26 posts categorized "Agriculture"

Planting intentions: What’s cropping up this year?

One of the major stories in agriculture over the past year was a big reduction in crop prices from the records they hit in 2012 toward more historically normal levels. In particular, corn prices dropped from over $7 per bushel in late 2012 to just over $4 more recently. Wheat and soybean prices fell over that period, too, but not as dramatically.

As expected, farmers reacted to these market conditions by moving away from corn and toward other crops, especially in the Ninth District. Nationwide, farmers intend to plant 4 percent fewer acres of corn in 2014 compared to last year, according to the U.S. Department of Agriculture. Meanwhile, soybean acreage is projected to increase 6 percent to an all-time record, while the forecast for wheat is nearly flat, with a 1 percent decrease in planted acres.

Farmers in the district are taking a harder turn away from corn, whose acreage is projected to decrease by 6 percent, while both soybean and wheat plantings are expected to increase by 12 percent and 11 percent, respectively (see chart below).

Plantings -- 4-29-14

Most of the decline in corn is accounted for by a big drop in North Dakota—23 percent—and a 6 percent drop in South Dakota; Minnesota and Wisconsin acreage is unchanged from last year. Likewise, while soybean acres are going up in all states, they’re surging 22 percent in North Dakota. Wheat acreage is also way up in North Dakota, at 28 percent, including a 38 percent jump in durum wheat, a specialty variety used for making pasta. Minnesota and Montana are increasing wheat acreage slightly, while South Dakota and Wisconsin both expect 8 percent decreases.

The USDA’s survey also covers some other important niche crops in the district. After a tough year for sugarbeets, acreage will be down 4 percent in North Dakota and 6 percent in Minnesota. Dry bean acreage will increase 36 percent in Minnesota and jump a whopping 41 percent in North Dakota, the nation’s leading producer (though acreage will remain below the 2012 level). And the nutrition conscious who closely watch their intake of omega-3s can also rejoice—North Dakota flaxseed acreage will double from last year.

Boundary Waters: Roughing it, for the day

The dead of winter can be a good time to start dreaming of a summer vacation. In Minnesota, many might be thinking about a trip to the Boundary Waters Canoe Area Wilderness. But fewer of those dreams appear to include overnight stays.

The 1.3-million-acre BWCAW, located in the northern third of the Superior National Forest in northeastern Minnesota (see map), is renowned for its vast nonmotorized lakes and other recreation areas. Since 2003, the park has seen a steady drop in permits (required for overnight stays and other special uses between May 1 and Sept. 30), but an increase in total visitors, according to information from the Superior National Forest office (see chart).

The office believes the annual variation and general decline in permits is likely the result of a combination of factors, including camp fire restrictions, bugs, weather, gas prices and the general health of the economy.

At the same time, based on permits and other monitoring, the office estimates that there has been a slow, steady increase in total park visitation from an estimated 200,000 people in 2000 to an estimated 250,000 people in recent years. This increase, according to the office, likely reflected shifts in travel patterns and length of stay, with fewer overnight stays and more day use spread more broadly across the seasons.

BWCAW chart & map -- 1-23-14

District crop production suffered in 2013

It’s no secret that last year was a tough one for district farmers. As discussed in the Minneapolis Fed’s most recent Survey of Agricultural Credit Conditions, the weather last year was difficult, beginning with heavy rains that delayed or prevented planting in some areas and giving way to drought later in the summer.

Earlier reports from the USDA gave indications that the weather had taken a substantial toll. The agency recently released its annual crop production summary, and final numbers show that while the weather did have an impact, it wasn’t the same across Ninth District states.

Take corn, for example. While overall production fell slightly from a year earlier as expected in Minnesota and North Dakota, it increased in Wisconsin and especially in South Dakota, though the increase is due more to a drought-ravaged 2012 than stellar production in 2013 (see Chart 1).

Crop production CH 1-2 -- 1-17-14

That wasn’t the case for soybeans or wheat, however, both of which saw lower overall production in the district, although South Dakota also had a strong year in soybeans compared with 2012 (see Charts 2). While crop acreage shifted somewhat, output changes among district states (both higher and lower) were due mostly to changes in yields. For example, corn acres harvested increased slightly last year in North Dakota, but production declined because yields fell about 10 percent. Conversely, higher corn production in South Dakota and Wisconsin was due to higher yields. For soybeans, both acreage and yields were down.

Wheat is a different story altogether (see Chart 3). The drop in wheat output was due almost entirely to lower acreage, thanks in part to the lingering effects of the 2012 drought, which led to a dramatic decrease in winter wheat plantings (which occur in the fall of the year prior to harvest).

It was also a tougher year for crop prices. For example, the price farmers received for corn at the end of 2013 was 37 percent lower than a year earlier, according to the USDA. Lower prices and poorer yields have meant lower income for many farmers. USDA data on state farm income will not be released until next month, but 48 percent of respondents to the ag credit survey expected lower farm income in the fourth quarter of 2013, compared with 16 percent expecting an increase.

Crop production CH 3 -- 1-17-14

After snowstorm, ranchers still surveying damage

Ranchers in the western Dakotas who were hit hard by a freak fall blizzard got some welcome news Tuesday—they can get some assistance from the federal government while they wait to find out if more aid is on the way.

For readers who are unfamiliar with the story, a little background: In early October, Winter Storm Atlas dumped several feet of snow on some parts of South Dakota, North Dakota, Montana and Wyoming. The storm came on the heels of heavy rains that left grazing lands a muddy mess, and many cattle were left exposed to a quick freeze and extremely high winds before they had a chance to grow thicker winter coats.

Reliable estimates of the number of cattle killed due to freezing, drowning or trampling aren’t available yet, but early estimates suggest that the number is easily in the tens of thousands. Anecdotal reports indicate that the devastation varied widely; some ranchers were barely affected, while others may have lost their entire herds.

The damage assessment itself has been complicated and delayed by muddy conditions created by melting snow. Immediately after the blizzard, South Dakota Gov. Dennis Daugaard announced an executive order waiving the standard requirement that ranchers dispose of carcasses with 36 hours under normal conditions. That waiver was set to expire on Friday, but was extended this week until the end of November.

Ranching is big business in the region—South Dakota is the nation’s fifth largest beef producer, and the state has five cattle for every one person. Grown cattle sell for $1,400 to $2,000. Added to cattle losses are the cost of cleanup and losses due to animal injury or sickness, all which will have a major economic impact on the state.

The other tough part about the timing of the storm is that it came during the federal government shutdown, delaying any action on a possible disaster declaration. In addition, funding for livestock disaster relief programs has expired because of the holdup over the passage of a federal farm bill.

However, on Tuesday USDA Under Secretary Michael Scuse announced that ranchers can apply for assistance under the Environmental Quality Incentives Program, a conservation subsidy that will help them pay for carcass removal and infrastructure repair.

This story will continue to develop as the extent of the destruction becomes clearer. The fedgazette Roundup will be following it, so expect updates in the future.

Personal income: One Dakota leaps, the other stumbles (kind of)

The Bureau of Economic Analysis just released figures on personal income, and Ninth District states fared comparatively well (see charts). Montana and Minnesota ranked in the top five in per capita income growth, and Michigan was ninth.

But the Dakotas stole the headlines, being the top and—maybe surprisingly—bottom state in terms of both total and per capita income growth last year. North Dakota was head and shoulders above other states, seeing a rise of 9.9 percent in per capita income. The next closest was Ohio, at 3.8 percent. Total personal income in North Dakota rose by 12.4 percent, thanks to strong worker migration to the state as well as rising wages.

Its southern sibling didn’t fare so well last year. In fact, South Dakota was the only state in the union to see a decline in per capita (-1.3 percent) or total personal (-0.2 percent) income. The likely culprit is agriculture, a volatile sector that suggests the state’s 2012 performance is not something to fret over.

Rewind to 2011. Farm income in South Dakota that year hit a record $4.6 billion—more than double 2010 levels—and was a big reason the state led the country in income gains in 2011, at 12 percent. Fast forward to 2012, a year with severe drought that hurt South Dakota ranchers and farmers more than in many neighboring states. Total farm income dropped to $3.3 billion—still a decent year on average. But the $1.3 billion drop in annual farm income last year represents significantly more than the $60 million drop in total state income recorded by the BEA.

Personal income in 2012 -- 3-28-13

Minnesota farmland has bumper crop of $$$

It’s no secret that the farm economy has been robust for a considerable stretch. That persistent strength can be seen in the market value of farmland in Minnesota, especially when compared with other types of property, particularly residential, which is by far the state’s largest segment of so-called real property.

It’s almost like agriculture didn’t get the memo on the recession and slow recovery. Thanks mostly to steadily strong crop prices, farm property saw exceptional growth during the recession through 2010 (see Chart 1). The last two years have been flatter—but still growing—in stark contrast with virtually all other real property. Like corn during a good growing season, farmland value as a share of all real property grew from 16 percent in 2007 to 24 percent in 2012 (see Chart 2).

MN farmland market value -- 11-1-12

Minnesota’s lakes: More impaired, but don't be afraid to jump in

In the land of 10,000 lakes, the Minnesota economy has a unique relationship to water that is widely used for fishing, general recreation and even moving goods to market. So it raised some eyebrows when the state announced that more than 600 bodies of water were added this year to its list of impaired lakes and rivers.

But before the “ick” factor makes you put away that canoe, or pull the kids from their favorite swimming hole, it helps to get the background story. Turns out that the measure is more building block than condemnation—a work-in-progress assessment for preserving one of the state’s most valuable natural resources.

Since the mid-1990s, the federal government has required states to assess their water quality. Since then, the number of impaired bodies of water—those that don’t meet various federal water quality standards—has risen steadily and now stands at more than 3,600 (see chart). A map shows that these impaired water bodies are widespread (see map).

MN impaired lakes CH1 -- 9-28-12  MN impaired lakes map -- 9-28-12

While this might not be “good” news for boaters and anglers, neither is it necessarily cause for great concern, according to officials with the Minnesota Pollution Control Agency, which puts the list together. The state has an incredibly large amount of water—92,000 miles of streams alone—and the growing impairment numbers “are indicative of our growing monitoring efforts,” said David Christopherson, who does environmental reporting and special studies for the agency’s water division.

Water bodies make the list if they exceed any number of water quality standards, like turbidity (excessive sediment), eutrophication (too much nutrient, often phosphorous from farm run-off), presence of fecal coliform or a host of other standards. In putting together its biennial impairment report, the agency “uses all available data” from internal and external sources with information about any of the state’s water bodies. As a result, the data are neither comprehensive nor systematic; given that the list comes from a partial assessment, it’s not even a random sample that could be considered scientifically representative.

The list also is highly sensitive to evolving standards for water quality. For example, a huge spike in listings in 1998 was the result of a first-time federal advisory on mercury and fish consumption, and mercury impairment is by far the biggest source of listings. Christopherson added that the state will be applying additional nutrient standards in the near future, “and I would expect to see a big jump (in impairments) then too.”

As a result, he said, “I don’t think (the impairment list) gives us much indication of overall water quality” in the state. Instead, Christopherson said the impairment list is more like a slow-growing benchmark that will give policymakers and others the data necessary to develop a more comprehensive approach to improving and maintaining water quality. “This is a primary driver in terms of what we’re doing” to improve water quality. “Once they get on the list, we have to deal with them.”

He acknowledged that “there are a lot of water quality issues out there. It’s a big issue and will take a long time to address … (but) I don’t think anyone here is particularly surprised” by the growing list of impaired lakes and rivers. The agency generally believes that about 40 percent of water bodies could stand some improvement, and the list “matches what we’ve been finding for years and kind of expected. A lot of other (states) are worse.”

If ol’ MacDonald had a specialty farm

In the summertime, farmers markets often brim with locally grown fruits and vegetables, along with the consumers who crave them. Even if you pay a little more for fresh produce than at the grocery store (though that’s not always the case), you figure it puts a little money in the pockets of local farmers, right?

But the profitability of many so-called specialty crops—which in the Midwest includes most any fruit or vegetable—varies considerably, according to an August report by the Minnesota Department of Agriculture. The report uses actual farm records from 2008 to 2011 from in-state producers to find out average financial performance for nine crops. At least five farms had to have grown the crop for it to be included in the analysis.

Just as strawberries are often the first crop out of the field, so too are they first in financial returns after direct expenses and overhead are paid, followed by assorted vegetables (see Chart 1). In some cases, they didn’t have much competition; four of the nine categories did not recover their basic costs or merely broke even.

Farm specialty crops Chart 1 -- 8-23-12

The difference in profitability appears to be due to a couple of factors. First, the most profitable crops had a clear edge in average revenue per acre (see Chart 2). Four other crops have medium-sized revenues—$4,000 to $6000 per acre—but only raspberries and cantaloupe were consistently profitable, thanks to lower costs. Three other crops had low costs, but also low revenues, and basically broke even after direct expenses (like seed, fertilizer and machinery use) as well as overhead (hired labor, taxes) were paid. These figures are fairly generous in their calculation of farm profits, the report pointed out, as they “do not cover full compensation to the owner for labor and management.”

Farm specialty crops Chart 2 -- 8-23-12

CRP: Production potential trumping conservation

Critics of farm subsidies often say the programs “pay farmers not to farm.” While that isn’t a fair characterization of most ag policy, it is literally true of the Conservation Reserve Program, where farmers can collect rental payments from the federal government for voluntarily pulling certain acres from production and returning them to a more natural state.

While that might sound like a can’t-lose business model, farmers across the country and Ninth District have been pulling acreage out of CRP at a fast pace since the recession. From 2000 to 2006, the program saw little fluctuation in enrolled acres. But starting in 2007, district states saw a steady outflow of enrolled acres (see Chart 1). Montana and North Dakota each lost almost 1 million CRP acres over this period (about 29 percent of enrollment), while Wisconsin saw the biggest percentage drop (39 percent), but has easily the smallest enrollment among district states.

CRP acres -- 6-20-12

The decline in district states reflects—and is a big contributor toward—a broader decline in acreage nationally because the district has nearly 30 percent of all CRP acres. So what’s behind the decline? Simple cost-benefit analysis. Over the past few years, prices for corn, wheat and soybeans have been at sustained highs.

CRP rental rates are determined through a bidding process, whereby interested farmers submit a price at which they will remove acreage from production for 10 years, and the USDA picks which contracts it will purchase. Contract prices have been rising, but they haven’t kept up with crop prices—which, not coincidentally, started rising in 2007. So the fall in CRP acreage simply means farmers believe these acres will be more profitable in production than conservation.

In aggregate, CRP payments might seem big; farmers in each district state have received hundreds of millions of CRP dollars since 2007. But as Chart 2 shows, these payments are tiny relative to overall farm income, and they are likely to decline further if more land exits the program, as many expect. The fact that acres are enrolled under 10-year contracts has probably prevented a faster decline. Those contracts can provide some idea of where the program is heading, which will be the subject of a future Roundup post.

CRP payments -- 6-20-12

Cashing in on the farm might mean holding onto it

Robust agricultural prices have led to strong farm balance sheets. That lure of high profits has generated anecdotes of some eye-popping sales of farmland and whispers of a farmland boom for a couple of years running.

But that’s only the wind blowing in your ears—there is no widespread evidence of a speculative boom, says a recent report by Steven Taff and Minnesota Land Economics, an online data warehouse maintained by the Department of Applied Economics at the University of Minnesota.

The price of land has risen considerably since 2000, even after adjusting for inflation, including a strong rise from 2007 to 2010. While farm income wasn’t particularly strong during the first half of that decade, farmers saw some of their best years during and after the recession.

But the lack of unbridled speculative bidding can be seen in the fact that the number of sales has dropped by 50 percent since 2007, and the number of acres sold has fallen even more—evidence that farmers are perfectly happy to take profits from fields, rather than from land sales (see chart). That was particularly the case last year, when the number sales, total acres and median prices all declined compared with 2010.

Farm sales MLE -- 5-9-12

The MLE database goes back to 1990 and includes some 54,000 farmland sales covering 6 million acres. The data come from state Department of Revenue compilations of property transactions, which are reported annually by county auditors. The distribution of those sales, broken out by year, offers an interesting timeline of farmland sales and values in the state over this period (see video at bottom; note that land values in the video are not adjusted for inflation).

Taff points out that ag land near the Twin Cities, other large cities and high-amenity locations has “always been affected by factors other than agricultural,” including recreation, housing development and retirement. “This results in some parcels selling for far more than we might expect if we simply focused on their farm income potential.”