Cash Market Moves

Mon. Feb 08, 2016 4:53 PM

By Mary Kennedy
DTN Cash Grains Analyst

Despite a three-year extension approved by Congress late last year, three of the nation's largest freight railroad companies informed the Federal Railroad Administration this month that they will not meet the 2018 deadline to install new required safety systems.

The Rail Safety Improvement Act of 2008 originally mandated that Positive Train Control (PTC) systems be implemented across a significant portion of the nation's rail industry by Dec. 31, 2015. PTC are integrated command, control, communications and information systems for controlling train movements with safety, security, precision and efficiency.

However, following warnings by several railroad companies that they would not be able to meet that deadline, the House Transportation and Infrastructure Committee on Sept. 30, 2015, introduced bipartisan legislation to extend the Dec. 31, 2015, deadline for all railroads operating in the United States to be compliant with Positive Train Control (PTC) technology.

In response to that request, U.S. Senator Richard Blumenthal, D-Conn., a member of the Senate Commerce, Science and Transportation Committee, cautioned that any Congressional action on PTC should ensure that railroads still move swiftly to install the new systems.

"It has been more than 45 years since the National Transportation Safety Board first urged railroads to implement positive train control -- an unacceptable delay in implementation of this critical, life-saving technology that has allowed numerous, preventable tragedies," Blumenthal said in a statement on his website. "Instead, the House Transportation and Infrastructure Committee's bill provides a blanket extension to 2018, a troubling move considering that some railroads are on track to meet the current deadline. Extensions should be granted only to railroads that have demonstrated diligent, good faith efforts to meet the mandate. Only by holding railroads' feet to the fire will this critical, life-saving technology finally be implemented."

On Oct. 27 and 28, 2015, bipartisan votes by lawmakers in the House and Senate passed HR 3819, which extended the deadline for implementing PTC by three years, to Dec. 31, 2018. President Barack Obama signed the bill into law on Oct. 29. All railroads were required to provide their timeline of implementing PTC to the Federal Railroad Administration (FRA) by February 2016.

CSX, Canadian National and Norfolk Southern informed the FRA this month that they will not meet the 2018 deadline. Here is the link to the Feb. 3, 2016, FRA report on the status of PTC for all railroads operating in the U.S.: https://www.fra.dot.gov/…

CSX COMMENTS ON DIFFICULTY OF IMPLEMENTING PTC

On Sept. 9, 2015, Michael Ward, chairman and CEO of CSX Corporation wrote a letter to Sen. John Thune, R-S.D., chairman of the Commerce, Science and Transportation Committee, explaining the challenges his company faced in implementing the new safety systems.

"Because of the PTC mandate and the nascent technology it represents, CSX's investment for development as of Sept. 9 totals more than $1.3 billion dollars and will ultimately reach east of $1.9 billion," said Ward. "As part of that substantial investment, we must replace 52% or our existing signaling system at a cost of over $800 million."

"The development and implementation of PTC constitutes an unprecedented technological challenge for America's railroads. Such a system requires highly complex technologies able to analyze and incorporate the large number of variables that affects train operations," added Ward.

To read Ward's full letter to Sen. Thune, visit http://goo.gl/…

On Jan. 28, 2015, Frank Lonegro, vice president of service design for CSX Transportation, Inc., also testified before the Commerce, Science and Transportation Committee about the challenges of implementing PTC.

"This task is made particularly complex by the need to ensure that PTC systems are fully and seamlessly interoperable across all of the nation's major railroads," Lonegro said. "It is not unusual for one railroad's locomotives to operate on another railroad's tracks. When that happens, the 'guest' locomotives must be able to communicate with, and respond to commands from, the 'host' PTC system. Put another way, a CSX locomotive has to behave like a Norfolk Southern locomotive when it's traveling on NS's tracks; a BNSF locomotive must be compatible with Union Pacific's PTC system when it's on UP tracks, and so on. That's much easier said than done, and ensuring this interoperability has been a significant challenge."

NORFOLK SOUTHERN WEIGHS IN

On Sept. 9, 2015, Norfolk Southern wrote a letter to Sen. Thune explaining the company's position on the implementation of PTC.

The letter stated: "Having begun to look at PTC as early as 2005, NS recognized that there would be significant challenges ahead after the Rail Safety Improvement Act (RSIA) of 2008 legislation established a deadline to complete the installation of an interoperable PTC system by Dec. 31, 2015. So, immediately after RSIA was enacted, NS began to work on multiple fronts to develop the many systems and subsystems necessary to implement PTC. NS began to enter into agreements with other railroads of all sizes regarding standards to ensure that PTC systems would be interoperable across multiple railroads. With industry partners, it created a new company, called PTC 220, to go into the market and acquire the wireless spectrum needed for PTC systems (at the 220 MHz frequency) because of the need for greater coverage, reliability and security than provided by the cellular networks in the U.S.

"In essence, NS and the other Class I railroads were forced to create a private radio frequency network capable of transmitting and receiving data necessary to support an interoperable PTC network. NS also invested to become a 25% owner of Meteorcomm, along with BNSF, CSXT and UP, to design a software-defined radio capable of operating on the 220 MHz frequency as no manufacturers were producing radios meeting those standards at the time. Meteorcomm also worked to design a robust messaging system that would be able to securely transmit the millions of messages an interoperable PTC system requires."

"But that was just the beginning. Before it can fully implement PTC, NS must also:

-- Install almost 5,000 wayside devices along its PTC 'footprint;'

-- Install PTC equipment in 3,400 locomotives;

-- Replace nearly 2,700 exiting signals;

-- Complete GIS mapping and attributing of over 16,000 track miles; and

-- Train over 20,000 employees.

"All of these efforts are well under way. As of September 2015, NS has spent nearly $1 billion and hired or retained 698 signal-related personnel to implement PTC on its system." http://goo.gl/…

DTN reached out to the NS for comments, and in turn, the company sent this link to a video that Norfolk Southern made about the complexities of installing Positive Train Control: https://www.youtube.com/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/BAS)

USDA Reports Preview

Mon. Feb 08, 2016 4:51 PM

By Darin Newsom
DTN Senior Analyst

You know the feeling of eating to the point your mind goes numb, so you eat a little bit more? Domestic and global stocks of grain are looking at the same situation.

USDA will release its latest Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11 a.m. CST Tuesday.

U.S. ENDING STOCKS

Average pre-report estimates for domestic ending stocks show slight increases for all three major grains (corn, soybeans and wheat). Most likely, these gains will come from decreases in demand with the latest weekly export shipment report showing marketing-year totals for soybeans trailing last year by 11%, wheat lagging by 15%, and corn behind last year's pace by a whopping 22%. In its January Supply and Demand report, USDA pegged year-to-year changes at 8%, 6% and 9%, respectively. Given these numbers, it would not be surprising to see USDA come in larger than the average estimates, but most likely not near the high side of estimates, at least not yet.

WORLD ENDING STOCKS

On the other hand, global ending stocks are expected to be trimmed ever so slightly. The average pre-report estimate for corn came in at 208 million metric tons as compared to January's WASDE figure of 208.9 mmt. Soybeans were estimated at 79.1 mmt versus last month's 79.3 mmt, while global wheat stocks were near a virtual tie with January's 232.0 mmt. Again, the end result could be bearish if global production numbers come in higher than expected and demand stays near unchanged.

WORLD PRODUCTION

As usual, this category could be one of the most closely watched in the February reports. There has been a great deal of discussion about the size of South America's corn and soybean crops, some of it echoing what has been heard in the U.S. the last couple of years. "Early season weather problems should trim crop production," the argument goes. Yet it hasn't been seen domestically and most likely won't show up in the February WASDE report either. The average pre-report estimate for Brazilian soybeans came in at 99.2 mmt, down slightly from the much-talked-about 100 mmt from the last few months. There is a strong likelihood USDA could leave this number unchanged for another month. Argentina's soybean crop is expected to be forecast slightly larger than last month's 57.0 mmt. The situation in corn is similar, with average pre-report estimates showing only small changes from January.

U.S. ENDING STOCKS (billion bushels)
Feb. Avg High Low Jan. 2014-15
Corn 1.809 1.852 1.772 1.802 1.731
Soybeans 0.444 0.475 0.403 0.440 0.191
Sorghum 0.064 0.066 0.062 0.065 0.018
Wheat 0.946 0.968 0.930 0.941 0.752
WORLD ENDING STOCKS (million metric tons)
Feb. Avg High Low Jan. 2014-15
Corn 208.0 210.0 203.5 208.9 207.2
Soybeans 79.1 81.0 76.4 79.3 76.9
Wheat 231.9 234.0 229.7 232.0 212.8
WORLD PRODUCTION (million metric tons)
Feb. Avg High Low Jan. 2014-15
Wheat
Australia 26.0 23.7
Argentina 10.5 12.5
Corn
Brazil 81.6 83.0 80.5 81.5 85.0
Argentina 25.3 26.0 23.0 25.6 26.5
Soybeans
Brazil 99.2 101.0 98.0 100.0 96.2
Argentina 57.1 59.0 56.0 57.0 61.4

Darin Newsom can be reached at darin.newsom@dtn.com

(AG/CZ)

Argentina Crop Outlook - 1

Mon. Feb 08, 2016 12:54 PM

By Alastair Stewart
South America Correspondent

URANGA, Argentina (DTN) -- The soybeans plants here have a nice deep-green hue, but the turned leaves betray a pressing need for rain.

"We are getting to the stage where the early planted soybeans really need some rain," said Ignacio Uranga as he drives through his 7,500 acre farm at the center of Argentina's main grain belt

After a wet winter and early spring, the rain stopped in northern Buenos Aires and southern Santa Fe province -- Uranga's farm in southern Santa Fe got just 4 inches in December and January combined.

Of biggest concern are the early planted beans, which are now flowering and starting to fill pods.

The good news is meteorologists indicate farmers will get their wish. Rainfall of between 1 and 3 inches fell across the region on Sunday, and further heavy showers are forecast for the region this week. Meanwhile, the El Nino weather phenomenon is expected to re-exert its influence the rest of February, bringing more moisture.

"If the forecasts are correct, we are on course for an excellent soybean crop," said Gustavo Lopez, grain analyst at Agritrend in Buenos Aires.

This good production outlook is, in part, because issues with lack of rain do not extend across the whole grain belt. In Cordoba and farther west, for example, they are still dealing with excess moisture in this El Nino-driven season.

Uranga also farms 7,500 acres in southern Cordoba where some soy area was lost to flooding. Excess moisture remains an issue, but the soybeans still look generally good, he said.

Argentina planted approximately the same soybean area as last year at 50 million acres.

Most farmers planted beans as a defensive play. With the Argentine election taking place midseason, nobody knew what the rules for selling corn would be at harvest and so opted for the oilseed, for which there is always a ready market.

However, with credit tight and prospective margins even tighter, investment in the crop was cut to a minimum.

"Farmers have been cutting every corner possible in an attempt to protect themselves," said Michael Dover, who farms 5,000 acres in Pergamino, northern Buenos Aires province.

But the crop has fared pretty well with disease and insect attacks limited so far. Argentina is on course for a crop of between 55 million and 60 million metric tons, down marginally from the record 61 mmt produced last year. USDA pegs the crop at 58.5 mmt.

The outlook is radically different for next year, though

The victory of Mauricio Macri in December's presidential election turned the local grain market on its head.

In Macri's first week on the job, the market-friendly right-leaning politician stripped away tariffs and restrictions on corn and wheat and devalued the peso.

The devaluation boosted margins all round, while the end of the quotas and tariffs of around 20% on the cereals made these attractive choices once again.

As a result, corn and wheat area will certainly bounce back next year, with preliminary forecasts indicating a 3-million-acre jump in each, and likely limit the size of the soybean crop.

Corn competes for acres directly with soybeans. Wheat is double cropped with soybeans and the cereal's growth won't pressure area, but soy yields are typically lower in this system.

But a couple of factors will offset the impact on soy.

Firstly, the more favorable conditions will prompt farmers to invest more in soybean crops. Fertilizer applications have been very low for a couple of years.

Meanwhile, total grain area will likely grow with marginal areas coming back into production, reversing the trend of lower acreage in recent years, notes Agritrend's Lopez. Overall grain area will be 81.5 million acres in 2015-16, down from 85 million acres in 2011-12, he noted.

And looking further ahead, the return of proper rotations instead of soy upon soy will increase yield potential, said Andres Alcaraz, communications manager at the Argentina Vegetable oil Industry Council (CIARA).

Alastair Stewart can be reached at alastair.stewart@dtn.com

Follow him on Twitter @astewartbrazil

(AG/CZ)

Investors Still Fans of Farmland

Fri. Feb 05, 2016 12:05 PM


By Elizabeth Williams
DTN Special Correspondent

WEST DES MOINES, Iowa (DTN) -- Wall Street's romance with farmland hasn't waned despite commodity price setbacks. In fact, professional investors attending the recent Iowa Land Expo see the steep drop in crop prices since 2013 as a buying opportunity for farm real estate.

Three publicly traded agricultural real estate investment trusts (REITs) now join other institutional investors combing the country for farmland deals. Although total investor ownership of farmland is just a small slice of farm sales, interest is increasing as farmland values slide lower.

"We're finding good return deals in this market. You just have to be selective," said Paul Pittman, CEO of Farmland Partners, Inc., the Denver-based ag REIT that made headlines in 2015 with the record purchase of 22,300 acres in Illinois.

Farmland Partners Inc., listed on the New York Stock Exchange ((NYSE: FPI) is the largest publicly traded agricultural REIT. It now owns 258 farms for a total of 107,900 acres in 13 states. Another REIT, Gladstone Land Corp. (Nasdaq: LAND) based in McLean, Virginia, owns 43 farms totaling 16,810 acres in six states. The newest publicly traded company devoted to farmland ownership is American Farmland Company (AMEX: AFCO), whose agricultural headquarters is in Salt Lake City. It went public in October 2015 and owns 18 farms in six states (California, Illinois, Arkansas, Alabama, Georgia and Florida) with about 16,000 acres.

While farm operators are somewhat wary about investors competing to buy farmland, "we don't set high prices," said Pittman. "A well-financed farmer will out-bid an investor looking for a higher return. In fact, we support the market at the lower end [when few want to bid on a farm]."

LOOKING FOR HIGHER RETURNS

Wealthy individuals also remain on the hunt for farmland, said Steve Bruere, CEO of People's Company, a real estate/farm management company based in West Des Moines. "We get calls all the time: 'I've got $10 million and want a 5% annual return, do you have any farmland property I could buy'."

Bruere tempers their expectations, given lower commodity prices and rents. "You're not going to find that kind of return in row-crop farmland," he said. "Today, we're looking at a 3% to 3 1/2% cap rate (cash rent divided by land value)."

For example, $250 per acre cash rent divided by $8,000 per acre land yields a 3.125% return (cap rate). "In this land market, you might be able to get a 4% gross return, before property taxes. For good quality land a year or two ago, you might have been able to get $350 per acre, but now you're looking at cash rent levels more around $250 per acre," Bruere added.

Pittman believes deals can still be had. "It depends on the area, as to what return we're looking for," he said "In the Southeast U.S., we want a 5%-5.5% return rate. In the Delta: 4.5%-5%. In the High Plains: 4.5%-5%. In eastern Nebraska: 4%-4.5%. In Illinois or Iowa 3.5%-4%." The higher the risk, the higher return.

For specialty crops, such as vegetables or permanent crops (orchards or vines), Pittman looks for a 7%-8% return on investment, but he is not a big fan of permanent crops.

"I don't want more than 15% of my portfolio in specialty crops because two-thirds of the value of the purchase is wrapped up in a tree or vine that won't last forever. For example, a disease or storm could wipe-out an orchard, or consumer demand could shift (such as in oranges), or over-supply could collapse prices (as with almonds) and you're stuck with a permanent crop," he said.

JOIN THE CLUB

Investor buyers are not new to ag land. Pension companies such as Prudential and Metropolitan Life have had farmland in their investment portfolios since the Depression. TIAA-CREF (Teachers Insurance and Annuity Association of America), a relatively newcomer to farmland ownership, owned 227,380 agricultural acres in 12 states at the end of 2014. That didn't count an even larger overseas portfolio.

Still the negative impression of outside investors in agriculture persists. "Nobody likes an investor, unless it's their own investor," noted Bruere. "To run a commercial farming operation of 5,000 acres, the capital investment just to operate is huge. It's hard to own all the ground you operate. Renting is a necessary part of doing business."

"Investor funds don't prevent farmers from owning farmland," Pittman noted. "The farm operator should own what he can afford and rent the rest. Our company is the simplest way to bring equity to American agriculture.

The advantage of an ag REIT is that it allows small investors to participate in the market and diversify their geographic risk. That's important when prime Midwest farmland still commands $10,000 an acre in some locales. "A teacher or firefighter or business person can buy our stock and own agricultural land," said Pittman. "And we only charge around a 1% management fee that includes the farm management."

Another advantage of owning farmland through a REIT, said Pittman, is if you want to sell, you simply sell your stock without having to sell the farmland.

NO BIG DEAL, YET

"Although we're seeing more interest from investment funds in farmland, they are still a small part of the market," said R.D. Schrader, owner of Schrader Real Estate and Auction Company, based in Columbia City, Indiana, which conducts more than 200 agricultural auctions per year in more than 40 states. "As land values were climbing, 70% to 80% of the buyers were farm operators. As the farmland market has softened in the past two years, investor buying has picked up maybe another 10%.

"There is still a lot of cash out there looking to invest in farmland from both farm operators and outside investors, Schrader reported. "Since farm profits aren't there right now, there is still pressure on land prices, but they haven't fallen as far as some expect."

Elizabeth Williams can be reached at elizabeth.williams@dtn.com

(SK)

Biotech Regs Proposed

Fri. Feb 05, 2016 11:01 AM

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- USDA is asking for the public's input on whether the agency should draw up new rules to regulate biotechnology products, according to a notice filed in the Federal Register this week.

The Animal Plant Health Inspection Service has faced heavy criticism from environmental and food groups for not conducting a complete environmental assessment on the potential effects of biotechnology crops. The APHIS announcement is part of an overall reexamination of the "coordinated framework" of regulations on biotechnology by USDA, the Environmental Protection Agency and the Food and Drug Administration. The White House ordered a review of the rules last summer.

APHIS is asking for public comment on a number of fronts, including proposed definitions of biotechnology and regulated organisms. APHIS proposes a number of regulatory and non-regulatory options on biotechnology, including genetically engineered organisms, and to safeguard agricultural plants and natural resources from plant pests or noxious weed damage caused by biotechnology.

Nathan Fields, director of biotechnology and crop inputs for the National Corn Growers Association, told DTN there are concerns APHIS will broaden the definition of biotechnology.

He said NCGA would rather limit the definition to transgenic crops. Transgenic crops include plant genes that have been artificially inserted instead of plants acquiring them through pollination, such as Bt corn.

Fields said NCGA may ask for an extension of the 30-day public comment period.

"There are some concerns we have," he said. "First and foremost, it's kind of odd we only have a 30-day comment on this. I'm not sure that's adequate time to address. USDA seems to be broadening the definition."

Jacque Matsen, public affairs manager for DuPont Pioneer, told DTN the company is watching the process closely.

"I can tell you we are closely following and engaging in USDA's efforts to update its biotech regulations," she said. "We will review and provide feedback on this latest development as well, but don't have anything specific yet."

Karen Batra, director of food and agriculture communications for the Biotechnology Innovation Organization, or BIO, said the group will be providing public comment to APHIS at some point.

"We are currently reviewing the proposal, but we are not able to comment yet," Batra told DTN. "We need to have a number of discussions first to outline the key issues we need to address."

Patty Lovera, assistant director of Food and Water Watch, said APHIS is taking a good first step. Food and Water Watch will be urging APHIS to include in their environmental impact statements the full list of impacts from adoption of biotech crops, including associated herbicide use, potential for contamination of organic and identity-preserved crops, development of resistance and any other potential impacts. "It is long overdue for APHIS to consider all of the ways that biotechnology impacts the environment," Lovera said. "The extremely limited scope of what is evaluated in APHIS' current process needs to be addressed in any update to their regulations."

PROPOSED OPTIONS

The APHIS notice said there are a number of options including taking no action to change existing regulations for certain organisms developed through biotechnology that could pose a plant-pest risk, but would continue to regulate those potential biotech organisms as the agency does now.

A second alternative is to revise current APHIS regulations on biotechnology. That would include creating a review process to regulate certain biotech products to protect plant health, analyze potential plant pest and/or noxious weed risks first, and "thereafter regulate only when appropriate and necessary."

The second option calls for setting a procedure to first analyze which biotech products would require an agency review. In addition, APHIS is asking for input on possible "justifiable exceptions or exemptions" that would exclude certain biotech products from regulatory review.

APHIS would propose to eliminate the notification procedure, as "APHIS anticipates that many GE organisms currently regulated under the notification procedures would not be regulated nor subject to further review under this alternative," the agency said in the notice.

The second option would eliminate the current petition process for non-regulated status and conduct new risk analyses when new information is made available.

A third alternative would be for APHIS to regulate biotech products as either plant pests or noxious weeds using an existing plant pest or noxious weed "analysis trigger."

"Under this third alternative, APHIS' proposed regulations would substantially increase oversight and resources over those currently used to regulate GE organisms," the notice said. In addition, the third alternative would not exempt certain biotech products and would eliminate notification and petition procedures.

The fourth option put forward in the notice would be to withdraw the current regulations completely and implement a voluntary, non-regulatory "consultative" process for certain biotech products.

With the fourth alternative, biotech developers would be responsible for ensuring their products "do not pose risks" as a plant pest or noxious weeds.

Despite the complexity of the proposed changes for the biotechnology industry, companies or others wanting to weigh in need to have their comments sent in before March 7. Full details can be found in the Federal Register notice: http://dld.bz/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @ToddNeeleyDTN

(CC/AG)

Woodbury: Family Business Matters

Thu. Feb 04, 2016 5:04 PM

By Lance Woodbury
DTN Farm Family Business Adviser

Estate planning, on the surface, has two primary goals -- transferring wealth and minimizing taxes. Both are important to agricultural families, as the high cost of land and equipment can be a barrier to entering a farming or ranching business. Additionally, a large estate tax liability can erode the equity built over generations, if assets must be sold to pay tax.

At a deeper level, however, estate planning serves another meaningful purpose. It can enhance the ties that bind heirs together. In my conversations with business owners, I often hear them express a desire to create something beyond financial significance with their planning efforts. They recognize that passing assets such as land, equipment and cash to the next generation is important, yet insufficient, to create or nurture strong bonds between family members.

We've all heard of siblings who inherited land, but then fought incessantly and eventually sold it. Or we know of family members who, in only a couple of years, exhaust the wealth accumulated over decades. Or we see heirs who can't make the adjustment from being siblings to being partners in business with one another, and their once-positive relationship deteriorates. How can you avoid these scenarios? By cultivating the following two non-financial principles that will enhance the ties between generations, siblings and cousins for the future.

SHARED VALUES

A successful estate plan fosters shared values, and those values form the foundation of a successful business partnership. Such values reflect our most deeply held beliefs about the world and our interaction in it, serving as guideposts along the path of family business growth. When values don't match, conflict more easily emerges.

Values show up in all kinds of day-to-day business decisions. For example, the value of stewardship is demonstrated in decisions about land and facility improvements. Financial values emerge in discussions about crop or livestock marketing, or equipment purchases. How you value the people who work for you is evident in your supervisory relationship, your human resource policies, compensation and benefits.

Values are also demonstrated in the events and stories that have shaped the family and business. Homesteading, survival in the 1930s or 1980s, off-farm jobs, weather or market events, family tragedy or success -- your family's values are apparent in all of these events, which is why it's important to tell, and retell, those stories.

SHARED VISION

A successful estate plan embodies a shared vision among family members or business partners. For example, many family business partners believe that keeping their capital together provides a better life for all of them. Other families I know share a vision of making a contribution to society by producing food. Another family believes that working together encourages strong family relationships, while another believes their family business is the best place to foster an entrepreneurial spirit.

In all of these examples, the family shares a common view of where they are headed. They are in agreement, at a high level, of what they want to accomplish. Sure, at times there are disagreements on the details and tactics of getting there. But the shared vision keeps them motivated to work through disagreements and train the next generation.

As a family in business, take time to articulate the values that have shaped your organization. Discuss your vision for the future with your heirs or business partners, and encourage them to participate by sharing theirs. It costs very little to have these discussions -- mostly time. But the ties between family members can be immensely strengthened with the investment, and your estate planning process will likewise be enhanced.

**

Editor's Note: Lance Woodbury writes family business columns for both DTN and our sister magazine, "The Progressive Farmer." He is a Garden City, Kansas, author, consultant and professional mediator with more than 20 years of experience specializing in agriculture and closely-held businesses. Email questions for this column to Lance@agprogress.com.

(MZT/CZ)

Obama Calls for $10 Oil Tax

Thu. Feb 04, 2016 4:59 PM

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- President Barack Obama's advisers on Thursday pitched a $10-per-barrel tax on oil to pay for new transit programs and research on higher-mileage vehicles.

The president will propose the plan when he releases his proposed 2017 budget next week to Congress. Such proposals frequently come with a truckload of "dead on arrival" comments from congressional leaders. Republicans, who control the House and Senate, are highly unlikely to approve a tax on oil to fund cleaner energy. The president's plan does provide stump-speech fodder for presidential and congressional campaigns.

The plan to tax oil comes as per-gallon national gas prices are the lowest since early 2009, Obama's first days in office. AAA reports gas prices are averaging $1.77 a gallon nationally and dip as low as $1.45 a gallon on average across Missouri.

Such a proposal is unlikely to be embraced by farm groups, which are going to highlight the high costs farmers pay for inputs, including fuel costs for machinery and vehicles.

The White House briefed reporters Thursday and laid out details for the president's "21st Century Clean Transportation System" that would spend about $32 billion a year on different infrastructure investments.

The president pointed to the need to address climate change by reducing carbon emissions while creating jobs in cleaner transportation. The transportation sector accounts for about 30% of greenhouse-gas emissions, the White House stated.

Thus, a new tax on oil would pay for high-speed rail and modernization to freight rail, as well as increased federal funds to mass transit in cities. It would also pay for more research into cleaner cars and planes. Increased funding would also make the Highway Trust Fund solvent again.

House Speaker Paul Ryan, R-Wis., sent out a "dead-on-arrival" statement shortly after the White House issued the proposal.

"Once again, the president expects hardworking consumers to pay for his out-of-touch climate agenda," Ryan said in a statement. "A $10 tax for every barrel of oil produced would raise energy prices -- hurting poor Americans the most."

The White House stated the $10-a-barrel oil tax would be paid by oil companies and phased in over five years. "By placing a fee on oil, the president's plan created a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future," the White House stated.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG)

Rethink Corn Economics

Thu. Feb 04, 2016 6:58 AM


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- Corn farmers looking to curb their losses this year should scrutinize two sizeable inputs: seeds and fertility.

Together, those two inputs cost Indiana farmers nearly as much as land does, according to numbers from Purdue's Center for Commercial Agriculture.

Farmers may mistake them for costs beyond their control, university agronomists Bob Nielsen and Jim Camberato and agricultural economists Michael Langemeier and Jim Mintert noted in a webinar sponsored by the center on Monday. Yet growers may find savings by revisiting common practices such as routine fertility applications, some nitrogen applications and packing corn fields with high populations of racehorse varieties stacked full of biotech traits, they concluded.

SEED SAVINGS

Nielsen has received many calls from farmers wondering if they can get away without biotech traits like Roundup Ready or Bt this year, he noted. His answer is yes, with several caveats.

"This is an opportunity to save a lot of money," he said. "But it needs to be done smartly. Traited hybrids are mostly either protecting against insect pests or allowing us to use herbicides like glufosinate or glyphosate."

Consider your pest problems carefully, he said. If you have light rootworm pressure that is controlled by crop rotation, maybe you can go without belowground Bt traits. If you are willing to scout more often and use insecticides and rigorous pre-emergence weed control, perhaps you can forgo aboveground Bt traits and Roundup Ready technology.

"If you back away from trait technology, you have to have a back-up strategy and be willing implement it," concluded Mintert.

Nielsen also pinpointed growers' tendency to plant a denser planting population than the ag economy can justify right now.

For example, for Indiana growers, the optimum planting rate is generally pegged at 32,000 plants per acre. Yet final stands anywhere between 29,000 and 35,000 will still produce "basically optimal yield," Nielsen pointed out. "Most farmers aim for the mid-30s or even low-30s, and we're saying if you aim for the high-20s, that is probably is the economic sweet spot at least for corn in Indiana."

While those numbers are specific to Indiana growers, it is a general truth of corn production that "optimal economic planting rates are several thousand less than optimum agronomic planting rates," he added.

Finally, pick your hybrids with a new mindset, Nielsen suggested. "It's not just about yield potential," he said of the hybrid selection process. "It's also about the ability of hybrids to consistently yield well no matter the growing conditions. We are in a time period of extreme climatic variability. So try to find hybrids with a wide array of tolerance to stress -- hot, cold, wet and dry."

Because corn hybrids turn over fairly quickly, growers can't always access more than a few years of data on any given hybrid. So widen your variety trial search beyond your region and state to see how a hybrid performs in a range of growing conditions, Nielsen said. "Look for hybrids that always end up in the upper 10% of a wide variety of trials -- company and university trials, across geographies -- even if they don't win trials outright. That tells me they are pretty stress tolerant."

After you've identified these hardy hybrids, narrow your search by looking for the ones that have the disease and insect package that best fits your growing conditions to save on insecticide and fungicide treatments, he added.

FERTILITY RECALCULATIONS

Try to shift to a risk-management mindset when planning nitrogen applications, Camberato said. His research has shown that farmers are most likely to lose nitrogen from fall applications, early spring anhydrous or liquid applications and surface-applied urea applications.

"We estimate on average, fall applications will lose 15%, and early spring maybe 10%," he said. "One practice to take better advantage of this is to put nitrogen on closer to planting time or even in-season."

Warm falls followed by wet springs, which we may experience this year, make fall-applied fields especially prone to nitrogen loss. "Looking ahead, it may be too late for fall applications this year of course, but for the 2017 crop, stay away from fall nitrogen applications," Mintert suggested.

Don't be too quick to dismiss in-season application as a hopeless rescue option either, Camberato said. "We've been surprised at how much potential the corn crop has to take up nitrogen late in the year and respond by increasing yield if the crop is healthy and you have a favorable grainfill period," he said of his research. "We've gotten 110-bushel yield increases with as late as V15 applications on corn that eventually makes 225 bushels."

Remember that corn's yield response to nitrogen is highest when nitrogen is severely limited and slows as you approach the optimal nitrogen rate, Camberato added. "If you're shooting for maximum yield [with nitrogen applications], you may be losing money on the nitrogen and then have to handle and dry more grain, which actually costs you more to produce than it's worth," he said.

Finally, 2016 might be a good year for Indiana farmers to drop a phosphorus application, he added. If a recent soil test shows levels within the maintenance range (30 to 50 parts per million), don't add any this year, he said.

"Typically, in the maintenance range, the recommendation is to replace crop removal, but there is very little probability of a yield response to the fertilizer applied that year," he said. "That recommendation was built for years of profit."

Don't worry that your levels will plummet from one year of restraint, he added. "To change soil levels just 15 ppm, you have to remove 300 pounds of P2O5 [phosphate]," he explained. "A 200-bushel corn crop removes about 75 pounds per acre of P2O5, so that's several years of crop removal for you to move out of the maintenance range."

For more information on these recommendations, see the slideshow from the webinar, Reducing Corn Production Costs, here: http://bit.ly/….

Emily Unglesbee can be reached at emily.unglesbee@dtn.com

Follow Emily Unglesbee on Twitter @Emily_Unglesbee

(PS/AG/SK)

Banking on Ag Research

Wed. Feb 03, 2016 2:20 PM


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- As sequestration has pressed USDA to make budget cuts in recent years, USDA Secretary Tom Vilsack told reporters Wednesday he hopes Congress will support the president's budget proposal, which will include a doubling of federal dollars spent on agriculture research and development.

President Barack Obama's proposed 2017 budget will be announced next week and would bump federal spending on ag research from about $350 million to $700 million -- the amount called for in the 2008 farm bill. The funding was re-authorized in the 2014 farm bill.

Vilsack said he believes Congress will get behind the need to fully fund research through the USDA's Agriculture and Food Research Initiative, or AFRI.

"I think people understand and appreciate the need for additional innovation," he said. "I'm hopeful that people will see the benefits of innovation in agriculture. That would be my hope. The budget gives us the opportunity this year to finally meet the amount ($700 million)."

On Wednesday USDA announced $30.1 million in competitive grants to fund 80 research projects centered on improving food safety, reduce antibiotic resistance in food, and to increase plant resilience.

Since 2008 AFRI has been funded at below half the levels established in the farm bill. Vilsack said Wednesday this means USDA has turned away about 90% of the research proposals presented for funding.

Grants typically are awarded to universities, non-profits, community groups, businesses, foundations, associations and federal agency and international partnerships.

John P. Holdren, science and technology adviser to the president and director of the White House Office of Science and Technology Policy, told reporters the president understands the importance of agriculture research and development.

"Further strengthening our investments in agricultural research will be essential for U.S. farmers to be able to keep the nation's food supply abundant, healthy, reliable and sustainable through the 21st century," he said. "That's why the president's forthcoming 2017 budget request doubles funding for the Agriculture and Food Research Initiative to the full authorized level of $700 million."

AFRI grants are administered by USDA's National Institute of Food and Agriculture.

The latest $31.1 million in grants includes $15.1 million to fund 35 projects in AFRI's food safety area. Those projects will focus on enhancing food safety through improved processing technologies, mitigation strategies for antimicrobial resistance, improving food safety and improving food quality.

The funding includes $3.4 million to address antimicrobial resistance throughout the food chain. NIFA also is awarding $15 million to universities, laboratories, and research organizations to fund 45 projects on plant breeding for agricultural production, plant growth and development, composition, stress tolerance, photosynthesis and nutrient use in agricultural plants.

The grants awarded cover a wide variety of research areas, from improving alfalfa yields, to plant resistance to drought, to plant use of nitrogen, http://tinyurl.com/….

Since AFRI was established in 2008, the program has led to innovations and discoveries in agriculture to combat childhood obesity, improve and sustain rural economic growth, address water availability issues, increase food production, find new sources of energy, mitigate the impacts of climate variability and enhance resiliency of our food systems, and ensure food safety.

"In the face of diminishing land and water resources and increasingly variable climatic conditions, food production must increase to meet the demands of world population projected to pass 9 billion by 2050," Vilsack said. "Funding in research to respond to these challenges should be considered as an investment in our nation's future, an investment which will pay big dividends in the years to come."

The National Institute of Food and Agriculture awards AFRI grants in six farm bill priority areas including plant health and production and plant products; animal health and production and animal products; food safety, nutrition, and health; bioenergy, natural resources, and environment; agriculture systems and technology; and agriculture economics and rural communities.

Read details about filing for the grants here, http://tinyurl.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @ToddNeeleyDTN

(CC\CZ\SK)

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