FARM Bill presentation to Realtors Land Institute -094

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2014 FARRM ACT

I was asked to do a Farm Bill presentation to the Illinois Chapter of the Realtors Land Institute.  The audience was realtors and farm managers.  To book me to speak to your group, head over to my speaker page.

Bill Graff Farm Bill Bill Graff Farm Bill presentationI discuss what options I will take on my farms, unless FSA rules are much different then the legislation.  Speaking of which it does not really matter how we read the farm bill legislation.  It is how FSA, USDA lawyers, OMB and Justice Department lawyers interpret the rules.  FSA has the gold, so the golden rule applies, they write and enforce the rules.

There will be many “experts” out there doing all kinds of presentations, but until the FSA final rules come out we all are really just playing in the ballpark maybe just not on the diamond.

I talk about my experiences in implementing 2 farm bills and how this can all shake out.  Topics that I cover are the farm program choices, what I think I will do on my farm, and some of the pitfalls to be aware of.

I discuss crop insurance changes, conservation compliance, adjusted gross income.  One biggie is the need to secure landowner signatures to many of these documents.  Overall this farm bill should be very good for production agriculture.

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093 – Ukraine, Global warming, World gone Mad?

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flight 370Update on Ukraine,

but before that I look at Flight 370

Global Warming

MF Global

End with an update on the Farm Bill, or should I say FARRM Bill.

Just a good old fashion discussion on odds and ends.

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Ukraine = Czechoslovakia? How does this affect the Commodity Markets?

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Neville Chamberlain

William Orpen via Wikimedia Commons

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So is Ukraine turning into Czechoslovakia 1938???  No in 1938 Chamberlain (British Prime Minister) at least got a piece of paper saying this was it and he would have “peace in our time”.

We (USA) will also never be able to get Obama’s dream of a nuclear free world.  Why? WE (USA) convinced Ukraine to give her nukes back to the Russians and if the Ukrainians still had nukes Russia would not have moved on them.  Obama also wants a smaller US military in a world where there is more cooperation all over, an “inter-connected” world.  Well tell that to guys like Putin, and countries such as Syria and Iran that still use naked aggression.  Of course we can listen to John Kerry as he talks about a 19th century act in a 21st century time period.  I guess Putin did not get that memo.

Obama also talks about a world in which “the tide of war is receding”.  Really guy, tell that to Ukrainian people right now.  Russia I believe will invade Eastern Ukraine “so as to protect the Russian speaking people there”.  May also have something to do with the nuclear missile facility in Dnepropetrovsk, Ukraine where SS-18 intercontinental missiles are maintained.  It appears Russian troops are massing on the eastern border of Ukraine. Putin has held a press conference saying that Russia is backing off, will not invade, is not going to take over the Crimea, etc.  Yeah, I am going to believe the former KGB guy, yeah sounds like a good idea-NOT.  My guess he waits, time is on his side, and then he moves how when Putin needs to.  He also may get the Ukrainians to cave in without a fight.

Obama also likes to call for “nation building at home”.  Which is just a reference to his predecessor’s “nation building” or attempt at it in Iraq, and which is really a code for less military spending and more social welfare spending (give me my free phone).

Excellent video by retired Col. Ralph Peters

He lays it out just how helpless the US has become.  This is going to eventually impact all markets I would guess.  Which way agricultural markets go is a good question.

We Americans are so naive and clueless about the rest of the world at times, just give me my free phone, (or farm bill for that matter).

Russia is already telling western Europe to expect natural gas shortages.  Of course the liberal progressive Europeans have very little energy of their own, they buy it all from the Russians.  The Germans after screwing up the world during the 20th century, sure look to me to be caving in to Russia now.

Just in time delivery and free trade work very well ( I am a free trader) but you have to know who you are dealing with at times. When they cut you off and you do not have reserves or your own backup supplies you are, well let’s say not in a very good position.

Kyrgyzstan could be next in line for Russian liberation I have been told.  First Georgia, now Ukraine, next central Asia for the “new” Russian Empire.

Putin in my opinion really believes his destiny is to restore the Russian Empire.  He is dangerous no amounts of “resets” will fix that fact.

Seems we are all hope and no reality.  “Don’t you just wish the world would turn out like our liberal college professors told us it would” or the Weatherman Underground folks.  Sorry to sound so rough, but coming from the state I do and watching all the liberal progressives from the extreme northeastern corner of my state nothing they “hope” for surprises me.  Washington Post has an opinion piece that is titled “President Obama’s foreign policy is based on fantasy”.

If you also want to look it up on the web – Hannity interviews Palin about comments she Ukraine coat of armsmade about Russia invading Ukraine in 2008 that the liberal main stream media just went after her over.  Seems she was not just a dumb good looker from Alaska.  You all also need to go back to the 2012 Presidential campaign and when Romney said Russia was a Geo-political threat to the US, Obama said the 1980′s were calling.  Really shows how out of touch with how the world actually is and not how he wants it to be.  Chris Matthews also has some real good video where he was the attack dog going after Romney on this, and he now looks like a complete idiot or fool.  About the only thing Putin has done for the US is show just how out of touch with how the world actually works the progressive liberals are.

Now back to what you farmers want to know.  How is this all going to affect prices.  Overnight is quiet.  We just may have to ride this out.  Grain prices for now have probably put in a temporary low, but do not listen to me I am not a good marketer at times and then at times I am just lucky and fortunate.  I am also not in the advice giving business I will just tell you what I am doing on my own operation (disclaimer).

My greatest worry is a massive increase in energy prices.  Which by the way helps Russia tremendously since it exports lots of energy.  See how this is a double or bigger win for Putin.  All the more reasons we need to become energy independent and build pipelines, drill for more oil, use the gas we have been flaring off, etc. to guard against somebody black mailing the States.  It would also be nice if we could export liquified natural gas to our allies when something like this happens in the future.  Besides putting money into the economy and adding jobs, etc.

Not to sound like a prophet but I did ask the question about Ukraine in a public grain marketing meeting about 10 days ago.  I just thought what was going on there and the Olympics over the time was right for Putin to move.  So where were all our experts on this one.  I am not a rocket scientist, so if I could see it coming where were they????????

Watch Peters’ video again, this will impact the USA long term in many ways we have no idea of now.  Probably you will see more calls for an increase in military budgets, of course the politicians will not let the military close domestic bases or cut back on projects in the politicians home states to actually help increase our efficiency with our military.  They will once again probably take it out of the pay our true American heroes receive for protecting all of us.

Link to my last post on Ukraine.

Link to my 1914 / 2014 podcast

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Ukraine is this 1914 no I mean 2014 – update

Just a quick update on what is going on in Eastern Europe.

And, for all you farmers who do not follow geopolitical affairs you may want to start.

10 days ago I went to a market outlook meeting.  Asked a question about the events in Ukraine and how it would affect the markets.  Commodity guy said “It is just in Kiev, it will have no affect on the markets, just not much there.”

Well it has been a very good ride to the upside for the last couple of days.  Ukraine is a big competitor of ours in the wheat and corn markets.  It was the bread basket of Europe before World War 1.  This may not last very long, but it shows what can happen in a world with very high demand for food and just in time delivery.

Ukraine situation has been brewing for some time now.  Ukraine is a country or really an ethnic group caught between two worlds, Europe and central Asia.  Crimea Peninsula for centuries was consider Turkish in its makeup. It has had all kinds of rulers, been fought over and been a “prized” possession for many kingdoms over the years.  Russia in its vast expansion 200 to 400 years ago moved into and took over many areas of southeastern Europe and south central Asia.  People in these regions have not been getting along since, well actually they probably never got along with each other before either.

Ukraine Political map

Wikimedia Commons

What I think really drives all this is, the former and current rulers of a Nationalistic Russia are afraid of these types of demonstrations and calls for freedom spreading over all the former Soviet Union.  There are hundreds of ethnic groups in what used to make up the old USSR.  The Soviet Leaders in the 1950′s “gave” Crimea to Ukraine so more ethnic Russians would be in Ukraine so as to better control it.  Ukraine is also an area where Stalin starved millions of Ukrainian people to death in the 1930′s.  Stalin was scared of Ukraine because years before the rulers of Russia had “invited in to settle” many Germans to farm the excellent lands there.  Stalin ruled with an iron fist and he just did away with the threat.

Well enough history I could write pages on this subject alone, what about now? 

Putin in my opinion believes he has a mission to accomplish.  That mission is to restore “Mother Russia” to her former greatness.  Russia has lots of problems and in many ways is a dying country.  If it was not for her great natural resources (oil and gas) Russia would be in big trouble.  A wounded bear is also a dangerous bear.  I also believe Putin figures Obama is not up to a stand off.  Not a fight, but a good old stare down.

Russian military spending has doubled since 2007 and will triple by 2016.  Thank you higher oil and natural gas prices.

You right wing conservatives have to face the fact, in many progressive liberals eyes you are the true enemy not some country or people overseas.  They really believed what they learned in “Social Studies” and what their liberal college professors were indoctrinating them with.  So Putin figures Obama won’t go up against him and Obama’s real fight is in U.S. politics anyway.

The real question right now are passions so high in Ukraine that they will fight instead ofMap of Crimea surrendering to the Russian military?  Do not misunderstand for Russia this is huge.  Its Navy’s home base is the Crimea.  Russians believe in their hearts, minds and souls Crimea is Russian territory.  And, if you are the Ukrainians you will keep wondering who will help you.  NATO should be on alert and getting ready if this thing goes hot and fast, but the Europeans lost most of their will to fight in both World Wars.  The Europeans are also not spending anything on their defense forces.  Hey they have a social welfare state to hold up and the good old USA will do it for them anyway, right? Of Course the good old USA has our own social welfare state to prop up and our trillion dollar budget deficits.

What happens here also could spread to the Baltic countries, which gets real close to Poland. And, to the central Asian countries that split off from the USSR.  These countries bring energy production and reserves into the mix and the Muslin religion.  I also believe the Balkan countries are watching this closely.  Russia’s old ally the Serbs still want a bigger better Greater Serbia, which is why the world had World War 1 in the first place.

Putin is the key, I believe he really believes that he has a “mission” to accomplish.  He is a dangerous guy with all of Russia to lose in his mind if these mini revolutions spread into his sphere of influence.

So back to the agricultural situation.  Last few days it appears that the rally is just short covering, which means if this thing settles down the markets settle down.  The Western World will probably do some type of economic sanctions, that everybody will figure a legal or not so legal way around.  Exports out of Ukraine will be a little less for awhile.  Who wants to risk not getting a shipment?  Outside investment may go down in both the short and long term.  If this thing gets out of hand then we have less competition for wheat and corn exports.  My opinion is this is just one more thing that helps put in an early spring bottom to the grain market.

I hate to see this happen in the Ukraine.  It could run the risk of spreading like a grass fire set to burn out the old growth, but spreads into a major fire.  These people have suffered for centuries, but especially since the communists took over.  Hey remember Putin is an old KGB member.  He knows a little bit about how the secret soviet police worked and how to “get things done”.

On the other hand for U.S. agriculture somebody Else’s problem is your opportunity.  Lets all pray that this thing somehow calms down and the people of Ukraine that want freedom can have it.

One last thing my greatest fear is that History repeats itself.  It was a Slavic country Serbia that set the last big European conflict off, with Russia backing the Serbs, which drew everybody else in Europe into it.  I consider World War 1, World War 2, and the Cold War all really just one long conflict.  Ukraine is really close to where Serbia was/is geographically.   Lets pray it does not happen again.

Well I guess the last, last thing.  China is watching all this and is backing Russia in the current stand off.  China has a number of territorial claims off its eastern coast that are rich with oil.  China, Japan, South Korea, Philippines,  Vietnam all claim some or all of these disputed areas. Other countries have claims also and China has some not so defined borders in the Himalayas.  China also has many ethnic groups mainly in the western and southern areas that would like to be free of China.  What happens in Ukraine will probably be taken as the example of what a country can expect the next time.  It is a very dangerous world we find ourselves in today.  Much more so than just a month ago.

Finally, this keeps getting longer and longer as I get asked more questions and interviews.  What about a grain embargo as part of economic sanctions, and what does this do to grain prices????

Well grain guys and gals do not have much to fear.  Unlike the late 1970′s Russia is actually a small net exporter of grains, but it is an importer of US meats.  They buy mainly pork and some chicken, not much beef.  Meat cuts that are lower quality and value than we like to eat in the states.  So, grains are not affected much to the downside, but the meats could be affected big time if sanctions go into place.

**update on Ukraine and commodity market in podcast**

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What about the next Farm Bill?-091

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OK,

farming has changedWhile I am waiting on a preliminary set of FARRM Bill rules to comment on, I will dissect what I think went right and wrong with this last farm bill.

Who did what right, who over played their hand.  Who cut the deck just about right.  And, last but not least what this holds in store for the next farm bill.

I still have to be convinced there will be a next farm bill.  Well, maybe one more, but after redistricting in 2020, it is going to get tough.  Why, you ask. Rural areas of the country continue to lose population, large cities stay the same and the suburbs grow, especially “down south”.  These ares are represented by representatives who understand they do not have many people in their districts who “benefit” from a farm bill.  At least not directly benefit.

I will start with who did it wrong, well maybe not wrong but not right.

All the “general” farm groups.  Their job is to bring all the separate commodity groups together hash out their differences and present a untied front to get a farm bill.  This did not happen and it almost cost American Agriculture a farm bill.  Farmers Union has to get back somewhat into the mainstream of American Agriculture, yes it is changing it is not your Grandfather’s type of agriculture anymore.

Farm Bureau just needs to start leading and somehow get the corn, soybean, wheat, cotton, rice, cattle and hog people to agree on an overall framework for agricultural policy.

Corn and soybeans need to understand there are other agricultural commodities besides theirs and what works for corn and soybeans does not always work for other commodities.  Corn growers have to understand the resentment against corn from other agriculture groups.  Those groups like to say corn has already got “theirs” and theirs means ethanol.  The staff at these agricultural groups want more acres and production of their crops.  Why you ask?  More crops means in most cases more check off money which means higher budgets, more programs, and maybe more pay for the staffers.  Sounds harsh, but the flip side in many cases has been less crops, less checkoffs and that leads to staffing cuts.  So agricultural group leaders you sometimes have to what is right for all agriculture and not always listen to staff.  This does not mean ignore them and not to value their opinion, but you sometimes need to do things and figure things out for yourself.  Take out the organization’s finances and do what is right for agriculture.   If you do what is right for your farmers and ranchers it will all work out in the end.

I am sure the mule and horse organization staffers could see what was coming when tractors started being used in production agriculture.  These staffers if they are good will be alright, and so will your organization.

Midwestern Politicians, need to in regards to agricultural policy quit being so partisan and do like the boys and girls do in the southern states and that is to figure out what works for the Midwest and then push that.  Goes for both sides of the aisle, but for years it was more of a democrat then republican problem.  As an example Senator(s) from an I state(s) was(were) always “out there” when it came to agricultural policy.  He needs to read my advice to Farmers Union above.  About the only thing they agree on is ethanol.  We in the Midwest also need to understand that the tobacco program was the best thing going for many areas of the south and it was a Midwestern Senator from a very large agricultural state who was the main driver to eliminate that program.  What goes around sometimes comes back around.

Another thought on one of the least tenured Senators from the Midwest, He has once again introduced legislation to cut the Sugar program out of the farm bill.  Well so much for protecting your Midwestern interests from others wanting to get rid of say things like, ethanol.

Livestock groups who opposed the farm bill.  COOL and GIPSA were not going to be taken up and worked on by a Harry Reid led Senate and a liberal progressive president.  Face it, it was not going to happen.  Livestock disaster was made permanent which is huge.  No more having to go back to ask (beg) for a livestock disaster program.  I have also been told there is a forage disaster program that is retroactive to 2012.  Which means forage producers could get big checks for feed costs during the 2012 drought.  I have not been able to get a whole lot of information on this, but if true this is big.

So NPPC opposed final passage, but why NCBA.  Is the national cattle group that controlled by large meat corporations that they cannot make a balanced judgement call and see that the positives outweigh the negatives.  Negatives that were not going to be handled anyway with the players at the table.  I was told by a Cattle Official that they were told COOL and GIPSA affect all producers all the time and disaster stuff only affects some producers some of the time.  I think it all came down to “if you don’t play my way then I am taking my ball and going home”.

Senator Stabenow has said if COOL is challenged and the U. S. loses then “COOL will be suspended, changed, or repealed”.  I don’t like this approach, but it will get challenged, we will lose and it will be “suspended” awaiting changes, which will probably never happen.  You may not like it, but it is politics, sometimes one has to give the politicians a way out and this is it.  And, for GIPSA it is defunded anyway and funds will not be available for it in this budget climate so it is not even an issue.  I want to see a NCBA official say to all those Dakota Ranchers who lost cows in that blizzard that NCBA was against them getting disaster relief.  Which is what they were advocating with a no vote on the farm bill.  Final passage, it is all or nothing and the Livestock groups chose nothing.  COOL and GIPSA will be non issues in the immediate future after a WTO court case.  I know they “fear” retaliation, but I really believe as soon as we lose we will fold up and suspend COOL and it is done at that point.

Southern crops such as rice and cotton eventually need to understand market forces and learn how to grow those crops without the best subsidies in all of agriculture.

Another Midwest Senator got most of what he wanted, but in the end the pay caps were an all or nothing vote for him.

Reformers and Tea Party people lost on this one.  Why????? They wanted too much change without a Tea Party Senate or President.  Tea Party people had several opportunities to get more cuts then they received in the end, but were not politically smart enough to take a “win and go home with it”.  Food stamps cut $8 billion when if they would have voted for house bill before they had to split it in two, the cut would have been $10 billion. Not a whole lot of difference, but they say it was on principle, but I say they were in the end dealt with in a way that shows one can wait them out in D.C.  Agricultural interests that wanted reforms never offered up alternatives, just kept saying no.  No sounds like your parents when you were a kid.  People want alternatives not just NO.

Tea Party needs to learn how to win and how to say “yes” while really meaning a “no” and to win something sometime, if they are going to be effective beyond republican primaries.  Reformers could also learn the same lesson.  Or as I say be in the meeting before the meeting that is before the meeting, which is before the actual public meeting.  4 layers down is where the nut cutting is at.

So how do you do this.  Well, early on and I mean real early on have a bunch of Tea Party leaders, and all the Tea Party guys and gals have to go along to be effective, (which may be a problem with this independent bunch) and say to Lucas.  “We will help you pass a farm bill, but we want some reforms.”  If Lucas doesn’t play ball go to the Republican leader he will make sure Lucas plays ball.  Realize the Republicans need a farm bill for about 10 to 15 seats in places like South Dakota (could go either way) and it could be 20 to 35 seats and realize the progressive liberals control the Senate and White House and ask for some common sense reforms that actually save money and get the deal done early. If Dems don’t play it is they that are now saying NO, NO, NO, and looking like they do not want a change in how D.C. operates.  Get in front of these things you will get more done.

By the way I was taught how to get things done like this from a very good conservative Democrat.  Make the opposition think they are actually winning when you already had a better deal cut then you would have gotten in the end before it all started.

Key is knowing what kind of deal you would or could get cut in the end, before you start in the beginning.  Livestock groups were big time guilty of not being realistic enough during this farm bill debate.  Corn almost fell into this trap also.

Dairy groups and Peterson tried to “roll” the Speaker of the House, not smart.  Really not dairysmart.  Lots of people were watching this and this will put targets on your back.  Dairy policy will pay for this for a long time.  Leahy had to come in and save the Dairy folks from themselves.  I am sure he loved spending his political capital saving them this way.  Peterson is mad at the Tea Party, but way to win this for him was to just defeat them in total bill at the end not just with dairy.  Dairy farming is changing big time.  It is getting big in a hurry and policy has to change with the change in that industry.  Still some small guys and gals out there, but they also have to realize they are less and less in numbers.

Now for winners or people who did not “hurt” themselves.

Lucas had some missteps early especially dealing with corn and soybeans, but he did it in the end.  Lucas did well for lots of “western” grain crops, wheat, barley, and sorghum.

Stabenow got much of what she wanted and she helped her home state producers in the process.

Vilsack was helpful but now his real job begins implementing this thing and I worry he does not have enough bodies on the ground in county FSA offices to get the job done.  Lots of retirements with no re-hiring to replace those ladies at the counters who knew how to get it done.

Southern crops were winners again.  No surprise here, just good solid politics.  Even though my above statement about the future still holds true, eventually they will have to get by with just the markets and less government support.

Sugar is a shining example of how to get it done.  But again they day of reckoning is coming.

House Republican Leadership showed it can get things done in Washington, if it wants to.  They needed to move this issue to make sure they would still dominate in the rural and I mean real rural (think South Dakota) house races this fall.  Not an election year issue anymore.

Question now becomes if this administration at the White House level does not take the Farm Bill serious enough to implement it correctly and in a timely fashion could it reflect negatively on democratic candidates in rural areas come November.  I think Vilsack and USDA will try, but they are going to need a re-allocation of some resources at USDA and re-thinking of priorities to get this done.

So what about the future??????

This could very well be the last or next to last Farm Bill.  As I said in the beginning after 2022 elections it will get tough.  Less and less money, less and less farmers, less and less rural people.  American is changing, not a good or bad observation, just changing.  Less and less people will remember, Grandpa & Grandma, or Mom & Dad, or Uncle Bill and Aunt Judi on the farm.  They have no clue what we do or how we do it, or what we are up against at times.

In 8 short years it will get tough.  Farms and Ranches will be bigger and more specialized.  People get their food from Wal Mart not the Farms and Ranches.  Our end users will want us to produce it in ways that we may not be able to economically for the mass of humanity on this planet.  Lots of water that needs to flow under lots of bridges.

This could all change, I remember in about 1979 and how insignificant the government programs were to us back them.  By 1985 that had changed drastically.  Next time it may be that the government itself will not be in a position to help.  Plug that into your long term budgets and see what that does for you.

Long term I would like to see a crop and forage insurance program that uses multiple year averages to take aggressive weather and price swings into account.  Maybe something like 85% of long term price average and 85% of long term yields maximum to smooth out the ups and downs of agriculture.  Tax free savings accounts to offset other losses would be good also.

But, I also need to prepare for the day when most of these programs could go away.  Gasp, gasp, cough, cough, but it could happen.  That would be a whole new world.

Lastly I will discuss what is going on with 80% of the farrm bill which is Food Stamps.    Or the decision that is being made by USDA to “slow walk” the new rules on food stamps.  Not good long term for getting agreements from opposing views on the next farm bill.

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