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Crop insurance blowback

Written by stevefairchild on .

This week we had the opportunity to hear an inside-the-beltway vision of this year’s farm bill (or next year’s farm bill, depending on the whims of our elected officials). Our man of the lobby said that with tens of billions of dollars slated to be paid out through federal crop insurance programs, the cries for means testing have become full-throated.


This is from the New York Times earlier this sumer:
“Obviously, crop insurance is important to an inherently risky business exposed to the vagaries of not only the world marketplace but the weather. But the purpose of insurance should be to protect farmers against losses, not to guarantee profits, especially for the bigger farms that command a disproportionate amount of the taxpayers money, and certainly not to guarantee the good life for the insurance companies.”

Perhaps. Then again, “bigger farmers” produce most of the product being insured. To remove them via means testing would greatly affect the risk pool. There is, after all, still a premium paid by the grower to obtain coverage.

Meanwhile, our friends over at the Heritage Foundation toss one of their frequent darts toward farm bill spending, in particular federal support for crop insurance, and, as always, “wealthy” farmers (also printed in the Washington Times).

The average American translates wealth through a very anecdotal series of paychecks—each with its tax and medical insurance withholdings tidily subtracted. It’s a one-line net income world out there. Farming is lost in that translation. Not just with $400,000 combines (and headers that cost as much as a house), but through no familiarity with the price of land, rent, inputs and interest. We’d like to see the pay scale of CEOs or business owners who put capital at risk each year in amounts similar to a sizable farm.

But we digress, like so many bags of wind in this silly political season.

Thomas P. Zacharias, president of National Crop Insurance Services, responded to the Heritage Foundation’s piece in the Washington Times with a letter to the editor :

Zacharias said:

"Prior to development of the modern [insuarance] program, response and reaction to agriculture disasters came in the form of 42 supplemental ad-hoc disaster bills, measures that have cost taxpayers $70 billion since 1989 and took up to 18 months to reach growers.

Contrast that to today’s modern crop-insurance program, in which last year 84 percent of eligible acres were protected by private crop-insurance policies purchased by farmers. When a string of natural disasters struck last year, there was not a single call from farmers for disaster aid.

Again this year, most farmers will be able to rebound from historic drought, thanks to crop insurance. Unlike in the past, taxpayers will not stand alone to shoulder the costs. Farmers will pay more than $4 billion in premiums, and insurance companies will incur billions in underwriting losses."


Stay tuned to the farm bill debates, which will be on hold until after November. And, if you’re a livestock producer, why not write your legislator to ask why in a year of true hardship, there hasn’t been much word from Washington about your plight and lack of insurance in market where federal regulations divert a considerable amount of feedstuffs away from feed markets. It’s a zinger, that one.
 

Fire ants in Missouri

Written by stevefairchild on .

This isn't a good thing.

 

 

 

Missouri has its first confirmed report of red imported fire ants, and residents of Missouri’s Bootheel should be on the lookout for fire-ant mounds on their property, said Richard Houseman, University of Missouri entomology professor and state extension entomologist.

Houseman and Judy Grundler, an entomologist with the Missouri Department of Agriculture, confirmed that red imported fire ants built mounds in Kennett, Mo.

“The mounds have likely been there for a few months,” Houseman said. “The mounds contained alates – winged ants that are ready to fly out of the mound and start new mounds somewhere else in the area.”

The alates indicate that the mounds have been there long enough for the ants to mature and reproduce, he said. “Red imported fire ants will swarm year-round, whenever it’s above 70 degrees, and this mound may have had alates earlier in the summer when swarming is more likely.”

Red imported fire ants are an exotic species brought to the United States more than 50 years ago in soil used as ballast in cargo ships from South America. They have since spread throughout the southeastern United States, costing affected states billions of dollars annually.

The dark reddish-brown insects build mounds that can be up to a foot in diameter. Within the mounds, there are several sizes of worker ants and several queens.

These aggressive ants bite and sting humans, livestock and pets. While biting, they release a pheromone that triggers all of the ants to sting simultaneously. They can sting through clothing and release a venom that causes the burning sensation that gives fire ants their name. Pustules, or blisters, form on the skin after the sting. In rare cases, attacks can result in anaphylaxis or infection.

Officials are not sure of the source of the red imported fire ants discovered in Kennett, but Houseman said they could have arrived in the area with landscaping plants purchased in nearby states where fire ants are established, such as Arkansas or Tennessee.

A Kennett homeowner discovered the mounds in late September and contacted Mike Milam, MU agronomy specialist, who took samples to MU entomologists for identification. Like many people in southeast Missouri, the homeowner purchased landscaping plants in Tennessee in the spring to replace those damaged in last winter’s ice storm.

“We really don’t know how long they’ve been there,” Houseman said. “Because it’s a mature mound, the concern is that they could have released alates that may have established new mounds elsewhere in the city.”

The site in Kennett is the typical environment where ants build their mounds. Milam found these mounds within an 8-foot area of the homeowner’s backyard, near a water spigot and under and around paving stones.

“They like open, sunny areas where the vegetation has been removed or landscape has been disrupted, or in fields where the ground has been tilled,” Houseman said. “When they become established in urban, agricultural or natural settings, they have a major impact on what happens there. These impacts include health, economic and ecological threats to humans, livestock, crops and wildlife.”

People who suspect they may have fire ants should inspect their property for mounds. “They can knock off the top of any suspicious mound and see if the ants come rushing out aggressively,” Houseman said. “If the ants get on them, of course, they’ll be stung.”

Milam and Houseman recommend a two-step treatment. First, saturate the mound and surrounding soil with a liquid insecticide. “This is high-volume and low-pressure, so it soaks deep into the mound and gets the queens,” Houseman said.

Follow the insecticide treatment with granular ant bait specially formulated for red imported fire ants. Use a hand-spreader to blanket the area immediately surrounding the mound.

“We want people to first take samples before treating the mound, and then we can confirm whether it is fire ants,” Milam said.

To collect a sample, fill a small vial with alcohol. Use a cotton ball lightly moistened with alcohol to dab the ants that come out of the disturbed mound. Put the cotton ball and attached ants into the vial.

Samples can be taken to local MU Extension centers or sent to the MU Plant Diagnostic Clinic for analysis. For more details on submitting samples, see http://soilplantlab.missouri.edu/plant/.

Because fire ants reproduce quickly, managing them requires a community-wide effort, Houseman said. “That’s what will need to be done in this area.”

Houseman and Milam, along with the Missouri Department of Agriculture and USDA, are developing programs to educate Missouri residents, farmers and community leaders on managing the pests.

The cost of drought for beef

Written by TF staff on .

Consumers focus on the cost of food, but beef finishers will pay

While mainstream media sources tend to focus on retail increases in the cost of food, and especially meat, livestock producers are looking at grim situations for inputs on their farms. The Kansas City Federal Reserve rounded up estimates of the situation for a recent special report. According to the Fed report released in August, 70 percent of all beef cows are in states with pasture conditions rated as poor to very poor.

“With two-thirds of U.S. hay production areas experiencing drought, alfalfa prices have jumped 15 percent since May. In an attempt to limit losses, ranchers weaned calves earlier than usual and increased the placement of feeder cattle into feedlots. Combined with the increased shipments of feeder cattle from Mexico, the influx of cattle into feedlots contributed to a 12-percent decline in feeder cattle prices since mid-June.”

Numbers from the Livestock Marketing Information Center show cow/calf returns have dropped by more than $100 per cow since May.

Meanwhile, break-even prices spiral up like so much hot air. According to the Fed, feedlots are under financial stress from feed costs as soybean meal, corn gluten and dried distillers grains jumped more than 25 percent from May to late July. During the same period, cattle prices fell more than 15 percent as seasonal price declines weighed on the market. The Fed report predicted trouble in feedlots for the foreseeable future:

“Combined with escalating feed costs, USDA expects feedlot operations to lose more than $200 per head this fall.”

Drought and your tax return

Written by TF staff on .

Check your options about reporting or deferring income from crop insurance

Roger McEowen, director of the Center for Agricultural Law and Taxation at Iowa State reminded farmers that crop insurance payments will bring tax implications for farming operations.

“For a cash-basis taxpayer, proceeds from insurance, such as from hail or fire coverage on growing crops, are includible in gross income in the year that they are actually or constructively received. In essence, destruction or damage to crops and receipt of insurance proceeds are treated as a ‘sale’ of the crop,” he explained.

However, growers may elect to defer the income into the next taxable year’s returns if the grower typically reports income from the sale of crops in the later year. “Also the deferral provision applies to federal payments received for drought, flood or ‘any other natural disaster,’” reported McEowen.  
More complicated is reporting tax for newer types of crop insurance because of the interpretation of how and why the products pay claims.

McEowen wades through the technicalities:
A significant issue is whether the deferral provision also applies to new types of crop insurance such as Revenue Protection, Revenue Protection with Harvest Price.
[For] Exclusion (RPHPE), Yield Protection and Group Revenue Protection to be deferrable, payment under an insurance policy must have been made as a result of damage to crops or the inability to plant crops. Other than the statutory language that makes prevented planting payments eligible for the one-year deferral, the IRS position is that agreements with insurance companies providing for payments without regard to actual losses of the insured do not constitute insurance payments for the destruction of or damage to crops. Thus, payments made under types of crop insurance that are not directly associated with an insured’s actual loss, but are instead tied to low yields and/or low prices, may not qualify for deferral depending upon the type of insurance involved. For example, payments made under policies where yield loss triggers payment will, at least in part, qualify for deferral. Other types of policies may not hinge payment on physical damage or destruction to crop.
If a crop insurance payment is based on both crop loss and price loss from a revenue-based insurance policy, only the portion intended to reimburse the farmer for crop loss is deferrable. The portion payable because of a decline in market price is not deferrable and is income in the year the payment is received.

McEowen sorts it all out with real-world examples on a PDF available from Iowa State.

These kind of complications in the tax return are worth a note to your accountant. The ability to defer income can be a valuable tool, but getting it right is the best policy with the IRS.

Non-browning apples

Written by TF staff on .

Biotech apples push toward marketplace

There is a line of argument that says biotechnology will appeal more to food consumers when biotechnology begins to deliver traits that consumers find to be particularly useful. Keep an eye on Arctic Apples to see if the argument carries. The apples have been genetically modified to prevent enzymatic browning, that brown discoloring we’ve all seen on cut or damaged apples.

USDA’s Animal and Plant Health Inspection Service has opened its review for public comment on Arctic Granny and Arctic Golden apples. The comment period will close on Sept. 11, 2012. The apples are from British Columbia-based Okanagan Specialty Fruits.

A second U.S. comment period is expected to open approximately six months following the closure of the first comment period.

The company points to 10 years of research and tree growing to show their apples and trees are safe.

According to the company, “Arctic Apples use gene silencing to suppress the apple’s expression of polyphenol oxidase, the enzyme involved in browning when the fruit is bruised, bitten or cut. This virtually eliminates PPO production, so in turn the fruit doesn’t brown.”

If the apples pass the regulatory hurdles, we’ll watch with interest to see if consumers find value enough in the new apples to make them a marketplace success.

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