Monday, January 29, 2007

The millionaires ride around Iowa

Well, the buzz around the South of Iowa is the unveiling of the route for the 2007 WHO Great Iowa Tractor Ride on Friday at the Machine Shed in Des Moines.

A good number of local farmers, both active and retired, take part in this annual ride. Drivers would drive their tractors (both antique and newer) from town to town, staying the night, for 4 nights. This is not RAGBRAI, folks; most riders bring campers or stay in motels. The "camp" is pretty much quiet by 7 PM every night. No wild parties take place, but maybe a shouting match or two over Deere vs Farmalls...just kidding.

This year the ride will be based at Osceola, with four single day "excursions" out to various towns surrounding Osceola. This will include Humeston, fortunately. The daily ride will start and end in Osceola each day, making it easier for riders and their support teams to find and maintain lodging. I'm guessing Terrible's casino ("the boat") will be visited by more than a few wives of tractor drivers during this time.

Why do I call this the millionaires ride? Figure this: With the recent rise in land value in the midwest and especially Iowa, a farmer who has 320 acres or a 1/2 section of land paid for is worth at least $1 million ($3500/acre in NC or Eastern Iowa). Of course, not all riders are millionaires or even landowners. It would be interesting to compare the net worth of RAGBRAI riders vs Great Iowa Tractor Ride riders... Some of RAGBRAI riders' bikes might be worth as much at the tractors.

Saturday, January 27, 2007

A Hillary sighting...

As as I was leaving a parking lot on the south side of Des Moines today, I pulled up behind a car with a bumper sticker and sign in the rear window that I hadn't seen before...

Hillary Clinton '08

The occupants were driving a Cadillac STS. The driver looked like a hippie liberal type, smoking a cigarette and wearing a bandana over his head. Smoke waifed through the open sunroof. The passenger had a similar psuedo unkempt look, with shaggy hair and beard.

The scene pretty much summed up what Hillary is - an elitist trying to pose as a commoner in order to take power. The Caddy is a symbol of elitism, while wearing t-shirts and shaggy hair connects with the proletariats.
For all I know it could have been Drew Miller.

Friday, January 26, 2007

A few characters around town

Today I was informed that I have a regular reader of this blog from here in "The South of Iowa". We'll call him "Windy". He's a cattle/grain farmer south and west of town. Windy always has a story or two to tell, sometimes rambling from one to another without stopping. An original if there ever was one.

There ya go, Windy - you're on the Internet now.

Yesterday at the office I was helping a customer load some straw bales into his pickup when a stranger came in and started helping. I didn't say anything, thinking this fellow may have came with the customer and I didn't notice him. After getting the customer loaded, I started talking to the guy and what I could help him with. He was interested in some DDGS that I sell. I said, sure, lets go take a look at the product on my feed truck, parked outside.

I then asked him his name, as I wasn't sure who he was. He told me, and for a split second I think the Earth stood still.

The 1980's were a turbulent time period on our farm, as it was for many others. Dad sold Pioneer seed corn at the time, and he had been selling seed to this fellow (we'll call him FC). Well, in 1984 FC came to our farm and helped himself to a few bags of seed corn (about $7000 worth) and left a note saying he'd taken them and would pay for them.
The problem was, he never paid for them.
We sued him, but were small fries compared to the other debts FC had. In the end, he declared bankruptcy and after the statute of limitations ran out, we couldn't do anything.

In order to pay Pioneer for the seed, we had to sell our camping trailer that we owned free and clear. That made an impact on our family; it wasn't so much losing the camper, but the fact that someone had taken it from us without attempting to come clean. He didn't pay us one dollar for his debt.

FC has done nothing to repay his debts. In fact, he's strung more people along over the years, leading them to believe that he'll pay them, when it reality he doesn't and won't.

So, when I told my folks that FC asked to buy feed from me, they were livid and amazed. Their first response was "get paid in cash" and quickly changed to "don't deal with him on any circumstances".

So, while I didn't bring up any of this with FC when I spoke with him about the feed, I have decided that I won't sell him any when he calls again. Or, if I do, I'll say the price is now $7000 + 23 years of interest.

Sorry Windy for grouping you and FC in the same blog!

Thursday, January 25, 2007

Smithfield getting rid of gestation crates

Smithfield Foods, the LARGEST hog producer in the nation, announced today that it would be phasing out gestation crates for its sows in favor of "group housing" over the next 10 years. Although not specified in the press release, it will surely please animal welfare groups.

For those unfamiliar with gestation crates, let me paint a picture: Picture a sow in a steel bar crate with 3" of room on each side and about 9-12" from front to back to move. The animal can't turn around - she's always facing the same direction, with her feed and water at her face. She can lay down and get up, but not move more than a few steps at a time.

Why are/were gestation crates used? Pregnant sows get nippy with each other at times, and the idea behind the crates is to protect them from each other, as well as maximize space inside the building to stuff the most # of sows into.

When we raised pigs, gestating sows were always group housed. It just made sense. Sure, you might have a sow that would get picked on more than others, and we'd have to separate her off. That's a little thing called "animal husbandry" that farmers used (and sometimes still do) practice.

I'm not a big fan of gestation crates, nor of large scale confinement operations. Yes, the economies of scale supposedly dictate today that confinements should reign, but they have their issues.

It will be interesting to see how Smithfield phases in and gets along with group housing. I'm thinking they'll make it work one way or another. Taking 10 years to do this, however, is somewhat slow; it could be done in 2-3 years easily. They're just giving themselves a long time to do what was right all along.

Monday, January 22, 2007

Winter's here, I guess

As many of you probably already realize, we have snow on the ground now in actual accumulated amounts. This is not too bad - the daily temperature is near freezing, and the wind is bearable enough. The total, at least here, looks to be around 3-4" or so.

The problem is, I still have a few outside projects to do.

One is getting a feed wagon converted into a mixer/scale for my distillers dried grains product. I think I have it going. Almost. The scale works, but I need it to read up to 10,000 lbs in 2 lb increments. Instead, its going to 5000 lbs x 1 lb increments. I think a call to the company is in order.

Another project is to erect a canvas building around and over said mixer/scale. It needs to be secured to the ground, but guess what - the ground is frozen. I might try pouring hot water over the areas where the anchors will go and we'll see how that works.

Speaking of hot water - it has now become my favorite "tool". Saturday morning I needed to convey some DDGS from a wagon at my father's to my feed truck. I planned to use my belt conveyor, but since I had used it last, water/snow/ice had accumulated at the boot of it and caused it to stick. A couple gallons of hot water, and wa-la, it broke free. Today I needed to free the door of a grain wagon from ice. Again, pour a couple of gallons of hot water around the door, wait a few minutes, and pop, it opens up. Hot water is a great tool.

I'm awaiting another load of DDGS to come today from the Lincolnway Energy plant at Nevada. In preparation, I made a new tool I call a "boomstick". It's basically a piece of 1/2" plastic conduit with an airgun valve at one end, attached to my air compressor. A steel rod is duct taped to the conduit to make it rigid. Sometimes DDGS will settle and hang up in the trailer, and so someone has to poke and prod at it. Well, the idea with the boomstick is that one can poke the 1/2" conduit into a tough pile of DDGS, hit the air, and BOOM, down it goes through the hopper into the auger. I tried it out on some packed snow, and I caused some minor explosions with it. My son would love seeing this work.

So, no real insight this time about ethanol, the corn market, livestock, deer, politicians, or cheesy 80's videos. Just gettin' along, dealing with the cold and the snow.

Monday, January 15, 2007

Minimum wage hike - how it would affect me

I have appreciated Jordan's posts over on Cornbelt Boys concerning the increase of minimum wage and how it would affect his business. I agree with him - it will cause his pizzas to go up in price (eventually), but not before putting a pinch on his operating capital in the meantime. Artificial inflation ensues.

As a farmer/entrepreneur, I never thought about the minimum wage issue - I don't get paid, or pay, any hourly wages, but instead pay salaries. When I have hired people to work for me temporarily, I've paid them $8.00/hour or more for pretty basic jobs.

However, my wife, the town librarian, brought up the other day that he would benefit from the minimum wage increase. Though working part time, she is paid $6.25/hour for 16.5 hours/week.

Let's say our minimum wage increase goes to $7.25/hour. That means the town would have to cough up another $858/year. I don't think they have budgeted for it, and being a small town with a lot of other pressing issues (sewers, water system, road maintenance, all with a low tax base), it may be difficult to get this. Her hours may get reduced in order to accomodate this, while her job demands would stay the same.

While I'd like to see my wife be paid more for what she does (she does have a college degree and state library certification), it's too bad it will take a government mandate to make this happen. She is not paid, as a city employee, based upon her performance, but on how much money there is available in the budget. Worse yet, the library trustees who "oversee" the library for the city, have been and are reluctant to ask for more money from the city. They won't even stand up for their only employee.

So, while I'd be glad to see an extra $500/year in net income come back to the house, I'm chagrined that A) it's not because of recognized merit and B) it had to take a government mandate to make it happen. Oh well, what can you expect when the government screws another government over.

Saturday, January 13, 2007

Corn, ethanol, and 2007

OK, enough silliness with While it is easy to rip apart our Boy Governor and 80's pop bands, it is another thing to tackle a major issue facing Iowa farmers - 2007's crop and its potential prices driven by a demand for ethanol.

Yesterday, here in The South of Iowa, we were blessed to have both Elwynn Taylor, ISU's climatologist, and Bob Wisner, ag economist, also from Iowa State, at a crop fair held at the Baptist church education building. As the snow was falling ever so gently, both men unwrapped their predictions for Iowa for the coming year.

Mr. Taylor, the elder meteorologist with the voice of a soothing grandfather, told us that we are destined to have a drought in the next 4 years. Our last drought year, 1988, is only 19 years ago. Major droughts have occurred at least once every 19 to 23 years, and if this does happen, we'd break 800 years of records (tree rings are used to determine this).

So, are we headed for a drought? We've never had a drought during an El Nino period, and we are going away from El Nino and headed to La Nina, which has produced many droughts. While we are blessed with a great amount of subsoil moisture at this time, we did as well in 1988 - it caused us to plant our crop too late, and they suffered under the hot and dry conditions of August. So, I'm going to visit my crop insurance agent on Monday and up my coverage - I can pay for it with the higher crop prices that we're seeing, I hope. Then I'm going to hedge with options on the CBOT when they become inexpensive enough.

Bob Wisner explained the demand for corn for ethanol production. He said that if all of Iowa's ethanol plants planned, expanded, and under construction come on line in 2008, they will use 133% of Iowa's 2006 production. That is, it will use all of the corn we produced and more, not leaving any for animal feed or export. That is a big, big demand. If 2006 acreage was the same as 2008, that would mean we'd have to produce 356 bu/ac...our state average this year was 166 bu/ac. Maybe if we had a state full of Francis Childs we could do this, but not for us mere mortals.

Mr. Wisner explained that this probably will not occur; some plants will not be built, but there will still be a big demand for corn if, and this is a big if, corn prices are still acceptable to ethanol plants and crude oil prices remain above $50/barrel or so.

Here's where the train wreck can happen:

Corn was up limit on the CBOT on Friday at 20 cents/bu, as was soybeans at 40 cents/bu. Corn delivered out of the field locally is priced at nearly $3.50/bu. While we as farmers will gladly take it now, I can see the following happen:

1) In December 2007 through March 2008, crude oil will fall or has fallen below $45/barrel. Ethanol plants have locked in this $3.50+ corn, and are now running in the red. New plants forego breaking ground. The expected demand for ethanol doesn't develop, and the bottom falls out of the corn market faster than Boy Governor taking off for Krispy Kreme.

2) Now that the market has dropped off and these plants are dipping into their equity, ADM/Cargill/et al come in to "rescue" these plants by buying them for 10 cents on the dollar.

3) The ethanol production is now consolidated under 2, maybe 3 large corporations. Corn goes back to $2.00/bu, but cash rents and inputs stay up. Farmers are back in the same ol' ____.

Or, maybe we'll have a drought in 2007 or 2008 and really throw everything into a tizzy. Meat prices will go through the roof, not before many hog producers are put out of business because of high feed prices.

While I love these high prices for corn and soybeans, it does bring further implications: Higher cash rents and land values, greater volatility at the CBOT, and the old saying "what goes up must come down". Things will equalize at some point; we are NOT at a new plateau in agriculture, just at a blip. The big boys will see to it that we don't profit too greatly from this demand, and something will happen to bring it all back down. It has happened before, and it will happen again. The smart thing is to prepare yourself against this foreknown information and do what is best for your operation. Zig when everyone is zagging.

Beating a dead horse...too easy

OK, this is too easy

Making comments about Boy Governor is waaaay to easy, especially when he has "Ten Ideas" for economic development in Iowa.

Wednesday, January 10, 2007

The Unsafe Dance

OK, this has nothing to do with The South of Iowa. I found this website after seeing the results of Jordan's work here.

So, I decided to add my insightful comments to one of the best music videos ever made...yeah, uh huh.

Saturday, January 06, 2007

Deconstructing the Earth Policy Institute

I got an email a few days ago discussing the recently published report from the Earth Policy Institute, an environmentalist group in Washington DC. Les Brown, the author, makes various claims that the production of ethanol will serious jeopardize food resources, and therefore a government moratorium (Big Brother knows best) should be instituted immediately to stop excess ethanol plants from being built.

So, I start checking it out, and what do you know, I find some holes in their methodology.

1) Not all ethanol plants consume corn. Some use cheese whey, some use milo, other use a few other inputs. I went through the list and found 16 plants that use some or entirely different feedstock than corn. Some use a mix of corn and milo, wheat starch, or barley. These 16 plants produce (or will produce) a total of 406.4 million gallons/year, or about 3.7% of ethanol production. Not a big deal, but something to point out.

2) It appears the authors assigned a production factor of 2.6 gallons/bushel of corn to plants that are in production as of December 31, 2006 and a factor of 2.8 gallons/bushel of corn to plants under construction. I would say 2.6 is a bit low - anything built within the last two years (which are quite a few) would easily be doing 2.8 gallons/bu. The first plants built in the 1980's and 90's, sure, I can see that being low, but I would use 2.8 for both operating and in construction plants.

3) Therefore, using their data, they would have you believe that current and under construction plants will use 104.34 million tonnes (metric), or approximately 4.11 billion bushels. This is assuming all plants use corn, and in production plants produce 2.6 gal/bu. With the non 100% corn using plants removed, and using 2.8 gal/bu factor, I come up with 3.81 billion bushels. OK, big whoop you might say, but that equates to 300 million bushels, and at 180 bu/ac, that's 1.67 million acres. That's approximately 15% of Iowa's corn crop. So, let's say their figures are plus or minus a few NC Iowa counties. Naw, no margin of error there, eh?

4) I hate it when people assume. That's why this statement really gets me: In addition, easily 200 ethanol plants were in the planning stage at the end of 2006.
OK, where's the documentation for this statement? The list they use that contains existing and under construction plants totals 192 facilities, including non-corn exclusive plants. WTF? Are we going to double the number of ethanol plants by 2008?

Les Brown, here is what is going to happen: demand for corn will become tight in the near future (2007 and possibly 2008), then ethanol plants will start faltering as they cannot maintain the pace with high input prices and lowering crude oil prices. Crude was $56/barrel the other day. Corn was $3.45/bu at the Lincolnway Energy plant at Nevada. You think they will be making a lot of money at these prices? Not nearly as much as when crude was at $72/barrel and corn was $2.00/bu!

In essence, the marketplace will shake some plants loose and an equilibrium will develop between corn production and ethanol production. The US government does not need to step in. In fact, if they wanted to reduce the number of plants on the drawing boards, simply remove the fuel tax credit for ethanol. That would hurt a lot of pro formas in deep red.

I am still bullish on ethanol - I just got into the distillers dried grains + solubles feed business (by product of the dry-grind ethanol plants, like Lincolnway), and I think it is a superior feed source for cattle operations. However, I just think that the plants that are the most efficient and have the least amount of debt will be the ones who will survive in this environment. If too many plants are built, some will go out of business, be bought for pennies on the dollar (not necessarily by ADM/Cargill et al, but other investors), and then brought back on line with better, more efficient technology and have a better strategy to source lower priced inputs. They may come back in if/when there is a glut of corn again, or a greater war breaks out in the Middle East and crude becomes $100+/barrel.

Cellulosic ethanol is still a few years out, but I am concerned about the environmental impacts it may have by removing millions of tons of residue from corn and wheat fields. While some might call the stalks and stems left after harvest as waste, we farmers realize that they also contain nutrients that will break down and return to the soil after time. Taking these nutrients out means we have to replace it with more commercial inputs. Oftentimes the market price of the residue removed is less than the cost of replacement fertilizer, so it makes little sense to bale and remove the stover and straw, unless it goes to livestock bedding, in which manure may get applied back to the field to replace missing nutrients.

Sorry for the rant, I but I get as worked up about environmentalists using fuzzy math to dictate my way of life and business as Jordan does about Nancy Pelosi raising the minimum wage and screwing up his business.

Tuesday, January 02, 2007

From bad to worse?

After having spent a few days away from the computer at my inlaws, I am surprised to come home and find that Governor Chet has appointed Rich Leopold as the head of the Department of Natural Resources, opting not to re-up Jeff Vonk.

I got into a debate with Leopold earlier this year about Conservation Reserve Program at the Iowa Farmers Union annual convention. In fact, our debate/discussion spilled out into the hallway, where Iowa Farmer Today editor Gene Lucht tried to intervene (or at least get us to slow down long enough to get some quick quotes).

I believe CRP should be scaled back, only to be used to preserve the most environmentally sensitive land. It should no longer be used to keep land suitable to crops/hay/pasture off the market, and the taxpayer shouldn't have to foot the bill. As I've written before, our southern counties have a lot of ground in CRP, and Uncle Sam is the biggest land hog around. It is hard for beginning farmers to get started when some of the available land is tied up by the government.

Leopold couldn't understand this concept. He believed that land in CRP should stay in CRP indefinitely, and that the environmental benefits outweighed the opportunity to generate REAL income from these lands. He could not see that CRP was hindering real economic development in our area, even if that development was environmentally friendly. It was obvious to me that this guy hadn't been to the field for a LONG time. His view on CRP was about as close to the real world as his view from his Iowa Environmental Council office...the parking lot at the west side of the Capitol.

Leopold, having been the director of the Iowa Environmental Council, made him the representative of a wide array of enivonmental interests, ranging from the Iowa Farm Bureau to Iowa Citizens for Community Improvement (ICCI). It even includes my organization, the Iowa Farmers Union.

I have no idea what Leopold's view is on deer, but if it is as limited as his view on CRP, I'm afraid we'll have more deer, less guided/leased hunting, and more restrictions to derive real economic and environmental development here in the South of Iowa. I'm glad he's for sustainable energy, such as wind, but I don't know how much his department has to contribute to (or regulate) the matter.

Overall, I am very wary of Rich Leopold taking over the DNR. This might be the an early indication of how Boy Governor's administration will operate.

Props to State 29 for bringing this up.