Regulations, fuel prices impact farm markets
MISSOULA – High cattle prices have boosted the Montana economy, but forecasting what 2015 will bring for farmers and ranchers is difficult, according to Montana State University Professor George Haynes.
Aside from beef prices, other factors may impact the bottom line of producers including low gas prices, looming possible regulations for organic growers, and unpredictable grain markets.
“The story, I think, in agriculture is one of uncertainty,” Haynes said.
Farmers can both benefit and be hurt by the recent downturn in the cost of energy, Haynes said.
“It cuts both ways for these farmers,” Haynes said. “They are all really excited about having lower diesel prices, and their fertilizer prices go down when we have lower oil prices. On the other hand in times like this we are worried about what is going to happen to ethanol prices. When ethanol prices go down, corn prices go down and our grain prices go down here in Montana.”
Grain prices are down a bit, but most producers are happy with them, Haynes said. He didn’t predict the prices will go above historically average prices, but said the market is vulnerable to a number of factors.
“The thing about grain markets is that they can turn on a dime,” Haynes said. “All we need is a big storm in the southern hemisphere, or something that happens here like a drought, and again we will have really high grain prices.”
Hay prices are expected to remain strong at more than $100 per ton, although the market has changed in the past year. In 2014, Haynes said much of Montana hay was being sent overseas to Asia and the United Arab Emirates, but now much of the hay is staying inside the United States. Demand for hay to fuel California dairies is higher because of drought conditions.
Kurt McPherson of St. Ignatius has sold hay to brokers that has been shipped to Japan, China, and the Middle East in the past, but one of his buyers said much of that market has disappeared because of stringent regulations put in place by China.
He said hay prices dropped last year, but it is hard to predict what prices will be like until hay brokers come round in spring.
And the thing that can make or break local farmers’ season is always out of their hands.
“Weather is a big factor,” McPherson said.
Impending regulation of organic growers by the Food and Drug Administration could hit the bottom lines of some farms that have found a niche in the Missoula area, Haynes said.
“I’m excited about the potential of organics,” Haynes said. “I just want to make sure that those guys who are diving into those markets will be able to make a nickel. I’m worried about some of these regulations that are in place and being applied if they have to sell to these local markets.”
Tracy Potter-Fins, owner of Country Rail Farm in Dixon with wife Maragret De Bona, said she didn’t expect too many of the organic farmers in her area to have to comply with stricter regulations because they are too small to fall under the regulation guidelines.
The Country Rail Farm will be one of six farms that are part of the Western Montana Grower’s Co-op that will take part in a pilot project of becoming certified under USDA Good Agriculture Practices program.
“It is a lot of work,” Potter-Fins said. “It is a big deal. It’s going to cost everyone a little bit of money, but in the end I think we’ll be better off in the long run.”
Jim Sugarek, financial manager and designated food safety coordinator for the Western Montana Grower’s Co-op said the organization would like to have all its farms GAP certified eventually, and the pilot program will help determine how feasible it is to gain certification. The co-op is made up of approximately 40 farms in the Mission and Bitterroot Valleys.
Sugarek said most of the changes are in regards to farm safety. More sanitation facilities and increased water testing are required.
“It may change the way people operate,” Sugarek said. “It remains to be seen if these six farms are able to meet this set of criteria.”
The drive for the change is both market-based and regulation-based. Regulations about stricter safety measures are coming forth from the Food Safety Modernization Act and are expected to take effect in a few years. At the same time, larger vegetable suppliers who purchase from vendors like the co-op are setting the bar higher for farms to have food safety plans in place.
“There is a component of us that is market driven and there is a component of us that is regulation driven, and neither of those is a big deal right now, but a few years down the road it will be,” Sugarek said. “There are a couple of situations where it might open up a couple of markets for us right away.”
As the co-op tries to get ahead of the curve on implementing the safety measures, Sugarek said the organic market in the area remains strong.
“I think the basic demand for organic has been increasing and we’ve really been working hard at having the supply go up as well,” Sugarek said.
John Walkup, of Mission Mountain Organic Eggs, also said demand has been high for his products as more and more people want to know where their food comes from.
Walkup said he usually doesn’t support unnecessary government regulation, but that it is important to keeping value in the organic label.
“If you are in a place where you don’t know the farmer, you don’t know the producer ... the organic label means a lot,” Walkup said. “I know organic means that I want to get away from the chemicals, and the GMOs.”