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ECO-Farming: It goes back to the root of it all, but could be the future of farming

Posted on Sep 14, 2011 by Clean Seed Capital in Soil,Agriculture,No Till Farming,Clean Seed Capital,Farming,Soil Erosion,Sustainable

fema

U.S. net farm income is expected to increase by 31% this year to a near-record $103.6 billion on higher prices for grain, livestock and other major commodities, the USDA said in an updated forecast.

Projected income is up from $97.3 billion in a February forecast and would be the second-highest inflation-adjusted figure since 1973, according to the USDA.

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The income surge is driven partly by sharply higher revenue from corn, cotton, hay, soybeans and wheat, the USDA said. Crop receipts will rise by an estimated $33.6 billion in 2011, according to the agency.

Grain and livestock prices rallied this year amid crop shortfalls that tightened global grain stockpiles and expanding demand from growing markets such as China. Corn, cattle and hog prices reached record highs in recent months, based on Chicago futures, and soybeans and wheat are also up from previous years.

Strong commodity prices are also boosting farmland values, fueling gains in producers’ net worth and pushing their debt-to-equity ratios near historic lows.

The U.S. farm sector’s net worth is projected to rise 7.7% this year, according to the USDA, while farm business real estate values will rise an estimated 7.1%. The projected debt-to-equity ratio for 2011, at 11.6%, would match the current record low set in 2007.

Median total farm household income is expected to increase 1.9% in 2011, to $55,405, the USDA said. That’s slower than the 4.1% increase in 2010, but higher than the five-year average of 1.2%.

Grain and livestock prices remain near highs reached earlier in the year, and many analysts expect the corn market to continue rallying after extreme heat damaged crops in the Midwest over the summer.

In trading August 30, corn futures for December delivery rose 5 ¼ cents to $7.75 ¼ a bushel. That’s the highest settlement for a December corn contract since July 2008. Corn futures have more than doubled from about $3.54 in mid-2010.

Soil depletion looms as potential disaster

Posted on Sep 12, 2011 by Clean Seed Capital in Soil,Agriculture,No Till Farming,Clean Seed Capital,Farming,Soil Erosion

muddy

STEVENS POINT – Autumn is at the doorstep again, and across much of the state, corn crops are bursting with promise, soybeans are yellowing out in their patient manner, alfalfa and pasture lands are lush and emerald green.

Grain prices are high, boosting land values and yielding profits for farmers. In a difficult economy, agriculture seems to be thriving. That’s good news for this bedrock Wisconsin industry, at least for the short term.

Not to look for clouds on a sunny day, but the words “short-term” are important markers for some analysts. Earlier this year, the Environmental Working Group issued a startling report. “Losing Ground” began with this ominous note: “Across wide swaths of Iowa and other Corn Belt states, the rich, dark soil that made this region the nation’s breadbasket is being swept away at rates many times higher than official estimates.” The report takes note of the work of researchers at Iowa State University, who are tracking soil erosion in Iowa after every storm that hits the state and collecting data that’s remarkably precise.

EWG’s report deserves attention, and it’s getting it. Craig Cox, the group’s senior vice president for agricultural and natural resources, will discuss it at the kickoff program of the Community Environmental Forum sponsored by the Gaylord Nelson Institute Tuesday, Sept. 20, in Madison. The program starts at 5:45 p.m. in Room 1106 of the Mechanical Engineering Building at UW-Madison.

Some will pooh-pooh the EWG report as the product of an environmental group trying to scare people. But what if a similar warning were sounded by the founder of an asset management firm who has had remarkable success predicting market turns? It has. Jeremy Grantham, founder of the firm GMO, warns of an impending food disaster in a recent New York Times Sunday Times Magazine piece.

While a burgeoning world population will strain resources like oil, metals and water, Grantham says our overuse of other resources is more serious. “Running out completely of potassium and phosphorus (two key elements in fertilizer), and eroding our soils are the real long-term problems we face,” Grantham warns in a July quarterly newsletter. “Their total or nearly total depletion would make it impossible to feed the 10 billion people expected 50 years from now.”

As does the EWG report, Grantham argues that the U.S. is losing ground on erosion. The rest of the world is doing much worse, he adds: “Globally, soil is eroding at a rate that is several times that of the natural replacement rate.” Impacts of climate change will exacerbate the crisis, especially weather instability that will produce more frequent and severe droughts and floods, he says.

Grantham salutes capitalism for its “magnificent virtues in the short term,” but says it cannot deal with the tragedy of the commons that leads to problems like overfishing and erosion. Why? “The finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and demand.” And capitalism fails to put a material cost to damage that occurs in the future. In other words, the problems to be faced by future generations because of resource depletion have no material present value. I’m far from an economics expert, but I think he’s telling us that’s bad accounting.

The news isn’t all bad, Grantham notes. No-till farming, for instance, has gained acceptance in the U.S. and South America. It reduces erosion by up to 80 percent, reduces fertilizer runoff, preserves moisture, improves soil and reduces emissions of heat-trapping gases into the atmosphere. But worldwide adoption of no-till is only about 5 percent, he notes, and in the end, Grantham says the trend lines aren’t good.

He predicts the world will end up with a population of between 1.5 and 5 billion, well below that 10 billion cited in most predictions for the middle part of this century. “The only question is whether we get there in a genteel, planned manner with mild, phased-in restraints, or whether we run head down and at considerable speed into a brick wall.”

All of which puts a lot of pressure on the fertile soils of the Midwest, one of the world’s most important agricultural areas.

In the short term, the increased production and higher prices we are seeing now is good news for agriculture in the region. But it must be asked, “What about the future?” If Grantham is right, and if we don’t ask that question, we may be facing the autumn of the world as we know it.

Funds increased bullish bets on agricultural commodities by the most in more than a year.

Posted on Sep 5, 2011 by Clean Seed Capital in Soil,Agriculture,No Till Farming,Investment,Clean Seed Capital,Farming,Sustainable

bloom

Sept. 5 (Bloomberg) — Funds increased bullish bets on agricultural commodities by the most in more than a year on signs of tightening supplies amid adverse weather conditions.

In the week ended Aug. 30, speculators raised their net- long positions in 11 commodities by 18 percent to 915,341 futures and options contracts, government data compiled by Bloomberg show. That was the biggest gain since Aug. 3, 2010. Holdings in wheat more than tripled, bullish corn bets reached an 11-week high, and soybean positions jumped to the highest since November 2010.

Corn prices have jumped 70 percent in the past year and soybeans have gained 43 percent. The hottest July since 1955 means that U.S. production of both crops may miss government estimates, according to researcher and broker INTL FCStone Inc. The costliest drought in Texas history has hampered U.S. supplies of cotton, while dry weather in the U.S. Great Plains may curb planting of winter wheat.

“You still have some pretty explosive supply and demand situations” for U.S. crops, said James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania. “There was a liquidation that went on because of the financial panic, and now some people are waking up and saying things are still pretty extreme in terms of the risks if there are supply disruptions.”

‘Exceptional’ Drought

Parts of southern Kansas and western Oklahoma have had less than half of the normal rainfall this year, according to the National Weather Service, and more than 81 percent of Texas is in “exceptional” drought, U.S. Drought Monitor data show. About 54 percent of the U.S. corn crop was in good or excellent condition as of Aug. 28, the lowest for any week since September 2005, government data show.

“Mother Nature’s been in a real bad mood this year, and we don’t see an attitude adjustment anytime soon,” Ron Lawson, a managing director at Logic Advisors, a commodity consultant in Sonoma, California, said in a telephone interview on Sept. 2. “Harvest time is going to be challenged by weather.”

On Sept. 2, wheat futures for December delivery rose 14.5 cents, or 1.9 percent, to settle at $7.755 a bushel on the Chicago Board of Trade. Corn futures for December delivery climbed 21.5 cents, or 2.9 percent, to close at $7.60 a bushel in Chicago. Soybean futures for November delivery climbed 11.25 cents, or 0.8 percent, to $14.4575 a bushel on the CBOT.

18 Commodities

A broader measure showed that funds also increased their net-long positions in 18 commodities by 15 percent to 1.27 million futures and options contracts, data from U.S. Commodity Futures Trading Commission show. That’s the biggest gain since July 19. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.6 percent last week, the second straight gain.

Investors pulled $581 million from commodity funds in the week ended Aug. 31, the third straight week of outflows, following four weeks of inflows, according to EPFR Global, a Cambridge, Massachusetts-based research company.

The withdrawals were “people trying to avoid getting caught in the pullback of gold prices,” Cameron Brandt, EPFR’s director of research, said in a telephone interview on Sept. 2. “Most of the outflows came from funds geared from gold and precious metals.”

Speculators cut positions in gold by 2.9 percent to 195,372 contracts, the fourth straight drop, government data show. Holdings are at the lowest in eight weeks. Prices have fallen 2.1 percent since touching a record $1,917.90 an ounce on Aug. 23 in New York.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

No-till farming could help solve global problems of food insecurity and climate change

Posted on Sep 1, 2011 by Clean Seed Capital in Soil,Agriculture,No Till Farming,Clean Seed Capital,Farming,Soil Erosion,Sustainable

The world’s soils have the potential to store about 3000 megatonnes of carbon per year by the end of the 21st century, according to a new study. It suggests that restoring carbon to cropland and peat soils through practices such as afforestation and No-till farming could help solve global problems of food insecurity and climate change.

Most countries suffering from food shortages are in the developing world where farming typically consists of small landholders using intensive practices. As a result the soils have low levels of organic carbon, making them prone to soil erosion, low levels of nutrients, poor water retention and less biodiversity. Poor soil quality means that crop yields are more dependent on rainfall and temperature and more affected by pest infestations.

The loss of soil organic carbon (SOC) can be remedied using recommended management practices (RMPs), such as afforestation, conversion of degraded and marginal cropland to pasture, no-till farming, use of compost/manure and crop rotations. Using figures on carbon sequestration gained by different practices, the study estimated that, depending on soils and climate, the potential of these RMPs for the next 50 to 100 years is in the range of 100-1000 kg of carbon per hectare per year. On a global scale, this could translate to as much as 3000 megatonnes a year. Not only would this improve the state of soils and food security but, according to previous research1, it could also reduce atmospheric CO2 by 50 parts per million by 2100.

The study investigated the potential impact of this restoration of soil SOC on crop yield. By pulling together information on the relationship between SOC in the root zone and crop yield in various parts of the world, the study concluded that SOC tended to contribute more to productivity in soils that were coarse, poor quality, received low rates of chemical fertilisers and were rain fed rather than irrigated. Depending on climate and other variables, it estimated the proposed increase in SOC could increase cereal and grain legume production in developing countries by 32 million tonnes per year, and roots and tuber production by 9 million tonnes per year.

Finally, the study offered a rough estimate of the cost effectiveness of paying farmers to improve the sequestration of carbon in soil. If farmers were compensated at a rate equivalent to the cost of carbon capture and storage, roughly $367 per tonne of carbon2, then even at the modest rate of carbon sequestration of 250 kg per hectare per year this would equate to $90 per hectare per year. Rewarding farmers even at $25/ha/yr ($10/acre/yr) could provide an incentive for adopting RMPs by small land holders and resource-poor farmers. As such the study suggests that paying farmers and managers to use RMPs to sequester carbon, either through schemes such as the Clean Development Mechanism or by paying for ecosystem services, is an important strategy to improve both regional and global food security. It suggested the concept of ‘farming carbon’ where credits gained by sequestering soil carbon could be sold and traded using transparent and fair prices based on the valuation of ecosystem services.

  1. See:      Hansen. J. et al. (2008) Target      atmospheric CO2: where should humanity aim? Open Atmospheric Science Journal.      2:217-231.
  2. See:      McKinsey & Co. (2009) Pathways to low-carbon economy. Version 2 of the      global greenhouse gas abatement cost curve. P190.
Source: Lal, R. (2010) Beyond Copenhagen: mitigating climate change and achieving food security through soil carbon sequestration. Food Security. 2:169-177.