Tag Archives: farmers
Brazil’s Booming Farms Reap Benefit Of Weak Currency
http://www.ft.com/cms/s/0/aab8e412-0dae-11e3-9fbb-00144feabdc0.html#ixzz2e0fynxYQ By Joe Leahy in São Paulo Carlos Piassi remembers the reaction from other farmers when he started planting a second annual crop at his farm near Uberlândia, in Brazil’s grain belt. No one believed it could be done given the semi-arid region’s relatively short rainy season and long dry winter. “If you had said you were going to plant a safrinha [the small harvest] here five years ago you were called crazy,” he says at his farm, Fazenda Campo Alegre. The naysayers were wrong. “The safrinha between last year and this has about tripled,” he said. That Brazil has risen in recent decades to become an agricultural power is no secret. It dominates the sugar, coffee and orange juice markets and competes with the US to be the world’s biggest soyabean exporter. What is less understood is that the transformation is not only continuing, it is gaining pace. Indeed, Brazil’s robust agricultural sector is promising to help Latin America’s largest country weather one of its toughest economic periods in a decade as a consumer-driven boom slows. And a recent 15 per cent plunge in the value of its currency, the real, against the dollar is set to give further impetus to the sector by reducing rising costs that were making its exports uncompetitive. “The devaluation of the real has been a complete game-changer,” said Giovana Araújo, an agribusiness analyst at Brazil’s Itaú BBA bank. Using new varieties of seeds that have allowed them to shorten soya and corn crop cycles, Brazilian farmers in the country’s centre-west savannah areas have moved from planting one crop to incorporating the second, the safrinha. In some areas where irrigation is available they are even contemplating a third harvest. The corn crop has benefited most from the safrinha. In the 2012-13 year, corn output is expected to total nearly 80m tonnes, up from about 56mt in 2011. Soyabeans, meanwhile, are estimated at more than 80mt compared with about 75mt in 2011. Brazilian agriculture output Agroconsult, a Brazilian consultancy, expects the safrinha to account for 56 per cent of total corn production in the 2012-13 season, and 58 per cent in 2013-14 – leading farmers to joke that the second crop should now be called a “safrão”, or “big harvest”. “The safrinha’s share of total production should continue to grow in the long term,” said Marcos Rubin, an analyst at Agroconsult. The new seed varieties mean that the first crop, typically soyabeans, can be planted and harvested in 90-95 days to make way for the second harvest, typically corn, before the summer rains end. After the rains, during the long dry period, some farmers are starting to experiment with a third crop using irrigation. “Brazil has the conditions to quickly double its production of corn, which today is about 80m tonnes to 160m tonnes,” said Roberto de Rissi, business director of Dupont Pioneer, one of the multinationals fighting for Brazil’s increasingly lucrative seed business. If you had said you were going to plant a safrinha [the small harvest] here five years ago you were called crazy – Carlos Piassi, Brazilian farmer Dupont, which is strong in Brazilian corn, has recently also invested in a new facility in the region near Mr Piassi’s farm with the capacity to produce 80,000 tonnes of soya seeds a year. It is fighting Monsanto, Dow AgroSciences and Syngenta for the country’s corn and soya markets. The companies have names for their products that range from Intrasect to Powercorn to Smartstax, a genetically modified insect-resistant variety. The dominance of the multinationals has turned Brazil into a stronghold for genetically modified crops, which account for 90 per cent of its soya-planted area and 76 per cent of corn, according to Jefferson Carvalho, an analyst at Rabobank International. “This year Monsanto launched the first soyabean that was developed specifically for another country, not the US,” he said. Challenging the rapid growth of Brazilian agriculture are the country’s poor logistics, which lead to bottlenecks at roads and ports and higher costs. In addition, recent falls in international prices for grains are squeezing farmers’ margins, though the weaker currency will be a big help. Brazil’s strong economy in recent years has also made it hard to find workers willing to toil in the fields when they could be doing a cushy service job in a city. “Today it’s hard to find anyone who wants to work. I can’t find a driver for the truck,” says Mr Piassi. “I’ve got two corn harvesters sitting idle because I can’t rustle up anyone to operate them.” Continue reading
Are UK Farmers Sitting on a Biomethane Goldmine?
UK – New research into biomethane production shows that farmers could be sitting on a £24 million “goldmine”. A new study has shown that medium to large farms could stand to make millions from producing renewable methane for the gas industry. Entitled Biomethane for Gas Grid Injection, the report details how the UK’s farmers are currently missing out on the opportunity to produce gas from suitable organic products and inject it into the country’s natural gas grid for large returns. Rob Heap, of Rob Heap Consulting, who carried out the work, said: “An entry-level anaerobic digestion (AD) plant would be looking to earn in the region of £24-million over 20 years and farms that developed larger plants could earn exponentially more than that. “Given the right conditions, it wouldn’t be difficult to double or even triple that amount.” Dairy and poultry farmers, pig farms and producers of energy crops such as maize, grass, rye and energy beet all have the potential to tap into this new money-making resource, said Rob. He added: “It depends on the style and type of farming but all farms have one or more of the necessary products needed for biogas production. For example, a dairy, pig or poultry farmer might have slurry and manure, but no energy crops. If a group of farmers got together, they would have a good chance of developing a very attractive business. “The more farmers that get involved, the more feedstock available to feed the AD plant and the more diversified it will be, which is quite important for receiving greater returns on your investment. “A lot of farmers are potentially sitting on a goldmine and ‘gas farming’ could be a valuable diversification opportunity that still has to be exploited by UK farmers.” Biogas is produced for commercial exploitation by processing organic feedstock at certain temperatures in controlled, airless environments. This process is called anaerobic digestion (AD) and has traditionally been exploited by the water industry, which has used “sewage gas” to produce its own renewable energy for decades. Biomethane is biogas that has been cleaned and dried and closely resembles the properties of natural gas. In more recent years, AD plants have been used to produce energy for the electricity supply industry, with 110 AD plants currently operational in the UK and more in construction. But with the introduction of tariff incentives for renewable methane and a number of enticements stemming from the government’s environmental commitments, producing biogas for the gas industry has become a very attractive financial prospect. Rob said: “Until about 18 months ago there was not a tariff available for farms to create biogas for the gas grid and everyone looked to embrace electricity production. “But things have changed and there is now an attractive tariff in place for biomethane. There has also been a relaxation in some of the regulations surrounding production and injection of biomethane into the gas networks. “More funding people are getting interested as biomethane has the potential to be more profitable than generating electricity.” The study, commissioned by Northern Gas Networks, has shown that hundreds of sites in Yorkshire, Cumbria and the North East alone are currently producing the appropriate feedstock necessary for biogas production. However, many of these sites are very low volume producers and are situated in remote rural locations or are using alternative methods of waste recycling. Nevertheless, the study has shown these farms could still contribute to the gas grid and stand to make huge returns by partnering up with neighbouring farms and forming regional alliances. Virtual gas networks, where biomethane is moved in a private pipeline or pressurized and transported by road (just like compressed natural gas) to centralised upgrading plants prior to being injected into the grid, could present small producers with further opportunities to develop feasible projects. Rob said: “A great deal depends on an individual farmer’s appetite to embrace these kinds of farming initiatives; it has a lot to do with attitude, knowledge and skills. “Anaerobic digestion is something that a lot of farmers will not be familiar with and some may be put off by its apparent complexities, which is a shame.” Rob continued: “The typical capital outlay for an entry level AD plant would be in the region of £3- to 4-million but it’s difficult to be specific because it’s a technology that is usually designed in a bespoke manner to suit each individual farm’s requirements. “However, there are specialised funding companies and indeed quite a number of individual entrepreneurs willing to put up funding for projects such as these. “More and more farms across the UK are exploring the possibilities of AD and as it takes off it’s hoped that more farmers will become open to the idea and cooperate with other interested farmers in their area.” The findings come ahead of a free conference on commercial opportunities in biomethane, to be held in September. Gas to Cash will explore how farmers can make money from their existing operations by producing biomethane for injection into the natural gas network. Organised and sponsored by Northern Gas Networks in partnership with the Institution of Gas Engineers and Managers (IGEM), the Chartered body representing the gas industry, the event promises to assist farmers in the steps necessary to realising the business opportunities available to them. TheBioenergySite News Desk Continue reading
Analysis – Lower Crop Prices A Pain For Deere, But Farmers Are Fine
http://s1.reutersmed…r=CBRE97E0YUC00 By James B. Kelleher CHICAGO | Thu Aug 15, 2013 1:32pm BST (Reuters) – Wall Street’s frosty reaction on Wednesday to Deere & Co’s ( DE.N ) latest quarterly earnings is no surprise given the recent sharp drop in agricultural commodity prices. Farmers buy fewer tractors and harvesters when corn and soybean prices are down. But the dramatic drops in corn and other prices over the past year are not causing a lot of pain on the farms. At least not yet. With income at records highs, farmland fetching top dollar and balance sheets strong, a drop in grain prices in the face of another record crop is hardly a sign of doom for growers. Lower prices are generating a lot of uncertainty around Deere, however. For the world’s largest maker of tractors and harvesters, as goes the price of corn, so too goes the price of the company’s shares. Deere prefers to talk about the correlation between farm cash receipts and the sales of its distinctive green and yellow equipment. And it is true that the two move up and down in tandem. But the correlation between its stock price and the price of corn on the Chicago Board of Trade is pretty high, too. That is why the last few years have been so good to Deere: Both corn prices and farm income were on a tear. For decades, corn prices hovered between $2 (£1.29) and $3 (£1.93) a bushel, but they surged as high as $8.49 a bushel during last summer’s drought. Supplies were tight, even as demand from China and other emerging markets increased along with rising corn-based ethanol use in the United States. Net farm income has doubled over the past five years, according to the U.S. Department of Agriculture’s Economic Research Service. Surging corn prices and rising production have been big factors. Farm balance sheets are strong, too. Net farm assets have risen by nearly $700 billion since 2009, according to the USDA, while net debt has gone up by just $40 billion. That is why the last few years have been so good to the top and bottom lines at Deere and its rivals in the farm equipment space, including Agco Corp ( AGCO.N ) and CNH Global NV CNH.N. Between 2009 and 2012, Deere’s farm machinery sales grew 60 percent and its diluted earnings per share jumped 270 percent. Deere continues to benefit from flush farmers. In the results released on Wednesday, Deere said its profit jumped nearly 30 percent, even though sales were only up 4 percent. The company, in a nutshell, was able to sock it to farmers price wise. But the company’s shares, which have underperformed the broader market all year long, fell as much as 3 percent following Wednesday’s report. The disconnect is all about expectations. The U.S. Department of Agriculture on Monday forecast a record corn harvest in 2013, which pushed the price down to $4.55 a bushel, near a three-year low. Now farmers – notoriously conservative – are widely expected to cut back on spending for equipment and acreage, which have also spiked in recent years. No one is expecting a catastrophic decline in the purchase of tractors, combines and other farm implements. Deere believes farmers’ cash receipts will fall 4 percent next year after a sharper 8 percent decline this year. Why would a 50 percent drop in corn prices result in a much more modest hit for farmers? Well, cash receipts are a function of both quantity and price. Corn was a lot more expensive last year, but the drought cut into yields. What’s more, farm income can include all kinds of non-crop revenue such as government payments, and crop and revenue insurance. Farmers also have lots of storage capacity, so they do not have to sell at current prices. They can store their grain instead. Add it up. Lower expected farm receipts + lower corn prices = double trouble for Deere shareholders. That is why many analysts who cover Deere, including Adam Fleck at Morningstar, expect the next few years to be tough for the company. “We’re a far cry from the farm crisis of the 1970s and 1980s,” said Fleck. “But the cold hard fact is farmers can always run a tractor one more year.” Lower corn and soybean prices, combined with the possibility of lower farmland values and higher interest rates, are coming together in a bad way for equipment manufacturers already facing several years of really difficult comparisons. Unlike farmers, Deere does not have a bin where it can store unsold farm equipment. It can’t stockpile tractors and combines and wait for the farmers to return. Deere, and perhaps its stockholders, might just have to tough this one out. (Additional reporting by Gavin Maguire.; Editing by David Greising and Andre Grenon) Continue reading
