Borg: Riding the wave. An economic high tide lifts Iowa agriculture. Is it sustainable or cyclical? We’re questioning Iowa’s Secretary of Agriculture, Bill Northey. On this edition of Iowa Press.
Funding for Iowa Press was provided by Friends -- the Iowa Public Television Foundation. The Iowa Gaming Association -- consisting of eighteen state licensed casinos who pay over 392 million dollars in local, county, and state taxes every year to help fund a variety of projects including school infrastructure, Vision Iowa, historic preservation, and environmental initiatives. Iowa Banks know you want honest advice about how to best reach your financial goals whether it is financing an education, buying a new home, growing a business or funding retirement. Iowa banks,Iowa values. myiowabank.com. The Associated General Contractors of Iowa-- the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Iowa Community Foundations -- an initiative of the Iowa Council of Foundations. Connecting donors to the causes and communities they care about for good, for Iowa, for ever. Details at iowacommunityfoundations.org. The Rotary Clubs of Iowa and Rotary International. In 1985 Rotary International committed to a goal of ending polio worldwide. Very soon now after immunizing over 2 billion children the goal will be achieved. Rotary -- humanity in motion.
For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond. Celebrating 41 years of broadcast excellence on statewide Iowa Public Television, this is the Friday, May 25 edition of Iowa Press. Here is Dean Borg.
Borg: Often said that a rising tide lifts all boats. Well, as it applies to Iowa agriculture, it’s certainly true that the commodity prices, favorable right now, everything from corn to pork and beef, are lifting other segments of the economy. Main street, small town Iowa businesses are benefiting. So are employees of farm equipment manufacturer, John Deere which has plants in Ottumwa, Waterloo, Ankeny, Dubuque and the Quad-Cities. Deere reporting corporate quarterly earnings exceeding a billion dollars for the first time in history. But Iowa farmers right now have millions of dollars invested in a new crop that’s now in the ground, trusting unpredictable weather. And so it’s abundantly clear that iowa’s farm economy does affect all of us. And today we’re getting comments from Iowa’s Secretary of Agriculture, Republican Bill Northey.
Borg: Secretary Northey welcome back to Iowa Press.
Northey: Good to be here. Thanks Dean.
Borg: And across the table Radio Iowa News Director Kay Henderson and from Cedar Rapids, James Lynch who writes for "The Gazette."
Henderson:Mr. Northey we have a flourishing ag economy as Dean mentioned, but are you in any way concerned about a land bubble given the price of farm land?
Northey: Well, certainly farm land prices have gone up dramatically over the last ten years as we have seen that profitability go up the demand for the products around the world and so whenever you see that happen it reminds us of previous times certainly the 70s and the 80s. I think there is a lot of difference between then and now. I believe that demand is better based. It is based on market conditions in Asia and demand for our products. At the same token we are seeing increased production in other places. So we are likely to see these prices soften a little bit and if that happens I would imagine that land prices will probably soften. We're nowhere near the financial shape that we were in the late 70s or 80s where we would expect if those softened it would create any kind of financial problem in agriculture.
Lynch: Congress is expected to take up the farm bill next month and they've talked about some changes ending direct payments, capping payments to farmers, how is that going to affect Iowa farming and who farms and how they farm?
Northey: Certainly those direct payments are likely to end. The Senate has passed the bill out of committee. The House is looking at a Committee Bill here pretty soon. Either one will likely not have direct payments. Those direct payments are payments that come no matter what the price and they are based on historical payments. In Iowa we receive about 500 million dollars, half a billion dollars a year, in direct payments. So those not being here will have some impact. At the same token over the last ten years the ag economy has grown so much. That is ok. That will have very little impact on the total profitability within agriculture.
Henderson: So what would the percentage of half a billion be in the total ag economy?
Northey: Well, right now in 2002 our sales to our farms of crops and livestock was 12 billion dollars. In 2007 it was 20 billion dollars. In 2010 it was 24 billion dollars, and if we look at 2011 it was right near 30 billion dollars. So, grown from 12 to 30. We lose half a billion, that is true, but we don't know what 2012 will be or what the future will be. It could well be off of that 30 billion but we're still multiples from where we were back ten years ago.
Borg: Another thing is changing is that the tax credits for fuels such as biodiesel and ethanol are changing the blender's credit, I think it is called, is going to expire at the end of this year. The ethanol industry must think that it is kind of on quicksand right now. Is it going to sink?
Northey: No, - ethanol is certainly very strong. We have 41 ethanol plants in Iowa. Produce over 3 billion gallons of ethanol a year and we actually lost those tax credits last December 31st. So, we have been operating the first five months of this year without that 45 cent a gallon tax credit. Now the plants aren't very profitable right now with these prices where they're at, but they are still open. They are still operating. There is some belief that maybe a few of those will slow down over the summer depending on what grain prices are and the availability of corn. But as you look out and you look at likely prices, you look at likely oil prices, I believe that those will continue. These plants have gotten more efficient and then we have the next generation of plants. We have some cellulosic ethanol plants that are in the process of groundbreaking or letting bids for new production facilities. So, I think we have that next generation that is coming as well.
Borg: Does it all concern you about the supporting the corn market price? That ethanol is on a little bit more shaky ground?
Northey: That 45 cents a gallon makes a difference. Much of that was passed on to the consumer and so that narrowed up the price between ethanol and gasoline for the consumer. But certainly some of that had an impact on ethanol price as well. So, it will probably as the market squeezes the price of oil comes down and the price of corn goes up, it will cause that unprofitable time quicker but we are at 90 dollar oil, we're at 6 dollar corn and it is still working, and so it will depend on what the other prices do.
Henderson: The price of corn has had an impact on the beef industry. They are also being squeezed as pasture land is plowed under to grow row crops. There is greater demand for grass fed beef at the same time that farmers are, you know raising more corn-fed beef. What is the state of Iowa's beef industry in this environment?
Northey: You know it is very strong. Actually because of those ethanol plants and certainly they had - have had some impact on the price of corn, but so has demand from China. The combination of those things impacting corn price has impacted the profitability of cattle production. But in Iowa we have the DDGs that come out of the back end of those ethanol plants. So, corn goes in the front, the starch is used for ethanol, the product coming out of the back is distillers dry grains and solubles. That is a wonderful cattle feed and we are actually seeing an increase in the number of cattle fed in Iowa because of that. Now some other areas of the country don't have that. They are certainly more reticent about ethanol and what our producers are that has been an advantage for us, and I would hope that we can continue to grow that cattle feeding business.
Lynch: In addition to the pressures that Kay just mentioned the beef industry here has been rocked by the lean finely textured beef controversy or pink slime as some people refer to it. Last summer the talk was all about rancid eggs. Is Iowa agriculture supporting two black eyes here that you have to sort of respond to, to gain consumer confidence?
Northey: Well, I think it is always important to be able to communicate to consumers what is going on and I think, you know those things have had very little impact. But they have had some impact and I think they certainly cause us to think that other things can happen down the road. We are at a time where a lot of folks are not close to agriculture. They don't know where their food comes from. They haven't had experience and even some of the normal ways of taking care of things, they're not used to that. So, I think we have to continue to ramp up our ability to communicate what is going on in agriculture. There are folks that are part of these movements that are - would love to shut down pieces of agriculture. I believe most of the folks that are involved in these issues are not that way. They are just wanting to be able to understand what is happening and I think we need to do a better job of communicating what is going on in agriculture. Mostly really good things.
Lynch: In that regard this year the legislature passed the so-called "Ag Gag” Bill that would ban people from hiring on at an ag production facility to do surveillance of - for some of these groups that you just mentioned who would like to shut down ag production facilities. Did that help or hurt the public perception that ag producers might be trying to hide something from them?
Northey: I think there is certainly were folks that were trying to hurt producers before when they were falsifying information to go into facilities and then sometimes falsifying what was actually happening in those facilities to be able to take a message out to damage agriculture. So that Ag Protection Act, the effort was to reduce the likelihood of that will never stop that. There is certainly those that want to do harm to agriculture. I think the vote of support for that tells you that there is a strong support for agriculture and livestock agriculture in the state. And now we are seeing other states look at that bill and decide to do it in their states as well. So, I think it was a good process. I don't think it solves a lot of things. There is certainly the folks that were opposed to agriculture before will try and use -
Borg: Are you glad - Are you glad it is inactive?
Northey: I am. I don't know that it fixes all the ills that we think that it could or we hoped that it could. And it certainly doesn't stop the need to communicate the positive things that are going on in agriculture. But it is simply asking for people to be honest in their application to work for facilities and that would seem, I think, very appropriate.
Henderson: For viewers who don't know who you are. You are a Republican. The Republican Party of Iowa has proposed platform that has an agriculture section and in that section it calls for labeling food that has GMO included in it, and it also calls for labeling food if it comes from another country. So that people know that they are buying Brazilian Grapes or strawberries from Mexico. Are those things that you support?
Northey: Well, there is a lot of effort out there and most of the foods do have some type of labeling. In fact that has been part of the battle here on country of origin labeling on meats and trying to determine how to best do that. I think generally labeling makes sense where it works. The mechanics of it is a challenge. I don't think a consumer learns anything by being labeled as a GMO. GMO, the biotech process, is just a process of developing that seed. If we were to look at all the different things that go into that, I think we confuse consumers with pages and pages of details that doesn't help them. So, I think we have had 20 years of biotechnology in the seed business that have proven to be very beneficial to agriculture and consumers, and I don't think we need to label it.
Borg: Secretary are you sensing that as applications for large scale confinement livestock operations are submitted to the approving authorities, that increasingly that there opposition? We saw that years ago that maybe it somewhat subsided, but now it seems that increasingly every permit is contested. Are Iowa's laws working well for livestock confinement now?
Northey: I think that they are. I think that we certainly see some that are contested and then in some cases people make different decisions based on what comes out of those discussions. I think an awful lot are being put in the right places. They are being put in places that the neighbors are not having a problem with and so although we are seeing the occasional cases where there are confrontations within neighborhoods over this, I believe the vast majority of them are being handled appropriately and this is working. We are talking about property rights for both - both the folks that want to be able to put a livestock operation on a farm and those around that. And I think the law, current laws, statewide law, balances that.
Borg: Does it need to b e modified, tweaked in any way?
Northey: I don't know that it does. I don't think that it does. I think there is opportunity for input. I also think the livestock industry is being much more aggressive and working with folks that are proposing new facilities, and saying let's consider where we put that. Let's meet with your neighbors before we even talk about it and those have eased a lot of the concerns. And frankly in some cases folks in the past have had some concerns. You go out to talk to them afterwards and they say it is nowhere near what the fear that we had prior to that building being built.
Henderson: Jim mentioned the farm bill earlier. Republicans in Congress are especially against direct payments to farmers. They are also not terribly thrilled about paying farmers when there is disaster flood or drought. Should Iowa farmers just prepare to have no assistance from the federal government if natural disaster strikes?
Northey: Well, I think there will certainly be a crop insurance aspect of the farm bill. In that case the farmer pays a portion of that cost. The government comes in and pays a portion of that premium cost as well. There will be that crop insurance available to producers if they want to pay that. I believe there will be some sort of safety net but I don't think it will be anywhere near as robust as it has been in the past and I think most farmers are looking and saying we will need to manage our own risk even better than what we did. And we need to be able to have some money on hand for those years that are much leaner. We need to go ahead and buy equipment in those years that are better, like now, and maybe use that equipment several years through years that are not as good.
Henderson: For critics, let's just be a devil's advocate, why should the government help farmers buy insurance for a business when they don't help the clothing store on Main Street buy insurance for their business?
Northey: Well, I think certainly agriculture is so - as we talked about in the beginning, we are so subject to the vagaries of weather. You look at last year. We had a year that was generally a very good year for agriculture in the state and yet along the --Missouri River, we had farmers that lost their whole crop, and without crop insurance those farmers would not have been able to go ahead a plant a crop this year. And by being able to have that, they pay significant amounts of money towards that insurance, and they choose at what level they are going to insure. But that is a good that I believe is good for the federal government and Iowans and other Americans to be able to have that insurance available.
Borg: As long as you brought that up, the Missouri River, not only did farmers out there loose crops, they lost productive farmland for years to come because it is not farmable right now. Are you advocating at all that there should be some assistance or maybe there is that I don't know about. Some assistance in compensating farmers who -- lost high price farmland.
Northey: Yeah, there is a couple different things that are done. One is in some cases, if farmers decide not to farm that again, they can put that into a longer term reserve program. That's not generally what they want to do. Where a portion of that farm into that and get some payment for the value of that land. It is going to be nowhere near what it was worth before. The general program that is being used is one that is being used through Farm Service Agency is part of USDA, and they will pay a portion of the cost to move the sand off and make that farm better. They just will pay it to move it to the side. They won't pay to truck it off and you can't put it back in the river, but it will soften some of that cost. But there certainly were a lot of folks that ended up paying the whole cost of getting that back in shape and they said, we can't wait for the federal government, we need to do that, the land is value, the crop this next year, we hope is valuable, and we need to get back to it.
Lynch: After flooding in Eastern Iowa in 2008, there was talk that in the future one option might be to flood upriver farm land to protect downtown Cedar Rapids, for example. What role should farmers play in flood mitigation?
Northey: Well, so much of it is based on the structure. And part of the problem is Cedar Rapidsis in a bowl where that water collects and that is a logical place - or that is the place at least the water finds to collect. There have been some efforts to say let's hold as much of that water on the land as possible, but as there is not very many places where you can say let's flood, you know acres and acres of farmland because there is not the kind of slope that allows you to do that. There is not a big large flat areas. They have property rights too. Certainly those farmers along those rivers, we saw in the case of Missouri, they long ago had agreed to have their land flooded if it was necessary. The federal government did that last year. If that is the case in situations, that makes sense. Maybe some farmers would be willing to sell that right in some of those years to be able to have that land flooded. If that is true then that makes sense to be able to work through. In most cases the mechanics of it don't really work very well. The best is to hold as much water as we can. But boy, when we get as much water as we did 2008, it is hard to hold enough water anywhere to keep that much water from going down the river
Henderson: I want to ask you a couple of questions about trading commodities. There is a proposal to have the board open nearly 24 hours a day and some discussion about when you USDA reports about the crop of the potential harvest or the actual harvest are released shutting down trading for a period because those reports have such an impact on the prices. Do you have an opinion as to what should be done?
Northey: We're kind of diving into that. We have already started the longer days. No one has decided exactly what to do when those reports happen. I think it does make sense to have a short, kind of cooling off period where everybody is able to look and digest what that report is. That the risk of somebody getting the information of that report even seconds before somebody else could cause somebody to have an advantage over somebody else. You know how fast is your email? How fast is your system? Who is closer? I do think it makes sense to be able to provide a little bit of time in-between. Whether that's some discussion about changing the reports until the afternoon or running them on weekends or doing something else to take them out that live time. I think that makes sense. I am not sure the mechanics of what is going to come out when it does.
Henderson: There were a lot of farmers who were impacted by MF Global and that's a firm that tanked because Jon Corzine, the former New Jersey Governor, who ran it, invested in sovereign debt. Nobody knew he did that and the whole thing collapsed. Do you think it is time for some new regulations from the Commodities Futures Trading Organization at the federal level to segregate those things or forbid those kind of investments because a lot of Iowa farmers lost money in that deal.
Northey: In my understanding in the situation, he actually violated regulations. He took money out of commodity accounts or -
Henderson: Customer’s. He took customer’s money.
Northey: He took customer’s money, put it into his corporate, so it was already illegal. We can make it double illegal, but it was already illegal. But there is as well discussion about guaranteeing those accounts somehow. If you have a bank account, you have a guarantee. So even if there is a mistake made by somebody, somebody illegal, there is an insurance fund that you pay into. It is very infrequently, actually tapped, but the potential of being able to make sure that those funds, that are yours, that are not the companies, they are yours, are protected when you don't really have control over those, over somebody doing something illegal.
Lynch: Changing gears here. Iowa farmers are very reliant on the farm to market road system, and Governor Branstad has said next year is the year to raise that gas tax that hasn't been raised in over two decades. Are you on board with that? And do you see a need to improve that system so farmers can move heavy loads of grain and livestock to and from the farms?
Northey: Boy, you can see a lot of problems in the countryside; bridges, gravel roads, certainly the other, even the paved roads in the countryside as well. We can see it in the state system as well. And so I hear from a lot of folks that we need to find additional ways to be able to repair some of those. It would seem like that is what necessary. I think the governor did it right in this year saying let's find efficiencies within DOT to be able to get more of the DOT dollars into projects. Let's make sure we're doing the absolute best job that we can before we go looking for that gas tax increase. So, when we get that next gas tax increase, if we do it, that we know that is all going towards roads and is not going towards other kinds of projects. So, I-
Lynch: It sounds like you don't see an alternative to a gas tax increase?
Northey: I really don't. I am afraid that we are seeing our infrastructure go backwards right now at least with the current rates. And our folks, you know ten and twenty years from now are not going to thank us if we don't do our share in keeping the-
Borg: So what would happen if oil prices - go ahead Kay.
Henderson: So, next year is the year to raise it?
Northey: Well, I think it could well be. I certainly follow the governor's argument. That is going to be decided by folks other than me. But I hear a lot of folks in the countryside that don't want more taxes. That will say this - these are user fees that are necessary to make sure that we have the roads that we need and the bridges repaired, they would need to have repaired.
Henderson: By all accounts you enjoy being Ag Secretary. I am wondering though if you have aspirations for higher office and what those might be?
Northey: I don't know what is next. We've got an election well before I have another decision to make. I serve until 2014. So, I don't know. I love doing what I am doing. I could see myself doing something nongovernmental. I could see myself running for something else. Right now I just feel very blessed to have had two terms in five and a half years now as Secretary of Ag.
Henderson: When you say something else, do you yearn to join a legislative branch somewhere or would you prefer to be an executive such as a governor?
Northey: That is a great question. I don't know. I don't know and it really does depend on what others are doing. It depends on what the issues are at that time and where I think I could make a difference. I really love what I am doing and it would have to be something I would really want to do to take me away from being Secretary of Ag.
Lynch: Secretary Vilsack was in the state again this week and he talked about how the ag economy, the flourishing ag economy where we started, should benefit Democrats in the election. And suggesting that President Obama should get at least some of the credit for that strong economy. Is he right? Should the President get the credit for this ag economy?
Northey: You know, there is lots of reasons for the strong ag economy. Certainly that's trade with China. Certainly that's an ethanol program. Many of these things started long ago. They - he had been supportive of renewable fuels, the administration has. They have certainly been making trade work. Although some of us got impatient along the line on some potential trade agreements that finally came about that we thought ought to happen sooner. You know inherently a president gets some credit. You know Iowa we have 5.2 percent unemployment. The Federal Unemployment is 8.1 percent. That impacts things. Now, that is one measure of it. There are folks that also have seen a series of potential regulations come in to agriculture from labor to dust, climate change regulations that affect electrical power plants, you know a pipeline that is not going through that affects fuel prices. Those things are also part of the matrix that people take into account when they decide to vote this fall and we will see how it breaks. I think certainly many -- or many farmers are going to lean towards the Republican Party because of some of those threats of regulation. Some of which happened and some of which didn't.
Borg: Just a few seconds left here. But there is a new reopening of the Tama packing plant that has been around for several decades by Bruce Rastetter and other investors opening that. You said the beef industry is expanding in Iowa. Is there a role for state government to get involved in providing more packing plant options for farmers?
Northey: You know, I think there is a risk of losing the Denison packing plant and we need more packing capacity in Iowa. I think in that case the state has been involved previously with the Tama plant and the state, I don't believe is likely to be very involved in this reopening. But I think it is important to encourage others to look at new packing facilities.
Borg: Thanks for being with us.
Northey: Thanks Dean.
Borg: Next week on Iowa Press, a conversation with two Iowa community college presidents, Rob Denson of Des Moines Area Community College and Northeast Iowa Community College President Liang Chee Wee. Usual times, 7:30 Friday night and a second chance to see the show Sunday at noon. I’m Dean Borg. Thanks for joining us today.
Funding for Iowa Press was provided by Friends -- the Iowa Public Television Foundation. The Iowa Gaming Association -- consisting of eighteen state licensed casinos who pay over 392 million dollars in local, county, and state taxes every year to help fund a variety of projects including school infrastructure, Vision Iowa, historic preservation, and environmental initiatives. Iowa Banks know you want honest advice about how to best reach your financial goals whether it is financing an education, buying a new home, growing a business or funding retirement. Iowa banks, Iowa values. myiowabank.com. The Associated General Contractors of Iowa-- the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Iowa Community Foundations -- an initiative of the Iowa Council of Foundations. Connecting donors to the causes and communities they care about for good, for Iowa, for ever. Details at iowacommunityfoundations.org. The Rotary Clubs of Iowa and Rotary International. In 1985 Rotary International committed to a goal of ending polio worldwide. Very soon now after immunizing over 2 billion children the goal will be achieved. Rotary -- humanity in motion.
Iowa Secretary of Agriculture Bill Northey
posted on May 25, 2012
Borg: Riding the wave. An economic high tide lifts Iowa agriculture. Is it sustainable or cyclical? We’re questioning Iowa’s Secretary of Agriculture, Bill Northey. On this edition of Iowa Press.