AG INSIGHT

BY JIM ERICKSON

Vilsack returns to USDA leadership

To say the Biden Administration’s secretary of agriculture has been able to hit the ground running would be an understatement. Confirmed for that position by the U.S. Senate on a 92-7 vote scarcely more than a month after the new administration took office, Tom Vilsack also led USDA for eight years under former- President Barack Obama.

But Vilsack is under no illusion the job he is stepping back into will be a repeat of his earlier tenure. “I am a different person. And it is a different department,” he said at his confirmation hearing.

Among other things, Vilsack noted the nation faces numerous challenges in the wake of the ongoing COVID-19 public health crisis, including rebuilding the U.S. economy from the pandemic-induced recession, getting food to hungry Americans and protecting frontline meatpacking and farmworkers.

He also faces the seemingly conflicting goals of farmers and others who strongly support the use of ethanol and biodiesel and President Biden, who already has voiced his plan to shift the nation to electric vehicles to cut greenhouse gas emissions.

Iowa, where Vilsack served as governor from 1999- 2007 after earlier service as a state senator and Mayor of Mount Pleasant in the far southeastern part of the state, is the nation’s top producer of ethanol.

As the longest-serving member of Obama’s cabinet, Vilsack also ranks second historically in his length of tenure in that position. Fellow Iowan James Wilson, a farmer and a professor of agriculture at what is now Iowa State University, holds the top spot. He served just under 16 years as secretary of agriculture from 1897-1913.

Born at a Pittsburgh, Pennsylvania, orphanage, Vilsack was adopted in 1951. After graduating from law school, he moved to Mount Pleasant, his wife Christie’s hometown. The couple have two adult sons and five grandchildren.

Before his return to USDA, he served as President and CEO of the U.S. Dairy Export Council from 2017-21 where he led that trade group’s global marketing, research and regulatory affairs activities. He also served as a strategic adviser to Colorado State University’s food and water efforts.

Input sought on climate-smart ag, forestry strategy

USDA has asked for public input on developing a climate-smart agriculture and forestry strategy. Printed in the Federal Register, the request is considered a key step in implementing President Biden’s executive order on “Tackling the climate crisis at home and abroad.” The order states that, “America’s farmers, ranchers and forest landowners have an important role to play in combating the climate crisis and reducing greenhouse gas emissions, by sequestering carbon in soils, grasses, trees, and other vegetation and sourcing sustainable bioproducts and fuels.”

The order directed Agriculture Secretary Tom Vilsack to solicit input from stakeholders as USDA develops the strategy. The notice sought information on four topics: climate-smart agriculture and forestry; biofuels, bioproducts and renewable energy; catastrophic wildfire; and meeting the needs of disadvantaged communities through USDA’s climate strategy. Deadline for public input was April 30.

Drop in farm liquidity forecast

USDA’s Economic Research Service (ERS) expects a decline in farm sector liquidity in 2021, following forecast general improvement in 2020.

Liquidity is the ability to convert assets to cash quickly to satisfy short-term obligations when due, without the assets losing material value. It is one tool for measuring the financial performance of the U.S. farm sector over time.

USDA uses several different financial metrics to evaluate farm sector liquidity, including:

• Working capital.

• The times-interest-earned ratio.

• The current ratio.

• The debt service ratio.

• The ratio of working capital to gross revenues.

ERS focused on working capital and the times-interest-earned ratio because they provide different perspectives.

Working capital is an absolute measure of cash available to fund operating expenses after paying off debt owed to creditors within 12 months (current debt). It is calculated as the amount of cash and cash-convertible assets (current assets) minus current debt on the farm sector balance sheet.

ERS forecasts working capital in 2021 at $74.3 billion, a 13.6-percent decrease from 2020 when values are adjusted for inflation. This reflects an expected decline in current assets with current debt remaining relatively unchanged from 2020. If realized, this would be the largest decline since 2016.

The times-interest-earned ratio measures the farm sector’s ability to service debt out of net farm income. It is calculated as net farm income, excluding interest expenses, divided by interest expenses. A value less than 1 implies there is not enough cash coming from farm operations to meet interest payments.

The weakening of this ratio in 2021 reflects the forecast decline in net farm income as well as the expected increase in interest expenses. Still, the timesinterest-earned ratio is forecast to remain above 2014- 19 levels.

Winners named in aquaculture problem-solving contest

USDA’s Agricultural Research Service (ARS) and HeroX have announced the winners of a competition that invited the public to submit innovative solutions to preserve the flavor of catfish and prevent the bluegreen algae that delays U.S. catfish harvesting.

Catfish exposure to certain varieties of blue-green pond algae, also known as cyanobacteria, can cause taste and odor problems, and a delay in harvest for roughly 50% of catfish ponds each year. Removing those problems prior to processing also can prevent $15-20 million in lost revenue and extra expenses for catfish farmers.

The contest attracted 86 entries from the United States and 24 other countries.

The next step is to connect the winners with ARS scientists and develop partnerships to advance the prize-winning ideas into solutions that reduce or eliminate off-flavor in commercial catfish aquaculture.

Winner of the $20,000 first prize was Laura Arroyo Miniel of the United States, whose entry was entitled “Preventing Winter Off-Flavor with Solar Heating.”

HeroX is a social network for crowdsourcing innovation and human ingenuity, co-founded in 2013 by entrepreneur Christian Cotichini and XPRIZE founder and futurist Peter Diamandis.

Food prices jump; pandemic blamed

The coronavirus (COVID-19) pandemic had wide-ranging effects on U.S. consumers in 2020, including on the prices they encountered at the grocery store.

Grocery store food prices increased by 3.5%, on average, from 2019 to 2020. For context, the 20-year historical level of retail food price inflation is 2% per year – meaning the 2020 increase was 75% above average.

This level of retail food price inflation was last realized in 2011 when poor weather, low commodity harvests, high fuel prices and international trade disruptions increased global food prices.

Prices for every major food-at-home category except fresh fruits increased in 2020. Fresh fruit prices dropped 0.8% from 2019 because of domestic and international shifts in supply and demand.

For example, stay-at-home orders in India, China and Taiwan created port delays and staffing issues in the produce supply chain, decreasing the capacity to import U.S. fruit – particularly apples, grapes and cherries. In the United States, the market for fruit shifted from foodservice outlets such as restaurants and caterers to retailers during the pandemic, contributing to an increased supply and reduced prices at grocery stores.

Consumers also purchased fewer perishable products during quarantine. “Fats and oils” was the only other food category to experience lower inflation than its historical value – likely as the result of high soybean yields and decreased demand for frying oils because of COVID-19.

Meat prices showed the largest annual increases in 2020. Beef and veal prices jumped 9.6%, pork rose 6.3%, poultry was up 5.6% and “other meat” showed a 4.4% jump.

The spike in meat prices was due to reduced supply because of COVID-19-related processing plant closures. Meat had not experienced this level of inflation since 2014, when drought and high feed costs combined to drive up retail prices.

Stay-at-home mandates in 2020 increased demand for several food products in retail stores, rather than at restaurants and schools. Supply chains struggled to adapt to this transition, which put upward pressure on retail prices.

Commodities particularly affected by this transition include meats, dairy, eggs and nonalcoholic beverages. Dairy prices rose 4.4%, eggs were up 4.3% and nonalcoholic beverage prices increased 3.6% during the year.