American Wheat Farms Face Double Trouble

Some American wheat farmers are not only going to lose money on every bushel they harvest this month, many won’t have a proper place to store it.

U.S. grain bins still hold surpluses from last year. Combined stockpiles for major crops -- corn, soybeans, wheat and sorghum -- are the biggest for this time of year since 1988. With demand slowing and output rising, space will get tighter, especially for wheat, which is the first one harvested. Some growers may dump grain in parking lots or vacant buildings.

“It will be the worst storage crunch in the 30 years I have been trading wheat,” said Michael O’Dea, a risk management consultant at INTL FCStone Inc. in Kansas City, Missouri. “A lot of grain will end up in ground piles.”

While farmers expanded storage in recent years, that’s been undermined by global crop surpluses and a strong dollar. Once the world’s biggest wheat exporter, the U.S. saw its shipments in the year through Tuesday drop to the lowest since 1972. With inventories up 30 percent and expected to swell further, the price outlook is getting more bearish. Chicago futures tumbled for three straight years, and in February touched the lowest level since 2010.

The glut may only get bigger. Global supply, including production and inventories, will exceed consumption by the most ever in the year that ends in June 2017, with the harvest expected to be the second-highest on record, the International Grains Council said May 26.

For many growers, the slump means they are spending more to grow wheat than they can collect when the grain is sold, according to analysts at Societe Generale SA, which forecast Chicago wheat futures will average $4.52 a bushel in the third quarter, compared with $4.855 now. Kansas State University estimates each bushel costs $3.90 to $5.18 to produce. Money managers have been betting prices will fall for almost 10 straight months.

Winter wheat harvested in June and July across the Great Plains is among the first crops to arrive each year at grain elevators, with corn and soybeans collected in September and October. While there isn’t any co-mingling, most bins can be used to store different crops, depending on need. Piling grain on the farm isn’t all that unusual, but without an impervious floor, walls and some kind of covering, there is an increased risk of pest and moisture damage.

But with so much left over from last year, growers from Texas to Nebraska probably will exceed local storage capacity by at least 15 percent, said Troy Presley, a grain merchandiser for Comark Grain Marketing LLC in Cheney, Kansas. The company markets crops for 13 cooperatives with more than 77 locations in Kansas, Oklahoma and Nebraska.

‘Storage Crunch’

“Storage space is going to be very tough to find this year,” Presley said. “Farmers have sold the smallest amount of wheat for harvest delivery in at least 10 years, compounding the storage crunch.”

Domestic storage capacity for more than a dozen different kinds of grain and oilseed crops has increased 22 percent in the past decade to 24.21 billion bushels, U.S. Department of Agriculture data show. But as of March 1, well before this year’s harvests, stockpiles of wheat, corn, sorghum and soybeans totaled 10.9 billion bushels, up 5.6 percent from a year earlier, according to the USDA.

In Kansas, the biggest producer of winter wheat, inventories were 29 percent bigger than a year earlier, government data show. Even before the harvest, leftover grain is using up 52 percent of the state’s storage capacity, compared with 41 percent a year earlier, according to the USDA.

‘Extra Bushels’

Production of hard red winter wheat, the variety used to make bread, will rise 4.3 percent this year to 863 million bushels, the USDA said May 10. The crop may be even bigger, topping 900 million bushels, because timely rains in April boosted yields and farmers sprayed fungicides to prevent disease, INTL FCStone’s O’Dea said.

“An extra 40 or 50 million bushels is not going to find a home,” he said.

There may be more storage space available outside the Plains, the main growing region, but transporting wheat there adds to the cost. The discount of cash-market grain to futures probably will fall to $1 a bushel, the most since 2010, O’Dea said.

The cost of U.S. wheat at export terminals in New Orleans costs at least 50 cents a bushel more for buyers than grain purchased from Russia, Ukraine and Europe, USDA data show. Wheat is so cheap, domestic livestock producers are considering using it in feed rations along with corn and sorghum.

“Cash prices could become weaker at local elevators as they are reaching their storage capacity limits,” said Dan O’Brien, a Kansas State University agricultural economist in Colby. “It will be a sizable crop."

McDonald's Canda Wraps Sustainable Beef Pilot

McDonald's Canada has wrapped up its industry-first Verified Sustainable Beef Pilot, marking a milestone of its collaborative partnership with the Canadian beef industry over the past 30 months to advance more sustainable beef practices.

McDonald's Canada tracked the journey of nearly 9,000 head of Canadian cattle, or the equivalent of 2.4 million patties. The cattle spent their entire lives, from “birth to burger,” raised on or handled by verified sustainable operations, according to the announcement.

The pilot has demonstrated that not only can sustainable practices and outcomes be verified through the entire Canadian beef supply chain (from farm to processing), but also that cattle from verified sustainable beef operations may be tracked through the operations. The Verified Sustainable Beef Pilot Project in Canada is the first program to make the Global Roundtable for Sustainable Beef (GRSB) principles and criteria actionable across the entire beef value chain.

More than 180 operations — 121 ranches, 34 backgrounding operations, 24 feedlots, two beef processors and one patty plant — completed the third-party process to verify their beef operations as sustainable under the pilot project.

The five indicator categories, which pilot participants were measured on, encompass:

• Natural resources, such as ensuring soil health, water supply and wildlife and plant biodiversity.
• People and community, include ensuring a safe work environment and commitment to supporting the local community.
• Animal health and welfare, such as adequate feed to drinking water and minimizing animal stress and pain.
• Food, such as ensuring food safety and beef quality, including training and registration in the Verified Beef Production (VBP) program.
• Efficiency and innovation, such as recycling and energy efficiency programs.

To recognize the conclusion of the pilot, executives from McDonald's, World Wildlife Fund U.S. and members of the Canadian Roundtable for Sustainable Beef (CRSB) met Wednesday with pilot participants, industry stakeholders and elected officials to share the progress that has been made toward verifying a sustainable beef supply. The pilot's findings were handed over to the CRSB, which is responsible for mapping the path forward for verified sustainable beef in Canada.

"The McDonald's pilot has provided us with new insights that will support our thinking and direction as we advance existing and new sustainability efforts within the Canadian beef industry,” said Cherie Copithorne-Barnes, rancher and chair of the CRSB, which was formed in 2014 to create a multi-stakeholder organization of experts representing various aspects of beef production, including McDonald's Canada, Cargill, Canadian Cattlemen’s Association, Canada Beef, Loblaw Inc., government and producer groups.

Changes Needed to Keep GMOs Effective: Report to EPA

The Environmental Protection Agency (EPA) needs to do more to prevent a widely planted type of genetically modified corn from becoming obsolete, according to a report from the agency's inspector general released Wednesday.

The report looks at corn plants that produce the insecticide Bt internally through genetic modification, which has helped corn farmers significantly reduce the amount of insecticides they spray externally on their crops. But widespread reports of insects impervious to Bt have prompted worries that corn farmers may have to return to heavy chemical spraying in the near future.

The EPA's inspector general said the agency should, among other actions, create a standardized test to determine if insects have become resistant to Bt and should also create a way for farmers and researchers to report instances of resistance directly to the EPA, rather than to the seed company, which may be disinclined to pass those reports along to the agency.

The IG's report indicates that the agency has agreed to implement all of the inspector general's recommendations, and in fact has already implemented several of them.

The report's recommendations include standardizing a testing method for confirming resistance; developing a method to allow researchers and growers to directly report resistance concerns; preparing remedial action plans before resistance occurs; increasing the requirement for resistance monitoring data; making Compliance Assurance Program reports and resistance monitoring data publicly available; and improving the EPA's website.

FSA Loans Could Be Delayed This Summer

(DTN) -- Farmers and ag lenders relying on Farm Service Agency direct loans or guarantees could see those loans delayed this summer as demand is quickly draining available funds.

Several ag groups are sending a letter Thursday to members of the House and Senate appropriations committees highlighting the escalating demand for these loan programs and pointing out the USDA's Farm Service is expected run out of funds later this month for direct operating loans and guaranteed operating loans. Roughly $650 million in potential farmer loans could be delayed.

"This substantial shortfall will leave many beginning farmers and others who cannot be fully serviced by commercial credit under current price conditions without the loans they need to stay in business," the letter states.

Additionally, there will be a backlog and waiting list for the same kind of loans and loan guarantees for FSA's 2017 fiscal year.

Increasingly farmers are turning to FSA for loans and ag lenders are turning to the agency to guarantee loans. An FSA spokesman told DTN the agency has seen 23% more applications for operating loans this year. Funding obligations for those loans are also up 19% from last year. Additionally, demand for FSA guaranteed real estate loans is up 27%.

"There's a higher demand now for guaranteed loans because of the low commodity prices," said Mark Scanlan, senior vice president for agriculture and rural policy at the Independent Community Bankers Association. "There has been a demand for a greater amount of operating loans and banks are relying more heavily on those loans because of the commodity prices."

While loan guarantees and direct loans were often considered reserved for beginning farmers or smaller producers, more ag lenders are seeking guarantees on loans with commercial farmers. Other farmers are increasingly turning to FSA for direct operating loans as well. The main problem is that more farmers are struggling to cash flow their operations.

Doug Stark, president and CEO of Farm Credit Services of America, told DTN last week in an interview that one of the biggest challenges facing farmers in the current market cycle isn't as much an issue of debt-to-equity, but working capital.

"Leverage and interest rates aren't the issue in this cycle, it's cash flow with the cost of production and the price of commodities," Stark said.

FSA was funded at $1.25 billion for direct operating loans for the 2016 fiscal year. As of the end of May it has used $1.12 billion for 19,335 loans, leaving the agency with just under $129 million for any new loans.

For guaranteed operating loans, FSA essentially gives lenders a guarantee that up to 95% of principal and interest will be backed by USDA. Congress approved $1.395 billion, of which the agency has guaranteed loans up to $1.329 billion, leaving about $66.9 million to use.

FSA was budgeted $2 billion for guaranteed farm ownership (real estate) loans, and has funded $1.67 billion thus far.

Loan availability may differ from state to state. FSA grants each state an allocation so one state may use its loan authority quicker than other states and run out.

USDA does have an emergency funding lever to pull, with authority to add up to 25% for FSA loan programs if demand outstrips appropriations. USDA has used that authority the past two years, but not for the full amount possible. If that authority is used again this summer, it's likely nearly all of it will be used as credit.

If loan demand reaches the point USDA is forced to stop or delay funding loans, farmers could wait until the new funding year begins Oct. 1. The delay could go longer depending on complications with congressional appropriation bills.

"The way a lot of the banks would handle it is they wouldn't make the loans until the funds are available," Scanlan said. "What typically happens is these loan applications are in the system in the order they are submitted to USDA, but they still don't have funding so the banker is not going to do the loan until that happens."

In some cases a bank may do a bridge loan, but that's not common.

If USDA uses 2017 funds to cover 2016 loan obligations and backlog, the fund shortage would carry over into the next fiscal year.

"If and when the appropriations bill gets done they will start funding those before they get to all the new applications for the next operation season," said Ferd Hoefner, policy director for the National Sustainable Agriculture Coalition. "Predictably they will run out of funds even faster next year."

So ag groups and lenders are trying to make the case to members of the House and Senate Appropriations Committees to increase FSA's budget authority for loans that would build in the ability to avoid another potential shortfall next summer.

"Even then we might be in the same situation next year, but we will have dealt with the immediate crisis and they won't run out so quickly," Hoefner said.

It would take roughly $16.5 million in increased budget authority to give USDA the ability to increase combined direct and guaranteed loan program levels by as much as $650 million, Hoefner explained. "So from a bang-for-the-buck point of view, if they can squeeze out that extra appropriated dollars somehow they will solve a lot of problems," he said. "We think they could solve what will be a really tight credit pinch if they could just come up with this money now," Hoefner said.

Hoefner added that the increase in loan authority for USDA would also ensure the loan programs still have funds to cover loans and guarantees for those underserved producers. "Our concern is the direct loans that are overwhelmingly targeted for beginning, veteran farmers and others get the short end of the stick because as everybody moves down a notch they get pushed out altogether. We want to prevent that."

The letter going out to congressional appropriators Thursday is signed by the American Bankers Association, Farm Credit Council, Independent Community Bankers of America, National Association of Credit Specialists, National Farmers Union, National Sustainable Agriculture Coalition, National Young Farmers Coalition and Opportunity Finance Network.

U.S. Bison Sales Increasing

The National Bison Association last week announced U.S. bison sales have topped $340 million at the retail and foodservice level. However, the association says continued growth is primarily constrained by the limited supply of market-ready animals. The association’s analysis was based on the results of the latest survey of commercial bison marketers. According to the association’s research, sales of bison meat in retail stores and restaurants have grown by 22.3 percent over the past two years. Further, the association’s latest survey of commercial marketers found that 94 percent of those businesses could easily expand sales if additional product was available.

FDA Announces Voluntary Sodium Guidance

The Food and Drug Administration Wednesday released the agency’s long-awaited voluntary guidance on salt intake for Americans. The draft guidance focuses on reducing the salt used in processed and restaurant foods by one-third over ten years. The FDA says the reduction is recommended because Americans get 70 percent of their sodium from those foods, according to the Hagstrom Report. The FDA says current average adult intake of sodium is approximately 3,400 milligrams per day, and the FDA’s goal is to reduce consumption to 2,300 milligrams per day. The FDA says the reduction would result in tens of thousands fewer cases of heart disease and stroke each year, as well as billions of dollars in health care savings over time. The FDA says the targets are voluntary because sodium is important to taste, texture and microbial safety.

While it failed in 2016, Utah 'Food Freedom' act sparks conversation

Buying food from local farmers isn’t new, but in recent years the idea has been becoming more popular in communities throughout the nation. The Farm to Fork or “foodie” movement is a popular idea in Utah, where consumers get to see the face of the farmer that produced their food.

An increased interest in consumers knowing farmers and buying directly from them is creating a need for farmers to more easily sell what they produce to educated consumers without overbearing government regulations. Utah House Bill 144 is designed to do just that. While the measure failed in 2016, the conversation it sparked continues.

Food Freedom Act

The measure was sponsored by Representative Marc Roberts, mirrored Wyoming’s “food freedom act” that passed into law in 2015. Like the Wyoming bill, the proposed Utah bill would have done away with almost all of the government regulations and oversight for farmers selling directly to consumers. The bill was designed for only products grown and produced in the state of Utah. It also would have exempted growers from certain state, county or city regulations in regards to serving, preparation, consumption, use, or storage of certain food and food products.

FREE THE FOOD: Kenny McFarland, a producer farmer has roadside stands throughout northern Utah. He views the attempt to pass the Food Freedom Act as a step in reducing government regulations.

The bill was only intended for products that are sold directly to informed consumers for home consumption. The producer/grower would not have been required to take any steps or jump through any regulatory hoops to eliminate the inherent risk of consumption of their products. Under this proposal, the food is not certified and no license whatsoever is needed to produce or sell the product. It is not inspected or regulated by any government agency.

The only exemption from this bill was nearly all meat products. HB 144 did not pass into law in the 2016 Utah legislative session but it has sparked a lively debate between supporters and opponents.

Those opposed

Opposition of HB144 included some heavy hitters in Utah including the state's Commissioner of Agriculture and Food, LuAnn Adams. The Utah Farm Bureau Federation and many local farmers were also concerned about the health risks involved. Says Adams: “The Food Freedom Act sounds inviting, but its name is misleading; its name should more accurately be called The Freedom From Food Safety Act.”

According to Adams one of the risks is allowing food to be produced, processed and prepared without any oversight from entities designed to ensure the safety of food. “These safeguards,” states Adams, “are in place to protect the interests of both the consumer and the producer.”

Commissioner Adams is also concerned with the lack of labeling this law would allow. “To take away those safeguards would be like taking a giant step backwards 100 years when the spread of disease was rampant,” she says.

The loss of labeling would also hinder traceability of foods back to the producer. The Utah department of Agriculture and Food is working with small producers to fix problems in the current farmer’s market system and feels this is a better option then throwing out all regulations. “We strive to find a safe balance that stimulates commerce, but ensures food safety,” says Adams.

Those in favor

Supporters of HB144 included organizations like The Libertas Institute and food freedom activists throughout the state. Supporters of the bill feel that food laws have become absurd and protect large farming operations but hinder the small family operated farms from selling to their neighbors and friends.

There are laws for small “cottage food licenses” but difficult, burdensome requirements still have to be met. Kenny McFarland, a produce farmer in Northern Utah is torn on this issue. “It’s an exciting concept for the government to have a lesser roll,” says McFarland.

He feels the public is educated and aware of the risks associated with food and should be in charge of their own choices when it comes to food. “What I see happen, is that big money and big corporations steer lawmakers to decide what is okay and not okay for people to eat and I’m not okay with that,” says McFarland.

On the other hand he says that the current system is working for their farm even with the regulation hoops they go through to meet standards. McFarland feels that whatever happens, a safety standard should still apply to all producers.

Looking ahead

The opposition and supporters of HB144 can agree that this issue is not going away anytime soon as more consumers seek to become foodies and a growing number of farmers seek to fill the demand for local direct food markets. Lawmakers, regulatory agencies, farmers and foodies alike, all need to look for improved, innovative ways to create an environment where selling food directly from farmer to the consumer is efficient, easy but also safe. For now Utah lawmakers have chosen to stay the course on food safety regulations.