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News from the Minnesota Association of Wheat |
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CHINA AND U.S. WHEAT EXPERTS PREPARE FOR OPENING MARKETS The visits are the latest in a growing dialogue on wheat trade and marketing in anticipation of U.S. congressional approval of normal trade
relations. If Congress approves the permanent status for China, U.S. wheat exports could increase as much as 10 percent. Next week, U.S. Wheat Associates experts are traveling to China, and will be meeting with
flour milling industry representatives and public officials in Shanghai, Beijing, Shenzhen, Guangzhou and Hong Kong. USW vice president Paul Dickerson will be explaining the U.S. wheat market system. "China
is on the cusp of economic and agricultural changes that will benefit both of our countries, and the U.S. wheat industry must be first in line when that door opens," Dickerson pointed out. "We have to
develop the wheat market now, and the best way we can do that is to meet and exchange information."
FIRST WHEAT SALE TO SUDAN SINCE TRADE SANCTIONS EASED Due to the absence of U.S. wheat over the last ten years, Australia and Canada have become the top supplier of wheat to Sudan. President
Clinton's announcement last spring that U.S. sanctions on medicine and food were eased was welcome news to America's wheat producers and traders. "With the U.S. trade sanctions in Sudan, miller and buyers had
very little familiarity with the U.S. marketing system or U.S. wheat classes," reports Dick Prior, USW vice president for the Middle East and East Africa. "This is a potentially important market for us, and
the U.S. wheat industry has worked hard to reestablish ties with Sudanese millers." Wheat consumption in Sudan is generally pegged at a little over one million metric tons. Sudan's 1999 wheat crop was estimated
at about 70% below the 1998 crop.
USDA TO DECIDE ON SUGAR PURCHASE
COMMITTEE SEEKS LEGISLATIVE DIRECTION ON MTBE The Senate Agriculture Committee is seeking direction on legislation needed to help MTBE exit
the reformulated gasoline scene and whether a bill should include consideration of "all of the environmental and energy security issues involved," according to committee Chairman Richard Lugar (R-IN).
"Our air quality and water quality are both extremely important," Lugar said. "It is clear that MTBE is on its way out. The question is, what kind of legislation" is needed now. Lugar has introduced
legislation, that has passed the Senate and is supported by the administration, to increase research to create biofuels from almost anything that grows, including agricultural wastes, weeds and much municipal waste.
The chemistry for the actual process is known, Lugar says, but the legislation is needed to bring affordable biomass ethanol to the market. The bill also would establish a $49 million a year research effort over six
years involving national laboratories, universities and industry. Sen. Tom Harkin (D-IA), the committee's ranking Democrat, is preparing to introduce a bill to tighten air quality performance standards in the Clean
Air Act's reformulated gasoline program and maintain and enhance ethanol's "rightful opportunity" to deliver clean air benefits.
RRV FARMS INCOME REBOUNDED IN 1999 Net farm income is income before self-employment and income taxes and family living expenses, explains Andrew Swenson, farm
management specialist with the NDSU Extension Service. Net farm income is calculated on a per-farm basis. Because some farms are partnerships or family corporations, the net farm income must be divided among multiple
operators. "Most Red River Valley producers would no doubt agree that 1999 turned out better than expected and that the reversal was needed,"Swenson says. Only 7 percent of farms had a negative net
income in 1999, compared to nearly 40 percent in 1998, and farm debt improved for the first time in three years, Swenson says. But a significant increase in government payments was the main factor contributing to the
turnaround. "Government payments averaged $91,375 in 1999, compared to a two-year average of $28,000 for 1997 and 1998," Swenson says. "The reason for the increase was twofold: one, the level of loan
deficiency payments resulting from low commodity prices, and two, the emergency federal legislation that provided market loss payments and crop loss disaster assistance." The Farm Business Management report also
shows that the size of farms in the Red River Valley continues to increase. The 211 farms featured in the 1999 report averaged 1,729 acres, of which 72 percent was cash rented. The average size of farms in the 1998
report was 1,485 acres. "Raising spring wheat on cash-rented land showed a loss of $12 per acre, for the third consecutive year," Swenson continues. "Sugarbeets on cash rented land returned $105 per
acre in 1999, but producers with cash-rented land and a joint-venture arrangement for the sugarbeet stock lost $31 per acre, on average." Average yields of corn and soybeans on cash-rented ground were very good
in 1999, at 127 and 36 bushels per acre, respectively. Even so, corn lost $17 per acre, Swenson says. In contrast, soybeans showed a $26-per-acre profit. Swenson says the annual Farm Business Management report is
designed to help Red River Valley farmers make more informed management decisions by providing measures of comparison to other farms in the area. Detailed 1999 costs and returns for each crop enterprise are included in
the report. The study also might be useful to educators, bankers and consultants. The report costs $5 plus handling and shipping and can be ordered in Minnesota by writing to Robert Bollesen at Northland Community
and Technical College, Highway 1 East, Thief River Falls, MN 56701. Bollesen can be reached by telephone at (218) 681-0797. North Dakota producers interested in the report can write to Farm Business Management, P.O. Box
6022, Bismarck, ND 58506, or they can call (701) 328-3162. The report also is available via Internet at Robert Burns, distinguished professor and head of the Department of Political Science at SDSU, is organizing the conference on a $7,000 grant from the Canadian Studies Grant Program of the
Canadian national government and a match from SDSU President Peggy Gordon Elliott. Burns expects to bring Canadian national government, trade, academic, and provincial officials, plus producers, to Brookings to meet
with their counterparts from the United States and Mexico. Burns also said the Governor's office will assist in inviting neighboring state governors and the Canadian provincial premiers. Burns hopes the
conference will accomplish a better understanding of NAFTA provisions and how it will impact the demand for and price of agricultural goods. He also hopes the conference will produce recommendations for refinement of
NAFTA provisions to provide more price stability and equity for both U.S. and Canadian agricultural producers. Burns said the conference will be open to anyone interested. The only registration fee will be for the
Thursday night banquet and the Friday noon luncheon. Burns' intent is for the conference to be conducted in "straight talk" with audience input. He added, "I don't want to discourage people from
attending by thinking it is just a high level discussion among academicians." More details as to participants will be announced as the event nears, Burns said. The conference is for people affected
by NAFTA, rather than the officials who administer the organization. The issues of contention include: outlawing export subsidies, relying upon scientific judgment in the promulgation of sanitary and health
rules, making import quota management transparent, and preventing domestic subsidies from creating trade-distorting production.
WILLISTON PRODUCERS IN PILOT PROJECT MARKETING WHEAT TO END USERS By planting cultivars that possess specific processing characteristics, the farmers and Northern Star
intend to create an identity-preserved system that controls wheat quality from the field to the factory, explains Randy Mehlhoff, a value-added specialist at North Dakota State University's Williston Research Extension
Center. "With this identity-preserved system, there would be no blending of varieties at the elevator," Mehlhoff stresses. "The goal is to give the end users of hard red spring wheat precisely what
they want, in terms of quality specs." NorthernStar selected the Williston area to launch the pilot project in this region because the climate is drier than other parts of the state and therefore offers less
potential for disease in wheat, especially Fusarium head blight (scab). Also, the amount of irrigation in the area was a factor, Mehlhoff says. Last year Northern Star contracted 20,000 acres with Michigan wheat
producers. Potential Buyers, Acreage Potential "Processors are currently paying a 20- to 30-cent premium for wheat that meets their specs," Mehlhoff says. "By helping NorthernStar discover additional quality traits for the
end user, they could become a preferred supplier, and the premium for our producers would grow to reflect the superior quality." Because this is the pilot project's first year in this region, NorthernStar is
contracting production on only about 2,000 acres, all of which will be under irrigation. If the project succeeds, Mehlhoff expects that perhaps as many as 20,000 acres will be under contract next year, and in future
years perhaps as many as 50,000 acres. He says that while NorthernStar is initially looking only at irrigated acres, the company will also be considering dryland production depending on the success of the pilot year.
"A critical component of this project is that producers must be willing to form a production alliance with NorthernStar," Mehlhoff stresses. "That means entering into a production contract, and each
producer will need to negotiate an individual contract, the terms of which will be based on the average production history (APH) for the past several years." Who Pays for What? "Because
producers have to come up with significantly less money to cover their input costs, they benefit from a cash flow standpoint," Mehlhoff says. Under the terms of their contract, producers are guaranteed an
acreage payment that is the difference between their APH times the contract price minus the input costs covered by NorthernStar, Mehlhoff says. For example, assume a producer contracts with an APH of 60 bushels per acre
at a price of $2.75 per bushel for a projected total revenue of $165 per acre. Assume further that input costs covered by NorthernStar total $85 per acre. The producer, then, receives a per-acre payment of $80.
"The producer must decide if the payment is enough to cover costs of seeding, watering and harvesting," Mehlhoff says. "Any premiums received for high yields and crop quality will be shared by
NorthernStar and the producer. The alternative is to continue producing and marketing wheat as the producer has done in the past." Since NorthernStar bases each contract on field-specific data, one producer may
contract for 50 bushels an acre while another may contract for 65 bushels an acre, Mehlhoff explains. In the case of a total crop failure due to hail or some other natural phenomenon, NorthernStar will guarantee a
per-acre payment based on 75 percent of the APH. In the event of a total crop loss, a producer with an APH of 60 bushels per acre who contracted for $2.75 a bushel would receive $38.75 (60 bushels per acre X 0.75 = 45
bushels per acre X $2.75 = $123.75 - $85 = $38.75). "This alliance represents a new type of opportunity for producers," Mehlhoff concludes. "Producers won't get rich through a program like this, but
they'll be able to make a profit, and do so on a consistent basis."
SPRING SAFETY INTO FIELD
WORK, SAFETY SPECIALIST ADVISES "The injuries
most likely to happen with spring work include sprains, strains, cuts and broken bones," says George Maher of the NDSU Extension Service. "Precautions need to be taken during maintenance and field work
with planting and tillage equipment. Hitching and unhitching cultivators and planting equipment, changing cultivator shovels and other tillage tool maintenance are common tasks that present some real threats."
Read the full report at |
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