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Underestimating Agribusiness?
Farm receipts top $5.2 billion, but UK economists say overall ag industry revenue is $34 billion By Kara Keeton Kentucky farmers had record revenues in 2012, topping $5 billion for the first time – and expectations are that 2013 will be even better. However, experts say overall revenue from state agribusiness production was at least $34 billion last year when the many value-added processing operations for Kentucky’s crops are factored in. Soybean crops in Western Kentucky such as at this Union County farm are faring well as a result of plentiful rain. The USDA farm gate receipts tally – that for decades has been the traditional measure of the agriculture economy – does not include any of the value and income generated by processing after crops and livestock leave the farm or the services and supplies sold to farmers and processors. When the revenue generated by directly related business activities are added to gate receipts, the result is a more accurate assessment of the real annual economic impact of agribusiness across the commonwealth, according to agriculture economists at the University of Kentucky. Meanwhile, diversification of agriculture in Kentucky the past decade has led to much more than just cattle, corn and tobacco growing across the state. The commonwealth’s entrepreneurial farmers are growing a robust agricultural economy in the Bluegrass. Total agriculture product cash receipts to Kentucky’s roughly 80,000 farms continued to increase in 2012, reaching an estimated $5.2 billion, and that was in spite of adverse weather conditions, according to recent economic estimates in the “April Economic and Policy Update” from the University of Kentucky College of Agriculture, Food, and Environment. USDA is scheduled to issue official 2012 income statistics within the next month, but estimates are that net farm income levels remained at about $1.5 billion thanks in part to significant crop-insurance payments to growers across the state. Also helping keep farmers’ net income levels steady was the nearly $50 million in direct payments and tobacco buyout funds. The UK 2013 Ag Outlook estimates cash receipts for 2013 will continue to grow because of increased crop acreage, rising global demand and relatively strong prices. Those estimates are based on hopes for a better growing season across the state than 2012, when drought conditions affected many western portions of the commonwealth – but 2013 calculations were made before this year’s cool spring and excessive rains across the Bluegrass State. “This year, farmers are either having a windfall or wipeout with the weather,” said Hoppy Henton, a farmer in Woodford County. “I’m one of the lucky ones. I got my wheat in early, and my tobacco is planted on a slope (and the land drains well) so it is looking good. But I have a neighbor who is looking at a wipeout due to the rain.” Looking at the total cash receipts for the state’s agriculture, it is easy to assume that all Kentucky farmers are successful in this thriving economy. This view of Kentucky’s agriculture economy, however, does not always reflect the challenges and struggles taking place daily on family farms across the commonwealth. It also does not capture the full picture of what is taking place in Kentucky’s diverse and expanding agriculture sector. Beyond the farm gate receipt “When we talk about the agriculture economy, we are often just talking about ‘farm gate receipts,’ as that is the most common way we tend to measure the agriculture impact on the economy,” said Dr. Scott Smith, dean of the UK College of Agriculture, Food and Environment. “Those numbers do not look at services, supplies and all the people employed in all the agriculture-dependent industries. I believe it is time to look beyond the farm gate to see the real impact of agriculture.” In contrast to 2012 drought conditions, Western Kentucky corn has had adequate rain in 2013. The National Agriculture Statistics Service ranks 85 percent of Kentucky’s corn crop good or excellent. Alison Davis, an agriculture economist at UK and executive director of the Community and Economic Development Initiative of Kentucky (CEDIK), has been looking beyond the farm gate over the past several years in an effort to gain a better understanding of the full reach of the state’s agriculture economic impact. Revenue and income generated by food and fiber processing and manufacturing – value-added enterprises beyond the farm gate – are not captured in traditional cash receipt numbers, Davis explained. The forestry and wood products production sector is not represented in these numbers either. “Ignoring these businesses underestimates the value of the agricultural sector,” she said. Meanwhile, the Kentucky Agricultural Development Fund, financed with federal Tobacco Master Settlement Agreement dollars since a multistate deal with the cigarette industry in 1998, has invested millions annually since then in food, fiber and forestry projects that are not captured in traditional cash receipt numbers. Because the health of the agriculture economy and family farms depends on more than the farm gate, the goal of the KADF has been to build the sustainability of family farms first, said Smith, a state Agriculture Development Board member. Roger Thomas, executive director of the Governor’s Office of Agricultural Policy, said the KADF investments made by the board reflect the wide range of diversification efforts they are seeing across the state. “The interest in buying local products has led to a growth in new processing facilities for livestock, value-added processing for produce, wineries and fiber processing facilities across the state,” Thomas said. “The investment of funds into these value-added projects has opened up opportunities for farmers to put their own brands on products and in some instances has opened up new jobs in rural communities.” In her study, Davis explains that redefining Kentucky agriculture to include these related sectors adds almost 195,000 workers to the more than 90,000 individuals who work directly in agriculture production and $34 billion in revenues. And this impact does not include service-based industries such as banking, insurance or legal sectors. “If we look beyond the farm gate and begin to think of agriculture in terms of biofuels, the food system, all of the things that come out of agriculture products, I think we have enormous potential to grow the industry in our state,” Smith said. Soybeans are state’s top ag export Kentucky agriculture has always been dependent on international markets. State agriculture exports are only a small percentage of the overall U.S. agricultural exports, but growth in U.S. agricultural exports plays a significant role in the success of the commonwealth’s exports. Kevin Trunnell has diversified his family’s farming operation by building the successful Trunnell’s Farm Market, but he still spends his summers in the field as the farm manager. “Kentucky exported over $2 billion of agricultural commodities and related products in 2011, representing 45 percent of total agriculture cash receipts and approximately 10 percent of total Kentucky exports,” said Will Snell, an agricultural economist at UK. This recent growth in exports has boosted Kentucky to the third most trade-dependent agricultural state in the United States. Other states export more in total dollars terms, but based on USDA methodology for measuring export value, the economic impact from the share of production exported and the value created across the Bluegrass ranks the state third nationally. For decades, horses and tobacco were the commonwealth’s major export crops. The growth in Kentucky’s grain industry and increasing access to river ports has led to a large portion of those grains entering the export market. Today, the largest agricultural export originating from Kentucky is soybeans, followed by tobacco and corn. Kentucky’s equine industry traditionally has led the export market demand for breeding stock, but some of Kentucky’s Angus and Holstein cattle producers are finding a niche in the international market for selling breeding stock. Kentucky also has several agribusinesses, such as Hallway Feeds in Lexington, that have worked to build international markets for their products. “I would say 15 percent of our total tonnage is shipped overseas, with Canada and Japan being our largest markets,” said Lee Hall, vice president of Hallway Feeds. “We are also shipping into a number of European countries, the Middle East, Asia and the Caribbean, so there are probably 15 to 18 countries we are shipping into out of Lexington on a regular basis.” Currently export numbers are based on the selling of agriculture commodities and some agricultural related products such as ethanol and distiller-dried grains, but excludes some other agriculture-related industries/products such as forestry and bourbon. While Kentucky’s agricultural exports are expected to continue to grow, the growth would be significantly more if forestry and value-added products like bourbon were included in the agricultural export numbers. Diversification adding value to ag “I think the only thing that hasn’t changed in farming since I began farming over 40 years ago is the tobacco knives I use for cutting tobacco,” laughed Rod Kuegel, a farmer in Daviess County. “Agriculture is changing constantly. Look at the technology we use today and the markets we are able to access. I think it is important for agriculture to change. It is even more important for all those in agriculture to take an active role in the community to make sure agriculture remains a priority for Kentucky.” Jeff Pendleton, left, general manager, and Lee Hall, vice president of Hallway Feeds in Lexington, believe export opportunities will continue for their growing specialty equine feed operation. Kuegel is one of the many farmers in Kentucky who is actively involved at the local, regional, state and federal level, making sure agribusiness remains a priority issue beyond the farm gate. The involvement and dedication of farmers led to the Tobacco Master Settlement that continues to bring millions into Kentucky’s agriculture economy, and the investment of settlement funds into new agriculture enterprises. These investments in Kentucky’s agriculture community have been the economic incentive that has driven diversification efforts that have helped the agriculture industry thrive even with the loss of the golden crop, which sustained generations of small farmers. Kevin Trunnell, another Daviess County farmer, has diversified away from tobacco by developing a farm market and agritourism operation. He believes that his role in agriculture these days is not only producing the products on the farm, but being the face and voice of the farmer to the consumer. “Not only are we offering fresh local produce to the consumers in our community at our market, but we also bring them out to the farm to see agriculture in action,” said Trunnell. “It is that connection to the farm, the agriculture education they receive that we hope helps them to see the important role agriculture plays in the local community and local economy.” Lewis Shuckman, foreground, and his daughter Lauren package a variety of Shuckman’s dips by hand. The Shuckman family has developed a nationally known product in their small value-added agriculture processing facility in downtown Louisville. Tim Woods, an agriculture economist at the University of Kentucky, is seeing firsthand how this connection between the consumer and their food is driving local food systems. “We have had more than 400 individuals go through our MarketReady training to help producers evaluate the risk of entering retail and value-added markets,” said Woods. “We are also working with farmers daily at the Food Systems Innovation Center in the development and testing of their value-added products.” Woods believes the local food movement will continue to grow as consumers become more focused on the quality of food and the environmental impact of how their food is grown. “I like the term ‘beyond the farm gate,’ that would describe much of what we do daily in our operation,” laughed Trunnell. “It hasn’t been easy to grow our operation with the challenges in the economy and the changes in the agriculture, but farmers are resilient. Consumers are starting to see value in local agriculture and for me that is where I see growth, even if it is beyond the farm gate.” Kara Keeton is a correspondent for The Lane Report. She can be reached at editorial@lanereport.com. Continue reading
Woodland Carbon Code Celebrates Second Year Of Achievement
6 AUGUST 2013NEWS RELEASE No: 16028 Woodland Carbon Code celebrates second year of achievement The Woodland Carbon Code, a voluntary UK standard which ensures that ‘carbon forestry’ projects really do achieve the carbon benefits they claim, has passed its second anniversary with an impressive number of achievements. Increasing numbers of people and organisations are seeking opportunities to invest in tree and woodland planting to help tackle climate change and compensate for their unavoidable carbon emissions to the atmosphere. Validation of such tree-planting projects under the Code ensures that they meet stringent requirements for sustainable woodland management and carbon accounting, and provides an assurance to investors. Achievements during the Code’s first two year of operation include: a total of 133 projects covering 14,200 hectares (35,000 acres) have been registered under the Code. (Registration is a notice of intention to seek validation); the amount of carbon dioxide predicted to be removed from the atmosphere by registered projects has passed 5 million tonnes; 42 of the 133 registered projects have completed audits and been independently validated as conforming to the standards of the Code, meaning that the carbon sequestration claims and other aspects of the project have been checked and confirmed; a scheme to allow groups of woodland projects to come together for validation has been successfully piloted and is now open to applicants, making the process more cost effective for smaller projects; the Code was recently launched on the Markit Environmental Registry, bringing enhanced accountability and transparency to the developing forest carbon market in the UK; and, an updated version of the Code has been published, addressing lessons learned from practical experience since the Code was launched in 2011. Dr Pat Snowdon, Head of the Economics and Climate Change Unit at the Forestry Commission, which administers the Code, said “It’s been another strong year of growth and achievement for the Woodland Carbon Code. It continues to offer credible assurance to investors that the woodlands they invest in will deliver the carbon dioxide emissions abatement ascribed to them, while also providing other environmental and social benefits. “Investing in woodland creation provides companies and individuals with a tangible means of demonstrating how they are reducing their carbon footprint. From October this year UK-quoted companies will be required to report their gross carbon dioxide emissions. The Government’s Environmental Reporting Guidelines also enable any company to report the benefits of its investment in carbon sequestration through Woodland Carbon Code-validated projects.” Further information is available at www.forestry.gov.uk/carboncode . NOTES TO EDITOR: Carbon dioxide (CO 2 ) is the most common of the greenhouse gases causing the atmospheric warming which is changing Earth’s climate. Growing trees sequester, or absorb, CO 2 from the atmosphere, and use carbon atoms to form wood while emitting oxygen back to the atmosphere. Projects can only be validated under the Code if they meet its rigorous requirements for sound forest management, sustainability and carbon ‘accounting’. It was launched in 2011, and uses independent auditing companies approved by the UK Accreditation Service to audit project proposals. ‘Registration’ of a proposed planting project under the Code is the first step towards ‘validation’. Once registered, the proposal is audited against the standards set down by the Code, and if it satisfies the requirements it is ‘validated’. Projects must subsequently be ‘verified’ at least every 10 years to check that targets are being met. Validation provides evidence of the quality of the proposal, not only in carbon terms, but also in sustainable forest management terms, and is critical for attracting investors. Woodland established under the Code must attain high standards of forest management in line with the UK Forestry Standard (UKFS) and its supporting guideline on Climate Change. The UKFS sets out the government vision of sustainable forest management, and is the ‘yardstick’ used by all four governments in the UK when assessing applications for forestry grants, tree felling licences and approvals of forest design plans. See www.forestry.gov.uk/ukfs . The 5 million tonnes of CO 2 registered will be removed from the atmosphere over the next 100 years. The woodlands should actually sequester significantly more than this over their lifetime, but a proportion is set aside as a ‘buffer’ in case of future losses of woodland (and carbon) caused by wind, fire, pests or disease. CO 2 sequestered, or absorbed, by WCC-validated woodlands in the UK can be traded, and entry on the Markit Environment Registry enables changes of ownership of each tonne to be tracked. The registry also records when projects are registered and credits are listed, and when carbon units have been “used” by a company in its carbon account. See www.markit.com . About 13 per cent of the UK’s land area is covered by woodland, which is more than double the woodland cover of 100 years ago. The European Union average is 37 per cent. MEDIA CONTACT: Charlton Clark, 0131 314 6500 Continue reading
GMO’s Jeremy Grantham on Climate Change and Investable Ideas
By Nick Summers August 08, 2013 Photograph by Harry Gould Harvey IV for Bloomberg Businessweek What was a 74-year-old asset manager, who oversees $100 billion, doing at a Keystone XL pipeline protest outside the White House? The biggest issue confronting us is the deterioration of the environment, particularly damage to the climate. It’s one thing to warn in a quarterly letter about a carbon bubble and another to maybe get arrested for it. Why did you take that step? Within the U.S., the biggest problem is coal and tar sands. If we burn half or more of what we have in two areas in North America, there is no chance of avoiding very dire consequences. Rising water levels displacing hundreds of millions of people globally, destabilizing global politics, acidification of the water almost certainly destroying most of the coral reefs, and possibly threatening the bottom of the food chain in the ocean. In November, you wrote that scientists must sound a more desperate note. I think they have an ethical responsibility. Did you ever think you would be out in front of scientists? I’m not out in front. What they are reflecting is what we learned in the investment business: the significance of career risk. I made a living pointing out that our No. 1 job is not managing money; it’s keeping our job. Short-term momentum investing dominates because of that. The scientists are protecting their jobs. How they do that is to stay out of the limelight and make sure they’re conservative. What is your opinion of young people? They’re not out in the streets. They are still flocking to Wall Street. They’re not flocking quite so enthusiastically to the financial world. I am prepared to take my optimism wherever I can get it. Obviously, they haven’t responded. It may seem too distant, which is ridiculous because this is happening so fast that this is their lives, not their children’s. How do you start with big observations and get to investable ideas? The only investable idea I have real confidence in is farming and forestry. My family owns some forest, and now we’re closing on a farm. Make the farming more sustainable and the forestry more sustainable, and everyone benefits. Can you talk more about the farm? We’re buying a farm to do comprehensive experiments and broad-based agriculture. What they call “mob grazing”—a high density of cattle, moving them around, making sure that they eat everything that’s there. They trample the seed and so on and they fertilize it. Using goats to eat invasive plants, using chickens to follow the cattle and pigs to eat the leftover vegetables and the fallen fruit, orchards growing fruit and organic vegetables, over 200 acres. Where is this? Maui. My elder son is at Harvard Management Co. He does exotic forestry and farming investments. The second son is a forester. This will give us data and experiments without betting the farm on any one of them. When do you plan to get seeds inthe ground? Immediately. They’ll start small. It will hopefully be a template. They use this offensive word “holistic.” I hate it. It’s the world’s most pretentious word. How long do you let an idea percolate before you commit it to one of your quarterly letters to investors? Sometimes years. I have a decent idea about the exaggerated attention given to debt. I seem to be having writer’s block. What is this big idea? I’m not saying it’s a big idea. It may be very humble. I noticed a series of deficiencies in the data as typically presented. It’s as if only debt matters, only finance matters, only banking matters. We have been manipulated to see ourselves in a world where those things rule the roost and therefore we have to be protective of the big banks. Can the Fed take away easy money without jolting the markets? Who cares? This is the game I’m complaining about. We will prosper by the quality and quantity of our labor and capital. Do not pretend that how they twitch around has any material effect. Many people intuit that climate change is getting worse, but put it out of their heads. Why do you find this interesting? I like to be right. I try not to miss the big ideas, forget the little ones, and try to get them right. End of job description. Continue reading
