MPR’s Dan Olson interviews Willis Anthony, University of Minnesota agricultural economist, who discusses farming, its future, problems and solutions. MPR’s John Ydstie talks about planting. Program also includes report from MPR’s Jennifer O'Neil on set-aside program.
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(00:00:00) Well Anthony from the University of Minnesota agricultural economics department is with us this afternoon to help us answer a question what our Farmers going to plant this season and will I suppose we can measure the thoughts of farmers and the beginning of Spring planting Intentions by the number of commercials on television over herbicides and other chemicals that farmers can use I noticed the advertisers are really making their play now for the farm dollar will we've done this about every year I suppose for the past three years. We've asked you to join us for some indication of what farmers will do in this next planting season. We had a record corn crop in the United States last year and we know that we have ample supplies of Wheat and a few other grains to what do you think is the Outlook generally for the 1979 crop will be again see Farmers harvesting record crops. I doubt it down. It's always a very difficult to forecast the weather even though you do it so well for the next couple of days, but There are you know, really a couple of very important parts of the equation. One of them is what people do decide to put in the ground by way of seed and the other is what the weather is going to be in 1979 growing season, but you're right. We do have a lot of carryover of Commodities particularly. The major grains are oilseed carryover is much less and consequently, we've been seeing these very strong sunflower and soybean prices in Minnesota. Yeah, and that carryover is important to I suppose because if I'm not wrong Farmers have been building more storage facilities than ever before at a faster rate than ever before is that right? Very very high rate of investment storage facilities in the farm down there in getting record capacity and Records amount of grain in storage in everyone will be getting back to some of these factors a bit later in our discussion. But today as part of our attempt to answer the question. What will Farmers plant will we're going to pay a visit to a couple of locations in Minnesota so that we can get some idea as to how Farmers make these decisions and what sort of Help farmers get in making the decision about what to plant Duane carlstrom Farms about 1,400 Acres of Red River Valley Land South of Moorhead and he Farms with his sons their the Farms main crops are sugar beets and small grains. Mostly wheat, mpr's John. It's t of K CCM talk with carlstrom on a recent winter morning about his planting plans for this spring that conversation which took place in Carl streams office in his farm home began as carlstrom explained the basic elements. He must take into consideration as he decides what to (00:02:31) plant. I guess the major consideration would be the economics of it what crops have done the best for you in the past and And you take into account what price forecast you get from? Let's say Farm magazines and newsletters things like that. And also you've got to consider the government programs now and what what effect they might have on it tentatively. I plan to go along with the government program. There are are some guarantees of price there and a little protection against disaster and if you should want to go along with a loan program that's also available. And if you did not go along with the program all these things would not be available to you. (00:03:17) Well, let's talk about your your rotation specifically, you've generally raise sugar beets and wheat in past years as I understand it. How do you decide just how many acres of Beats you're going to have and how many acres of of Wheat and do you (00:03:33) consider whether or not you had to put another specialty crop in there or another crop when you're having trouble with one of the others well. Sugar beets has been our main crop and I suppose that's probably the basis of our rotation. We try to beats are contracted, of course and we are to live up to the contractor required to plan so many acres. We Works in good with the beat rotation because you can plant beets on on last year's wheat ground. Therefore take a crop like sunflowers which has probably been doing as well as anything in the valley for the last few years would be a good crop to plant but they don't work out well in a rotation with sugar beets. We also raise barley that works out. Well and another consideration we have to take in is if we go along with a government program and set aside cropland. We know we're cleaning up the land a little bit and of course that that helps to be crap and it's also probably good for another ton or two of Beats. So when you sit down to decide what you're going to plant in the (00:04:48) spring you and many other farmers in the Red River Valley who have contracted to American Crystal sugar to grow beets. You have a set amount of sugar beets that you've got a plant somewhere on your farm. (00:05:00) That's right that like I say, that's probably the basis of our rotation because we know what we have to do there. Another consideration is is your workload sugar beets require a lot of a lot of Labor and a lot of time a lot of cultivation and if a person were to go to more say sunflowers or soybeans, which also require Nation the workload can just just get too heavy and you're not going to do the best job on something. (00:05:30) How about Beats now? We've had low sugar prices in the last couple of years and you had a real good crop. In fact a record crop in the Red River Valley last year so that helped to bring in some profits when you sit down during the (00:05:45) winter now and start to think about what you're going to (00:05:47) plant. Do you consider that well, maybe I had to (00:05:50) get rid of my sugar (00:05:51) contract because that ties me up and given the prices we've had in the past years. It may not be the best investment for me. (00:05:59) Oh you certainly think about it, I guess in our farm in particular we've been raising bees here since 1936 and it's just been a way of life and beets have been good to us for many years and just because they're have had a few rough years here. I can't see myself giving up on him yet. Let's talk about how you decide. (00:06:22) Whether or not to plant wheat or barley or another grain to go along with your sugar beets, we've had poor wheat prices in the past several years. How do you decide (00:06:34) if you're going to raise that wheat (00:06:37) or (00:06:39) whether it would be better off for you to try to raise barley or whether you should think about another crop? Well, that's probably made on by reading up and studying pamphlets and and on the Mount of carryover and and taking the price of previous years seeing how you come out. It seems that as far as the decision between wheat or barley would go they've been price-wise have been pretty much the same. It seems we always have a problem when we have an oversupply of either one when they want low protein and barley your barley protein is too high and they want high protein in wheat, and your wheat protein is too low and it seems like you can't win. I have a crop land drawn up and it's a tentative decision that can always be changed toward spring. I think myself. I think I'm probably going to increase the lead slightly and cut back on the barley mainly because we've had good barley crops here, but we have a problem with to higher protein and we take a big discount at the elevator for that. (00:07:50) You say you've decided tentatively. How soon do you have to really make a commitment about it? Do you have to order seed and fertilizer to go along with your you're planting plans early or or can you wait till the last minute (00:08:04) or you can wait I've already ordered a few things you allow for a little change in plans. They're like, you mentioned that we've been a wheat and sugar beet Farm, but I think this year you may see a few sunflowers out here to just Mainly to get the feel of the situation. Although we realize that probably sunflowers and sugar beets. Don't mix too. Well, but you always like to like to know what other possibilities (00:08:35) are. So you're going to do a little experimenting really this (00:08:38) year. I guess you could say that and and from talking to the neighbors around here. I think you'll probably find a lot of that. (00:08:46) Do you make use of any of County Extension courses on on planting and planning your acreage or any state computers that you might feed your information into come out with some kind of advice on how you had a plant or is it mostly done here in your office over your desk looking at your figures and calculating in your head and just making a hunch about what you want to do? (00:09:15) I think basically that's that's where most of it is done. We certainly take advantage of a short courses or one-day seminars or things like that because you always pick up some good advice, but I guess the final decision has to has to be made in your own office on on your own operation. (00:09:35) Well, thanks for for sharing your plans with us this morning, and we wish you luck in the coming year Dwayne carlstrom a farmer from South Moorhead. He Farms about 14. Third Acres of generally sugar beet and wheat acreage with his sons. This is John. It's t-jon visited the carlstrom farm a few morning's ago during some winter in activity for the carlstrom family near Morehead. We're at 29 minutes now past twelve o'clock. This is midday on Minnesota Public Radio. We're asking the question. What will Farmers be planting in the next growing season Our Guest is Willis Anthony agricultural Economist from the University of Minnesota. Will what do you think of Dwayne Carl streams a decision making process? Do you think Duane is fairly typical of us Farmers? Well, very good. Then I think that he certainly is bringing out a lot of things that farmers are considering whether or not mr. Carlos term is typical and I don't know I have more and more problems in trying to Envision. What is it typical farmer because there is so so much e very great variation. There are some things that he brought out though that I think really are typical. In the sense that he talked about a number of things that people that I think everyone considers one of them is the economics. What are the crop prices looking like compared to the production costs and they're indicating as we're looking at them that in the major say sunflower growing areas. The sunflower prospects are looking about twenty dollars an acre better than the standard crop in the Northwest which is wheat in the corn-soybean area of the state the sort of these sunflowers are the soybeans are looking as though they're 80 to 90 dollars an acre more profitable than corn in the southern part of the state. So the economics is part of it. He also mentioned this aspect of Trends Dan talked about experiences with new crops. It certainly is one of the things that's happening in sunflowers in Minnesota as people are becoming more familiar and how to grow and handle and take care of them. We do see it as simply a trend of increasing acreage. He mentioned the importance of crop rotations that is that in any one year the cropping decisions are not simply based on what the economics of the coming year is. They're based on what kind of rotation program makes sense in that kind of a farm operation the sugar beet sweet corn soybeans and other parts of the state and so on what's happened in the way of fall fertilizer applications that mean Investments are already made in the ground. So that's important. Let's take two of you go ahead now will crop rotation and fertilizer first rotation. I was under the impression that rotation is not as widely practiced by us Farmers as it once was and in fact, there is now the continuous planting method used by farmers and worry about going from alfalfa then to wheat then to Barley and then back to Alfalfa, for example, they'll just planted continuous sweet every year in a sense. That's true. I guess it depends on how far back one goes with standards of comparison, but there is a substantially more interested in rotation now than there was five to ten years ago, but less rotation than we used to see 30 years ago, for example, and this is because of a couple of things that a disease problems insect and pest problems and the economics of In fertilizer also a factor and that brings us to the point of fertilizer. Now fertilizer. We are promised is going to be considered for somewhat more expensive this year since it is some for some fertilizers are based on petrochemicals. How do you think that is affecting plans this year? Our Farmers not changing the crops they will plant but rather changing the amounts of fertilizer, they apply I don't think they're doing either one to n because the the crop price fertilizer price ratio is not really significantly different from what it was a few years ago. And as a matter of fact we did see a sharp rise in prices on the petrochemical fertilizers a couple three years ago, but have sort of leveled off since then so that's not as important to factors. We might be led to believe with all the news about cut off from crude oil from Iran. And so I don't think it's a big factor this year. The only substantial factor that I can see in the in terms of fertilizer affecting planning this year could be transportation problems in terms of putting phosphate and potash into place and nitrogen in some cases into place one more question will about this issue of rising energy. Costs it is related to to Rising costs. Generally that farmers face have their costs been rising in relation to the prices. They receive or have the costs been increasing much faster than the prices they receive. Well again, it depends on what you're a person happens to pick for his figures for purposes of argument in which prices he's looking at in terms of Commodities. But if you look at very general price trend lines showing indexes of all inputs for production and inputs of all commodity Pride or outputs of all commodity prices. It shows that that we have had in the last two or three years more rapidly rate of increase in costs and we've had an increase in commodity prices that seems to be consistent with what we were hearing from members of the American agriculture. Yes, I think is it at Washington not long ago. I think that's right. We'll be getting to that point to in a moment, but will one thing that Duane carlstrom said was of interest to me. He uses his farm Publications for some of his advice. I'm I have the impression that there is a small Industry that has sprung up around this issue of trying to forecast what Farmers should do the farm publication seem to be involved in that how reliable are these various forecasting forecasting groups? Well, it is a growth industry to be sure and there are two elements of the growth industry one is it there has been quite a quite a little industry developing in terms of the commodity price forecasting both individual Consulting arrangements and and simply suppliers of of ongoing weekly materials and so on and also the development of consulting services in in production past analysts and so on as well how reliable are they? It depends on your standards of reliability most of the things that I've looked at. It would probably be a little better than flip of the coin better than 50/50 and that's good in an uncertain world of commodity price for casting back to farming as gambling I guess. Well, right we'll be back to will Anthony and just a moment. We did mention one thing early on in our discussion and that is Farmers this year are considering the Surplus is left over from last year's crop last year American farmers produced a record 7.1 billion bushels of corn the USDA estimates that about one and a half billion bushels of that corn will be carried over to 1979 making grain stock piles there at the putting them at their highest level since the early 1960s. So for Farmers this surplus of corn May mean lower prices and to help curb grain production and increased prices last year the Department of Agriculture instituted what it called a set-aside program. And again this year crop and livestock farmers are deciding whether to participate in the 1979 version of that feed grain program and we hear more on that from NPR's Jennifer O'Neill who is at que él se in Rochester. This year's feed grain program requires a farmer to take out of production in Anchorage figure equal to 10% of his plantings for Harvest of corn and sorghum and 20% of his barley in the United States. These grains are usually fed to livestock with corn being the largest. In crop under this program a farmer is guaranteed a price of two dollars and twenty cents per bushel of corn. That's up from last year's price of two dollars and ten cents per bushel but the payment to Farmers for diverting more than 10% of their Acres was reduced the agricultural stabilization and conservation service administers. This USDA program Russell Priests of Olmsted County ASCS (00:17:03) explains, the 1979 feed grain programmer set-aside program as you call. It is very similar to the 1978 program. I guess I might say we do feel that the 1978 program did a lot of good. It did keep the market prices the feed grain prices up to ATS. They were at least stabilized. We didn't get a big increase in our local market prices, but we saw some this year. The Target price has been increased from 210 to two dollars and twenty cents, which should mean a little bit more to the farmers next year. We do know that the sell side payment has been reduced last year. They got paid on the for 20% that they set aside this year. There is really no cash payment on the first 10% but there is on the second 10 percent which is equivalent to about the same rate as was paid last year, but the purpose of the program is Farmers realize their income from the marketplace and course with the two dollars and twenty Cent Target price this year. They will either get it through a deficiency payment or the two dollars and twenty cents will come from the marketplace (00:18:16) farmers who comply are also eligible for loans and disaster payments and possibly a grain Reserve program in the fall in January. The usda's planting intentions survey showed Farmers planning a 1% increase in corn planting despite the set-aside program sign up for the program began, February 15th and Priests expects only a moderate participation in Olmstead County. (00:18:39) I guess telling me Saw throughout the county. There isn't too much optimism. I guess it might say in fulfilling this goal. There are several farmers who do anticipate on on applying or complying with the program. But I guess at the present time I'd have to say that we don't have too much (00:19:00) activity Russell priests Olmsted County ASCS director critics of the program say that a larger payment for extra acreage diversion could have been provided giving Farmers more incentive to keep land out of production. But according to a national farm management magazine in most cases. It will pay Farmers to participate in the set-aside program. Only of market prices are below a dollar ninety per bushel. Will they pay them to set aside more than 10 percent of the crop Murph Freeman area farm management specialist explained that farmers who raise corn principally for their own livestock may choose not to participate in the set-aside program. (00:19:35) These kinds of people normally do not entered in the program because they need the total Supply anyway. The people who usually sign up in the program are those people who have some crops for sale and the ones of course that are you think of right away are the cash crop farmers and a cash crop farmer very often will participate in this program not only in the signup part of it, but he also may take a loan out. This is part of the program to and that loan. He'll use it to build new grain storage facilities and store Grain on the farm. He also gets a payment for that storage and these kinds of people I think sign up by and large and larger numbers in the the smaller life doc. Farmer (00:20:17) where cornyn's King like it is in southern Minnesota Farmers are especially reluctant to take their best crop out of production. According to Freeman the program penalizes the good farmer who's able to produce higher yields than the projected normal crop acreage one school of thought is to raise what you're best at and what you can support (00:20:35) TF armor is trying to make the most money (00:20:40) from Resources that he has the land that he has in the Life doctor that he hasn't and each of these things such as corn and (00:20:49) soybeans and wheat and Alfalfa in a normal year. He gets a normal kind of yield on it now, his farm is different than the neighbors. He has fire May do very well in raising corn or it may do very well in raising Alfalfa and maybe with his particular talents. He does a very good job and so he gets outstanding yields on those things. And because he's trying to make the most money from the limited resources. He has he keeps changing these combinations of acreages, you know, their acreage (00:21:20) mix mer Freeman area farm management specialist did the 1978 feed grain program keep enough corn out of production to increase corn prices USDA officials attribute a strengthening of farm prices to the farmers participating in the 1978 feed grain and wheat program, although observers noted that strong export markets helped push. Arne prices up last summer exceptional whether boosted corn production up 10 percent despite a 5% cut back in acres planted at least said management specialist Freeman and ASCS director priests. The set-aside program was better than no program at all to help stabilize prices from Rochester. I'm Jennifer O'Neil. Will Economist will Anthony the message I get from that report is that the government Farm program may or may not work depending upon what the weather does and depending on what foreign countries do in the way of their production and Export demand. Yeah and depending on what a person's definition of work is the way it looks by and large down is that the the farm program from the standpoint of an individual corn producer? He's probably going to make more money not participating in the government program than by participating from the standpoint of a wheat producer. He might have more dollars in his pocket if he participates than if he doesn't but the major impact of the farm program is going to be whether or not there is enough acreage set aside in order to reduce grain production. 79 and therefore increase the total market price. I know it's a dangerous question to ask but I forget the figure. It's in the billions of dollars. I guess the cost for the usda's farm program. Do you think the farm program is worth the time of the federal government that is to say would American agriculture be a reprobate harmed if there were if there were no government intervention at all. Well, I forget the cost to unfortunately, but I think that in trying to assess the current kind of a farm program that's in place a person has to go back and review just a little bit of history and the history is of this at the farm program that we now have which is primarily a program putting Commodities into Reserve was one born out of the frustration that a lot of the public felt in 73 and 74 when we were having such a sharp increase in our export grain sales that there was substantial concern as to whether or not we were going to be selling our cupboard bear and consequently not have enough wheat to make bread for United States consumers and not enough corn for our Going to save for a Wheaties. I guess we don't put corn in hoodies but not enough corn for breakfast cereal. Now the farm program that emerged from all of that then was essentially a compromise kind of a program in which the consumer interests in Congress were looking at what they saw is a necessity of trying to generate some kind of a grain Reserve program so that we had some stocks in reserve this on the one hand coupled with some of the farm interests in trying to maintain some kind of price stability in the marketplace and now to a considerable degree will u.s. Granaries are full or almost full and yet the farm products are not moving at as fast to foreign customers is perhaps some people would like them to be sold is that because u.s. Farm products simply aren't competitive on World Markets. It depends on the products were looking at the oil seeds are moving like gangbusters into the world markets. No problem at all among our major grains. We're not having any really significant problem in our corn exports work exporting a lot of corn one point. Billion bushels about the same as we had last year. And the reason we're not exporting more corn. This year is partly because the Soviet Union had a big wheat crop and of somewhat poor quality and they're going to be feeding some wheat. We have been having some difficulty in wheat exports chiefly because European economic Community had an enormous wheat crop last year and they've been very heavily subsidizing wheat exports into Latin America and into some other countries. Now are we Tech Sports? In fact are ahead of a year ago, but they're not as large as they would have been had there not been the European economic Community export subsidy the Europeans engage in some subsidy programs that rankle a lot of American farmers and well we cannot get into a detailed discussion. I guess of European economic Community subsidy programs. Can you summarize what the what the objection is there by some Americans towards subsidies by Foreign government. Well, the nature of their subsidy program is essentially this at they put relatively High Target prices domestically in the European economic community. That means that any agricultural Commodities that are coming in European economic Community pay a very high Levy in order to get into the system that Levi becomes the treasury for the economic Community. The thing that rankles many of the u.s. Agriculturalists is that this this treasury is then used to subsidize heavily some of their agricultural commodity exports when they need to export into a more info given marketing year. I understand well that there has been a tremendous amount of activity in the past few months to try to arrive at some agreement among about ninety eight Nations. I guess that have been participating in agricultural trade talks those talks recently collapsed according to a news item of a few days ago. What were those negotiations aimed at doing I presume one of the benefits would have been a somewhat increased level of exports of American farm products. Not necessarily the purpose of the agreements under the young Tad or the purpose of the negotiations under the Young Ted agreement was to try to do two things one develop some world stockpiles of grain which Be consistent with the with the ROM can food convention food Aid Convention of a couple of years ago to develop those stockpiles on the one hand and on the other hand try to achieve some kind of price stability by withdrawing stocks from the market in big production years for the world and having those stocks available to go into the market in low production years and at the same time use those stocks for food aid for countries who do not have the money to buy food. Well after all of this rather high level discussion ranging all the way from government farm programs to u.s. Farm products surpluses to export policies it all comes back to the American Farm family and we'll want to conclude our discussion by tackling the definition of the family farm concept. I think it is an image that is confusing to many people because the media will have us believe that the family farm is where mon past and on the porch of their white frame house with a milking cow and a few chickens in the background and a field of corn perhaps sprouting up behind the Red Barn, that's one image. Another image of the family farm we are given is that it has changed remarkably from that bucolic image. It is now dominated by very expensive machinery and some cases the Family Farm man and woman will be very active in bookkeeping. They may be using a computer terminal. What is the what is the typical family farm? Where do the where do most of people most of the people in this country reside on that Continuum? I think you hit a den the concept of a family farm is is an image rather than a statistic and in some sense. I think it's important that we remember that because we try to use statistics to explain things and it's not always a very useful way of explaining things and one of the reasons that that we get into in agriculture substantial arguments occasionally on what's happening to the family farm is that it depends on what ones image of the family farm is now if you take a look at what's happening in some of the some of the growing areas of the United States, let us production in the Imperial Valley of California. For Nia, which has been in the news obviously one image of the farm is is the one which fits but largely you're talking about not Family Farm production. If you talk about corn and soybean and wheat production in Minnesota, you're talking about farming where most of the or virtually all of the labor is from the family that owns or is renting the land and the image of the family on the white frame porch is really not too far from from reliable. One other thing. I was going to comment on Dan and it relates back to some of the conversation with mr. Carlos term a while ago is it he took off a number of the important considerations at these families are thinking about in making that decision on what crops to grow in 1979? I think there were two or three other things. However, that that he probably alluded to but but probably ought to be made specific one of them and this is where we let into this whole conversation are the expectations with respect to the weather in this applies. Not only to The concerns that there may or may not be enough moisture to make the crop grow in 1979 and different crops have different tolerance to moisture deficiencies at also applies to what the anticipated date of spring planting is and what the frost date might be in all of that sort of thing in the growing season. There's another set of factors again that he alluded to but again ought to be made somewhat more specific I think and that's a set of expectations that people have it's not only the current do new crop contract prices in New crop Futures prices on the market that they're looking at but it's also their set of expectations that did that are of importance and if a farmer is is of a mind to believe that we're due for a world grain failure a crop failure in 1979 1980, which would be consistent with the past 20 years of History. Then he met as mr. Carlstrom suggested to plant more wheat, even though current wheat prices are low and we've got all kinds of wheat now he might say, well there's a good chance that there's going to be a crop failure and the Soviet Union or China or somewhere. There's another As well that's important. And that's that. There are a lot of people in the commodity market so much like people in this stock and other financial markets who talked in terms of long-term price Cycles in many of those people are saying we're due for an upturn in the long-term price cycle and Grains. Maybe it's something like the Ouija board. Maybe there's substance to it. I really don't know under there's another Factor as well on thats the the the if you will the game people play that farmers play in terms of trying to outguess what the their neighbors are going to do. For example last spring in the spring of 1978. We also had relatively high prices of soybeans compared to Corn but we did not have any an extremely large increase in soybean acreage partly. I believe because many farmers thought that with that favorable soybean to Corn price racial many other Farmers would be shifting into soybeans and therefore they're going to stay in corn production and there's another Factor as well then which I think out not to be lost sight of And that's that it's not only an economic decision and I suppose maybe those of us who are trained in economic stress out a little bit too much but there's a lot more than economics that are involved in the decisions. There's a certain amount of is thetic involved in the whole thing as well. A cornfield looks nice in the corn growing area. And that's a powerful incentive for planting a field of wheat in the Red River Valley is a beautiful sight and that's a powerful incentive for planting wheat, even though other crops may be more profitable looking so there are those kinds of things as well that come into play and I think they ought not to be downplayed because in a sense of person is looking at something of this magical process that we all consider when we look at the seed catalogs that are coming into the mailboxes in January and February and we look out at the cold snow Banks and and yet at the same time are contemplating what happens when the seed Falls in this same thing applies. I think whether you're talking to a home Gardener whether you're talking Thing about someone with a flower box in their window or whether you're talking to a mr. Carlstrom who's planning 1,400 Acres of crops. It says there are emotions and Aesthetics and all kinds of things besides economics. And these decisions are being being made at many levels as you point out. Thanks to you. We'll Anthony University of Minnesota agricultural Economist for joining us today on midday. And also thanks to mpr's John. It's tea and Jennifer O'Neill for contributing reports to this discussion to help us answer. The question of what farmers will plant. I have a feeling though will that we probably didn't help many farmers answer that question. They probably don't listen to too many outside sources. They returned to their desk and pretty much do what they want to do.