Fresh Produce Discussion Blog

Created by The Packer's National Editor Tom Karst

Friday, October 3, 2008

Obama by a nose

The latest Fresh Talk poll asked who won the Sept. 26 debate, with Obama polling 16 in his favor and McCain 13, or a spread of 55% to 44%. I see this week that John McClung of the Texas Produce Association made an argument for Obama in an opinion piece in The Packer, so Obama supporters in the produce industry are not alone.

How about another poll on Sarah Palin/Joe Biden, at the risk of exhausting our fascination with the presidential contest?

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Land Values - Micro and macro

Here is a link to a paper forwarded to me by University of California economist Roberta Cook about the farm real estate markets in Florida and California. The paper, written by John Reynolds and Warren Johnston, is titled "Micro Markets for Farmland: The case of California and Florida." The authors say a statewide average price for farm land isn't too helpful. From the paper:



The average per acre statewide value of farm real estate, whether for Florida’s 44,000 farms, or for California’s 87,500 farms, is a singular statistic of dubious “value.” It is akin to imagining whether Merriwether Lewis and William Clark, prior to their departure on the Expedition 200 years ago, would have found it of value to know the average depth of the Missouri River from its headwaters in the Rocky Mountains to its junction with the Mississippi. Probably not.



TK: As referenced in an earlier post, here is the USDA site for average farmland value, for what little it may be worth.


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Cornucopia: Give us the science justifying almond pasteurization rule

Slid across the inbox last night, more intrigue about food safety regulation through marketing orders:


Cornucopia, WI – The Cornucopia Institute has filed a Freedom of Information Act request with the United States Department of Agriculture and the Almond Board of California seeking public documents justifying the merits of the almond pasteurization rule and the science supporting it.

Since the passage, in spring 2007, of the controversial rule mandating pasteurization of raw almonds grown in California, policy analysts at The Cornucopia Institute have made numerous requests for public information from the Almond Board of California (ABC). Repeatedly, the Almond Board has failed to turn over documents they allege prove the effectiveness of pasteurization and the comparative nutrition, quality, and safety of pasteurized almonds and raw untreated almonds.

Some in the industry, family-scale growers, organic farmers and handlers, retailers and consumers have vigorously protested the USDA-imposed pasteurization mandate of raw almonds and questioned whether it is based on sound research.

“We have taken this step because we have been frustrated by the Almond Board and the USDA’s unwillingness to share the science behind the rule, the science that purports to show that treatment with either a toxic fumigant or steam heat is safe and does not affect the almond’s taste and nutritional qualities,” said Will Fantle, research director for The Cornucopia Institute, a Wisconsin-based farm policy group.

The Almond Board claims that the EPA, the FDA, and the ABC's own "Technical Expert Review Panel" have undertaken "extensive research" to evaluate the effectiveness and safety of propylene oxide (PPO), the toxic chemical approved for use with almond pasteurization. Furthermore, they claim that these tests have demonstrated that PPO effectively kills Salmonella and other harmful bacteria, and that almonds treated with PPO are safe for consumption. However, they have refused to reveal the results of these or any other tests, including the results of a $1 million study commissioned by the ABC to assess quality degradation.

“If they have completed these studies, why won’t they share this research?” asks Eli Penberthy, a policy analyst with Cornucopia. She notes that she has made multiple requests to the Almond Board asking for a number of their studies and research documents.

One explanation may be that the studies are incomplete or unfinished. Cornucopia has learned that at least some of the studies were still being conducted nearly a year after the raw almond treatment mandate was implemented on September 1, 2007. Additional research results assessing the shelf life, oil stability, flavor, texture, and appearance of treated almonds are also supposed to be available.

“We find it very troubling that the proponents of the almond treatment rule, who portray this as a food safety measure, still cannot produce the science and studies upon which the rule is supposedly based,” said Penberthy. “The lack of data proves that the rule was passed prematurely and without sufficient review.”

The Cornucopia Institute helped 15 California almond farmers and raw almond wholesale handlers
file a lawsuit on September 9 challenging the pasteurization rule. The lawsuit contends that the USDA lacked regulatory authority and acted illegally in implementing the almond pasteurization rule.

A Washington, D.C., federal court will be ruling on the lawsuit, perhaps later this year. If successful, the raw almond treatment mandate would be overturned.

“Many family-scale farmers producing almonds and fresh fruits and vegetables are now having their livelihoods put at risk by a number of onerous ‘technological fixes’ that corporate agribusiness is looking to for solving food contamination problems," added Cornucopia's Fantle. "These draconian regulations might very well push out of business the highest-quality and safest farm operations in the nation and, in doing so, will shut out growing legions of consumers who are seeking out a higher quality and more nutritious food supply."

More information on the federal lawsuit and the almond pasteurization controversy can be found on Cornucopia’s web page at
www.cornucopia.org.

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Ag land values - cause for concern?

I was searching the Web today and came across a story published back in March of this year, where one state bank regulator raised worries about a bubble in farm real estate prices.

A state banking regulator raised a warning flag about soaring agricultural land values on Tuesday, telling a congressional hearing that the U.S. farm land bubble could burst and unleash a fresh set of economic problems. "If there has been too much leveraged or loaned against the inflated value of farm land, the bubble will burst, and we will once again experience an economic crisis similar to that of the 1980s," Iowa Superintendent of Banking Thomas Gronstal told the Senate Banking Committee.

His remarks came before the release of USDA data on farm real estate values for 2008. which showed an overall U.S. gain of 9% this year and some corn belt states showing close to a 20% gain compared with last year. The USDA data showed California's land values were up 8.8%, with Florida's mostly unchanged and Texas up 14%. Illinois farm land was valued at a whopping $5,000 per acre in the 2008 survey, with California at $6,500 and Florida at $7,600 per acre.

The average value of farm real estate in 2008 was estimated by the USDA at $2,350 per acre, up from $1,340 in 1998.

This afternoon I visited with Tom Hill, chief financial officer of the Austin-based Farm Credit Bank of Texas. Hill assured me that agricultural lenders - at least in Texas - don't face the same worries as Fannie Mae or Freddie Mac - even though the Farm Credit Banks (there are five in U.S. farm country) are government sponsored enterprises like the aforementioned Fannie and Freddie.

I asked if the credit crisis on Wall Street will affect farm country credit.

"My observation is that there be some tightening up, but nothing as dramatic as urban consumers are experiencing, because of where we started with underwriting criteria," eh said.

Hill said the Farm Credit didn't write the kind of "no doc" and sub prime loans that have seized the credit markets and threatened the existence of various banks.


"We never left our basic underwriting criteria," he said. "While we may tighten up a little bit on advance rates - make them a little more conservative, make the terms a litter bit shorter, reinforce underwriting covenants and conditions, underwriting covenants and conditions, the impact to a good producers won't be adverse compared with the rhetoric you are seeing in the papers about home buyers," he said.

Generally, he said Hill the Farm Credit Bank was in a "much tighter range" in terms of what it advances on real estates loans. Most loans would give land buyers 70% to 75% of the land's value.
"We've never advanced 100% and it was rare that we advanced over 80%; we drifted a little bit, and current conditions will truly make us drift down a little bit," he said. " But we won't be in such an adverse swing that a good producers that has been in the market will ever sense we have changed."

Hill said land values in Texas haven't taken a hit yet, and said any declines would be linked to the run ups in real estate values that has occurred up until now. Increases in the value of Texas agricultural land have been moderate - at about 8% to 10% annually - compared with some of the states. He noted that the most drastic increase in land values have occurred in primary Midwest corn ground.

"It's no different that what happened in the housing market; if you have a run up in house values from $250,000 to $500,000 and you are lending on 90% of that, your exposure to a downturn is huge," he said.

Hill said the value of corn acreage may be vulnerable to changes in the government policy toward ethanol, which has been hotly debated this year because of high food and fuel prices.

Hopefully, I'll have more of a chance to visit with ag lenders in Florida and California in coming days (weeks?) to get a stronger sense on how lending to produce growers may be stung by the Wall Street credit crunch.

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