Record high grain prices and profits in the U.S. have pushed farmland values to record highs. Historically agriculture has been asset rich and profit poor but this time we are asset rich and profit rich said David Kohl, professor of agricultural economics at Virginia Tech. The high prices and profits have only happened four times in the past 100 years, Kohl told U.S. agricultural bankers at their annual meeting this month.

Hundreds of millions of hungry and wealthier Chinese and Indian consumers lining up at the table for grain from the United States has been part of the reason for the high grain prices. However ethanol has in less than a decade gone from consuming less than 10 percent to currently 40 percent of the giant U.S. corn crop. That is a huge factor and likely the single biggest cause behind the surge in corn prices and farm income, according to the chief executive of the Farm Credit Administration, the largest real estate lender to American farmers.

The 2007 U.S. energy bill mandated that a total of 15 billion gallons of renewable ethanol must be produced by 2015 for energy independence. Demand for corn skyrocketed, with prices of corn and then corn land following it up. Other grain prices have risen just to assure that farmers don't all switch to corn. Confidence in ethanol is being tested in the current U.S. budget environment, where Republicans in Congress have been pushing major cuts in spending that include long-standing subsidies and incentives for ethanol production.

A blenders tax credit and a tariff on ethanol imports are set to expire on January 1, 2012. Most experts do not expect either to be renewed given Republican-led budget pressure. If ethanol is the key to corn prices and land prices, then experts say crude oil remains the key to ethanol. As long as crude oil is high, the demand for ethanol is going to be high.

What impact will Shell Canada's recent announcement of establishing a biofuel plant in the Portage la Prairie area have on the ethanol industry? The facility would be a cellulosic ethanol plant, which is proposed for the Poplar Bluff Industrial Park section. A cellulosic ethanol plant is the same as any other ethanol plant, but in this case the ethanol is made out of straw rather than the food portion of the plant.

So the question is – will the ethanol of tomorrow be made from by products such as straw, a much cheaper alternative, or from a human food source like corn and wheat. The answer to that question, along with lower U.S. ethanol subsidies if realized, may have profound effect on the ethanol industry and the high grain prices that followed.

Canada Wins U.S. Trade Fight Over Meat Labelling

Canadian livestock producers celebrated a hard-fought battle over food labelling requirements imposed by the U.S. in 2008.

The federal government argued before the World Trade Organization that American "country of origin" labelling rules (COOL) actually worked to the detriment of the meat industry on both sides of the border by increasing costs, lowering processing efficiency and otherwise distorting trade across the Canada-U.S. border. From 2008-2009, Canadian feeder cattle exports declined a "staggering" 49 per cent. Slaughter hog exports also declined an "overwhelming" 58 per cent.

The 2002 U.S. farm bill created new mandatory labelling requirements for covered commodities (beef, lamb, pork, fish and shellfish, fruit and vegetables, and peanuts) sold at U.S. retail outlets. In 2008, these requirements were enshrined in law. As a result of the implementing regulations, U.S. livestock-processing facilities were required to segregate Canadian and U.S. production. This had a dramatic effect on Canadian live-animal exports. The Manitoba government, federal government and several other producer groups argued these laws contravened WTO agreements.

The U.S. had been an important market for Manitoba's livestock producers. Prior to COOL in 2007, Manitoba producers exported 4.5 million feeder pigs valued at $191 million and 1.6 million slaughter pigs valued at $178 million to the U.S. In addition, 280,912 of the 516,600 head of feeder and slaughter cattle marketed in 2007 were destined for the U.S., representing a total value of $277 million.

Although the ruling was unanimous on all points in the case, the Americans have 60 days to file an appeal. WTO rulings do not assess compensation or penalties.

For more information, contact the Portage MAFRI office at 239-3353.

source: portagedailygraphic


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