the magnitude: A broad commodity index from the International Monetary Fund was down 18% in the third quarter; excluding energy, it was down 12%.

Given the severity of the current turmoil in global markets, using historical patterns to forecast commodities like natural lawn care mightn't be of much use at the moment, cautioned Ms. Chen, an economist at the University of Washington.

Among emerging markets, there are several currencies with strong links to commodities, among them the Chilean peso, which moves with copper prices, and the South African rand, which has ties to gold and minerals like platinum. The Russian ruble also has benefited from the soaring price of crude oil.

Some experts caution that the recent thumping taken by commodity currencies may be overkill. Robert Sinche, head of global currency strategy at Bank of America, says that the Australian dollar may have been unduly punished from a medium-term perspective.

Economic growth in Australia is projected to slow markedly in the year to next June, to 1.5%, according to the country's central bank. That isn't a great figure, but still better than in other advanced economies.

But with currency markets so unsettled and many investors still on the sidelines, making bets is difficult. "Even if some of these currencies look considerably cheap, the volatility is just immense," says Jens Nordvig, a currency strategist at Goldman Sachs.

Thursday, October 30, 2008

'Yes' on Proposition 2

You can tell a lot about a ballot measure by the groups for and against it. The leading backers of Proposition 2 - which seeks to stop the inhumane confinement of certain animals in tiny crates or cages on factory farms - are the Humane Society of the United States, the California Veterinary Medical Association, the Center for Food Safety, the Consumer Federation of America, and the United Farm Workers, among more than a thousand prominent organizations and individuals.

Proposition 2's opponents are agribusiness corporations masquerading as "safe-food" advocates, and they are trying to trick you. The largest donor is Moark, an egg factory farming operation from Missouri that has kicked in $800,000. This company settled criminal charges for dumping live chicks in a Dumpster, and Moark's California egg factory farm was the subject of a recent investigation finding filth and cruelty at the plant. The second largest donor at nearly $600,000 is Cal-Maine, another egg factory farming company, from Mississippi. These companies and others opposed to Proposition 2 are under investigation by the Department of Justice for illegally fixing egg prices that has consumers paying 40 percent more now than they did two years ago.

Don't be fooled. The power to end the suffering of millions of farm animals is in your hands. If you care about animal welfare, family farms, consumer protection, the environment and food safety, then please vote "yes" on Proposition 2.

Plan to promote precision farming techniques

DINDIGUL: Twenty five clusters covering 500 hectares would be established in various places in the district on an outlay of Rs.2.06 crore to raise various crops through application of precision farming techniques, said Collector R. Vasuki.

Each cluster would be developed in an area measuring 20 hectares. It would help farmers learn modern agriculture practices, use modern agriculture equipment, sophisticated irrigation management and pest control measures and application of organic manure and micro-nutrients.

With shortage of labour and increase in agriculture inputs, precision farming would not only scale down production cost but also ramp up production and ultimately profits.

One user group would be created for each cluster. All implements would be done through user group only. A hi-tech green house would also be developed in an area measuring 50,000 square metres.

To meet a growing demand for organic manure, 1,300 farmers — 100 farmers in each block in 13 blocks — would be engaged in organic manure production. They had been trained in use of vermi-compost and bio-fertilisers, she said.

A modern community nursery exclusively for sugarcane, cotton, sunflower, maize, pulses and oil seeds would also established to supply quality seedlings to farmers, for which Rs.25 lakh had been sanctioned.

Organisers were selected for eight blocks to set up agriculture clinics and small soil testing laboratories. Training was imparted to four organisers.

Identification of organisers was under way to set up the centres in rest of the blocks.

Each organiser would get Rs.6 lakh with 50 per cent subsidy. And Rs.42 lakh had been sanctioned for setting up of these clinics.

Self-help groups and members of Tamil Nadu Women in Agriculture would also be involved in seed purification unit to supply quality seeds to farmers.

Fish farming needs rules

A decision to allow commercial fish farming in federal waters of the Gulf of Mexico should only come after extensive consideration of the environmental and health impacts to the Gulf and its wild fisheries.

The Gulf of Mexico Fishery Management Council is meeting in Mobile this week to consider adopting rules on fish farming. It should wait, and let Congress weigh in with consistent standards to be applied to all federal waters.

Fish farming sounds intuitively benign, using floating pens to raise fish or shellfish. But beneath the surface — literally and figuratively — there are real and serious dangers.

Ocean fish farming elsewhere in the United States and around the world has produced problems few, if any, anticipated before the simple-sounding idea took off.

But experience has shown that the problems are real.

That includes pollution of surrounding seawater and ocean bottom from the accumulation of concentrated feces and uneaten fish food, and from the antibiotics and other medicines used in response to diseases and other problems caused by the concentration of large numbers of commercially grown fish in a small area.

There have also been serious problems with parasites and diseases spreading between confined commercial fish populations and wild fish that pass near the farms, or from commercial fish that escape.

That problem is magnified if the commercial fish include genetically modified species that can escape and mate with wild fish.

Congress is considering standardized fish farming rules under the National Offshore Aquaculture Act, which would provide a regulatory framework similar to regulations on wild-caught fish.

The last thing the Gulf's beleaguered commercial fishermen — or it sports fishermen — need are unanticipated problems from poorly considered fish farming off our shores.

Overhaul farming policy for drought, says Productivity Commission

The Government's key economic advisory agency will release a report today proposing major changes to the Government's Exceptional Circumstances drought-relief system, including a shift from unlimited drought support payments to grants to help farmers improve their ability to withstand future droughts.

The report will also say the existing EC system is dividing communities because eligibility for assistance is given according to arbitrary lines on a map indicating which areas are drought-declared.

The release of the report follows news in The Australian yesterday that the National Farmers Federation had scrapped its long-term support for the EC system.

In its submission to the Productivity Commission's inquiry into drought assistance, the NFF called for adaptation grants for successful farmers and HECS-style loans to help others build their businesses to the point where they can afford to invest in adaptation. The NFF also called for time-limited income support for struggling producers while they considered whether to apply for exit grants to leave the land.

The Productivity Commission's report is the last of three reports commissioned by the Rudd Government when it took office late last year.

A Bureau of Meteorology report released earlier this year warned of more frequent droughts because of climate change, while an expert panel investigating the social effects of drought last week called for an end to no-strings assistance.

Today's Productivity Commission report, a draft ahead of a final report in February, is expected to criticise the design of the EC system, created by the Keating Labor government in 1992.

The report is expected to say that the system does nothing to encourage farmers to change their practices and that the need for adaptation is becoming more serious because of climate change.

It will say the lack of incentives for change encourages farmers whose operations are unprofitable to continue to use bad management practices.

During last year's election campaign, Kevin Rudd promised to spend $55 million on training and re-establishment grants for primary producers, as well as $15million for research into better farming practices and $60million to retrain farmers in better farming practices.

The Productivity Commission report is expected to advise the Government to lift these financial undertakings.

Agriculture Minister Tony Burke was unavailable to comment yesterday, but has previously said any changes would not leave current EC recipients without support.

Opposition agriculture spokesman John Cobb agreed there was a need for reform of the EC system, provided there were proper transitional arrangements to ensure people were not suddenly denied income support.


SANHE, HEBEI PROVINCE, China – Spend an afternoon with the men who run the HuaXia Dairy Farm in Hebei Province and you soon suspect they are on a mission that’s more than simply about making money.

"We want to provide all the Chinese people [the ability to] drink fresh milk," said ER Hong, HuaXia’s Chief Strategy Officer, as we walked around the clean yet odorous farm that’s home to 5,000 cows and a lot of imported technology.
"In China right now, most people are not drinking fresh milk," continued the Taiwan native who says he grew up drinking fresh milk daily and talks about dairy as a basic human right. "Not many places can produce fresh milk."

It might sound like an odd pitch to make, given the bad press dairy products have been getting here lately. In September, the industrial chemical melamine was discovered in Chinese-made powdered and fresh milk and other dairy products sold in China and exported to parts of East Asia and Africa. Four babies died from kidney failure and at least 54,000 other young children in China have fallen ill as a result of drinking the tainted milk.

But HuaXia is poised to help overhaul the way millions of dairy farms operate across the country.

Bringing U.S. technology to Chinese agriculture
HuaXia was founded four years ago by Charles Shao, a 49-year-old information technology specialist, when he decided to pack up his life in Santa Monica, Calif., after the venture he was involved in sold to Google for a princely sum. "This was kind of a retirement for me," he laughed.

But when he arrived in China in 2003, he was determined to start his next adventure in an entirely different field. "[Some friends and I] were looking into either a vineyard or a dairy farm, and I choose the dairy farm," said Shao, whose mild manner belies an instinct for ambitious enterprise.

Adrienne Mong/NBC News
Hua Xia Dairy Farm has 5,000 cows, making it one of the largest in China.

Agriculture, as he saw it, was the last frontier in China’s economy. "If you try to set up a technology company here, there’s pretty much competition everywhere."

Moreover, there was an opportunity to make a real difference by focusing on agriculture. "The idea of dairy farming is actually to bring in U.S. technologies to do technology transfer so we can teach people in China how to do dairy farming correctly," he said.

It might sound presumptuous, but ongoing food safety scandals over the decades suggest Chinese farmers could use the help. Last month, melamine was discovered in not only powdered milk but also fresh milk, yoghurt, and some brands of cookies and candies.

And just this past weekend, authorities in Hong Kong found melamine in chicken eggs produced by a food distributor in the northeastern Chinese port city of Dalian.

Trying to regulate a fragmented system
The central government continues to take steps to try to address the problems of food safety; they include adopting a comprehensive food safety law and consolidating regulatory agencies to tighten oversight, but regulation may not be enough.

"We’ve found in other countries, when you have separate systems, one for the farm, one for industrial production, one for the retail sector and so on, it doesn’t work," said Jorgen Schlundt, Director of the World Health Organization’s Food Safety, Zoonoses, and Foodborne Diseases.

And China’s food production and supply chain is highly fragmented – especially the dairy system, which consists of millions of individual farmers who have been encouraged in recent years by government reformers seeking to promote dairy farming as an alternative income source.

"You have small-scale farmers that have four cows or eight cows," said David Oliver, an agriculture consultant. "They then sell to their larger milk companies. Quite often, they don’t have their own milking shed facilities like you would find in the U.S. So what they do every day is bring their cows to a community milking shed. The milk is then sent to the milk company. Sometimes those milking sheds are owned directly by the milk company but at other times they’re owned by a third party contractor."

It’s those third-party contractors who are suspected of being central in this latest scandal. Last week, six people were arrested for either selling melamine to milk suppliers or adding the chemical themselves directly to milk.

NBC News cameraman David Lom and assistant Ed Flanagan get up close and personal with the cows.

One of HuaXia’s operational advantages is its size. Of the 5,000 cows it owns – making it one of the top 20 largest dairy farms in the country – 1,000 are milking cows, producing 30 tons of milk a day.

All the animals are closely monitored for illnesses, and the milk produced is tested on a daily basis by the farm itself and on a weekly basis by an independent lab hired by HuaXia. The milk is then sent directly to a processing plant for packaging, eliminating the need for a middleman.

It’s a single-stream system – from the farm directly to the table – that experts like Schlundt and his colleagues at the WHO say is key to ensuring food safety.

Shao and his colleagues have invested in state-of-the-art equipment to help monitor the quality of their milk, thus making the farm work like an assembly factory.

"Even though we have U.S. technologies, we’re still in China," said Shao. There are no specialist herdsmen and farm labor is unskilled. "We instead have to compartmentalize and make our staff task-oriented," he explained. "The concept of high quality, quality assurance, and all these things is new to them."

HuaXia’s cows come from New Zealand or Australia, and the heavy equipment – like the mixing wagon to feed the animals, as well as the tractor required to pull the wagon – comes from the U.S.

Shao and his team’s efforts to run a tight ship are paying off. Not only have they easily weathered the milk scandal, their reputation for safe, fresh milk is gathering momentum. HuaXia already works with the U.S. Grains Council as a demonstration farm and training center for Chinese farmers. And the company is hoping to gain the seal of approval for quality and safety from the U.S. Food and Drug Administration.

"It’s possible to change how dairy farming is in China," said Shao. "We’re a good example!"

Monday, October 27, 2008

Monsanto Cites Strong Demand

Seed and herbicide supplier Monsanto Co. said global agricultural demand remains strong and U.S. farmers still have ample access to credit despite the turmoil in financial and commodity markets.

Monsanto says agricultural demand is still healthy globally. Pictured here is a researcher at the company's Peyrehorade laboratory in France.

The world's largest producer of traits and seeds by revenue has seen its market capitalization halved over the past 10 weeks as investors worry about the outlook for demand and pricing for crops.

Monsanto Chief Executive Hugh Grant said that, despite the gyrations in commodity prices, demand fundamentals remain intact for the company's corn, soy and vegetable seeds and traits, which offer protection against pests and drought.

The St. Louis company on Wednesday increased its long-term profit forecast amid acquisitions and new-product launches.

Mr. Grant said gross profit in 2012 is expected to reach $9.5 billion to $9.75 billion, ahead of what he described as a "bold" forecast given by the company last November. Monsanto also issued a 2009 earnings forecast, which undershot analysts' estimates. "We do control the factors that truly drive our business," Mr. Grant said on a call with analysts to discuss the company's fiscal 2008 results.

While acknowledging demand growth may fluctuate, he expressed confidence that the combination of rising protein consumption in emerging markets and low commodity stocks will boost earnings. He also said Monsanto would continue to create new products that would command premium prices.

Terry Crews, Monsanto's chief financial officer, said farmers in the U.S., Brazil and Argentina still enjoyed access to credit from government sources, banks and vendors. Tougher financing conditions have contributed to sharp falls in the share prices of equipment manufacturers such as Deere & Co. But Monsanto executives say seeds are the last input that farmers would seek to curb.

Mr. Crews said price increases for its seeds and traits in the U.S. are expected to be above its targeted 16%-18% range next year, with volume growth in the low single-digits.

Monsanto reported a net loss of $172 million, or 31 cents a share, in its fiscal fourth quarter, which ended Aug. 31. This compares with a net loss of $210 million, or 39 cents a share, a year earlier, in what is traditionally the company's weakest quarter.

Revenue climbed 35% to $2.05 billion, while the gross profit margin rose to 46.8% from 42.4%.

The fourth-quarter performance was foreshadowed last week when Monsanto boosted its fiscal 2008 guidance for the seventh time this year.

Sales for the segment that includes the company's seeds and traits business increased 27% to $941 million as corn sales rose 3% and soybean sales more than doubled.

Revenue increased 43% to $1.11 billion for Monsanto's agricultural-productivity products, which include the company's Roundup lawn-and-garden herbicide as well as crop-protection, herbicide and animal-agriculture products.

The company projected earnings of $4.20 to $4.40 a share for the new fiscal year, below analysts' expectations for net income of $4.62 a share. For fiscal year 2008, Monsanto posted net income of $3.62 a share.

Thursday, October 23, 2008

Corn, soybeans looking good, but prices aren't

CHAMPAIGN, Ill. (AP) — A farming season that once appeared to be doomed by the weather has turned out pretty good for Midwest soybean and corn crops.

But, to the surprise of farmers harvesting soybeans and starting on corn, it's the fall of once record-high prices that now threatens to take a lot of the shine off of 2008.

"Our potential was there," said Rolland Vandeveer, who has more than 5,000 acres of corn and soybeans near Salem, Ill., about 80 miles east of St. Louis. "This probably was going to be our best year for the last 20 years."

Farmers in Illinois and Iowa, the country's top corn and soybean producers, endured wet, cool springs that slowed planting and growth. Then they watched heavy, soaking rains and rising rivers swamp their fields, forcing many to plant their crops two or even three times.

All the while, though, prices held close to the record highs of the past couple of years, price peaks driven by the ethanol boom and growing global demand for food and livestock feed.

But as the summer wore on, crops looked better, expectations improved, and prices sagged.

Corn topped $7 a bushel and pushed toward $8 in midsummer, but has since fallen back to about $4.

Similarly, soybeans are selling for just under $9 a bushel now, well off the $16-plus they were going for in June.

The current prices are still high by historical standards, but they don't look so high to farmers paying more than they've ever paid for fertilizer, fuel and other things they need to grow a crop.

Some farmers paid well over $800 a ton for fertilizer over the summer, more than double what they paid a year earlier.

"We've had a huge increase in production cost over this time, and people's expectations have changed so much over time," Pat Westhoff, an agricultural economist at the University of Missouri said, explaining that farmers are accustomed to unusually high prices for their crops. "People have gotten used to that kind of world, but we're not in that world anymore."

Price problems aside, farmers and crop experts say the soybeans and corn being harvested so far look pretty good, particularly given the rough start to the season.

The harvest isn't as far along as it would normally be.

The Illinois Department of Agriculture says only about 20 percent of the state's 11.9 million-acre corn crop has been harvested so far, compared with about 63 percent at this point the past few years. Forty-five percent of the 9.2 million acres of soybeans have been harvested, compared to 70 percent or so in recent years.

Ken Cripe said he's seen a lot of soybeans but only a little corn come in so far at his grain elevator in Bluff City, Ill., about 70 miles east of St. Louis.

"The soybean quality is real good, and the yield looks good," he said as he watched a line of trucks wait to unload.

The little bit of corn he's seen looks promising, too, Cripe said.

The U.S. Department of Agriculture has gradually ratcheted up expectations for both crops since the wet spring.

Earlier this month, the USDA said it expects American farmers to harvest 12.2 billion bushels of corn, which would be the second largest corn crop on record after last year's biggest ever. The agency expects 2.98 billion bushels of soybeans, 11 percent more than a year ago.

With that in mind, Westhoff said many farmers will still have a good financial year. But in some cases, the combination of high costs and diminished prices could prove painful.

He said if someone owns all the land they operate, the chances are good that they can cover their costs and likely make a significant profit. But it might be more difficult for those who rent.

Monty Whipple, like a lot of farmers, figures it was time for the run of sky-high crop prices to end.

Whipple grows corn and soybeans near Utica, Ill., about 90 miles southwest of Chicago.

"You know that it has its up and downs and cycles, and nothing stays glamorous forever," he said.

But he admits that he, and maybe a lot of others, started thinking those prices might just last a while longer.

"We all get caught thinking things will never go back down," he said.

Minister Seeks to Turn Farming Into Export Industry

Soon after taking office in August, Food, Agriculture, Forestry and Fisheries Minister Chang Tae-pyong presented a new goal ― to achieve $10 billion in exports of farm and marine products by 2012, more than doubling last year's $4.2 billion.

"Many say it doesn't seem plausible, but I think it's possible," the minister said. "Of the exports so far this year, unprocessed farm products topped $600 million, unprocessed marine products $1.2 billion and processed food $1.9 billion. And the key lies in processed food,'' he said in an exclusive interview with The Korea Times Tuesday at his office in Gwacheon, Gyeonggi Provice, on the occasion of the 58th anniversary of the daily, which falls on Nov. 1.

"It is all about technology. It is the role of technology to make better ingredients, or even additives, for food. With better technology, it will also be possible to export processed materials made of imported ingredients. It is all about how to add value, and how to efficiently do it," Chang said.

Exporting is important because it creates more demand for farm and marine products, helping farmers and fishermen to earn more income, according to the minister.

"For example, this year saw a bumper harvest of cucumber. However, it only ended up halving its price, forcing farmers to scrap a lot of their harvest," Chang said.
Korean farmers need to export more, he said. "Cucumber is one of the most popular vegetables in the world. Expanding exports could prevent such a pitiful occasion."

For more exports, farmers need to change their point of view in an "innovative" way, the minister said, because each market has a different standard of favored products and it is important to produce what consumers want in specific markets.

"Up to now, farmers have just raised pigs. Now they need to know their main work is to supply pork for the market. In other words, agriculture is about providing consumers with ingredients they need," he said.

This offers a valuable cue to what is in Chang's mind. Farming and fishing are another form of manufacturing industry. And he didn't deny it.

"All farmers are CEOs of their own business," the official said. "Agriculture is no different from the manufacturing of products in plants, that's what I believe. Science and technology should occupy more room in agricultural management."

So, inevitably, it all comes back to one word ― productivity.

"Market competition is essential," he said. "Because competitors are everywhere, even outside Korea. At the same quality, prices should be competitive. In that regard, farmers need to make process innovation as other manufacturers do at factories.

"With the same budget, farmers can produce more by cutting expenses in each step of their work process, like plant managers do for their work."

Productivity varies in Korean farming circles, Chang said.

In a survey of rice farmers last year, the most productive 20 percent produced nearly 3.5 times more rice than the least productive 20 percent on average. The gap grew from a 2004 survey, in which the top 20 percent of farmers produced 2.4 times more than the bottom 20 percent.

The principle is also applied to distribution of their products.

"In an exemplary case, a farmer is selling the rice he produced at three different prices according to quality. I can safely say he surely has the quality of being a good CEO," he said.

Chang started to refer to farmers as entrepreneurs back in 2004, creating the term "farming CEO." It was meant to introduce the concept of "business management" to local farmers, the minister said.

"I used to tell them: Each of you is a business owner, not hired staff. That means you have to make your own decision about production and sales," Chang said.

"It's about the way they use various resources they have.

The approach is also better for more exports, he added.

Currently Korean rice is about 3 or 4 times more expensive than foreign rice, but the price can be more than halved to an exportable level, through productive farming and adoption of quality species.

Korean ``hanwoo'' can also be exported through quality innovation and productivity enhancement like Japan's beef, Chang added.

The first thing he did since taking office was to meet local farmers every weekend. There, he saw pain, but also signs of hope.

"Even though an influx of imported products and rising prices of oil and feed have hit farming households, many farmers are doing their utmost to be more competitive," he said.

Overall, it is still a serious problem that Korean farmers are unequal in production, and, strictly speaking, Korea's agricultural production is just 50 to 60 percent of that of the Netherlands. Chang, however, says it has enough potential to make a huge leap on the global stage.

"In the future, a lot of the minister's policies will be about hiking productivity like organizing households, developing advanced agricultural technologies and establishing more infrastructure in the farming village," the minister said.

Safety Matters

In no other time in our history have consumers here been so acute and sensitive about the safety of what they eat.

After the dangers of mad cow disease become the talk of the country following the resumption of U.S. beef imports, panic is now prevailing in the whole food industry due to melamine-tainted Chinese products.

Chang assured that food safety is his top priority.

"Safety is definitely the most important, and about half of the ministry's work is about monitoring food safety. The government is obliged to supply safe food to its people," he said.

The issue is also meaningful to globalize Korean food products, as exports will be impossible without securing safety, let alone being recognized as quality products, he added.

"I do understand a lot of people are still worried about U.S. beef," Chang said. "The government will closely monitor the whole process of its import and distribution. All restaurants must clearly identify the origin of ingredients they serve."

In July, the ministry set up comprehensive measures for food safety, which include establishing a preventive system and intensified import food control. Also, it plans to make it obligatory for food dealers to keep records of their transactions this year, before completing a food distribution tracking system by 2010.

An overhaul of the related system will be soon made, the minister said. Most importantly, a project is under way to integrate all safety controls for dairy, farming and marine products, all of which are separate at present.

There will be more roles for consumers under the new system. The government will encourage more civic engagement in supervision of food-related facilities and the labeling of the origin of food.

"Safety control is basically a matter of system, so it will take some time to make it full force. But all other measures available will be introduced as soon as possible, hopefully this year," Chang said.

Investing in Antiquity

Once at risk for demolition, the historic Grandview Farm, one of the last vestiges of Burlington's agricultural past, may finally get a face lift.

After years of uncertainty over the future of the local landmark, the town plans to spend up to $2 million to restore the exterior of the farmhouse, also known as the Marion Tavern.

"This is definitely a large step forward for is," said Nick Rubino, cochairman of the Grandview Farm Use Committee.

Residents at Town Meeting recently approved borrowing $1 million over 20 years to help pay for the renovations. The borrowing will cost about $75,000 annually, which will be covered by payments from a local developer, the Gutierrez Co., to the town. The payments were part of the three-way land swap agreement seven years ago between the former owners of the farm, the town, and the Gutierrez Co. that allowed the town to take ownership of the property.

The town also has about $800,000 from various sources available to help pay for the restoration. Additionally, the town plans to sell a single-family residential lot on the property that could generate between $250,000 and $300,000 toward the Grandview renovations, said Town Administrator Robert Mercier.

The $2 million is expected to pay for structural repairs and exterior work to the main house, the oldest part of the complex. It does not include work to the ell or the barn, which are connected to the house.

Mercier said the town will issue a request for proposals this fall for the work, and hopes to award a bid for construction by late winter and have the contractor begin work in the early spring.

"Lots of ifs in the plan, especially with the current market conditions, but this is our best hope to date to stabilize and save this structure," Mercier said via e-mail.

Better known today for its shopping and business parks along Route 128, Burlington started out as a farming community, according to Michael Tredeau, cochairman of the Burlington Historical Commission. Just 100 years ago, the town's population was 592, Tredeau said. Today, the residential population is 24,000 and its daytime population is 150,000.

The Grandview Farm complex began as a Greek Revival-style house built by the Marion family in 1830, said Tredeau. Abner Marion decided that, in addition to running a farm, he would open a tavern to attract those traveling between Boston and Lowell. He moved a pre-1750 saltbox house to the site and connected the two homes into one main house. An ell was constructed to connect the main house to the barn.

By 1870, Charles McIntire owned the property and ran a large dairy farm there. It was later turned into an egg and poultry farm. The McIntires named it Grandview Farm because its high peak had majestic views of Mount Wachusett in Princeton and Mount Monadnock in southern New Hampshire.

In 1970, the property was purchased by Hubert Ruping, whose family owned the property until the three-way land swap in 2001.

Tredeau said the connected farm complex is an architectural style unique to New England. "It's the only one left in Burlington and one of only a few in the Eastern Massachusetts area" - reason enough to preserve it for posterity, he said.

"The growth has been incredibly explosive and all the farms are gone," he said. "This is a building right in the middle of town to remind us of our farming heritage. To say this property is the truest example of Burlington's heritage would not be an understatement."

Tredeau said the building is in "fair condition." The framework is solid, but the roof and foundation need work, and its exterior needs to be redone. He said it's been vacant since the town took ownership about seven years ago.

"It's not falling down, but a couple more years with nothing being done and it could get into that condition," he said.

When the town first took over the property, a committee was formed to look at how it could be used. But it became clear that the house needed work and renovations would be needed before the town could decide its best use, said Rubino. "Our focus shifted from use to saving the building," he said.

The committee raised $800,000, but it wasn't enough to do all the work, Rubino said. At one point, the committee recommended razing the structure because the renovation costs were so high.

The first phase won't fix everything, town officials acknowledge. But Rubino said it's a good start.

"From the common, certainly it should look much better," he said. "The outside will look like it should."

Rubino said the second phase will focus on the ell and the barn, and the third will target the interior.

"We do want to save that as well, but money is tight and we had to focus on the most historic portion," he said.

Once the renovations are done, the committee will once again be able to look at use. Rubino said ideas include using it as a function hall, meeting space, and offices. One idea would turn the barn into a community theater.

Tredeau said town residents should remember that while it would be nice to reuse the building, its most important purpose is to serve as a reminder of what the town used to be - a farming community.

"We have in our hands, a prime example of that agricultural industry," he wrote recently in a letter to the Board of Selectmen. "A building which was the center of commerce for this town. A building which can show us, remind us, and teach us the history and heritage of Burlington. And we need to remember the value of this building is its unique structure, and its antiquity.

Tuesday, October 21, 2008

Trouble down on the farm

The worsening financial crisis is making it harder and more expensive for farmers and cattlemen to borrow money to pay for feed, land and salaries. While the credit squeeze on the agricultural sector is buffered somewhat by subsidies and other federal assistance, the timing is nonetheless bad: the costs of fertilizer, fuel, seed and equipment have all risen sharply in recent years, and a global recession is on the horizon.

“Other than the sky is falling, I’m OK, I guess,” said West Texas rancher John Welch, who manages 10,000 head of cattle.

With confidence dwindling in borrowers’ ability to repay loans, banks are requiring more collateral and higher interest rates from crop farmers, ranchers and meat processors, said Carl Anderson, an agricultural economist at Texas A&M University. “The bankers are turning conservative.”

This is the toughest lending environment farmers have faced in about 25 years. At the same time, the agricultural sector has historically done better than other industries during a recession because of the local lenders’ familiarity with the area, the safety net provided through farm bill programs and producers having crop and revenue insurance coverage.

In response to the lending crunch, farmers and ranchers are expected to rein in costs wherever they can — whether it means using less fertilizer, restructuring debt or putting off new equipment purchases.

While the weakening global economy is putting downward pressure on fuel prices, it is also depressing the value of grains and livestock — and that will eat into farmers’ and ranchers’ pocketbooks. The upside for consumers is that food prices are likely to come down.

The agricultural sector won’t be frozen out of credit markets entirely. For starters, the industry’s traditional lenders — independent commercial banks — are on more solid financial footing than the country’s largest investment banks and commercial banks, which have suffered the most in recent months from mortgage-related losses.

Moreover, federal assistance programs put in place in response to the country’s farm crisis of 1919 are still active, helping the industry weather the current crisis.

Provisions in the Farm Bill, portions of which grew out of the Agricultural Adjustment Act of 1933, give the industry special access to government-backed loans that are nearly fully guaranteed by the U.S. Department of Agriculture’s Farm Service Agency.Historic intervention

Asset prices plunge and a panic sweeps through international markets. Congress enacts sweeping government intervention, putting aside faith in free markets to heal themselves.

Sound familiar? So went the farm crisis of 1919.

When the U.S. bailed out the agriculture sector in the early 1930s, it forever changed the business of farming. The interventions of the 1930s succeeded in their goal of smoothing out the farm sector’s booms and busts, said Neil Harl, an agricultural economics professor at Iowa State University. But farmers chafed under Depression-era programs that limited their planting acreage. Their resistance led to the 1996 Farm Bill, known as the Freedom to Farm Act, which aimed to return the farm sector to the free market.

Farm credit still flows, but standards tighten

Strong commodity prices, high land values and a low rate of farm loan delinquencies should insulate the farm credit market from the Wall Street woes that have tightened the nation's credit market. Lenders say California farmers and ranchers should have little problem obtaining loans, but will face more scrutiny and higher interest rates.

"The positive thing is we are doing business today. I would not term it as business as usual, though," said Ron Carli, chief executive officer of Santa Rosa-based American AgCredit, one of eight Farm Credit Services associations in California that specialize in agricultural loans.

Unlike financial institutions that have been devastated by subprime mortgages, the agricultural lending sector has remained on solid financial footing because of its strict lending practices. Not only are farmers required to answer questions about their assets, production costs and crop plans, but they must also substantiate the financial details of their operations and show proof that they can pay off their debts.

"Farm Credit didn't lower its underwriting standards like the mortgage brokers did on housing," said Ken Graff, chief executive officer of Farm Credit West in Roseville. "And because the ag sector of the economy has had good commodity prices, our credit quality remains solid and sound at this time."

Carli said while the government-sponsored, farmer-owned cooperative has not suffered mortgage-related losses like other investment and commercial banks have and will have funds available to lend to qualified farmers and ranchers, those funds will come at a cost.

"The interest rate on the variable side is going to go up because the cost for us to get our monies is going up," he said.

Interest rates could soar dramatically for farmers who are considered a high credit risk, either because they're farming a crop that has not been profitable or they're farming in an area where water availability could curtail their production, said Cornelius Gallagher, senior vice president and agribusiness executive for Bank of America in Roseville.

Farmers can also expect tighter lending standards from banks on some loan products. In many cases, long-term loans with fixed interest rates are simply not available at this time, Graff said.

Roger Sturdevant, executive vice president and head of the agribusiness banking division for Bank of the West in Fresno, said lending institutions are looking for the greatest return for the least amount of risk and increasing scrutiny of borrowers' credit worthiness. Customers who want just a loan and are unwilling to bring over their entire banking relationship or use other financial services will be less attractive to banks during this lending crunch, he added.

"A lot of institutions are being very selective and planning on managing their growth more closely than what they have been doing in the last year or two," Sturdevant said.

Carli said American AgCredit plans to stick to its core business and core customers but will likely tighten its underwriting standards and make fewer exceptions to loan qualifications than it may have allowed in the past.

"There would be certain risks that we may not be willing to take today that we were willing to take a year ago when the economy was still doing pretty well," he said.

Today's tighter lending standards have their roots in the agricultural recession of the 1980s, said Steven Blank, University of California Cooperative Extension agricultural economist in Davis. Inflation in the previous decade had pushed farmland values so high that many producers, feeling wealthy, borrowed against their equity to buy more acreage to expand their operations, he said.

When farmland values dropped as much as 60 percent in a couple of years, many growers had gone so far into debt that their farm incomes were no longer sufficient to meet their loan payments.

"It was just like the foreclosure problems we have now, except it was in farms," Blank said.

The farm and bank failures of the 1980s led to major regulatory changes in the banking industry. One significant change that affected agriculture was the shift from lending based on a farmer's equity to his farm income, Blank said.

"Those are traditional underwriting requirements that have been in place since the '80s and haven't changed materially," said Gallagher of Bank of America.

And while the farm lending business today has generally been somewhat insulated from the dire conditions of the housing market, agricultural sectors such as nurseries, which rely on that market for much of their sales, could be feeling ripple effects that will ultimately hurt their businesses.

"There are going to be spot sectors that have different markets, and those sectors could be indirectly impacted by the housing issues," said Gallagher. "The mortgage crisis has significantly reduced housing starts and housing sales, and that in turn causes people to buy less nursery plants and products."

San Bernardino County nursery producer Jim Rietkerk said because his business is more closely tied to the retail level than some other farm sectors, he has already felt the effects of the slowing economy and was forced to cut back some of his employees' hours.

"If credit lines are not extended or lowered, that makes it difficult for some people to build inventory and meet payroll obligations," Rietkerk said.

Joe Zanger, a diversified farmer in San Benito County, said many farmers are making production plans for next year and depend on a line of credit to plant crops, buy or lease land and replace equipment. Without a line of credit, there's not much they can do, he said.

Faced with rising fuel, fertilizer, feed and other production costs, they are also borrowing more money than ever before to cover their operating expenses. That has increased the demand for credit and loan products, as well as put a strain on the amount of capital available in the system to support the growth in agricultural lending, Sturdevant said.

While high commodity prices mean more income and credit advantages for some farm segments, they can spell trouble for livestock and dairy producers who depend on commodities such as corn for feed. Those higher prices cut into their already-narrow profit margins, potentially putting a strain on their ability to borrow.

Mary Cameron, a dairy farmer in Kings County, said she purchased 170 acres of land this year to expand her operation and is concerned about how her outstanding debt will affect her ability to secure additional loans to run her dairy in the future. While fuel and feed prices have leveled off recently, milk prices have also softened. If milk prices come down faster than her input costs, that could put her in a financial bind.

"The way it is now, we cannot even pay our monthly bills because our income is less than our feed costs and payroll," Cameron said. "If you've borrowed enough money from the bank that you're close to your 75 percent LTV (loan-to-value ratio), the bank is not going to loan you any more money. That's why we have so many dairies selling out because the banks are calling in the loans."

The credit crunch will also cause indirect impacts even for farmers with strong balance sheets, as agricultural businesses such as fertilizer dealers cope with costlier credit, according to an economic analysis by the American Farm Bureau Federation.

With fertilizer prices doubling in the past two years and continuing to rise, farmers are now being asked to make commitments for their 2009 fertilizer needs and to pay a substantial amount, sometimes 100 percent, up front, said Terry Francl, AFBF senior economist.

"What is happening is that the credit function of these transactions is being shifted from the fertilizer producers and retail dealers to the farmers," he said. "The net result is that it increases the farmers' cost."

Blank said not only will fertilizer dealers likely pass along some of their higher credit costs to their farm customers, but in extreme cases, they may refuse to sell fertilizer to customers who have to pay on credit. To the extent possible, some of these costs will likely be rolled into prices that consumers will pay for processed goods.

Despite the gloomy economic forecast, Blank said he remains optimistic that, in a couple of years, "we'll be right back to normal."

"Being in agriculture is a great place to be in down times because people are going to eat," he said. "Even if the economy is a little soft, we're all going to keep getting hungry. I think agriculture in many ways is a bit more of a safe harbor than other parts of the economy in that regard."

Wednesday, October 8, 2008

Presidential Candidates on Agricultural Policy

Presidential Candidates on Agricultural PolicyFarm Progress, a Rural Press/Fairfax Media subsidiary in the United States, posed a series of agricultural policy questions to the Obama and McCain camps. This is an extract of what the two men vying for the most powerful job in the world had to say about farming, fertiliser and fuel for American farmers…….

What are your views on the food vs. fuel debate?

*Barack Obama: "Corn-based ethanol has been an important transitional technology in helping make America more energy independent. However, it has limitations, and that's why I am committed to accelerating the transition to advanced biofuels. I support an array of policies to speed the transition away from corn and toward low-carbon, sustainable alternatives that do not rely on food crops. There are many flavours of ethanol - different feed stocks, different production approaches, different carbon footprints. In contrast, there is only one flavor of oil - expensive, polluting and largely imported. As president, I will work to phase in at least 2 billion gallons of cellulosic ethanol into the national fuel supply by 2013."

*John McCain: No response

What steps might you take as president to stabilise fertiliser prices, which have doubled and tripled?

*Obama: "A major key to stabilising fertiliser prices is addressing the skyrocketing costs of natural gas. Through my policies for continued domestic production combined with investments in efficiency, we will take some of the pressure off the resource and increase supply, bringing costs down."

*McCain: "I believe in promoting and expanding the use of our domestic supplies of natural gas. When people are hurting, and struggling to afford gasoline, food, and other necessities, common sense requires that we draw upon America's own vast reserves of oil and natural gas. Within the United States we have tremendous reserves of natural gas."

As we author trade agreements, are there ways to level the playing field in regard to individual countries' regulations, such as employee conditions and chemical use?

*Obama: "For too long, Washington has put the interests of free trade ahead of broader concerns about our economy and American workers. I will break from the failed trade policies of the last eight years. As president, I will ensure that our trade agreements include strong, enforceable labour and environmental provisions in the core of the agreements."

*McCain: "I believe that globalisation is an opportunity for American workers today and in the future. Ninety-five percent of the world's customers lie outside our borders, and we need to be at the table when the rules for access to those markets are written. To do so, the U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules."

What would be your policy concerning greenhouse gases? How would it affect farmers? Would you pursue approving the Kyoto Treaty?
*Obama: "As a result of climate change… I support implementation of an economy-wide cap-and-trade system to reduce carbon emissions by the amount scientists say is necessary: 80 per cent below 1990 levels by 2050. This market mechanism has worked before and will give all American consumers and businesses the incentives to use their ingenuity to develop economically effective solutions to climate change. This will transform the economy, especially in rural America, which is poised to produce more renewable energy than ever before, creating millions of new jobs across the country. I will also develop domestic incentives that reward forest owners, farmers and ranchers when they plant trees, restore grasslands or undertake farming practices that capture carbon dioxide from the atmosphere, creating new opportunities for rural America to help solve the climate crises."

*McCain: "I will propose a cap-and-trade system that would set limits on greenhouse gas emissions while encouraging the development of low-cost compliance options. A climate cap-and-trade mechanism would set a limit on greenhouse gas emissions and allow entities to buy and sell rights to emit, similar to the successful acid rain trading program of the early 1990s. The key feature of this mechanism is that it allows the market to decide and encourage the lowest-cost compliance options."

If you're elected president, the most recent farm bill won't expire in your term. Would you do anything in the next four years to address any problems you see with the current legislation?

*Obama: "It's important to implement the 2008 Farm Bill in keeping with the intent of Congress. As president, I will work to ensure that the protections in the bill against gaming the system are properly enforced, and I will work with Congress to push for greater reform to ensure that payments are targeted appropriately."

*McCain: "I support a risk management program for farmers. When a farmer suffers from a natural disaster such as droughts or floods, we should assist them - this is a commitment we have made to our farmers, and I will honor it. As president, I will fight on behalf of family farmers to enact reasonable reforms to our crop insurance program and our system of countercyclical and direct payments."

Survey conducted by Farm Progress, USA.

Farmer Mac's Amber Waves Of Pain

Farmer Mac's Amber Waves Of PainThe agricultural sector swept in and bailed out its own Wednesday at a time when farmers are feeling the impact of the credit crunch.

Federal Agricultural Mortgage, the rural cousin of Fannie Mae and Freddie Mac announced a $65.0 million capital infusion from a group of banks on Wednesday.

Federal Agricultural Mortgage, which is also known as Farmer Mac and was created by the U.S. government as a secondary market for agricultural real estate and rural housing mortgage loans, saw its shares soar 65.6%, or $2.69, to $6.79, on Wednesday, but that will be cold comfort to investors who paid more than $30 for it in August. The shares held up well until last month, when the Treasury took control of Fannie Mae, in which Farmer Mac held preferred shares.

The Farm Credit System, which is a federally chartered network of borrower-owned lending institutions, purchased $60.0 million in preferred stock of Farmer Mac. In addition $5.0 million of Farmer Mac senior cumulative perpetual preferred stock has been purchased by Zions Bancorporation of Salt Lake City.

“Farmer Mac enhances the availability of agricultural mortgages, and more recently, rural utility loans, thereby assisting in the steady and dependable flow of capital to American farmers and ranchers and rural America,” said Robert B. Engel, chief executive officer of CoBank, one of the Farm Credit System institutions. He was speaking on behalf of his fellow Farm System Bank presidents.

Meanwhile, just as Farmer Mac got a bailout on Wednesday, U.S. Agriculture Secretary Ed Schafer said the credit crunch may impact agricultural production next year.

Schafer warned that the costs of farming have soared and without loans it may be difficult to pay for operations. According to the U.S. Department of Agriculture, farm expenses are expected to rise 16% to $294.8 billion this year.

Engel said “agriculture is a key economic driver in our economy, providing food, thousands of jobs and biofuels that help make our nation more energy-independent,” which is why the Farm Credit System wants to ensure that U.S. agriculture has the capital it needs to survive.

As fertilizer and seed companies such as Potash, Agrium, and Mosaic continue to raise price due to soaring fuel prices, higher costs of borrowing and supply concerns, farmers feel the pain.

Last month, Farmer Mac plummeted after it filed a document with the U.S. Securities and Exchange Commission saying it would incur charges due to its exposure to Fannie Mae securities. The agency owned $47.2 million of Fannie Mae preferred shares at the end of June. About $44.0 million of value has been wiped off those shares, whose dividends are being suspended as Washington opted to support Fannie and Freddie bondholders at the expense of owners of those companies' common and preferred shares. Farmer Mac said last week it also had exposure to Lehman Brothers Holdings, which filed for bankruptcy last month, and may suffer a substantial write-down.

Farmer Mac also announced Michael A. Gerber will now serve as acting president and chief executive, replacing Henry D. Edelman, who was the only president and CEO that Farmer Mac had ever had.

Farmer Mac said Gerber will continue as CEO of Farm Credit of Western New York, an association in the Farm Credit System.

By: Ruthie Ackerman,
Forbes.com; October 1, 2008

Small Town Forms the Heart of Pear Country

Small Town Forms the Heart of Pear CountrySacramento is known for many things--a rich culinary scene, unique scenery, and a wealth of history. Just a stone's throw away from California's capital those words describe another Central Valley city--the agricultural oasis known as Courtland. Along the Sacramento River Delta, as Forty Niners came searching for riches during the Gold Rush, some found riches in farming. Now it's up to people like Tim Neuharth to keep that history alive by farming the land that has given him and his family so much.

Tim along with his wife, Laura, his two sons, Zach and Michael, and his 81-year-old mom Lucielle, all care for the most recognizable crops along the delta these days--pears. He has approximately 55 acres of pears, all of which thrive in this rich agricultural land.

The Sacramento Delta's pear district can boast to being the world's most extensive plantings of pears. Most have gone to the canning industry in years past, but Tim's pears go to the fresh market, to the juice industry and to baby food. Always striving to do more, Tim is hoping to turn this farming area into an educational oasis for visitors of all ages.

"We're slowly transitioning to agritourism to get people to come and enjoy the farm and see what goes on in agriculture. Ag-education is a big thing on farms these days to let people know where their food comes from and how it gets to their tables so they can enjoy it," Tim said. Educating people is made easier when you also entertain them, which is what the Pear Fair aims to do each year. The event is an annual one in Courtland, as this tight-knit community pays homage to its past--through what else but pear food and fun!

Patrick Mulvaney, a Sacrmento-area chef enjoys the fruit that made the delta famous. His restaurant, Mulvaney's Building and Loan, has become a popular hangout for folks hoping to take advantage of Patricks's culinary consciousness--the more seasonal and local, the better. And while pears may have a sweet history in this area, the people of Courtland and Sacramento will tell you, it's the future that's ripe for success!

Amish Clash With U.S. Farming Rule

Amish Clash With U.S. Farming RuleIt's not like Glen Mast to be confrontational or to draw attention to himself. He is Old Order Amish and is happy to tend his 35-acre farm in his rural central Michigan community.

"I just want to be left alone," Mast says.

So it is extraordinary that Mast is a plaintiff in a federal lawsuit filed this month seeking to stop the government from tagging the ears of cattle with computer chips, chips that Mast and others say violate their religious freedom.

In Michigan and other states, the insular, Old World ways of the Amish are clashing with the technology-driven New World desire to track the movement of livestock in hopes of ensuring the safety of the food supply from mad cow disease, pseudo rabies, tuberculosis and other maladies. Some Amish are selling their cattle rather than comply with the regulation. Some are refusing to register their farms with a government-run national database. And some are moving to other states, where enforcement of the federal regulation is not as rigorous.

Historically, the Amish have quietly but fiercely fought for their separate and isolated status, winning, for instance, exemption from the military draft. They do not participate in Social Security, nor do they vote or run for political office.

But the emerging public health issue behind the livestock-tagging requirement has put the preservation of the Amish way against a compelling national concern.

Because the Amish are a growing segment of the dairy industry, that has put them in conflict with government efforts to regulate and protect the food supply. The concept behind the radio frequency chips is to follow the movement of millions of cattle and, when diseases occur, trace the possible origin.

In the decidedly small world of the Amish, though, the program is an incursion into their privacy and, for many, a violation of their religious freedom.

Many Amish interpret the New Testament book of Revelation as a warning that acceptance of technology — in this case the chips and the computers into which the information would be stored — amounts to worship of the Satan-possessed Antichrist. To many, the computer is the beast that will control their lives. There are disputes among the Amish about that interpretation, Alexander said, but there is broad agreement that embracing technology as a means to sell cattle is not in keeping with the teachings of the Bible.

The Virginia-based Farm-to-Consumer Legal Defense Fund, along with Mast and a handful of other plaintiffs, sued the U.S. Department of Agriculture and the Michigan Department of Agriculture, seeking to block enforcement.

By: Tim Jones
Chicago Tribune; September 27, 2008

Friday, October 3, 2008

Farmer Mac Rescued by Lenders

Group Injects $65 Million, Lifts Capital Above Minimum Level; CEO Edelman Departs

A group of farm lenders rescued Farmer Mac from a glut of souring investments by injecting $65 million of fresh capital into the smaller cousin of Freddie Mac and Fannie Mae.

As part of the move Wednesday, Farmer Mac, which is chartered by Congress to operate a secondary market for farm loans, replaced Henry D. Edelman as its chief executive, a position he had held since its creation in 1989.

Mr. Edelman, 59 years old, was succeeded by Michael A. Gerber, the 49-year-old chief executive of Farm Credit of Western New York. Mr. Gerber will hold the position until a permanent CEO is found for Farmer Mac, which is formally known as Federal Agricultural Mortgage Corp.

Farmer Mac's stumble comes as farm banks are riding high. While bad debts are battering the home-mortgage industry, rural lenders are benefiting from a two-year boom in grain prices, which is lifting farmland prices to record levels. Because land, along with machinery and John Deere tractors, are the biggest source of collateral for farmers, the farm-debt picture is its brightest in decades: The delinquency rate on the $9.5 billion in farm and rural loans under Farmer Mac's umbrella is the lowest in its history.

What got Farmer Mac in trouble were losses in its investment portfolio, which included one million preferred shares of Fannie Mae. The value of the shares evaporated when the federal government took Fannie Mae into conservatorship, and Farmer Mac faced a $44 million write-down. Then, Farmer Mac took another hit when Lehman Brothers Holdings Inc. filed for protection under Chapter 11 of the federal bankruptcy code, casting a cloud over its holdings of $60 million in Lehman debt securities.

The losses threatened to drain Farmer Mac's capital below the minimum level required by regulators. Farmer Mac's move to sell $65 million of preferred stock to some of its biggest banking customers brought its capital level up to $210 million, above the minimum statutory requirement of $181 million.

Most of the new capital came from the five banks in the Farm Credit System, a network of lenders created by Congress in 1916 to lend to farmers. An additional $5 million of preferred stock was purchased by Zions Bancorp of Salt Lake City, which has owned about a fifth of Farmer Mac's voting shares.

As part of the rescue plan, the preferred stock bought by the Farm Credit System banks will pay an initial annual dividend of 10%. The Farm Credit System banks also get the right to nominate three observers to the Farmer Mac board.

By: Scott Kilman
Wall Street Journal; October 2, 2008

Wednesday, October 1, 2008

Wind-Power Stock Suffers Blowout

wind turbinesFirm That Invests in Alternative Energy Fails to Impress; 'Market Is Pretty Penal if You Don't Deliver' on Promises

Wind-power stocks can be as fickle as the wind itself.

Shares of Otter Tail Corp., a diversified company with businesses in food-ingredient processing, plastics and wind-tower manufacturing, dropped sharply Tuesday, losing 19% to $36.16 after the company's earnings report showed the wind sector isn't blowing in the sort of profits investors expected.

Otter Tail shares have rallied ever since wind became fashionable with alternative-energy investors such as oil man T. Boone Pickens. Before Tuesday, the stock had climbed 29% for the year, and it hit a 52-week high of $46.15 July 30.

But Otter Tail's net income dropped to 11 cents a share in the second quarter, down 79% from 53 cents a year earlier. The company also lowered expectations for coming quarters for the second time this year, citing, among other factors, higher materials costs.

"This market is pretty penal if you don't deliver on your promises, especially if you are at a premium value and are in a space that's supposed to be doing well," said Andrew Meister, portfolio manager at Thrivent Investment Management, who holds the shares.

Part of the problem for investors is that the company is tight-lipped about its results in the wind business. The wind division, run by a subsidiary called DMI Industries, is folded into the company's manufacturing division, which also includes several other businesses. The company doesn't report specific revenue and income for each unit.

For this quarter, manufacturing brought $1.4 million in net income, compared with $5.3 million a year ago. Increased costs at DMI's Tulsa, Okla., plant resulted in a $2.2 million decline in DMI's earnings, the company reported, without saying what the overall results were.

"They tell you the [earnings] change in that business for the most recent quarter but we don't know from what base, or what the new number is," says James Bellessa Jr., an analyst at D.A. Davidson, whose firm makes a market in the shares.

When Otter Tail cut its guidance after releasing earnings in May, the stock fell just 3.5% the next day, suggesting "they got the benefit of the doubt," Mr. Meister said.

Not anymore. "Wind is where the growth is supposed to come from and it's what people are paying the premium multiple for," he said. "What you've found out is that there are growing pains here and the premium multiple should be re-evaluated."

By: David Gaffen
Wall Street Journal; August 6, 2008

Tuesday, September 30, 2008

Egg Industry Probe Is Urged

Egg Industry Probe Is UrgedThe Humane Society of the United States petitioned the Justice Department and Federal Trade Commission to investigate the nation's largest egg producers, alleging that their animal-welfare program masked an illegal plan to limit supply and raise egg prices.

Quality-control worker Phyllis Raber checks eggs for impurities as they roll over a bright light at Sauders Egg Processing plant in Winesburg, Ohio.

Egg producers also faced a growing number of lawsuits from customers seeking to recover alleged overcharges. Several of the lawsuits seek class-action status and could bring large damage awards if they prevail.

Egg prices are up 41% in two years, outpacing higher feed and energy costs. The Wall Street Journal reported Tuesday that part of the increase may be due to an industry cartel that arranged a series of large export orders and pressed its members to adopt new cage-size standards. Both efforts had the effect of cutting supply, which led to higher prices.

The industry group, United Egg Producers, has said its actions were proper and fully protected under a 1922 exemption to antitrust law. The Georgia group represents more than 250 U.S. egg farmers.

The Food Crisis

The most significant of the new antitrust suits, filed in U.S. District Court in Philadelphia by a New York restaurant, alleges a longstanding scheme to limit supply in the multibillion-dollar market for fresh eggs and egg products. The suit, which seeks to invalidate United Egg's antitrust exemption, cites internal documents and witnesses, and was brought by Cohen, Milstein Hausfeld & Toll, a Washington, D.C., law firm. The United Egg Producers has said it will defend its exempt status.

A second suit, brought by a Florida bakery and filed in federal court in Minneapolis, focuses on the smaller market for liquid and powdered egg products. An investigation of possible price fixing is under way in the egg-products market, a Justice Department official confirmed earlier this week.

The national Humane Society is engaged in a pitched battle with the egg industry in California, where a proposition on the November ballot would force producers to improve conditions for farm animals. The industry has said that Proposition 2 would be too costly for many farmers, and that it already is taking steps to give caged animals such as hens more room to move.

The Humane Society won an injunction in federal court in San Francisco last week barring an industry marketing group, the American Egg Board, from using U.S. Department of Agriculture funds to attack the proposition in an advertising campaign.

In Washington, U.S. antitrust enforcers declined to comment on the complaints filed this week by the 10-million-member nonprofit group.

By: John Wilke
Wall Street Journal; September 27, 2008

Thursday, September 25, 2008

Feds Probe Food Prices

Federal prosecutors are conducting criminal investigations into possible price-fixing by egg producers and California tomato processors, The Wall Street Journal reports. It's the latest in a series of federal probes of alleged price-fixing by farmers and processors.

Rapid increases in food prices have been blamed on the cost of fuel and feed but investigators say collusion may be an equally important factor.

Besides the egg and tomato probes, investigators have been looking into cheese, milk and fertilizer markets, trying to determine if suppliers worked together to manipulate prices. Last year, the Justice Department said it was investigating citrus fruit prices.

Milk prices have been a particularly sore point with many consumers, especially in New York City where shoppers have been paying $4.49 or more for a gallon of milk. Earlier this year, the New York City Council issued a report charging that high milk prices were due to "significantly decreased" oversight of New York State's Milk Price Gouging Law, resulting in citywide milk prices that are above the state-determined legal threshold.

In July, Danielle of New York City complained that she was charged $5.99 for a gallon of milk at the Amish Market on 9th Avenue. Maryellen said she also paid $5.99 at the Broadway Farms Grocery on West 85th St. Kim of Manhasset, Long Island, said she paid $4.19 at a BP station in Levittown.

Cynthia of Brooklyn told ConsumerAffairs.com, also in July, that she sent her son to the Produce and Meat Market on Livonia Avenue in Brooklyn to get ready-to-feed infant formula for her newborn baby. On July 23, the formula was $7.99. Two days later, it was $9.99, she said.
Price-fixing illegal

It is illegal for competitors to share pricing information or conspire to drive up prices but there are numerous loopholes, including an exemption for farm cooperatives that's intended to help small farms bargain more effectively with big processors.

Egg and tomato producers are claiming their collaborations are protected by that exemption, the Journal said, but a federal grand jury in Sacramento and the FBI are said to be continuing their probes.

Besides being sold as fresh produce, tomatoes are an important component of many processed foods, including ketchup, pasta sauce and salsa. Tomato growers suffered a setback earlier this year when tomatoes were wrongly blamed for a Salmonella outbreak but prices have since recovered, rising 16% in the year ending in August, according to government statistics.

Egg prices, meanwhile, are up more than 40% in the last year.

Part of the dilemma facing prosecutors is weeding out legitimate influences on prices from the results of illegal collaboration.

Food prices have been affected by the rising price of fuel, for instance, as farmers spend more to heat hen houses and transport animals to market. The growing use of ethanol has driven up the price of corn, a prime component of most animals feeds, to cite just a few examples.

The price of corn has risen almost 50 percent in the last two years, as both the cattle industry and ethanol producers have competed to buy it.

Increased consumer demand also drives up prices. Just as more Chinese are driving cars and increasing demand for gasoline, so are more families in emerging economies beginning to demand more meat, eggs and milk in their diets, putting pressure on prices in the U.S. and other developed nations.

By: Truman Lewis
consumeraffairs.com; September 23, 2008