Articles

    Grain merchandising and uncertain markets

     

    When dealing in the commodity markets, volatility is your friend. This observation was among the nuggets that Jeffrey Hainline, chairman of Advanced Trading Inc., and Jeremy Strubhar, Ag Risk advisor at Advanced Trading Inc., shared during their presentations at the November 13 Chicago Farmers’ meeting.

    Advanced Trading (ATI), based in Bloomington, Illinois, is a commodity trading company. It offers consulting services to people in agriculture on how to manage their enterprises, related Jeff. Additionally, ATI provides assistance for logistics, strategic planning, marketing, and research. Proprietary software and solutions to help manage commodity risks also are available through ATI. It has national and international clients.

    Some things to know in managing your commodities:

    • Jeff noted that in 2017 there have been very narrow price ranges in corn and soybeans with little movement. “Without much movement, grain companies suffer. Lack of  movement means lack of opportunity,” said Jeff.
    • He said that 2017 has the second highest corn stocks/use ratio since 2000. Jeff went on to say that 87 percent of corn is used domestically and the use is growing slowly by about two percent a year. Feed and industrial uses of corn respond to the size of the crop.
    • Jeff related that ethanol use is growing and ramping up. As a result, there will be a need for more corn. Currently, China only uses a two percent ethanol blend with gasoline. If they expand their ethanol use, there would be a dramatic increase in fuel and ethanol demand. The same situation exists in India. Brazil is a major ethanol producer, but its ethanol is made from sugar. The United States exports corn in the form of ethanol to Brazil. He said that the United States has lost the China market because it has a stockpile of corn. However, we have picked up Mexico and Turkey.
    • Ethanol companies continue to be profitable.
    • Logistics is an important consideration with stockpiles of corn. Last year’s record corn crop forced many ground piles. When there is a significant amount of corn that needs to be stored and there is no place to put it, the price goes down.
    • The forecast for this year is that there will be deficit space by 250 million bushels.
    • At one point, the United States had 74 percent of the corn market; however, exports stayed stagnant and now the United States has 34 percent of the market.
    • Regarding soybeans, it is estimated that China will import 97 million tons of beans this year. This is due to the increase in feed needed for animals because Chinese are eating more meat. South Africa, Asia, and the Middle East bean markets also are growing because they are buying more meat.
    • There is a meteoric growth in the demand for soybeans because it has become food for animals.
    • There is an incentive for farmers to plant more beans and sell them; not so for corn.
    • There is a record short position for managed money in corn.


    Jeremy discussed what the farmer can do to better manage the grain market. He noted that 2.4 billion bushels of corn were carried over from 2016-2017 and” the farmers owned it,” which resulted in a lot of storage costs.

    “You want to be hedgers,” said Jeremy. “Lock in prices. Be aware of what will hurt your operation, such as lower prices. Things outside of our control can lead to lower prices, such as political unrest and natural disasters.”

    Jeremy observed that the American farmer has become an expert in managing risks in growing the crop, much of which has improved due to technology. However, managing price risk still suffers.

    The tools that help manage prices are:

    • Put options, which give the farmer the right to sell unsold bushels; puts gain in value as the price drops.
    • Call options, which give the farmer the right to buy. It is used to replace ownership after selling bushels; calls gain in value as the market goes higher.
    • “A put is used to protect yourself against lower prices,” said Jeremy. “With a call, if prices go higher, you benefit. A call option is a way to replace grain once you sell it. It is often cheaper to own grain in a call option than to store the grain in a commercial grain elevator.”
    • He pointed out that options work best when there is volatility.
    • Puts:
      • Lock in a floor and give you a minimum price
      • Extend cash pricing window
      • Allow you to partake in higher cash prices, or increase floor
      • Make the risk know
      • Insulate you from a price drop, protect your financial balance sheet
    • Calls:
      • Gain if futures prices rally
      • Risk is known
      • Remove fear of selling too early and too low
      • Make cash sales with confidence
      • May be cheaper than paying for commercial storage


    In response to a question, Jeremy said that 5,000 bushels is the minimum amount of bushels for option strategies.

    Jeremy said, “My recommendation is to have a basic risk management plan based on protecting prices, not speculation.”

    FSA fosters successful farmers and quality environment

    Rick Graden is an enthusiastic spokesman for the Farm Service Agency (FSA) and he helped attendees at Chicago Farmers’ October 16 meeting understand why the FSA is beneficial and benefits farmland owners during his presentation.

    Stabilizing farm income, helping farmers conserve land and water resources, providing credit to new or disadvantaged farmers and ranchers, and helping farm operations recover from the effects of disaster are the missions of the U.S. Department of Agriculture’s Farm Service Agency (FSA), explained Rick, who is the acting state executive director of the agency. He noted that FSA has been a part of the U.S. Department of Agriculture since the 1930s when it became an initiative through the Agricultural Adjustment Act. While its name changed over the years, FSA has maintained its focus on ensuring that the country has safe and reliable food sources and on keeping farmers on the farm.

    Rick noted that FSA is the only U.S. government agency that works with elected county committees that are composed of farmers’ peers. “Because there is local representation, these committees make determinations based on local affairs, and agricultural conditions,” said Rick.

    FSA provides numerous programs that benefit farmers, but due to time constraints at the meeting, Rick focused on the Conservation Reserve Program (CRP). Implemented in 1985, CRP protects the environment, controls erosion and benefits wildlife, said Rick. CRP acreage is capped at 24 million acres under the current farm bill. “FSA would like to see a cap of 35 million acres,” said Rick.

    Currently, FSA is processing CRP applications that were submitted from May to September of this year. Rick urged people to be patient. He said that FSA is always adding more acreage to the CRP pot as CRPs are terminated when farms are passed on through inheritance or when people opt out of the program. Farmers can re-enroll in the CRP program, but owners might have to enhance their CRP practices to remain eligible to re-enroll. However, FSA will cost share in many instances for the enhancements.

    Rick noted that FSA has approximately 42 different CRP practices, not all practices are available in Illinois. Among them is the pollinator habitat that was implemented in 2012. A maximum of 100 acres per farm can be set aside as a pollinator habitat.

    “Seed for these habitats is expensive, but FSA will cost share with farmers for these plantings and specialists will assist in planting the areas,” said Rick. “A pollinator habitat on your property results in higher CRP cash rental rates.”

    Rick noted that FSA monitors practices and spot checks CRPs and pollinator habitats. At times, it might recommend spraying for weeds. There are 106,615 acres of pollinator habitats in Illinois and applications are no longer being taken. Rick said FSA will probably return to the pollinator habitats program because the planting of milkweed, goldenrod and blackeyed Susans are so beneficial for Monarch butterflies and honeybees. He noted that FSA hopes that pollinators could be planted along the interstates and Illinois is considering undertaking this. Iowa already is doing this.

    “CRP is the best program FSA has ever had,” Rick said. “Its provisions result in so many benefits for the environment. In my opinion, it is here to stay.”

    Longtime TCF Speaker Returns to Share His Expertise

    Dr. Gary Schnitkey, professor of Agricultural and Consumer Economics at the University of Illinois Urbana-Champaign, discussed crop farm income, cash rents and farmland prices during his presentation at the Chicago Farmers September 11, 2017 meeting. Dr. Schnitkey has been keeping TCF members well informed through his presentations since 1998. “He is a wealth of information,” said TCF President Barbara Clark.

    Dr. Schnitkey related that 2015 was a low income year, but income bounced back in 2016 with an average income of $90,000 per farm. This was due to good yields in Illinois. However, he suggested that incomes in 2017 could be less, averaging around $60,000.

    “Of course, much depends on where crop prices go as we move forward,” said Dr. Schnitkey. “Income is down because prices have not changed a lot and the yields this year are projected to be down.”

    Dr. Schnitkey said that soybean and corn yields have been above the trend in recent years, but he said that projections are down for soybeans in Illinois. He noted that 50 percent of this country’s soybeans are exported, with the vast majority going to China, which also imports soybeans from Brazil. “The hope from farmers’ perspective is that this export situation to China continues to grow so that soybeans remain in a positive situation,” said Dr. Schnitkey.

    Other information shared by Dr. Schnitkey:

    • Static prices for corn and soybeans: 2017 price per bushel for corn - $3.30, soybean - $9.50; 2018 projection: corn - $3.80, soybean - $9.50

    • ARC payments are expected to decrease and will vary by county; however, recipients should expect one-half or less of what they received last year

    • Costs are expected to be less in 2018 than they were in 2017; fertilizer costs have come down as well as fuel costs

    • Seed costs have not come down

    • For Central Illinois, soybeans are more profitable than corn; corn costs and seed costs increased more than costs for soybeans

    • Corn demand is static in comparison to soybean demand

    • There will be downward pressure on cash rents

    • Farmers and landowners should consider moving into variable cash rents

    • Little movement in farmland prices; prices have come down 10-15 percent off their peak; prices could come down another one to two percent

    • Anything that causes trade to slow in regard to NAFTA would be a negative; grain farmers want free trade

    • Regarding real estate taxes, use-valuation should be coming down

    • Projections indicate that the federal government will not do anything with ethanol; Brazil is raising a lot of corn that can be used for ethanol; the overall use of corn in ethanol is static

    • The United States could possibly begin exporting more corn, primarily to China, which now uses soybeans to feed animals

    • It doesn’t appear that water constraints will cause land to go out of production; Dr. Schnitkey thinks we will see more land coming into production due to Asian countries beginning to eat more meat: “As long as growing increases, land will be brought into production.”

    How to plan for smooth succession planning

    The hardest part about owning a farm is how to keep the land in the family, said Paul Morf during a presentation at The Chicago Farmers’ May 8, 2017, meeting. Morf, chair of the estate planning group for Simmons Perrine Moyer Bergman, a law firm principally located in Cedar Rapids, Iowa, allowed that “taxes are hard, too.”

    Morf related that setting up an LLC is the most efficient structure for succession planning. The LLC provides:

    • Centralized management.
    • Privacy regarding the ownership of real estate.
    • Separation of ownership from control through recapitalizing the LLC into voting and non-voting ownership interests.
    • Facilitates estate planning transfers of real estate to descendants and trusts for descendants.
    • Treatment like a partnership for income tax purposes so that all income and deduction items of the LLC flow through directly to the members.
    • Distribution of funds from the LLC to the members without taxation.
    • Liability protection for all owners.
    • Restrictions on transfers and insulation of LLC assets from creditors of owners.
    • Facilitating availability of significant valuation discounts for transfer tax purposes.
    • Avoidance of partition.
    • Avoidance of ancillary probate and possibly state death taxes in Iowa or Illinois for a non-resident landowner from Florida, Texas, Arizona or other state without a death tax.
    • Smooth business succession planning.

    Morf noted there is an emotional and economic attachment to a farm and there are times when fair is not always equal. He said this situation generally occurs when a child returns to the farm to work on it and maintain it, while other siblings have chosen other paths. Decisions have to be made:

    • Should there be identical treatment for siblings?
    • Give farming son the right/option to purchase farms from the estate or other siblings?
    • Should the land be held in trust, require rental to son at fair market retail rates and distribute rent equally to siblings?
    • Sell farms to the son (or grantor trust for sons) on an installment contract during life?

    In families where the business owners or famers have few assets outside of the business/farm and there are one or more children involved, other decisions have to be made when creating estate plans:

    • Treat children equally or fair but not equal?
    • Will the equipment pass predominately to the on farm heirs? What about the land?
    • Should children be put in business together or is each given a different parcel?
    • If you give children different assets, do you equalize with life insurance or liquid assets? He noted that life insurance is subject to the death tax.
    • Should children involved in the business be given purchase options?
    • Are those children not involved in the business given put options?
    • How do you value farmland or business assets for purposes of division?
    • Are buy-outs among family members for cash, or on an installment basis:

    Morf pointed out that there are a lot of tools for shared inheritances. He encouraged people to talk with their advisers and family during these considerations. Morf suggested that premarital agreements be in place for second marriages to protect the children. He added that placing an inheritance for children in a trust is a protection against a divorce.

    Morf reviewed revocable trusts and related that the trustor, who is the initial trustee and initial beneficiary, can amend or revoke the trust at any time. The trust is not a separate taxpayer and gifts to the trust have no tax implication. Additionally:

    • With the death of the trustor, the trust continues with new beneficiaries, according to the terms of the trust, which at that point becomes a will substitute.
    • It is important that every revocable trust be backed up with a valid will. A “pour over will” provides that any property owned by the trustor (and not by the trustor’s revocable trust) at death pours into the revocable trust.

    Investing in farmland

    There are good reasons to invest in farmland and Douglas Hodge, District III vice president of the American Society of Farm Managers and Rural Appraisers, outlined farmland’s many investment enticements from an institutional perspective during The Chicago Farmers’ April 10 meeting. Hodge also is part of Nuveen’s APPR Services/Risk Management group.

    “Historically, from an institutional perspective, farmland is a solid investment,” said Hodge. “It provides steady income, serves as a hedge against inflation, and reacts differently than equities to outside stimuli. It is a risk alternative to other investments. Plus, they are not making more farmland in the United States.”

    Hodge did note that unlike the United States, acreage in Brazil is increasing, but at the expense of the rain forest and many green spaces in that country.

    With the acreage of farmland not increasing in the United States, how can farmland be used most effectively? Hodge said that world demands have to be considered. Agriculture has been a key to energy through ethanol. Additionally, as third world countries improve, their populations are moving away from a grain-based diet to a meat-based diet. Technology has allowed increased production to begin meeting the growing world demand for food, Hodge added.

    As an aside, Hodge related that recently he met with a delegation from China and he learned that the typical farm in China is seven to 10 acres. The Chinese want the technology and equipment that the United States has so they can grow the food they need. “China is our greatest export market, so this Chinese goal could be bad news for the United States,” Hodge remarked.

    Among other reasons to invest in farmland is the preservation of capital, said Hodge. He noted that he personally recommends investing in farmland, which can be used to feed people. Former dairy farmers, Hodge and his wife are beginning to invest in farmland.

    He noted that farmers’ financial statements are stronger now than they were in the 1980s so he does not foresee the problems that plagued that period.

    “You have to keep in mind that you have to be in a farmland investment long-term,” said Hodge. “The next closest hedge against inflation is gold or silver.”

    The growth in bio-fuel presents more opportunities for agriculture, according to Hodge. Noting that 25 percent of corn is used for fuel, Hodge said other opportunities besides corn will present themselves. He noted that sugar cane is used for bio-fuel production in Brazil.

    While returns have declined on farmland, it is not a reason to panic, said Hodge. “Remember, it is a long-term investment. The average return on farmland has been 12.5 percent over the last 20 years.”

    Nearly one-half of all farmland will transfer ownership in the next 20 years, said Hodge, so it is important to take a careful look at estate planning.

    “The average age of the American farmer is over 50,” said Hodge. “As we age, who will buy our land? It is possible that the older famer can own the land and cash rent to younger farmers.”

    He added that less than one percent of farmland in the United States is owned by institutions. It is mainly owned by farmers.

    Hodge said that Nuveen is buying farmland in the Midwest and the Pacific Northwest. He said there also are investment interests in Brazil, the eastern and western parts of Australia, Eastern and Central Europe, and Africa. Nuveen buys Class 1 farmland, he said. “More and more money is chasing this category of land.”

    Hodge shared that the Creighton Farmland Index is a good tool to use to see how values are tracking.

    What are the cons of farmland investment?

    • The risk of inflation and deflation
    • Volatility of commodity prices
    • Lack of liquidity
    • Possibility of high transaction costs
    • Geo-political risk

    Hodge pointed out that top quality land will not decline in value as less desirable land will. He noted that fundamentally, farmland is real estate and the adage, “location, location, location,” also applies to it.

    The current market indicates that farmland owners are facing lower values; however, commodity prices are stabilizing, said Hodge. On the negative side, there is a potential for higher interest rates and that has to be closely watched.

    He went on to say that cash rents are likely to decrease; there is a correlation between land values and cash rents. Hodge said there will be some harder negotiations between the farmer and the owner.

    Hodge added that investors have to be aware of what is happening in Washington regarding trade issues because it will have an impact on commodity prices.

    Good soil management promotes the quality of water

    The weather forecast of several inches of snow falling on the Chicago area did not discourage a number of Chicago Farmers’ members from attending the March 13 meeting, which dealt with the relationship between agriculture and water quality. Unfortunately, travel conditions did hamper our speakers’ ability to get to Chicago. But Chicago Farmers’ member Jeff O’Connor, who had come to the meeting to provide support for the scheduled speakers, volunteered to take on the topic of “Cover Crops and Nutrient Reduction” and serve as the day’s presenter.

    O’Connor, a graduate of the University of Illinois, is a sixth generation farmer who raises soybeans, corn and wheat on 1,000 acres in Kankakee County. He also is chairman of the Kankakee County Soil & Water Conservation District and a member of the Kankakee County Farm Bureau.   In both roles he works to promote the use of cover crops and better nutrient management.

    In addressing the connection between agriculture and water quality, O’Connor explained that the two become linked through the gulf hypoxia zones. Hypoxia, or low oxygen, is an environmental phenomenon where the concentration of dissolved oxygen in the water column decreases to a level that can no longer support living aquatic organisms.

    The largest hypoxic zone currently affecting the United States, and the second largest hypoxic zone worldwide, is the northern Gulf of Mexico adjacent to the Mississippi River. O’Connor noted that there have been sedimentation studies in the gulf to determine how long the flushing of nutrients down the Mississippi has been occurring. Studies were possible through the study of two types of algae that thrive in a hypoxic zone and whose remains can be measured in the sediment on the Gulf floor.   He said that researchers have routinely been able to measure higher concentrations of these single cell organisms in the gulf area sediment dating back to the 1950s. These higher concentrations roughly coincide with the advent of modern agriculture and the introduction of commercial fertilizers.

    To control the flow of nutrients into the Mississippi River Watershed, the USEPA (United States Environmental Protection Agency) in 2011 urged states to develop strategies to reduce the outflow.  Illinois stakeholders met from August 2013 to May 2014 to develop a strategy and gave input that resulted in the release of a 10 year plan in July 2015.  Guidelines were developed and in July 2015 the official Nutrient Loss Reduction Strategy (NLRS) plan was adopted.  Several points that O’Connor made from that plan include:

    • Science assessment-the University of Illinois along with IEPA conducted research that addressed what practices could be used to control loss and at what cost.
    • Rivers that are considered impaired receive priority but non-impaired watersheds also are to be supported in the maintenance of the quality of their water. Interestingly, O’Connor noted that the Kankakee River is probably the cleanest river in the state due to the act that its primary source of water comes from Indiana through limestone and bedrock.
    • By 2025, there should be a 15 percent reduction of nitrates and a 25 percent reduction of phosphorous being flushed from fields into the Mississippi with an ultimate goal of 45 percent reduction for both. O’Connor added that studies have gone so far as to test the water run-off of golf courses and homeowners’ properties and found that they were contributing little to the problem. Agricultural lands are the main source within Illinois.

    O’Connor said that a priority of the Illinois Farm Bureau (IFB) is the education, research, implementation, and accumulation of evidence of ability to protect the quality of water. The Illinois Farm Bureau has allocated $100,000 for the Nutrient Stewardship Grant program that is funding 15 projects in 32 counties. O’Connor pointed out that it also is important to have boots in the field demonstrating what needs to be done. IFB also is offering free, confidential water testing in select counties to test for levels of nitrates in tile drained farm fields.

    To further education in the use of cover crops, O’Connor said demonstrations of new practices are necessary; there has to be a cultural change among farmers; and the appearance of innovators and early adopters of cover crops to lead the way are necessary. He noted that changes should benefit both the environment and the livelihood of agriculture.

    Among the changes that need to take place, for example, is more application of nitrogen to fields of corn in May or June, prior to when the tassels appear. O’Connor said this is the time when the corn is in most need of the nitrogen, rather than in the fall when nitrogen traditionally had been applied. “Putting nitrogen on when the crop needs it and is using it means less opportunity for it to escape in run-off,” he noted.

    Tillage patterns also need to be changed, said O’Connor. “No-till is a better system for soil health,” he said. “The worst thing you can do to discourage soil health is work the soil.”

    Regarding cover crops, O’Connor said that his use of cereal rye as a cover crop has prevented erosion of the soil through wind and water.  Any soil that leaves a field often carries with it phosphorus residue. As a result of the cover crop usage, phosphorous stayed put. The cover crop system also had no increased herbicide costs.

    O’Connor said that he found cereal rye to be a beneficial cover crop because it grows anywhere, handles cold weather well and grows early in the spring. He said his system mixes the cover crop seed with fertilizer in the fall and both are spread on fields that will be rotating to soybeans in the subsequent year.  O’Connor noted that the roots of cereal rye may inhibit the growth of corn, but not soybeans. He related that he raises his own cereal rye seed on areas of his farm where corn won’t grow profitably. O’Connor is able to raise the seed for $7 to $8 per bushel versus the commercial cost of $15 per bushel. He also sells excess seed to neighbors. O’Connor said that many producers use their fields of cover crops for grazing livestock. Winter rapeseed is another good cover crop that he is experimenting with.   Winter rapeseed can overwinter well and adds diversity to the soil fungal activity.

    Regarding cover crops’ effectiveness in removing residual nutrients, O’Connor said that he had two fields of corn in 2015, side by side. In one field, a cover crop was not used; in another, there was a cover crop. The following spring he said there was a 67 percent reduction of nitrates leaving the soil in the cover crop field versus the field with no cover crop.

    Agriculture and technology make good partners

    Does technology have a place in agriculture? The resounding answer is yes. A group of panelists, moderated by Dan Stokes, a director of Chicago Farmers, discussed Agtech at The Chicago Farmers’ February 13, 2017, meeting and offered interesting insights. Panelists included Guy Turner, a partner with Hyde Park Venture Partners; Corbett Kull, senior director engineer and head of the Chicago Office of Climate Corporation; Mark Haraburda, CEO of Barchart; and Matthew Rooda, CEO and president of SwineTech.

    How do the panelists define Agtech? Haraburda, whose Barchart company focuses on commodities and futures data, said that Agtech has made it possible to analyze large amounts of data that are cloud-based, and Rooda, of SwineTech, which creates products that reduce piglet deaths, noted, “Time is our most valuable resource and technology gives time back to people.” Kull, of Climate Corporation, which helps people and businesses adapt to climate change, remarked that the technology has to improve productivity for the farmer and/or landowner. Turner, whose Hyde Park Venture Partners focuses on high-growth technology startups in the Midwest, believes that Agtech involves genomics and chemistry.

    And who are the innovators of Agtech? “Everyone, including growers, who have been tinkering with new solutions for decades,” said Turner.

    In discussing the history of the adoption of technology in agriculture, Kull that it can be traced back 120 years and include mechanization and the use of fertilizers, chemicals and GMOs. “There appears to be a cycle every 20-25 years in agriculture,” he said. “At the front end of innovation, there are a lot of naysayers. There was a time when farmers were suspect of tractors and were reluctant to replace their field horses with these machines. Three or four years ago, I was hearing that farmers don’t use smart phones. That is not the case now.”

    Timing is everything, observed Haraburda, and noted that rooster.com came out in 2000. While it was a great idea to bring a digital marketplace to the farmer, the time was off, said Haraburda. “The platform was not there. Now we have that platform, but it is still tough to sell grain online. It won’t happen overnight, but the behavior is changing.”

    How does that platform happen? “You have to think ahead,” said Rooda. “You have to find cost-effective ways to get an advantage over your competitors.”

    Kull noted that computerization has gotten very cheap. He pointed to the ability to walk up to livestock in the field and check a fit-bit in an animal’s ear and gain a reading with an iPhone. “Affordability and pervasiveness make the technology right for right now.”

    Also noted in the discussion:

    • The consumer drives the investment in the Agtech industry. Look for what the consumer needs.  The consumer has to lead the way. They won’t buy if they don’t need it. (Rooda)
    • The grain market is a huge area of investment opportunity. There are two or three tiers of management structure on a farm, so there is opportunity to create transparency. (Turner)
    • While hog prices are low and there is an oversupply of pork, the rise of the middle class in China and its appetite for American cuts of meat could change that situation in the next few years. (Rooda)
    • Every commodity industry lives on a supply curve. (Turner)
    • A farmer is running a factory and it requires doing a better job of measuring and scaling. (Kull)
    • Immigration and tariff issues could affect Agtech’s future; however, if there is a shortage of labor, some start-up would figure out how to pick the fruits and vegetables. “Regulations present great opportunities for startups.” (Kull)
    • The demand for restaurants to serve locally grown food affects agriculture and technology. There have been advancements in storage and modifications in growing to give longer life spans to fruits and vegetables.
    • Collecting information for the famer is a problem; don’t let information die in the field.
    • Regarding tech investments or involvement in startup companies, panelists recommended gathering as much information as possible and consulting with a good legal team regarding structuring a company.
    • The bar is high for venture capital; a 20 percent return is sought.
    • Expertise in the market, tenacity, and previous experience indicate probability of success for a startup company and make it easier to raise capital.
    • In response to a question about protection of intellectual property in overseas deals, Haraburda said that Barchart has grains.com and sells grain to one or more elevators. A Brazilian grain buyer wanted a similar situation in Brazil. Barchart is licensing the technology to the group.
    • Regarding the future of land grant colleges in research and development of technology, Haraburda said that the University of Illinois tech campus is extensive and it has talent. People are being hired from this pool of talent.
    • Future of Agtech? Kull said that Climate Corporation is making investments in sensors for the field and livestock. Haraburda said he is interested in tools that are simple and affordable.

    Farm managers’ compensation and goals explored at January meeting.

    The Chicago Farmers’ January 9, 2017, meeting featured Kyle Mehmen and Gary McDonald who shared their insights about farm management with an appreciative crowd. The two men were part of a panel that was moderated by TCF Director Dan Stokes.

    Kyle owns MBS Family Farms with his family in Plainfield, Iowa. The group influences over 20,000 acres via farm management, input sales, custom work, and traditional farming. Gary is the owner of Organic Resources in Springfield, Illinois. He became a farm manager in 2010 when he was asked to assist with the management of an organic farm owned by an organic investor. From that point, the need for an organic farm manager was evident because of the consumer shift to organic, which has created a demand several times greater than supply, he said.

    In discussing compensation for farm managers, Kyle noted that his family owns a small farm management agency and the managers usually are paid a percentage of the gross revenue from the farm that ranges from five to 10 percent, depending on the services provided. He said they are moving away from this model because it may not always encourage the best behavior for the land. Kyle related that they are moving to compensation based on the asset value of the land, but this presents challenges. On the other hand, some of the clients pay on a per acre basis. This can be done on an hourly basis and ranges from $300 to $500 per hour or $5 to $7 an acre, dependent upon the task.

    Gary, who assists existing organic farmers and transitional farmers with a variety of tasks, said that compensation for conventional farm managers on a conventional farm would be two to 10 percent of the gross and $100 per hour when help with leasing is provided.

    “When I am working with an organic farmer, I am handling many things,” said Gary. “I charge 10 percent of the gross or an hourly rate of $200 plus expenses because many times I am required to travel a fair distance. Management of organic operations entails a number of added responsibilities, such as teaching and guiding.”

    Regarding other metrics for determining compensation, including the possibility of being compensated on a percentage of profits, Kyle responded, “We started down that path, but we still have many clients that we manage on a gross basis. It is difficult trying to decide what the mathematical equation should be.”

    Gary suggested that the appreciation of the assets also be considered, but that has to be quantified.

    Kyle remarked that determining the value in appreciation is difficult. “We have a baseline, we use metrics and we look at improvements and ROI, but we are far from perfecting a math equation that can be plugged in. There has to be significant trust between the manager and the client.”

    He went on to say there are variables in determining compensation. For example, a $10,000 an acre farm could have fragile soil, low fertility and an aging draining system. As Kyle’s group addresses these problems and adds their work into the equation, it has to be determined what the new value looks like after the improvements and the receipt of enhanced revenue.

    An essential aspect in managing farmland investments is working with, or being, the people doing the actual work on the farm to produce a crop and care for the soil. Consolidation and automation have not yet eliminated the role of the farmer. Dan pointed out that some farm managers and landowners have in fact expressed concern about the number of qualified farmers retiring and the need for more farm operators who are skilled working with technology and data collection and analysis. Gary noted, “The number one natural resource we are squandering is the American farmer. There is a scarcity.”

    A discussion about managing soil fertility ensued, and Dan raised the question about using soil tests as a tool for measuring progress. Basic soil tests can be misleading not only because they can vary greatly by year and location, but also because they say very little about longer-term soil health soil conservation, which is important for optimizing the value of the land asset over time. The soil horizon test and the Cornell soil health test, for example, are more advanced tests that do a better job of tracking durable fertility. Dan noted, though, that use of these tests, and ultimately how everyone manages fertility, will depend on everyone’s time horizon.

    Gary observed that true farmers work with the soil to make it “reproductive,” not just “productive.” He noted, “An operator, who can raise 200 bushels of corn organically using rotations, cover crops and livestock with very little fertility inputs, if any, has successfully worked with the creative processes of the soil.”

    “There is an art to soil testing,” said Kyle. “You have to establish a benchmark. There is a lot that goes into the process.”

    Dan observed that in the past, relatively few outside of organic farming put much stock in the idea of building soil microbes as a way to build soil fertility, opting instead for applied chemical fertilizer. Now that larger companies are researching and promoting microbes more, interest has broadened.  A lot of wisdom from organic farming is being commercialized and applied to conventional farming.”

    Regarding benchmarks, Kyle said he looked at them on an individual basis. “I am trying to add value to farms,” he said. “Sometimes, fragile areas have to be taken out of production. How do we monetize and reward management in this situation?”

    Gary pointed out that well drained soil is very important. He said he prefers Class B soil with a lower PI because often times it is lower priced lighter soil and sometimes rolling and dries out more quickly so the farmer can more easily get back into the field to perform mechanical weed control. Dan related that the USDA’s Web Soil Survey website provides satellite maps and is a “very useful resource” for discovering the various soil types and drainage issues on a property.

    Next, the conversation went to a discussion about cover crops, and Dan noted that many farmers become frustrated using cover crops because cover crops are legitimately difficult to get right. He asked Gary and Kyle how they approach farmers regarding cover crops.

    “You have to talk with the farmers,” said Gary. “They are very used to thinking about what they can get out of the soil rather than what they can put back. I work to get the biology and earthworms thriving in the soil, that’s the true wealth generating engine. We need to get the biology back to work.”

    Kyle added, “I am trying to learn all the time about cover crops. It is an art to manage cover crops, I have to continue to work at it. I would caution mandating cover crops, they might not be the best solution. But, educating yourself is the right answer. I know what does not work and, at times, that is more valuable than knowing what works.”

    Gary said, “It is a matter of faith with organics. You need more than one year to transition a conventional farm to an organic farm and produce a successful crop. It is three years before the organic crops are produced. To build the soil, one has to be willing to invest in the soil, there is no magic bullet.”

    “We share information,” said Kyle. “I manage for landowners where I farm. We have a full-time farm manager and I rent three parcels that are under the manager. I tell the tenants what we are doing and demand that they do the same on the land.”

    Regarding collection of financial data, Gary said that he is more operational and turns to experts for the numbers side of the farm.

    Kyle related that his group hired a CFO five years ago. “It is the best investment we made,” he said. “It is hard to quantify how it makes me money, but the position has been a good thing for my operations. We also use AgManager software, Quick Books, and Conservis (an analyzing tool).”

    Gary said that he finds his own markets and related, “I grow what the buyer and processors want. I intend to find the best and highest priced markets, and my goal is that the increase in revenue is more than enough to pay my fee.”

    Some thoughts that emerged during the question and answer segment:

    • Gary and Kyle said that investors and individuals comprise their client base.
    • Regarding organic farming, Gary said that he tries to mimic nature. He said he is against burning because it destroys microbes and causes the loss of too much carbon and energy, which is needed in the soil.
    • Organic does not necessarily increase the selling price of a farm, according to Gary. “When I have transitioned a farm to a certified organic farm, the much higher crop prices increases the value of the farm based on ROI; however, without a skilled operator, that is a moot point. The price of anything is based on how the buyer perceives the value,” he said.
    • Care must be taken with equipment that is used in organic farming so that there is no contamination from a conventional farm, Gary said.  It is required that all equipment be properly cleaned before being used in organic production and logs must be kept. Operators who farm both organically and conventionally sometimes will have separate equipment designated just for organics.

    Farming in uncertain times


    Kennedy Weighs impact of new administration on ag.

    The political uncertainty at the national level may result in significant changes to the role of government for many people.

    “For large family farmers, the reduction in inheritance tax may preserve and help protect intergenerational transfer of not just family farmers, but a way of life, as well,” said Christopher Kennedy, chairman of Joseph P. Kennedy Enterprises Inc.

    “On the other hand, a pullback in crop insurance by the federal government may leave all farmers more exposed to the volatility of nature,” Kennedy said during a presentation at the Chicago Farmers meeting.

    To read the full article by Martha Blum with AgriNews, click here

    Updating the farmland market


    Dr. Bruce J. Sherrick gave a highly informative presentation during Chicago Farmers’ November meeting regarding the headwinds, tailwinds and implications affecting the future of agriculture. He noted that his take on a variety of factors that affect farmland value is based strictly on his opinion. Dr. Sherrick added that he gleans valuable resource material in his role as a member of the Board of the Federal Agricultural Mortgage Association and as director of the TIAA Center for Farmland Research at the University of Illinois Urbana-Champaign campus. He is the Marjorie and Jerry Fruin Professor of Land Economics at the university.

    Among the points that Dr. Sherrick made during his presentation:

    • Farmland remains a good investment.
    • There is $3 trillion in the ag sector and 80 percent of that is in farmland; there is little debt.
    • Private equities have agrowing interest in the agriculture sector.
    • Dr. Sherrick noted that two farmland REITs that sell stock are Farmland Partners (FPI) and Gladstone Land Corp. (LAND). A Wall Street Journal article published November 24, 2015, related, “The National Council of Real Estate Investment Fiduciaries’ (NCREIF) Farmland Index had an average annual return of 12% over 20 years. That beat the NCREIF’s Commercial Property Index and the S&P 500’s return of about 9%. It also topped investment-grade corporate bonds, which had returns in the 7% range.”
    • From 1970 to 2015, farmland is the only investment that averaged a double digit rate of return. “Very few assets have that track record,” he observed.
    • 24% of the land is controlled by four percent of the farms in the United States.
    • While farmland owners are aging, this does not directly portend sales; there are multi-generational operators on many farms.
    • Farms become an asset to sell when families decide to turn the land into money to leave to heirs; however, anecdotal data tell us that the sale does not always happen because the owners can’t think of a better place to invest their money than in the land.
    • Farm sales often are triggered by the fact that generations become too far removed from the farm to have experienced time there or to have clear memories of being a part of the farm.
    • The website AcreValue.com provides free information regarding comps and appraisals, soil productivity ratings, crop mix, and parcel ownership information. “It is astounding what is available for free on line. This ability revolutionizes the cost of acquiring information,” said Dr. Sherrick. 

    Global trends and industry consolidation

    Global affairs and consolidations are some of the factors that affect stocks. In particular, what impact do these elements have on chemical stocks that are related to agriculture? Steve Byrne, an equity analyst for Bank of America Merrill Lynch, brought his insight on this topic to The Chicago Farmers’ October meeting.

    Steve who is BofAML’s director of US Chemicals-Equity Research/Global Research, previously dealt with agricultural chemicals. Currently, he focuses on picking winners and losers in chemical stocks. “I try to answer who is going to post a better or weaker earnings outlook than the market thinks,” related Steve.

    To get an edge in the chemical field, Steve said it is necessary to have a view of growth prospects or demand better than the market has. “This is a hard edge to get,” he remarked. Steve said he spends a lot of time talking to retail channels and getting into the Corn Belt to talk with farmers. A recent survey BofAML jointly conducted with Purdue University helped him acquire a lot of data that otherwise might not have come his way. Additionally, he has myriad sources as part of the Merrill organization. “I have colleagues all over the world who are able to keep me up to date on the agrichemical industry in China, Russia or South America. For example, if a Brazilian crop looks bad, I could change my outlook on that information,” said Steve.

    Steve covers Dow Chemical, DuPont, Monsanto, and FMC. He said there is quite a bit of consolidation activity regarding chemical companies due to the challenging state of agricultural economics. “If a company is a crop or seed producer, the situation is likely to be challenging and remain so for the near future,” Steve said. Currently, Dow and DuPont are moving toward a merger. “If this merger happens, there will be several others,” Steve observed. “This merger will work out only if it has global approval.”

    Further affecting consolidation is the fact that a number of patents are expiring and this will move to more use of generics. He also noted that he was bearish on innovation. “The introduction of new active ingredients peaked 30 years ago,” Steve shared.

    Regarding the Dow/DuPont consolidation, he noted the two companies have different strengths. The consolidation of the two companies combines their skill sets and will offer strong competition for Monsanto down the road, according to Steve.

    Regarding fertilizers, Steve noted that due to the decrease in corn prices, he expects growers to move back to soybeans, and this affects fertilizers and crop seed sales. He said he sees pricing decreasing for potash and nitrogen. He related there was a lot of new capacity coming on in nitrogen in the Corn Belt and there is a new potash mine coming on stream in Saskatchewan. “This could signal a contraction in potash demand. Potash’s pricing this year is down by 50 percent,” he said.

    Steve pointed out that potash inventory levels are high in China, but the potash producers in Canada think that 2017 will be a record year. “They are delusional,” related Steve.

    He went on to say that China is a key player in the nitrogen market. Forty percent of nitrogen produced comes from China, and it is mostly unprofitable. Steve said that China is losing money on every ton that it makes on a cash basis;however, the Chinese government subsidizes the industry so it is able to stay in business. “If China shudders, we could see a $50 per ton increase in urea,” said Steve.

    Other points made by Steve:

    • A powerful trend is to farm according to the heterogeneity of your land. It speaks volumes in yield improvement.
    • The demand for corn in ethanol has played out; genetics is the growth driver for crops.
    • Weather was on the side of the farmer this year and farmers cut back on prophylactic use. If they don’t get burned, the farmers will do this again next year.
    • In the last 10 years, seed prices have doubled; crop prices have not.
    • Gene editing, which came out of Pharma, is being applied to agriculture. The early developers are small start-up companies. Steve expressed surprise that Monsanto did not embrace this technology, although it is licensing Dow’s technology in this area. Gene editing has support because it does not involve GMOs and does not require USDA approval.

    What’s ahead for grain prices, leases for 2017?

    Dr. Gary Schnitkey, professor of Agricultural and Consumer Economics at the University of Illinois Champaign-Urbana, looked into his crystal ball and projected what 2017 might have in store for farmers regarding grain sales and cash rent leases at Chicago Farmers’ September 12, 2016, meeting. Nearly 100 people were in attendance for the informative afternoon.

    It is a good news-bad news story. The last several years have produced good yielding crops. There has not been a shortage of crops since 2013, said Dr. Schnitkey. There have been good supplies. As a result, the $4.70 average price of corn per bushel that was driven by ethanol and hit a plateau in 2006, has fallen and continues to be below the $4.30 mark since 2013.

    Dr. Schnitkey noted that when the December contract futures of $4.30 were set in June, the weather was hot and dry. However, July and August were perfect in Illinois and Iowa for corn and soybean production. Now corn is in the $3.40 - $3.50 range and soybeans are at $9.10 per bushel, down from the high of $10. There have been record productions of corn and soybeans in the United States, said Dr. Schnitkey. “This will push down prices for 2017 and affect revenue.”

    He noted that since 2014, soybeans have been more profitable than corn because corn seed costs have increased. Also affecting revenue is the Agricultural Risk Coverage (ARC) and Price Loss Coverage. The payments in 2016 were lower than those in 2015 and it is anticipated the coverage will be lower still in 2017.  On the plus side, said Dr. Schnitkey, fertilizer costs are decreasing and this could continue into 2017. He went on to say that the average cash rents have been coming down since 2014.

    How long will prices stay low? Until a short crop occurs in the world and until then, prices will hover around $4 per bushel for corn. In planning budgets, Dr. Schnitkey suggested that farmers plug in $4.30 per bushel for corn and $10.30 per bushel for soybeans. He said if these prices do not work, it may be time to initiate variable cash rents.

    Dr. Schnitkey noted there are continued low incomes for 2016; there is potential for low returns in 2017; and to mitigate the losses, non-land costs and cash rents must continue to decline.

    “The outlook will turn around,” said Dr. Schnitkey. “You are still in a fundamentally good business.”

    To help ensure a more positive situation, Dr. Schnitkey suggested:

    • Consider planting more soybeans.
    • Lower all costs.
    • Lower cash rents and negotiate new leases in the fall; don’t negotiate during a price spike.

    Play helps us learn about immigrant farmers in the U.S.

    Immigrating to a new country, facing a new culture, language and climate, establishing roots and becoming part of that country’s agricultural industry are daunting, but people from distant places come to America, face these challenges and succeed. The Chicago Farmers learned about relatively recent immigrants to the United States and how they met those challenges and how they fared with farming through a performance of the play “Vang” during TCF’s May meeting.

    Performed by Matt Foss and Cora Vander Broek, the dramatic presentation is a moving account of true stories of Hmong, Mexican, Sudanese, and Dutch immigrants’ struggles in the United States as they work to establish themselves in farming communities in Iowa. Based on the collaborative efforts of Poet Laureate of Iowa Mary Swander, Pulitzer Prize winning photographer Dennis Chamberlin, and Matt, recipient of a Kennedy Center award and an acting and theatre professor at the University of Idaho, Vang, which means garden or farm in Hmong, brings four immigration stories to life and gives us a glimpse of what brings people to the United States and what happens once they have arrived.

    Matt and Cora assume the roles of photographer Dennis and writer Mary as well as the immigrants. They speak the immigrants’ words through actual interviews that Mary conducted and transcribed. Pictures taken by Dennis of the people whose stories are being told appear on a screen throughout the performance. Cora previously appeared at TCF’s May 2015 meeting when she performed the one woman play, “Map of My Kingdom,” which focused on the transference of farmland from one generation to the next.

    We learn in “Vang” that a Hmong couple flees the oppressive communist regime of Vietnam for America after a two-year period in Thailand. The couple sets out for America to become farmers. The man notes, “Plant makes you feel good.” The man and woman sustain themselves by working in hotels and eventually open a tailor shop in Iowa, but they also farm. While language is a challenge, the Hmong couple is successful and today is “the toast of the farmers’ market in Des Moines,” according to Matt.

    Joseph, who is seven feet tall, escapes from Ethiopia in 1998 and the brutality of the Muslims who are terrorizing Christians. “Mary” and “Dennis” relate his detainments, the need to eat garbage to sustain himself and his arrival in a UN camp. In the winter of 1999, Joseph is relocated to Des Moines, Iowa, where he works in a meat packing plant and eventually begins to farm. Along the way, Joseph also earned a PH.D. from Iowa State University and now teaches at the school.

    Benny and Ramona are immigrants from Mexico. They arrive in Iowa in winter and Benny works in a meat packing plant where he stays for 10 years. Through their many experiences, Benny and Ramona become great resources and support for their fellow Mexicans who immigrate to Iowa.

    Jahn and Doreen are from the Netherlands and they come to Iowa to begin a dairy operation through a program seeking Dutch farmers who will immigrate to Iowa. They are one of the 12 Dutch families arrived in Brooklyn, Iowa, to farm, but only two or three remain today, said Matt.

    “We have found that the second and third generations of these immigrant families tend to leave the farms and head for the cities. There is always the issue about which child will succeed the parents in farming the land,” related Matt following the play. “There are not a lot of formal agriculture programs for these new immigrants, but the Midwest appears to be in the vanguard of attracting immigrants for farming. The lack of availability of land is the biggest obstacle. The newest wave of immigrants coming to Iowa is from Myanmar. They come to work in the meat packing plants.” 

    Land prices slightly down, but there is light on the horizon

    While farmland prices have dipped lately, experts Kenn Corban, Roger Hayworth and Eric Wilkinson at The Chicago Farmers’ April 11 meeting said that it is not a dour situation.

    In the last six to eight years, farmland owners experienced increasing incomes, but this situation has taken a downturn with the decreased prices of commodities. However, this period is not in the same category that was prevalent in the 1980s.

    “Farmers have to adjust to today’s climate by making some changes in their expenses,” said Kenn, RVP of field operations for 1st Farm Credit Services. “In our firm’s experience, we have seen approximately 30 percent of farm operators who had significant losses in their working capital in 2015. This group knows that changes have to be made if commodity prices stay at or below where they are now for awhile.”

    Kenn noted that while there was a portion of farm operators who had significant losses in 2015, there also were people (20 percent) whose working capital had manageable losses and others (50 percent) either had minor losses or increased working capital. He related that decreasing corn and soybean prices in 2015 resulted in a 35 percent drop in revenue. At the same time, costs were not adjusting as quickly as prices were dipping. “While we have seen cash positions of some operators drop, there is still significant equity and ways operators can manage through these times,” said Kenn.

    Eric, of Hertz Farm Management, Inc., agreed with Kenn’s analysis, noting that cash rent prices are down along with incomes. At the same time, seed and chemical costs are slowly coming down, giving farmers something positive to embrace.

    “There are still a great number of farmers who are financially sound and in a good position to absorb losses,” said Eric. “They can sustain their positions for one or two years, but not too much longer. Cash rents will be under pressure.”

    He went on to say that some landowners are protecting themselves against losses by shifting away from split rental payments to upfront payments at the signing of leases.

    Roger, real estate broker with Farmers National Company, covers a wide swath of territory that includes portions of Missouri, Arkansas, Kentucky, Indiana, Illinois, and Michigan. He related that he is seeing a decline in the market place in land prices during the last six to nine months. “It has been a sellers’ market for the past five years, and that is changing. However, there is little correction in the sale of high quality property. We are still experiencing strong sales. Regarding B and C soil land, sale prices are down eight to 15 percent.”

    He went on to say that buyer interest is fairly high, but buyers are being cautious at land auctions and during negotiations. “Landowners were buying acres with the additional income they had. That scenario is slowing a bit, yet they still want to add acres to their holdings.”

    Roger added, “There is a limited supply of land. Sales are stagnant across the eastern region of the area I cover. Additionally, many believe that interest rates will rise, which will put pressure on land prices going forward.”

    This market also is seeing internal trading, said Roger, because many farmers are interested in bringing their acreage closer to their home base. He also said there is a higher influx of 1031 exchanges.

    “The media also are playing a role in exacerbating people’s worry about the current situation by likening it to the 1980s,” said Roger. “That is not the case. Farmers are less in debt today. Things go through cycles, but we are not at doom’s day level. Things will go up. We need food. We will move forward.”

    In response to an audience member’s question, Eric noted that prices largely are being affected by the worldwide over-supply of commodities. “There are large stockpiles of corn and soybeans. Until we eat through that stockpile, prices will remain constant or dip a little.”

    The men observed that banks foresaw what is happening today and were proactive in their business decisions.

    “The large (banking) concerns are conservative and are making loan decisions on a case by case basis,” Roger said. “They are concerned about their bottom line, but money is available.”

    Kenn added, “If you (farmland owners) are conservative when things are good, you have more equity when there is a problem.”

    Regarding land purchases by investors, Eric said that farmers are driving the market with 80 percent of the sales involving active farmers. Roger agreed and said that investors try to be more aggressive, but the majority of land sales are local farmers who want to control acres.

    Other points:

    • Foreign investors are not a key component in buying farmland in the Midwest.
    • Farmland REITs seem to be making a big splash on the market, but are not influencing it. Yet, they are well diversified and worth watching.
    • Insurance coverage has not changed with 85 percent revenue protection for corn and soybean operations.
    • There seems to be more sale listings today versus land auctions.

    GMOs are not so mysterious


    Dr. Stephen Moose, professor of plant genomics in the Department of Crop Sciences in the College of Agriculture, Consumer and Environmental Sciences at the University of Illinois, chats with Lexi Gomez, center, and Lorraine Claros, students from the Chicago High School for Agricultural Sciences, prior to our February meeting where he discussed biotechnology and genetically modified crops.

    GMOs are not so mysterious

    GMO (genetically modified organisms) or biotechnology is a process with which we have quite a bit of familiarity. Biotechnology is the use of a biological process to make a product, such as bread, cheese and wine, Dr. Stephen Moose, professor of plant genomics in the College of Agriculture, Consumer and Environmental Sciences at the University of Illinois, told the February 8th gathering of The Chicago Farmers.

    He noted that modern biotechnology uses DNA, the carrier of genetic information. Dr. Moose noted that biotechnology helps us improve upon nature. For example, it has helped scientists to reprogram gut bacteria to make human insulin for medical use. “Almost all insulin is produced in a lab using genetic engineering,” said Dr. Moose.

    “We have been doing genetic modifications for a long time,” he related. “Innovations in agriculture and our scientific abilities have allowed us to modify genetics to our liking. Human intervention has changed crops to what we have today, such as drought and insect resistant corn that grows well in the Midwestern climate. Technology improvements have continually increased corn yield and biotechnology is part of that.”

    Dr. Moose noted that if we understand the differences in genes, we realize that a gene from one plant can be programmed and used in another plant to develop a beneficial trait. “We are mixing and matching DNAs that work better than nature intended,” he observed.

    Almost all table squash are genetically modified, as well as soy beans that have been genetically engineered to improve cooking results. That brown color that appears on wedges of apples to discourage hungry insects? Apples are being engineered so that browning is “dialed down” to make the apples more appealing to people, Dr. Moose shared.

    Dr. Moose said that genetic engineered crops have a number of benefits:

    • more efficient in controlling weeds and insects
    • use less energy, chemicals and labor
    • reduce soil erosion
    • improve product quality
    • safer than spraying

    Concerned about ingesting DNA? Research has shown, Dr. Moose said, that eating DNA is not harmful. He points out that breast milk contains more DNA than anything else that people consume.

    Dr. Moose said that people’s concern about the development of superbugs in response to overuse of a chemical, is not completely valid. “It is possible, but that was happening prior to the use of GMO,” said Dr. Moose. “It is up to the farmer to be a good steward. Don’t overuse or abuse; resistant super bugs are not unique to GMOs.”

    Regarding GMO seeds, Dr. Moose said the testing of the seed is rigorous and there is oversight by the government. While the government plays a major role in getting an approved genetically engineered seed to market, it is the companies’ that fund the cost of development, and if there is an issue with the product, it is a company’s responsibility, not the government.

    Regarding labeling products that contain GMOs, Dr. Moose related that labeling is covered by the 1938 Food and Drug Act, which provides that the risks of an ingredient must be known before labeling can occur. He noted that several states have had movements encouraging labeling and Vermont did pass a law mandating labeling; however, this inhibits interstate commerce; trade barriers cannot be established in the United States. This matter is in the courts now.

    GMOs have gotten poor receptions in many areas due to the media campaign against them. Also, people who are not connected to food, do not know the benefits of GMOs. “The more people know about GMOs, the better,” said Dr. Moose. “In 25 years of using GMOs, the risks have not materialized, but we should still be cautious. There is a thorough review of products by the government, so we have not had problems.”

    Downsides of GM? The seeds are more expensive, is the value worth it? Also, a farmer may be paying for two traits in a seed when he only needs one of the traits.

    Dr. Moose was asked whether genetically engineered insecticides contributed to “sterilized” agricultural soils compared to neighboring woodlands. Dr. Moose said he does not support the notion that GMOs lower soil biodiversity. “Any managed environment will be different from what is found in the woods. GM would only be a part of differences in soil quality. Amendments are necessary.”

    Moving Illinois and its agriculture to the forefront

    By Denise Faris

    FARM Illinois is the state’s food and agriculture industry’s greatest cheerleader. An acronym for Food and Agriculture RoadMap for Illinois, FARM Illinois is a major initiative designed to secure Chicago and Illinois as a global hub and agriculture in Illinois as a global leader, according to Lee Strom, project director of FARM Illinois and guest speaker at the Farmers’ January meeting. Strom works with his son, Tyler, project manager of FARM Illinois, to help FARM Illinois achieve its objectives.

    Strom related that FARM Illinois is the first coordinated effort system to bring together agriculture, food, major food companies, business, universities, and Chicago. “There never has been an effort to bring all of these groups together,” said Strom. “We want our state to be a regional, national and global hub. We have a world class asset in Chicago and in Illinois agriculture.”

    FARM Illinois represents thinking forward and making the country and the world aware of what Illinois has to offer, said Strom. The state is centrally located, is a transportation hub, and boasts some 27 million acres of prime farmland, he noted. Additionally, it has Chicago, a global magnate for business; witness ConAgra Foods’ recent decision to move to Chicago from Omaha.

    While Illinois and its food and agriculture sector have much to offer, they face challenges:

    • The world population of 7.3 billion is increasing. Secretary of Agriculture Tom Vilsack predicted that in 35 years, the United States will need as much innovation as has occurred in the last 10,000 years to feed this growing population, related Strom.
    • Consumers’ preferences are changing. Will food and agriculture be able to give the knowledge new generations want about their food?
    • The agriculture sector in Illinois has never fully recognized Chicago and its contributions to agriculture and the global food economy. This has to change.


    “FARM Illinois is working to bring all of the necessary parties together so there is greater collaboration, coordination and discussion,” said Strom. “Illinois does a lot of good things, but it does not get recognized. We have to be identified as a global leader. That is the goal of FARM Illinois. FARM connects groups and helps them move forward. It champions Illinois.”

    Strom said that FARM Illinois is dedicated to “ensuring that we get it right for the future.” He added, “We want to create the right environment for job opportunities. We want our young people to know that agriculture offers a viable future.”

    Strom related that FARM Illinois is funded through the private sector and it wants to remain that way. Its benefactors include the Searle Funds at The Chicago Community Trust, 1st Farm Credit Services, Archer Daniels Midland Company, CME Group, Farm Credit Illinois, Fresh Taste, GROWMARK, Inc., Illinois Biotechnology Industry Organization-iBIO, Illinois Corn Marketing Board, Illinois Farm Bureau, Illinois Soybean Association, Ingredion, Renew Moline, Inc., and United Airlines.

    For more information, go to www.farmillinois.org.