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Colorado Ag Classic gives producers industry update

By Kylene Scott

"Count your blessings we're in an industry that is so critical to the American economy," Colorado Agriculture Commissioner John Salazar said during the Colorado Ag Classic General Session Dec. 13 in Loveland, Colo.

The event was the joint annual convention of the Colorado Corn, Colorado Seed Growers Association, Colorado Sunflower Administrative Committee and Colorado Wheat. Several sessions were held Dec. 12, but the bulk of the events took place Dec. 13.

Salazar kicked off the General Session and reminded producers that getting together to discuss industry issues is very important.

"We have talked about how there are so few who live on farms and ranches--two percent of the population," Salazar said. "Our voice cannot be heard unless we stand united. These special interests that have tried to divide our industry. You see how commodity groups are pitted against livestock groups. We're too huge to allow that division to happen."

Salazar encouraged farmers and ranchers to reach out to their counterparts and stand united on important issues.

"We are all one industry, a viable part of America's economy," Salazar said. "It would be a sad day in American history had we ever not been able to produce our own food. This is a matter of national security."

Salazar believes United States agriculture will remain in the driver's seat for the next 10 years despite the numerous challenges the industry.

"Let me just say, if you look at Colorado's agriculture, for example, since 2004 we have had eight consecutive years of markets being or actually net farm income being over the one billion dollar mark," Salazar said. "We continue, and look at 2013, according to the ag statistics survey, we will see a record year that will actually top and make record numbers as far as net farm income."

Salazar reiterated the importance of water and said the biggest challenge Coloradans face is to keep water on the farms.

"As many of you know, part of the reason that we continue driving up ag land is because the cheapest source of water is in agriculture and we continue to have an industry that actually contributes over 40 billion dollars to the state's economy," Salazar said.

Agriculture in the state has 170,000 direct jobs.

"I would venture to say that we produce a lot more jobs than that, because agriculture contributes and touches almost every single sector of the economy--whether it's transportation, whether it's fuel, fertilizer, manufacturing, education," Salazar said. "Our contributions to the state are great."

Salazar said in Colorado the agriculture industry contributes more than 40 billion dollars to the state's economy, ranking second in the state. Only one tenth of one percent goes to the general fund to help fund the Colorado Department of Agriculture.

Following Salazar was the keynote speaker, Jim Wiesemeyer, vice president, Informa Economics. He provided an analysis of the issues facing agriculture, including the economy, the farm bill, energy and trade.

"Leaders better lead now, it's that important," Wiesemeyer said of the legislators in Washington. He has been an analyst/reporter based in the nation's capital for 35 years.

"The business of agriculture, in my lifetime, has never been better. You're several years into the golden era of U.S. agriculture," Wiesemeyer said. "If you produce anything protein, you are in one of the best world markets of your lifetime, and it's the rise of the rest--China, Indonesia, Malaysia, Latin America. They need food, they need protein, and they need you."

The corn-based ethanol program and the policy change involved with the industry "dramatically changed agriculture," Wiesemeyer said. Bulk commodities became an asset commodity, and roles changed.

"It was no longer bulk wheat, bulk corn. It became a protein around the world," he said.

The index funds then became important, and the world opened up. China began flexing their economic muscles. None of that is going to change according to Wiesemeyer. It was catch-up time for the really laborious markets at the time.

"So you're never going to see $2.50 corn again. You just won't," Wiesemeyer said. "That doesn't mean you're never going to have a bear market, but more often than not, you're going to have higher highs and higher lows."

The value of the U.S. dollar plays a role in agriculture Wiesemeyer said. Some big producers (15,000 to 20,000 acres of corn) have told the analyst that their longer-term marketing plan is based on the dollar.

"They started getting bullish when the dollar started trending lower because they knew that would make your commodities more competitive than the export market," Wiesemeyer said. "Inversely, they're going to be more aggressive sellers when that dollar bottoms and starts going higher. No on knows when that is going to be."

He said watch out for Germany, as it is by far the strongest European economy at the moment. They are going into a mini recession, and if it were to go into a severe recession, it would cause a domino reaction.

"Europe is China's biggest customer, so you can see some linkages here. China's growth would be tempered if Europe goes into an even worse recession, and we in the United States would not be able to escape that," he said. "This is not a prediction. I've learned in my career, you tell people what to look out for and if they see this happening, you can make decisions."

According to Wiesemeyer, biofuel production is just not a U.S. issue, but a worldwide one.

"This is just not an agriculture issue or an energy issue, its national security," he said.

Countries in Europe have scaled back their percentage of agriculture crops being allowed into renewable fuels.

Trade and trade liberalization plays a big role as well, Wiesemeyer said, as export markets are needed to give a little bit more margin profits, and there has to be a viable trade policy.

"The ag commissioner talked about the last three free trade agreements done under the Bush administration and finalized under Obama through the free trade agreements with Columbia and panama, etc.," he said. "They can't guarantee exports, but they can give you the opportunity for market access."

Biotech has played a huge role in agriculture in recent history, and the U.S., according to Wiesemeyer has been late to the game, and is now paying the price for the delay. Precision development is going to help to feed growing populations, and a recent speech from a Monsanto official has helped Wiesemeyer believe there might be a solution. They are developing seeding technologies that would allow up to six hybrids across a field in one pass, coupled with aerial seeding.

"You know, variable seeding is going to get a significant increase in yields in the years ahead. This is not pie-in-the-sky," he said. "Monsanto began in their corn--they call it field strips last year in Illinois. They're adding soybeans this year in fallow with wheat and other commodities."

Wiesemeyer said if there is a sandy spot in the field it can be evaluated and a different hybrid could go in that area and their data shows a significant increase in the yields.

"The data clearly shows a fairly consistent increase in yields across that field," he said. "They're dissecting that field GPS wise. The contour of the land, just not soil types, the contour of the land, where fertilizer should go, etc."

This technology makes Wiesemeyer much more hopeful fort the future.

"So I'm far more comfortable that this country will be able to meet the demands from a production side. But now think through from a competitive side, between the different crops," he said. "Corn is king right now, no ifs ands or buts. Not only from a market place, but from an acreage decision. Look at your energy policy--ethanol. When you mandate crop to be used for energy you have to use it."

If the yield enhancement comes out, Wiesemeyer said it would be priced per acre not per bag, with Monsanto gearing for 2016 nationally, so other seed companies are talking about gearing up in 2017.

"Hopefully they'll have the data for all the major crops at the same time, but I have my doubts. So the bigger you go to the spread between corn yields and soybean yields and other crops, that's the competitiveness factor in the market place," Wiesemeyer said. "So that means you wheat producers, have to maintain your thrust on research. Look at the equipment changes that are coming there because the seed industry is going to dramatically change from 2016 forward, I'll guarantee you that."

Most of the growth in trade is outside of the U.S., and even in the southern hemisphere--in many emerging markets. Wiesemeyer said President Barack Obama hasn't been very aggressive on trade policy but he's been working on one to keep the U.S. in competition with China.

"Import growth again is coming from those same developing countries. You look at your trade policy with those countries and make sure that you have the right people in the right spot and the right policy," Wiesemeyer said.

Be cautious though.

"If you think it's been volatile the last two years, hang onto your seat, because it could be just as volatile," Wiesemeyer said. In trade disputes, you have to have the right people in Washington and you have to have your commodity groups do a good job. They do police some of these trade disputes that do your industry well."

Watch for more coverage from the Colorado Ag Classic in upcoming issues of High Plains Journal.

Kylene Scott can be reached by phone at 620-227-1804 or by email at kscott@hpj.com.

Date: 12/24/2012

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