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Articles from 2006 In November


CRP Won't Be Ethanol Factor in 2007

For the full article, click on the headline above. 

There's a bidding war going on in corn country, trying to buy corn acres to feed growing ethanol demand, as well as domestic feed needs. Many are looking at idle lands in the Conservation Reserve Program (CRP) to contribute to the needed 4-8 million acres of corn next growing season. However, a growing number say that isn't the answer and it won't even be a factor in 2007. In addition, instead of saving the government money, it may end up costing the government more while in turn lowering crop prices.

About 16 million of the 37 million CRP acres are scheduled to come out of the program in 2007. Earlier this year, USDA offered re-enrollments to producers currently enrolled in CRP fearing a mass depletion of the environmentally-sensitive lands. But instead of the 10 and 15-year enrollment periods, Secretary of Agriculture Mike Johanns said it was done on an index basis, including 10, 5 and 2-year contracts.

In mid-November, USDA Deputy Secretary Chuck Conner said higher prices are not enticing landowners to move their land back into production. USDA is expecting an 81% retention rate, inline with previous re-enrollment periods, but more puzzling in the current high farm price climate.

In comments to the Senate Committee on Environment and Public Works, Keith Collins, USDA chief economist, a preliminary assessment of all CRP land in counties where 25% or more of harvest cropland was producing non-irrigated corn and soybeans concluded that 4.3 to 7.2 million acres currently enrolled in the CRP could be used to grow corn or soybeans in a sustainable way.

CRP end lowers prices

A study, Analysis of the Economic Impacts on the Agricultural Sector of the Elimination of the Conservation Reserve Program, released earlier this fall from the Agricultural Policy Analysis Center at the University of Tennessee estimated that if CRP contracts are eliminated as they expire, 37% of today's 34.7 million CRP acres, or 12.6 million acres, will return to crop production by 2015. Seventy-one percent of returning acres, or 9 million, will grow corn, soybeans and wheat.

"With additional CRP acres coming into production, corn prices would be 31 cents below current expectations with wheat prices experiencing a 63 cents per bushel decline. Soybean prices would suffer from a 90 cents per bushel drop" said author Daniel De La Torre Ugarte. "These lower prices are the trigger that brings about a nine year $33 billion increase in farm program spending."

By 2015, APAC's model predicts

  • Corn at $2.29, 31-cents per bu. below USDA's projected baseline,
  • Wheat at $2.92, 63-cents per bu. below USDA's projected baseline, and
  • Soybean prices at $5.20, 90-cents per bu. below the USDA projected baseline.

APAC estimates the three major crops will lose at least $6.9 billion in net market returns in 2015 if CRP acres flow back into crop production.

Changing policy

Johanns said he has made "no decision" about paring down the Conservation Reserve program to allow for more planting for biofuels and plans to kick acreage out are "baseless."

Lands currently enrolled face steep penalties if ended before the contract expires. An opportunity exists for legislators to provide greater CRP enrollment flexibility in the next farm bill.

Kendell Keith, president of the National Grain and Feed Association, said if commodity prices stay relatively high, odds start to improve to allow producers to make decisions without facing penalties and still not definitively locking land out of production, he said.

"Even if you have an open market that can essentially bid for CRP land, there are a lot of barriers to making that happen," he said.

Keith explained that you don't just pull CRP land out of the program and plant corn into it. "There is a fairly substantial cost to getting the land prepared and ready to go for cropping," he said. It takes multiple cultivations to break down grass rooted. Some lands require considerable fertilizer because a lot of the nutrients had been taken up by grass.

Ethanol investors: Make sure it's business first

When farmers first began investing in ethanol plants several

years ago, the ghosts of past failed business ventures were looming. Most farmers rightly want to add value to what they produce, and some times in their enthusiasm the wrong business decisions can lead to disaster.

At a recent Renewable Fuels conference sponsored by USDA, nearly every speaker talked in gushing tones about the wonderous potential of biofuels. But only one speaker -

John Deere CEO Bob Lane
(left) — stood up to say it won't happen unless you make sound business decisions along the way.

Who better than the leader of one of the oldest farm-related businesses to tell that message. Many years ago the Prairie was a vast new frontier, and John Deere's invention — the self-scouring moldboard plow — made these fertile fields productive.

That's quite a story in itself. But the real highlight is that the young blacksmith from Grand Detour, Ill., made wise investments and business decisions to build a company that today is 169 years old and is now the world's largest farm equipment company.

Now the vast new frontier is biofuels. Will farmers and other investors make wise decisions to make those renewable fuel companies sustainable for the long haul, like Deere did?

"Laying the groundwork for growing sustainable businesses is critical to the long-term future of renewable energy in the United States and the entire world,•bCrLf says Lane. "It would indeed be a shame if the promise of renewable energy were not met because our early successes could not be sustained over time, for lack of sound business underpinnings.•bCrLf

Good business sense Businesses like Deere simply don't operate for that long without attending to three critically important constituencies: customers, employees and shareholders.

Attention to customers often means anticipating market and technological advances, reckoning the specific needs and desires of the customer — sometimes before the customer does, says Lane.

"Sustainability•requires that the business provide a high-quality product or service that fully meets the customer's needs,•bCrLf he adds, "a workplace environment that attracts the best and brightest employees and enables them to realize their potential; and, succeeding with the customers and employees, ensuring that shareholders receive attractive returns on their investment.•bCrLf

Another bubble? Lane brought up the issue because there's a nagging question that continues to surround renewable energy. Is the surging interest in renewable energy development merely another short term "bubble" in our economy? Or are we truly in the initial stages of a thriving industry that will contribute both economic and societal benefits, not only today but for many, many generations to come?

Some people believe the zeal for renewable energy — namely biofuels, wind and solar - is based solely on high world oil prices and the midwest's strong political clout. That without them, there is no sustainable business to buil.

Those question marks are bound to remain unless the renewable industry is helped along by sound public policies. Good public policy proves essention to the emergence of economic, political and social environments that enable good businesses to evolve and become sustainable, says Lane. "Renewable energy with all its benefits should be no exception,•bCrLf he adds.

Lane sees a "useful partnership•bCrLf between government and the private sector. "Public policies can provide useful "pump priming" for new, evolving industries, creating the infrastructure needed for markets to develop and businesses to grow,•bCrLf he says. "Tax and regulatory incentives can provide needed planning stability while business conditions evolve, facilitating the growth of new business ventures.

"Over time, as markets and businesses mature, the need for these incentives will recede and a transition away from these policies is appropriate.•bCrLf

Machines of the future You might ask, why is John Deere so interested in the future of renewable energy? The company already is heavily involved in developing wind power. But it is also looking ahead to the day when biofuels will be processed from cellulosic biomass.

A 2005 USDA/DOE study concludes that by 2030 more than 800 million tons per year of cellulosic biomass could be produced from crop residue and perennial crops in the U.S. And, another 120 million tons annually could be derived from forest residues.

For reference, this biomass would be more than the total amount of grain, oilseed, sugar, and hay crops harvested in the United States last year. And Deere will be interested in developing harvesting and processing machines needed for that industry.

"This clearly points to a tremendous opportunity,•bCrLf says Lane. "But, it also presents a significant challenge: how to produce, collect, transport and process such a volume of valuable energy feedstock. To meet this challenge, all of us—government, academia, and the private sector—ought to "pick up the pace" all across the system—in commercial-scale research and development, in harvesting technologies, materials transportation, conversion, and fuels distribution.•bCrLf

In other words, there's more at stake here than just producing another gallon of ethanol. There's a whole new industry a-comin'. Lane believes, like his company's founder, that the best way to participate in future business growth is by making sure businesses make wise investments and good decisions.

"If we can grow great businesses that deliver long-term, sustained performance and endure, I am confident we will meet the promise of renewable energy for our children and their children,•bCrLf he concludes.

Plant "Healthy Oil" Bean Varieties in 2007

Soybean farmers in 2007 can select from new Iowa State University soybean varieties that will promote the production of healthy oils for consumers.

"The new varieties are part of ISU's ongoing program to continually improve the yield and other agronomic traits that are important to farmers," says ISU soybean breeder Walter Fehr. "These improved varieties, developed with support from the Iowa Soybean Association and the United Soybean Board, will increase the production of oils desirable for human health."

Three of the new varieties will enhance the production of an oil with 1% linolenic acid. Low levels of linolenic acid in soybean oil increase its shelf life. Demand for the oil from the food industry has been high because of this oil's excellent frying and flavor stability--without the hydrogenation process that creates trans fats. Farmers who prefer production of varieties with the Roundup Ready trait will be able to choose from 12 new varieties that produce oil with 1% linolenic acid.

Roundup Ready low-lin varieties

Production of low-saturated-fat soybean oil will get a yield boost with one of the new varieties. With only 1 gram of saturated fat per tablespoon, the oil matches the saturated fat content of canola oil and reduces by half the saturated fat found in traditional soybeans. Adopted by the USDA's National School Lunch Program, this soyoil has enjoyed continued success in food applications.

During the 2006 growing season, a soybean breeding team led by Fehr in ISU's agronomy department introduced a winning combination soybean line that contains twice the amount of oleic acid found in conventional soybean oil and only 1% linolenic acid. Oleic acid is the same monounsaturated fatty acid found in olive oil. Food industry tests last summer confirmed that the combination oil could be used in many food products that require more stability than previous unhydrogenated soybean oils could deliver.

"There were 34 companies that tested the new mid-oleic 1% linolenic oil," Fehr said. "The results were very positive. Twelve new soybean varieties that produce this unique oil will be available for planting by farmers in 2007."

Soybean producers who are interested in growing any of the improved 1% linolenic or low-saturated-fat varieties should contact the ISU Research Foundation, 310 Lab of Mechanics, Ames, Iowa 50011; Phone (515) 294-4740; fax (515) 294-0778; e-mail licensing@iastate.edu.

On-Farm Network Conference Feb. 21

Mark your calendar, if you're interested in learning more about using precision farming methods to make better crop management decisions. February 21, 2007 is the date scheduled for the Iowa Soybean Association's annual On-Farm Research and Nitrogen Conference. It'll be held at the Scheman Building on the ISU campus in Ames.

Tracy Blackmer is director of research for ISA and coordinator of the conference. What does he expect to be new at the upcoming conference in early 2007 that he hasn't been seen by farmers at the past conference?

"We will still be maintaining our focus on nitrogen management, but nitrogen won't be the only topic covered. We'll explain the data we've collected from farmers in 2006 regarding various crop management practices," says Blackmer. "This fall, we've had data from every county coming into us for analysis. We've already summarized a lot of it and you can view the results on our Web site."

It's about more than just nitrogen

One thing ISA is adding to this year's meeting that's different: there will be multiple sessions held at the same time. That's so farmers who attend can learn more about how to process the data themselves. Also, so you can learn how to install a yield monitor in a tractor or combine cab and the proper way to put GPS on your farm machinery to record where your test strips are located in the fields.

Blackmer and colleagues will also discuss fungicide trials they've run in soybean fields on farms the past few years. In addition, they'll talk about tillage trials and how to use remote sensing data. "We've expanded the number of topics offered at this year's meeting -- to further reinforce the value of doing on-farm research for our cooperating farmers who test these practices in their fields," says Blackmer.

What is the On-Farm Network?

What is the On-Farm Network? What is its purpose? "Growers who sign up to participate in our program use the newer technologies to evaluate and test which crop management practices work best on their farm," explains Blackmer. "Most farmers find at least one management practice or one thing they can be doing better in their farming operation. For example, maybe they want to learn how to do a better job of managing nitrogen. They can test the different options for the different N management practices they want to improve on their farm.

"What we do from our ISA offices in Des Moines," says Blackmer, "is help the participating farmers interpret the data they collect from their fields. We pull the data together from the hundreds of farms participating in this program across the state. We put all the results together for comparison, and on February 21 we gather and explain what we've learned to the farmers who attend the meeting."
Why are farmers so interested and willing to participate in this program? "Most of the farmers who participate find ways to make more money," says Blackmer. "They've found out how to become more efficient and improve their management practices. It's all voluntary—farmers make their own decisions as to whether or not they want to participate in our on-farm testing program."

Conference open to anyone interested

"Being able to use this new precision ag technology to find out how to make more money is something farmers want to learn how to do," he notes.

The February 21 all-day conference at Ames will certainly be attended by a lot of the cooperating farmers who participated in the trials on their farms. They want to come to this conference. But ISA is also inviting all farmers to come who wish to, even if they are not in the program. "This conference is open to anyone who wants to attend," says Blackmer. "That includes agronomists and farmers—even if they have not actually participated in our trials but who want to come just to learn about the results of the trials."

If you'd like to learn more about this conference or results of the 2006 studies, log onto www.iasoybeans.com and click on the "ISA Farmnet" link.

Will Acres Diverted to Corn Pay Off?

With corn prices at the highest levels in ten years, many producers are expected to plant more corn in 2007 - some are predicting the most corn acres in 60 years. However, farmers choosing to devote more acres to corn are betting that the ethanol boom will keep corn prices up, Purdue University agricultural economist Chris Hurt says.

"It's a wonderful time for corn producers. They're extremely excited but they're also apprehensive because they've seen booms before and they don't last," he says. "That tends to be the nature of agriculture."

Corn prices have climbed around $1 per bushel since mid-September, to $3.45 on Tuesday. At that time last year, corn was $1.50 to $1.80 a bushel.

Hurt says farmers incomes could get a 30% to 50% boost from higher corn prices this year. If the ethanol boom continues - more than 150 plants are under construction, planned, or in operation in the U.S. - the industry's demand for corn could continue to drive up corn farmers' profits.

Gary Schnitkey, a University of Illinois farm financial management specialist, says the issue of whether or not to shift acres to corn is a complicated one.

"We're treading in new territory now," he says. "We've never been in a position where we've seen this much new demand for a commodity."


Source: Dow Jones

Purdue Ag Economist Predicts Policy Shifts

With Democrats running Congress starting in January of 2007, PurdueUniversity agricultural economist Allan Gray says to expect a new approach to agricultural policy.

Gray outlines the "four E's" that he believes will be central to the Democratic approach to agricultural policy: extension, environment, equity and energy.

'Extension,' in this case, refers to extending the 2002 Farm Bill.

"Some Democrats who are taking over chairmanships in the ag committees have generally been pretty favorable to the commodity title, or the subsidy system, of the 2002 bill," Gray says. "I think it is highly likely that they are going to push for an extension of those programs, meaning that direct payments, counter-cyclical payments and marketing loan payments are likely to stay the same."

In keeping with their past record, Democrats will probably push for greater environmental protections in agriculture, Gray says, pointing out that the new chairman of the ag committee, Sen. Tom Harkin, D-Iowa, authored the 2002 Conservation Security Program.

"Due to some changes in appropriations, that program never got funded as it was supposed to. I think Sen. Harkin will push to have that program become a bigger part of the next farm bill," Gray predicts.

Both Republicans and Democrats have talked recently about leveling the playing field between producers receiving different amounts of subsidies, making "equity" a potential issue as well. Gray says Congress may start "thinking about making those payments to a broader base of farmers."

The fourth E, "energy," has been a very hot topic, and both Republicans and Democrats support initiatives to reduce U.S. dependence on foreign oil by promoting biofuels, Gray says. Although the two sides generally agree on this approach, Gray expects the Democrats to "push that agenda a little bit harder."

FAO Report Says Livestock Is Damaging the Environment

The global livestock sector is a major generator of greenhouse gas emissions, the Food and Agriculture Organization said in a report it released Wednesday.

According to the report, titled "Livestock's Long Shadow: Environmental Issues and Options," the livestock sector accounts for more than 9% of carbon dioxide derived from human-related activities, 65% of human-related nitrous oxide, 37% of human-related methane and 64% of ammonia.

"Livestock are one of the most significant contributors to today's most serious environmental problems. Urgent action is required to remedy the situation," says Henning Steinfeld, chief of FAO's Livestock Information & Policy branch and senior author of the report.

The agriculture sector is growing faster than any other section of agriculture, contributing about 40% of global ag output, FAO says.

World Biodiesel Output Could Hit 16M Tons this Decade

This year's world biodiesel output was around 5 million metric tons. According to Nancy DeVore, a senior analyst with Bunge Ltd., that figure will triple over the next three years.

Speaking at the Terrapinn Biofuels Finance & Investment World conference in London, DeVore said that world biodiesel production will be nearly 16 million tons in 2009.

"It will be a big challenge for the world to meet biodiesel demand," she says in a Dow Jones news wire.

DeVore says her prediction accounts for projects expected to be built, not just those currently being planned.

The large amount of soybean meal left as a byproduct of soy-based biodiesel - only 20% of crushed soybeans is oil - will limit the use of soybeans in biodiesel production, DeVore says. Other oilseeds, such as rapeseed, could fill the demand with less byproduct, she adds, and another Bunge official says that more rapeseed will be sourced from Eastern Europe in the coming years.

Economist Says to Expect New Approach to Ag Policy

With Democrats running Congress starting in January of 2007, Purdue University agricultural economist Allan Gray says to expect a new approach to agricultural policy.

Gray outlines the "four E's" that he believes will be central to the Democratic approach to agricultural policy: extension, environment, equity and energy.

'Extension,' in this case, refers to extending the 2002 Farm Bill.

"Some Democrats who are taking over chairmanships in the ag committees have generally been pretty favorable to the commodity title, or the subsidy system, of the 2002 bill," Gray says. "I think it is highly likely that they are going to push for an extension of those programs, meaning that direct payments, counter-cyclical payments and marketing loan payments are likely to stay the same."

In keeping with their past record, Democrats will probably push for greater environmental protections in agriculture, Gray says, pointing out that the new chairman of the ag committee, Sen. Tom Harkin, D-Iowa, authored the 2002 Conservation Security Program.

"Due to some changes in appropriations, that program never got funded as it was supposed to. I think Sen. Harkin will push to have that program become a bigger part of the next farm bill," Gray predicts.

Both Republicans and Democrats have talked recently about leveling the playing field between producers receiving different amounts of subsidies, making "equity" a potential issue as well. Gray says Congress may start "thinking about making those payments to a broader base of farmers."

The fourth E, "energy," has been a very hot topic, and both Republicans and Democrats support initiatives to reduce U.S. dependence on foreign oil by promoting biofuels, Gray says. Although the two sides generally agree on this approach, Gray expects the Democrats to "push that agenda a little bit harder."