Muddy rivers? Don’t blame farmers

Taken from The Land article, November 26, 2010

When people hear that I’m an advocate of high-yield farming to feed the world and protect the environment, assertions of farm runoff into the rivers are raised to support charges against modern farming methods.

Urban dwellers, even some of my rural neighbors, tell me their concerns about large-scale farming ruining our rivers “because the rivers are muddy.” They worry about even more soil erosion as farmers gear up to double food production over the next 40 years to feed a peak population of 9 billion people.

Certainly, the rivers in the world’s farming areas run brown. Muddy rivers generally mean the surrounding soils are good enough to farm. But the farmland sustains high yields despite the brown rivers. The mountain streams produce no food – even though the water coming down the mountainside travels at much higher and more dangerous speeds and run crystal clear. Why? The soil from the mountainsides has mostly eroded long since.

Fortunately, you don’t have to just take my word for that. A research team sponsored by Minnesota corn and soybean farmers just carried out an airborne laser scanning study of the Minnesota River above Mankato. The study found that 56 to 86 percent of the sediment in the river came from the natural erosion along the riverbanks – which has been going on for centuries.

Satish Gupta of the Minnesota Department of Soil, Water and Climate was the lead author on the study. He said, “Some of these (river) banks are 150 feet high. They are very steep, not very stable, and they slough into the river.” Gupta also emphasized that the sediment load in any farm-country river will be a combination of bank erosion and runoff from the farm fields. The proportions vary with the soils, slope, rainfall patterns and farming systems. Thanks to the laws of hydraulics, however, any stream will get enough sediment to slow itself down, one way or the other – as it flows brown.

Gupta notes that in addition to bank erosion, the Minnesota River has also been impacted by a Corps of Engineers dredging program. The Corps takes 20,000 cubic yards of sediment per year out of the river to maintain a nine-foot depth for barges and towboats. The dredging makes the river flow faster and straighter. So does the extra water from urban rooftops, streets, parking lots and airports running into the river instead of infiltrating the surrounding soils. What happens to the dredged sediment? Beneficial public uses include wetland creation, bird nesting creation and upland habitat development.

Even though the Minnesota River study shows up to 86 percent of the sediment coming from bank erosion, best-farming practices are still helpful in minimizing crop and soillossBs. Notill farming, contour farming, grassed waterways and buffer strips at field edges all help reduce sediment loss. Fencing cattle from the creeks has also become a popular conservation policy in many areas (including my rural Shenandoah Valley.)

Continuous research and innovationhas made today’s farmers the most sustainable in history. Their high crop yields mean they need to farm less cropland to supply food demands. They restore the soil nutrients taken up by the growing crops with chemical fertilizers. This keeps the plant root structures strong, so they resist erosion. No-till farming by itself can reduce soil erosion from the fields by 65 to 95 percent. But don’t expect to ever see crystal clear rivers in good farming country.

This commentary was submitted by Dennis Avery, a senior fellow for the Hudson Institute in Washington, D.C., and the director for the Center for Global Food Issues. He was formerly a senior analyst for the Department of State. Readers may write him at P. 0. Box 202, Churchville, VA 24421 or email to cgfi@hughes.net.

U.S. cannot afford ethanol subsidies

THE CHICAGO TRIBUNE | Last update: December 12, 2010 – 4:53 PM

‘I‘m Al Gore, and I’m an alcoholic.”

No, that’s not exactly how the former vice president began his recent mea culpa on alternative energy. But he admitted he had an unwise dependence on alcohol — corn-based ethanol as an ingredient in auto fuel, to be precise — and tried to steer others from the same course.

Gore’s dependence was not physiological but political. He backed federal support of the industry as a member of Congress because he wanted to win the votes of farmers in his home state of Tennessee and– when he ran for president — in Iowa. “It is not good policy to have these massive subsidies,” he says, now that he no longer aspires to elected office.

Maybe his admission has started something. Even many current politicians are swearing off the stuff.

It’s not every day that California Democrat Barbara Boxer, one of the most liberal members of the U.S. Senate, joins forces with Arizona Republican Jon Kyl, one of the most conservative. But they and 15 other senators signed a letter calling the existing 45-cent-per-gallon federal subsidy to ethanol fuel and the 54-cent-per-gallon tariff on imported ethanol “fiscally irresponsible and environmentally unwise.” They oppose renewal of the two programs, which are scheduled to expire at the end of this year.

Yet there’s talk that an extension of the subsidy, and even a boost in the tariff, could be included in the tax deal reached by President Obama and Republican leaders. That would be a terrible mistake.

The fiscal tab of the federal tax credit comes to about $6 billion a year, which is more than the entire savings from the president two-year freeze on federal civilian pay. The more dire our fiscal predicament grows, the harder it is to justify this special-interest expense.

Then there are the environmental questions. Ethanol is actually worse than ordinary gasoline when it comes to some pollutants. True, it does generate fewer greenhouse gas emissions — but that savings could be canceled out if forests are cut down to expand corn production, because trees absorb so much carbon dioxide. Some estimates also suggest it takes more energy to produce a gallon of ethanol than the gallon contains, making the whole exercise pointless.

The excuse for this favor to corn farmers and ethanol producers is that it reduces our dependence on foreign oil. But the effect is modest at best. In 1997, the General Accounting Office (now called the Government Accountability Office) said that “ethanol’s potential for substituting for petroleum is so small that it is unlikely to significantly affect overall energy security.”

If reducing our reliance on foreign oil producers were truly the goal of federal policy, the government wouldn’t be so intent on keeping out foreign ethanol. The high duty on imported ethanol, noted the 17 senators, “discourages transportation fuel imports from Brazil, India, Australia and other sugar-producing countries, and leads to more oil and gasoline imports.”

In better fiscal times, it was easier to excuse our leaders for having their fun doling out subsidies for ethanol and protecting its makers from competition. But it’s time for the party to end.

— CHICAGO TRIBUNE EDITORIAL

U.S. corn ethanol “was not a good policy”-Gore

By Gerard Wynn, Reuters Africa | November 22, 2010

ATHENS, Nov 22 (Reuters) – Former U.S. vice-president Al Gore said support for corn-based ethanol in the United States was “not a good policy”, weeks before tax credits are up for renewal.

U.S. blending tax breaks for ethanol make it profitable for refiners to use the fuel even when it is more expensive than gasoline. The credits are up for renewal on Dec. 31.

Total U.S. ethanol subsidies reached $7.7 billion last year according to the International Energy Industry, which said biofuels worldwide received more subsidies than any other form of renewable energy.

“It is not a good policy to have these massive subsidies for (U.S.) first generation ethanol,” said Gore, speaking at a green energy business conference in Athens sponsored by Marfin Popular Bank.

“First generation ethanol I think was a mistake. The energy conversion ratios are at best very small.

“It’s hard once such a programme is put in place to deal with the lobbies that keep it going.”

He explained his own support for the original programme on his presidential ambitions.

“One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.”

U.S. ethanol is made by extracting sugar from corn, an energy-intensive process. The U.S. ethanol industry will consume about 41 percent of the U.S. corn crop this year, or 15 percent of the global corn crop, according to Goldman Sachs analysts.

A food-versus-fuel debate erupted in 2008, in the wake of record food prices, where the biofuel industry was criticised for helping stoke food prices.

Gore said a range of factors had contributed to that food price crisis, including drought in Australia, but said there was no doubt biofuels have an effect.

“The size, the percentage of corn particularly, which is now being (used for) first generation ethanol definitely has an impact on food prices.

“The competition with food prices is real.”

Gore supported so-called second generation technologies which do not compete with food, for example cellulosic technologies which use chemicals or enzymes to extract sugar from fibre for example in wood, waste or grass.

“I do think second and third generation that don’t compete with food prices will play an increasing role, certainly with aviation fuels.”

Gore added did that he did not expect a U.S. clean energy or climate bill for “at least two years” following the mid-term elections which saw Republicans increase their support.

(Reporting by Gerard Wynn; editing by Keiron Henderson)

Forbidden fruit: A new apple, the SweeTango, at center of controversy

Fred Sandvick picks apples on his 80 acre farm, Hickory Orchards, Wednesday in rural La Crescent. He and other Minnesota apple growers are suing the University of Minnesota to lift the restriction on growing and selling SweeTango apples, a new variety recently developed by the university. PETER THOMSON photo

The SweeTango is everything you could want from an apple. It has crunch and lots of juice. As the name suggests, it’s sweet, with a hint of spice. Already fat and red by August, it’s an early taste of fall.

Fred Sandvick picks one off a young tree in his La Crescent orchard and tosses it to a visitor.

“It’s a good apple,” he says.

But without legal intervention this homegrown apple, invented by scientists at the University of Minnesota, won’t be a money maker for Sandvick, or most Minnesota growers.

As the new crop ripens, a lawsuit is working its way through the courts, pitting Minnesota apple growers against one another and the institution that developed much of the fruit on which the industry is based. At the heart of the suit is a contract that gives one Lake City orchard the exclusive rights to market and sell this new apple – and to control who grows it.

About a dozen apple growers who joined the suit allege the arrangement effectively shuts them out of what could be the hottest new apple variety since the Honeycrisp and could jeopardize the Mississippi River valley fruit industry.

The lawsuit

Developed in 2000 by the University of Minnesota’s apple breeding program, the SweeTango is a cross between the popular Honeycrisp and Zestar varieties.

The university granted Pepin Heights Orchard an exclusive license to grow and sell the apple. In 2006, Pepin Heights formed a cooperative, called Next Big Thing, comprised of 45 growers who would produce SweeTango apples grown on Minneiska trees.

An exception allows Minnesota orchards to plant the trees, but with restrictions: they can have no more than 1,000 trees – a fraction of what wholesale growers typically plant – and are forbidden from pooling their crops with other orchards for the wholesale market or selling them outside the state.

That limits growers like Sandvick to selling their crop at the farm, in farmers markets and roadside stands, or direct to a grocer. The problem, growers say, is that few grocers will do business with individual orchards with small crops. The only way they can survive is by combining their crops to sell to wholesalers, which the contract prohibits.

The lawsuit, filed in June in Hennepin County District Court, alleges the agreement runs contrary to state and federal law as well as to the university’s policy as a Land Grant institution.

Mark Rotenberg, general counsel for the university system, disputes that claim, saying public institutions regularly license intellectual property and rely on the revenue to fund future research and inventions.

Rotenberg said the managed variety agreement grew from a bad experience with the Honeycrisp. Some growers planted that apple in areas where it wasn’t intended to be grown, undermining the brand.

“Our chief concern is the quality of the fruit,” he said. “We want to protect the taste and appearance. This is the best way to do it. There’s nothing unlawful about that whatsoever.”

Dennis Courtier, president of Pepin Heights Orchards, echoes that.

“We’re snack food producers,” he said. “For us it’s about share of stomach. Our competition is Doritos and Snickers bars. The only way to compete is consistency. … You can’t disappoint consumers.”

Deliver an apple that doesn’t disappoint, he said, and people will eat more apples.

‘An even field’

The lawsuit claims a publicly-funded institution used tax dollars to develop a new apple that will benefit mostly out of state orchards at the expense of Minnesota farms.

“It just isn’t right when you look at it,” Sandvick said. “An even field, that’s all we’re asking for.”

Fred Wescott is an apple grower from Elgin, Minn., who runs the Mississippi Valley Fruit Co., which packages and distributes many of the apples grown along the Mississippi River in Minnesota and Wisconsin.

The arrangement hasn’t just created an uneven field, said Wescott, also a partner in Fred Sandvick’s Hickory Orchard. “When the university comes out with a new variety and that variety gets leveraged against all the other growers in the area, it takes the playing field and turns it upside down.”

Courtier said his orchard won the right to manage the SweeTango in an open process and that all members of the Minnesota Apple Growers Association were invited to contact him about joining the growers coop.

“The whole thing is regrettable,” Courtier said. “We have every confidence our agreements are in full conformity with state and federal laws.”

Plaintiffs say they don’t begrudge Pepin Heights the right to control the national production and marketing of SweeTango, but they want a fair shot at competing in their home state.

“It doesn’t need to be done this way,” Wescott said. “Everybody can win.”

Honeycrisp killer?

The complaint alleges the university and Pepin Heights marketed SweeTango as a “Honeycrisp killer,” an apple poised to replace one of the market’s most popular varieties. Retailers want what’s popular, and if growers can’t supply it, they’re likely to lose those accounts, as the suit claims some already have.

Next Big Thing promoted the SweeTango in a 2008 YouTube video.

“I think that it’s one of the best apples we’ve discovered in a hundred years of breeding,” said David Bedford, the apple breeder at the University of Minnesota who helped develop SweeTango and will profit from its success.

Bedford, who estimates he’s tasted millions of apples in more than 30 years as a breeder, predicted “it’s going to become one of the top apples in the country.”

Sandvick sums up the problem this way: “People hear SweeTango, they’re going to want to come try it.”

Others feel the university is taking advantage of the growers who have helped make the horticultural program successful.

“The personal feeling is that we’re the marketing arm of any new apple that comes out of the University of Minnesota,” said John Curtis, who runs Southwind Orchard in Dakota, Minn. “We promote the name but we don’t get the benefit.”

The Minnesota apple industry and the university’s breeding program are key partners, according to the complaint. Four out of five apples grown in the state were developed through the program, which has relied on Minnesota orchards to test and market apples like the Regent, Zestar and Honeycrisp.

But only three of the members of the SweeTango grower’s coop, including Pepin Heights and La Crescent’s Fruit Acres, are in Minnesota.

Still, more than 80 Minnesota orchards have planted Minneiska trees, Courtier said, “So it can’t be that bad.”

Harry Hoch planted 1,000 on his organic farm west of La Crescent and plans to sell the fruit at food coops in the Twin Cities. Though he expects to do fine, Hoch doesn’t compete with growers whose apples end up in big box grocery stores.

He is not a plaintiff in the lawsuit but has come out against the marketing arrangement, saying most of the SweeTango crop will be shipped thousands of miles to Minnesota while local farmers are largely shut out of the market.

“What does bother me,” he wrote on his website, “is that our great University of Minnesota has made a mistake in its release of SweeTango and may inadvertently play a role in destroying the Minnesota wholesale apple industry.”

Posted in Local on Sunday, August 29, 2010 12:00 am Updated: 8:46 am.

USDA Rural Development Under Secretary Tonsager Announces Recipients of Rural Business Enterprise Grants

Release No. 0433.10
Contact:
Weldon Freeman (202) 690-1384

USDA Rural Development Under Secretary Tonsager Announces Recipients of Rural Business Enterprise Grants
USDA Support Will Help Create Jobs and Economic Opportunity in Rural Areas

WASHINGTON, Aug. 31, 2010 – USDA Rural Development Under Secretary Dallas Tonsager today announced that 45 states, the Western Pacific region and the commonwealth of Puerto Rico will benefit from funding made available under the Rural Business Enterprise Grant program (RBEG).

“The funding announced today represents the Obama Administration’s ongoing efforts to create economic and job opportunities in rural areas by ensuring that strategic investments are made in our small towns and cities,” Tonsager said “Rural businesses drive community revitalization by providing products and services to local residents as well as throughout the country and world. Projects like these spur important economic development and strengthen communities across the nation.”

For example, the Kentucky Highlands Investment Corporation in Laurel, Ky., has been selected to receive a $499,000 grant. This funding will be used to establish a revolving loan fund for small and emerging businesses located in a 14-county service area. This proposed project is expected to create 52 and retain 10 jobs in the area.

In Cass, Iowa, the Southwest Iowa Planning Council has been selected to receive a $95,000 grant. The funding will be used to establish a revolving loan fund to assist small and emerging private businesses in Cass, Fremont, Harrison, Montgomery, Page and Shelby counties. This project is expected to save or create 11 jobs. In both projects, the revolving loan funds bring important access to capital to lend to rural small businesses.

The RBEG program helps to finance and facilitate the development of new and existing businesses in rural America. Funds can be used for start-up and working capital loans, building and plant renovations, transportation improvements, project planning and other business needs.

More information about this program is available at http://www.rurdev.usda.gov/BCP_rbeg.html

Funding is contingent upon the recipient meeting the conditions of the grant agreement, and is not provided through the American Recovery and Reinvestment Act. The following is a complete list of organizations that have been selected to receive RBEG grants. A total of 61 awards were announced.

Minnesota

* Windustry – $275,000 grant to help provide assistance to facilitate wind development projects.
* Northwest Minnesota Foundation – $99,000 grant to provide technical assistance to small and emerging private business enterprises. Initial financing actions are expected to result in 39 jobs being created and/or retained.
* City of Baudette – $99,999 grant to capitalize a revolving loan fund to assist small and emerging private business enterprises. Initial financing actions are expected to result in eight jobs being created and/or retained.

Through its Rural Development mission area, USDA administers and manages more than 40 housing, business and community infrastructure and facility programs through a network of 6,100 employees located in the nation’s capital and 500 state and local offices. These programs are designed to improve the economic stability of rural communities, businesses, residents, farmers, and ranchers and improve the quality of life in rural America. Rural Development has an existing portfolio of more than $142 billion in loans and loan guarantees.

Record crops predicted — but ‘it’s not in the bin yet’

Posted: 09/01/2010 12:01:00 AM CDT

Outside its State Fair building, the Farm Bureau’s hard-luck soybean patch is an annual reminder that farming isn’t easy.

One year, its fairground plants were eaten by rabbits. Another time, zapped by drought. Then trampled by visitors.

But this year, the Minnesota Farm Bureau’s tiny soybean patch is green and lush — and so are the crops on real-life farms all around the state. Thanks to an unusually wet and warm summer, crop records are expected to tumble this fall when the combines start rolling.

“The corn and soybeans out there look fabulous,” said Marvin Johnson, a farmer near Independence. And his alfalfa is growing so well, “I’ve never seen anything like it,” he says.

Not that farmers at the Fair are boasting. Fall harvest is still several weeks away, and there’s an ingrained wariness about bragging. A freak storm, a killing disease or an early frost could come anytime — although, with temperatures in the 90s this week, the latter seemed a little remote.

“You have to remember, it’s not in the bin yet,” said Gary Wertish, vice president of the Minnesota Farmers Union. Still, he knows the lush-looking crop and stronger grain prices have helped the mood.

“A lot of it goes back to having a good-looking crop in the field,” Wertish said. “If you’ve got a poor crop, you don’t know if you’re going to be able to make your payments, and that’s a tremendous burden.”

The U.S. Department of Agriculture has made a series of ever-happier forecasts of Minnesota’s crop prospects. On Monday, it reiterated that Minnesota has the nation’s finest corn and soybean crops — a potential monster harvest worth more than $8 billion, about 10 percent more than last year.And with grain and livestock prices turning stronger, Minnesota’s rural communities should get an economic lift, too. That’s welcome news anytime but especially now, with recession sapping other parts of the economy.

Still, at the Fair it’s clear that a wet and warm summer hasn’t helped everyone. Inside the Agriculture-Horticulture Building, the competition of growing gigantic vegetables is having “an average to below-average year,” said Phil Klint, superintendent of vegetables and potatoes.

Case in point: The Fair’s giant pumpkin is more than 100 pounds lighter than last year’s record, though the 2010 winner still tips the scales at 1,036 pounds.

“With all this moisture, on and off, a lot of things exploded,” Klint said.

Minnesota fruit growers have had challenges, too.

For grape growers, the season “was going to be good, but we had the Mother’s Day frost,” said Cindi Ross, a board member of the Minnesota Grape Growers Association. That killed primary buds at some vineyards, which cuts in half their grape output.

For apple growers, “it was really a goofy year,” said John Leadholm of Fischers Croix Farm Orchard in Hastings. “We had May (weather) in April, and April (weather) in May,” including an untimely frost that zapped some apple varieties then in bloom. But not every variety was affected, nor every orchard. Even individual trees had some branches hit, others spared, he said.

Backyard gardeners have their own issues. The warmth and rain have made peppers go wild, but tomatoes have been iffy. That’s kept the Fair’s master gardeners desk busy.

“Most of the questions today were about tomatoes, why they didn’t grow or rotted on the vine,” said Ellie Anderson, a master gardener from Washington County. Her diagnosis: blossom-end rot, where the tomato looks red on top but the bottom has turned black. Blame the heavy rains.

On Machinery Hill, seed dealer Bert Enestvedt has been a Fair exhibitor for nearly 70 years. For farmers, he calls this year “sort of an ideal growing season,” then added, “That’s in our area (in Renville County). There are some areas that aren’t so lucky.”

He has heard the whispered forecasts of fantastic yields. And it raises the question: In an ideal season, how many bushels per acre is he hoping to see from his corn seed?

Here, Minnesota reserve takes over. Enestvedt makes no bold predictions.

“I’d rather just preserve that answer,” he says.

Tom Webb can be reached at 651-228-5428.

Farm Groups Pleased with Romanski as DATCP Secretary

Wisconsin Ag Connection – 09/01/2010

Several Wisconsin farm groups have issued statements indicating they like what they see in Governor Jim Doyle’s new agriculture secretary. This week, Deputy Secretary Randy Romanski was announced to replace the late-Rod Nilsestuen as the chief of the Department of Agriculture, Trade and Consumer Protection.

The Wisconsin Farm Bureau Federation says Romanski’s extensive experience with agricultural and rural issues makes him the logical successor to ensure continuity for the industry and consumers.

“We at the Wisconsin Farm Bureau Federation wish to congratulate Randy Romanski on his appointment as Wisconsin’s Secretary of Agriculture, Trade and Consumer Protection,” WFBF President Bill Bruins said. “As Deputy Secretary he garnered our respect for his ability to resolve divergent viewpoints on issues.”

Dairy Business Association President Jerry Meissner said Randy will help dairy farmers make a seamless transition as that sector moves forward with important issues in the months ahead.

“As much we miss Rod’s leadership on the dairy issues that are so important to our farmers, Randy’s appointment is good news because he has worked closely with the Governor’s Office and helped shepherd a number of these important issues through the legislative process,” Meissner said.

And the Wisconsin Farmers Union stated that Romanski knows his way around government and knows the importance of taking reasoned approaches to problem-solving. Director Scott Schultz says his best quality is that he listens to people before moving ahead.

Doyle announced his appointment of Randy Romanski to head the state’s agriculture department on Monday. He will serve until January when Doyle retires from public office and his successor names his own new cabinet members.

They Are The BIGS

WRITTEN BY DAN MILLER, MARCIA ZARLEY TAYLOR AND ELIZABETH WILLIAMS
Minutes after the March 31 crop report, partners in Carson & Barron Farms huddle in their Iowa conference room. These allies-eight in all, ages 23 to 62-make independent decisions and farm individual holdings.

But as a team, they operate with the clout of a 5,000- acre farm-pooling equipment, labor and skill-and extracting premium prices from the market.

Insurance companies and pension funds have long packaged land holdings as investments. This is different. “What’s different now is that it’s also happening on the operator side,” says Mike Boehlje, a Purdue University economist.

They operate under the notion that being big confers both cost-saving efficiencies and monetary rewards.

The “Bigs,” defined as farms, or groups of farms operating under a common business plan with incomes north of $500,000, control large chunks of America’s farm and ranch productivity. They compete in a highly competitive acreage race that inflates local land prices and rearranges local markets. They wield a purchasing power that commands discounts from the suppliers of equipment, seed and other inputs.

Best estimates show there are 57,000 farms with annual gross incomes of $1 million or more. Less than 3% of all farms, these million-dollar farms haul 59% of all farm sales.

to the million-dollar club the 64,000 farms earning $500,00 but less than $1 million and you have a tightly controlled farming resource of 121,000 farms making 73% of all farm sales.

The consolidation of farming might into fewer and fewer hands has been a fact since the 1930s. But consolidation may have new velocity. At the turn of this century, it took 144,000 farms to produce three-quarters of the nation’s agricultural output. Back in 1982, million-dollar farms accounted for only a quarter of u.s. ag output.

Cotton, high-value crops-fruit and vegetablesdairy, poultry, hogs and fed beef dominate the structures of million-dollar farms. A quarter of the nation’s largest farms are 5 years old or less.

There are also million-dollar grain farms. Take a look at corn: 347,000 farms produce corn. Of those, 151,000 farms grow at least $50,000 worth of corn while 62,000 farms have corn sales in excess of $50,000 and operate more than 1,000 corn acres; 29,000 farms have 2,000 acres or more of corn.

The number fluctuates, but in all there appear to be 21,000 million-dollar farms that produce at least $50,000 worth of corn for grain. According to the 2007 Census of Agriculture, this thin 6% slice of corn farms generates 38% of all corn sales.

Take this analysis a couple of steps farther. There are 29,000 farms, with incomes of $500,000 to $1 million that produce at least $50,000 worth of corn. They account for another 25% of corn production. In total then, 50,000 farms account for about 63% of all corn for grain sales.

These corn farms and other have purchasing muscle. That’s evident in USDA study of big farms. Operations earning more than $1 million a year produced an operating profit margin of 20%. Operating profit margin increased to 26% on farms earning $5 million a year. Nearly 80% of million-dollar farms produced a positive net farm income that year, and they posted a net worth exceeding $5.3 million-compared to a net worth of $790,000 for all farms.

Farming businesses with sales exceeding $1 million average 3,400 acres-although the specialized farms that make up more than half of this group may work much less ground. Compare that to the 281-acre average for farms earning $250,000 or less per year.

American agriculture is still a family business.

Eighty-four percent of million-dollar farms are family operated. Non-family farm operations generally have less than 10 stockholders.

Joint buying, marketing power and machinery efficiency create an $85- to $100-an-acre advantage for those who had farmed 1,000 acres solo, Carson & Barron members say of their alliance.

“My dad and grandfather started farming together in 1966, so I learned the benefits of farming in cooperation,” says Chris Barron, of Rowley, Iowa.

But this has new applications. Moe Russell, a Panora, Iowa, farm financial consultant who works with Barron sees merit in the concept for lowering machinery costs. Among his farm clients, those savings can range ftom $26 to $180 an acre.

In theory then, the efficiencies and benefits found in large farming operations perpetuate the cycle that allows big farIIls or alliances to pull additional resources into their operations. For example, one Illinois producer who works 20,000 acres is able to bank a 9-cent-per-bushel savings on storage costs because he stores his own harvest.

At times, Carson & Barron will pool its grain sales to capture lO-cent-per-bushel premiums on 100,000-bushel contracts to processors in nearby Cedar Rapids, Iowa.

Large farms and alliances also can benefit by owning their own crop insurance agency ordering inputs direct or pooling grain deliveries in volume to export elevators or grain processors.

“To play [this] game, you’d need a group that could fill unit trains or buy fertilizer by the barge load,” says Danny Klinefelter, a Texas A&M economist and director of an executive education course for commercial farms.

Joe Nichols, with 18,000 acres outside Cadiz, Ky., works in the arena Klinefelter describes. It . is details, not always obvious, that supply the jet fuel for his operation. Look at his annual, $7 million equipment budget.

“We traded every motorized vehicle last year,” he says, adding he trades his Seven Springs Farms tractors and combines annually. This year he brought home seven combines and 18 tractors. “We own every bit of the equipment. We don’t rent them. We don’t lease them.

They are all on the same depreciation schedule,” he says. “It’s a wise financial investment for us and we can stay with the most up-to-date systems.” Nichols declines to provide details of his equipmentbuying program, but he assures the caller his strategy works profitably for him and his equipment dealer. Key to Nichols’ equipment strategy is the turnover. By keeping operating hours under control (if separator hours on a combine start to push 350 hours, he’ll add another combine to the effort), he claims tax benefits and commands a premium dollar at trade-in. “You have to have a good dealer to make this work,” he explains. Notice he says “dealer,” as in one. Nichols does not shop around. He has developed a beneficial relationship with a local dealership. That dealer supports his fleet and is assured a supply of highly maintained, low-hour equipll1ent~ Right-sizing equipment makes sense to Bob Craven, director of the Univers~tf of Minnesota’s Center for Farm Financial Management. The 2,400 farm records he tracks in Minnesota show that farms in the 2,000- to 5,000- acre category spend about $255 per acre for machinery investment, versus $382 per acre for farms in the 250- to 500-acre category.

But studies of farm financial records in Minnesota and Illinois show grain operations hit maximum equipment efficiency at 1,200 to 1,500 acres. Craven thinks larger operations lose some advantages once they hire labor and bring on all of its added costs. Nichols might argue with that. “The last thing we focus on is ‘investment per acre, or our [equipment] cost per acre,” he says. Rather, he maintains an equipment line that gives him the ability to capture opportunity-and 2 million bushels of storage capacity.

At its most basic level, Nichols’ marketing strategy is simple: Time equals money. He loathes missed opportunities simply because his semi driver is out planting, for instance. To that end, he employs drivers to deliver grain into those brief moments when the markets offer unexpected profits.

“If I’m planting corn and the market wants corn, I want to be equipped to move corn and plant corn at the same time,” Nichols says. “If [other farmers] are planting, I can deliver more loads to the elevator because no one is there.” That capability may cut his corn delivery costs by 21h hours per day. “On a cost-per-bushelper- day [basis], driver costs start to fall.” Nichols’ grainhandling system is designed to strike quickly. It load out a semi in seven minutes. On one day last fall Nichols’ drivers dumped 72 loads of corn.

Terry Jones and his wife, Susie, started farming in 1983 with only 92 acres of.com in Williamsburg, Iowa. From that humble beginning-in a highly competitive area of eastern Iowa-the Joneses, along with Terry’S brother Eric and Eric’s wife, Kathy, have grown their operation to several thousand acres, a grain elevator business, a consulting business and land investments in Oklahoma, Arkansas and Brazil.

“Every decision we make we look at the return on investment,” Terry explains. “We don’t necessarily have the lowest COSt on equipment, but timeliness is extremely important to us and our landowners.” The farm recognizes opportunity-contrarian instincts help. Here are some of the farm’s plays.

After watching cattle feeders lose money in 1994 and 1995, Terry and Eric moved into the cattle feeding business. “We bought bred heifers for $600 to $650 and built a cow herd. We fed a lot of cattle and built up equity.” In 2003, the Joneses cashed in that equity and exited the cattle business.

Terry had four semi trucks that mostly sat around.

After buying an elevator, they commercially licensed those trucks and three more. “Our elevator picks up the corn. So”a farmer can sell us 10,000 bushels or 50,000 bushels and we’ll send three or four trucks and be done in one day,” explains Terry.

Terry expects improving corn genetics will expand the size of the Corn Belt. “I think the fringe areas like Oklahoma and Nebraska will see the biggest bang from drought-resistanthybrids,” he predicts. Terry bought land in Oklahoma and Arkansas.

The Arlington, Ky., family operation in which Darren Grogan farms is fine-tuning a strategy to “discover” unrecognized value in land. The family does it in part by putting water onto their ground and by removing excess water from it. The Grogan’s run 5,500 acres of corn and 11,000 acres total.

To bring a good return on that investment-and that marketing opportunity-the family has invested heavily in irrigation, with more than 1,000 acres under center pivots and more being added.

They do it, Grogan explains, because the farm can only be as good as the number of 180-bushel acres harvested. In other words, irrigated ground produces 240 or more bushels to the acre. But Grogan’s dryland corn fields yield about 180 bushels. Those dryland fields limit the farm’s potential.

“[The irrigation] is not for free,” Grogan says of the substantial investment. “But it does give us a management tool.” More interesting is the strategy the Grogans deploy to remove water from ground newly added to the farm. They aggressively tile these new purchases with the farm’s own tiling machine.

“Tiling land that needs to be tiled will make more corn,” Grogan says. “We can see 100% yield increases.” Essentially, tiling reveals a yield potential not apparent at the time of purchase. It also allows them to plant their corn up to a month earlier.

“You need to look at the final product-find value” no one else saw, Grogan says.

Family Farms LLC, organized by AgriSolutions founder Allen Lash of Brighton, Ill., is experimenting with a business model-a kind of big-farm strategy on steroids.

Family Farms aligns large farms in a kind of consortiUm. Some members farm 10,000 acres and more. But many believed their operations had hit a ceiling. “They were big but they weren’t growing and they couldn’t figure out why,” Lash says.

With coaching from Lash’s group, Family Fanus members analyze their strengths, weaknesses, opportunities and threats, and write business plans incorporating the findings. They draft standardized operating procedures. Members commit to training and education programs, three weeks in year one and two weeks annually thereafter.

Lash’s Family Farms organization requires members to pay a fee to join and adopt his accounting system.

Some reveal they must be willing to double or triple the size of their personal operations, build grain storage, keep a sizable amount of working capital on hand and clear their public comments through a public relations firm. The Family Farms arrangement has not been without controversy. “It works in Argentina and Brazil because there’s no local backlash,” observes Texas A&M’s Klinefelter. “Here, someone with 10,000 acres or more is viewed as a predator because he’s taking away land from local farmers.”

Wall Street Eyes Farmland Again

Marcia Zarley Taylor – Progressive Farmer

In a New York City ballroom where actor Michael Douglas gave his iconic “Greed is good” speech in the movie “Wall Street,” 400 pension and fund managers, investment bankers and some of the world’s largest farmers gathered to discuss the latest hot prospect: farmland.

The “Who’s Who” of Wall Street financiers now interested in channeling billions of new dollars into cropland ownership in the United States, South America, Eastern Europe and even Africa include heavy hitters like UBS, Franklin Templeton, .

Morgan Stanley, TIAA-CREF, Rabobank and John Hancock.

Pension fund TIAA-CREF has $2 billion invested in farmland, but has intentions to double its holdings.

Underlying the investment frenzy is the expectation that food demand will double by 2050 and skepticism that agribusiness can engineer higher yields to meet that demand. The need for greater soybean production is especially acute as China and India work to improve their diets.

Given this outlook, 125 million to 200 million new acres may need to be brought into cultivation, High Quest Partners, a consulting group that sponsored the investor.

conference, estimates.

“People really do believe agriculture is headed for a super cycle,” says Kenneth Van ‘Heel, global director of Dow Chemical’s pension fund, which is stepping up its land investments, primarily in the United States. “Across the industry there are so many investments to be made.” Many of the would-be farmland ‘ owners are no neophytes to U.S. or global agriculture.

Gary Taylor, former president of Cargill Cotton, spent 38 years immersed in the commodities business worldwide and already owns 7,000 acres in his personal portfolio. Now he and a partner have launched a farm real estate investment firm to purchase farmland in the Mississippi River watershed.

They favor corn, soybean, cotton and rice land with good access to water and the benefit of Mississippi River basis for the best market prices.

People Really Do Thing Agriculture is Headed For a Supercycle
-KENNETH VAN HEEL, GLOBAL DIRECTOR OF DOW CHEMICAL’S
PENSION FUND

With what he knows about growing world trade in agriculture, Taylor expects u.s. farmland prices to ,doub le in the next five years.

scale are ineligible for u.s. farm programs. What’s more, North Dakota, Minnesota and Iowa outlaw corporate ownership of farms.

What gives institutions hope is that Nebraska’s anti-corporatefarming law was recently overturned by the state Supreme Court, and they believe other states could lose if challenged.

In the European Union, there To date, most investment is being steered to locales outside Europe and North America where land costs less.

But foreign control of land is controversial. News that a South Korean firm wanted to farm 3.25 million acres in Madagascar in 2008 led to riots, 130 deaths and the fall of its government. Brazil’s president is now expressing concern about foreign ownership of its farmland.

To keep the phenomenon in check, the World Bank and United Nations are trying to develop ethical standards for investors in developing countries. “It’s like the California gold rush. The initial investors are not the most savory characters in the world,” says John Lamb, World Bank agribusiness team leader.

Insurance· companies and pension funds romanced U.S. farmland in the 1970s, only to exit when land prices cratered in the 1980s.

This time is different because interest is global. Brazil is attracting corporate-style farming with firms traded on stock markets;· and the former Soviet Union and Eastern European bloc offer a frontier for private investment that didn’t eXIst during agriculture’s last golden age.

One constraint on investorsbut not present for operators in the U.S.-is that investors of this are no eligibility or payment limits on farm subsidies, so farms like Spearhead International, Europe’s largest farming corporation with 150,000 acres in the United Kingdom, Poland, Romania and the Czech Republic, can collect EU farm subsidies worth about $90 per acre annually.

“We’ve waited 40 years for something like this,”. says an Iowa farm manager. But he doubts outsiders will hike U.S. farmland values as high as some expect, since institutions need cash returns of about 5% and rarely can afford to outbid established farm operators in prime Grain Belt locations.

Farmers still buy and own the vast majority of America’s farmland, he notes. Institutions like to step in to buy only when there aren’t two bidders at an auction.

“Maybe they’ll just keep land from the price correction everyone in agriculture’s been expecting,” he says.

Understanding Recent Changes to Minnesota’s Green Acres Program

By: JEFFREY J. SERUM & MARY S. RANUM
July 2010

Minnesota’s Agricultural Property Tax Law, codified at Minnesota Statute 273.111 and commonly known as the Green Acres Program, has existed since the 1960s. A key purpose of the Green Acres Program is to reduce urban sprawl by assessing certain land based upon its agricultural value and deferring higher property taxes attributable to the land’s value if it were assessed as commercial or residential.

Green Acres property is assessed at both an actual market value and an agricultural value. Property taxes are calculated on both values, but are paid on the lower agricultural value until the property is sold or no longer qualifies for the Green Acres Program. Once the property is sold or no longer qualifies for the Green Acres Program, the deferred tax will be due for the immediate prior three years on the portion sold or no longer qualifying. Special assessments are also deferred while a property qualifies for the Green Acres Program. Once the property is sold or no longer qualifies for the program, all deferred special assessments become due and payable.

In 2008, the Minnesota Legislature made sweeping changes to the Green Acres Program. One of the most controversial changes made certain non-productive agricultural land ineligible for the program. This change outraged some landowners, and fears mounted that landowners would convert wooded areas and wetlands into tillable crop acreage. In response to this and other problems created by the 2008 legislation, the Minnesota Legislature again amended the Green Acres Program in 2009. This article answers several questions about the cumulative effect of these changes to the Green Acres Program.
What land now qualifies for the Green Acres Program?

Commencing with the 2009 assessment for taxes payable in 2010, only land that the assessor classifies as “class 2a” agricultural land will be eligible for the Green Acres Program. Class 2a agricultural land must be primarily devoted to agricultural production and be at least 10 acres in size. The 2008 legislative changes required the assessor to subjectively determine what land qualified as class 2a agricultural land. The 2009 legislation amends the definition of class 2a agricultural land in such a manner that an assessor must (as opposed to may, in the 2008 legislation) classify certain class 2b non-productive rural vacant land as class 2a agricultural land if: (i) the land is interspersed with class 2a agricultural land; (ii) the land is impractical for the assessor to value separately from the rest of the property; or (iii) the land is unlikely to be able to be sold separately from the rest of the property. Examples include sloughs, wooded wind shelters, acreage abutting ditches, and ravines.

The 2009 legislation allows certain land enrolled in the Reinvest in Minnesota (RIM) Reserve Program, the federal Conservation Reserve Program, or a similar state or federal conservation program to qualify for the Green Acres Program if the land was in agricultural use before enrollment. Land enrolled in the RIM Reserve Program will not qualify for the Green Acres Program if it is subject to a perpetual easement.
Are there any changes as to who may participate in the Green Acres Program?

The 2009 legislative changes provide that any entity in which (i) a majority of the members, partners, or shareholders are related, and (ii) at least one of the members, partners, or shareholders either resides on the land or actively operates the land, may own land enrolled in the Green Acres Program. Previously, many limited liability entities were not eligible to own land in the Green Acres Program.
Will land that no longer meets the Green Acres Program requirements be grandfathered?

Class 2b non-productive rural vacant land currently enrolled in the Green Acres Program that qualified for the Green Acres Program prior to 2008 will be grandfathered until the 2013 assessment. Commencing with the 2013 assessment, the grandfathered land will be removed from the Green Acres Program and deferred taxes for the then-current assessment year and the two previous years will be collected.

If grandfathered class 2b land is sold, transferred, or subdivided during this grace period, the land must satisfy the current Green Acres Program requirements created by the 2008 and 2009 legislation to remain eligible for the Green Acres Program. If it does not qualify, deferred taxes will be collected. Certain conveyances, however, such as transfers to a child or transfers to a trust created by the landowner that do not alter the landowner’s beneficial interest in the land, will not affect the status of grandfathered land.
Is there an option to withdraw the land from the Green Acres Program without penalty?

Land currently in the Green Acres Program that no longer qualifies as such due to the 2008 or 2009 legislative changes can be withdrawn from the Green Acres Program prior to August 16, 2010, with no requirement to pay the deferred taxes.
What is the new Rural Preserve Property Tax Program?

Despite the 2009 legislative amendments, some land that historically qualified for the Green Acres Program will no longer be eligible. Examples include larger tracts of non-tillable acreage, such as wooded areas, that can be separated from an agricultural operation and sold separately. To account for some of these lands, the 2009 legislation created the Rural Preserve Property Tax Program to provide favorable assessment to certain lands that no longer qualify for the Green Acres Program. There is no requirement to pay deferred taxes on land that is converted from the Green Acres Program to the new Rural Preserve Property Tax Program.

To qualify for the Rural Preserve Property Tax Program, a parcel must be at least 10 acres in size and the owner must commit to enroll the parcel in a conservation management plan for a period of not less than 10 years. The conservation management plan must be approved by the soil and water conservation district and provide a framework for site-specific healthy, productive, and sustainable conservation resources. The landowner must sign a covenant agreement that is recorded in the land records in the county where the land is located. This program will be available for the 2011 assessment year, with taxes payable in 2012. If an owner removes land from the Rural Preserve Property Tax Program, it is subject to the same three-year deferred taxes requirement as land enrolled in the Green Acres Program.
Takeaway

Rural landowners should familiarize themselves with the 2008 and 2009 changes to the Green Acres Program to determine whether their current Green Acres status will be affected.