U.S. Agriculture OUTLOOK 2019 Edition by Faircount Media Group

2019 EDITION

PICK & CHOOSE Robots Are Coming to a Farm Field Near You

PLUS: Trade War Highlights of the New Farm Bill

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Fiber-optic cables are installed to the existing electrical grid in the Lexington, Virginia, area to bring for the first time dependable high-speed broadband to the rural area outside the city. Because broadband offers rural areas connectivity to business, education, health care, and other services necessary for economic growth, it is rapidly becoming indispensable in all sectors of the economy. Late last year the U.S. Department of Agriculture announced ReConnect, a new program aimed at helping to bring broadband to rural areas nationwide that lack access.

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To keep up with the world’s growing population, agricultural production will have to double by 2050. Increasing crop yields that much means growers will need to cultivate farm, agronomic and machine data more precisely, efficiently and sustainably than ever before. At Fuse®, we believe that hinges on an open technology platform that connects mixed fleets across the entire operation. We believe growers should be free to choose the machinery, software and service providers that create their own perfect digital ecosystem. And, we believe they shouldn’t have to wait 30 years to do it. Today, when you buy a technology product from any of the leading AGCO® brands, you’re in control with open connectivity and application. We call it: Smart Farming. Synchronized.

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Table of Contents FEATURES

PICK AND CHOOSE...............................................................................................................................6 Robots Are Coming to a Farm Field Near You By Eric Tegler TIRES VERSUS TRACKS.......................................................................................................................12 By J.R. Wilson CEA AND THE HUMAN TOUCH.............................................................................................................18 Advancements in Controlled Environment Agriculture By Jan Tegler SUPPORT GROWS FOR FOOD SUPPLY TRACEABILITY.......................................................................24 By Charles Dervarics USDA OUTLOOK: 2019.........................................................................................................................28 By Craig Collins THE AGRICULTURAL IMPROVEMENT ACT OF 2018............................................................................36 Highlights of the New Farm Bill By Craig Collins TRADE WAR.........................................................................................................................................42 A Short- and Long-term Outlook for U.S. Producers By Craig Collins INNOVATION SHOWCASE....................................................................................................................48

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2019 EDITION Published by Faircount Media Group 4915 W. Cypress St. Tampa, FL 33607 Tel: 813.639.1900 www.faircount.com EDITORIAL Editor in Chief: Chuck Oldham Managing Editor: Ana E. Lopez Senior Editor: Rhonda Carpenter Contributing Writers: Craig Collins Charles Dervarics, Eric Tegler Jan Tegler, J.R. Wilson DESIGN Art Director: Robin K. McDowall ADVERTISING Associate Publisher: Patrick Pruitt Account Executives: John Caianiello Steve Chidel, Christopher Day OPERATIONS AND ADMINISTRATION Chief Operating Officer: Lawrence Roberts VP, Business Development: Robin Jobson Business Development: Damion Harte Business Analytics Manager: Colin Davidson FAIRCOUNT MEDIA GROUP Publisher: Ross Jobson Front cover: Harvest CROO Roboticsâ&#x20AC;&#x2122; strawberryharvesting robot. Advances in artificial intelligence, machine vision, and manipulative robotics are enabling the development of agricultural robots capable of weeding, seeding, spraying, and harvesting tasks. Cover image credit: PHOTO COURTESY OF HARVEST CROO ROBOTICS

ÂŠCopyright Faircount LLC. All rights reserved. Reproduction of editorial content in whole or in part without written permission is prohibited. Faircount LLC does not assume responsibility for the advertisements, nor any representation made therein, nor the quality or deliverability of the products themselves. Reproduction of articles and photos, in whole or in part contained herein, is prohibited without express written consent of the publisher, with the exception of reprinting for news media use. Printed in the United States of America. None of the advertising contained herein implies U.S. Department of Agriculture endorsement of any private entity. This is not a publication of the U.S. government.

ROBOTS AND FARMING

PICK AND CHOOSE Robots Are Coming to a Farm Field Near You BY ERIC TEGLER

Above: A strawberryharvesting robot developed by Harvest CROO Robotics moves through the rows of a strawberry field.

catalysts for developing agribots are inexorably rising demand for food and rising labor costs.

DEMAND AND LABOR “We’re going to have to innovate to make up for future [food] demand,” said Manoj Karkee, Ph.D. Karkee is an associate professor at Washington State University’s Center for Precision and Automated Agricultural Systems. He is an expert in agricultural robotics who leads a research team working on the employment of autonomous UAVs to deter birds from damaging crops. The food demand that Karkee references is expected from a global population rise of more than 2 billion by 2050, according to the United Nations’ World Population Prospects: The 2017 Revision. Increased wealth in Asia and Africa means that consumption per capita will also increase, further spurring demand. Along with reducing crop waste

PHOTO COURTESY OF HARVEST CROO ROBOTICS

ithin the next decade, the term “mechanized agriculture” will refer to more than the stereotypical combines, feeders, and irrigation systems we’ve come to associate with farming. A new wave of robotic mechanization is on the cusp of washing over the industry in a drive to significantly increase agricultural productivity even as it reduces the number of human hands involved. “Robots” have been in field (or above) in the form of self-driving tractors, materials-handling machines, and aerial imaging/sensing unmanned aerial vehicles (UAVs) for more than 10 years. They’ll soon be joined by new artificial intelligence (AI) enabled counterparts that will assume the tasks of weeding, seeding, spraying, and harvesting. According to a study just released by London-based market research firm TechNavio, the global market for autonomous farm equipment will see compound annual growth of approximately 15 percent by 2023. Advances in AI, machine vision, and manipulative robotics are making such growth possible, but the

USDA PHOTO BY LANCE CHEUNG

(15 to 30 percent annually), raising agricultural productivity will be absolutely vital. Researchers, some growers, and the nascent agricultural robotics industry posit a shortage of farm labor as holding productivity back. Karkee points to instances of crops going to waste for lack of labor to harvest them, adding, “Human beings deserve better than the working conditions in agricultural hard labor.” Nevertheless, the great majority of annual crop production is successfully harvested, and USDA statistics present a picture of a labor force that has remained consistent or grown. The USDA’s Hired Farm Labor – Workers and Payroll table from the 2012 Census of Agriculture put the number for hired farm labor in the United States at 566,469. The Bureau of Labor and Statistics assessed the number of agricultural workers in 2016 to be 856,300, and projects total employment to remain approximately the same through 2026. Labor cost is generally agreed to account for more than one-third of typical farm overhead. It is demonstrably rising. Nationwide minimum wage increases are in force and laws in California now require overtime pay to workers beyond a 40 -hour work week. Given the time-critical nature of harvest pick cycles, overtime is inevitable, further increasing labor cost. While automation is generally described as a response to worker shortages, increasing pay could actually expand the pool of farm labor. This broader picture suggests that the drive for agricultural automation hinges at least as much on cost as labor availability.

MANIPULATIVE AND MULTITASKING There are two basic forms of robotics, Karkee explains: navigational robotics and manipulative robotics. Navigational robotics facilitates autonomous movement from place to place

Farm laborers pick squash on a farm in Virginia. Issues of labor cost and availability have helped to spur development of agricultural robots.

while manipulative robotics enables physical motions for specified exercises. “A lot of applications combine these two,” he said. “Fruit harvesting robots may have navigational systems which move the machine to a desired location combined with a ‘hand,’ which is the manipulation part of it used to pick apples or other fruits.” Harvesting fruits or vegetables requires deft movement and feel as well as the ability to see and choose which objects to pick and which to leave aside. Around 18 billion apples are picked in Washington state every year, meaning there are at least 18 billion movements of human hands to harvest them, Karkee says. Humans can pick an apple every second or so, a tough ask for machines that need to identify targets, evaluate sensor data to make a pick/no pick decision, and then – if a “pick” decision is reached – navigate within apple tree structures, subtly avoiding branches and gently reaching for the fruit. Not surprisingly, robotic manipulation is the real challenge in agriculture. “There’s been a lot of effort in these manipulation areas, and we’re making progress using new artificial learning techniques, faster computational systems, and more robust robotics,” Karkee said. Indeed, machine learning, image processing, and sensor and data mapping are being integrated into agribots tasked with precision weed control, fertilization and seeding, and crop harvesting. These machines rely on the same PNT (position/ navigation/timing) infrastructure that the American military, utility, and financial sectors depend on and bring with them a significant degree of risk concentration. Well over 70 companies and organizations have determined to meet the challenge of increasing productivity and grasping business opportunity. Startups like Blue River Technology, FarmWise, Abundant Robotics, Cainthus, and FFRobotics populate an IT-influenced robotics developer 7

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IMAGES COURTESY OF MANOJ KARKEE, #AGROBOTICS TEAM, AND WASHINGTON STATE UNIVERSITY

Left: An apple-picking robot developed at Washington State University (WSU) combines navigational and manipulative robotics to enable the machine to move through an orchard and pick fruit. Below left: Manoj Karkee, Ph.D., demonstrates how an instrumented glove was used to understand the forces and motion involved in manual apple picking – information that then guided the design of robotic hands for the WSU apple-picking robot.

market poised to expand. One of these – Harvest CROO Robotics – illustrates the blend of established technology adoption and new innovation.

PICK AND PREDICT Strawberries are tough to harvest. Hidden among the leaves of plants at ground level, they bruise easily and ripen at different times. For every hour a strawberry is off the plant and not refrigerated, it loses a day of shelf life. So they are still harvested by hand. That’s a challenge for growers, including Plant City, Florida-based Wish Farms. When an H2A farm labor contractor walked out, taking his crew with him, during last year’s harvest, Wish Farms lost $500,000 in fruit in ground. “We could not find the domestic labor in order to pick that fruit,” said Harvest CROO Robotics CEO Paul Bissett. “That was not a fun situation.” The “CROO” in Harvest CROO stands for Computerized Robotic Optimized Obtainer – a strawberry-picking robot. The company was established in 2013 by Wish Farms’ owner, Gary Wishnatzki, and robotics engineer Bob Pitzer. Backed by a coalition of growers representing 70 percent of the $3.3 billion strawberry industry by value, Harvest CROO Robotics is about 18 months away from placing its strawberry harvester on the market.

The CROO system consists of a GPS-enabled, self-driving, crop-straddling vehicle on which 16 robots are mounted. Each robot has paddles that gently move leaves aside to expose the fruit. A pick wheel then circles the plant using lidar, stereoscopic cameras, and AI to locate ripe strawberries. Rubber claws then extend from the wheel to pluck the fruit from the stem. The fruit is then deposited into supermarket-ready packaging via a mechanism still in development. Bissett says each CROO system is capable of harvesting an acre per hour, the equivalent of a 25- to 30-person picking crew. The robots can also work at night when humans can’t and on weekends when they don’t want to. Picking in cooler temperatures reduces refrigeration requirements and energy consumption. Continuous robotic picking meshes well with three- to four-day pick cycles, revisiting the same acreage as strawberries ripen, without paying overtime to workers. Robots won’t walk off the job, increasing harvest reliability and hence, the investment risk that farmers are willing to take at the outset of a season. “Increasing the surety of harvest is a big deal,” Bissett said. The harvest-per-acre cost is about $10,000 in Florida, and, “If we can assure that every acre is harvested, yields will go up, costs will go down, and growers will be more likely to make that bet at the beginning of the season,” he said. Harvest CROO Robotics is currently on the fifth iteration of its platform, with the major design components locked in. Testing with a sixth-generation platform will continue this year, and the company expects to generate revenue from the system, getting berries picked at scale in 2020. “Assuming we hit those milestones, we’ll move to commercial picking operations sometime over the next year to 18 months,” Bissett said.

FIELD OF OPPORTUNITY As Harvest CROO Robotics goes to market, it envisions leasing its robots to farmers rather than offering them as capital equipment. This model would essentially replicate the on-demand contract labor that growers currently hire, maintaining flexibility for both farmers and the harvest robot provider, relieving the former of the need to acquire, maintain, and operate such complex systems. “Rather then selling them a lot of capital equipment which they don’t currently buy,” Bissett explained, “we’re going to say, ‘You can choose traditional harvest services labor or you can have it automated with us.’” The idea of “agribots as a service,” similar to software as a service, aligns well with the tech startup landscape of the agricultural sector. The lion’s share of research and development carried out thus far has been done by small firms. That’s 9

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PHOTO COURTESY OF HARVEST CROO ROBOTICS

starting to change, Karkee observes, with larger robotics and agribusiness concerns quietly assessing the agribot market internally. “There has been some effort in India and elsewhere. They contact me from time to time regarding possible investment, mostly looking at the status of artificial intelligence and machine learning development.” Blue River Technology is a concrete example of the trend. The company has launched a weederadicating robot called See & Spray, which it markets as a safer solution to herbicide resistance, claiming it significantly reduces crops’ exposure to chemicals. Pulled by a tractor, See & Spray employs deeplearning algorithms similar to facial recognition algorithms with cameras and highly capable processors to see every plant in a field, distinguishing weeds from crops and very precisely spraying herbicide on targeted weeds or applying fertilizer to targeted plants. Targeted herbicide or fertilizer application reduces chemicals cost, while the robot replaces up to eight people carrying out the same task, according to Blue River Technology. John Deere acquired Blue River Technology in September 2017 for a reported $305 million. Deere joins agricultural equipment makers AGCO, CLAAS,

The Pitzer wheel on the Harvest CROO robot circles strawberry plants to locate ripe berries that it then picks with rubber claws. A CROO system can harvest an acre per hour, the equivalent of a 25- to 30-person work crew. Harvest CROO Robotics envisions leasing – rather than selling – its robots to farmers.

CNH Industrial, and Kubota with significant investments in and/or ownership of agricultural robotics developers. Despite such notable investment, the field remains largely open with questions of who will lead the market (argibusiness or Silicon Valley) joining questions about which devices (drones, harvesters, sprayers, mobile software) will be most in demand. For Karkee, the question of which bots will proliferate hinges on which show the most value in the next two to three years. Beyond that, the professor puts wider adoption somewhere around five years. “That’s just my educated guess,” he said. “There are a lot of uncertainties to deal with.” The supply and cost of labor will surely play a central role along with input from organized labor. Left basically unexamined as yet is the question of whether a new regulatory framework will emerge around agricultural robots. Their impact on labor conditions and the environment as well as security issues arising from their connectedness will likely draw the attention of regulators. Obviously, it won’t be just the robots picking and choosing in the field. Industry and broader society have a lot of decisions to make going forward. 11

TIRES VERSUS TRACKS

TIRES VERSUS TRACKS BY J.R. WILSON

ifty years ago, tractors rode on large tires and for track sales, with cost and maintenance being major tracks were rarely seen outside of construcfactors in some customers moving to tires. tion sites. “Some of the larger operations will try to stay on In recent years, however, tracks have gained a foottracks. But with up to a $110,000 difference, the hold in the agricultural market, albeit one that seems guys who are on the fence or really trying to reduce to have reached its peak. costs will turn to tires. That’s where we have an “Tracks have been around since the late 1980s opportunity, as we develop flotation tire options in agriculture, but it never really stuck because they designed to perform equally as well as tracks, but at were expensive and just not practical. But they a much lower cost.” perform better and are much more economical Michelin North America, a long-established name now,” said James Crouch, national agriculture in tires, recently added track manufacturer product manager for Alliance Tire Group. “The Camso, based in Quebec, to its business line. equipment makers were kind of forced into “Now that we have Camso, that makes us making tracks. a track company,” said Michelin agriculture “The quad track is everyone’s reference when marketing manager David Graden. “My stance “Tracks have you think about tracks in agriculture. It was is very much the same: tracks have their place, introduced and popularized when commodity their place, tires tires have their place; it depends on what the prices were high, around 2008 to 2011, when have their place; end user is trying to achieve. farmers had a lot of money and were willing to “Where there has been rapid growth in it depends on try new things. Tracks were sold as the ultimate tracks, that will level off and there will be a solution, so farmers saw that almost $90,000 better balancing of the two. There will be a what the end update cost as a kind of insurance.” continuing increase in tracks in the South When the quad track really got popular, the user is trying to and Southwest, but tracks will level off in the horsepower range for big tractors was from Midwest as CTIS [Central Tire Inflation System] achieve.” 380 to 500, and now is up to 600-plus, he becomes better known and used.” explained: “When you look at putting that Covering its bases, Michelin also recently much power to the ground, tracks do very acquired two CTIS companies – German-based well. There also is a gap in the understanding PTG and Téléflow in France – both leaders in of tires, which are taken for granted. More than systems that enable fully automated pressure 75 percent of tractor tires are overinflated, which adjustment to vehicles while on the move. shrinks the footprint, and slip increases. So there is The key reason for the regional market difference an education gap between proper tire maintenance in tire versus track sales is soil composition – clay and tracks.” and sand in the South, sand in the Southwest, both While the commodities market, especially for of which are far less vulnerable to compaction than corn, has dropped, some pockets of demand for the rich dark soil that blankets most of the Midwest. tracks remain strong, while others may begin In a list of factors farmers must consider when trending towards tires, according to Scott Sloan, weighing tires versus tracks, recent studies (largely global agricultural product manager for Titan done by or for tire manufacturers) have given the International, which produces the Goodyear line of edge to tires in most categories. farm tires – but no tracks. Graden explained the most common results: “Case is running about 60 percent quad tracks INITIAL COST – “Tires are less expensive at and John Deere has maybe 35 percent going out as initial purchase, even with the addition of a CTIS. tracks,” he acknowledged. “It will be an ongoing battle On a quad track – and it depends on the machine

ALL IMAGES COURTESY OF TITAN INTERNATIONAL

Above: A Case IH Steiger 580 equipped with the world’s largest farm tires (Goodyear® OPTITRAC LSW1400/30R46) went head to head against the Case IH Steiger 580 Quadtrac machine. Results from the test showed the wheeled machine had greater fuel efficiency and improved ride quality. Left: A comparison chart of tires and tracks shows various applications for different attributes.

– tires on a four-wheel can cost $7,000 to $8,000 per tire and there are eight of them. The upcharge for tracks is around $70,000, [roughly twice the price of tires].” MAINTENANCE AND REPLACEMENT – “Tires are less expensive to maintain over the course of an average 4,000 hours; track replacement parts are more expensive and the time it takes to maintain all the moving components in tracks is more.” FUEL COSTS – “It depends on the machine, but in studies we have done on a quad track versus four-wheel drive, fuel is less expensive using pneumatic tires because it takes more horsepower to move all the moving parts and additional weight of a tracked machine.” TRACTION – “Traction goes to tracks. The track itself doesn’t spin like a tire, but lays down a road for the components inside the track to roll over.” POWER – “With a quad track, it takes up to 50 percent more power to move the track than a pneumatic wheel, so if 13

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DID YOU KNOW THIS MAGAZINE IS AVAILABLE ONLINE ON ANY DEVICE? 2018 EDITION

PICK & CHOOSE Robots Are Coming to a Farm Field Near You

2018 EDITION

PICK & CHOOSE Robots Are Coming to a Farm Field Near You

PLUS:

PLUS: The Trade Wars Highlights of the New Farm Bill

The Trade Wars

ROBOTS AND FARMING

Highlights of the New Farm Bill

PICK AND CHOOSE Robots Are Coming to a Farm Field Near You BY ERIC TEGLER

Above: A strawberryharvesting robot developed by Harvest CROO moves through the rows of a strawberry field.

catalysts for developing agribots are inexorably rising demand for food and rising labor costs.

USDA PHOTO BY LANCE CHEUNG

PHOTO COURTESY OF HARVEST CROO

Farm laborers pick squash on a farm in Virginia. Issues of labor cost and availability have helped to spur development of robots.

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Above: This John Deere four-wheel-drive HHP tractor is fitted with Michelin MACHXBIB tires. The tractor is pulling tillage equipment and the tires are designed for traction and carrying capacity. Right: The graph indicates the pull force or fuel consumption necessary to move tires versus tracks on soil and on concrete.

you stick with power only and not combine it with tracking, it goes to tires.” WEIGHT – “Weight also goes to the tires. You have a significant amount of additional weight for tracks.” ROAD SPEED/EFFICIENCY – “That goes to tires. Tracks, depending on their width, are limited to a certain speed before they begin to overheat.” SOIL COMPACTION – “It tends to depend on the part of the country – and can be a point of heartburn for those in the Midwest who purchased tracks. Compaction is a big issue in less sandy soil, such as the Midwest, and tires have a much lower downward pressure. Tracks are traditionally pitched on contact area, which has little to do with compaction. When you get into clay and sand, soil compaction is not an issue because they don’t compact, so tracks really excel in those areas.” Tires also win when it comes to ride and comfort. “A track machine is like riding in a tank,” Sloan added, predicting little is likely to change in the comparison despite improvements to track technology in the years to come. “But tires can have their ride quality issues too. Power hop and road lope can inhibit field and on-the-road performance. Those are

issues that we’ve worked to solve with Low Sidewall (LSW) technology.” Sloan also points out that when it comes to tires versus tracks, people often confuse the terms flotation and compaction. Both are important, but are separate considerations when selecting tires or tracks. “There’s a difference between compaction and flotation. Flotation is what gets you through mud; compaction involves the footprint. Tracked machines are significantly heavier than wheeled machines, but we did a test where we added ballast to make them equivalent and found the ground bearing pressure beneath the bogies [the wheels inside the track] was significantly higher than under a tire. A tire equalizes the 15

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pressure across the footprint, which is reaching a significant size, although still smaller than a track. That equates to lower soil compaction, and potentially greater yields by going with a flotation LSW tire.” Modern tractors are bigger, heavier, more powerful, more costly, and more comfortable. Tire manufacturers acknowledge putting tracks on a large quad machine makes for an impressive sight that may influence some buyers. That trend toward increasingly larger machines also can lead to a belief they must be equipped, if not with tracks, than with the largest available tires. Michelin warns farmers they should choose tires based on performance – and bigger is not always better, possibly reducing equipment efficiency. Instead, the company recommends farmers avoid “over-tiring.” Today’s tractors also are far more advanced electronically, with driver seats that would make Capt. Kirk green with envy. Those electronics include CTIS, which monitors tire pressure and allows the driver to inflate or deflate tires on the fly based on surface conditions, load, and other factors.

Above: A track footprint is larger than a tire footprint, but the ground pressure under the bogie wheels is higher (as indicated by the graph spikes as downward force) than from pneumatic tires. Below: This CASE Quadtrac is using tracks in a hay field.

CTIS is an add-on and, based on the number of tires, can cost from $7,000 to $25,000 per tractor, which includes an air compressor, hoses, electronics, and labor. Auto inflation/deflation is part of CTIS, and Graden predicts several new technologies now being developed eventually will enable “smart tires” that can measure soil moisture and density, then change tire pressure accordingly without any action by the farmer. “I don’t know that anyone is within five years of that, but I think that is the long-term future of CTIS,” he said. Currently, the driver can press a button in the tractor cab to change from field to road and back again. But while a fully autonomous, sensor-based system will be a marked improvement, the tire makers are committed to educating their customers today about the importance of tire pressure – and its competitive impact versus tracks. “A common tire is 18.4 inches wide and that’s pretty much the most you get, but you can make it longer with lower pressure, putting more tire on the ground. That’s a step that was missed by the OEMs [original equipment manufacturers] as a solution to putting power to the ground,” Crouch explained. “Long term, tracks have a market they will control. As fields get wetter, tracks don’t respond like tires when it comes to the slip increase; tracks stay about the same rate. “The future is low-pressure tires and proper inflation; the missing piece is the ability of the tractor to know what the tire pressure is and should be. Static loaded radius – distance from center of the tire to the ground when inflated – means the tire pressure is irrelevant. The technology is almost there to do that automatically, in the next 15 years, in a way the farmer won’t even realize what’s happening.”

CEA

CEA AND THE HUMAN TOUCH Advancements in Controlled Environment Agriculture BY JAN TEGLER

f you’ve ever walked into a greenhouse infused (primarily leafy greens), lower overall yield, and with light, warmth, and color in the dead of winter, thin operating/profit margins. you’ve experienced controlled environment agriResearch and investment in “smart CEA,” part of culture (CEA). the new movement toward digital agriculture, will The simple idea of covering crops to protect them solve some of these challenges. Investment in human from temperature fluctuation, weather extremes, capital will take CEA further. disease, and pests – basic CEA – has been around since Roman times, but it wasn’t until the 17th SMART CEA century that the modern concept of the greenhouse was born. Today, greenhouses and other CEA structures – Technology is being applied to CEA as never from repurposed industrial buildings to container before. Smart CEA leverages advances in softfarms – are in use globally and produce a wide ware-based environmental monitoring and control variety of crops. Light, air temperature, relative systems and automation along with cloud-based humidity, carbon dioxide, soil acidity, and nutrients data collection and analytics to make indoor farming are the main elements CEA regulates, allowing more efficient. New, primarily small, techvegetables, fruit, and flowers to be cultivated nology companies are offering an array of inteToday, in ideal growing conditions that would be grated solutions for managing CEA operations, greenhouses impossible to achieve consistently in tradiselling subscription-based services to estabtional open-field agriculture. greenhouse growers and CEA start-ups. and other CEA lished Soil-based growing systems in modern GrowFlux, Inc., a 5-year-old firm based in structures – greenhouses still comprise the largest segment Philadelphia, Pennsylvania, is a good example of CEA, but indoor farming, particularly vertical from repurposed of the trend. Founded by Eric Eisele, an entrefarming in urban settings, is growing steadily preneur/engineer with experience in the industrial with hydroponic and aeroponic systems. In industrial Internet of Things, the company 2017, the global indoor farming market was manufactures connected horticultural lighting buildings to valued at $106.6 billion and is expected to and sensing solutions and indoor agriculture register a compound annual growth rate of container farms automation systems. 3.4 percent between 2018 and 2023. North Artificial lighting-based indoor agricul– are in use America accounted for nearly 44.2 percent of ture systems are receiving “huge interest” globally and the global market in 2017. from vertical farming operators, technology With United Nations predictions that by produce a wide companies, and investors, says Murat Kacira, 2050, more than two-thirds of the world’s Ph.D., director of the Controlled Environment 9 billion people will live in cities, CEA can variety of crops. Agriculture Center at the University of Arizona. contribute significantly to the year-round “That’s where you’ll find software compaproduction of fresh vegetables in urban nies, cloud computing/data analytics compaareas, according to the U.S. Department of nies, even those dealing with artificial intelligence Agriculture. But the agency also acknowledges the and machine-learning,” Kacira said. “There’s huge challenges to modern CEA, including high startinvestment from companies like Amazon and up costs, high energy consumption and costs, Google, banks, and other investors – not only for the comparatively limited number and variety of use in the vertical farming sector but also to make crops that vertical farming can currently produce them available for greenhouse operations.”

USDA PHOTOS BY PRESTON KERES

Above: Allen Sirmon, right, speaks with U.S. Department of Agriculture Alabama State Executive Director David McCurdy, center, about the butterhead lettuce grown through hydroculture in the Sirmon Farms greenhouse. In the greenhouse, where oxygen and nutrients are regulated, the lettuce grows 20 to 30 percent faster than in the fields. Right: Farmer Sara Constantineau grows three different varieties of basil in a vertical farm setting at Square Roots, a group of urban farms housed in shipping containers, in Brooklyn, New York.

Artificial lighting represents the largest expenditure for vertical farms and cannabis growing facilities, and is a considerable expense for many greenhouses. Thus, advances in lighting technology are a prime focus for CEA operators. In recent years, LEDs have gained popularity, but many in CEA are wary, noting their high cost of installation and operation. GrowFlux offers integrated solutions for artificial lighting, Eisele explains. The company’s products start with broad-spectrum LED lights, which produce light in the spectral range that plants use for photosynthesis. The “tunable” LEDs allow indoor growers to manipulate crop outcomes and flowering. “We’re also able to shorten harvests and boost the chemical content of crops with certain spectrum settings of light,” Eisele said. Digital microclimate sensors that monitor temperature, humidity, carbon dioxide, vapor pressure, and light in close proximity to crops are also part of GrowFlux’s smart CEA package. Unlike more common wall-mounted sensors that measure the

overall conditions in a greenhouse, microclimate sensors capture plant response to conditions at the source. Data from the sensors can be fed into algorithms in GrowFlux’s automated systems to tailor control of light or other environmental conditions for optimum growing. GrowFlux’s Chlorophyll Fluorescence Sensor, or CLF, is a good example. Set to debut later this year, CLF allows indoor farming operations to detect how efficiently photosynthesis is happening in real time inside plants. “With that data, we can identify the circadian rhythm of a plant,” Eisele explained. “We can determine when the plant is not photosynthesizing as efficiently as it may be in other parts of a day. Then 19

PHOTOS COURTESY OF GROWFLUX, INC.

we can feed that data into our lighting control scheduling.” Microclimate sensors feeding data over a wireless network to GrowFlux’s automated lighting controls increase production and save energy. “We’ll feed direct plant response data into our algorithm,” Eisele said. “That will tell our lights to go to full intensity when the plants are able to use all of the light. When they’re not, the algorithm will tell the lights not to produce as much light.” Data integration completes the system. GrowFlux is at work currently on a cloud-based platform that 20

Horticultural LED lights from GrowFlux installed in a greenhouse. The company’s lights can be “tuned” using input from microclimate sensors to deliver the appropriate amount of light for optimum growing.

will allow the company to modularize the complex algorithms it has developed for automated lighting and other environment controls. With open source platforms, users will be able to “drag and drop” algorithms tailored for their needs into control automation software. “We’ll be offering our data integration platform as a service on our cloud platform.” CEA operators will be able to subscribe to GrowFlux for a monthly fee with environmental control software, sensors, and data-warehousing in the cloud included. Smart CEA as a service is a model Kacira

An indoor cannabis cultivation facility featuring GrowFlux lighting. Advances in lighting technology are of particular interest to CEA operators, as artificial lighting represents the largest financial expenditure for vertical farms and cannabis growing facilities, and is generally a significant expense for many greenhouses.

says indoor growers will adopt more and more. He explains that until recently, CEA operations purchased environmental control systems (sensors, controllers, and software) as a package. “You installed it in the computer at your site, learned how to operate that system, and how to analyze the data you get. “But now high-tech environmental control system companies like this are providing software-based control as a fee-based service via the cloud,” he said. “Operators don’t worry about installing software at their site. They simply access the cloud for data extraction and analysis. This comes with innovative data analytics and visualization where growers would not necessarily need to dig into the data and grasp the analytics on their own.”

THE HUMAN TOUCH While the benefits of smart CEA can be significant, they are not presently being maximized, says Kacira. That’s because technology solutions

for CEA – whether in the form of software-driven automation and environmental controls or hardware enabled by software, including robot labor – must be utilized by greenhouse operators and indoor farmers who understand the fundamentals of biology and agriculture. “That has been the limitation of the industry so far to grow at a speed beyond what you’re now seeing,” he said. “They’re missing a component, not understanding the biology or engineering associated with these systems and agriculture, not understanding the analytics as well in an integrated fashion.” That’s why graduates of the University of Arizona’s Controlled Environment Agriculture Center and similar programs nationally are in demand. They are key to CEA’s future, Kacira says. “We see that gap in many of these operations,” he said. “You bring together expertise on the computational side and some expertise on the agriculture side, but they don’t talk to each other effectively sometimes. People are needed who can make the linkage, people who can help the biological or agriculture group present their needs in terms of plant production 21

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PHOTO COURTESY OF DR. MURAT KACIRA, UNIVERSITY OF ARIZONA CONTROLLED ENVIRONMENT AGRICULTURE CENTER

so that engineering can understand that need and deliver the technology compatibly.” Kacira thinks that traditional agriculture degree programs will not be able to deliver the kind of people CEA needs. He argues that the industry is looking for graduates who are trained broadly in collaboration-based degree programs where graduates can specialize in one discipline but also learn other skill sets including engineering, biology, and soft skills like business and entrepreneurship. “This requires nontraditional, multidisciplinary, collaborative degree programs in university settings,” Kacira explained. “I would like to underline that investment in human capital is very important.”

MARRYING CEA AND FIELD-BASED AGRICULTURE The notion that controlled environment agriculture operations like greenhouses and the varied indoor facilities used for vertical farming are separate from field-based farming has to change, Kacira says. Vertical farming in urban settings or in food deserts like the planet’s northern and southern latitudes or

Murat Kacira, Ph.D., speaks with a student at the University of Arizona Controlled Environment Agriculture Center vertical farm research and education facility. Kacira believes graduates who understand both the agricultural and engineering components of CEA are necessary to move the industry forward.

in the Middle East can be viable, Kacira observes, producing food crops linked directly to local distribution facilities and markets and conserving resources. But integrating greenhouses, vertical farming, and open field agriculture can produce larger benefits. He suggests that vertical farms growing seedlings or transplants could be co-located with greenhouses, which can then use the seedlings to produce crops. “You can improve the quality, consistency, and cost in terms of growing seedlings that are needed for greenhouse operations. And you save space doing that. “That marries the complementary nature of greenhouses and vertical farming in food production. You can even do it with field-based agriculture where you need transplants and seedlings, which could be grown in vertical farms or greenhouses with highquality consistency in a speedy way.” The point at which technology, efficient use of energy, automation, and maximization of human capital intersect is the target CEA should be aiming for, Kacira concludes. “I think if we can integrate field-based and CEA operations and bring technology and people to bear, we will definitely succeed in growing food and using resources more sustainably and cost effectively.” 23

TRACEABILITY

SUPPORT GROWS FOR FOOD SUPPLY TRACEABILITY BY CHARLES DERVARICS

hen the U.S. Food and Drug produce and floral supply companies. By advising Administration (FDA) issued a national Americans not to eat, serve, or sell romaine lettuce alert on the safety of romaine just before the start of the 2018 holiday lettuce last November, the decision cast a spotseason, the agency nearly ground an entire light on a key challenge for the food industry: industry to a halt. And at a time when nutri“People just the limited ability to identify where contamitionists recommend more consumption of nated produce enters the U.S. food supply. For fruits and vegetables, it may undermine want to know experts working on this issue, the news also confidence for the long term. more about the consumer presented some of the strongest evidence yet While it hurts corporate bottom lines, Treacy of the need for food supply traceability, or the added, “It’s also a major health issue.” products they ability to easily trace back the sources of fresh supply traceability dates back to use, and this is theFood items delivered to local grocers. 1930s, when retailers and consumers “If the FDA says not to eat a certain a good thing.” wanted proof that high-end products such as commodity, it affects consumer confidence French champagne actually came from the not just in romaine lettuce but in all leafy advertised country of origin. But the issue has greens,” said Ed Treacy, vice president of supply taken on more health implications in recent years, chain efficiencies at the Produce Marketing from companies wanting to quickly find sources of Association, a trade organization representing food contamination to consumers seeking proof that 24

Left: The Food and Drug Administration issued a national alert on the safety of romaine lettuce in November 2018 after an E. coli outbreak was linked to its consumption. While traceability, the ability to quickly and easily trace foods back to their sources, will not prevent contamination, it can speed up the process of determining the source of contamination. Below: An employee stocks leafy greens at a Walmart store. Walmart will require its leafy greens suppliers to participate in end-to-end traceability of their product by Sept. 30, 2019.

PHOTO COURTESY OF WALMART

PHOTO BY LIZ WEST

products are organic or free of genetically modified organisms with a label of non-GMO. “People just want to know more about the products they use, and this is a good thing,” said Kenneth Côté, director of U.S. agriculture at Intertek Agricultural Services, which conducts audits, inspections, product testing, and certifications for companies and government entities. He called it “an inevitable conclusion” in a global society where citizens value quality. Traceability also offers industry and government a way to address a safety issue before it becomes a national recall, and it stands to contribute to the nation’s health. According to the U.S. Centers for Disease Control and Prevention (CDC), 1 in

TRACEABILITY

A carton of blueberries is scanned after being traced from farm to store on the IBM Food Trust blockchain network. IBM Food Trust uses blockchain technology to address issues in the global food supply chain, including safety, freshness, waste, and sustainability.

More companies may join the trend in 2019 in response to a new policy just instituted by retail giant Walmart with help from IBM. After conducting pilot projects, the retailer has pledged to require complete supply chain traceability for all leafy greens it sells before the end of this year. “Our customers need to know they can trust us to help ensure that food is safe,” said Charles Redfield, executive vice president of food for Walmart U.S. “These new requirements will help us do just that.” Prior to the announcement, Walmart conducted extensive research testing new technologies. In one pilot using traditional supply chain processes, it took the company six days and more than 18 hours to trace a pack of mangoes from a store back to its point of origin. With a blockchain traceability solution through the IBM Food Trust Network, however, such information was available in just 2.2 seconds. A letter from the company to suppliers said the goal is not just more data but faster gathering of quality information

IBM PHOTO

6 Americans – or 48 million individuals – get sick every year from a foodborne illness. Another 128,000 require hospitalization, and in some cases, it can take weeks to find the cause of contamination. Prior to the November recall, an E. coli outbreak affecting romaine lettuce earlier in 2018 resulted in five deaths and more than 200 illnesses in 36 states. After a lengthy investigation, that event was eventually traced back to contaminated water near Yuma, Arizona. At its core, traceability provides tamper-free data on all aspects of food harvesting and handling. It may include labels or advanced shipment notifications providing all the key data on a product from farm to store or table. “It will record data at critical tracking events – when you make it, how you pack it, when you ship and receive it, when you turn it into something else, and when you might dispose of it,” Treacy said. “It captures the lot number to tell what you did and who you did it with.” While some products may have tracebacks at certain stops along the way, he said it is essential to have traceability throughout the supply chain to make it truly effective. “There’s an increased awareness of how critical it is to have whole chain traceability,” Treacy said. “Having it just in pieces or sectors within the supply chain doesn’t do people or regulators much good. Everybody’s got to do their part.”

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through technology. That letter outlines a goal to trace back leafy green products “within seconds, not days.” If growers want to continue doing business with Walmart, they will need to participate in endto-end traceability by Sept. 30, 2019. Experts believe this move could serve as a tipping point for the food service industry. “If companies see their top competitors using it and gaining an advantage, they may quickly follow suit,” Treacy said. “Leafy greens are a starting point for obvious reasons,” although a logical next step may be traceability for all fresh food. Through blockchain, all parties have access to information about product moves, typically through codes and advanced shipment notifications. Treacy said an important theme is not just safety but transparency, as companies can find and address inefficiencies in their supply chain. In many cases, codes are scanned in as a product moves from point to point to point, with companies able to pinpoint delays. Traceability will not prevent the problem of contamination, but it can speed up the process of finding a source of contamination, he said. Currently, hospitals and medical centers report patient data to the CDC, which notifies the FDA. At that point, investigators begin to talk with those affected by the contaminated food to learn what they ate and where they purchased food during the previous seven to 10 days. Along with E. coli, listeria and salmonella are other major pathogens sometimes found in food products. “It’s like putting a puzzle together,” according to Treacy. “We need to do our tracebacks more quickly, and it’s not good for business when you have product recalls.” Yet as word of blockchain grows, interested companies are not just those wary of product recalls. Many are businesses looking to build their market base for the future. “Many of our customers are companies that have decided to be proactive in their quality assurance to protect their brand,” Côté said. E. coli outbreaks in leafy greens may have prompted many companies to look at technology options to trace back the origin of food. “If people stop eating greens, it’s not good for the industry as a whole.” Although improved food safety is a benefit of traceability, another is the ability to certify that products are as described on a can or bottle. One example from Intertek’s recent work involves jars of olives, Côté said. If a company says its olives are grown in Greece, a traceability application can provide that type of documentation. Intertek was asked by a company to do just this type of certification. “With our integrity preserved programs, we are able to follow each aspect of the supply chain to ensure that customers’ claims are backed by certification,” he said.

A Proposition 65-mandated warning sign at a California Starbucks informs customers of cancer-causing chemicals that can be found in the establishment’s offerings. Producers doing business in California who want to tout their goods as free of pesticides or certain chemicals can back up their claims with certification made possible through traceability.

Another popular request from states and countries is to certify that a product is free of trace metals. Often these certificates are available electronically, but they also can be attached to the item for sale. Across the food industry, certification of products as organic is also a high-growth area. For growers worldwide, the state of California is a significant driver behind the traceability trend. In that state, Proposition 65 requires companies to provide special warnings to consumers about pesticides and cancer-causing chemicals. If companies want to continue to do business in the state and succeed, many want to implement processes that certify their products as pesticide free. “Consumers are aware of these trends, and companies want to do business in California,” Côté noted. Yet another contributor is the Food Safety Modernization Act signed into law by President Barack Obama in 2011. Under the act, FDA has new authority to regulate the growing, harvesting, and processing of food. Central among the law’s new powers is the ability of the government to mandate a product recall. The agency continues to work on other far-reaching provisions of the law, including pilot projects, more than a dozen new rules, and a variety of guidance documents and notices. Looking at the long term, consumers may not care much about the precise technology used to promote supply chain traceability. But the bottom line is that they want to know that their products are authentic and safe. As a result, these efforts can improve customer confidence and loyalty. “It’s better for the consumer if companies are proactive,” Côté said, “since consumers help drive all of this.” 27

USDA OUTLOOK: 2019

USDA OUTLOOK: 2019 BY CRAIG COLLINS

USDA’s 62,000 employees were furloughed during the government shutdown. On Jan. 9, the Congressional Research Service reported that while select USDA functions continued after the shutdown, many others had stopped, including “data collection and analysis that inform the commodity markets, development of regulations to implement the new farm bill ... completing the Administration’s ‘trade aid’ payments, processing and funding farm loans and guarantees, rural development loan and grant programs ... agricultural research programs and grants, and many international assistance programs.” The shutdown continued past Jan. 15, the deadline for farmers harmed by the administration’s trade war to apply for relief payments – leaving many in the lurch. John Heisdorffer, an Iowa farmer and president of the American Soybean Association, said the shutdown couldn’t have come at a worse time for farmers already suffering adverse market conditions. “Farmers rely on their county officers to get commodity loans through the CCC [Commodity Credit Corporation],” he said during the shutdown. “Those offices are shut down now. They cannot get loans. If things get bad enough and they can’t get a loan through their normal lender, the FHA – the Farmers Home Administration – can’t step in. Those offices are also shut down. So it’s really putting farmers in a bind.” On Jan. 16, USDA Secretary Sonny Perdue announced that, in an effort “to minimize the impact of the partial federal funding lapse on America’s

Above: A U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) loan officer talks with Rick Davis Farms owner Rick Davis in one of his cotton fields outside of Quitman, Georgia. FSA offices were closed for much of the government shutdown, leaving producers without access to loans.

PHOTO BY PRESTON KERES

he U.S. Department of Agriculture (USDA) was among several federal institutions faced with uncertainty at the end of 2018, when an impasse over the $5.7 billion in border-wall funding President Donald Trump demanded left several executive branch departments unfunded – at least in part – and triggered a 35-day partial government shutdown. By the time of the shutdown, USDA and several other departments were being funded not through the normal appropriations process, but through continuing resolutions – stopgap measures that generally sustain existing funding levels – that expired on Dec. 21. Further complicating the picture for USDA is the fact that its programs are funded through separate measures: Benefit programs mandated by law, such as crop insurance, nutrition assistance (“food stamps”), and conservation and commodity programs, are funded through farm bills, typically passed at fiveyear intervals; the most recent farm bill, the $867 billion Agriculture Improvement Act of 2018, was signed into law by Trump on Dec. 20, 2018. The operating costs associated with administering those programs, however, along with discretionary spending on programs such as research and the department’s rural broadband initiative, are funded through normal budget appropriations. And with no agriculture appropriation bill signed by the president by the time the continuing resolutions expired in late December, the USDA and those who rely upon it felt the effect. According to the White House Office of Management and Budget, more than two-thirds of

USDA PHOTOS BY PRESTON KERES

agricultural producers,” the USDA would call back about 2,500 employees and temporarily reopen approximately half of its Farm Service Agency (FSA) offices, which process and administer crop insurance and farm loan programs, to provide limited services assisting individuals with existing loans. About a week later, on Jan. 22, Perdue announced that all FSA offices would be open and providing a greater array of services starting Jan. 24, and that the deadline to apply for trade relief was extended to Feb. 14. As it turned out, the action taken to reopen offices came at the tail end of the shutdown. On Jan. 25, the president signed a three-week funding measure that would reopen the government until Feb. 15 – but he left open the possibility that it could be shut down again if Congress did not include border wall funding in the next spending bill it put forth. As furloughed USDA employees returned to work in late January, the appropriation for USDA’s 2019 fiscal year remained in limbo. However, the budgeting process up to that point offered important hints about the near-term future of agricultural policy and departmental structure. The White House proposal, issued in February 2018, was a topline request about 16 percent lower than the previous year’s budget, and included reductions in rural development, food stamps (the Supplemental Nutrition Assistance Program, or SNAP), and farm programs. The administration requested a 27 percent cut overall in discretionary accounts. Both the House-reported and Senate-passed bills generally rejected the severest of these cuts. Finally, on Feb. 15, 2019, Trump signed an omnibus spending bill that funded the remaining parts of the government that lacked finalized budgets, thus averting another shutdown. Because the spending bill he signed did not include the full amount of border wall funding he sought, the president also signed a declaration of national emergency that would enable him to reallocate funds from other parts of the government – without the approval of Congress – for the wall. Opposition to the move has been strong and swift. On Feb. 26, the House of Representatives voted to overturn the

Top: USDA Secretary Sonny Perdue, accompanied by Chief Economist Dr. Robert Johansson and Acting Budget Officer Diem-Linh Jones, is questioned by Sen. John Hoeven, R-N.D., on April 11, 2018, during his testimony to the Senate Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies about proposed budget estimates and justification for fiscal year 2019 for the Department of Agriculture. Congress generally rejected the severest cuts to USDA’s budget that appeared in the president’s FY 2019 budget proposal. Above: Contract lineman Brandon Sims climbs a utility pole to frame for future stand wire in February 2018 as Virginia’s BARC Electric Cooperative leads the way in the area outside Lexington, Virginia, in installing fiber-optic cables to the existing electrical grid to bring dependable high-speed broadband to the area for the first time. Given that rural areas where business and residential consumers use broadband service are more likely to enjoy higher incomes, lower unemployment rates, and stronger growth than those without broadband, the USDA is taking steps to expand broadband service to rural areas that currently lack sufficient access.

declaration. At press time, the Senate had yet to vote on the Housepassed resolution to block Trump’s national emergency.

RURAL BROADBAND Despite the drama that marked the passage of a FY 2019 federal spending bill, several new plans and programs have emerged within USDA. Last year the department launched a pilot program, ReConnect, that allocated $600 million for the expansion of broadband service to rural areas without sufficient access. The threshold for “access” was defined as a minimum download speed of 10 megabits per second (Mbps) and 1 Mbps for uploads. 29

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USDA PHOTO BY LANCE CHEUNG

Agriculture Secretary Sonny Perdue, at podium, and, from left, U.S. Representatives Bruce Lee Poliquin, Anderson “Drew” Ferguson IV, Douglas L. LaMalfa, Robert Brown Aderholt, and Roger Wayne Marshall take questions after announcing on Dec. 13, 2018, that the USDA is offering up to $600 million in loans and grants through its new ReConnect program to help build broadband infrastructure in rural America. Congress appropriated funds in the fiscal year 2018 budget for this broadband pilot program.

The announcement of the program was followed by a public comment period in which critics weighed in, with some saying 10/1 Mbps was far too slow; ReConnect projects should, at minimum, meet the Federal Communications Commission’s (FCC) own definition of “broadband” as 25/3 Mbps, and aim for a standard of 50/10 Mbps. Another common concern was that the program didn’t appear to restrain costs for rural customers, who tend to pay more for internet service than urban and suburban customers. The most recent “minibus” spending package, the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act of 2019, includes an additional $425 million in grants and loans to internet service providers to bring broadband connectivity to rural communities. In December 2018, as USDA, the FCC, and other federal partners were finalizing rules for the pilot, U.S. Secretary of Agriculture Sonny Perdue announced its launch and invited communities and service providers to begin applying for grants and loans to fund projects in communities where the 10/1 Mbps service threshold isn’t met. As a result of public commentary, however, projects funded through the pilot will be required to provide speeds of 25/3 Mbps. While the pilot kicked off, the Midwest Center for Investigative Reporting (MCIR) provided an update on other rural broadband projects funded by USDA through 2018 – a total of 36 projects, totaling $228 million, in 22 states. Federal assistance for rural broadband is set to expand from these projects to include the initial $600 million in ReConnect funding; another $550 million with passage of the FY 2019 USDA budget; and, via the FCC’s Connect America Fund, nearly $2 billion over the next decade. While this sounds impressive, the MCIR article points out two likely concerns for the future: First, it’s a drop in the bucket; by the FCC’s own estimate, it would require $80 billion to bring a fixed fiber-optic connection to the 14 percent of Americans who lack broadband access – and about half that cost would be consumed by projects supplying the final 2 percent of Americans. Second, broadband in remote areas is already expensive. Fiber-optic technology is the most reliable for broadband, and while 26 of the 36 projects approved by USDA so far mention fiber-optic technology, few rural advocates believe it’s the most efficient solution. Jim Moseley, a retired USDA policymaker who now farms in rural Indiana, said, “We aren’t really looking at the most cost-effective technologies right now to deliver internet to rural areas. Investing in wireless technology probably gives us more net benefit than using fiber-optic cable.”

In any case, broadband internet for many rural communities is still a long way off; the first ReConnect projects, which may take up to five years to complete, are expected to be awarded in the summer of 2019, with the first construction activity expected to begin at the end of the year.

USDA REORGANIZATION The Trump White House had announced a reorganization of the USDA before Perdue’s appointment was confirmed by the Senate in April 2017, and the new secretary enthusiastically embraced the idea, announcing a plan aimed at “improving customer service and efficiency.” Some of the changes undertaken over the past year-and-a-half have been bureaucratic reshufflings that have caused little fuss, while others have been controversial. The biggest restructuring move announced by the department in 2018 fell squarely in the latter category: In August, USDA announced it would be moving both the Economic Research Service (ERS, which employs 303) and the National Institute of Food and Agriculture (NIFA; 404 employees) outside of Washington, D.C. The department gave several reasons for the move: to improve its ability to attract and retain highly qualified staff from land-grant universities; to place USDA resources closer to stakeholders; and to save taxpayers money through savings on employment costs and rent. The department also announced its awareness that not all of the more-than-700 employees would be able or willing to move away from the D.C. area, so it would be working with the White House Office of Management and Budget (OMB) on payment incentives for early retirement and separation. ERS and NIFA are two of the four research services led by the Under Secretary for Research, Education and Economics (REE), 31

THIS EDITION OF OUTLOOK IS AVAILABLE ONLINE. 2018 EDITION

PICK & CHOOSE Robots Are Coming to a Farm Field Near You

2018 EDITION

PICK & CHOOSE Robots Are Coming to a Farm Field Near You

PLUS:

PLUS: The Trade Wars Highlights of the New Farm Bill

The Trade Wars

ROBOTS AND FARMING

Highlights of the New Farm Bill

PICK AND CHOOSE Robots Are Coming to a Farm Field Near You BY ERIC TEGLER

catalysts for developing agribots are inexorably rising demand for food and rising labor costs.

USDA PHOTO BY LANCE CHEUNG

Above: A strawberryharvesting robot developed by Harvest CROO moves through the rows of a strawberry field.

PHOTO COURTESY OF HARVEST CROO

Farm laborers pick squash on a farm in Virginia. Issues of labor cost and availability have helped to spur development of robots.

worldagnetwork.com/US_Agriculture_Outlook_2019

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USDA PHOTO BY LANCE CHEUNG

each of which had its proposed FY 2019 budget cut significantly from the 2018 level. The administration proposed cutting the ERS budget from $86.8 million to $45 million, a cut of about 45 percent. The August announcement of the ERS/NIFA move came within weeks of the House and Senate markups of this spending request, each of which either restored 2018 funding levels or greatly reduced the cuts. This sequence led some critics, including the Union of Concerned Scientists (UCS), to infer the proposed move was a “back door” attempt to shrink ERS and NIFA, and that another feature of the reorganization plan – moving the ERS out of REE and into the Office of the Chief Scientist, within the secretary’s office – was designed to make science support policy after it was made, rather than inform policy before it was made. In August, the UCS charged that the USDA’s “restructuring may have been used to pressure scientists to quit, to greatly reduce the size of the scientific divisions, and to potentially limit the scientific integrity and autonomy of ERS researchers.” The ERS provides economic research and information to inform policymaking in both the public and private sectors. It supplies objective estimates of the general health of the food and agriculture sectors, and measures the effectiveness of existing programs and policies. Shortly after the move was proposed, Susan Offutt, who served as ERS administrator from 1996 to 2006, under both the Clinton and George W. Bush administrations, published an editorial in The Hill arguing that ERS – an institution “ranked No. 3 in research quality among more than 2,500 academic

The Whitten Building, home to U.S. Department of Agriculture headquarters, in Washington, D.C., is one of several USDA offices in the National Capital Region. The USDA announced in August 2018 its intention to move the Economic Research Service (ERS) and the National Institute of Food and Agriculture (NIFA) – two of four USDA research services – outside of Washington, citing cost-saving and recruitment purposes among its reasons for the relocation. Some critics read the proposal as an attempt to shrink ERS and NIFA.

and government agricultural economics institutions worldwide” – should stay in Washington, D.C. “ERS works on national policy,” Offutt said in an interview in January. “National policy is made in Washington.” Offutt was one of more than 1,100 scientists who petitioned leaders of the House and Senate agriculture committees to delay the reorganization until it had received more stakeholder input. Offutt wasn’t satisfied with the department’s rationale for moving ERS and NIFA out of the area. For its part, USDA provided no data to support its claims that the move would improve recruitment and retention, improve stakeholder engagement, or save money. “They’re going to have to spend money on non-research items to move people,” Offutt said, suggesting the move might be a zero-sum game. Offutt also felt the ERS belongs in the REE mission area, rather than reporting to the Office of the Chief Scientist. “The purpose of a research agency is to look to the future, to examine options, to understand the impacts of current programs,” she said. “The function of economists in the secretary’s office is to support the secretary’s policies. Those are two distinct roles.” On this point, other former ERS scientists were divided. Former ERS chief scientist Joseph Glauber, who retired in 2014, agreed that moving ERS and NIFA outside Washington was a bad idea, but didn’t think the service’s independence would be threatened by a move into the secretary’s office. In a December interview in Science magazine, Glauber said: “Everybody in the department ultimately reports 33

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to a political appointee. What’s important is that its boss back ERS and defend its research.” Amid the public’s discussion of the potential relocation and realignment, the department advanced its proposal to move ERS and NIFA by soliciting proposals from communities around the country with ambitions to become the new homes of these institutions. In October, Perdue announced that 136 groups, in 35 states, had expressed interest and submitted proposals, and that new locations would be selected from among the applicants by January 2019. Concerns and questions about the move, however, resonated with legislators. On Dec. 20, the day the 2018 farm bill was enacted, Democratic members of the House of Representatives introduced a new bill, the Agricultural Research Integrity Act (ARIA) of 2018, aimed at halting the move, but the bill was doomed for rejection by the Senate’s Republican majority. The new legislative session that began in January during the government shutdown saw a new Democratic majority in the House, and Democratic legislators who had sponsored ARIA in leadership positions on the House Appropriations Committee and its subcommittee on agriculture. On Feb. 14, Congress reintroduced ARIA. Additionally, the spending bill that Trump ultimately signed on Feb. 15 was accompanied by a Joint Explanatory Statement in which conferees direct USDA to provide a detailed

President Donald J. Trump delivers remarks in the Rose Garden of the White House on Feb. 15, 2019, explaining his intention to sign a declaration of national emergency. Shortly thereafter, Trump signed both the declaration and a bipartisan spending bill that funded the remainder of the federal government for FY 2019. The spending bill was accompanied by a Joint Explanatory Statement that halts USDA’s proposed relocation of ERS and NIFA.

analysis of its reorganization proposal as well as to delay indefinitely the transfer of ERS. They wrote: The conferees are concerned about the unknown costs associated with the proposed move of the National Institutes of Food and Agriculture and the Economic Research Service to a new location outside of the National Capital Region. In submitting the fiscal year 2020 budget justification, the Department is directed to include all cost estimates for the proposed move of the two agencies, as well as a detailed analysis of any research benefits of their relocation. There is an expectation that this process will be followed in the future for any other potential proposed agency relocations by the Department. The conferees support an indefinite delay in the proposed transfer of ERS to the Office of the Chief Economist. At this time, the conferees find it appropriate for ERS to remain under the Research, Education and Economics mission area. The conferees take this position as several questions remain about the merits of the proposed transfer as well as the proposed relocation of ERS outside of the National Capital Region. Insufficient information and justification relating to the reorganization and relocation make moving forward on these proposals premature at this time. It would seem ERS and NIFA, and their 700 employees, are staying put – for now. 35

FARM BILL

THE AGRICULTURAL IMPROVEMENT ACT OF 2018 Highlights of the New Farm Bill BY CRAIG COLLINS

n Dec. 20, 2018, President Donald Trump supports for U.S. farmers, as well as greater flexibility signed an $867 billion farm bill, officially in choosing among them. known as the Agricultural Improvement Act of Though the provision for stricter work requirements 2018, that reauthorized and made minor modifications for SNAP – by far the largest USDA-administered to programs and funding levels authorized in the 2014 program, accounting for 80 percent of farm bill farm bill. The bill was passed by an overwhelming spending – was eliminated from the bill signed by bipartisan majority; the 87-13 vote in the Senate was Trump into law, the administration immediately the largest Senate majority ever for a farm bill. unveiled a plan to toughen work requirements Earlier, in May, a vote had actually failed in the by restricting the ability of states to waive House of Representatives, amid controversies existing requirements. According to Agriculture about work requirements for beneficiaries of Secretary Sonny Perdue, the proposed changes The bill was the Supplemental Nutrition Assistance Program would be entered into the Federal Register passed by an (SNAP, or “food stamps”) and immigration policy and subject to a 60-day period for public for agricultural workers, but toward the end of overwhelming comment. That was subsequently delayed the year, factors converged that compelled negowhen most USDA activities were suspended bipartisan tiators to smooth over differences between the amid the 35-day government shutdown that House and Senate versions. First, several provi- majority; the 87- began on Dec. 22. However, the rule change sions of the 2014 farm bill expired on Sept. was submitted on Feb. 1, 2019, soon after the 13 vote in the 30, the end of the fiscal year, without replacegovernment reopened on Jan. 25, 2019. The ments. Second, in November, the Economic Senate was the comment period ends April 2, 2019. Research Service (ERS) of the U.S. Department largest Senate of Agriculture issued a grim Farm Income Forecast for 2018: The nation’s net farm income, majority ever for RISK MANAGEMENT TOOLS the service projected, was set to drop 12 percent a farm bill. from the previous year, even after the first round The Trump administration’s trade war, of “trade aid” payments announced by the U.S. which by the end of 2018 had widened to Department of Agriculture (USDA) in July were include conflicts with China, Mexico, Canada, factored into the equation. Europe, and Turkey, provoked retaliatory tariffs on When Democrats won control of the House of U.S. agricultural products, which in turn caused Representatives in the November mid-term elections, most prices to plunge for American producers. lawmakers from both parties understood that to delay While trade war-associated risks aren’t addressed further would mean beginning negotiations from specifically by the farm bill (affected farmers scratch when the 116th U.S. Congress was seated are being supported with $12 billion in subsidy in January 2019. The farm bill that resulted offers very payments, much of them distributed through few truly new provisions, but does extend a variety of USDA’s Market Facilitation Program), they provide

OFFICE OF REP. ROGER MARSHALL USDA PHOTO BY PRESTON KERES

Above: President Donald Trump signs the $867 billion Agriculture Improvement Act of 2018 on Dec. 20, 2018, at the White House. Right: James Matheny and his wife operate Stonewall Angus LLC, in Fairplay, Maryland, where he markets his grass-fed beef directly to the public from his 60-acre farm. Matheny also grows grain crops and makes hay on several rented farms. He participates in several USDA programs that are funded by the farm bill, such as Agricultural Risk Coverage and Price Loss Coverage and the Conservation Reserve Program.

a textbook example of the unexpected pitfalls American producers confront every year. Most of the tools offered by the federal government to manage these risks are contained in two farm bill titles: Title I, which covers federal commodity programs, and Title XI, which covers crop insurance. According to Art Barnaby, a professor of agricultural economics at Kansas State University who has spent his career studying and working on crop insurance and commodity programs, the 2018 farm bill offers modest changes to federal crop insurance. “What they didn’t do with the crop insurance title is probably more important than what they did do,” he said, “because what they didn’t do is put in payment limits, or limit the size of the farm in any way, at least for commodity farmers. ... If you’re willing to pay the premium, you can buy coverage.” Barnaby thinks the commodity title, which establishes an arcane set of rules and procedures for supporting prices and farm income, was the more interesting component of the new farm bill. In their current form, farm commodity programs support farm income through the use of supply controls. The 2014 farm bill, in a sweeping change, eliminated direct payments to farmers and replaced them with two programs: Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC). Each provides support under adverse price or yield conditions at levels above the application of regular crop insurance, but they’re subtly different: PLC payments are triggered when a commodity’s average marketing year price falls below a reference price (formerly “target price”) established in a farm

bill. ARC payments are triggered if the actual revenue from all covered commodities falls below a guaranteed level. Generally, PLC is aimed at steep, multi-year price declines, and the 2014 farm bill offered farmers a one-time opportunity to select either ARC or PLC on a commodity-by-commodity basis – a selection that was binding for the five-year life of the farm bill. The 2018 farm bill offers farmers more flexibility: the chance to choose either program for the 2019 and 2020 crop years, and then, in 2021, to make annual choices between PLC and ARC on a crop-by-crop basis. Barnaby said the new bill also makes subtle but significant improvements to the ARC’s revenue protections: To calculate benchmarks and yields, the program will switch from using data gathered by the National Agricultural Statistics Service (NASS) and derived from individual farmers’ survey responses to data and trend-adjusted yield factors supplied by Risk Management Agency (RMA) of USDA’s federal crop insurance program. “In areas where you’ve got 80 percent of the acres insured under a particular crop practice,” Barnaby said, “you’re pretty close to capturing the entire population with RMA data. You should come up with a very accurate county yield. When you have to revert to representative farms, that’s when data gets really thin and some judgment calls will have to be made.” 37

Dairy cattle at Reinford Farms. The 2018 farm bill includes enhanced support for dairy producers through the new Dairy Margin Coverage program.

to $400,000. The limit on guaranteed loans was raised from $1.25 million to $1.75 million.

CONSERVATION PROGRAMS Conservation programs, covered in Title II of the farm bill, are risk management tools as well; they offer producers support for preserving the integrity of natural resources that help determine the long-term prosperity of a farm or ranch. Title II changes in the 2018 farm bill were subtle as well. The Conservation Reserve Program (CRP), USDA’s flagship conservation program, was established in 1985 to provide

USDA PHOTO BY PRESTON KERES

Federal marketing loans, an indirect means of supporting farm income, are also covered under the commodity title of the farm bill. The 2018 bill increases loan rates for most commodities and eliminates the payment limit. Loan rates provide a “floor” under commodity prices, since producers can, when the market price is lower, claim a payment for the difference between the price and the loan rate. Title I also offers enhanced support for dairy producers, creating a Dairy Margin Coverage (DMC) program that reduces premiums on the first 5 million pounds of production, raises top margin coverage levels, and offers discounts and refunds to those who participated in the DMC’s predecessor, the Margin Protection Program (MPP). Direct farm loans for farm ownership and operation, administered under Title V of the farm bill by the Farm Service Agency (FSA), were expanded by the 2018 legislation: The limit on direct ownership loans was raised from $300,000 to $600,000, and the limit on direct operation loans is raised

USDA PHOTO BY PRESTON KERES

incentives for farmers to take marginal lands out of production for at least a decade and instead convert them into vegetative cover – windbreaks, riparian buffers, or grasslands, for example. The 2018 bill increased the maximum enrollment in CRP from 24 million acres to 27 million acres. To offset the cost of that increase, legislators capped program payments at 85 percent of local rental rates (90 percent, if farmers enroll through continuous sign-up). The Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) were also funded as stand-alone programs by the farm bill, though an earlier House version of the bill proposed folding CSP into EQIP. Both programs were developed to promote production and improve environmental quality by providing payments and technical and educational assistance, but according to Jim Moseley, a longtime USDA policymaker who helped to craft both programs, they’re structured differently: EQIP offers grant funds to farmers who commit to making environmental improvements such as planting cover crops, while CSP rewards them, in the form of annual payments, for the results of comprehensive steps taken to conserve resources such as water, soil, and air. CSP’s longer-term focus makes it a more effective tool for preserving environmental integrity, but the 2018 farm bill, while keeping CSP alive, siphons about $800 million from it annually, to be spent on EQIP and other programs. Why? “Because EQIP is far more politically popular than CSP,” Moseley said.

Kale grown through aquaponics at Mayim Farm in Opp, Alabama. In 2016, Mayim Farm’s owners received funds through the Environmental Quality Incentives Program (EQIP) to construct a hoop house that has enabled them to extend the growing season on some crops and start growing earlier on others. They have also been approved for financial assistance in completing a written transition plan from traditional to organic production. The farm bill authorizes funding for various conservation programs, including EQIP, as well as support for farmers who want to become certified organic producers.

“Think about it: If you’ve never done anything [to conserve natural resources], and you decide you need to change your farm in some way, you can get some cost-share money up front through EQIP. That’s better than having to make the investment and the effort, moving forward with a plan, and finally producing the result – and then signing up for a program that says, ‘OK, I’ll give you a reward for having done that.’” The 2018 farm bill also creates a new pilot program, the Soil Health and Income Protection Program (SHIPP), to evaluate the feasibility of allowing farmers to take land out of production for shorter periods than allowed by CRP. SHIPP, introduced by Sen. John Thune, R-S.D., is a voluntary program, limited to 50,000 acres in the Upper Midwestern “prairie pothole” states. Another new initiative within CRP, the Clean Lakes, Estuaries and Rivers (CLEAR) program, is aimed at improving water quality by protecting waterways from pesticide and fertilizer runoff.

BEYOND THE STATUS QUO Legislators , journalists , and obser vers throughout the agriculture industry – including Moseley, who retired to his farm in Indiana after serving as USDA’s deputy secretary in the George W. Bush administration – have called the 2018 farm bill a “status quo” law that generally sustains existing farm and nutrition policies. The 39

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UNIVERSITY OF KENTUCKY AGRICULTURAL COMMUNICATIONS SPECIALIST/PHOTOGRAPHER STEVE PATTON USDA ECONOMIC RESEARCH SERVICE

new farm bill, Moseley said, “was literally a matter of balancing out interests and moving around money. We didn’t change very much in this farm bill, compared to others. There was nothing that was extremely new or innovative.” Whether you agree with Moseley may depend on your definition of “extremely.” The Agriculture Improvement Act of 2018 did contain some new wrinkles that got some people excited: • The bill legalized the production of industrial hemp and allowed for its regulation by states and tribes under USDA-approved plans. Specifically, the bill eliminates hemp from the definition of “marijuana” under the Controlled Substances Act and creates an exemption for the small amount of THC (marijuana’s psychoactive compound) in hemp, which is grown primarily for fibers used to make rope and textiles – but which may be increasingly valued for another compound, cannabidiol (CBD), a non-psychoactive substance used in health and wellness products. Industry estimates for the future value of the hemp-derived CBD market range from $1.3 billion to more than

Above: A field of industrial hemp at the University of Kentucky College of Agriculture, Food and Environment’s Spindletop Research Farm in 2015. The Agriculture Improvement Act of 2018 legalizes the production of industrial hemp and makes it eligible for crop insurance. Left: The USDA’s Economic Research Service’s projection that 2018 net farm income was set to drop 12 percent from the previous year spurred legislators to smooth out differences between House and Senate versions of the new farm bill in order to get it passed.

$22 billion annually. The new farm bill also makes hemp eligible for crop insurance. • A number of provisions in the bill encourage an increase in the amount of organic food grown in the United States. It establishes permanent funding for organic research – to $50 million a year by 2023, up from the current $20 million. The bill also relieves some of the costs incurred by farmers who want to become certified organic, and allows for stricter scrutiny of organic imports. The Organic Trade Association hailed the 2018 farm bill as “an historic milestone.” • The bill provides unprecedented support to new and socially disadvantaged farmers. It combines two existing programs, the Beginning Farmer and Rancher Development Program and the Outreach and Assistance for Socially Disadvantaged Farmers and Ranchers and Veteran Farmers and Ranchers Program, into the Farming Opportunities Training and Outreach (FOTO) Program, a grant program funded at $435 million over 10 years. It also creates a national beginning farmer coordinator position at USDA, as well as designated coordinators in each state to help with outreach efforts. “The new farm bill,” wrote the Sustainable Agriculture Coalition in a Dec. 12 press release, “includes an ambitious new farmer agenda and makes historic investments in training and outreach initiatives.” It’s understandable that Jim Moseley, who grows commodity crops in Indiana, isn’t as passionate about these new provisions as others. “There were nuanced changes, of course, all the way through the new farm bill,” he said. “The effect it had on me as a farmer is that now I get to evaluate whether I want to use PLC or ARC as my Title I mechanism. I do have choices now that I didn’t have before. Those are small things. But they’re good things.” 41

TRADE WAR

A Short- and Long-term Outlook for U.S. Producers BY CRAIG COLLINS

PHOTO BY JIRI REZAC

resident Donald Trump’s 2016 elec Canada, Mexico, and the European Union, all of tion victory was attributed in part to his whom imposed retaliatory tariffs on a variety of U.S. denouncement of other nations’ unfair goods. China was among the first to respond, with trading practices – particularly China’s – and his tariffs aimed at 128 U.S. products, including wine, pledge to do something about fruits, nuts, and pork; within weeks, them. So it surprised few when, in it had tacked an additional 25 February and March 2018, he fired percent tariff on imports of 106 U.S. the first volleys in what has become After its first tariffs on the products, including soybeans. After an escalating – and widening its first tariffs on the United States United States went into – trade war, slapping tariffs on went into effect in July, China’s list U.S. imports of solar panels and effect in July, China’s list of of taxed imports expanded by more washing machines, followed by taxed imports expanded by than 500 U.S. goods. By the fall, across-the-board tariffs on steel the United States and China were more than 500 U.S. goods. running out of imports from each and aluminum. These tariffs, along with levies other to tax, and their dispute overon foreign tech goods and other shadowed other trade negotiations consumer products, provoked countermoves from in which the United States was involved since Trump major trade partners, including China, Turkey, took office.

Opposite page: Chinese solar panels were among the first imports to be affected by tariffs put in place by the Trump administration in 2018. Above: The price of soybeans, already decreased due to record yields in 2018, dropped further after China imposed a 25 percent duty on U.S. soybeans in retaliation for tariffs on Chinese exports to the United States.

USDA PHOTO BY LANCE CHEUNG

These retaliatory tariffs have stung, particularly among Trump’s political base. China’s 25 percent duty on soybeans, the nation’s top American agricultural import in 2017, for example, struck hard at red-state farmers. According to the Center for Agricultural Policy Review at Iowa State University, about 60 percent of U.S. soybean exports – or about 25 percent of the total U.S. soybean crop – is shipped to China in a typical year. In January 2018, American soybean farmers, after harvesting the largest U.S. crop in history, exported $1.2 billion in soybeans to China. By April, those exports had taken a nosedive, dropping a staggering 98 percent. The short- and likely long-term effects of the trade wars on U.S. producers have been complex, varying by sector, region, production volume, and other considerations. While the outcome of the trade wars for American producers is still a question mark, there are nevertheless several emerging trends.

THE NEAR TERM: LOWER PRICES, SMALLER MARKETS For many U.S. producers, the immediate effect of retaliatory tariffs was a precipitous drop in prices they expected to receive

for their produce. Eric Johannsen, a South Dakota farmer who raises about 1,800 acres of soybeans on his family’s 5,000acre farm, estimated that “the trade war has taken a solid $2 off a bushel of our beans, if not more.” The impact on Johannsen wasn’t as bad as for some of his neighbors; he’d already sold more than a third of his crop before the tariffs were implemented. Soybean prices dropped about 22 percent from April to July, darkening an already bleak picture painted by the law of supply and demand. The year 2018 saw record yields not only for several commodity crops, such as corn and soybeans, but also for specialty crops, including tree nuts. It also saw record yields of California almonds and walnuts, both of which are exported to China in significant quantities. This abundance had already softened prices, and the tariffs triggered a sudden demand slump that ratcheted them down further. Meanwhile, some farmers reported that tariffs on U.S. steel imports had driven up prices they paid for machinery and equipment. These grim circumstances were punctuated by some brightness in September, with the Trump administration’s announcement of a $12 billion bailout program aimed at bringing relief to farmers adversely affected by tariffs, much of it through USDA’s Market Facilitation Program. The first $6 billion was made available in September; by mid-November, $830 million had been paid out. But through the rest of the fall, there wasn’t much good news to make ag producers feel hopeful: China imported zero U.S. soybeans in November, the first time since the trade war began that the country brought in no U.S. supplies. The U.S. 43

Above: World leaders at the G20 Summit in Buenos Aires, Argentina, photographed on Nov. 30, 2018. At a dinner the following day, President Donald Trump and Chinese President Xi Jinping announced a 90-day “truce” in the U.S.-China trade war. Opposite page: In early November 2018, Ambassador of the United States to the People’s Republic of China Terry Branstad, right, had meetings in Washington, D.C., with President Donald Trump, U.S. Trade Representative Robert Lighthizer, and Treasury Secretary Steve Mnuchin and with USDA Secretary Sonny Perdue (pictured at left) to discuss trade negotiations with China in preparation for the G20 meeting in Argentina.

John Heisdorffer, an Iowa soybean farmer and chairman of the American Soybean Association, agrees that bailout subsidies have helped farmers, even if they’ve been relatively modest: $1.65 per bushel for soybean growers, for example. “It’s not making them whole by any means,” he said. “But it is offering enough relief that it’s helping them with their lenders, that they have a decent price now for their soybeans, or at least closer to a normal price.” With his colleagues at Purdue University’s Center for Commercial Agriculture, professor James Mintert, Ph.D., tracks the economic outlook of crop and livestock farmers nationwide in the center’s monthly Ag Economy Barometer. One indicator on which they survey producers is agricultural exports. The farmers’ near-term outlook on this point was fairly optimistic for the first few months of the trade war, but it hit a low at the end of 2018. “In December, we had 26 percent of the people say they think ag exports will actually decline in the next five

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Department of Agriculture’s (USDA) Farm Income Forecast, issued in November 2018, projected a net decrease in U.S. farm income of 12 percent, and a study by the Federal Reserve Bank of Minneapolis documented an increase in farm bankruptcies in the Upper Midwest. In December, the Nebraska Farm Bureau estimated that the trade wars had cost the state’s producers more than $1 billion in revenues. But December did bring some heartening developments. Trump and Chinese President Xi Jinping, during a Dec. 1 dinner meeting at the G20 summit in Buenos Aires, announced a 90-day “truce,” during which they planned to work on negotiating a trade deal and pledged not to add additional tariffs. Farmers experienced some small relief when, in a show of good will, China followed up the announcement with relatively modest purchases of U.S. soybeans: A Dec. 20, 2018 report from Reuters estimated that China had bought approximately 3 million metric tons (MT). In 2017, China imported more than 31 million MT of U.S. soybeans, valued at $12.25 billion. Also in December, the farm bill – the Agriculture Improvement Act of 2018 – was passed, and the second $6 billion of the $12 billion bailout program was made available. The partial government shutdown disrupted payments for a time, but by Feb. 22, $7.7 billion had made its way to farmers, according to the USDA. The “trade aid” payments have helped. Johannsen has taken advantage of them, and said they’ve been particularly helpful to some of his friends: “If it wasn’t for the Market Facilitation Program, it [wouldn’t] look good for a lot of producers,” he said. “I’ve been talking to my banker here, and he says that’s pretty much saved some guys.”

USDA PHOTO BY KEN HAMMOND

years,” he said. “That’s actually the worst number we’ve had with respect to that question since we first started asking it back in 2017.” However, outlook in January was markedly more positive: Just 7 percent said they expected agricultural exports to decrease in the next five years, and 63 percent said they expected them to increase, whereas in December,

59 percent expected an increase. In February, 6 percent said they expected exports to decrease, and 67 percent expected them to increase. Mintert’s Ag Economy Barometer has also documented changes in farmers’ thinking about soybean inputs for the next growing season; by November 2018, about 30 percent

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TRADE WAR

Brazil’s Port of Santos, through which much of the country’s exported soybeans pass on their way to China.

has emerged as a supplier of soybeans to China as well; the country’s exports to China doubled in 2018.

THE FUTURE OF U.S. AGRICULTURE EXPORTS The easy opinion to have, in light of shifts in U.S. exports, is that the long-term outlook for American agricultural exports is grim, and that the trade war will wreak lasting damage. But that’s also too simple a conclusion, largely because it neglects to look at how the trade war is affecting U.S. trading partners. Economic analysts from Forbes, the BBC, and the Asia Times, among others, pointed out that China’s economy was losing steam at the end of 2018, reporting its weakest quarterly growth in a decade, and a 3.7 percent decline in exports to the United States. How these changes would play out remains uncertain, however; the trade war has also played a role in slowing the U.S. economy. Reuters’ quarterly polls of economists have revealed that a majority expect the trade war to harm the U.S. economy as well. In August 2018, CNBC reported that the U.S. trade deficit continued to increase, up 8.6 percent from a year earlier.

PHOTO BY A. DAVEY

of the soybean growers in the survey planned to reduce their soybean acreage in 2019. “A month earlier, it was 19 percent,” he said. “And of the people [in the November survey] who said they were going to reduce their soybean acreage, almost 7 out of 10 – 69 percent of them – said they planned to reduce their acreage by more than 10 percent.” In February, 23 percent of soybean farmers surveyed said they planned to reduce acreage, and of those, 66 percent planned to reduce their acreage by more than 10 percent. As of late February, the USDA predicted that farmers would plant 85 million acres of soybeans in 2019, down 4.7 percent – 4.2 million acres – from 2018. What’s happened to the American soybeans that would have gone to China? Many U.S. producers have either tried to find somewhere else to send them, or simply elected to store them, hoping to wait out adverse market conditions and sell them later at a better price. “Some of the soybeans went to other countries,” said Heisdorffer. “Egypt has been a big buyer. The EU has been a big buyer, and several other countries. But you’ve got to understand, it’s not like we’re gaining a lot of new exports. It’s that these folks used to buy from Brazil – and Brazil is sending everything to China, so Brazil doesn’t have any.” Brazil, where China turned for soybeans after the plunge in U.S. imports, overtook the United States in 2018 as the world’s largest soybean producer. Russia

OFFICIAL WHITE HOUSE PHOTO BY ANDREA HANKS

On March 6, the Commerce Department said the U.S. trade deficit for 2018 reached $621 billion, the highest it’s been since 2008. U.S. farmers comprise a large, diverse sample of Americans, and many remain cautiously optimistic for the future of agricultural exports. “Long term, if we can get China to play a little more fair, it would be good,” said Johannsen. “You don’t have to be smart at all to realize there’s been serious market manipulation going on, for a number of years.” The Trump administration resumed trade talks with China after the truce was declared in December with the aim of getting China to “play a little more fair.” The 90-day détente saw no new tariffs imposed and ongoing negotiations between China and the United States. On Feb. 24, Trump announced that a tariff increase set to take effect on March 1 (the end of the 90 days) would be delayed, because of “substantial progress” made toward a trade agreement; a commitment made by the Chinese to purchase 10 million MT of U.S. soybeans announced two days earlier would appear to support that claim. In talks, the United States has reportedly pushed for China to make substantial changes to better protect U.S. intellectual property, to open the domestic market to U.S. companies, and to increase purchases of U.S. goods, among other demands. According to a Bloomberg News report, China has proposed that it could purchase an additional $30 billion per year in U.S. agricultural products, and the New York Times reported that the country is “rewriting some of its laws and regulations to better protect foreign intellectual property, ban the forced transfer of foreign technology to Chinese business partners and codify equal treatment of foreign companies.” It has agreed to drop the tariffs it imposed in response to Trump’s levies on Chinese goods, and it has asked that the United States drop all the tariffs imposed over the course of the last year. As of early March, negotiations were still underway. And while Trump has described the talks as “moving

U.S. Trade Representative Robert Lighthizer, senior staff, and Cabinet members meet with Chinese Vice Premier Liu He and members of his delegation for U.S.-China trade talks on Jan. 30, 2019, in the Diplomatic Reception Room in the Eisenhower Executive Office Building. Trade negotiations with China are ongoing as of early March.

along well,” he has also said he’s prepared to walk away from a deal “if it didn’t work out.” So for now, farmers remain at the mercy of global dealings outside of their control and must weather the difficult circumstances as best they can until an agreement is reached and conditions improve. “I think in agriculture, there tends to be this longer-run perspective that we’ve got a growing world population,” Mintert said. “We’re going to need to feed that population, and the demand for food is going to remain strong over the next several decades, which provides a good opportunity for the U.S. to continue to grow and to improve its export situation. But in the short run, what we’ve done is helped encourage some additional competition from major competitors.” Whether that short-run outcome ends up being a net negative remains to be seen, but it seems likely it will, at least, be a factor in shifting global export markets. In China, for example, the replacement of U.S. soybeans with beans from Brazil is unlikely to be entirely reversed. “Once you lose a customer,” said Heisdorffer, “you never get all those exports back. It just ain’t going to happen.” Brazil’s rise to soybean-growing prominence was spurred in part by President Richard Nixon’s 1973 export embargo on all grains, including soybeans, a protectionist move designed to drive down domestic prices of agricultural products. The embargo shook the confidence of Japan, for one, in the reliability of the United States as a trading partner; at the time, Japan imported about 92 percent of its soybeans from the United States. Japan soon launched an economic partnership with Brazil that included significant investments in its soybean industry. As long as U.S. trading partners have questions about its reliability, said Mintert, American exporters will continue to suffer. The 4.2 million acres of soybeans that won’t be planted in the United States next year, for example, will certainly be planted somewhere else – most likely Brazil, and maybe Argentina. “Once those acres are in production,” he said, “they’re going to stay in production. It [the trade war] is helping to create stronger competitors for U.S. producers, and I think at least a portion of that damage has already taken place – and the longer this goes on, the more damage is going to take place.” 47

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U.S. Agriculture OUTLOOK 2019 Edition

Articles inside

Trade War

The Agricultural Improvement Act of 2018

USDA OUTLOOK 2019

Support Grows for Food Supply Traceability

CEA and the Human Touch

Tires Versus Tracks

Pick and Choose