However, Farmers Do Have Options
LITITZ, Pa. — Ever hear of the PIIGS?
How about the BRICS?
They may just look like bad misspellings. In reality, though, farmers may want to get familiar with what these two terms really mean, as they may affect their bottom lines.
At the Binkley & Hurst Customer Classic held Wednesday and Thursday at the dealership’s Lititz location, R. Warren Graeff, senior banker with PNC Bank, spoke about the implications of increased volatility and why producers should pay attention to what’s going on elsewhere in the world.
PIIGS and BRICS are actually acronyms. The most indebted European countries — Portugal, Italy, Ireland, Greece and Spain — are the PIIGS. And the fastest growing economies in the world — Brazil, Russia, India, China and South Africa — are the BRICS.
Graeff said what happens in these countries could affect farm profitability for years, since agricultural exports have now reached record levels and these economies have become crucial to international markets.
“It’s going to be necessary for you producers to understand what you’re operating in and (that) you don’t control it,” Graeff said.
Ag exports, he said, are being fueled by the fact that the U.S. dollar is weak, and when it’s weak, it makes it cheaper for other countries to import from the U.S.
Here at home, the “fiscal cliff” of spending cuts and tax increases looms like a dark cloud, with some saying if Congress fails to act, it could lead the country into another recession, which no doubt would affect farmers.
He predicts a new wave of farm consolidation and volatility. He also thinks the use of technology will increase on farms and that shifting demographics will force farms to change what they do to keep up with new customers.
But if there is a silver lining to an uncertain future, Graeff said farmers can do a lot to prepare themselves for it.
He said farmers could start by surrounding themselves with good people, including hiring, training and retraining employees. They could also put more of a focus on sustainable ag practices, have a public relations plan in place to deal with the outside world and maintain a financial cushion to deal with tough times.
When it comes to finances, he said farmers should remember the 60-30-10 rule, earmarking 60 percent of gross income for operating expenses, 30 percent for asset purchases or improvements, and 10 percent for coping with tough times and living expenses.
The Customer Classic, held every two years, featured speakers on many topics from nitrogen management in fields to getting a crop insurance program for the farm.
Mike Oscar, partner with Gray & Oscar LLC, a Washington lobbying firm, and former ag policy aide to the late Sen. Arlen Specter, said he wouldn’t be surprised if the 2008 Farm Bill, which expired at the end of September, was extended another year to allow lawmakers to keep their focus on the impending fiscal cliff.
Even though the full Senate has passed and the House Agriculture Committee has approved different versions of the Farm Bill — the Senate’s would cut $23 billion while the House committee’s would cut $35 billion — a group of mostly conservative Republicans is holding up the bill from coming to the full House for a vote, he said.
About 78 percent of the Farm Bill is tied up in nutrition programs, mostly in what used to be called food stamps. The remainder is in farm commodity programs, crop insurance and other things.
Oscar said Rep. Bob Goodlatte, R-Va., has even floated the idea of eliminating dairy market stabilization programs from the Farm Bill, something that is currently included in both House and Senate versions.
The Milk Income Loss Contract (MILC), he said, paid the state’s dairy farmers $30 million in 2012. That program, regardless of whether a new Farm Bill is passed, has already expired and would have to be passed again.
Even if a one-year extension of the 2008 Farm Bill is passed, which Oscar said appears more and more likely, the process would have to start from scratch since a new Congress would have to pass its own version.
The government has passed a Farm Bill in a lame duck session only once in the past 40 years — 1990. So, in all honesty, it could be a year before a new Farm Bill is passed.
“What we need to understand is, we need to come together. Regardless of politics, we’re talking about a livelihood here,” Oscar said.
In another session, Ken Ferrie of Crop Tech Consulting in Heyworth, Ill., said farmers need to use as many tools as possible to deal with resistance problems, not only in weeds but also insects.
Resistance issues, he said, come from a genetic variant in either a plant or insect, and management can’t prevent it from happening, only from getting worse.
“Sound practices does not stop resistance,” Ferrie said.
Glyphosate-resistant weeds are well-documented. But there have also been issues more recently with insects that have become tolerant or even resistant to certain insecticides.
A resistant type of western corn rootworm, he said, was documented in Iowa in 2011 and in his home state of Illinois in 2012.
The problem is, new formulations of product to deal with the issue are not on the horizon, he said, and the products currently on the market are few.
“We really have to protect what we have,” he said. “Unfortunately, what we have is old chemistry.”
Therefore, farmers should practice such things as crop rotation and using different spray formulations to prevent problems from occurring, he said.
Paying close attention to the labels is critical since they will list the different modes and sites of action for a particular spray, Ferrie said.
Even using different corn or soybean traits will help to a certain extent, he said, and if all else fails, go back to the hoe.