Scythe & Spade Blog

High Cotton

by Patina Thompson

It’s no secret that cotton prices are a main topic among farmers as prices soared to unbelievable highs in the 2010 growing season. As the law of supply and demand peaked and ideal growing conditions produced above-average yields, those farmers with more cotton than they had contracted for were selling at prices close to $1.30/lb at the end of the season. Much like the reference in the country-music group Alabama’s hit song “High Cotton”, 2011 looks to be a year full of cotton in the Southwest.

For agricultural producers planning to grow upland cotton in 2011, marketing that cotton is a big decision. Among numerous private companies, the four major U.S. cotton marketing cooperatives are Calcot, Staplcotn, Plains Cotton Cooperative Association and Cotton Growers Cooperative.

Calcot has recently been in the spotlight for farmers in the Southwest which includes California, Arizona, New Mexico and Texas. There are two options for growers in the marketing game; Seasonal pools (SP) and Call pools (CP). The Seasonal pool takes advantage of time in determining a price, and typically runs off an average high of prices which is a “safer” way to go and allows Calcot to make all the marketing decisions.

The Call Pool operates differently whereas the price tracks the futures commodity market and the farmer has more marketing control by being able to lock in at a chosen price. With the increased interest in the CP, some speculated changes are coming; a potential “margin” may be charged up-front per bale (but returned to the grower at the end of the season), as well as a limit on the number of bales that can go into the CP.

By March 1, a farmer has to declare whether they will participate in the SP or CP and must place some to-be-determined amount of cotton into the SP in order to participate in the CP. Membership and Marketing Agreements (MMA’s) with Calcot are automatically renewed unless notified in writing between February 1st and 15th in the calendar year. A marketing year runs from August 1 to July 31 and a final payment should be received the September following harvest.

So if you’re contemplating changing your crop plan and this summer finds you walking in high cotton, be sure to watch those prices now and market strategically. Not only must you factor in the risk of picking a price on the futures market, but the turnaround time for a payment.

Genetically Modified Foods

by Chas Bonner

Because genetically modified foods always create controversy, and because a little controversy always spices our lives, we decided to wade into the subject, doing some research on the “Father” of GMO foods, Norman Borlaug who recently died at age 95.

Borlaug’s family emigrated from Norway in the mid-1800’s and eventually settled on a 107 acre farm in Iowa. After high school, Borlaug decided to go to college rather than stay on the farm, due largely to his grandfather who told him “You’re wiser to fill your head now if you want to fill your belly later on.” At the University of Minnesota, he was very interested in forestry until persuaded that he should study plant pathology and special plant breeding methods.

Borlaug graduated at the beginning of World War II, and went to work as a microbiologist for DuPont where he discovered new glues that could withstand salt-water corrosion, and therefore enabled delivery of foods and gear to troops in the South Pacific.

After the war, the U.S. government began helping Mexico increase food production as Mexico could not feed its population. Borlaug left his DuPont job, despite huge money offers from the company, and went to Mexico for the next 30 years, working on countless wheat and grain productivity efforts. By cross-breeding, selective gene production, crossing hybrids with newer generations, he was able to create disease resistant grains and stronger wheat stalks that pulled Mexico out of a food deficit.

Norman Borlaug was still working on new strains in Mexico in 1970 when notified that he had won the Nobel Peace Prize for probably saving much of mankind. One of the most remembered quotes of Borlaug, when criticized for creating “Franken Foods” was “We are 6.6 billion people now. We can feed only 4 billion. I don’t see 2 billion volunteers to disappear.”

With the world’s population is expected to top out at 9.1 billion in another 40+ years. In spite of deep reservations by many, regarding GMO foods, it is a safe assumption that without such technology, we would see mass starvation. The world has a limited supply of arable land, a limited supply of water, and to feed this world, productivity must increase, and increase dramatically.

What we truly need is more Norman Borlaugs.

Food Trends

by Chas Bonner

Virtually every food company is carefully watching consumer habits to find the latest secrets of food appeal. What most are discovering is that price is number one concern of grocery shoppers today, given not only the scares of the current economic environment, but also given that conspicuous consumption is “out” and frugality is “in.”

The biggest food sellers are not the well-known food retailers like Albertsons, Shop-Rite, Publix, or Food Lion, but rather the Wal-Mart SuperCenters, Costco’s, and the BJ’s Wholesales of the world. Even Dollar Stores are booming.

Nonetheless, every consumer wants foods that are interesting, even if inexpensive. Food manufacturers are bringing out far more new products, almost 10,000 in 2010, or about 2500 more new products than 2009. Furthermore, consumers themselves are adding interesting spices, rubs, vinegars, oils, etc. to their food to keep it exciting, and not necessarily buying it fully prepared by the manufacturer.

There are other groups of consumers focused on locally grown, organic, and sustainable agriculture foods (however one might define that). Fruits, vegetables, grains, nuts and seeds are important to that crowd. They are also looking for low energy-intensity foods, ones that are not trucked all the way across the continent. The word “locavore” applies.

Even when dining out, diners are looking for interesting meals, and restaurants are serving more seasoned dishes, using chipotle, cinnamon, cilantro, jalapeno and many other “flavor of the month” spices.

After watching and understanding these trends, it tells us that today’s consumer wants inexpensive food, but exciting when eaten. Hence, to a producer these trends signify that we must continue to be low cost producers with products needed by the marketplace instead of a perceived “wanted” by the marketplace. But we also cannot go to sleep, assuming marketplaces to be static; when times return to “normal,” convenience will again be of paramount importance.

Winter Forecast

by Patina Thompson

Much of agriculture hinges on hedging your bets against the weather . . the unpredictable, harsh, irrational but oftentimes mild weather. Timing is essential in farming and having the right weather at the right time impacts the costs for fuel, fertilizer, pesticide and seed. Having the wrong weather at the wrong time can be even more devastating. Everything from planting crops to harvesting crops depends on the daily weather cycle and extended forecasts.

Scientists with the National Oceanic and Atmospheric Administration (NOAA) track the temperature of the surface waters in the tropical Pacific Ocean typically over a three to five month time frame. This data is analyzed and used to predict the occurrence of a La Niña or El Niño weather event. The water temperatures tend to be warmer than normal during an El Nino event and cooler than normal during a La Niña event. These variations of temperatures cause noticeable weather impacts in the United States, which vary from season to season. History shows that El Niño and La Niña systems alternate through the years although the length of each is certainly variable.

A La Niña system developed in mid 2007 and lasted until early 2009 followed by an El Niño system May 2009 through April 2010. The warmer and cooler trends directly relate to the North central states, so the warmer El Niño creates the opposite effect of a cooler winter in the Southeast and Southwest. Therefore a La Niña event, which we are currently experiencing in Arizona, holds true as the early winter of 2010 has shown to have warmer than normal temperatures, and a wetter summer.

Other predictors indicate a change in the coming months as the “real” winter storms arrive resulting in a delayed planting season in March and April 2011 due to frozen soil conditions. March is expected to be a particularly brutal month of arctic temperatures and winter storms across North America. However, the Farmer’s Almanac predicts for the Western states to see a “kinder and gentler” 2010-2011 winter overall compared to the winter of 2009-2010.

Whether the warm continues or the cold stays put, as we have seen time and time again in the agricultural industry . . . it all depends on the weather.