Feb/March 1998
News & Views From the Wheat & Barley Growers
Library
Home
E-Mail
Back
Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
Price volatility and the unforgiving weather patterns of the past few years has created quite a challenge as we try to manage our farms. Opportunities exist under the new farm program environment, but questions such as what to plant, how much insurance to purchase or whether to buy or lease machinery are all management decisions that are difficult to make in a volatile market.
The challenge for us all, I believe, is to identify and address the risks that threaten our profit potential. That's why a primary objective for the NDGGA is to help educate growers in assessing their risks and then provide opportunities for minimizing the impact of those risks.
Risk management isn't fun but as costs go up and prices go down, we as farmers need to learn where we can cut costs and increase revenue. On Feb. 26 and 27, the NDGGA has organized workshops that will focus on aspects of risk management. Sessions will be conducted by risk management specialists and speakers that can help grain producers analyze their risk environment. We hope to augment these sessions with further risk management information and ideally, create a system to help all our members manage their risks more successfully.
Other industries and businesses have spent a lot of time and money evaluating their risks and then finding ways to manage them. Farming operations should be no different. We will seek examples of other business sectors that have completed comprehensive risk assessments, as well as establish an integrated risk assessment tool that we will be able to use. We have contacted small grains associations in other states and are encouraging them to engage in a similar approach. This educational effort will have even more strength if it is done collectively on a national level.
The NDGGA believes that to manage risk, farmers must have tools to assess what their risks are and how great the impact of those risks will be. We are committed to providing wheat and barley producers with the education and information necessary to increase farm profitability and create opportunities for growth and development.
Lowell Berntson, Kulm, ND, NDGGA past president
10 Integrated Risk Management Tips
Kansas State University extension grain marketing specialist Bill Tierney has helped wheat growers across the country to better understand how they may employ different marketing strategies which, when combined with crop insurance, can help to both minimize financial risk and enhance farm income.
He has led Integrated Risk Management workshops at conventions of the National Association of Wheat Growers, North Dakota Grain Growers Association, and most recently, the Minnesota Association of Wheat Growers, in a workshop sponsored by Rain and Hail LLC. A few IRM tips offered by Tierney:
1. Some farmers only complain about risk, while other farmers know that risk is part of farming and can bring opportunities.
2. Good farm managers set goals and are not unduly swayed by every gyration in market prices.
3. Crop insurance can serve as a financial "safety net" which can give you the confidence to take advantage of pricing opportunities if and when they occur.
4. If available, consider supplemental crop insurance options (increased coverage, replacement coverage, or CRC). They can further reduce your risk.
5. The crop insurance guarantee can provide a rule of thumb on how much to contract (at reduced risk).
6. Improved pricing opportunities occur almost every year. Have a written strategy so that you are ready to act when an opportunity occurs.
7. The markets wait for no one.
8. Never put all your eggs in one basket, or price all your crop at one time.
9. Your crop insurance agent and local grain merchandiser can provide you with the tools to maximize profits in good and bad years.
10. Good marketers and risk managers are always learning. Take advantage of the resources available in your area: cooperative extension, community colleges, satellite programs, hedge brokers, elevator managers, ag lenders, consultant services, and marketing clubs.n
How 60 cents/acre can stop a loss of $175/acre
I encourage wheat producers in Minnesota to vote in the March referendum, on the proposal to increase the wheat checkoff by a half cent per bushel, to a total of one and one half cents per bushel.
This is the first request for an increase since the wheat checkoff was created in 1978. An increased checkoff would:
Increase funds available for scab research- For one producer to solve scab would be an impossible task. Collectively, we are able to concentrate funds on research to solve this disease.
Leverage public dollars- Every penny contributed to the checkoff last year leveraged an additional three cents from public and private sources; a 300% return on investment. This leveraged funding would not have been achieved without the producer checkoff commitment.
Jointly fund a state wheat breeder-Minnesota's only wheat breeder is employed by USDA and will retire in two years. If replaced, USDA would likely hire a geneticist, not a wheat breeder. Minnesota needs a wheat breeder to improve varieties specific to our needs. A public-producer partnership will allow us to hire a Minnesota wheat breeder.
Build export and domestic markets- Basic supply and demand fundamentals mean there will be market ups and down, and we're in one of those cycles now. Over the long term, however, hard red spring wheat exports are eight and a half times what they were 30 years ago. Domestically, flour consumption is at a 50-year high. More private buyers in the global wheat market that need to be educated about our wheat, and the healthy, nutritional message that's winning consumers over in the domestic market, means promising market development potential.
In addressing scab alone, let's put the checkoff in perspective: In the past five years, average losses to Minnesota wheat producers because of scab have been $33.50 per acre per year. Right now, at a penny a bushel, we invest about 40 cents an acre on research and market development. Increasing the checkoff by a half cent would mean investing an additional 20 cents an acre.
Is it worth investing a total of 60 cents an acre in R&D to help stop a loss of $175 per acre over the past five years? That is a decision you need to make for yourself. If you haven't already, you need to fill out a form to receive a ballot, by calling the Minnesota Wheat Council office at 1-800-242-6118 by March 13. Ballots will then be mailed to the producers who requested them, and you will then have until March 27, 1998, to return the ballot.
Cliff Keller, Fergus Falls, MN, MWRPC chairman
EU farm support six times that of U.S.; may become even larger under "Agenda 2000"
A recent study at the University of Guelph shows that safety net support available to U.S. and Canadian grain and oilseed producers is similar, but far less than that provided to producers in western Europe.
The study, co-funded by Ontario farm groups and the Ontario Ministry of Agriculture, Food and Rural Affairs, shows that for a "benchmark" farm growing corn, soybeans and winter wheat, the average per-acre support amounts were $23.70 for the U.S., $27.35 for Ontario, $25.25 for Quebec, and $162.72 for France.
The results show that the relative amounts of support differed among years, with Canadian support varying according to crop prices, and US and European support being a flat rate per acre independent of crop price. To calculate US support levels, the study used an average of per-bushel support levels over the seven-year Freedom to Farm period.
European farmers may receive direct subsidies over and above what they receive now, under the European Union's proposed "Agenda 2000" that would reform the EU's common agricultural policy (CAP).
According to the analysis last fall by the Food and Agricultural Policy Research Institute (FAPRI), the proposed changes are intended to empower EU ag sectors with greater competitiveness and market orientation, greater planting flexibility, no set-aside requirements, and reductions in intervention (loan) prices. Sound familiar? Indeed, the Agenda 2000 appears to be the European version of "Freedom to Farm."
European farmers would even have a new system of "non crop-specific compensatory payments," a fancy way of saying decoupled direct payments, based on crop history with no link to crops grown, similar to our transition payments under Freedom to Farm. Theirs would be $176.35 per acre for wheat, and $132.26 per acre for barley, based on crop history. That's not including the value of the crop. And significantly, these payments would not sunset like ours do.
The new policy would enhance EU market competitiveness in domestic and international markets. FAPRI estimates that the United States will be primarily impacted by reduced grain export demand that would result in lower U.S. farm prices. Of all U.S. ag commodities, according to FAPRI, wheat would feel the largest impact, followed by feed grains. U.S. wheat prices would fall about 23 cents per bushel and barley 6 cents per bushel if the higher EU support levels are enacted.
FAPRI stressed that this assessment will likely be revised before approval is granted. Trade leaders and commodity organizations in the U.S. and other countries must work together to ensure that happens.
This issue is much more significant to our market competitiveness than Canadian imports. Further, it could play a key role in the direction of future U.S. farm policy. Clearly, the EU's Agenda 2000 must also be high on our agenda.
Mike Seeger, Red Lake Falls, MN, Chairman, MBRPC
Developments at NAWG signify a new direction for the future
The "future" is quickly becoming the present, and as you have witnessed over the past few months, changes at the NAWG are underway to help us take charge of that future.
We have created a new CEO position to serve the top post in Washington, D.C. This is an exciting change, because it will present new opportunities for the wheat industry to begin unifying ourselves. The CEO will lead us forward with new partnerships, and the industry will begin to see the long range planning process come to fruition.
In planning our future, we have begun to elevate our thinking, and to look in other areas of the wheat industry to gain our rewards. In the past, farmers tended to invest in their own business, while ignoring things of a larger focus. All that is changing. Farmers are investing in prospects further down the wheat industry chain, including buying bakeries, and mills. Growers want to be more proactive, and they are starting to making things happen.
One way to make things happen is through partnerships. Forming partnerships with our industry associates is a vital key to achieving the most from our future. Better industry-wide communications will help us identify potential new markets for more specialized varieties and wheat products. The main charge for the new CEO will be to identify those areas of potential partnership, both with industry and with other segments of the wheat chain, in which the wheat farmer can gain economically.
Political representation in Washington, D.C. has always been the strong suit of the NAWG, and will continue to be an important part of our future. However, other areas, such as the aforementioned partnerships, as well as beefed-up efforts to increase membership, need to be developed.
To take this bold step into the future will require a unique and visionary person, and that is exactly what we intend to supply you with in the NAWG's new CEO. A true "spark plug," this CEO will hit the ground running to catalyze those changes in a concerted direction.
The CEO Selection Committee is now in place. It consists of Bill Flory, NAWG president, and Jim Stonebrink, NAWG vice president, from the officer ranks, as well as three at-large members, including Terry Detrick of Oklahoma, Gary Broyles of Montana, and Lowell Berntson of North Dakota. Robert Connelly and Associates based in Minneapolis, MN is the executive search firm selected to aid in the search process. It is our goal to have finalists to present to the Board in March of 1998.
The future is upon us, and it is time to take those steps to create a future bursting with economic opportunities for wheat farmers. I'm excited about that future, and I hope all my fellow wheat growers share our vision in this new direction.
Phil McLain, Immediate Past NAWG President
Never mind Uncle Sam: It's the community that can shut you down
Farmers need to be careful what they ask for. My family has formed an alliance with another farmer who works for us during the busy planting season. In return for his labor we plant his crops for him with our equipment, and he receives a break on the rental rates of his farm ground.
Recently he applied for a Conditional Use Permit to build a hog finishing site to be located on my family's ground. He would own and operate the finishing sites, and we as neighboring landowners would handle all of the manure management. The finishing sites would utilize a Slurry Store manure handling system and the manure would be injected into the ground no more than twice a year (usually only once a year). The nearest neighbor is over two miles away and the nearest that we would be applying manure would be one mile from any dwelling. There are no major highways nearby and the largest town in the county (pop. 900) is nine miles away. The land base that the manure would be applied is 150% more acres than is needed for long term application of hog manure. The property taxes generated from these barns are equal to 15 quarters of farm ground. All of the county zoning ordinances were followed.
Still, the public showed up in large numbers to the hearings. Many of the residents voiced opposition manly due to fear of the unknown. This county has very few finishing sites of this size and style. The county zoning board (which is the same as the county commission) recently voted to deny the Conditional Use Permit based on the health, safety, and welfare of the county residences. Keep in mind that the engineering surveys found no shallow aquifers, there are no streams or watersheds nearby; and as one engineer put it, this is an ideal location.
What does this tell us as farmers? Plenty. We are in times of rapid change, with new ways of doing business. The era of economies of scale, with new technologies abound. Many of us in farming already sense this, and we're trying to prepare for it. But are our neighbors ready for this? Are the customers ready for this?
Never mind the EPA, DENR, or the MPCA; it is the community that can shut you down. And it can be done merely through governance of speculation and emotion. It's unfortunate what the hog industry is going through. Dairy and beef are not far off. Down the road, it could be crop protection products, and uses of fertilizer. Perhaps inventories of each and every acre as to what was applied, at what time, in what amounts, overlayed with land surveys and permits. Exaggerated possibilities? You most certainly could argue that. You also couldn't rule it out.
Our biggest challenge in the future is not necessarily educating ourselves on new technologies and new ways of doing business. It is educating all of the people around us that these new ideas are safe and that they are beneficial for agriculture and the general public. Our farm groups and commodity associations do a good job of monitoring state and federal politics, but we also need to keep an eye on city and county halls. More and more, it's not so much the faceless bureaucrat in Washington D.C. we need to educate about our business; it's our neighbor down the road.
Chet Edinger, Mitchell, SD, President, SD Wheat Inc
Crop insurance in need of significant reform
Weather experts say the Northern Plains have the second most varied climate on earth. With no large bodies of water or mountain ranges, the temperatures can swing wildly. Only the Siberian region of Russia has a larger temperature spectrum, the experts say.
With our varied climatic conditions, our crops face more varied risks. And the current crop insurance system is failing to help Northern Plains growers cover those risks.
The APH and coverage levels are dropping and premiums increasing, because of weather problems and crop disasters out of the grower's control. This year our APH took another hit with the loss of 1987 in the APH calculation. Crop insurance flat out doesn't compute with a crop history consisting of drought years 1988 and 89 and the scabby 1990s strapped to our backs.
Federal Crop Insurance Corporation administrator Ken Ackerman was in our area earlier this month to talk about crop insurance with growers. In the short-term, the MAWG urged that the APH is in desperate need of a fix. There are ways to consider: index out the disaster years with National Ag Stats Service yields or long-term trend yields, perhaps using a 20, 30, or 40-year yield history. Or eliminate yields from years in which a disaster is declared- if we're not going to get disaster payments any more, at the very least, the disaster year shouldn't count against us.
In the longer-term, 1999 or 2000, the MAWG urged for the implementation of a dollar coverage or gross revenue pilot program may be implemented in 99 or 00. Dollar or crop value coverage by production area could be offered. The farmer would be allowed to buy a revenue level, say 50 to 85%, of the crop value in his production area. Rates would increase if the area would incur repeated losses.
Tying crops together in a "Whole Farm or Combined Crop Revenue Coverage" is another idea that would decrease risk, encourage crop rotations, simplify the insurance process and increase coverage levels, and participation. The data is there to do it, and these are ideas that are politically feasible. Until 2002, when the farm program ends, perhaps the state could help underwrite the cost of a pilot program. Then, perhaps the federal government would step in, offering incremental premium reductions in exchange for implementation of certain conservation practices, if county participation reaches a certain level, or a combination of factors. These are just a sketch of ideas. We will continue to hammer on this issue and let Mr. Ackerman and other policy makers know that a bandage won't cut it; crop insurance is in need of real reform.
Tim Dufault, Crookston, MN, MAWG president n
Didn't make CRP? Here's three other conservation programs to consider
If you had land that didn't make it into the latest Conservation Reserve Program signup, or would like to enhance some land with federal compensation, following are three voluntary USDA conservation programs to consider:
Wildlife Habitat Incentives Program
WHIP is a land management-rather than a land retirement-program, introduced last fall. It provides both technical assistance and cost-share payments to landowners to help establish and improve fish and wildlife habitat. In addition, if the landowner agrees, cooperating state wildlife agencies and nonprofit or private organizations may provide expertise or additional funding to help landowners complete a project. WHIP provides cost-share assistance up to 75% of the cost of installing wildlife habitat practices. The total cost-share amount cannot exceed $10,000 per agreement. Agreements generally last from 5 to 10 years.
Continuous CRP signup
This program allows you to establish certain conservation buffer practices on cropland and marginal pasture and enroll the land in CRP at any time without submitting a bid. Eligible buffer practices include grass waterways, shelterbelts, field windbreaks and living snow fences. The USDA hopes to establish two million miles of conservation buffers nationwide by 2002.
Wetlands Reserve Program
The continuous WRP offers landowners financial incentives to enhance wetlands in exchange for retiring marginal agricultural land. There are three options: permanent easements, 30-year easements, and restoration cost-share agreements of a minimum 10-year duration. Eligibility includes farmed wetlands, prior converted cropland, farmed wetland pasture, previously restored wetlands, and farmland that has become a wetland as a result of flooding. The landowner continues to control access to the land and may lease it for hunting, fishing, and other undeveloped recreational activities. Compatible requests for uses such as haying, grazing, and harvesting wood products may be made.
For more information, contact your local Natural Resources Conservation Service (NRCS) office.n
NAWG Convention Highlights
The 48th annual National Association of Wheat Growers convention in San Diego last month featured a wheat industry research forum to bring growers and industry together with wheat researchers to discuss current and future research needs. One session focused on fungicide technology and management of wheat diseases, featuring crop scientists from the University of Minnesota and North Dakota State University. The forum attracted a great deal of producer and industry interest and will be continued as an integral part of future NAWG conventions.
Deputy Secretary of Agriculture Richard Rominger acknowledged the scab problem, and that federal research is needed to help find solutions. A producer himself, he said that "farming is pretty easy when your plow is a pencil and you're 1,000 miles away from the field." Despite Freedom to Farm, Washington shouldn't lose sight of the fact that farming faces inherent risks, and as such, farmers "shouldn't have to face that alone. We need to ensure economic security without manipulating farm prices."
Rominger said that in the next century, the world's population is going to grow at the equivalence of a New York City every month. That said, biotechnology, crop research, and high-yielding crop production will be needed to supply that demand.
In regard to grain trade problems with Canada, he said that USDA has offered a pilot program to work toward a solution: That a minimum of half of the grain Canada exports to the U.S. be farmer-direct sales, not through the Canadian Wheat Board.
California Department of Food and Agriculture Secretary Ann Veneman presented a litmus test for special interest complaints against the North American Free Trade Agreement: "If NAFTA went away, would the irritant still exist? In almost every case it still would be."
Gary Lee of United Spring Wheat Processors was one of four CEOs to discuss adding value through farm cooperatives. He was asked if Canadian spring wheat will ever find its way into USWP. The co-op's business and tax structure prevents that, he said. "We do have the Canadians as competitors, as there are some opening bakeries across the border. But our members are required to deliver to our cooperative, and we in turn are bound to our members' grain." Lee said that the USWP plant will process 1.6 million bushels of wheat at full production.
One pathway to success, said Lee, is operational efficiency. "Keep a narrow focus, run a high volume and run the plant hard." Business alliances may be another; for example, Kraft Foods (hypothetically) contracting with USWP to make its pizza crust.
Joe Famalette, former head of American Crystal Sugar and current CEO of Tri Valley Growers, a 520-member California vegetable co-op, said that "there is an inherent weakness to having a total grower board in today's global economy." Tri-Valley tries to have at least two outside directors on its board, with a financial, food service, or customer background.
At the NAWG convention, members from across the nation established trade, grain quality, risk management, conservation, research, crop protection, tax, farm program and other policy that will direct the association through 1998. For a copy of the 1998 NAWG resolutions, contact your state wheat association or the NAWG's web site, www.wheatworld.org, where the resolutions are posted.n
Three MN wheat leaders elected to national offices
Pete Kappes, Ada, MN, has been elected secretary/treasurer of the National Association of Wheat Growers Foundation, which oversees many of the educational and leadership programs offered through the NAWG. Chairman is Jerry Theusen, a producer from Montana; Madison Angell, North Carolina, serves as vice chair.
Art Brandli, Warroad, MN, has been elected secretary/treasurer of the Wheat Foods Council, which promotes increased consumption of grain-based foods nationally through nutrition, education, and promotional programs. WFC members include millers, bakers, cereal, cracker, tortilla and pasta manufacturers, and producer groups including the Minnesota Wheat Research and Promotion Council and the wheat commissions in North and South Dakota. Brandli will assume the office this summer.
Bruce Hamnes, Stephen, MN, has been elected secretary/treasurer of U.S. Wheat Associates, the export market development organization which works in 130 countries to increase wheat consumption and U.S. marketshare for all classes of U.S. wheat. There are 18 wheat-producing states representing about 90% of the wheat grown in the U.S. which fund USW through wheat checkoff contributions. USW maintains its headquarters in Washington, DC, with an office in Portland, Oregon, and 15 overseas offices to implement its market development programs throughout the world. Hamnes assumes office later this summer.n
Loss of a Wheat Champion
Mel Maier, long-time administrator of the North Dakota Wheat Commission, died at age 64 on Dec. 28, 1997. Maier began his work with the NDWC in 1963 as assistant administrator. In 1967, he moved to Rotterdam, The Netherlands, where he worked for five years as European director of Great Plains Wheat to expand exports on behalf of seven state wheat commissions. He returned to the NDWC in 1972 to become administrator and celebrated his 25th year in that position in October, 1997.