Vilsack Takes Heat On Climate Change Legislation
The Commerce Department reports the U.S. trade deficit rose 2.2 percent in April and is running at an annual rate of $361 billion -- -- or about half of last year’s trade gap.
U.S. exports and imports both soared to record-highs last July. Since then, exports have fallen 26 percent, while imports are down nearly 35 percent -- -- with one notable exception… Petroleum imports rose 2 percent in April to $18 billion.
Keep in mind, the average price for a barrel of crude oil last spring was $46.60. On Thursday, it settled at $72.68. That’s its highest level since October, but only about half of its all-time high posted last summer.
Higher energy prices had a profound effect on U.S. motorists who drove 12 billion fewer miles in the first quarter of 2008, than in the previous year, reducing carbon dioxide and other greenhouse gas emissions by roughly 9 million metric tons.
Nevertheless, the push to curtail CO2 emissions is now in high gear. And with legislation designed to fight climate change about to be debated in the House, Secretary of Agriculture Tom Vilsack testified to lawmakers this week on agriculture’s role in pending climate change legislation.
Rep. Frank Lucas, R-Oklahoma: "This is a bill, enormous in size and consequence, that has the potential to permanently effect every man, woman and child for decades to come."
Rep. Leonard Boswell, D-Iowa: "We've got to have USDA involved in this and we have to have the confidence it will be or I don't think we're gonna have a bill."
The Waxman-Markey Bill, officially known as the American Clean Energy and Security Act of 2009, establishes rules for storing and trading greenhouse gasses. House Agriculture committee members are angry the measure all but eliminates agriculture from any monetary benefits available in the two billion tons of allowable offsets. They also were displeased the Environmental Protection Agency, or EPA, will administrate the law.
Chairman Collin Peterson, R-Minnesota: "...and then coming up with these kinds of projections, that I don't agree with, this is why a lot of us on the committee do not want the EPA near our farms."
Lawmakers are concerned the measure could cost agriculture millions. There also is fear new jobs would go to countries like China and India where emissions are virtually unregulated.
Stressing the need for the U.S. to be the leader in climate change, Secretary Vilsack continually repeated his belief that American farmers are innovative and EPA would treat the agricultural industry fairly. But that failed to appease lawmakers.
Rep. Frank Lucas, R-Oklahoma: "...they will put their name on the line on this version of the bill. But if you were a member of Congress, representing the great state of Iowa, and you had to vote 'yes' or 'no' in 14 days on this bill, what would you do?"
Secretary Tom Vilsack, USDA: "You're asking me a hypothetical..."
Rep. Rep. Frank Lucas, R-Oklahoma: "But you're the voice of agriculture within the administration, sir."
Secretary Tom Vilsack, USDA: "I appreciate that and I'm going to answer your question... We are looking forward to working with you to do whatever is necessary to make sure agriculture and forestry are, in fact, part of this opportunity."
Rep. Frank Lucas, R-Oklahoma: "I truly appreciate the challenge you are in but sitting on this side of the dais, looking at this...hope my colleagues who care about rural America and their districts cannot vote for."
Because the measure is on the fast track the House Agriculture Committee will not be allowed to make any changes to the bill before it reaches the House floor.
Regardless of the bill's future, Vilsack made it clear the Obama Administration wants to demonstrate the U.S. is working to prevent climate change by the time the President attends the United Nations Climate Change Conference in Copenhagen at the end of the year.
Proposed Food Safety Reforms Authorize FDA to Conduct On-Farm Inspections…
While it’s doubtful the consolidation will go that far, a series of high-profile recalls now has Congress considering the most sweeping reforms of the nation’s food safety system in the past 50 years.
Known as the Food Safety Enhancement Act, the measure would give the Food and Drug Administration broad new powers that could extend all the way to farm.
Currently, USDA oversees food safety for meat poultry and eggs. And the FDA regulates fruits, vegetables, processed foods and other products which cumulatively account for about 80 percent of the U.S. food supply.
The push for more rigorous food safety standards comes in the wake of recent food scares over salmonella-tainted tomatoes, peppers and peanuts, which prompted national recalls.
The proposed “Food Safety Enhancement Act” would broaden FDA’s oversight, granting the agency power to mandate, what are now “voluntary” recalls, and assess the costs of the action to the food’s producer and/or processor.
The measure also would establish new standards on animal control and waste management, but its most controversial aspects are provisions authorizing FDA to conduct on-farm inspections, ensuring the safety of meat and poultry products.
According to the National Cattlemen’s Beef Association, or NCBA, the FDA does not have the money, employees, or expertise to properly oversee the livestock and poultry industries.
Noting “the United States has the safest food supply in the world,” NCBA officials caution, “Any changes to that system should be carefully considered to ensure they provide additional benefits without detracting from successful processes.”
The Food Safety Enhancement Act would require better tracking of the origin of processed food. And meat producers would also have to label where feed sources originated and post that information into an electronic database.
The measure passed by voice vote out of the House Energy and Commerce Subcommittee on Health Wednesday and is expected to go to the full Committee for markup next week.
Barn Restoration
Since farmland tends to be flat, well-drained and affordable, AFT estimates that every minute America loses two acres of agricultural land to development. And over the past 20 years, the average acreage per person for new housing almost doubled—with the best agricultural soils being developed the fastest.
And as America’s fertile fields succumb to development and disappear forever, so do the rustic barns that once dotted the rural landscape. Increasingly though, landowners are investing time and money in hopes of saving the iconic structures. Andrew Batt explains.
In the last fifty years, 
changes in farming practices have altered the rural landscape dramatically. In Iowa, it’s estimated that only 60,000 barns remain of a legion that once numbered over 200,000.
And the Hawkeye State loses 1,000 more barns every year.
Jacqueline Schmeal, Iowa Barn Foundation: “Can you imagine Iowa without barns, without corncribs, without silos? And all these metal buildings are just going up everywhere. We're just going to look like an industrial park like much of the U.S. is starting to look. And if we can save these, it’s going to be special.”
Jacqueline Schmeal is the president of the Iowa Barn Foundation… a non-profit organization dedicated to the preservation of Iowa’s rural buildings. Scmeal says the barns are “symbols of Iowa’s early agricultural heritage and a way of life that is disappearing.” The Foundation provides matching grants to farm families for barn restoration. In exchange for the grant, the owners sign an easement obligating all future owners to keep the barns in good repair.
Shirley and Larry Ellis have lived on their farm near Lytton, Iowa for more than three decades. Their classic structure is a local landmark known as “The Big Red Barn.” Built in 1918, the barn is 40 feet tall to the eaves and features of 3 x 12-inch A-frame timbers.
Over the years, the Ellis’ have worked on nearly every structural component of the barn, from the ground up. The work included replacing and, in some cases, relocating siding, doors, windows, and the entire roof.
Orinally built for dairy, “The Big Red Barn” benefited from and Iowa Barn Foundation Grant. And while the Ellis barn no longer used as a dairy, it continues be a safe haven for traditional farm animals, like chickens and the few head of cattle the Ellis’ own. The main residents of the barn, these days though are Red Rock Arabian Horses.
Larry Ellis, Lytton, Iowa: “I’m really proud of it. I really am. It was just a neat project altogether, and this winter when the animals are in there and you can go to bed at night and know that they’re housed nicely, that gives you peace of mind too. So, it was worth it. Yes, it was worth it. I’m pretty proud of it. I’m as proud as the guy who built it.”
In 2001, the Ellis Barn was on the first All-State Barn Tour held by the Iowa Barn Foundation. Held annually, the tour is a weekend-long open house of barns that have received matching grants from the foundation. The 2001 event was the first of its kind in the nation and drew thousands of barn enthusiasts from 20 different states.
Dennis Heflin, Harlan Iowa: “As we get older, we get more of an interest in saving some of this history for future generations and I think that's what's happened here. We just all have to age before we realize maybe there is a reason why we should do this.”
Dennis Heflin farms near Harlan, Iowa and the barn on his family’s farm has been a stop on eight of the Iowa Barn Foundation’s All-State Barn Tours. Built in 1901, the classic structure has served four generations of Heflin’s.
Dennis Heflin, Harlan Iowa: “So we've seen life go through here, we've seen death happen in it and just about anything and everything else in between.”
With its four-gabled roof line the Heflin barn is distinctive. At one time, there were several similar barns in Shelby county, but today only the Heflin barn remains.
Dennis Heflin, Harlan, Iowa: “To me, if we didn't see barns part of the landscape, it would signify that we're not maintaining our heritage, were not maintaining the history that was there, and that we’re just letting the old go away and just let them be no more. ”
The reasons people cite for restoring their barns are as diverse as the structures themselves. Family heritage was the primary motivation for Charles Anstey to renovate his barn near Massena.
Charles Anstey, Massena, Iowa: “I did it to kind of remember my parents and grandparents—grandfather. He built the barn, for my folks. as a wedding present when they were... the following year after they were married. The house and the barn both, at the same time.”
For others, like barn enthusiast Wendy Elliot, there is a spirituality in barns. With their cupolas that reach for the sky, Elliott sees the iconic buildings as cathedrals of the cornfields.
Wendy Elliot, Colo, Iowa: “I've always like going in barns ever since I was a girl because I think you can almost feel the spirit of all the animals that have been in the barn. So, I think it's definitely a sanctuary and I think it also represents the heritage of the entire state.”
Wendy Elliot and Joe Rude were Midwesterners living in New York City who decided to return to Iowa when their children were born. The barn on the property they purchased was in such disrepair that it took two different house movers and a team of Amish builders to straighten the building. Lee Gelder helped repair the roof.
Lee Gelder, Elliot-Rude Barn: “I think it's fairly important that people do this. I know my children really don't have any idea what the purpose of a barn is. They just look at it as a big old building that is 90% of them are empty. If somebody doesn't do something, children are not going to know what a barn was even used for in another 20 years. You'll be lucky to find a barn.”
For “Market to Market,” I’m Andrew Batt.
Market Analysis: Sue Martin, market analyst
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For the week, July wheat lost nearly 40 cents, and the nearby corn contract was down 18 cents.
Tighter supplies of old crop soybeans sustained the rally in the soybean pits, where the July contract gained another 20 cents and the nearby meal contract was up more than $26 per ton.
In the softs, cotton moved back into positive territory as the December contract posted a gain of $1.65.
In livestock, August cattle were down 45 cents. Nearby feeders gained nearly $1. And the July lean hog contract traded sideways with a weekly gain of a penny.
In other markets of interest, the Euro advanced 50 basis points against the dollar. Crude oil gained more than $3.50 per barrel. Comex Gold was down nearly $22 per ounce. And the Goldman Sachs Commodity Index gained 14 points to close at 467.80.
Martin:Thank you.
Pearson: Let's start off with what we talked about earlier in the show, that is the price of oil, $46.50 a year ago, up over $70.00 this market today. Are we headed for a strong oil move and another big commodity advance this spring?
Martin:Well, I think if we truly do have economies around the world stabilizing and starting to improve, such as China, India, Russia, Brazil, then I think crude oil deserves to go to at least a 38% retracement and that's a little over 76 cents. So, we're not far from that. I think on Friday we were around $72.20, $72.30, something like that. Crude came back after other markets closed, still closed lower for the day but did come back. I think that's where we're headed and it wouldn't surprise me if we see it this next week. I think that when I look at the crude oil market and I look at gasoline and the prices of gas have improved, which they probably needed to, it's helped improve profit lines for ethanol as well. I think that when I look at this market here at least it should get to $76, possibly if we can get through that it might lead us on up closer towards the 80 cent mark. But we've got to be careful, this next week is a very volatile week in my book, it's a week where we're going to really I think set down some decisions on are we really turned around in the stock market, are we going to improve? I fear we're not and I think that this next week if we see the stock market start to fail then maybe if the dollar continues to improve does that continue to help the crude? We might snack that 38% retracement.
Pearson: What do you think will happen with the stock market?
Martin:Well, I'm looking for the stock market, the Dow, to start to roll over. We've had a nice rally, a nice corrective rally and it's made everybody feel better and we've seen a nice improvement. But I fear we could have at least a 10% to 15% correction. If we do more than that then this market may be headed back towards the lows and we set a really good, strong benchmark at 666, that's kind of a mark of the beast on the Dow so I tend to think that a 10% to 15% correction I want to see that and then I want to see where we're going from there.
Pearson: Let's talk about reports this week in fundamentals WASDE came out this week, USDA we talked just a moment ago about a little bit bearish on the wheat, kind of friendly to corn and certainly old crop soybeans the sky is the limit here. Let's talk first about the wheat market, it seems like plenty of worldwide wheat supplies at this stage.
Martin:Well, at this time there is and I think that when the WASDE report came out it just sort of every day since the wheat market has fell. But we also have to remember wheat is in harvest, even though the yields may not be special it's in harvest and amongst the fact that we do have decent stocks at this time and demand may be not as robust as we'd really like, Egypt I think said today that they have about a six month supply of wheat on hand and they have been kind of dickering with Russia about quality and so that can be part of that excuse and they're even starting to do that on corn now. So, I think the wheat market we had an exact dollar break from the high of June 1st down to the low of Friday so we might catch here on this dollar break, give us a little bounce. I hate to sell it right at this moment, I think there's a bounce coming but I think the next rally is a corrective rally and you use that to make up some cash sales if you need to get old crop gone and maybe you do some new crop.
Pearson: So, pretty good there. Let's talk about the corn market, a little more bullish scenario than what was anticipated for corn after this, a lot of concerns, this 2009 crop we're talking about the great hybrids and we've got them but places in Illinois, Indiana and Ohio there's a lot of ponds still standing, there's not going to be as much corn growing there and where it is getting planted they are going for more of the shorter season hybrids and maybe some switches to soybeans. So, give us your thoughts on the corn market for 2009.
Martin:Well, I think for this year for the 2009 if we're looking at 2009-2010 I can build some bullish cases. In fact, it may be the bull market of next year. But right now we have a concern over the livestock industry and a liquidation that may be occurring in the pork sector especially and in the meantime we're having a liquidation of dairy cows so I think that that's going to take away some demand for corn but you also have the ethanol being a little more profitable and it's at the time of the year where ethanol competes with gasoline and I think that's helping the cause and because of the economy people are not flying more places, they are tending to travel so they might tend to drive so those are all pluses for the ethanol side of things. Also, our imports of ethanol are down and that's partly because of the fact that in Brazil their own mandates are going up and also you have a sugar industry that is going by way of bioenergy and therefore it is competing against acres for corn. I think that when I look at the corn market I'm very leery of it. We've tried to get through the January highs and we were able to just pinch through and that's all the better we could do. The market caught some heavy selling, some blame the dollar for it. I tend to think that you're at the time of the year planting is pretty much in all practical purposes done and I think yes we'll see some acres out of corn, I'm thinking a million and a half, some are talking two million, some of that will go into prevent plant, others into beans. I think that we have a corn market that is going to step back, we'll probably test on the July contract the $4.10 area but I would recommend if you get some movement back up around $4.35 to $4.40, $4.45 I probably would step up the pace and make some sales. I would use any rally you get this next week to move old crop cash. New crop if you want to wait on that a little bit, fine, we may still see some setback in that as we normally would in a year but the long-term there is a bull story building I think for new crop corn as we go into next year.
Pearson: And into 2010-2011.
Martin:Exactly.
Pearson: Sue, let's talk about the soybean market, a tale of two crops there, old crop the '08-'09 crop tight as it is and confirmed in the WASDE report and then you've got a new crop coming in that may not be as tight. So, what are you telling producers who are making decisions on soybeans?
Martin:Well, the thing we're at right now is we're watching this next week, I think this is a very important week coming up. This past week here we got up to just almost $13.00, $12.91. I think the market reacted to $13.00. In the meantime, you've got China slowing down their imports, the demand and they're also talking about releasing some reserves. So, that is kind of creating a little bit of a little uncomfort. We have to remember we started this major bull move with China's demand then it was Argentina's lack of crop or deterioration of their crop that finally gave the realization like we're going to be the market of choice for a while until Brazil got harvested. Well, they're harvested now and in the meantime they're running about 40 cents a bushel cheaper than we are FOB to FOB so they're going to probably elect to be the seller. And, of course, our prices broke today, dollar was up nice and they like to see the dollar improve but still when I look at the bean market I'm very suspect of it, I think if we get a rally up towards the highs of this week next week say we get up around $13.22, make sales of the old crop. In fact, I'd clean up old crop sales if you still have them, make some new crop.
Pearson: So, start making some new crop sales. Let's talk about the livestock side of this whole thing which has not been a good picture. You mentioned the pressure on hogs, liquidation occurring on the pork side, we've been trying to see a turnaround on the cattle business here for some time. What is your take for the balance of 2009 on fed cattle?
Martin:Well, I think the cattle market when you look at the contraction of meat not only in the U.S. but what we're seeing worldwide I think down the road we're looking, if these economies start to grow, remember we kind of got everybody spoiled into liking a better diet with protein, all of a sudden that is a pent up demand that's going to hit us full force and we're not going to have the numbers there to supply it. We're going to see some extremely high prices down the road. How long it takes, probably into the latter part of this year to get started. I think that, yes, we can maybe move around within a huge range on the August cattle, the basis has been narrowing like it should traditionally do in the month of June, it's possible we see the cash market go discount to the futures on the August contract by the end of June but I think that we have this next week some demand, grinder demand should be pretty good, you've got Father's Day coming up along with the 4th of July so that should be a little boost for some beef but I have to say that I'm a little concerned about the feeder market. There may be good demand for feeders but I have to tell you, you know, we broke from $103.80 down towards the $95 area, it's broken hard and fast, it needs to have a rally, you get up around $97.00, $97.50, $99 would be max and I think you sell it. I think the feeder market still may have to go down to around $92.50. That will tug on the futures of the fats at some point. But we're caught in this huge sideways range and we have been for a long time and if we can ever get up over $83.00, $83.50 on these August cattle maybe we can start to spur this thing on and get something better but right now we're just not seeing it.
Pearson: Dairy and poultry have been hit hard too. Pork in eighteen months lack of profitability, Sue, and just as we were starting to get the ducks in a row H1N1 hit, one problem after another. What is your take on this hog market? You mentioned liquidation, we've heard from a lot of producers who have said I'm done.
Martin:Well, there is and that's the sad part, again, because of the fact that boy if they can eak by I think it will be okay. I've noticed the last couple of days of this past week that bear spreads have kind of turned a little bit, in other words the premium that has been in those deferreds has been starting to let the air out a little bit. That could be a good sign. But we need demand for pork, we need our exports increasing and that's not happening and until that happens I fear this hog market is caught in trouble and it may still go lower before it actually does get better. Long-term I'm friendly to the hog market but you have Poland, the largest exporter of pork in the world, may end up being an importer. What does that say? It says our numbers are going to be really tight down the road but right now we're just in trouble.
Pearson: Sue Martin, thank you so much. That will wrap up this edition of Market to Market. If you'd like more information from Sue on where these markets just may be headed visit the Market Plus page at our Web site where you'll find streaming video of our program and you can download audio podcasts of our Market Analysis and Market Plus segments absolutely free at our Web site. Be sure to join us again next week when we'll examine a public school curriculum designed to teach children the importance of agriculture. Until then, thanks for watching. I'm Mark Pearson. Have a great week.
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