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Articles from 2008 In September


Transportation efficiency: It's your business

For the full article, click on the headline above.

Ancient locks and dams•monopolistic railroad service•skyrocketing fuel surcharges: A crumbling transportation infrastructure may seem like someone else's problem. But it's really a pain in the behind for farmers — i.e. a pain in your pocketbook.

That's one of the points Mike Steenhoek is trying to drive home these days as executive director of the Soy Transportation Coalition, a group established late last year by seven state soybean boards, the American Soybean Association and the United Soybean Board to provide information and education on behalf of the U.S. soybean industry on shipping and transportation.

The farmers on the STC work overtime to try to feret out information that may lead to improving efficiencies when it comes to getting your commodities on to ships and trains and eventually into people's stomachs. "The goal of STC is to make the journey from farm to dinner plate as efficient as possible,•bCrLf says Steenhoek (below).

In a way this group is working for all farmers as a kind of watchdog on the transportation industry, but it's also working to build relationships within that industry so that every one wins from greater efficiencies. The railroad companies know they have a sweet deal by having nearly no competition among themselves. But they don't like bad publicity and agriculture is a major rail customer.

The value of a soybean on your farm is nothing until you factor in the cost of transport, processing and everything else needed before that oilseed feeds someone, here, or 5,000 miles away.

Today we have higher rail costs, higher fuel costs for trucks, and higher barge rates. Ocean freight rates are through the roof. Will higher transport costs damage grain exports?

If infrastructure costs continue to skyrocket, we will be pricing ourselves out of business? As globalization continues and we become more integrated with the world community, how do we buttress U.S. agriculture, especially if more decisions are made in Geneva than Washington?

"One way to fortify it is to have an efficient logistics channel that is always WTO compliant,•bCrLf says Steenhoek. "It's not acute right now but it will be in the future.•bCrLf

STC is putting the wraps on a new study on basis, and what causes gaps in basis in various regions of the country. The group is hoping to find out if there's more to basis weakness beyond typical seasonality, supply and demand, or cost of storage.

Rail worries One of the biggest areas of concern for STC is rail issues. Over two decades ago there were dozens of class one railroads (revenues in excess of $320 million); now there are seven. A lot of track has been abandoned, providing fewer alternatives to farmers.

"It used to be every country elevator 20 miles apart from each other had a railroad that called on them,•bCrLf says Steenhoek. "The rail industry increasingly says, we can't be stopping every 20 miles. The two most expensive miles a train takes is the first mile when they leave and the last mile upon arrival. When they're chugging along the countryside at 50 mph that's what they do best.•bCrLf

Even as rail service vanishes, the rail companies have had "significant•bCrLf cost escalation with rates and fuel surcharges. "It's not widely known or understood by the farmers,•bCrLf says Steenhoek. "What farmers need to realize is that when the elevator pays a higher rail rate, there's a corresponding effect on the amount of money they offer to pay farmers for their grain.

"The farmer is the one entity that can't pass on costs; it's unique that they are price takers on both their input costs and on the revenue side as well.•bCrLf

On the other hand, most people don't understand that the rail industry is privately financed. "The fact is we in this country have obligated the rail industry — unlike the road and interior waterways — to finance their own maintenance and expansion,•bCrLf says Steenhoek. "It's one of the most capital intensive industries on the planet. A new locomotive costs $2.5 - $3 million. So we can't just simply berate them for not providing the service we would like. The rail industry has the highest degree of reinvestment in their own industry of any in this country.•bCrLf

Higher fuel costs STC will also do a study of how higher fuel costs impact the soybean industry. If oil soars to $200 a barrel, will we still be competitive on a global scale? And if not, what's the ripple effect on the soybean crop?

"Roughly half of the crop finds its way into the international markets,•bCrLf says Steenhoek. "If all of a sudden transportation becomes much more costly it's going to impair our ability to move it into markets. To what degree are we going to maintain our customer base - whether its livestock in the southwest, swine in North Carolina or poultry all over the world?•bCrLf

Steenhoek is hoping that the more farmers learn about inefficiencies in transportation, the more active they will be on the issue. That's the only way to minimize losses resulting from higher fuel costs or less-than-competitive modes of transport.

"We need farmers to regard transportation as similar in importance to other issues critical to the industry such as renewable fuels, market access and production research," he says. "After all, if we have a breakdown in our distribution system, producer investments in these other areas will not be fully realized."

 

 

Congress approves farm bill fixes

For the full article, click on the headline above.

Congress this week passed several farm bill fixes to make it easier for producers to participate in the bill's disaster assistance program and temporarily suspend the bill's 10-acre provision. The House of representatives first cleared H.R. 6849 Sept. 24, by a voice vote. The Senate approved the bill with amendments and the House cleared the Senate's amended version Monday, Sept. 29. The bill now awaits the President's signature.

H.R. 6849, as amended by the Senate, makes technical corrections to the permanent crop disaster program included in the 2008 Farm Bill. It also temporarily reverses the U.S. Department of Agriculture's published notice regarding the Farm Bill's 10 base-acre provision, which would have denied farm program benefits to hundreds of thousands of producers nationwide by refusing to allow for the aggregation of small base acreage.

USDA's interpretation would eliminate producers from receiving direct, counter cyclical, or ACRE payments, if the farm is 10 acres or less. The manager's report of the farm bill specifically included language to ensure that small farm acreages could be aggregated to allow for farm program payments if the sum of the acres is over 10.

The Senate's version provided a one-year fix rather than a two-year fix as originally proposed last week and as passed in the House. Farmers now have one year to combine these small acre operations with other acres for the purpose of program payment eligibility.

The fix was said to cost $20 million, with funds coming from the Risk Management Agency's information technology fund in order to meet pay-as-you-go requirements.

Disaster provisions

Among the provisions in the disaster program technical corrections bill are:

  • An extension of the waiver for the CAT/NAP purchase requirement for the 2009 crop year for crops with an August 14 or earlier administrative fee payment requirement.
  • An exclusion from the CAT/NAP purchase requirement for portions of the total acreage on a farm that are not of economic significance or for which the administrative fee for those programs exceeds 10% of the value of that coverage.
  • Clarification of the rules pertaining to the treatment of a crop that has been planted subsequent to the failure of the original crop due to weather-related factors.

The National Sorghum Producers Association welcomed the disaster provision fixes which for example would designate uninsured sorghum and other crops planted behind failed first crops as "ghost crops," meaning that the crop's revenue will not reduce a farmer's Supplemental Revenue Assistance Program (SURE) payment.

NSP chairman of the board Toby Bostwick said the measure is important, especially in these uncertain economic times so farmers are not discouraged from planting a second crop at their own risk. "Congress has done the right thing by passing a bill that exempts the value of uninsured second crops from their calculation of revenue in determining disaster payments," he said.

Dow AgroSciences Announces Agreement to Acquire Renze Hybrids Acquisition to Expand Dow’s Business in Western Cornbelt

Dow AgroSciences LLC announced today it is acquiring the majority of Renze Hybrids Inc. assets. The addition of the newly formed Renze Seeds LLC will build upon Dow AgroSciences’ current seeds business and will expand its broad range of product offerings. The transactional close is expected in the near future.

“Renze has an established brand and product portfolio that strengthens our corn, and soybean business in the Western Cornbelt,” said Stan Howell, vice president, North America, Dow AgroSciences. “Furthermore, Renze’s combination of outstanding customer service and commitment to quality complements our strategy to build a world class seeds business.”

Under the terms of the agreement, Dow AgroSciences will acquire all sales, marketing and agronomy assets related to the Renze brand as well as all soybean production assets. Dow AgroSciences will continue to independently market seeds under the Renze brand and product offerings in 2009 will not be affected. Renze will continue to be headquartered at its existing location near Carroll, Iowa.

Craig Williams, currently operations manager for Renze, will remain with the business to lead Renze Seeds as Dow AgroSciences’ general manager. Tim Renze and Jeff Renze will serve as consultants to Renze Seeds. In addition, they, together with their father, Cyril, have formed RenPro Inc., a new seed corn production company to provide hybrid corn for Renze Seeds.

The Renze business experienced great success under the leadership of Cyril Renze, 82, with continued growth through sons, Tim and Jeff. Cyril entered the field of seed production in 1939 and is one of the industry’s original seedsman. Through his leadership in industry organizations, such as the American Seed Trade Association (ASTA) and several state seed organizations in Iowa, Cyril has helped to build a growing seed business that improved Midwest farmers’ production and yields.

“We believe the best time to make a move like this is when you are not forced to do it, and that time is now. I consider this the opportunity of a lifetime as possibilities of new product development are almost unlimited,” said Cyril Renze, president of Renze Hybrids. “Part of our legacy is that we, as a company, always have been on the forefront of adopting new technology. We wanted to ensure our customers’ success by continuing to offer the newest technology and best products in the future. And, our agreement with Dow AgroSciences ensures access to future technology and germplasm.”

Renze is the sixth acquisition, including Agromen, MTI, Duo Maize, Triumph Seed and Dairyland Seed Co., in the last 12 months as Dow AgroSciences builds a global seeds platform. This combination of companies will provide a strong regional presence for Dow AgroSciences to commercialize its HERCULEX® Insect Protection traits, SmartStax™, and Dow Herbicide Tolerance (DHT) technologies for the benefit of corn and soybean growers.

About Renze Hybrids

The Renze mission is to grow our business based on ethical business practices and our reputation for providing midwestern corn, soybean and alfalfa growers with the best genetics, traits and quality possible, thereby improving their profit per acre. For nearly 70 years, Renze Hybrids has been a preferred supplier of superior genetics, uncompromising quality and outstanding service to our customers, the American farmers of the Midwest.

Syngenta and Metabolon Inc. in Collaborative Research Agreement for Biochemical Profiling Technology

Syngenta announced a multi-year agreement with Metabolon for biochemical profiling technology that will enhance the Syngenta technical toolkit for its seeds research programs. This agreement will support Syngenta researchers' understanding of plants' response to environmental conditions and decisions on crop traits earlier in the development cycle.

"Biochemical profiling is becoming an important part of Syngenta's focused program to apply the full range of cutting-edge science to supply solutions for growers," said Roger Kemble, Ph.D., Head, Syngenta Crop Genetics Research. "Metabolon's technology will enable Syngenta's insights to the performance of our products as we focus in bringing the next generations of seed science across native traits and GM paths to unlock crop productivity."

"We are excited to expand our partnership with Syngenta, a leading seed biotechnology company," said John Ryals, Ph.D., president and chief executive of Metabolon. "This agreement brings Syngenta into our growing stable of commercial partners in the pharmaceutical, biotechnology and consumer product sectors and we look forward to providing further actionable insight with our global biochemical analysis."

This agreement expands upon initial studies performed by Metabolon for Syngenta to test the application of the technology. Financial terms of the agreement were not disclosed.

Honeywell Develops Safer Ammonium Nitrate-Based Fertilizer; Receives SAFETY Act Designation From U.S. Department of Homeland Security

Honeywell (NYSE: HON) announced today it has developed a patented new technology to produce a highly-effective, safer ammonium nitrate-based fertilizer with significantly lower explosive potential.

The new technology has already received SAFETY Act Designation from the U.S. Department of Homeland Security (DHS) under the Support Anti-terrorism by Fostering Effective Technologies Act, which was created to provide incentives, including liability protections, for the development and deployment of anti-terrorism technologies that can help mitigate security threats.

“The unique composition of this new fertilizer makes it extremely difficult to turn it into a weapon,” said Qamar Bhatia, vice president and general manager of Honeywell Resins & Chemicals, which is one of the world’s largest producers of ammonium sulfate fertilizer.

“Ammonium nitrate has long been an excellent fertilizer, but this technology makes it safer.”

Independent tests using guidelines developed with the U.S. government demonstrated that Honeywell’s new fertilizer is significantly more difficult to use as an explosive. When mixed with fuel oil – a common method of using ammonium nitrate as an explosive -- the new ammonium sulfate nitrate fertilizer did not detonate.

The new technology fuses ammonium sulfate with ammonium nitrate, providing both nitrogen and sulfur needed for efficient plant nutrition as well as enhanced safety, quality and storage characteristics.

Honeywell is conducting pilot plant test production of the new fertilizer to finalize scale-up and engineering for manufacturing, and is also in talks with potential manufacturing partners. The company hopes to have limited quantities for sale in certain regions in 2009 and plans to market the material as Sulf-N® 26 fertilizer.

Independent agronomic tests on crops and plants -- ranging from grass to cabbage and tomatoes to strawberry and oranges -- found the new fertilizer to be as effective or more effective compared to alternative fertilizers, including straight mixtures of ammonium sulfate and ammonium nitrate. The tests, conducted over the last two years, were completed by major universities in the U.S., Canada and Brazil.

Also, the new fertilizer is both non-hazardous and non-oxidizing as tested by United Nations and U.S. Department of Transportation standards.

Honeywell worked with the DHS and the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives to develop testing procedures to evaluate the explosive potential of the new fertilizer. The tests were conducted independently by Energetic Materials Research and Testing Center (EMRTC), a division of the New Mexico Institute of Mining and Technology. As part of those tests, the new fertilizer was mixed with a number of substances, including explosives, sensitizer and fuel oil. In all tests, the new fertilizer significantly reduced or eliminated the explosive power of traditional ammonium nitrate.

Honeywell Resins & Chemicals is a part of Honeywell Specialty Materials and is a global leader in the development and production of ammonium sulfate fertilizers, which it sells under the Sulf-N brand for both crop and turf applications. For more information, go to http://www.sulfn26.com.

Honeywell International is a $38 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London and Chicago Stock Exchanges. For additional information, please visit www.honeywell.com.

Honeywell Specialty Materials, based in Morristown, N.J., is a $4.9 billion, global leader in providing customers with high-performance specialty materials, including fluorine products; specialty films and additives; advanced fibers and composites; intermediates; specialty chemicals; electronic materials and chemicals; and technologies and materials for petroleum refining.

This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management’s assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

No Lipstick on These Pigs

Remember a couple weeks ago, when everything political suddenly began to revolve around lipstick and hogs? As silly as it all was, the Illinois Pork Producers saw it as a prime opportunity to offer up a little porcine education, sending something of a care package to the Obama and McCain campaigns.

 

The idea, said IPPA executive director Jim Kaitschuk, came about after the association received actual media calls wondering what would happen if someone tried to put lipstick on a pig. Really. Amid economic turmoil and a mortgage crisis, somewhere, some reporter actually took time to dial up the Illinois Pork Producers and ask that question.

 

And so it was that IPPA began compiling a package for the candidates. Along with a reminder to laugh and wishes for a successful campaign, the candidates received a packet of info about pork production, a "Nice Chops" t-shirt and the following poem:

 

In the land of politics and campaigns galore,

The rhetoric has shifted to lipstick and a boar.

 

Though putting lipstick on a pig may seem cute,

It's one thing farmers will surely refute.

 

It wouldn't be sanitary, it wouldn't cross their mind,

To apply a glycerin product -- derived from the pig's behind.

 

It's a noble profession raising pigs for a living,

A pig is an animal that just keeps on giving.

 

From bacon to sausage, pepperoni to ham,

We're even linked to your old friend, Uncle Sam!

 

But did you know we're more than just pork?

Our value extends far beyond the fork.

 

By-products from pigs make heart valves and plastic,

Crayons, insulin, buttons, even LIPSTICK!

 

Whatever you think of - bacon, lipstick or ham hocks,

Doesn't matter to us… we say, NICE CHOPS.

 

So far, no word from the campaigns, and no sightings of the "Nice Chops" t-shirt on the back of either candidate. But you never know, especially this year.

Registered users can comment on this blog - share your thoughts on this topic!

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How Could Wall Street Impact the Farm Gate?

You would have to be a recluse not to be aware of the huge financial challenges awaiting the U.S. in the next few months. While everyone has been discussing the impact of Wall Street on Main Street, let’s go beyond that to the farm gate.

First, many of you deal with community banks, the Farm Credit System, FSA and other financial institutions. Is your money safe and will they continue to loan money?

Many of the lenders involved in this crisis were shadow bankers, who are apart from the mainstream regulated lenders that must play by the rules. However, some banks have invested in financial instruments or made loans in areas facing a major correction of asset values. These institutions may face challenges.

Expect more paperwork and documentation to be required. Government unfortunately will attempt to step up oversight on all institutions, possibly under one regulation. Many of these oversight agencies may not have an understanding of agriculture and rural areas. Producers must make their lender better by providing the financial statements and detail necessary to tell the story to the oversight agencies.

Credit will become more scrutinized and possibly much more conservative – you had better know your five Cs of credit. Liquidity, cash and financial sensitivity testing will be very important in developing salable financial packages.

For producers in the grain enterprise who experienced red-hot markets and strong profits, watch for 2009 and 2010 margin compression because of increasing input costs. Another barometer to measure upcoming economic health will be the economic health of the Asian economies. Growth must be near 10% to maintain strong food and fuel demand.

The final word is that Wall Street will ripple to the far corners of the globe and to farm and rural communities. A proactive plan is your best remedy, but that may not stave off some economic damage.

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.