The Buzz: Year End Notes

Odds and ends while contemplating the dawn of a New Year. Bill Spiegel 

Published on: Jan 2, 2006

Over the course of a year, I've managed to collect numerous press releases, newspaper clippings, e-mails and hand-scratched notes, waiting for the perfect time to use them. Now that the calendar has been flipped to 2006, it's time to glean some information from the piles on my desk before discarding the excess.

  • In his year-end commentary on the American Farm Bureau Federation, President Bob Stallman says the AFBF had a "tremendous policy year," in particular with passage of the Central American Free Trade Agreement-Dominican Republic. He writes, "The agreement provides significant opportunities for U.S. agriculture because tariffs on almost all U.S. products exported to CAFTA-DR nations will decrease to 0% after full implementation..."

  • Some agriculture groups were vehemently opposed to CAFTA-DR. However, USDA Secretary Mike Johanns told those who attended his Farm Bill Listening Tour at the Kansas State Fair in September that the trade agreement has many positives for U.S. agriculture – and for the affected countries. "...for the past 20 years, countries had duty-free trade preference [with the U.S.] We sent products there with high tariffs. These countries are now flourishing democracies. CAFTA brings [tariffs] down to a level playing field..."

  • Did you know that in the last 10 years, the U.S. has gone from a net exporter of nitrogen to a net importer? That's according to an article in the "Servi-Tech Review." More than 55% of the nitrogen used on U.S. farms is imported from Russia, China, Trinidad and the Persian Gulf. That's because these countries have abundant supplies of natural gas, used in the refining process. It costs less money to import nitrogen than create it in this country...

  • Importation of nitrogen is one reason why your energy costs will be so much higher in 2006. How much higher? The USDA has established an "Energy Calculator" Web site that you may want to check out (http://ecat.sc.egov.usda.gov/Default.aspx). Simply by plugging in projected planting acres on your farm, you can estimate the cost of petroleum products in 2006 based on local diesel prices...

  • Mid-year, the Dutch banking company Rabobank issued a research report stating that, "the U.S. farming industry is well-positioned to succeed in an increasingly global market..." The company's findings, however, are based on the ability of U.S. farmers to "grow, innovate and use domestic advantages in order to overcome challenges such as high land costs, increasing environmental regulations, changes in governmental support and global competition."...

  • Rabobank, which made news in 2005 by trying in vain to buy Omaha-based Farm Credit Service of America, says consolidation, integration and contracting are advantages U.S. farmers have over global competitors, as is access to technology, strong managerial skills and a strong domestic market...

  • Speaking of high land costs, the news just keeps getting worse (if you're the one trying to buy land). The Westchester Group, Inc., an Illinois-based agricultural asset management company, says in its newsletter called "Current Thoughts" that in many cases in recent years, wooded and rough land sold through the company has brought more money per acre than productive farmland...

  • The rural land market continues to appreciate at a rapid pace, according to the American Society of Farm Managers and Rural Appraisers. Investors are buying farmland due to "nominal annual returns of 8-10% and real returns of 4-6%," says Ron Geer, an appraiser in New Jersey. "Farmland rates of return have consistently moved upward compared to stocks that have been less predictable the last five years..."

  • USDA, by the way, estimates that farm real estate prices have increased for 17 years in a row...

  • Finally, the Association of Equipment Manufacturers expects a downward trend for the 2006 agricultural machinery market. The AEM's annual forecast predicts 2WD tractor sales in the U.S. to total 205,834 units; 4WD tractors, 3,401 units and combines, 6,232 units. Though total sales would be down, 2003-04 were historically high sales years for the industry...

  • In equipment sales, hay and forage tool sales are expected to increase, with round balers leading the way at 1.6%, followed by mower conditioners (0.8%) and loaders, 0.7%). Planers and tillage tool sales are expected to decline at least 7%.