Ag Journal | Spring 2019

Ag Journal Daily Record Spring 2019

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Water levels slightly below average

Farmers bucking tradition to grow hemp ■ General Mills looking toward regenerative land use ■

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Table of contents

Ag Journal Editor Michael Gallagher Publisher Heather Hernandez Advertising Contact us: Ag Journal 401 N. Main Street Ellensburg, WA 98926 509-925-1414 The Ag Journal is published three times a year by Kittitas County Publishing LLC. Contents copyrighted 2018 unless otherwise noted.

On the cover: Daily Record File

Snow covers the peaks near Snoqaulmie Pass.

Snowpack update Page 4

Cherry farmers could receive aid Page 6

Farmers bucking traditions to grow hemp Page 12

3 | 2019 Ag Journal - Spring

A bit behind

Daily Record File

Snow covers the peaks near Snoqaulmie Pass.

4 | 2019 Ag Journal - Spring

Water supply largely dependent on precipitation over the next few months

W

By KARL HOLAPPA staff writer

ater levels in the Upper Yakima Basin are behind average going into spring, but the main factor that will determine whether farmers have an adequate water supply will largely hinge on precipitation levels over the next two months.

A river operations meeting report released March 7 from the United States Bureau of Reclamation said as of March 4, the Washington SNOTEL snow water equivalent measure for the Upper Yakima Basin was at 78 percent of average. This number was up from the measurement taken on Feb. 4, putting the average then at 69 percent.

As of Feb. 21, the seasonal outlook for spring in the basin calls for above-average tempera-

tures and an equal chance of precipitation. The forecast currently shifts towards summer with above-average temperatures, but a below-average chance of precipitation. As of Feb. 14, the report says weak El Nino conditions are present with a 55-percent chance of continuing in the Northern Hemisphere through spring.

“February was one of the coldest months on record for many areas, both sides of the Cascades, likely the snowiest for Seattle,” Phil Volker of Extended Range Weather Forecasting said in the report. “We have impressive snow below 2,500 feet that will come out quickly mid-late March once temps start to warm.”

The report summarized that total reservoir storage is at 86-percent of average, with total February precipitation at

108-percent of average. Snow levels have improved but are still at 65 to 91-percent of average above basin reservoirs. The report placed prorationing levels at 90 percent, with a range from 60 to 100 percent.

BOR Hydrologist Chris Lynch said the late-season snow that blankets valley at lower altitudes creates a good base to start with when on agricultural land.

“It does help the water table in general,” he said. “It does provide water so that they won’t need water on their land as soon. It will start the soil with a good water content and carry things for a while.”

Lynch said the snow in the valley should also provide good groundwater recharge, which he said is important in helping the base flow later in the summer. He said water deficit in the soil has a

factor in when irrigation is turned on, and that although irrigation is commonly turned on for farmers in the Kittitas Valley in April, the moisture content from lateseason snows should help farmers get off to a good start.

“We’re in mid-March and the snow is melting already so it’s hard to say what it will be like by the normal time they would want to turn on,” he said.

With the snowpack being below average and reservoir levels being far-behind, Lynch said farmers should still have an adequate water supply for the upcoming growing season. He did warn however that a lot of that stability depends on weather conditions in March. Since March has not had large amounts of precipitation, he said much will depend on what happens for the rest of the month.

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Sweet cherry aid

TNS

A customer shops for cherries at a farmers market on June 13, 2012 in San Francisco, Calif.

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Disaster funds change would benefit cherry growers

By Kellie Mejdrich CQ-Roll Call WASHINGTON –– A provision moving through Congress as part of disaster aid legislation would let farmers earning more than $900,000 on average for the past three years qualify for President Donald Trump's $12 billion program compensating producers for traderelated losses.

Ostensibly, the language would benefit any well-to-do farmers and ranchers. But the $2 million provision was designed specifically with one constituency in mind, according to congressional aides: growers of sweet cherries, predominantly in Washington state.

The fact that the provision specifically mentions Trump's Market Facilitation Program to help farmers caught up in his trade dispute with China, rather than some natural disaster, on its face strains the definition of "emergency" that the supplemental aid package will carry, enabling it to skirt budget rules.

For Washington cherry growers China's retaliatory tariffs are an economic disaster. And because some earn too much to qualify, they currently get no help from Trump's compensation fund.

An aide to Rep. Dan Newhouse, a Washington Republican who pushed for the income waiver, pointed out that the $900,000 income limit for farm subsidy programs applies before operating expenses and before taxes are figured in.

It also doesn't take into account higher costs involved in cherry production than for other crops, and the substantial upfront investment and long lead time before cherries can be sold.

Since Trump imposed tariffs on steel and aluminum imports last April, followed by tariffs specifically on Chinese goods, China has retaliated by increasing its tariffs on U.S. fresh cherry exports from 10 percent to 50 percent. That's effectively added more than a third to the price of U.S. cherries sold in China.

Newhouse's staff said the trade war led to about $96 million in losses to sweet cherry producers for the 2018 growing season. It has decimated a top export market, which a major Washington state grower told the House Ways and Means trade subcommittee last year accounts for as much as one-third of the company's sales.

Cass Gebbers, president and CEO of Gebbers Farms, told the subcommittee last July that if tariffs persisted into 2019, he stands to lose out to competitors in Europe and Turkey. He said his "razor-thin margin" business, based in Newhouse's district, would probably have to cut production, cancel equipment purchases and lay off workers.

Typically, lawmakers rush to take credit for provisions that would benefit their constituents. And Newhouse advocated for cherry growers' successful inclusion in the Market Facilitation Program last year, as did other delegation members.

But Newhouse didn't take any victory laps when the House passed his proposal earlier this year — no floor speeches, no press releases — though that's not altogether unusual given that he voted against the underlying bill, which was tied up in the government shutdown battle over Trump's border wall.

The ambiguous nature of the income waiver, which doesn't name any specific beneficiary, doesn't fit the

traditional definition of an earmark. The program would technically be open to any producer applying for aid that is currently above the income threshold.

That could also include almond growers, whose crop hasn't been eligible for subsidies but was included in Trump's trade relief program. Californians, including Democratic senators and House Republican leader Kevin McCarthy, successfully pushed the administration to add shelled almonds to the Market Facilitation Program, according to the Almond Alliance of California.

But waiving the $900,000 threshold has been driven mainly by cherry growers, according to aides, with Newhouse and former Ways and Means Trade Subcommittee Chairman Dave Reichert, now retired, driving the effort in the House.

It wasn't included in a $7.8 billion disaster aid package that passed the House in the last days of Republican control in December, but House Democrats included it in the $14.2 billion package that chamber passed in January.

The Trump administration opposes the provision. The Office of Management and Budget said in its official views on the House disaster bill that it “makes unnecessary changes to the Department of Agriculture’s trade mitigation payments that would allow funds to go to those with adjusted gross income ... over $900,000.” The statement called the existing threshold “consistent with other price and income support payments” to agricultural producers.

Snowpack Continued from Page 5 “Since we didn’t hit March with a really great supply, we’re a little more dependent on what March does to us,” he said. “March and April will become more and more important.”

Lynch said depending on the weather over the next couple months, the water levels could either catch up to average levels or fall farther behind. He said he has seen years when water levels have caught up to average levels by May after being behind in early spring.

“Right now, I think we will have an adequate supply for everyone,” he said. “We will have to watch carefully.”

See Cherries, Page 8

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cHeRRIeS Continued from Page 7 The Trump administration opposes the provision. The Office of Management and Budget said in its official views on the House disaster bill that it “makes unnecessary changes to the Department of Agriculture’s trade mitigation payments that would allow funds to go to those with adjusted gross income ... over $900,000.” The statement called the existing threshold “consistent with other price and income support payments” to agricultural producers.

An aide said Sen. Maria Cantwell, a Washington Democrat, worked to attract support in the Senate, though her staff didn’t respond to a request for comment. But the language was picked up in a $12.8 billion supplemental disaster package introduced by Senate Republicans in January, as well a $13.6 billion version introduced last week by Sen. David Perdue of Georgia

and others.

Rounding error In the multibilliondollar disaster bills under consideration, $2 million qualifies as a rounding error, perhaps shielding it from more scrutiny. And Senate Appropriations Committee Chairman Richard Shelby has said the eventual package his chamber takes up as soon as this month is likely to be even larger than previously-introduced aid packages.

A Senate aide confirmed the $2 million cost of the income waiver, though since it is not a direct appropriation the figure isn’t listed in the bills. While the cost is relatively small, with individual payouts capped at $125,000, it’s still a limited universe of potential beneficiaries. And the current income thresholds are a sensitive matter on Capitol Hill and within the agricultural communities.

The Republican-led House last year tried to waive the general $900,000 income limit for USDA commodity and conservation programs set in the 2014 farm bill when it comes to disaster aid eligibility. The provision was part

of that chamber’s five-year farm bill, which passed on a 213-211 vote last June after being defeated on the floor a month earlier.

No Democrats voted for the House Republican farm bill. During floor debate, Rep. Ron Kind took aim at even preserving the $900,000 income cap, saying it should be cut nearly in half.

“Why is a farm entity with an adjusted gross income of over $500,000 a year still receiving taxpayer subsidies under this bill?” the Wisconsin Democrat said on the floor. “This legislation should be working for family farmers, not powerful special interests here in Washington.”

The Senate initially went in Kind’s direction, including a reduced threshold of $700,000 in adjusted gross income across farm programs in that chamber’s version that would have saved $107 million over five years, according to the Congressional Budget Office. But neither the House’s income waiver nor the Senate’s tighter limit made it into the final version.

‘Congress had made some targeted

exceptions to farm payment limits in the past, such as for federally recognized Indian tribes.

And in a huge $89.3 billion disaster bill enacted in February 2018, lawmakers waived not only the income threshold, but also the standard $125,000 payout cap for crop damages as a result of the 2017 hurricane season, allowing payments of as much as $900,000.

Florida lawmakers inserted the language, called the “citrus fix” for their state’s growers hurt by Hurricane Irma, according to a source familiar with the provision.

Given the scope of trade-related damages, Washington state growers say income thresholds shouldn’t matter.

“We’re being impacted and the growers are being impacted regardless of how much acreage they have,” said Mark Powers, president of the Northwest Horticultural Council, which represents cherry, apple and pear producers. He said cherry growers have never been involved in a direct payment program until now, but the benefits are limited by the income threshold.

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Hoping for hemp

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Michael Calebs, 56, looks up in his London, Kentucky, tobacco barn, where as a youth he would climb up to horizontal beams to hang floppy tobacco leaves to air cure. Farmers like Calebs are increasing their hemp acres, decreasing their tobacco acres and betting that this new crop will usher in a new era for Kentucky agriculture.

10 | 2019 Ag Journal - Spring

Farmers are bucking traditions despite the risks

By APRiL SiMPSON Stateline.org LONDON, Ky. — Michael Calebs begins feeling nostalgic standing in the airy barn on his rolling, 400-acre farm. He recalls the hard labor of his youth: climbing up to horizontal beams to hang floppy tobacco leaves to air cure so the leaves could develop a sweet taste.

Calebs places a small amount of Kodiak snuff between his cheek and gum on a recent afternoon while walking about the barn in dirty work boots over blue dress pants and an argyle sweater, having just come from his day job as an engineer with the Kentucky Transportation Cabinet.

Bucking tradition, Calebs, 56, is transitioning the land from generations of tobacco farming toward a new crop: industrial hemp. He used to grow about 30 acres of tobacco,

but cut back to 22 acres in 2017 when he started growing hemp.

While there are risks in moving away from his family’s lifeline of 70 years, Calebs is confident.

“We’ve got the labor market here; we’ve got the land; we’ve got the infrastructure, so we have the upper hand,” said Calebs, who wears a clean gray cap emblazoned with the green upside-down V logo of the company that processes his hemp, Atalo Holdings. “I can produce it as cheap as anybody. I have the expertise.”

“That’s a fact,” chimes in Kim Henson, Calebs’ farm manager.

Kentucky was the country’s greatest producer of hemp in the 19th and 20th centuries. But two legislative efforts limited production: A 1937 marijuana taxation law characterized hemp as a narcotic and required growers to hold a federal registration and special

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tax stamp. And the Controlled Substances Act of 1970 made hemp illegal to grow without a permit from the U.S. Drug Enforcement Administration.

The farm bill, which President Donald Trump signed in December, makes growing hemp in the United States legal again. Now Kentucky, which the Brookings Institution called one of the best places to cultivate hemp in the world, is returning to its roots.

Farmers across the country looking to move away from tobacco have big expectations that hemp can keep them in business. But experts and some farmers worry that without tighter regulations in place, farmers may overproduce a lucrative form of hemp and the market will crash.

Since Kentucky is further along in the transition, thanks to its five-yearold pilot program, many other states

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will look to the Bluegrass State to see how well its policies work.

Before December, federal law had treated hemp as a quasi-controlled substance, due to its relation to marijuana. Farmers couldn’t grow hemp at all until 2014 when the farm bill allowed limited cultivation under tightly regulated state research and pilot programs.

Kentucky that year began its industrial hemp pilot program to study hemp’s environmental impacts and potential as an energy source for biofuel.

Now hemp is treated like other agricultural commodities. Hemp producers are eligible for federal crop insurance and U.S. Department of Agriculture research grants.

Some farmers and experts say hemp can be a lifeline to those who struggle under declining commodity prices.

See Hemp, Page 12

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Hemp Continued from Page 11 Corn, soybeans and tobacco are among Kentucky’s top agricultural exports whose prices have remained persistently low.

For some, tobacco farming is a tradition and at the core of farmers’ identity. But amid falling prices, labor shortages, declining demand and other factors, many tobacco farmers are desperate for a replacement.

“This is hard times in agriculture, and every farmer out there is hunting for that magic bullet that’s going to save his farm,” said Donn Teske, president of the Kansas Farmers Union, which advocates for the economic interests of farmers in the state.

Kentucky has been a leader in developing an industrial hemp sector, taking a highly regulated approach that it revised during the test phase.

Growers and processors will continue to apply for a license.

The state approves growers for a certain number of acres. They must submit GPS coordinates of growing locations that the Kentucky Department of Agriculture and law enforcement may inspect. Workers must submit to background checks.

“We’re proud of the program we’ve built here, because it’s a model for the nation in how to bring everyone on board,” said Sean Southard, director of communications for the Kentucky Department of Agriculture.

Kentucky’s hemp grower application asks farmers to describe their marketing plan for the crop, and to indicate whether they have a partnership with a company to process the hemp. The state recommends such partnerships,

but some farmers say doing so may discourage independent growers’ cooperatives.

“It limits the unaffiliated farmers’ opportunity to what the companies currently in Kentucky are hoping to do with this product,” said Joe Schroeder, a former hemp farmer from Lexington who has served as an industry consultant. “It also limits the growers’ ability to negotiate and compete in existing markets.”

Other states are following Kentucky’s lead in encouraging hemp.

Forty-one states have enacted legislation to establish industrial hemp cultivation and production programs, including 19 that grew hemp in 2017 under special pilot and research programs and four that started in 2018, according to the “U.S. Hemp Crop Report” from

the advocacy organization Vote Hemp.

Among the states that continue to outlaw growing hemp, Georgia, Idaho, Iowa, Mississippi, New Hampshire, Ohio, South Dakota and Texas have introduced hemp bills this legislative session to align themselves with federal law. Hemp farming also remains illegal in Louisiana.

With the passage of last year’s farm bill, states allowing hemp farming must submit a plan detailing how they will license and regulate hemp to the USDA. Otherwise, hemp farmers in those states will have to comply with the USDA’s regulatory program, enforced by the U.S. Department of Justice.

See Hemp, Page 14

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Hemp Continued from Page 12 to curious farmers the benefits of cannabinoid or CBD oil, an extract from hemp with the potential to reduce inflammation and anxiety, boost the immune system and more.

Ogburn is the co-founder and owner of Production Hemp Agriculture Research Management, LLC in Trimble County, Ky., northeast of Louisville and along the Ohio River.

At the farm show, he displayed a table full of “Pharm CBD” products, hemp oils with a proprietary blend of organic compounds, “terpenes,” which are found in the essential oils of plants.

“People are just flooding the market right now, and I think the quality is going to rise to the top,” Ogburn said. “The people that know what they’re doing, they’re going to be able to maintain long

term. All these other people, they see dollar signs.”

Kentucky, along with most states except West Virginia, defines hemp as cannabis plants with a concentration of less than 0.3 percent THC, the psychoactive compound in marijuana. Authorities will destroy the crop if the THC exceeds that amount.

In 2018, 62 percent of Kentucky’s 210 hemp farmers grew the crop to have it processed into CBD. While the latest farm bill makes hemp eligible for crop insurance, CBD is still under the purview of the Federal Drug Administration, which could put CBD back on the list of scheduled drugs, said Tyler Mark, a University of Kentucky agricultural economist.

The hemp-derived CBD market in the United States is expected to grow from a $390 million market

in 2018 to a $1.3 billion market by 2022, according to estimates from the Hemp Business Journal.

During Kentucky’s first year of the industrial hemp pilot program, in 2014, the state Department of Agriculture said it received reports of prices as high as $1,000 a pound for CBD’s dried material. In a 2018 report, the agency warned that prices continued to decline rapidly and could drop to $5 to $10 a pound.

“How long is that market stable?”

Mark said. “I don’t think any of us know that answer right now. A lot it is going to depend upon how many acres come into production. Do we have the processing capacity to handle that?”

There is also little information on how much demand will increase for CBD products as prices decline, Mark said.

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U.S. Sens. Mitch McConnell, a Kentucky Republican, and Ron Wyden, an Oregon Democrat, have asked the USDA to quickly issue regulations to end uncertainty the banking industry might have with financing hemp farmers and to minimize any interference from law enforcement with the interstate transportation of hemp products.

Kentucky was the first state to submit its state hemp plan to the USDA. The farm bill gives the department 60 days to approve Kentucky’s plan, which the recent federal government shutdown may have delayed, Southard said.

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The state’s Department of Agriculture has approved 42,086 acres of industrial hemp for 2019, up from 16,000 in 2018, plus 2.9 million square feet of greenhouse space for hemp cultivation.

Licensed processors paid Kentucky growers $7.5 million for harvested hemp in 2017 and took in $16.7 million in sales.

“We’re convinced here in Kentucky that there’s value to it,” Southard said. “We think it’ll be a huge thing.”

No one has done a good job of managing farmers’ expectations, said Mike Lewis, a farmer and businessman who is the director of Third Wave Farms, 20 miles north of London, Ky. “I have farmers expecting to make $35,000 to $40,000 an acre,” Lewis said. “Nobody’s really making any money right now.”

Calebs said he’s getting $6.50 a pound from his processor, Atalo Holdings, and a yield of 600 to 700 pounds an acre.

In contrast, he earned roughly

$2 a pound on burley tobacco in 2018 at a yield of 1,900 pounds an acre. So that’s $3,900 to $4,550 an acre of hemp compared with $3,800 an acre of burley tobacco, which Calebs said is far more labor-intensive.

Calebs said he’s no longer making a profit on tobacco. After growing 18 acres in 2018, he plans to cut back further in 2019.

He’ll grow 36 acres of hemp. As producing CBD becomes more efficient, Calebs agrees that CBD may not be the long-term cash cow people are envisioning.

“Yes, it’s risky,” Calebs said.

“There’s some risk to great gain.”

Atalo consultant Brent Cornett, a seventh-generation tobacco farmer, works the land 30 minutes north of Calebs in Laurel County, Ky. “It’s fixin’ to be the end with me. I’m dropping the torch,” said Cornett, who plans to phase out his burley tobacco production this year to farm 150 acres of hemp.

“It’s a wild card at this point,”

Cornett said. “Markets are definitely expanding and demand is increasing, but at the same time, every farmer nationwide is looking at this crop as a possible opportunity, and what farmers do best is overproduce.”

Mary Berry, executive director of the Berry Center in New Castle, in northern Kentucky, which advocates for small farmers and healthy regional economies, is concerned that there is no supply management, production controls or parity pricing for hemp.

“We’ve got to take a step back from capitalism and think about the lives of people who produce what we’ve got to have,” Berry said.

Berry pointed to the federal tobacco program, which ended in 2005. The program offered tobacco farmers parity in the marketplace and put in a quota system that assured farmers grew what was needed.

Besides, she pointed out, several agricultural fads have failed to live up to expectations: Ostriches,

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emus and Jerusalem artichokes were investments and crops touted as ways to diversify farm income.

Hemp is another tool in farmers’ tool belt if managed appropriately, said Mark of the University of Kentucky. “If you don’t have money to lose, this may not be the crop for you, just because there’s so many unknowns.”

In the past, small and midscale farmers without industry connections and access to land never stood a chance of participating in Kentucky’s hemp economy, though the field is widening, said Schroeder, the former farmer and consultant.

“In the early years, it was an option for people who are well-positioned financially, wellpositioned with state politics, and had enough land that they could endure the opportunity cost of growing other products while they take this risk,” Schroeder said. “And now, because of legalization, it’s going to be a lot more accessible nationally.”

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