The situation for dairy farmers in 2017 was not good. A lot of diary operations are running right on the edge, trying to stay profitable at a time when there is ever shrinking demand for liquid milk for drinking, and a glut of other dairy products like cheese, butter and powdered milk. This story above from NPR illustrates just how bad the situation is getting. Go read the article if you have the time. It isn’t very long.
If you don’t have the time, here’s a brief summary: A dairy co-op in the north east US, Agri-Mark, has seen three of it’s farmer members commit suicide in the last few years. Agri-Mark makes Cabot cheese among other products, and has about 1,000 members. In February when it sent out the milk checks, it included a chart showing just how bad the dairy market was looking for the upcoming year, and a list of suicide prevention hotlines. The reporter talked with Will Rogers, who milks 75 cows in Massachusetts, who is having a difficult time keeping above water. Even more upsetting is the fact that his own father who used to own the farm, killed himself because of financial problems.
While the letter from Agri-Mark was probably well intentioned, it certainly added to the stress a lot of it’s farmers are already facing and Rogers says in the article, it might push some farmers so far that they think “there’s no point in going on.” Agri-Mark certainly could have done a better job of trying to communicate with it’s farmer members.
And as if dairy farmers don’t have enough problems, they are increasingly worried about being able to sell their milk at all. Dean Foods just told at least two dozen farmers in Pennsylvania, Indiana, and four other states that Dean will no longer take their milk as of May 31, leaving them scrambling to find a milk processor they can sell their milk to.
The same thing happened here in Wisconsin last year about this time when Grassland rather abruptly dumped a group of farmers, leaving them to desperately try to find a market for their milk.
The article at Dairy Management about Dean seems to be trying to blame Walmart for Dean’s decision. Walmart used to buy it’s in-house brand milk from Dean, but Walmart is building it’s own milk processing facility in Indiana which will come on-line in May, so Dean is going to be losing a significant amount of sales as Walmart switches to product coming from it’s own production facility.
Certainly there is enough blame to go around, but everyone is ignoring the fact that the real reason behind almost all of the money difficulties dairy farmers are having is over production. They are producing more product than the market really wants, which is pushing prices down lower and lower.
Seventy-five percent. Think about that for a moment. We are facing a national health crisis due to people eating too much of what is bad for them, with government agencies and others trying to figure out how to help people get their weight under control, and at the same time other government agencies and marketing specialists are trying to get food manufacturers to drastically increase the amount of cheese they use in their products.
Egads, it’s been a while since I did anything here. When things get a bit busy I’m afraid the first thing to suffer is this blog. So let’s take a look at what’s been going on. It’s going to be a mixed bag this time, covering a variety of different topics. Let’s look at some agricultural stuff first.
The dicamba saga continues. Monsanto’s lawsuit against the state of Alabama over its very strict regulations concerning the use of dicamba was thrown out of court. Alabama put very stringent restrictions in place on the use of the product after thousands and thousands of acres of crops were damaged by the herbicide drifting.
The case was thrown out on a legal technicality, it seems. Apparently Alabama has a “sovereign immunity” clause in it’s constitution that prevents it from being sued for things like this. So nothing has really been settled.
There are new federal regulations in place now, new training requirements and other things, so I guess we’ll see if those will be sufficient to keep the herbicide under control.
Trade Wars — Of course that’s the big news right at the moment. With NAFTA negotiations already allegedly falling apart and threatening our economic links with Canada and Mexico, the last thing we needed was for the administration to launch a full blown trade war with, well, with just about everyone. So, of course, that’s exactly what the administration has done. The administration claims that the tariffs will have no effect on the NAFTA negotiations, which is a flat out lie. Of course it will. It already is having an effect.
The negotiations were already contentious, adversarial and often completely unrealistic, and both Canada and Mexico have made comments that they were considering pulling out of NAFTA entirely if the tone of the negotiations didn’t change. The threat of tariffs has made the situation even worse. The Canadians have become far more outspoken now, openly talking about “responsive measures”, i.e. political speak for levying such huge tariffs on US made goods that US manufacturers and agribusinesses will be unable to sell products in Canada. Mexico has been a bit less open about it, saying that the country is “considering all of its options”.
If you look past NAFTA and look at what’s happening elsewhere, the response to the administration’s tariff threats has been even more forceful, with some countries threatening reciprocal tariffs that would make US goods unmarketable. And as for China, well, if we lose China as a market, that’s pretty much going to destroy the ag economy, and decimate a lot of other businesses as well.
Weather — The weather here in Wisconsin used to be pretty reliable. We could depend on blistering hot summers and cold, snowy winters that would rival anything seen in the arctic.
Yeah, well, about that whole snow and cold thing… Although we had a period of intense cold over Christmas and New Years, it’s actually been ridiculously warm here. We had a February with temps at or above freezing more often than not, and some days when it was pushing 50 degrees. In February. In Wisconsin??? WTF? Really? After a couple of days of 45+ temps, it cooled down and we got about an inch of snow, not enough to bother shoveling because it almost immediately melted off again, and now, on March 3, we’re looking at temps back up in the high 40s and low 50s again.
I’ve been hearing rumors now that the snowmobile clubs in the area are seriously considering not bothering to lay out trails any more and may even be closing down because we haven’t had any actual snow for years now. The trails never opened this year. If they opened at all last year it was only for a few days and in limited areas.
And while we still complain about the cold (we love complaining up here in Wisconsin, it’s the state hobby, I think), and we do get some intense cold periods, all things considered it hasn’t really been all that cold either. If you look at the ice data that shows how long the lakes here are ice covered, you’ll find that the number of days, on average, that lakes are ice covered has dwindled by several weeks.
And if you look at the growing zone map, where I live about 20 miles south of Green Bay, well, we used to be firmly in Zone 4. We’re now in zone 5 and I keep hearing from people that a lot of years now we’re actually pushing zone 6.
Speaking of gardening — MrsGF and I are getting impatient. We’ve already been talking about expanding the garden area on the south side of the house and trying to figure out an easy way to get rid of sod.
One of the things that’s been pushing us into impatience is that whenever we go down in the basement we walk past the famous “Bag ‘O Seeds” that eldest son gave us for Christmas. It’s hard to tell how many are in there from this photo. That pile of seed packets is about a foot deep. He literally got us one of everything that the retail chain he works for sells in their garden department.
We really need to sit down and do some planning because there is no way that we are going to be able to plant more than a fraction of the different seeds we have.
I can tell MrsGF has gotten impatient because yesterday she got some pots and some potting soil and put in some daffodil bulbs and I suspect those will end up in front of some of the windows in the house and she was wondering if it was really still too early to start some seeds for the garden.
Amateur Radio Stuff — I’m still playing with the FT8 mode and I can see how it can be addicting. I know that some people have complained that it isn’t really “communicating”. The typical FT8 exchange consists of call signs, grid square, signal strength report, and then bye-bye. FT8 is pretty much completely useless for exchanging any kind of genuinely useful communications. So what’s the point of it?
A lot of AROs are interested in things like trying to contact 100 different countries or more, contacting every state in the US, or things like that. It’s making the contact that is important to them. Actually talking to someone? Not so much. They’re chasing awards or certificates of accomplishment or competing in contests, or doing it just for the personal satisfaction of having done it. For those people, FT8 is great. I worked something like 27 different countries in just a few hours while I’ve been experimenting with it. I’ve worked countries I never thought I’d ever successfully contact. I worked a station in Japan the other day and yesterday I got the Cayman Islands.
The fun thing about FT8 is that you can do all that stuff with very modest equipment. You don’t need transceivers that cost $10,000 and huge amplifiers and ten acres of antennas. You can do this running less power than it takes to run the average light bulb and little more than a wire hanging in a tree for an antenna.
But it does have “issues”, as they say. One of the biggest problems is that it is being crippled by its own success. It’s become so wildly popular that the small parts of the radio frequency spectrum that are recommended for its use are ridiculously overcrowded.
And it’s about to get much, much worse because the wonderfully skilled and creative programmers who developed the WSJT software most people use for FT8 is bring out a “Dxpedition” version of the software that will permit as many as 500 contacts per hour and will transmit up to five signals at the same time.
Now, the developers have stated that this new system is “suitable for use only by Dxpedition stations and those attempting to work them”, and that it should not be used on the normal FT8 bands. But you can be sure there are going to be people who are going to completely ignore that. If we get a significant number of operators running the Dxpedition version of the software in the normal FT8 bands, well, the situation is going to go from merely ridiculous to utterly insane.
I saw a statistic the other day that claimed that more than half of all contacts being made now are done by FT8, and considering the amount of activity I’m seeing I suspect that’s probably correct. I wonder if this is just a fad though and if in a fairly short time FT8 will end up abandoned by everyone except the DX hunters.
Where Has PSK gone? — One of the side effects of the widespread adoption of FT8 is that it seems to have almost completely killed off the use of the PSK mode. PSK was a fairly popular mode of communication. When I first started using PSK I would find dozens of contacts and conversations going on on the PSK sub-bands. But now? I generally fire up FLDIGI a couple of times a day when I have the time and check the PSK bands and, well, I’m seeing nothing. I mean nothing. I haven’t seen a single PSK signal out there in days now. It’s almost as if every PSK user out there immediately jumped ship for the FT8 mode and hasn’t gone back. That’s a bit disappointing because PSK is a great low power, weak signal mode, and is, or can be, as automated as FT8 is. When using PSK64 and properly set up macros, making a contact can be as quick and easy as with FT8. And the big plus is that PSK can be used to actually communicate with people.
There, I think I’ve bored you long enough for this time…
The interesting thing about the new tax law that got rammed through is that no one really seems to have known what was in it, not even the people who wrote it. This law was literally written in secret, behind closed doors, with only a very few people being allowed to know what was actually in it. Special clauses were inserted for no other reason than to get support from members of congress who threatened to vote against it. And often the people writing it had no idea what they were actually putting into the law. Except for a few high profile items and talking points, none of it was allowed to be made public until it came to the floor for a vote. And finally it was passed in such a rush that the people voting on it didn’t know what they were actually voting for or against.
Apparently even the people who actually had specific items inserted into the law didn’t know what the clauses that they themselves had put in would actually do. Part of the new law, IRC Section 199A that applies to earned income from pass through business activities is one of the items that even it’s authors didn’t really understand. And one section of the 199A deduction could have a huge impact on farmers and how they sell the commodities they produce. I ran across this over at WallacesFarmer and it gives a brief rundown on how it works. But if you don’t have time to go read it yourself, here is how it would work.
The law includes a deduction for income from cooperatives for members of co-ops that is calculated differently from other sources of income. Basically income derived from selling your crops to a co-op you belong to is treated entirely differently from income from selling your products to a non-co-op.
The whole thing is a bit complex. What it essentially does for farmers is that in certain situations it carves out a huge deduction for selling your commodities to your co-op instead of to a commercial grain dealer. In the example they give in the article over at Wallaces, a farmer who sells his grain to a non-co-op business like an ethanol facility and ends up with a $50K profit, will end up owing about $4K in taxes on the profits from the sale.
If he sells it to a co-op, however, the farmer will end up owing zero taxes on the net income from the sale.
The really scary part is that the senators who inserted this into the tax bill, apparently had absolutely no idea this would be the result of the clauses they put into it. Two senators, Hoeven of ND and Thune of SD seem to have been largely responsible for shoving this into the bill just hours before it passed, and both claim that they did not intend to favor co-ops over any other business, despite the fact that is exactly what this does.
And this is just one clause in a law that is hundreds of pages long. No one knows yet what kind of traps, loopholes, give aways or other little surprises are lurking in this thing, and it could be months before we really know. And you can be sure that a lot of this is going to end up going through the courts before it all gets settled.
I haven’t done one of these in a while, so let’s take a look at what’s been going on in agriculture. And since this is January 2018, maybe take a peek at the crystal ball (I actually use an old tennis ball because, well, have you seen what a good crystal ball costs these days?) and see what might be going on in the upcoming year.
Dicamba has been in the news again. This time the Arkansas state legislature has weighed in on the issue. It’s legislative council has approved the Arkansas plant board’s ban on the use of Dicamba from April 16 to Oct. 31. The board put the ban in place after receiving almost 1,000 complaints of Monsanto’s new “no-drift” blend of the herbicide doing exactly that, drifting, and damaging thousands of acres of crops in the state. The company has released the hounds lawyers, is filing for court orders, is threatening to sue everyone in sight, has launched attacks against at least one individual member of the plant board, and it’s getting nasty real fast.
Meanwhile other big soybean growing states have instituted new, much stricter controls on the use of the new herbicide after hundreds of thousands of acres of crops were allegedly damaged by the new blends. Even the feds have gotten into the act, instituting stricter rules and usage regulations about using the stuff.
Monsanto and it’s partners that are selling these blends claim that the drifting isn’t their fault, and that it’s the farmers and people performing the applications that are to blame. The clam is that they’re using the wrong equipment, spraying at the wrong time, at the wrong temperature, and even using not Monsanto’s patented product, but straight dicamba that they’re purchasing elsewhere that volatilizes much more easily. But in order for this much damage to be caused that way, a huge number of farmers and applicators would have to be breaking the law, and I don’t believe that. Commercial applicators won’t risk it. They could lose their licenses, get huge fines, be sued, basically be put out of business if they didn’t apply these products in the proper way. And farmers who apply these products themselves would face similar penalties.
A2 Milk – I don’t recall now if I’ve talked about so-called “A2” milk before, but if you haven’t heard of it yet, you will in the near future. I suggest you go read the Wikipedia article on it which goes into extreme detail, and which has a plot like a soap opera, complete with bankruptcies, threats, untimely deaths, utterly ridiculous health claims including that it cured diabetes, cancer, etc., bogus marketing scams and I don’t know what all else before it finally became “legit”. I just re-read it and– oh brother, it’s a mess. The thing you want to remember about A2 milk is that it is, well, milk. The only difference is that the casein in the milk has a slightly different chemical makeup than A1 type milk. Nor is A2 milk entirely free of the A1 type of casein. Despite all of the hype, it is still just milk, and there seems to be no real basis in fact for any of the health claims being made for it. If you want to drink it, fine. But for heaven’s sake, don’t pay more for it than you’d pay for regular milk because it doesn’t cost any more to produce the stuff than it costs to produce A1 milk.
Dairy – There doesn’t seem to be much good news for the dairy industry for 2018. Thanks to continued overproduction and a projected increase in production during 2018 of 3% or more, milk prices look like they’re going to be heading down, with some people predicting the price could drop to $13/CWT or even lower. A dairy economist over at UW Madison thinks prices could climb as high as $16 in the second half of the year, but he seems to believe that production and demand are going to start to balance out, and frankly there doesn’t seem to be any real reason to believe that.
Some people think China is going to dramatically increase imports of milk products, but there’s no real reason to believe that, either. China has had a moderate increase in imports, but not to the point where it is having much effect on milk prices.
Don’t look to NAFTA for any help, either. If anything, the NAFTA negotiations are doing little more than making Mexico and Canada increasingly irritated. But more about that lower down on the page.
About the only good thing that’s happened in the dairy industry is that cattle feed prices have remained fairly low. But while that’s good news for dairy, it’s bad news for grain farmers.
Corn – Corn prices don’t look like they’re going to get much better either. Despite predictions that farmers are going to be planting less acreage in corn in 2018, the amount of grain actually produced isn’t going to be shrinking much because of improvements in yield, and as a result the price of corn on the commodities market has remained at or near the $3.50 level, where it’s been for months now. Demand for corn appears to be relatively flat.
As is the case with milk, there is hope that China will start to ramp up imports of corn, but there seems to be no real proof that is going to happen any time soon. The biggest buyer of US corn used to be Mexico. In 2017 Mexico curtailed it’s purchases of US corn, and has been talking to sellers in Brazil and Argentina. Increased sales to Japan has made up for some of that loss, but the way things are going in the political arena, don’t look for any improvement in grain exports any time soon.
NAFTA – The trade agreement that administration officials were claiming would be done in just two or three weeks back in mid summer of ’17, wasn’t, of course. Negotiations are still going on, and despite public statements by the administration indicating things are going just fine, they aren’t. Behind the scenes reports from the proverbial “unnamed source” indicate that things are definitely not going well. And when one considers that the ruling party in DC can’t even negotiate with it’s own members to keep the government funded and has to depend on the opposition to get enough votes to keep government offices open, that shouldn’t be surprising.
The question isn’t when a new NAFTA will be negotiated, the question should be is there going to be any kind of NAFTA at all. Right now I’d say that the chances of NAFTA being successfully renegotiated are around 50/50.
As is common this time of year, the experts are trotting out their opinions about what’s going to happen in the upcoming year in the agriculture sector. And as for that question up there in the headline, the answer is no.
The only analyst who seems at all optimistic is McGlone from Bloomberg, and his comments are a bit, well, odd, frankly. McGlone’s comments seem to be made by someone who hasn’t read a market report recently. He thinks ethanol demand is going to hugely increase, China is going to import US ethanol at a high level, and that is going to drive prices up. And none of that is really true. There is no huge increase in demand for US ethanol from China, ethanol use in the US has flatlined. And the “robust” global demand for corn he talks about? If that “robust demand” actually existed we wouldn’t be seeing record levels of corn sitting in storage.
As for the rest of the sources quoted in the summery, none of them are very optimistic about corn prices. Rabobank seems to think corn will reach $4 or better, but it’s basing that on are, I think, some pretty sloppy speculations about decreases in corn acreage.
Most of the others don’t see corn prices going up any time soon. Unless some kind of major disruption occurs like a severe weather event like a widespread drought, corn prices aren’t going to be moving up and may even move down a bit.
I was tempted to add in a bit about the whole ethanol industry here at the end, but I think I’ll leave that for an upcoming article. I’ll leave you with this thought, though. The entire ethanol industry is going to utterly crash and burn within the next twenty years or so, so I wouldn’t invest your 401(K) funds in it if I were you.
Well, I’m bored, I haven’t written much here of late, so let’s take a look at what’s been going on in the ag world recently.
Dicamba Issues Abound — The controversy over Monsanto’s dicamba herbicide blends and those approved under license, XtendiMax, Engenia and FeXapan, continue to have problems and generate considerable controversy, complaints and legal issues. Minnesota and other states have instituted restrictions on when, where and how the herbicides can be uses, new federal restrictions regarding training requirements and new application restrictions, etc. Other states have issued wide ranging restrictions as well. Even Mother Jones has gotten into the act with an article about the drawbacks of the product.
The companies involved are fighting back, blaming anything and everything for the fact that over 3.5 million acres of crops were allegedly damaged by the herbicide drifting away from the application area this past year. They’ve been claiming farmers are spraying the product with the wrong equipment, failing to follow the proper application techniques, etc. They’ve even tried claiming that famers are illegally spraying non-approved types of the herbicide. In one case one of the companies involved tried to get a member of the board that regulates herbicides in one of the states involved removed from the board.
Words Are Worth Money — The University of Arizona did a study of how consumers react to the term “natural” on meat labels and found out pretty much exactly what you might think: that people who know what the term means were unwilling to pay more for meat labeled “natural”. In the study half of the people involved were told the legal definition of the term, and half were unaware of what the legal definition was. They found that those who did not know would pay $1.26 more for steak labeled “natural”, while those who did know wouldn’t pay more.
Under USDA definitions, all fresh meat, even hamburger, can be labeled as “natural” as long as it does not contain artificial flavors, colorings, chemical preservatives or other synthetic ingredients. So basically if you’re paying more for a package of steak or roast labeled “natural” you are being scammed.
What it boils down to is that a lot of these companies will use any kind of marketing tricks they can to fool you into paying more for a product than you should.
Meat Tax Coming? — Methane and carbon emissions from cattle raising operations makes up almost 15% of the total production of greenhouse gases, and the production of cattle is projected to increase by 70% over the next fifty years or so. So some people are considering taxing the production and sale of meat to try to reduce the reduce greenhouse gas production from cattle. There are serious talks going on in some countries to institute tax policies similar to those used to curb tobacco in order to reduce production and consumption.
Frankly this seems a bit silly to me. The two largest producers of greenhouse gases are electric power plants and motor vehicles. The amount of methane and carbon dioxide produced by cattle hardly makes more than a blip on the charts when compared to that. So I’d think that if they were really serious about greenhouse gas reduction they’d be going after those two sources far more vigorously.
Corn Acreage Shrinking — It looks like farmers are finally beginning to cut back on the amount of corn they’re raising in response to poor prices. USDA is predicting that for the first time in years the number of acres of soybeans will equal or even surpass the number of acres of corn being planted in the US. Corn prices on the Chicago Exchange never went much over $3.75 or so at the peak, and have been sitting at the $3.50 or lower level for some time now. And, of course, the commodities price generally isn’t what the farmer gets for the corn. They often get considerably less than that. When you add in other costs like storage fees, etc. farmers are often getting a lot less than the commodities price. A awful lot of farmers out there are just barely breaking even on corn this year.
Some people are pinning their hopes on China increasing their imports of corn. China has been drawing down it’s huge stockpiles of corn over the last year or so, and some are taking that as a sign the country will begin to import more corn. But continuing to produce corn in the hopes that China might increase imports sounds like a great way to end up bankrupt.
Chicken Suits — No, not that kind of suit. The legal kind. Both California and Massachusetts are being sued over regulations they’ve instituted regarding how chickens (and other farm animals as well in the case of Massachusetts) are raised. The regulations require chickens (and in the case of Mass. other agricultural animals as well) from which products are derived for sale in the state, must be raised according to certain minimal humane standards. The plaintiffs claim that the regulations dramatically increase the cost of eggs and that it will cost consumers hundreds of millions of dollars, and that the cost of eggs nation wide has increased as much as 5% because of it. A claim I view with considerable skepticism. Locally the retail price of eggs is at almost an all time low. They’re going for about $1.00 to $1.28 per dozen at most retail outlets around here for standard, non-organic “generic” brands, and I’ve seen them as low as $0.79 and even less.
Now that’s a scary headline, isn’t it? You’ve probably seen similar headlines over the last few days as even some of the major news outlets have been talking about it. What’s especially troubling is that canola oil has been marketed as being a “healthy” oil for many years now, and it is in very wide spread use around the world. So the possibility that it is linked to something as scary as dementia is pretty serious.
What is canola in the first place? Well, in a way “canola” doesn’t really exist. It actually a variety of rapeseed. The term “rape” comes from the Latin word “rapum”, which means turnip. Rapeseed is related to turnip, rutabaga, cabbage and mustard. We’ve been using plants in this family for oil for thousands of years. It seems that rapeseed oil in the first half of the 20th century was used more as a lubricant than as a food product. Production in Canada increased enormously curing WWII.
After the war demand fell drastically and farmers began to look for other uses. Rapeseed oil was brought to the market in the mid 1950s as a food product, but it had some problems. It had a nasty green color and tasted pretty bad. Even worse, it had a high concentration of erucic acid. Animal experiments indicated that consuming large quantities of erucic acid caused heart damage.
In the 1970s Canadian researchers bred a variety of rapeseed that had far fewer objectionable qualities and far less erucic acid. The term “canola” was originally a trademark name for the new variety, made out of “Can” for Canada, and “ola” from other vegetable oils like Mazola.
Modern canola oil is considered, or was considered before this study came along, to actually be fairly healthy. But now…
How concerned should we be about this? This was just one study and more research needs to be done, but it still is something we need to be concerned about. Dementia is very scary and anything that increases the risk of getting it needs to be avoided if at all possible. To be honest, I’m not going to be buying canola oil after this. There are other oils out there with similar smoke points and nutrition profiles that can be used instead.