The "official" publication season for Crop Watch has ended. Updates will be posted to this Web site and the Crop Watch Events page intermittently throughout the winter. Photo by Brett Hampton

Updated December 6, 2002

David Kohl

Dr. David Kohl will be speaking on “Best Management Practices of Agriculture and the Seven Business Models for the 21st Century Agriculture” Monday at the first session of this year’s Farmers and Ranchers College. The presentation will be from 1:30 to 4 p.m. at the Kimmel Ag Expo Center in Syracuse.

“Today’s profitable agricultural producers know they must compete in a global market to survive,” said Carol Ringenberg, program coordinator and Extension educator at the NU Kimmel Education and Research Center in Syracuse. “Decisions regarding crop and livestock production, marketing and risk management expand beyond the borders of their farms and ranches.” Dr. Kohl will be addressing how producers can plan and incorporate strategies and adjust management practices to operate more successfully in this changing scenario, she said.

Kohl, professor of agricultural finance and small business management and entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Tech University, contends that ag managers often fall into one of four categories: those who have positive income and cash flow and accumulate wealth; those who consistently lose money and erode net worth; and two groups of those who fall somewhere in between because they fail to exhibit management practices or encounter circumstances that prohibit them from being peak performers.

A national leader in his field, Kohl will discuss the seven business models he sees emerging in 21st Century agriculture. Kohl has conducted more than 1,500 workshops and seminars for producers, bankers and agribusiness groups and has published four books and more than 380 articles. He regularly writes for Farm Journal, Ag Lender, Top Producer, Journal of Agricultural Lending and Soybean Digest.

Producers and representatives of agribusiness serving on the steering committee for the Southeast Nebraska Farmers and Ranchers College are Tom Baxa, Bob Brandt, Mark Easter, Doug Friedli, Tom Keslar, John Munn, Dale Piper, Carol Ringenberg, Erik Olson, and Steve Zimmers.

The program is free, but participants are encouraged to preregister by calling (402) 873-3166. Walk-ins will be welcomed the day of the program.

Upcoming free programs offered as part of the Southeast Nebraska Farmers and Ranchers College include:

Art Barnaby Steve Johnson

1. Jan. 10, 9 a.m. to 4 p.m.: Combining Government Program Payments, Crop Insurance and Marketing to Manage Farm Financial Risk, Art Barnaby, professor in the Department of Agricultural Economics, Kansas State University. Preregister before Jan. 6 by calling (402) 873- 3166. Barnaby’s research work with the private sector was the basis for the first revenue insurance contract, Crop Revenue Coverage. He has been recognized nationally for his research and extension work related to crop insurance and marketing and has presented numerous talks and writes regularly for Successful Farming on these subjects. His book, Managing Risk Through Crop Insurance, was recently published.

2. March 7, 1:30 p.m. - 4 p.m., Success Strategies: Conservation Security Program 2003 Grain Marketing Crop Insurance, Steve Johnson, Ag Economist and Farm Management Field Specialist, Iowa State University Cooperative Extension. He works with ag clients and agribusiness in the areas of marketing, risk management, decision tools, and business planning. Johnson also has been a guest speaker for several years at the NU Cooperative Extension Soybean Management Field Days, conducted annually across the state. Preregister before March 4 by calling (402) 873-3166.

Anne Vidaver, Jennifer Chaky, and John Watkins, NU Extension plant pathologists involved with the new program, will describe the destructive potential of plant pathogens and talk about how potential problems can be limited. They’ll also talk about the structure of the new federal program, which emphasizes rapid communication among universities, researchers, educators, and producers nationwide.

Also scheduled to appear on the program, is Andy Christensen, Hamilton County extension educator. Christensen will talk about the steps farmers can take to prevent crop contamination. Regular “Market Journal” features include an ag-weather update from Al Dutcher, NU state climatologist; corn and soybean market analysis from Roy Smith, Plattsmouth producer and consultant; and a review of the wheat market from Lynn Lutgen, NU Cooperative Extension ag marketing specialist.

“Market Journal” will be broadcast via satellite (NEBSAT 106) from 8 to 9 p.m. CST (7-8 p.m. Mountain) on Thursday, December 12. The program can be viewed at county extension offices across Nebraska. Contact your local extension educator for program availability in your area. In Lincoln, “Market Journal” also can be viewed on Time-Warner Cable channel 21. The show will be re-broadcast on Friday, Dec. 13, from 9 to 10 a.m. CST (8-9 a.m. Mt) on NEBSAT 103.

“Market Journal is also available on the Internet at http://marketjournal.unl.edu. “Market Journal” is presented by the University of Nebraska Cooperative Extension and NU Department of Agricultural Economics.

Deflation possible but not likely

Simply put, deflation is the opposite of inflation. Its defining characteristic is generally falling prices. This doesn't mean that prices of all goods and services are dropping at the same rate -- or even that they're all falling. But most are.

At first blush, it may be tempting to conclude that generally lower prices would be welcome. After all, who doesn't want to pay less for the essentials of everyday living?

The problem is that deflation goes hand in hand with recessions, even depressions. It's associated with declining levels of output and employment as well as a collapse in consumer spending. The last time that the United States experienced significant deflation was from 1921 to 1933, hardly a stellar period in the nation's economic history.

One reason that deflation concerns arise is that the general economy continues to stumble along, even after the nation's central banker, the Federal Reserve System, has aggressively lowered interest rates. One key interest measure, the federal-funds rate, is now at 1.25%, the lowest it's been in over 40 years. Normally, this ought to spur the economy. But economic growth in the fourth quarter just barely may be in the black.

Fed officials say they'll keep trying to shake the economy out of the doldrums. Even if the federal-funds rate is lowered to zero, potential Fed actions to stimulate the economy will not have been exhausted. Massive government bond purchases or financing further tax cuts are possibilities. While significant deflation seems unlikely, make no mistake about potential winners and losers, should it occur. Those on guaranteed fixed incomes could be better off because their incomes should stretch further in an era of declining prices. Creditors who can still collect from debtors would benefit. In addition, some savers would experience gains from the enhanced purchasing power of their savings.

Deflation problems, however, would be widespread. Many wage earners would lose their jobs. Some debts almost certainly would not be collectible. Savings tied to investments in the stock market could be expected to plunge in value. All in all, it would not be a pretty picture. Since 1997, deflation and economic stagnation have been ongoing problems for Japan. Although the economic setting is much different there, American policy-makers continue to learn from Japan's mistakes. If nothing else, the Japan situation underscores the urgency of doing everything possible to keep deflation from occurring in this country.

Roy Frederick
Extension Public Policy Specialist

They also know a thing or two about ferulic acid, a natural antioxidant that's abundant in rice and oat bran. Their knowledge of such things is all part of the job: developing new, value-added products from agricultural commodities, especially soy oil. By one estimate, the U.S. soy industry generates 800 million pounds of surplus oil each year. With SoyScreen, the researchers hope to cast soybean oil into the lucrative skin- and hair-care markets as a natural alternative to chemical sunscreens.

After reviewing the chemistry of sunscreens and researching ferulic acid's ability to absorb harmful ultraviolet (UV) light, Laszlo surmised the antioxidant's usefulness could be improved. "We needed to make it more lipid-like so that it won't dissolve in water when you go swimming," he says. "I thought that if we could chemically connect ferulic acid with soybean oil, we'd get UV protection and water resistance."

Their solution was to dissolve ferulic acid esters in soybean oil, then expose the mixture to lipase enzymes and heat to bind them together. In February 2002, USDA secured a patent on the SoyScreen technology, and a company has expressed interest in licensing it.

For the skin- and hair-care markets, the scientists had to show SoyScreen's effectiveness in filtering out harmful UV light. They ran sun-protection-factor tests to compare SoyScreen to four commercial UV absorbents: oxybenzone, dioxybenzone, octyl methoxycinnamate, and padimate-O.

Bennett is among a growing number of farmers who are selling meat directly to consumers and retailers, instead of selling livestock to a packing house. The concept is called ‘direct meat marketing.’

"Our emphasis has changed from a direct-to-individual model to much more of a wholesale business," Bennett said. "I still believe the individual market is the most reliable and loyal." Bennett's Ottawa, Kan. family owns Bennett Ranch, which sells all-natural beef, pork, poultry and eggs. Bennett started the operation in 1997, primarily selling products to family and friends, but since 1999, the Bennetts also have sold their goods to stores and restaurants.

Building a customer base can pose a challenge at times in the direct meat market, said Jana Beckman, coordinator of the Kansas Center for Sustainable Agriculture and Alternative Crops. For Bennett, marketing involves more than putting up handmade signs along the side of the road to advertise. He claims word of mouth is his operation's best marketing tool. The ranch also has its own Website and sends out a newsletter twice a year.

When marketing, it is important to remember to target a specific audience, rather than the general public, Beckman said.

"Advertisements placed in the local newspaper or radio station sometimes get lost amidst the sea of announcements," she notes. "It is best to place those ads in places where they can really be seen, such as local club newsletters or in the grocery or health-food store."

In order to sell meat directly from the farm, there are certain livestock processing regulations to meet, said Liz Boyle, a meat scientist with Kansas State University Research and Extension.

Producers must have their meat processed at either a state or federally inspected packing facility.

Meat that will be sold across state lines must be processed at a federally inspected processing facility.

In situations where the consumer buys the animal from the producer and the producer delivers the animal to a processing facility for the consumer, the meat is processed specifically for that consumer and must be marked as "custom, not for sale."

Consumers who purchase their meat this way are able to specify exactly how the meat is processed, including fat content of ground meat, steak thickness and cuts of meat, Boyle said.

Also, she says, a well-planned label is important in the marketing process. Labels provide an opportunity to convey a message about producers and their products, and therefore should be well designed.

A basic check-off label -- which saves on printing and design costs -- lists various cuts of meat and the producer place a check in the box next to the corresponding cut.

Boyle said labels are required to have the product name; ingredient statement; the name and place of business of the manufacturer; packer or distributor; an accurate statement of the net quantity of contents; and official inspection legend. Other information may be required depending on which regulations apply to the particular product.

Nutrition facts labels also are required for multi-ingredient meat and poultry products, but an exemption is granted if the producer's annual production is less than 100,000 pounds of the product and the firm has 500 or less employees. Nutrition labels on fresh meat products currently are voluntary.

Packaging the product also is important. The Appropriate Technology Transfer for Rural Areas (ATTRA) recommends that meat be packaged in airtight, high-quality freezer paper, or Cryovac. Vacuum packaging is another option, but can be costly, adding up to ten cents per pound in extra costs, according to ATTRA.

KSU News Release

Norfolk - Dec. 9

North Platte - Dec. 10

Beatrice - Dec. 11

Lexington - Dec. 17

Ainsworth - Dec. 19

Norfolk - Dec. 20

Will this winter bring an end to the drought?

Many areas of the state are now at a critical juncture in terms of water availability. Most reservoirs across western Nebraska are at or near historical lows. Lake McConaughy was at 35% of capacity at the end of October, while Harlan County Reservoir stood at 51% of capacity. Most of the reservoirs in southwestern Nebraska were less than 30% of capacity. To complicate matters, most of the reservoirs in northeastern Colorado, as well as south central and southwestern Wyoming, were in a similar situation.

If the Rocky Mountain snow pack this winter is similar to the last two years, Nebraska water users should be prepared for a continuation of the current drought at levels much more severe than those experienced this year. -- Al Dutcher, State Climatologist

How did things get so bad? The answer lies in the lack of significant snowfall during the past two winters throughout the river basins which feed the reservoirs of western Nebraska. Snow pack over north-central Colorado, as well as south-central and southeast Wyoming during the last two winters has averaged less than 60% of normal. These areas are feeder sources for the Platte River System. The situation is as bad, if not worse, across northeast Colorado, the feeder source for the Republican River Basin.

We can’t blame the entire drought on lack of snow because there was a significant decline in summer precipitation during 2000 and 2002 across most of the state. Three-year precipitation departures are 12-20 inches below normal across the western two-thirds of Nebraska. The hardest hit areas are the southwestern corner of the state, the central and northern Panhandle, and portions of central Nebraska.

The importance of snow pack

When it comes to hydrological impacts, a significant decline in mountain snow pack across the central Rocky Mountains has the potential to alter atmospheric weather patterns during the spring and early summer. In general, we would like to see the snow pack disappear sometime in July. The snow pack in 2001 lasted until the middle of June, while the snow pack in 2002 disappeared before the end of May.

When snow begins to melt in the mountains, it provides a pocket of cool air in the mid-layers of the atmosphere. This generally suppresses the semi-permanent high that becomes established in the desert southwest in late spring. If the snow pack disappears earlier than normal, this high can expand northward and strengthen. If this high becomes too strong, the northern jet stream may be pushed to a position farther north than normal and deflect late spring and early summer storm systems north and east of Nebraska.

Thunderstorm development during the spring and early summer depends on the availability of moisture at the surface and cold unstable air in the middle and upper layers of the atmosphere. The central Rocky Mountain snow pack can provide a valuable source of cold air for low pressure systems entering the central plains. Strong low pressure systems will tap cold air out of Canada; however, many weaker lows depend on the cold air over the inter-mountain region to provide the instability necessary for thunderstorm development.

Finally, the snow pack provides moisture for runoff that is necessary for filling western reservoirs. Most reservoirs are sufficient in size to meet public demands for water even without sufficient winter snow pack. Problems begin to arise when the snow pack over several consecutive winters falls below normal, coupled with normal to above normal demand by downstream users. This is precisely the situation that Nebraska faces as we enter 2003.

El Nino -- a tutorial

El Nino, a major player in North America’s winter weather pattern, is now building in the central Equatorial Pacific Ocean. El Nino usually begins to form during the summer months and reaches its peak statistical intensity (maximum ocean warming) by Christmas. In any given event, peak intensity usually occurs in December or January.

The strength of any El Nino event is determined by how far sea surface temperature deviates from normal and the extent of the area covered by warmer than normal temperatures in the Pacific Ocean. Typically, increases of one to two degrees Centigrade above normal are classified as weak events, two- to three-degree increases are moderate events, and warming greater than three degrees above normal would be considered a strong event. At present, the Climate Prediction Center predicts this El Nino to be of moderate intensity.

An El Nino’s greatest contribution to North American weather is to enhance the sub-tropical jet stream. This jet stream is usually active during the winter and early spring and typically impacts the extreme southern United States and Mexico during a normal winter. As El Nino strengthens, the sub-tropical jet moves northward and dramatically improves precipitation prospects over the southern third of the United States, with lesser impacts being felt over the central third of the country.

El Nino-enhanced storms will enter the west coast from southern to northern California and head eastward. Storms typically move due eastward under the enhanced subtropical jet. Therefore, the average position of this jet will determine who receives moisture. Most moisture associated with the sub-tropical jet will fall immediately under and south of the jet. The mean position of the sub-tropical jet entering the western United States lies along the southern periphery of an area of high pressure that develops in the upper atmosphere over the Pacific northwest.

The northern jet stream during most El Nino years is most dominant from September to December. As El Nino strengthens, the northern jet is displaced northward in response to a building ridge of high pressure over the Pacific northwest. Storm systems following the northern jet stream ride up and over this ridge, so that the greatest precipitation impacts from the northern jet fall across the Great Lakes and northeastern United States. Because of this upper air ridge, most of the Pacific northwest receives below normal precipitation, while the northern third of the central U.S. typically experiences above normal temperatures.

During a normal winter, the northern jet stream is the dominant feature affecting the weather patterns of the continental U.S. Large storm systems cross the Pacific Ocean and enter the United States in the Pacific northwest. From there they typically head south-southeast into the southern to central Rocky Mountains. As these upper air lows cross the mountains they induce a low pressure system to develop in the vicinity of southeastern Colorado. Warm Gulf of Mexico moisture is drawn northward in advance of the northeast moving storm system, while cold Canadian or Arctic air is drawn southward on the backside of the low. The result is a heavy band of precipitation over much of the central plains whenever one of these strong surface lows develops.

El Nino -- drought buster?

There's likely to be significantly more income disparity among Nebraska farmers and ranchers this year, thanks to drought and other factors, said Roy Frederick, a University of Nebraska agricultural economist and public policy specialist.

"It's probably the most significant in nearly a decade," Frederick said. "It's a rather poor year overall, but around that average of being poor there are some who will have done very well and all too many who will see red ink."

Negatives included the drought, limited irrigation water in some areas, increased irrigation costs, dried up grazing lands, higher forage costs and drab livestock prices. On the more positive side, crop insurance, federal price supports and drought assistance for livestock producers should ease the financial strain for some farmers and ranchers.

In the crops sector, growers who had plenty of water for irrigation saw at least average crops, Frederick said. Even with higher irrigation costs, a 20% to 30% hike in corn and soybean prices this year compared to 2001 should generate higher gross and net farm incomes, the Institute of Agriculture and Natural Resources economist said.

Dryland producers in parts of the state -- particularly in northeast Nebraska -- should have produced enough grain to take at least partial advantage of higher crop prices.

"Problems begin with those with much smaller than normal crops," he said.

Dryland crops in the western two-thirds and southeast part of the state were hit hardest. Average dryland corn yields dropped by half from 2001 to 2002 and some dropped much more than that.

"High commodity prices alone won't overcome yield losses of that magnitude," Frederick said. "Luckily most crops were insured through the federal government crop insurance program. However, the insurance only minimizes the losses, few farmers will find it turns a loss into a profit."

Drought-parched grazing and hay lands also plagued producers. About half of Nebraska's land is used for haying and grazing and no insurance is available when it fails to produce, he said. In the livestock sector, prices generally have been lackluster, Frederick said. Recent fed cattle prices in the mid-$60s are not profitable for most producers nor are hog prices in the $30 range.

"Unfortunately, these price levels have been more the norm than the exception through much of the year," he said.

Nationally, lower livestock prices are the major reason the U.S. Department of Agriculture projects a 20% drop in net farm income for 2002. "Nebraska agriculture is probably more dependent on the livestock sector than the national average. There is no reason to think that farm income in the Cornhusker state won't be hit at least as hard," Frederick said.

Livestock producers did receive federal drought aid. The feed assistance program and livestock compensation program will help cattlemen, Frederick said. For example, beef cow owners will be able to collect about $40 per head from the two programs. This will offset a significant part of the lost forage and hay from this year's drought. The new Farm Bill's commodity support program eventually will give modest help to feed grain, wheat and oilseed producers. However, the payment schedule will be spread over a much longer time than before and may not be available in 2002.

"Direct payments will be made on soybeans and other oilseeds for the first time," Frederick said.

Another mostly positive factor is that crop production input costs were only modestly higher this year. For example, lower nitrogen fertilizer costs tended to offset higher seed costs. Operating loan rates also were the lowest in decades. Land prices and cash rental rates tend to be good predictors of agricultural profitability, Frederick said. Like incomes, these values vary across Nebraska.

"I would expect farmers and other potential agricultural investors to take a wait-and-see attitude" about land purchases next year, he said. "They will want to know that 2003 is not going to be a repeat of 2002 before making much of a commitment."

Sandi S. Alswager
IANR News and Publishing

Biotechnology dilemma deepens

Had he been an economist, Penney might have said that the demand side of the market is all-important. If the customer neither needs nor wants a product, it cannot be sold at a profitable price.

Perhaps the Penney philosophy should apply to genetically enhanced commodities. The European Union, Japan and China continue to be reluctant buyers of biotech corn and soybeans from the United States. Shouldn't we just give in and supply what they want? Perhaps so. But maybe not.

A response that seemingly rejects consumer sovereignty makes several assumptions.

First, scientific evidence consistently and unconditionally must show that biotech crops are safe.

Second, through education, persuasion and patience, we must convince foreign customers of that reality. In some ways, it's not unlike the local merchant who advertises regularly to keep us buying.

Finally, biotechnology eventually needs to go well beyond just being advantageous to producers. It needs to be perceived as being beneficial to consumers as well. This is a huge challenge because many foreign customers currently view biotech products as undesirable.

Opposition to genetic enhancement of crops has been strongest in the 15-nation European Union. The EU has not approved any new genetically enhanced crop varieties for human food or livestock feed since 1998. A group of more than two dozen U.S. farm organizations want to change that. They've asked the Bush Administration to file a formal complaint against EU inaction with the World Trade Organization.

However, if backed into a corner, the EU may respond with new, tougher rules on labeling and traceability. American farmers fear that widespread biotech labeling would scare away even more consumers.

Equally significant, it would be extraordinarily difficult to maintain a labeling system throughout the market chain. Meat products, for example, might need to be labeled, even though no evidence of genetically enhanced feed could be identified in meat tissue.

A number of new varieties of biotech corn will be available to U.S. corn producers in 2003. While these varieties will have been approved by our own regulatory agencies, some farm groups are urging caution. If the EU or any other nation won't accept these varieties, then it may be unwise to contaminate market channels, even if this corn is destined for domestic feeding operations. It's all part of the continuing biotechnology dilemma that American farmers face.