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Northey urging higher yields

By Staff | Jul 22, 2011

By Karen Schwaller

Farm News staff writer

DES MOINES – Iowa Secretary of Agriculture Bill Northey stood before a room filled with Iowa and Minnesota grain producers last week and encouraged them to continue to improve yield potential to feed a growing world population.

In addition, he urged farmers to continue to diversify for the future of agriculture in Iowa.

Northey was one of four speakers to address growers at the Sci-Max Solutions Learning Seminar on July 14 in Des Moines.

China, with its 1.3 billion population, Northey said, continues to lead the way in soybean imports from the United States, accounting for one fourth of this country’s soybeans production – an estimated 84 million acres worth of grain.

“China is the second largest economy in the world,” he said. “They have a lot of mouths to feed. They eat more and they buy more.”

Because China is a natural large importer of U.S ag products, Northey said U.S. grain producers are looking for ways to make more grain available.

Northey said that China’s need to purchase U.S. pork and grain (especially corn) have had a huge impact on world markets, adding that China’s need to import U.S. meat and grain has had three to four times the impact (acre-wise) than the ethanol industry has made to date.

“China has increased their economy 10 percent per year for the last 35 years,” Northey said, adding that the communist country feels capitalistic in many ways.

“Their creative and aggressive economy is set up to reward those who can be successful. There are more billionaires in China than anywhere in the world,” he said.

Northey also made a comparison between the country of South Korea and the state of Iowa, saying that Iowa has 35 million acres of land, with 23 million acres of corn and soybeans planted each year. By comparison, South Korea has 25 million acres to its claim, with only four million acres being farmed.

“We have more than our fair share of good soil, but in South Korea, the land is more like CRP–like pasture land,” he said. The zinger came when he said that, with all of the rich soil and abundant farm land in Iowa, our state has three million people to feed, but South Korea has a population of 50 million.

“They import 70 percent of the calories they consume each day,’ Northey said. “We want them to be imported from Iowafrom the United States.”

Northey said South Korea has just come through a battle with foot and mouth disease, with the country’s pork industry losing a full one third of its hog production. He said that a free trade agreement needs to be signed between the two countries in order to ensure U.S. pork exports to South Korea.

The issues of drainage and water quality also came up, with Northey saying that some people he has spoken to prefer a regulatory approach to keeping nitrogen out of drainage tiles and out of rivers. He disagrees, saying that farmers instead need the tools to help them with plant nutrient reduction, along with incentives for it. This could be done, he said, through (more precisely timed) nitrogen application, insurance policies for those who apply less nitrogen, and finding accurate ways to measure it.

Northey also addressed the announcements made in the past month regarding AGP purchasing the Algona ethanol plant, and the Department of Energy approving POET’s financing for a cellulosic manufacturing plant in Emmetsburg.

“It’s an interesting time in renewable fuels,” he said. “There is a federal ethanol discussion going on, but also a lot of cellulose discussion as well with DuPont’s announcement about the plant in Nevada and now with the POET plant in Emmetsburg that’s being talked about(they) now have a tentative agreement on some loan guarantees from the Department Of Energy for them to be able to build that plant. My sense is that they’re getting a pretty dark green light in going forward. It’s not happening in other places in the world other than just a couple of places in Iowa right now. So it’s a very interesting time, certainly the world will be watching to see whether we can turn corn stalks into ethanol, and I think we can, both at that plant and the plant by Nevada.”

Northey said Iowa is seeing some growth again in biodiesel–with AGP purchasing the 60 million-gallon plant at Algona recently.

“It’s one of the bigger bio-diesel plants there are, and they didn’t buy it to mothball it–they bought it to run it, and it’s nice to be able to see a time when we can maybe start running some of these plants that have been sitting idle, and that they have enough confidence going forward beyond this year’s tax credit, that there will be tax credit and make it profitable in the future to be able to run it,” Northey said.

“It’s a good sign for positive attitude in the industry that they’re willing to make that kind of investment, and it will be a good thing for Algona, Northwest Iowa and North Central Iowa to be able to potentially have that plant running,” he added.

Northey said that, while legislators are still waiting for Gov. Branstad to sign the new budget, the budget that has passed approval from the legislature shows that funding to run the Department of Agriculture is down about $600,000 compared to last year. He said this came primarily from $1.3 million in increased costs, including insurance and costs to keep the same amount of staffing. He said they could see that coming and worked to prepare for it, and so he feels the department will be able to operate adequately this year, but said that next year’s initial outlook shows a possible reduction in staff.

Northey also said there was not much in terms of regulatory issues that were approved in this legislative session, though on the federal level, fuel barrels and containment around them continues to be it item on the table. He said there was some desire to get rid of some of the regulations around electrical and plumbing inspections, but it did not happen.

“Those things that went into place in the last couple of years are still in the books, and folks are still required to get an electrical inspection when they do some new service to grain bins and those sorts of things. There was some hope that some of those things would go away with this session, but they did not,” he said.

Volatility is something that Northey said continues to challenge today’s producers, and that it has created a sense of nervousness in the ag sector.

“When the market can move a dollar on the corn side in a week or two, that’s way more than we intend to profit from our land,” he said. “A dollar per bushel is $180 per acre that can change in profitabilitythe hard part comes in figuring out how to control some of the risk in the markets.”

Northey said it’s not just grain markets that producers worry about, but also the high costs of fertilizer, fuel and equipment.

“We’re at a time, with all this volatility, that makes producers very, very nervous. There’s always been a certain amount of risk with crops,” he said, mentioning the wind damage the previous weekend that bent crops and devastated about two million bushels of storage within 100 miles of Des Moines. “Hail is also a risk factor. Crop insurance helps us, but it doesn’t bail us out–it helps us through it.it’s hard to figure out what tools to use, but we have to use something because there is too much risk that’s open for us,” he said.

The producers’ main tool tends to be the markets themselves, along with splitting crops up and selling them in different ways, trying to book inputs ahead of time when prices can be lower, etc., Northey explained.

“We’re dealing with a lot more dollars now, and also a lot more dollars per acre than we ever did before, and so there’s a nervousness out there. We like profitable prices, and we see it reflected in land values that are higher. We’re impacted by the world, too. Some rumor of crop production or demand in China impacts us, or some market report can send the market down a dollar per bushelit’s a crazy time, although there is a lot of opportunity the future, we just have to make sure that we’re all still in business in the future for those opportunities when they come.”

Northey, who was elected Secretary of Agriculture in 2006, is in his second term, being re-elected to the position in 2010. He said he loves the job, meeting the people of the state, and working on the issues that face producers in this state.

“It’s an exciting time in the industry, and Iowa is a place where we can have an impact on national policy, whether it’s environmental policy or ag policy, and in some cases, even internationally, and I appreciate the chance to do it.”

Contact Karen Schwaller at kschwaller@evertek.net.

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