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Articles from 2002 In January


More declines for cotton, corn?

Quinn, who works jointly with the Mississippi Farm Bureau Federation and the Mississippi Cooperative Extension Service, presented his market outlook for cotton, soybeans and corn to farmers attending the 2002 Delta Ag Expo in Cleveland, Miss.

“The greatest motivator is pain, and we’ve sure got a lot of it to deal with in farming right now,” he says. “Whether or not we see the seasonal price trends work as they normally do is still to be seen. They didn’t work as normal in 2001.

“If we get a seasonal spike of anywhere between 40 and 45 cents in December cotton futures, it may be the time to obtain some price protection with a put option.”

Quinn predicts 2002 cotton will trade between 35 and 45 cents on the cash market and between 30 and 50 cents on December futures.

“We could dip into the 20s, if mill use continues to decline and consumers don’t start buying more cotton,” he says. “Ultimately it will be world supply and world demand that move the price of U.S. cotton.”

Also weighing heavily on the commodity market is the uncertainty of farmers’ planting intentions for 2002. “Planted acreage is going to be the big thing and we don’t even have planting intentions yet. I’m not sure where we’re going, but I think most planting decisions will have to be made before we see a new farm bill signed into law.”

Cotton production in 2002 is expected to be somewhere around 15 million acres in the United States, but according to Quinn, that’s 3 million more acres than the market needs.

“Production will drop into the 18-million bale range, but it needs to come down from there to solve the overproduction problem,” says Quinn. “We’re looking at a 10-million-bale carryover this year. We’ve just got a lot of cotton here and a lot of it all over the world. We really can’t stand more than a 5-million-bale carryover to get prices to a level where we can afford to grow cotton.”

Quinn expects the “exceptional” cotton yields of 2001 to drop slightly in 2002, and says cotton exports should hit the 10-million bale mark this year. However, he says, sluggish consumer demand will continue to adversely affect cotton prices.

“Mill use is killing us, and I just don’t see the situation with stopping anytime soon. To make matters worse, while mills are closing here, we’re also hearing about foreign cutbacks,” he says. “Cotton may be healing itself right now, but it’s been a very sick industry.”

Corn yields are also likely to drop off from 2001 levels. However, according to Quinn, the 77 million acres of corn growers could plant in 2002 will drag the market down somewhat.

“I was favorable to corn throughout all of 2001 and all corn prices did were go down. It seems now that we are in more of a sideways trend even with a tighter supply outlook,” he says. “With average yields in 2002 we should see corn stocks tighten slightly. If corn futures go above $2.50 per bushel you should probably start pricing some of your crop.”

While Quinn thinks the potential is there for that price level, he is projecting cash corn prices will range between $2 and $2.50 per bushel this market year. December corn futures, he estimates, will fluctuate between $2.25 and $2.50 per bushel. “Growers should not expect a loan deficiency payment (LDP) for corn in 2002,” he says.

Any rally in corn prices will likely come during the early part of 2002, with the possibility for higher prices likely followed by another drop in corn prices sometime after March, Quinn says.

However, Quinn says he believes the market will wait until it sees the grain leave the country before making any upward move. Helping support corn prices is a corn-wheat price ratio that doesn’t favor feeding wheat over corn. Weather, though, will be the final factor in determining the value of the 2002 corn crop.

In comparison, Quinn is somewhat optimistic in his market outlook for soybeans.

Despite the current low prices, Quinn still believes that the soybean market is a healthy market. “I don’t see a big rally in soybean prices, but I do see some upside potential.

Expecting only a slight reduction in 2002 acreage over 2001 levels, he anticipates that average U.S. yields will drop slightly to 38 or 39 bushels per acre.

“We could see some rally in March, April or May if corn starts pulling some acreage out of beans, but if South America comes in with a record crop in February, soybeans could go to $3.75,” he says. “We could be seeing a pricing opportunity now with soybeans.”

“With average yields, world soybean stocks grow, and as with corn, weather will be the final factor. In fact, South America weather is already moving the price of U.S. soybeans,” he says.

Ultimately, Quinn is projecting 2002 soybean prices to range between $4 and $4.50 on the cash market, and between $3.75 and $5 on November futures. Growers can expect to receive an LDP for their soybean crop in 2002, he says.

“We need to remember that every six months we’re harvesting a huge crop of soybeans somewhere on this planet. And, although we keep growing more of them, we keep using more of them. We’re selling the fool out of soybeans,” he says.

e-mail: dmuzzi@primediabusiness.com

Senate passes disaster aid amendment

After suffering a defeat on the floor of the Senate less than one week earlier, the amendment authored by Sen.. Max Baucus (D-Mont.), which needed 60 votes for passage, was approved Jan. 29 on a 62-33 vote. But at least one Mid-South senator called the vote a “partisan game” aimed at making Republicans look anti-farm.

Originally included in the Senate version of the House stimulus bill, H.R. 3090, the amendment provides $1.8 billion for emergency financial assistance to producers who suffered losses in their 2001 crops and $500 million for livestock producers with losses in counties designated as disaster areas. It also instructs the agriculture secretary to spend $220 million to purchase agricultural commodities that experienced low prices during the 2001 crop year for the school lunch program to help restore some measure of profitability.

Most farm organizations have been focusing on passing a new farm bill. Spokesman for the organizations have said they will seek passage of an economic emergency bill containing $7.35 billion in funding that was passed in last year’s agricultural appropriations bill if a new farm bill cannot be passed and signed by the president by spring.

The almost $2 billion agricultural aid package was included in the economic stimulus package, which stalled in the Senate last December. It was not, however, included in the stimulus bill currently being debated by the Senate.

To remedy that problem, Baucus, who chairs the Senate Finance Committee and wrote the disaster assistance language section of the stimulus package, offered the amendment to again include the disaster assistance.

“Sen. Daschle put together what he considered a bare bones economic stimulus package. The proposed legislation now includes only those consensus items with overwhelming support, and disaster assistance for agriculture was not included in that category,” Baucus says. “Sen. Daschle himself supports the measure, however.”

A Jan. 24 vote to override the Budget Act, and include the disaster assistance in the stimulus package, came up three votes short. Because only 90 Senators were present in the chamber at the time of the vote, supporters are hopeful a second vote would rubber-stamp the measure.

Shortly before the vote was taken, Baucus said, “We feel pretty confident we can get the 60 votes we need.”

Mississippi Senator Thad Cochran, who voted in favor of Baucus’ amendment both times it was brought up for a vote, says, “Because of the extensive damage to agriculture in our state just before, and during, the harvest season, I think additional disaster assistance is justified,” Cochran says. “I hope the Senate will find a way to approve the Baucus amendment.”

Senate Minority Leader Trent Lott of Mississippi voted against the measure, calling it a partisan measure aimed at casting a negative shadow on Republicans.

Lee Youngblood, press secretary for Sen. Lott, says, “Because a consensus couldn’t be reached on an ag bill prior to the holiday recess, the Democrats agreed to move on to the economic stimulus bill. Then, they broke their agreement by bringing up an agricultural amendment in debate on the stimulus package.”

“This is clearly a partisan game played so the Democrats can make the Republicans look anti-farm,” he says. “The fact that Sen. Daschle has made this so political is what’s hurting farmers.”

Youngblood adds, “Trent Lott wants an ag bill more than anybody up there in Washington, D.C., but he wants the development of agriculture policy to be a bipartisan effort done through the farm bill, not through other pieces of legislation, like an economic stimulus package.”

While most of the Sunbelt voted in favor of the agricultural assistance package, support for the agricultural disaster assistance amendment was split in Texas, with Sen. Kay Bailey Hutchison voting for the measure, and Sen. Phil Gramm voting against.

Despite the severity of 2001 agriculture losses and their impact on rural communities, Baucus noted that some members of the Senate have attacked the agricultural provisions of the legislation.

“They’ve poked fun at it, circulating pictures of various fruits and vegetables,” he noted. “Farmers and ranchers across the country may not find this all so amusing. They may wonder why the economic problems of ailing corporations demand immediate action, but the economic problems of farmers and ranchers deserve only derision.”

According to Baucus, the economic stimulus bill may come up for a vote as soon as Feb. 7 or 8.

For information about how to e-mail your senator or representative go to or .

Senate passes disaster aid amendment

After suffering a defeat on the floor of the Senate less than one week earlier, the amendment authored by Sen.. Max Baucus (D-Mont.), which needed 60 votes for passage, was approved Jan. 29 on a 62-33 vote. But at least one Mid-South senator called the vote a “partisan game” aimed at making Republicans look anti-farm.

Originally included in the Senate version of the House stimulus bill, H.R. 3090, the amendment provides $1.8 billion for emergency financial assistance to producers who suffered losses in their 2001 crops and $500 million for livestock producers with losses in counties designated as disaster areas. It also instructs the agriculture secretary to spend $220 million to purchase agricultural commodities that experienced low prices during the 2001 crop year for the school lunch program to help restore some measure of profitability.

Most farm organizations have been focusing on passing a new farm bill. Spokesman for the organizations have said they will seek passage of an economic emergency bill containing $7.35 billion in funding that was passed in last year’s agricultural appropriations bill if a new farm bill cannot be passed and signed by the president by spring.

The almost $2 billion agricultural aid package was included in the economic stimulus package, which stalled in the Senate last December. It was not, however, included in the stimulus bill currently being debated by the Senate.

To remedy that problem, Baucus, who chairs the Senate Finance Committee and wrote the disaster assistance language section of the stimulus package, offered the amendment to again include the disaster assistance.

“Sen. Daschle put together what he considered a bare bones economic stimulus package. The proposed legislation now includes only those consensus items with overwhelming support, and disaster assistance for agriculture was not included in that category,” Baucus says. “Sen. Daschle himself supports the measure, however.”

A Jan. 24 vote to override the Budget Act, and include the disaster assistance in the stimulus package, came up three votes short. Because only 90 Senators were present in the chamber at the time of the vote, supporters are hopeful a second vote would rubber-stamp the measure.

Shortly before the vote was taken, Baucus said, “We feel pretty confident we can get the 60 votes we need.”

Mississippi Senator Thad Cochran, who voted in favor of Baucus’ amendment both times it was brought up for a vote, says, “Because of the extensive damage to agriculture in our state just before, and during, the harvest season, I think additional disaster assistance is justified,” Cochran says. “I hope the Senate will find a way to approve the Baucus amendment.”

Senate Minority Leader Trent Lott of Mississippi voted against the measure, calling it a partisan measure aimed at casting a negative shadow on Republicans.

Lee Youngblood, press secretary for Sen. Lott, says, “Because a consensus couldn’t be reached on an ag bill prior to the holiday recess, the Democrats agreed to move on to the economic stimulus bill. Then, they broke their agreement by bringing up an agricultural amendment in debate on the stimulus package.”

“This is clearly a partisan game played so the Democrats can make the Republicans look anti-farm,” he says. “The fact that Sen. Daschle has made this so political is what’s hurting farmers.”

Youngblood adds, “Trent Lott wants an ag bill more than anybody up there in Washington, D.C., but he wants the development of agriculture policy to be a bipartisan effort done through the farm bill, not through other pieces of legislation, like an economic stimulus package.”

While most of the Sunbelt voted in favor of the agricultural assistance package, support for the agricultural disaster assistance amendment was split in Texas, with Sen. Kay Bailey Hutchison voting for the measure, and Sen. Phil Gramm voting against.

Despite the severity of 2001 agriculture losses and their impact on rural communities, Baucus noted that some members of the Senate have attacked the agricultural provisions of the legislation.

“They’ve poked fun at it, circulating pictures of various fruits and vegetables,” he noted. “Farmers and ranchers across the country may not find this all so amusing. They may wonder why the economic problems of ailing corporations demand immediate action, but the economic problems of farmers and ranchers deserve only derision.”

According to Baucus, the economic stimulus bill may come up for a vote as soon as Feb. 7 or 8.

For information about how to e-mail your senator or representative go to or .

Senate passes disaster aid amendment

After suffering a defeat on the floor of the Senate less than one week earlier, the amendment authored by Sen.. Max Baucus (D-Mont.), which needed 60 votes for passage, was approved Jan. 29 on a 62-33 vote. But at least one Mid-South senator called the vote a “partisan game” aimed at making Republicans look anti-farm.

Originally included in the Senate version of the House stimulus bill, H.R. 3090, the amendment provides $1.8 billion for emergency financial assistance to producers who suffered losses in their 2001 crops and $500 million for livestock producers with losses in counties designated as disaster areas. It also instructs the agriculture secretary to spend $220 million to purchase agricultural commodities that experienced low prices during the 2001 crop year for the school lunch program to help restore some measure of profitability.

Most farm organizations have been focusing on passing a new farm bill. Spokesman for the organizations have said they will seek passage of an economic emergency bill containing $7.35 billion in funding that was passed in last year’s agricultural appropriations bill if a new farm bill cannot be passed and signed by the president by spring.

The almost $2 billion agricultural aid package was included in the economic stimulus package, which stalled in the Senate last December. It was not, however, included in the stimulus bill currently being debated by the Senate.

To remedy that problem, Baucus, who chairs the Senate Finance Committee and wrote the disaster assistance language section of the stimulus package, offered the amendment to again include the disaster assistance.

“Sen. Daschle put together what he considered a bare bones economic stimulus package. The proposed legislation now includes only those consensus items with overwhelming support, and disaster assistance for agriculture was not included in that category,” Baucus says. “Sen. Daschle himself supports the measure, however.”

A Jan. 24 vote to override the Budget Act, and include the disaster assistance in the stimulus package, came up three votes short. Because only 90 Senators were present in the chamber at the time of the vote, supporters are hopeful a second vote would rubber-stamp the measure.

Shortly before the vote was taken, Baucus said, “We feel pretty confident we can get the 60 votes we need.”

Mississippi Senator Thad Cochran, who voted in favor of Baucus’ amendment both times it was brought up for a vote, says, “Because of the extensive damage to agriculture in our state just before, and during, the harvest season, I think additional disaster assistance is justified,” Cochran says. “I hope the Senate will find a way to approve the Baucus amendment.”

Senate Minority Leader Trent Lott of Mississippi voted against the measure, calling it a partisan measure aimed at casting a negative shadow on Republicans.

Lee Youngblood, press secretary for Sen. Lott, says, “Because a consensus couldn’t be reached on an ag bill prior to the holiday recess, the Democrats agreed to move on to the economic stimulus bill. Then, they broke their agreement by bringing up an agricultural amendment in debate on the stimulus package.”

“This is clearly a partisan game played so the Democrats can make the Republicans look anti-farm,” he says. “The fact that Sen. Daschle has made this so political is what’s hurting farmers.”

Youngblood adds, “Trent Lott wants an ag bill more than anybody up there in Washington, D.C., but he wants the development of agriculture policy to be a bipartisan effort done through the farm bill, not through other pieces of legislation, like an economic stimulus package.”

While most of the Sunbelt voted in favor of the agricultural assistance package, support for the agricultural disaster assistance amendment was split in Texas, with Sen. Kay Bailey Hutchison voting for the measure, and Sen. Phil Gramm voting against.

Despite the severity of 2001 agriculture losses and their impact on rural communities, Baucus noted that some members of the Senate have attacked the agricultural provisions of the legislation.

“They’ve poked fun at it, circulating pictures of various fruits and vegetables,” he noted. “Farmers and ranchers across the country may not find this all so amusing. They may wonder why the economic problems of ailing corporations demand immediate action, but the economic problems of farmers and ranchers deserve only derision.”

According to Baucus, the economic stimulus bill may come up for a vote as soon as Feb. 7 or 8. <<p>

FORREST LAWS: Indiana Senator won't give up

Lugar’s farm bill, which would mostly replace farm payments with beefed up crop insurance, was rejected twice — once in the Senate Agriculture Committee and again in the Senate in December.

But Lugar continues to plow ahead, arguing that passing the Senate Agriculture Committee bill or the House bill will be a “serious public policy mistake.”

In his latest broadside, the Indiana Republican elevated his visibility, persuading the New York Times to give him 950 words on its Op Ed page to attack the Daschle-Harkin or Senate Agriculture Committee bill.

While the Times is not regular reading for most farmers, it is inside the Beltway in Washington where efforts to pass a new farm bill were expected to pick up steam following the President’s State of the Union Address.

Lugar was chairman of the Senate Agriculture Committee when Congress passed the Federal Agricultural Improvement and Reform Act in 1996.

Although southern farmers and their organizations tried to tell him Freedom to Farm was doomed to failure, Lugar and House Republicans rammed the bill through Congress, saying it would mean “farmers would know exactly how much would be spent on agriculture over the next seven years.”

Instead, Congress was forced to appropriate another $72 billion in economic and disaster assistance to keep U.S. agriculture from being swept under by rising surpluses and the resulting low commodity prices.

Shortly after Lugar announced his new farm bill last fall, Agriculture Secretary Ann Veneman called it “a thoughtful piece of legislation that was consistent with the president’s principles.” But the administration switched its support to the Cochran-Roberts amendment after the Senate rejected the Lugar bill 70-30,

In his Op Ed piece, Lugar repeated the warmed over rhetoric that most farm payments go to a small number of large farming operations in a handful of states. Instead, Lugar would provide every farmer a payment equal to 6 percent of his total farm receipts — whether he needs it or not.

The critics’ main concern is his crop insurance provision that promises farmers would receive 80 percent of an average income taken over the last five years. Most farmers would rather forget their lack of income during that period.

At press time, it was still too early to predict the outcome of the farm bill in the Senate. Senate Majority Leader Tom Daschle and Minority Leader Trent Lott both were saying the bill would have a high priority.

Sen. Thad Cochran, R-Miss., announced he and Sen. Pat Roberts would not re-introduce their amendment during the Senate debate, but would attempt to offer its provisions in the House-Senate Conference that will follow Senate passage.

The president, meanwhile, was expected to include the need for passage of a farm bill early this year in the State of the Union Address. USDA announced that Secretary Veneman would make a swing through four states to discuss the president’s priorities following the speech.

Farmers can hope that Lugar’s proposal will continue to be lost in the president and most senators’ stated intentions to get real relief to farmers as quickly as possible.

USDA prepping for farm bill

Veneman said the advance work is being done to ensure programs are available for farmers once a final bill from the Congress reaches the President’s desk. While there will be much work to be accomplished for implementation, and, in some instances, public input, Veneman said early planning is critical to the process.

“We are preparing ahead of time as much as we can even though we don’t have a final bill,” she said in remarks to USDA Farm Service Agency employees attending a training workshop in Savannah, Ga. “While we continue to work with Congress in completing a new farm bill, our team is already working on programming changes that may be required for implementation.”

Veneman thanked the employees for their efforts to implement key programs noting the work of several USDA agencies.

On Aug. 14, 2001, just one day after President Bush signed a bill approving $5.5 billion in supplemental emergency payments, Secretary Veneman initiated the first payments from the Farm Service Agency to 1.4 million producers across the country.

That was accomplished utilizing software developed at USDA’s Kansas City facility. Last year, FSA delivered a dozen new and special programs authorized by the Congress, some with only days to complete before the end of the fiscal year.

USDA’s Risk Management Agency (RMA) is in its second year of delivering an innovative $8.2 billion risk management reform package under the Agricultural Risk Protection Act of 2000. RMA has implemented the law in a timely and farmer-friendly way, developing new products, promoting risk management strategies and reinsuring nearly 1.3 million policies covering over 211 million acres.

Secretary Veneman thanked the employees for their dedication and commitment to serving the nation’s farmers and ranchers and the entire food system. “I know that each of you and all of USDA can and will do the job efficiently and effectively. Your hard work is critical to the success of our operations across the nation.”

Veneman noted that the Bush administration has called on the Congress to pass a sound, bipartisan farm bill that provides a solid safety net for farmers and ranchers, expands markets abroad for American agricultural products, and increases resource conservation in ways that enhance the environment.

The Administration has pledged to support additional 10-year program funding of $73.5 billion in accordance with the Congressional Budget Resolution, she said.

The secretary’s visit to Savannah, one of several stops in four states over the next two days, was scheduled as a follow-up to the president’s State of the Union address on Tuesday night.

e-mail: flaws@primediabusiness.com.

Appeal made for grass hay standards

Juan N. Guerrero said the lack of a defined, uniform grass hay standard for these tropical species impairs the production from them of consistent, export-quality hay. During the recent 31st California Alfalfa & Forage Symposium in Modesto, he said the three species of grasses, when exported to the Orient, are judged solely by color, texture, weediness and other subjective means. No chemical tests other than that for nitrate content are required.

"To further cloud the issue," Guerrero added, "the final country of destination may have its own set of standards. Different hay trading companies from the same country may have different hay grading standards, and different geographical areas of the same country may also have differing hay preferences."

Green, soft hay has always been prized by the U.S. livestock industry, Guerrero noted. For the export trade, green-colored bermudagrass and kleingrass hays are also valued. But in certain areas of Japan sudangrass buyers prefer a nitrogen-deficient and thoroughly bleached product, counter to both maximum yields and economics for the grower.

He suggested that a test developed from well-defined research might show some connection between hay color and nitrate levels in sudangrass hay. Stem texture could be detected by the existing acid detergent fiber (ADF) test.

During 2000, Imperial County had 42,000 acres of bermudagrass and 55,000 acres of sudangrass, while kleingrass, a new crop, made up about 20,000 acres in the Imperial and Palo Verde Valleys and in Arizona along the Colorado River.

Majority exported

Citing interviews with Imperial Valley hay brokers, Guerrero said more than half the hay from the three grasses is exported. The lack of consistent standards for quality means that grading is generalized and may not apply to any one transaction.

Bermudagrass has hay, seed, and straw segments, and, depending on the price of seed, as much as half the Imperial Valley acreage may be allocated to seed production. About 10 to 15 percent of the acreage produces domestic-market horse hay.

Export bermudagrass hay has a grading system based on fiber length, texture, color, weediness and "rerake." Hay not meeting a C grade goes to the domestic market.

Rerake, Guerrero explained, is the portion of hay left in the windrow by the baler. It remains in the field and after flood irrigation turns brown. In subsequent cuttings it mixes with fresh, green hay, creating a discolored bale of diminished value.

Bermudagrass hay is gaining acceptance by the horse market, which requires it to have green color, no weeds, and bales weighing 75 to 100 pounds.

Giant bermudagrass, favored because of its longer fiber length, is put up as hay rather than common bermudagrass.

Kleingrass, he said, came to the Sonoran Desert about six years ago. It has a market in the Orient but has been dogged by palatability problems. On the other hand, in the southwestern U.S. beef range cattle relish kleingrass pasture.

Kleingrass hay is graded by texture, color, plant maturity, and weediness. Weed contamination will exclude it from export. Guerrero said about 20 percent of the volume fails to meet export grade and goes into the domestic market, mainly for dry dairy cows and beef feedlots, which, he warned, "may contain weeds, be rained-on, be off-color, and contain rerake."

Grades for kleingrass hay vary as to country of final destination, said Guerrero. Under certain growing conditions, according to reports from Texas, it can contain toxic saponins, which cause problems for sheep and horses but not cattle. "These saponin problems have not been reported under the drier, irrigated conditions of the Imperial Valley,’ he said.

Most sudangrass grown in the Sonoran Desert, where it has been a crop more than 40 years, goes to export. About 20 percent of the crop, or the portion from later cuttings, finds its way to domestic dry dairy cows, beef feedlots, zoos, and Mexico.

It may contain weeds, hard stems, and high nitrate content. No chemical test other than a nitrate test is required for export, but grade is determined by a subjective evaluation of weediness, stem thickness, and color.

"California hay producers are at the mercy of ill-defined, subjective grass hay export grades with no regard to objective chemical analyses," said Guerrero, who added that grass hay standards jointly developed by U.S., Japanese, and Korean scientists could benefit both the California growers and importers in the Orient.

The water transfer that's the envy of everyone

That day is at-hand. And when it arrives — likely before the end of this year — about 100 farmers will pocket checks that will make them the envy of every struggling farmer in California.

The Metropolitan Water District of Southern California (MET) has offered Palo Verde Valley farmers $800 million over 35 years to agree to fallow about a third of the acres in the Palo Verde Irrigation District (PVID) in Riverside County each year so MET can provide more Colorado River water to the thirsty millions in the Los Angeles Basin.

MET is offering a one-time signup incentive of more than $3,000 per acre for the right to divert water used to irrigate almost a third of the valley for use by urban Southern California. And, the huge water consortium is willing to pay an additional $550 per acre annually for fallowing ground. PVID farmers now pay $48 per acre for all the water they need, typically four to six acre feet per year depending on the crop. Irrigation district general manger Ed Smith says PVID uses about 450,000 acre feet annually from the Colorado, and MET wants to have 111,000 acre feet of that available to it annually.

"Farmers will be asked to sign up to sell their water — not the land and not the water rights. No one is selling farmland or relinquishing rights," emphasized Smith.

Income example

For a 1,000-acre farmer who signs up, here’s what he’d get under an agreement in principles negotiated by the district and MET: an up front check of almost $1 million and the potential for an annual income of from $33,000 to $160,000 per year for more than three decades, depending on the amount of water MET wants to take from PVID’s Colorado River allocation.

In today’s blighted agricultural economy, you can almost hear a collective "Where do I sign?" echoing through the sparsely populated desert valley nudged up against the mighty Colorado River.

Not so fast, says Hull and a growing league of fellow PVID farmers. Hull says alfalfa growers don’t take the first offer in a hay deal, and he is in no hurry to take this deal.

"Lords knows I can use the money on my farm," said Hull, who has farmed in the valley for three decades. "But I’ve got to divorce myself from the current economic situation in farming and look forward. I would just as soon go broke as turn over a really bad deal for the next generation."

Hull knows the deal will be done. A committee of his fellow farmers hammered it out with farmer interest uppermost. Hull does not want to kill it. He only wants to reduce what he considers the unacceptable risks in the principles of agreement pact negotiated by PVID and MET over the past year.

Hull’s does not want more up front money; it’s the annual payments he wants changed. He wants an inflation rate escalation tied to the annual payment. "Maybe it needs to be 1 percent over inflation," he said. MET’s initial proposal was for a 2.5 percent annual adjustment of that $550, but negotiations are now under way to modify that. Hull, Robinson and other Palo Verde Valley producers want something less risky than a fixed adjustment rate.

"Maybe we need to reduce up front money and gain some long term stability. A cash flow that increases relative to inflation over time will promote long term farm and community economic strength," explained Hull, adding, "that up front money is ordinary income, and the taxes will be heavy.

Long-term deal

"Once we sign, there will not be another deal come along for 35 years, therefore, this contract must prove viable for a long time."

The agreement between PVID and MET is scheduled to be finalized by August. The pact is undergoing an environmental impact review.

The PVID/MET pact is nothing new. Farmers and urban water purveyors are making deals to squeeze every ounce of water out of the available California water supply. There have been underground recharge deals; outright land sales for water rights; conjunctive use agreements.

California urban water providers are getting desperate and creative as they struggle to meet California’s rapidly growing future water needs from a dwindling water supply.

And the Palo Verde Valley is one of the plums. It’s a farmer-run irrigation operation largely devoid of urban politics because it does not supply drinking water, and there’s no ominous environmental issue like the Salton Sea standing in the way. It’s also easy to transfer the water form the farmer to the city. MET would simply divert it at the river.

PVID, with Colorado River rights dating to 1877, is a key element in California meeting a federal mandate to reduce its Colorado River use to its entitlement, 4.4 million acre feet annually.

California has been using 5.3 million acre feet, but must get to 4.4 within the next two decades. Almost 3.9-million acre feet of that 4.4 is agricultural water rights.

Only place to look

That means basically urban water suppliers must find 1.5 million acre feet of water just to meet California’s current needs, and agriculture is the only place to look, said Smith.

"MET must be very careful in making sure any new water it contracts for, like PVID water, is not construed as new water for new development. It must be water for existing users," said Smith.

MET came to PVID a year ago. "We knew they were coming because we had heard that they had long been saying elsewhere that they wanted 200,000 acre feet from Imperial Valley and 100,000 from Palo Verde as part of the 4.4 plan," said Smith.

This is not the first time MET has bought water from PVID. The consortium of 26 cities and water districts that provides drinking water for nearly 17 million people in parts of Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties bought about 25 percent of the district’s water in 1992-93, but that was on a two-year deal. It took out of production 25 percent Palo Verde Valley farmland for 115,000 acre feet of water annually.

This time MET wants a 35-year contract.

And, the deal was hammered out quickly in the world of California water politics.

"It was worked out for a couple of reasons. One was that there were no attorneys involved in the negotiations. Once deals were struck, they were taken to the attorneys to see if the deals were doable," said Smith.

Secondly, the fact only farmers were involved in PVID was another plus, believes Smith.

"And finally, I give a lot of credit to Dennis Underwood, who is the former commissioner of the Bureau of Reclamation who now is MET vice president in charge of Colorado River operations," said Smith. "He is knowledgeable about the operation of the Colorado from his years in the bureau and was a key element in putting the program together."

Up to growers

When the final package is bundled up, it will still be up to producers to accept or reject it. "If there are not enough growers signing up, there will be no program," said Smith.

Hull believes there will be a program, and it will forever change the valley and its hub community, Blythe.

"There are people who say when you take land out of production, you are going to hurt the town. I don’t necessarily think it will. Instead of selling our least profitable crops from less productive land, the commodity we will sell will be water. With that we will have the money to buy into other opportunities," he said.

He expects the crop mix to change, away from low value crops like bermudagrass and marginal hay production.

"We can grow anything here, and I expect farmers to get be even more creative over the next 35 years," he added.

Hull said there needs to be local research on low water consumption crops, and the MET pact may provide that cash.

"I think there is an opportunity for more cattle grazing. As the public lands become less available for grazing, perhaps we can irrigate the fallow ground once or twice and lease it for cattle," he said. "Under the current proposal we cannot irrigate the ground set aside for water transfer, but a good contract would provide for negotiations to allow opportunities such as a grazing deal."

"What makes our deal the envy of everyone is the up front money. What should be envied is we have water to deliver and can deliver it," said Hull. MET would take it directly out of the Colorado and send it to its 17 million customers.

Saw it coming

The inevitability of a water transfer has long been there for Hull. "I knew this day would come. We bought ground in 1982 for that reason. We paid too much for it, but we bought it because it would be worth more in the future because of the water. The water is now worth more than the land," said Hull.

Nevertheless, one of his first emotions in hearing about the agreement in principle was depression.

"What I really want to do is farm — grow crops for the whole world to eat. If I wanted to get rich I sure would not farm," he said.

As a businessman however, he cannot ignore the economic reality of what MET is offering. "You have got to reduce what is on the table to a deal…take the emotions out of it. It is just another deal, but one with 35 years of consequences."

Nevertheless, it is the emotional envy of every struggling farmer in California because it makes 25 percent of every Palo Verde Valley farm profitable for the next 35 years.

When you start from that premise, it is a deal that will be made.

Corn+Soybean Digest

Brock Online Notes

Corn Sales Strong, Soybeans Disappoint

Thursday's USDA weekly export sales report showed stronger-than-expected sales of corn and wheat for the week ended Jan. 17, but net soybean commitments were a bit disappointing.

USDA pegged net weekly corn export sales commitments at 51.4 million bushels, versus trade expectations for 27.5-39.5 million. The total was more than double the four-week average for sales.

An increase in sales to Japan paced the improvement. Japanese buyers purchased almost 16.4 million bushels of U.S. corn on the week.

Net weekly wheat sales commitments were pegged by USDA at 24.5 million bushels, versus low trade expectations of 11-15 million bushels. Sales of 12.2 million bushels to Egypt paced the weekly total, which doubled the four week average for sales.

USDA reported net weekly soybean export commitments of 27.7 million bushels, versus trade expectations for 29.5-37 million. China was the leading buyer on the week, committing to purchase about 8.3 million bushels of U.S. soybeans.

The total was pulled down, though, by the cancellation of 5.78 million bushels in sales to unknown destinations. Those sales could possibly have been to China. There were rumors Wednesday of China either "washing out" or canceling U.S. soybean shipments.

Actual weekly export shipments of soybeans were very strong, however, at 38.5 million bushels. Soybean export shipments for the year to date are running 15.1% ahead of the year-earlier pace.

Editors note: Richard Brock, Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com. SMALL HEADLINE IMAGE TAG FOR RICHARD BROCK'S COLUMN Brock Online Notes