Facing Big Changes Down On The Farm

It's the best of times and the worst of times for U.S. farmers.

Red-hot economies such as China and India are hungry for U.S. farm exports.

The bad news is the U.S. may slide into a recession that sideswipes the world economy -- slashing food prices and the appetite that Chinese housewives have for Kansas wheat and Washington apples.

Another dilemma is that input prices -- what farmers pay for seeds, fertilizer and other supplies -- probably won't fall as rapidly as the food prices that all growers depend on to make a buck. So farmers face the double-edged sword of falling prices and inflated costs.

"The thing that concerns me most is our ever-rising input costs," said Tim Siefert, a farmer who owns 200 acres of farmland and leases another 200 acres in Auburn, Ill. He says the cost increases for fertilizer, seed, chemicals and fuel far exceed anything he's seen in the past.

Add the impact of climate change, new technology and farming methods and you have one of the biggest farm management challenges since the Dust Bowl days of the 1930s.

How are U.S. farmers coping? They're tapping a mix of new computer technology, tilling methods, chemicals, genetic engineering and consulting services. Their ability to mobilize these tools will help decide if they get traction in a competitive global economy where Peruvian onions are sold alongside New Jersey tomatoes in U.S. supermarkets.

Tech Clears Way

Doug Mosebar, president of the California Farm Bureau Federation, can't say enough about how new technology is transforming the way farmers manage their acreage.

In many cases, the gate to new technology leads to outer space.

Farm equipment makers like Deere & Co. (NYSE:DE - News), Japan's Kubota (NYSE:KUB - News) and others are placing satellite-based global positioning systems onto tractors and harvesters.

A Deere tractor with a GPS-equipped Auto-Trac steering system, for example, moves so precisely through a field that it optimizes tilling, seeding and other activities, while saving on fuel, seed, fertilizer and time.

Aerial imaging and other data gathered from computers mounted on farm equipment also can analyze nutrients, moisture and yield in every square foot of field under cultivation. This tells farmers how much fertilizer, seed and water should be used to cut waste and ramp up farm profits.

While some farmers have embraced computer tech in the field and office, others still fly by the seat of their pants.

"You can use computers and spreadsheets. Some do it the old- fashioned way with calculators. The main thing is to figure out what costs will be," said Jim Zimmer, Monsanto's (NYSE:MON - News) vice president of U.S. branded business.

But computer-based farming clearly has the edge these days. The USDA says the number of farmers with high-speed Internet access doubled in 2007, to 27%.
In 2007, 78% of medium to large farms -- those with sales of $250,000 or more -- owned or leased a computer. About 66% used it to help them manage their farm business.

Fortunately, many farmers have money to pay for this new tech. "Crop prices have been very good the last few years -- mostly because we've had a real change in the (way farms are organized)," said University of Missouri agronomist Nicholas Kalaitzandonakes.
The U.S. Department of Agriculture says the total value of all U.S. farm exports soared 67% to $81.9 billion in 2007 from $49.1 billion. in 1999.

U.S. farmers also have benefited from swelling demand for grain products like corn to make ethanol alternative fuels.

Consultants Help
On the human side, consultants are filling in the cracks for farmers where computers can't.
Siefert relies on consultants to help him decide when to sell his crops. "Timing is extremely important," he said, alluding to fast-changing commodities prices that spell success or doom for those who work the land. Consultants advise farmers on things from when to sell their crops to the best crop to plant for their soil type.

Monsanto's Zimmer says the biggest managing challenge that farmers face is deciding which crops to plant.

"Commodity prices have gone up," Zimmer said, "but so have input costs, fertilizer and fuels. Different crops take different fertilizers and fuel. Deciding which ones to plant is crucial."
Newer field techniques like no-till farming also help farmers get a leg up on efficiency.
No-till farming offers a way to grow crops from year to year without disturbing the soil through tillage. It first came into use in the early 1990s and is now popular.

Usually, the remains of the previous year's crop aren't plowed under and act as sort of a mulch that enriches the soil.

The farmer becomes more productive by not spending time plowing the field, time that can be spent planting, fertilizing or otherwise managing farms.
Research shows that continuous use of no-till methods controls soil erosion, raises crop yields and protects the environment.

War On Weeds
Floods, droughts and other forms of climate change are also stirring challenges for U.S. farmers.
Shifts in growing conditions are triggering weed growth in growing areas across the U.S. This is prompting development of new herbicides .

Monsanto's popular Roundup Ready herbicide gives farmers a new weapon in their war on weeds. It kills weeds without harming the crop. Monsanto also sells crop seeds that are resistant to the chemicals in Roundup. The one-two punch kills weeds while letting crops grow.
Drought conditions in some U.S. states also hurts corn and grain production for ethanol fuels. To meet the challenge, big agribusiness players like Monsanto, DuPont (NYSE:DD - News) and Novartis (NYSE:NVS - News) are using genetic engineering to produce drought-resistant crops.
Monsanto just finished its fifth season of field testing for drought-resistant corn that grows on far less water than regular strains.

Some industry officials say the long-term prospects for U.S. farming are good even if there's a dip in the economy this year that hits overseas markets.

"I think the next 15 to 25 years are going to be the most exciting in agriculture history," said Tom Warner, the vice president of Agrium (NYSE:AGU - News), a Calgary, Alberta-based agricultural products retailer. "There's an opportunity to help with the energy crisis as well as with increasing human consumption of food."

Deere's CEO Robert Lane says demand from China and India will play a big role in energizing U.S. farming.

"The growth of China and India means there are more than 2 billion people who will be able to buy food like they never did before," Lane told IBD in a recent interview.