5 years ago AFBF
A new report from CoBank shows three threats to the agriculture supply sector for 2019. Poor weather last fall and so far this spring have combined with stressed farm financials to pressure ag retailer margins and impact farmer decisions that could reduce sales volumes. Increased costs in the form of operating expenses for ag retailers, including labor, equipment and other expenses, will potentially rise due to a compressed spring planting season. The report says that as commodity prices have declined, farmers are increasingly price shopping and looking to cut costs. Variable costs like fertilizer, seed and crop protection products are key targets. Delayed farmer decisions can also be linked to weak farm financials. The report says stressed farm financials combined with a decrease in prepays, ag retailers are facing greater inventory risk and more difficult inventory decisions. Accounts receivable risk for ag retailers will likely increase as cash farm income dropped nearly ten percent in 2018.
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Report Details Risks of U.S. Hemp Industry
The U.S. hemp industry is poised for growth, but there are serious financial, regulatory and agronomic risks that farmers must understand. A report by Rabo AgriFinance says the market is “highly fragmented,” and there is no reliable source for pricing and production data. The report notes that the 2018 Farm Bill set off a process to completely overhaul hemp industry regulations, including the legalization of hemp and hemp-derived products. USDA plans to release its new rules in the fall, but new regulations won't take effect until the 2020 planting season, and hemp production is not legal in all 50 states. The report says hemp will not be treated like other commodities. Growing hemp requires a lot of paperwork and careful record keeping, and regulatory infractions could result in the seizure and destruction of a hemp crop. Finally, the report says the U.S. may soon face an oversupply of hemp grown for CBD extraction, which could result in major losses for farmers once prices adjust.
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Missouri River Runoff Breaks 1952 Record
March runoff in the upper Missouri River Basin above Sioux City, Iowa, was a record 11.0 million-acre feet, surpassing the previous record of 7.3 million-acre feet set in 1952. The average March upper basin runoff is 2.9 million-acre feet, according to the U.S. Army Corps of Engineers Missouri River Basin Water Management Division. Division Chief John Remus says the record high runoff in March was caused by 2-4 inches of rain falling on heavy plains snowpack causing the snowpack to rapidly melt on frozen, saturated soils. Pool levels have increased in flood control reservoirs, capturing some of the runoff. The Corps plans to increase Gavins Point releases to 55,000 cubic feet per second by early next week. Gavins Point releases will be above average for the next several months, and possibly as late as November. Typical releases during the spring season are between 20,000 and 30,000 cubic feet per second. The releases increase anxiety along the Missouri River as the March flooding event left more than 50 levee’s breached between Kansas City, Missouri, and Council Bluffs, Iowa, leaving vast areas of farmland without flood protection.
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Iowa Flood Losses Estimated at $2 Billion
The Iowa Farm Bureau Federation Says Iowa may see more than $2 billion in damages from recent flooding in the state. The organization says damages from the Missouri River are not complete and the Mississippi River’s anticipated flooding has yet to hit, which will make this a challenging year for Iowa farmers. Iowa Farm Bureau senior economist Sam Funk says the damages will continue to culminate long after the floodwaters recede. Compared to the 2011 flood that destroyed 127,00 acres of crops, Funk says “this flood isn't just bigger; the effects will last longer." Flooding may peak again, according to the National Oceanic and Atmospheric Association, when snow melts make their way down from neighboring northern states and heavy spring rains arrive. Many farmers in the flooded areas won't plant a crop this season. And, like in Nebraska, Iowa livestock farmers were challenged by floodwaters directly impacting animals or in accessing roads needed to care for livestock or transport them to market.
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USDA to Release Census of Agriculture
The Department of Agriculture’s National Agricultural Statistics Service will release the 2017 Census of Agriculture results on Thursday, April 11, at noon ET. The full Census report will include millions of data points, including number of farms, land in farms, total value of production, demographics, and more at the national, state, and county levels. The report, along with a number of related publications, will be available on the NASS website at www.nass.usda.gov. Agriculture Secretary Sonny Perdue says the date “will help inform decisions about ag education, research, farm programs, rural development, and much more over the next several years.” The 2017 Census report will include new information on military service, food marketing practices, and on-farm decision-making. USDA says these additions help better capture the roles and contributions of beginning farmers, women farmers, and others involved in running a farm enterprise. The first Census of Agriculture was conducted in 1840 in conjunction with the decennial Census.
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Grassley, Merkley, Push for Robust Wind Energy Funding
Senators Chuck Grassley of Iowa and Jeff Merkley of Oregon are leading a bipartisan push for “robust” wind energy funding in the 2020 funding bills. Grassley, a Republican, and Merkley, a Democrat, call the funding necessary to “continue supporting rural communities, advance domestic energy independence, and ensure America remains a leader in wind energy technology.” Their comments were sent in a letter to the Senate Energy and Water Appropriations Subcommittee. The senators noted that the wind industry employs more than 100,000 Americans and the wind turbine technician is America’s second-fastest growing job. The wind industry also employs veterans at a rate that is 50 percent higher than the national average. Grassley and Merkley were joined on the letter by a bipartisan group of 17 senators. The National Renewable Energy Laboratory estimates distributed wind could be deployed at an additional 49 million sites in the U.S. alone. Approximately 99 percent of wind turbines are located in rural communities, and in 2018, winds turbines produced $289 million in annual land lease payments in the United States.
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The top lobbyist for the ethanol industry in Washington sees Big Oil’s handwriting on a key part of the Environmental Protection Agency’s proposed rule to allow E15 sales year-round, and oil-industry favored provisions, in another.
Renewable Fuels Association chief Geoff Cooper says ethanol credit or RIN reforms in the E15 proposal, clearly favor oil refiners…
“It’s clear that that half of the proposal is there, because the president made a commitment to refiners to address RIN issues. Our frustration has been…they wanted low RIN prices—they got them.”
And EPA’s E15 year-round sales proposal also makes it harder for retailers to make the fuel on-site, as most do, by blending E85 and E10, forcing them instead, to buy more expensive blend-stock from a terminal…
“Right now, you’ve got E15 being sold for 5-to-7-cents less than E10, at retail. If EPA were to finalize this rule, you would probably cut that discount in half.”
But Cooper blames EPA staffers concerned about natural gasoline impurities in E85, not oil refiners, creating an obstacle for retailers.
“Oil guys don’t mind seeing any constraints, or any impediments or obstacles, for ethanol blending. So they’re either going to have to find a new source of E85 to make their E15, or, we’ve heard from some that have just said, ‘well, we’ll just stop selling E15 during the summer from our blender pumps and just sell flex-fuels: E20, E30, E85.”
Cooper says the concern is real, especially with the comment period for the rule ending April 29th and the start of summer driving, June 1st…
“If they don’t have some certainty about how this is going to play out, by the beginning of May, they’re going to take steps to prepare for summer…and if they don’t know with 100-percent certainty, that E15 will be a legal fuel that qualifies for the one-pound waiver, many of them may begin to take steps to take E15 out.”
Cooper and others have urged EPA to change its proposal allowing for E15 sales and it greater summertime evaporation, but the politics and the clock don’t seem to favor the industry right now.
