Bean Day 2007 Highlight - Part 2
March 30, 2007
Farm Bill: A Sausage Making Process
Dale Thorenson presented an overview of the stage set for the next farm bill, something that might be best described as a sausage-making process. Thorenson, a farm lobbyist with Gordley & Associates and a former aide to Sen. Byron Dorgan, says a final bill will need to mesh budget concerns and party, ideological, and geographical politics. Proposals by numerous farm groups need to be boiled down not only in the Commodity Title, but in nine other titles, including energy, nutrition, trade, and conservation.
One factor that seems to be of less concern now is appeasing the World Trade Organization, with talks faltering and agreements on agriculture questionable at best. There was concern that the planting restriction of fruits and vegetables (the FAV provision which includes dry beans) in the current farm bill would need to be scrapped to avoid a WTO challenge. I dont believe its going to happen now, says Thorenson, placing his bet.
Disaster Aid Still in Play
Its nice to hear the words Chairman Peterson, says Scott Stofferahn, deputy state director for Sen. Kent Conrad. Stofferahn is referring, of course, to the change in Congress that led to Democratic control in both Houses, with Rep. Collin Peterson becoming chair of the House Ag Committee. Conrad is chair of the Senate Budget Committee.
Stofferahn says Conrad will make it a priority to protect baseline spending for agriculture, and in the farm bill, preserving the baseline for the Commodity Title, which contains farm program support. Stofferahn notes that lawmakers tend to view the Commodity Title (as well as Nutrition) as more off limits for raiding the kitty compared to other titles such as Rural Development and Conservation, which seem more prone to budgetary tinkering.
The pre-election buzz about the farm bill of how much farm program budget cutting can we prevent? has changed with some to how much can we add? But the budget problem is still there, despite the change in party control, and Stofferahn says the favorable approach will be pay as you go if spending is increased for one area, it will need to be cut or savings found in another.
Its conceivable that a committee bill could have a draft of the farm bill ready by the August recess, with floor action by late fall a reasonable expectation, says Stofferahn. In the last farm bill go-round, the House passed its version on Oct. 5, 2001, the Senate passed its version on Feb. 13, 2002, and a final version was signed into law on May 13, 2002.
Like Thorenson, Stofferahn believes the FAV provision has a better climate now for surviving. Were not willing to sacrifice to get a trade deal. And just because we have trade challenges, doesnt mean we cant win, he says.
Stofferahn says a disaster bill is still in play, and might be attached to a supplemental spending bill this spring. Snowstorms this winter in Colorado, damaging frost in California, and more storm damage elsewhere before spring thaw, may build support for a disaster assistance measure.
Growing the Caribbean Market
The Caribbean region was actually the second largest export market for edible beans in 2006 (first was North America Mexico and Canada). The Caribbean was the fourth largest export market for U.S. edibles in 2004. Sales to this region in the last five years (2002 2006) have amounted to 196,000 metric tons worth about $121 million (average price of $616 per mt, equivalent to $28 per cwt).
With many in the Caribbean who eat rice and beans on a daily basis, it was a wise move for the Northarvest Bean Growers Association to focus in on this market, says Jois Alaby, newly hired market consultant for this region. A native of Brazil, Alaby has 10 years experience representing the National Dry Bean Council (now part of the U.S. Dry Bean Council) in Brazil. He and his family have recently moved to Costa Rica, aimed at being closer to the U.S. main export markets.
Alaby also represents the USA Rice Federation in the Caribbean with these two food staples often combined, it makes sense for one consultant to represent both commodities when talking with prospective buyers.
Cuba is a market in the Caribbean with great potential for growth once political hurdles are resolved. The country with 11.4 million people, just 90 miles from the U.S. mainland, has a per capita dry bean consumption of 46 lbs (in the U.S., its less than 10 lbs).
There has been some movement of U.S. beans into Cuba in recent years, virtually all pintos, accounting for about 10% of Cubas total dry bean supply. The limited purchases show an interest and intent to buy U.S. beans, says Alaby, and the Cuban market would likely buy more, with trade restrictions eased (U.S. exporters have limited access into the Cuban market now, on a cash-only trade basis).
Cuba now has just two state buying agencies: Alimport, the State Food Supplier that is the primary importer, and Cimex, the State Food Distributor, which basically uses Alimport to source food products.
The country is not capable of producing nearly enough edibles to meet its needs, and a number of exporters are vying for business in this price conscious market, including Mexico, Chile, Canada, Argentina, Brazil, even China.
Alaby says Brazil in particular is a country to watch as a trade competitor in the Caribbean region. They are starting to slightly increase exports, dont be surprised to see them within five years become a net exporter, which would be a 180 degree shift from having traditionally being a net importer of dry edible beans, he says. Alaby noted that he is glad to hear that no GMO edible beans are near commercialization, or even being researched in the U.S. At this point it would be a negative to marketing beans in this region, he says.
Relationship building will in turn help build markets in this region, Alaby says. Some might ask, why do this (work on developing the Cuban market) if theres basically just one client (Alimport)? When Fidel is gone, what will that do to impact trade? The tendency is to think that down the road, whether its Raul Castro (Fidel Castros brother) or someone else, will be more U.S. trade friendly, and we want Northarvest to become their first choice."
Cuba, Haiti, Jamacia, and the Dominican Republic are key
edible bean markets in the Caribbean.
Can Dry Beans Compete with Corn?
Its only been since mid September of last year when the corn futures market began its move beyond the $2.50 per bushel mark. And in the five or so months since, it seems more has been written and said about corn and ethanol than in the previous five years. Will dry beans or any other crops be able to compete with corn in the short and long term?
Despite a supply/demand picture that should be friendly for boosting dry bean acres, plantings are estimated to be down slightly this year compared to last, although weather and prices may result in last minute planting intentions.
"Most of the dealers in this region are thinking the reduction in acres will be less here (Northarvest region) than in the rest of the U.S. and Canada, says Larry Sprague, senior dry bean merchandiser for the Kelley Bean Company.
On one hand, dry beans do not have the wide range of pest treatment products that the other major crops have. And biotechnology is giving crops like soybeans and corn a leg up. Corn yield is expected to double in less than 15 years, Sprague says. Can we continue to develop dry bean varieties that will compete by conventional breeding techniques?
But dry beans have their production advantages too. They are a short season crop, needing from 90 to 110 days for most classes of dry beans to ripen. The planting season begins about May 20 until the middle of June. This allows growers to better utilize their labor and equipment by not needing to plant dry beans in the same time period that is needed to plant corn and spring wheat. This is especially useful in the advent of a wet late spring.
Further, the dry bean harvest usually falls in the middle, after wheat but before corn and other late fall crops. Dry beans can often be used for early fall cash flow needs while waiting for the fall crops to ripen, says Sprague.
Another big plus: dry beans have an ability to fix some of its own nitrogen, which helps to reduce the need of nitrogen fertilizer. Some crops yield better following a crop of dry beans, making it an attractive rotation option.
The crop also has less input costs compared to corn. This number varies by the region but would range about $25-$75 per acre less than corn in most regions of North Dakota, according to NDSU numbers.
In the end, Sprague believes that dry edible beans will be able to compete with corn and other crops, with many who are longtime growers that do not jump in and out of the crop. They have a good relationship with buyers, and will continue to earmark acreage for edibles.
Are dry beans for you? This is a question only you can answer on your own farm. I would think that you have answered that question by attending Bean Day again this year, says Sprague. Commodity prices rise and fall and as growers you have learned to adapt. Back in 1996-97, a guy came into our office and said corn will never be less than $3 again. Not soon after it fell to $1.70. Not anyone here will planting all their acres to corn. Dry edible beans have been competitive with other crops, and will continue to be.
Net Profit Crop Comparison By District In North Dakota
Larry Sprague of Kelley Bean said at Bean Day that the best way to tell how crops can compete is to compare the net profit per acre between the crops. He referred to the table that compares net return for various crops in several regions of N.D., as calculated through NDSUs Crop Compare - www.ag.ndsu.nodak.edu/aginfo/farmmgmt/farmmgmt.htm
The table uses a 7-year Olympic average of yield for each region. The costs are averages of variable inputs for each one of the crops. The table compares most of the significant crops to corn at $3.00 cash price per bushel. The values that are listed in the table for the various crops would be the prices needed per unit to equal the net profit that is obtained as compared to one acre of $3.00 per bushel corn by region.
How do the various classes of dry beans compare with corn within these regions? The current crop and new crop prices for pinto, navy, black, pink, small reds, kidney beans, and great northern beans were at or above $20/cwt at the beginning of 2007. Sprague points out that the only region where dry beans would be at a disadvantage to $3 corn was in the southern region of N.D. Two of the other major crops, soybeans, and wheat, had actual prices much less per unit than what is shown in the table to compete with $3 corn.
Sprague says this same table can be used with any value of corn by using a little math. For example, the dry bean price in Steele County (SE Region) would have to be $21.32 per cwt to equal the same net profit per acre as cash corn at $3.50 per bushel. How about $2.50 per bushel corn, which is a price that most growers would have been happy to have last summer? The dry bean price would only have to be $15.16 per cwt for the same net return as $2.50 per
bushel corn", he says.
Doug Tehven (right) of AgCountry Farm Credit Services presented Randy Mauch, of Mooreton, ND a $300 American Express gift card as the recipient of this year's Bean Day door prize.