Wednesday, January 31, 2007

Hold me, please...

Jeez - flatlanders shouldn't travel to places like Spokane that have three (count 'em) dimensions. Oh, sure - these places make nice postcard materials, but it it worth the vertigo?

Farmers in this area are unique, and suddenly find themselves facing an agriculture reshaped by biofuels. Regardless of what part of ag is your particular corner, the size and depth of the disruption in markets, land use, and policy will leave no farmer/rancher untouched.

This great debate will at the very least expose the powerful ties which link producers. One is land. As the mandated push for renewable fuels thunders on, it soon dawns on participants that green resources have to be grown somewhere, and virtually all of our somewheres are busy already.

Another link is trade. Grass producers here face fierce competition from Danish growers, for one. [BTW - Danish grass seed production is a case study of what happens with just one decoupled, fixed payment for a subsidy]. And recent court decisions on open burning have forced changes for this high-value industry. Grass seed is a big export, and growers have much to lose from a failed Doha round.
A few players now dominate our world’s turf, forage grass, and legume seed production, with the majority of trade being turf grasses (perennial ryegrass, annual ryegrass, tall fescue turf varieties, Kentucky bluegrass, and the fine leaved fescue’s). With the European Union expanding to 25 nations, lands in the newer community members may switch to grass/legume seed production. Direct subsidies to grass species in the EU have been taken off, but now the market place will play a major role in European growers decisions to grow grass/legumes seeds. This change to “Farm Based” subsidies will no longer be applied directly to a particular crop. Instead, EU growers will be growing the most profitable crop for their situation, be it grains, oilseeds, or grass/legume seed.

The marketplace has also changed. No longer do end-users obtain supply in advance. Buyers have moved to a “hand-to-mouth” approach. Obtaining supply month’s in advance is becoming the exception. This has forced growers to hold onto their production longer, thus becoming the storage component of the marketing wheel. Improvements in transportation have also allowed end users to wait before placing orders. These marketplace changes will force growers into more timely decisions. In the grass/legume seed business, growers must decide quickly when and which crop to grow, which may also mean quicker movement of growers into, and out of, grass seed production. [More]

Ditto for wheat. My gut feeling is wheat needs to get even higher relative to corn to keep our foreign customers supplied. New 35-day corn varieties* opening the possibility of growing corn in places wheat has owned.

Finally, we are all linked by being citizens in the same country. Well, duh! But if the other 300 million citizens decide there are better things to do with government money - even slightly - we could be facing a significantly different business environment. Or if our economic policies grease the skids for an even cheaper dollar, that means something as well on your farm.

Livestock producers (especially ranchers) may reconsider if traditional independence has been more an aloofness from participating in farm policy. Up until now it has been a pretty good fight to sidestep, because 50-cent LDP's certainly helped keep the market price for corn um, reasonable.

Like it or not, we are all in this together. Globalization of markets has insured linkages will continue to intensify and entangle formerly disparate enterprises. And if producers in the US don't start communicating better, we could see our strongest opposition coming from across the street - not the ocean.

* Joke (for now)

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