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Articles from 2001 In April


Embargo holds U.S. farmers hostage

“The most glaring truth that came out of my visit to Cuba was the tremendous cost to the U.S. taxpayer and the U.S. rice industry as a result of the embargo,” says Ferrara, chairman of the U.S. Rice Millers’ Association. “Cuba is doing just fine. We are the ones being held hostage by the embargo.”

Ferrara, who accompanied a group of U.S. industry leaders and three congressmen on a trip to Cuba in April, says Cubans have problems, resulting from its 42-year experiment with communism.

“The embargo has clearly caused hardships, but they are well-educated, have food to eat and are provided with health care,” he noted. “This is an island with 50 new hotels, none of which could be built by U.S. companies.

“Cuba trades with almost every other country, including our North American neighbors, Europeans and Israel. They don’t understand why our embargo stays in place when we trade with Russia, Vietnam, China and North Korea.”

Ferrara, president of A.C.-Humko Rice Specialties in Greenville, Miss., said the Cuban economy has been in transition since the Russians pulled out of the country at the end of the Cold War.

“They recognize that system of government did not work and will not work to meet all the needs of their people,” he said. “During this time, the government has opened the country to investments from other nations on a partnership basis with individual companies.”

It’s difficult to calculate the impact of economic sanctions on the U.S. rice industry, he said. But, it’s safe to say that the total runs into billions of dollars in lost sales and American jobs.

Over the years, the U.S. government has allowed other countries to build rice handling and processing facilities protected by differential tariffs. “We need tariffs eliminated or reduced on U.S. rice, and to have equal tariffs during any tariff phase-out,” says Ferrara. “Our industry can compete in any market if it’s on a level playing field.”

He said Congress could level the playing field in Cuba simply by lifting the embargo. “In addition, we need PL 480 funds made available to Cuba for a minimum of three years to purchase up to 200,000 metric tons of rice annually.”

The chief stumbling block to such action: the Cuban exile community in Florida. “It’s not hard to understand their feelings, but they seem to be willing to sacrifice any and all segments of the U.S. economy to maintain their position. And they seem to have a great hold on our politicians.”

Ferrara says rice industry members must ask their individual representatives their position on the embargo and insist on their help in lifting it and the restrictions included in sanctions reform legislation last year.

“The U.S. rice industry and the rest of the U.S. farm economy can’t afford any more delays or red tape. We need it lifted now with the right to travel freely to and from Cuba for all Americans.”

Embargo holding U.S. farmers hostage

“The most glaring truth that came out of my visit to Cuba was the tremendous cost to the U.S. taxpayer and the U.S. rice industry as a result of the embargo,” says Ferrara, chairman of the U.S. Rice Millers’ Association. “Cuba is doing just fine. We are the ones being held hostage by the embargo.”

Ferrara, who accompanied a group of U.S. industry leaders and three congressmen on a trip to Cuba in April, says Cubans have problems, resulting from its 42-year experiment with communism.

“The embargo has clearly caused hardships, but they are well-educated, have food to eat and are provided with health care,” he noted. “This is an island with 50 new hotels, none of which could be built by U.S. companies.

“Cuba trades with almost every other country, including our North American neighbors, Europeans and Israel. They don’t understand why our embargo stays in place when we trade with Russia, Vietnam, China and North Korea.”

Ferrara, president of A.C.-Humko Rice Specialties in Greenville, Miss., said the Cuban economy has been in transition since the Russians pulled out of the country at the end of the Cold War.

“They recognize that system of government did not work and will not work to meet all the needs of their people,” he said. “During this time, the government has opened the country to investments from other nations on a partnership basis with individual companies.”

It’s difficult to calculate the impact of economic sanctions on the U.S. rice industry, he said. But, it’s safe to say that the total runs into billions of dollars in lost sales and American jobs.

Over the years, the U.S. government has allowed other countries to build rice handling and processing facilities protected by differential tariffs. “We need tariffs eliminated or reduced on U.S. rice, and to have equal tariffs during any tariff phase-out,” says Ferrara. “Our industry can compete in any market if it’s on a level playing field.”

He said Congress could level the playing field in Cuba simply by lifting the embargo. “In addition, we need PL 480 funds made available to Cuba for a minimum of three years to purchase up to 200,000 metric tons of rice annually.”

The chief stumbling block to such action: the Cuban exile community in Florida. “It’s not hard to understand their feelings, but they seem to be willing to sacrifice any and all segments of the U.S. economy to maintain their position. And they seem to have a great hold on our politicians.”

Ferrara says rice industry members must ask their individual representatives their position on the embargo and insist on their help in lifting it and the restrictions included in sanctions reform legislation last year.

“The U.S. rice industry and the rest of the U.S. farm economy can’t afford any more delays or red tape. We need it lifted now with the right to travel freely to and from Cuba for all Americans.”

Coffee talk - USDA soil tilth lab director discusses hot agricultural topics

One of the fun parts of this job is picking the brains of leading agricultural researchers. In mid-April, I toured the USDA National Soil Tilth Laboratory in Ames, IA. Working inside this red brick building are researchers from many disciplines.

“We have everyone from clay mineralogists to microbiologists to agronomists and agricultural engineers,” says Jerry Hatfield, the lab’s director. “We have quite an exchange of ideas. The backdrop of our research program is to examine whole farming systems over a 365-day basis.”

Over a cup of hot coffee on a chilly spring day, Hatfield discussed some of agriculture’s hottest topics and laboratory research projects.

Precision farming. Lab researchers have immersed themselves in precision farming. They’ve found that rather than “farm by the foot,” producers may want to instead “farm by the zone.”

“We have to be more simple than where we’re at today,” Hatfield says. “We should try and divide the field down to two or three management zones, rather than down to the size of a desk. Measuring differences down to one square meter in a field probably won’t do you much good in terms of a profitable system.”

That’s because the expense of minute measurements dwarfs potential yield gain. “But if there is a good-producing soil and a poor-producing soil in a field, dividing it into two or three zones should help,” Hatfield says.

Grain quality. Rather than quantity, farmers and researchers will emphasize quality in future grain production.

“Eventually, producers will want to be paid for more than just mass quantities of grain,” Hatfield says. “Right now, we sell No. 2 yellow corn and soybeans. But Canadian and Australian producers are moving their whole systems toward managing for quality.”

To compete, Hatfield expects American producers to eventually follow suit.

Quality is particularly important to specialty grain producers. “We will see a lot more interest in how to consistently produce a specialty crop,” Hatfield says. “For example, you may plant high-oil corn hybrids. However, you may be planting them on soils that won’t allow the genetics to express themselves.”

That’s why lab researchers are testing the best nutrient, tillage and residue management packages for specialty grains.

Crop rotation. Corn and soybeans are the heart and soul of Midwestern agriculture. But in many areas, this rotation has become a monoculture that’s ripe for disease and insect infestations.

“We need additional crops in our rotation,” Hatfield says. Besides breaking up pest cycles, diversifying the rotation with additional crops could help protect the landscape over winter.

“Since corn and soybeans are planted in the spring and harvested in the fall, fields sit empty over the winter,” Hatfield says. “There are crops that protect the landscape, such as alfalfa or another forage crop.”

Manure management. Historically, farmers applied manure from their livestock on their crops. But integrated crop and livestock farms have decreased in number over the past 20 to 30 years. When many farmers began to specialize in crop or livestock production, manure converted from a nutrient into waste, Hatfield says.

“We think about manure disposal, not nutrient management,” he adds. “We’ve boiled it down to simplistic terms that I don’t think are healthy for long term in the ecosystem.”

Hatfield encourages crop farmers and livestock producers to work together in order to use manure as a crop nutrient. “Part of our problem in modern agriculture is that we just think of row crops as a way to dispose of waste,” Hatfield says. “We’ve taken and manipulated the system, and that’s not healthy for us.”

Nitrate runoff. Some government officials, researchers and environmentalists have blamed agricultural nitrogen (N) runoff for causing hypoxia in the Gulf of Mexico. Hypoxia kills marine life by snuffing oxygen in the water.

Hatfield says that precipitation, soil type and the amount of watershed drainage in the system influences the amount of N runoff. “We probably can’t change drainage systems,” Hatfield says. “But we can influence the N management of the crops that are grown in the watershed.”

For example, a five-year study revealed that subsurface drainage N concentrations decreased by 25% when researchers applied N during the spring and growing season instead of in the fall. Researchers also decreased N leaching by 50 to 75% through sophisticated N management, such as placing wood chips around tiles. By curbing N runoff, such practices could help halt hypoxia, Hatfield says.

Environmental issues. Typically, environmentalists and farmers oppose each other on environmental issues. But they have a lot more in common than they realize, Hatfield says.

“When you talk to both sides and find out what’s important to them, both groups are really quite surprised that they carry the same value set,” he says. “Both groups want to preserve the landscape for future generations. They just argue about what path to take.”

On some issues, farmers could win over environmental groups via education. For example, environmentalists who oppose growing grains with genetically modified organisms (GMOs) don’t realize that scientists have manipulated genetics for years. “It’s just that we’ve removed Mother Nature a little more quickly with GMOs,” Hatfield says.

Corn+Soybean Digest

Brock Report Online

Weekly export sales are dismal.

Weekly corn and soybean export sales reported by USDA on April 26 were toward the low end of trade expectations and did nothing to ease demand worries.

USDA pegged net corn export sales for the week that ended April 19 at 16.1 million bushels, versus trade estimates of 16 million to 27.5 million.

For the marketing year to date, corn export sales commitments are now running nearly 12% behind the year-earlier pace. Sales commitments would now have to average 35 million bushels per week the rest of the marketing year to reach the level needed to reach USDA's export projection.

USDA pegged net weekly soybean sales at 4.9 million bushels, compared with trade expectations for 3 million to 11 million bushels. Weekly shipments of soybeans came in at only 6 million bushels, which was a new low for the marketing year.

Both 2000-2001 soybean export commitments and actual shipments are still running about 8.5% ahead of those from a year earlier, but the market fears further sales cancellations in the face of heavy competition from South American soybeans.

Weekly wheat export sales were pegged at 10.2 million bushels, which was in line with trade expectations, but below the pace needed to hit USDA's export projection.

For the marketing year to date, wheat export sales of 956.9 million bushels are about 1.6% ahead of the year-ago pace. Shipments are running about 1% ahead.

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.

Corn+Soybean Digest

ADM, Farmland Industries Form Joint Venture

Farmland Industries is entering into a 50/50 grain marketing joint venture with Archer Daniels Midland (ADM). Under the agreement, a new company, ADM/Farmland Inc., will lease and manage Farmland’s 24 grain elevators.

"Our initial efforts were to find a cooperative partner for the grain business, wrote Bob Honse, Farmland president and CEO, in a letter to members. "But after careful discussions with CHS Cooperatives, we were unable to structure a transaction that would meet both cooperatives’ financial goals.

"We are pleased to have found a partner in ADM, a company with a history of successful relationships with local and regional cooperatives, including Growmark, Countrymark, CHS Cooperatives and Goldkist."

Honse explained that grain businesses operate on very thin margins and generate low rates of return. "As a result of the leverage on our balance sheet, our interest expenses have grown," he added. "This has increased our costs and hampered our ability to continue to generate acceptable earnings in this business."

ADM will provide financing for the new company’s operations. Farmland and ADM will share equally in the earnings of ADM/Farmland Inc. Farmland’s share of those earnings will be patronage-based.

Corn+Soybean Digest

The Road Warrior Goes Back to School

This past week, while on sabbatical leave, I had the pleasure of attending an Ag Finance Class that featured a speaker discussing investments. There were many interesting perspectives.

Points to Ponder

  • Online trading has declined about 50% since the stock market downturns.

  • If you are feeling bad about low commodity prices – don’t. The investment advisor’s average portfolio lost 32% over the past 12 months. Personally, I am down 7.9%, so I’m not feeling bad. How do you stack up?

  • Americans have lost $4.4 trillion in paper wealth over the past year.

  • The investment advisor’s biggest investment losers were people who moved lower and modest return investments to higher risk and return options in 1999 and 2000. Does this sound familiar in marketing crops and livestock?

  • Greed and fear still move the markets.

  • Nearly a third of a class of 114 students had started long-term investments. About half began before they were 15 years of age. Yes, there is hope for the younger generation.

Question and Tip of the Week
This comes from a student at Virginia Tech.

"Do I have to make big money to be able to retire comfortably?"

The investment advisor’s response: "One of my great success stories is of a retired Sears repairman who had made modest earnings, lived frugally but enjoyed life. He and his family invested monthly and attempted to earn an 8% average on investments. They currently have nearly a seven-figure retirement investment portfolio!"

Most farms are increasing debt loads as it pertains to machinery debt, capital leases, and credit cards. In a downturn this could be a bad sign.

Sports Perspective
Do you find NBA basketball boring? I would still rather play than watch.

Next week I am with an agrilenders group – tune in to find out where I have been!

Final Note
I received some really good questions from readers this week that you will see in the weeks to come. Keep sending.

My e-mail address is:sullylab@vt.edu

Editors note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He currently is on sabbatical and working with the Royal Bank of Canada.

To see Dave Kohl's previous road warrior adventures click here

This online exclusive is brought to you by Soybean Digest

Gas prices send farmers back to budgets

According to the Energy Information Administration (EIA) with the U.S. Department of Energy, Gulf Coast prices for unleaded gasoline rose from $1.35 per gallon April 2, to $1.54 per gallon by April 23. An informal survey of Mid-South and Southeast petroleum distributors April 24 found unleaded gasoline prices hovering around $1.57 per gallon and farm diesel prices ranging from a low of $1.01 per gallon to a high of $1.10 per gallon.

Fuel prices are expected to remain high throughout the spring and summer months, the government agency reports in its short-term energy outlook. “U.S. crude oil and gasoline inventories are below normal and are expected to remain low through the driving season and into the fall. Therefore, price volatility remains a possibility this summer,” the outlook says. “While there are reasons to believe that summer gasoline costs may not rise much above current levels, some of the same conditions that contributed to sharply rising prices last year are re-appearing this spring, such as low inventories and high crude oil costs."

The report continues, “Natural gas in underground storage reached the lowest levels ever recorded by EIA at the end of a heating season on March 31. This development has set the stage for continued high spot and wellhead prices that will be sensitive to variations in summer weather conditions that could lead to high electricity demand and competition for gas needed for storage. Only sharply higher-than-expected production performance, or a sharper-than-anticipated downturn in industrial activity will each continued upward pressure on gas spot prices.”

The Oil Price Information Service (OPIS) is reporting new record highs in April for spot prices in the New York, Gulf Coast and Midwestern markets “The price increases during the first weeks of spring have made mincemeat of earlier predictions released by the Energy Information Administration.”

“The increases have accelerated recently thanks to expectations that industry data will show another draw down “ the OPIS Energy Group says. May gasoline futures hit a high of $1.091 per gallon before the April 24 opening, which according to the Oil Price Information Service, is just shy of last summer's post Gulf War peak of $1.096 per gallon.

The rise is being blamed, at least partly, on to a fire at a California refinery. “When gasoline inventories are ultra-sensitive to any unplanned refinery downtime, any unexpected loss in production is met with an immediate response,” the energy group says.

The Energy Information Administration, reports that 43 percent, or roughly half of the price of a gallon of gasoline goes towards the price of crude oil. Of the remainder, 29 percent goes to pay taxes, 11 percent goes to distribution and marketing costs and profits, and 17 percent goes to refining costs and profits.

In its April 2001 Short Term Energy Outlook, the Energy Information Administration says, generally tight market conditions that are developing in the face of low stocks and increased demand will keep oil producer margins, and thus consumer prices, relatively high.

As one Delta area distributor, who wished not to be quoted, explains, “The switch from making heating oil to making unleaded and diesel fuel was not made soon enough, and refineries are running at very high capacity which leaves very little room for error.”

Another Mid-South petroleum company executive says, he believes fuel prices are being affected by market speculators’ beliefs’ that inventory levels are not currently high enough and, because of this, there is a possibility for shortages to occur around the country this summer. He says this “perceived” shortage, combined with low refinery utilization, is causing speculators to run the futures prices up.

“In the last twenty years we have had a surplus of energy production. All that excess capacity is now gone, And, while we are currently building eight generator plants in Mississippi, the experts are projecting that in the next 20 years there will need to be 40 generating plants built every year to keep up with the demand for electricity.

“If we have a hot summer and the folks who own the generator plants have to use natural gas to produce electricity, it will keep natural gas prices high. The increased use of natural gas to produce electricity instead of allowing it to go into storage for the winter, will likely affect the price of petroleum-based products, including fertilizer,” he says.

Veneman calls for high food safety standards

Food safety is "a global issue that demands a global response," says Secretary of Agriculture Ann Veneman, taking issue with those who would "argue that to insure the safety of the American food supply, the wisest course would be to isolate U.S. agriculture from the rest of the world."

Because "diseases and pathogens respect no national borders," the wiser course, she said at the Food Safety Summit at Washington "is to work cooperatively with other countries on food safety."

Every link in the food chain "needs to work together toward common solutions," Veneman said.

Food safety goals must begin, she said, with "an understanding that the food chain has fundamentally changed over the past few decades," and that today the various sectors of the food economy, from producers to processors to retailers, "grow more interconnected every day.

"U.S. agriculture operates in a global, high tech, consumer-driven environment…and changing consumer demands are challenging existing marketing institutions and traditional ways of doing business."

Veneman said also that the USDA will seek to:

o Insure that all food safety policies are based on sound scientific principles. It's important, she said, "for those of us who oversee research and make policy based on its findings to accept only scientific studies that live up to the highest standards of methodological integrity."

o Continue to educate the public about all aspects of food safety, from the testing done at the USDA to safe handling practices for consumers. "A well-educated public is better prepared to assess the validity of claims they may hear in the media and to reject false or misleading information." An example, she said, is the confusion resulting from the extensive publicity about foot and mouth disease in the United Kingdom and Europe. "Many people worry needlessly that foot and mouth disease poses a risk to humans — which, of course, it does not, and the USDA is working hard to get that message out."

  • o

  • Insure that the USDA's food safety policymaking process continues to be transparent and that the public has the opportunity to provide input and be fully involved through public meetings and other methods.

  • o

  • Encourage public-private partnerships to address food safety problems.

  • o

  • Strengthen the cooperative working relationships between the USDA and other government agencies involved in food safety. "We were very pleased when Environmental Protection Agency Administrator Christine Whitman announced that her agency will re-establish a liaison to USDA. This will help to insure that our respective agencies work together toward our common goals, rather than at cross purposes."

Consumer confidence in the U.S. food supply "is high," Veneman said, noting that those who travel oversees "have seen firsthand what can happen when the public loses confidence in the government's ability to protect the food they buy."

Even though the American public is confident of the ability of government to insure food safety, she said "no system of regulations or inspections can remain effective forever" and the USDA's efforts to protect the food supply "must be constantly reassessed and updated where necessary. Already, our partners in industry are looking at ways to improve our system even further."

When government, industry, scientists, farmers, and consumers work together to solve problems, Veneman said, "the results are policies that satisfy the interests of the various groups while promoting the public good."

Veneman urges high food safety standards

Food safety is "a global issue that demands a global response," says Secretary of Agriculture Ann Veneman, taking issue with those who would "argue that to insure the safety of the American food supply, the wisest course would be to isolate U.S. agriculture from the rest of the world."

Because "diseases and pathogens respect no national borders," the wiser course, she said at the Food Safety Summit at Washington "is to work cooperatively with other countries on food safety."

Every link in the food chain "needs to work together toward common solutions," Veneman said.

Food safety goals must begin, she said, with "an understanding that the food chain has fundamentally changed over the past few decades," and that today the various sectors of the food economy, from producers to processors to retailers, "grow more interconnected every day.

"U.S. agriculture operates in a global, high tech, consumer-driven environment…and changing consumer demands are challenging existing marketing institutions and traditional ways of doing business."

Veneman said also that the USDA will seek to:

o Insure that all food safety policies are based on sound scientific principles. It's important, she said, "for those of us who oversee research and make policy based on its findings to accept only scientific studies that live up to the highest standards of methodological integrity."

o Continue to educate the public about all aspects of food safety, from the testing done at the USDA to safe handling practices for consumers. "A well-educated public is better prepared to assess the validity of claims they may hear in the media and to reject false or misleading information." An example, she said, is the confusion resulting from the extensive publicity about foot and mouth disease in the United Kingdom and Europe. "Many people worry needlessly that foot and mouth disease poses a risk to humans — which, of course, it does not, and the USDA is working hard to get that message out."

o Insure that the USDA's food safety policymaking process continues to be transparent and that the public has the opportunity to provide input and be fully involved through public meetings and other methods.

o Encourage public-private partnerships to address food safety problems.

o Strengthen the cooperative working relationships between the USDA and other government agencies involved in food safety. "We were very pleased when Environmental Protection Agency Administrator Christine Whitman announced that her agency will re-establish a liaison to USDA. This will help to insure that our respective agencies work together toward our common goals, rather than at cross purposes."

Consumer confidence in the U.S. food supply "is high," Veneman said, noting that those who travel oversees "have seen firsthand what can happen when the public loses confidence in the government's ability to protect the food they buy."

Even though the American public is confident of the ability of government to insure food safety, she said "no system of regulations or inspections can remain effective forever" and the USDA's efforts to protect the food supply "must be constantly reassessed and updated where necessary. Already, our partners in industry are looking at ways to improve our system even further."

When government, industry, scientists, farmers, and consumers work together to solve problems, Veneman said, "the results are policies that satisfy the interests of the various groups while promoting the public good."