In the Spotlight

News & Features
Regional Farmers Joining Global Economy
By Cara Hetland
June 9, 1998
Click for audio RealAudio 2.0 14.4

Part of an MPR Mainstreet Radio project on farming issues.
The June 8 - 10, 1998 series includes:
1. What's Driving U.S. Farm Policies?
2. "Freedom to Farm" Legislation Leading to Changes in Farming Practice
3. Regional Farmers Joining Global Economy
4. Secretary of Agriculture Visits Region, Offers Help
5. The Economics of Organic Farming

Despite almost perfect growing conditions, many farmers are facing financial hard times because of changing regulatory and economic conditions. Local farmers are selling to a global markets now where outside pressures such as the Asian and Russian financial crises can have an impact on how they farm.

THE U.S. DEPARTMENT OF AGRICULTURE predicts a record soybean crop this year.This would be the second record-breaker in a row. Prices, though, could sink to the lowest level in a decade, and soybean exports are also declining.

South Dakota State University Ag-Economist Everit Van der Sluis says the United States exports a third of the soybeans it grows. He says farmers now have the flexibility to plant in order to meet export demand, and that's why prices are falling.

Van der Sluis: A large part of the export is going to be determined by Southeast Asian countries, I think, and Latin American countries as well as Middle Eastern countries.

He says the personal incomes in those countries will drive the soybean exports. Van der Sluis says as more people move into the middle class the demand for meat will increase and so will the demand for soybeans, the base for soy meal - a protein feed for cattle and poultry.

Van der Sluis: A bit of a wild card is the import demand for soybeans in China. The USDA is expecting it to increase dramatically. It's still a question, though, because it'll depend on what China is going to do with respect to its pending membership in the World Trade Organization.

Congress will soon debate whether to renew the most-favored-nation status to China. That, too, will play a role to the local soybean producer.

Working on a global scale is relatively new to farmers. Thirty years ago farmers would watch the local weather patterns, call the grain elevator in the nearest town for the latest price, and then decide whether or not to sell.

Paul Casper: That really doesn't move that way anymore. It's if South America doesn't get a crop or if Africa doesn't get corn.

Paul Casper farms in Lake Preston, South Dakota.

When it comes to the global market, farmers like Casper like the flexibility in the Freedom to Farm legislation in order to meet demand. Casper says there's also more opportunity for farmers to market commodities through value-added processing, like milling the grain and crushing the soybeans themselves to increase the value of the raw commodities.

This soybean processing plant near Volga, South Dakota crushes 1 million bushels of soybeans in three weeks. The meal goes to the livestock industry in the Dakotas and Minnesota, and the oil goes for further processing. Casper is also the president of the South Dakota Soybean Processors. He says farmers can now compete with the larger companies and remove the middleman when selling their product. Casper says this is a better way to diversify than adding new crops or more livestock. He says the fear for farmers is missing out on value-added opportunities and exporting raw material.

Casper: I don't want subsidies, I don't want aid. What I want is the education so I can become the processor or the middleman of what I produce. I want you to have funding available so I can start up companies like this.

And there may be a window of opportunity for U.S. farmers. Market specialist Alan May says Asian countries, where labor costs are lower, also want to build processing plants. But he says the United States can get a jump start now while Asia recovers financially over the next two years. May says farmers need to become better at risk management, and it's going to take a different kind of farmer to compete globally.

May: Farmers have to be prepared to do some things in terms of forward pricing. They have to establish a break-even price and see if the market offers that, and they have to be able to look at the bigger picture and be able to adjust rapidly when they see changes coming.

With the recent down swing in prices, many farmers wish they had locked in a price two weeks ago at $6 a bushel. By harvest, if weather conditions continue to be favorable, prices are projected at $5 a bushel for soybeans.

Bigger companies like Minnesota-based Cargill are working with farmers and local extension agents to lay out more options. Cargill spokesman Rob Johnson says over the next ten years farmers will be able to diversify in many directions. He sees larger farms, more cooperative processing plants, and more niche crops to serve specialty products for feed and oil markets.

A year ago Cargill caused a farmer uproar by importing soybeans. Johnson says that was an instance where poultry growers in the southeastern United States needed soy meal at a time when stock piles were not high in the U.S. and prices were lower in Brazil.

Johnson: Companies like ours who are intermediaries in the marketplace can choose or not choose to serve that demand. Not to serve it will not make the demand go away, and it will still be there, and someone else will serve it. So it is a business, and it is a business that's driven by growers and producers, and, in this case, the producers of poultry in the southeastern United States.

Farmers say they are now competing against big companies, foreign markets, politics, and cheap labor. But in their favor is new technology helping to produce more bushels per acre and to farm more land. Affordable transportation also helps the U.S. farmer. The desire expressed by many Midwestern farmers is to have a level playing field so all farmers worldwide can compete fairly. Farmer Paul Casper says there needs to be fast-track trade negotiations, free trade, and consistent standards in order for farmers to survive.

Casper: For instance some of the chemicals we are not able to use in the United States they are able to use in other countries. And they are a cheaper chemical. Then we import that product. That doesn't make sense to me. If it's not good enough for the American farmer to use and be processed and consumed here, how come we have it imported to the U.S. and that gives them a way better chance of surviving. And it's chemicals we've banned here.

Casper says he sees more farmers selling directly overseas as a new generation of farmers emerge. He says many older farmers will sell out in the next few years and the new farmer will be linked to the Internet and will farm more land than ever before.