UP FRONT – Regional Roundup – September

Posted on Sep 1, 2012 :: Up Front
Posted by , Insight on Business Staff Writer

Dry ground

This summer’s drought expected to have long-lasting effect

When the rain finally came to Wisconsin in mid-July, it was too little, too late to save the state’s corn crop. While the immediate effects of the summer’s drought were stunted plants, low yields and high grain prices, the true impact will be felt well into 2013 and even years to come.

On July 17, Gov. Scott Walker declared a state of emergency covering all 72 Wisconsin counties, and on July 25, the U.S. Department of Agriculture declared 23 Wisconsin counties natural disaster areas, including New North counties Fond du Lac, Green Lake and Marquette. By the end of July, the U.S. Drought Monitor showed extreme drought conditions in the southern third of Wisconsin, and drought conditions covered the lower half of the state, along with two-thirds of the continental United States.

Bob Oleson, executive director of Wisconsin Corn Growers Association, says the drought hit the Corn Belt particularly hard. “We have fields where the pollination just didn’t work this year.”

In Winnebago County, the situation is dire but comparatively better than farther south. “The line does seem to run through Winnebago County,” says Nick Schneider, Winnebago County agricultural agent with the University of Wisconsin-Extension. He says the differences from Green Lake to Oshkosh to Chilton are dramatic.

Oleson says livestock take one-quarter to one-half of all the corn produced in Wisconsin, and as the price of purchased feed goes up, those who raise livestock are making tough decisions.

Changing the feed ration is one option, but it’s not all about quantity. “It has to be good quality feed to get good productivity,” Schneider says.

Some farmers are reducing their herds for the short-term.

“Livestock farmers have been sending livestock to market in record numbers,” says Oleson.

Omro dairy farmer Jim Kasten has considered both options. He has 190 dairy cows and raises 40 to 50 head of steer, and typically raises corn, hay and alfalfa, enough forage for the farm.

“This year the corn that we have here is not going to be adequate,” he says. He’s already sold half the steer, and may sell them all in an effort to protect the dairy operation.

He started farming in 1987 with his parents, and weathered the last severe drought in 1988.

“I don’t remember this feeling of panic,” he says. “This event is big enough to put people in a precarious position financially. You’re afraid to make a mistake that will cost you so much you won’t recover.”

He says things are slightly better than they were mid-July, and crop insurance will help with some of his losses. Statewide, about 70 percent of the corn crop is insured.

Already, high grain prices are having an impact. “As we are moving through this year, the impact is more than what has been estimated,” says Kasten. “At this point, I would estimate corn prices will be 25 to 30 percent higher than trend. What we don’t know, looking down the road, is what farmers can afford to pay.” He notes that the price of corn is not unlimited, because farmers won’t pay infinitely more to feed livestock if selling the animals makes better financial sense.

“That’s the squeeze right now,” he says. “The cost of grain has gone up drastically. The price of milk has not.”

The impact on consumers and food prices is unlikely to be as dramatic. On July 25, the USDA Economic Research Service forecast an increase of 3 to 4 percent for 2013. However, beef, pork, poultry and dairy could increase within months and into 2013. In the short term, the meat supply could increase, resulting in lower meat prices due to herd culling.

Businesses are more likely to feel the drought’s impact within their community, when farmers pull back on spending because of decreased cash flow.

“There are so many businesses that do business with a dairy farm,” says Schneider. “There will be a wave effect through their supplier chain.”

“This is a slow-motion disaster,” says Kasten. “It’s going to unfold very slowly.”

A 2011 University of Wisconsin-Madison and University of Wisconsin-Extension study showed statewide agriculture is a $59.16 billion industry providing 353,991 jobs. Outagamie County is a top 10 dairy-producing county, and agriculture provides 11,593 jobs and $2.8 billion in business sales. In Brown County, agriculture provides 21,038 jobs and $6 billion in business sales. In Marquette, Waushara, Oconto and Green Lake, agriculture may not employ large numbers, but it does account for a significant share of the economy.

“If I’m going to reduce the number of animals on my farm, and I have three employees, I may have to let one go,” says Kasten, who is concerned that displaced farm workers will leave the area and not return. “Already in this industry, we are short of the truly skilled farm workers.”

He’ll know more in the coming weeks, but the fate of the corn crop is already determined.

“The miracle already needed to have happened,” he says. He may decide to plant peas and oats and harvest later into the season, or alfalfa might still do fine, with a little rain, he says. He’s already sold some of the dairy cows sooner than he would have, and he may still cull the herd size down by 10 percent.

“We’ll find a way to get enough feed to get us through and maybe next year we have a good year.”

The resiliency of Wisconsin’s farmers may be what sees the industry through what appears to be a catastrophic year. “It’s a difficult way to make a living, but don’t be fooled,” says Kasten. “There are rewards. That’s why there are still farmers. Farmers will find a way.”

Ethanol industry feels the drought impact

Like the corn crop it’s made from, Wisconsin’s fledgling ethanol industry is under the weather.

“There are nine ethanol plants in Wisconsin,” says Bob Oleson, executive director of Wisconsin Corn Growers Association. “They all use Wisconsin corn, and that corn tends to come from within a 50-mile radius of the facility.”

With severe drought decimating Wisconsin’s corn crop, ethanol plants are cutting back on production or slowing down for maintenance.

“They’re concerned about the physical availability of corn,” he says.

In addition, “there is some pressure from some groups to change fuel standards,” he says.

On Aug. 2, 156 members of the U.S. House of Representatives signed a letter calling on the Environmental Protection Agency to reduce the Renewable Fuel Standard requiring the use of ethanol. The requirement mandates that refiners blend 13.2 billion gallons of ethanol into fuel. Livestock producers have also petitioned to waive the mandate.

Oleson says 4 billion bushels of Wisconsin corn goes to ethanol production, while 1.3 billion comes back as livestock feed.

This hits the industry after the end of a 45-cent-per-gallon tax subsidy that ended Dec. 31. Gasoline companies stocked up, creating heavy demand and large-scale production, but demand has since fallen off.

According to the U.S. Energy Information Administration, in 2010 Wisconsin ranked ninth in the nation in ethanol production and produced 438 million gallons of ethanol.

– Karla Wotruba

» Highway 41 Corridor
Brown, Calumet, Outagamie, Winnebago, Fond du Lac Counties

Plexus Corp. lays off 116 employees

The Plexus Corp. of Appleton, a contract electronics manufacturer, laid off 116 employees in early August. Employees let go from the company have already begun concluding their work at Plexus. The cut in workforce numbers was attributed to a decrease in customer orders. The layoffs were split evenly between full-time and temporary workers, with half of the overall layoffs coming from each group.

Plexus currently employs approximately 2,000 workers in two of its Appleton sites. Ginger Jones, senior vice president and chief financial officer of Plexus, says that the layoffs were “a small percentage” of the company’s workforce.

Lawrence recognized as Forbes top college

Lawrence University of Appleton topped the Wisconsin portion of Forbes’ “America’s Top Colleges” ranking, a position it has held in Wisconsin for the past five years.

Forbes uses five criteria of comparison when determining ranking decisions: post-graduate career success, student satisfaction and retention rate, student debt, four-year graduation rates and acquisition of competitive national awards, such as Fulbright and Rhodes scholarships.

In addition to Wisconsin rankings, Lawrence ranked 16th in the Midwest, and 85th out of 650 colleges and universities nationwide. St. Norbert College, De Pere, ranked No. 113 nationwide.

Brown, Winnebago receive state ‘Transform’ awards

A grant for $320,000 was awarded to the Green Bay Area Chamber of Commerce’s Live54218 campaign from the “Transform Wisconsin” initiative.

The Live54218 program promotes healthy eating and physical activity among K-12 students.

The “Transform Wisconsin” initiative, created by the Wisconsin Clearinghouse for Prevention resources, provides grants to local wellness programs that deliver healthy options to its local community, such as more fresh fruits and vegetables in school cafeterias, affordable physical activity and smoke-free buildings.

Transform Wisconsin also awarded the Winnebago County Health Department $460,000 for its “re:TH!NK” program, which promotes healthy lifestyles through increased physical activity, healthy diets and smoke-free environments.

The grants, totaling $6.6 million among 30 communities, aim to reverse unhealthy habits, such as increased obesity and chronic illness brought on by insufficient health measures.

According to Vicki Schorse, executive director of Mercy Health Foundation, “Prevention efforts are the key to accomplishing systemic changes that will encourage healthier lifestyles and improve the overall health of our community members.”

» The Lakeshore
Door, Kewaunee, Manitowoc, Sheboygan Counties

Ironwood Plastics has record sales

Ironwood Plastics of Two Rivers, a custom injection molded plastics manufacturer, had record sales of $30 million from its two plants in Ironwood, Mich., and Two Rivers in 2011, said company officials.

In Dec. 2010, Ironwood Plastics was purchased by CTB, Inc. CTB, a 60-year-old company owned by Berkshire Hathaway, has 1,650 employees and 730 million in sales annually.

Not only did the merger bring about an increase in sales for Ironwood, but it allowed the company to venture into new markets. Ironwood currently produces a product for poultry feeding, which opens the manufacturer up to the agricultural market.

Acuity Insurance in top 2 percent nationwide

The Ward’s 50 named Acuity insurance of Sheboygan among its top performing insurance companies of 2012. The Ward’s 50, a list compiled by the Ward group, recognizes the top performers in property-casualty insurance and in life-health insurance. Acuity is one of 3,000 property-casualty insurance companies evaluated. The company has received this honor for each of the past 13 years, and it puts Acuity in the top 2 percent of insurers in the nation.

Acuity is headquartered in Sheboygan and employs 875 people in 20 states. Each year, it generates $850 million in revenue and manages $2.5 billion in assets.

According to Ben Salzmann, president and CEO of Acuity, “It’s difficult for a company to be named to the Ward’s 50 once, and tougher still to repeat, particularly in this difficult economy and challenging marketplace. To be named to the list for 13 consecutive years is a testament to our operational consistency, the efforts of our employees, and the quality of business our agents send to us.”

The Ward Group analyzes company financial performance over a five-year period, and sustained results have landed Acuity on the list year after year. In 2011, Acuity’s policyholders’ surplus grew by over 9 percent, improving its combined ratio to 99.6, a ratio nearly 10 points better than its competitors.

» West Central
Shawano, Waupaca, Waushara, Marquette, Green Lake Counties

Shawano Tourism Council receives $14,858 grant

The Shawano Country Tourism Council received a Joint Effort Marketing Grant from the Department of Tourism for $14,858. The tourism council plans to use the funding to expand marketing efforts, including that of the Shawano Country Miles of Art Fall Fest.

The Miles of Art Festival, held on Oct. 6 and 7, highlights the cultural history of the Shawano area through visual and performing arts. The event, in its second year of operation, is expected to generate $136,400 in economic impact to the region.

Patti Peterson, tourism manager for the Shawano Country Tourism Council, says, “We appreciate this support from the Department of Tourism. JEM funding allows us to promote Shawano Country Miles of Art to a much wider audience which will increase the number of visitors who will experience our unique visual and performing arts, Native American culture and beautiful fall colors.”

» The Northwoods
Florence, Marinette, Menominee, Oconto Counties

Bayland builds new Oconto Town Hall

The Oconto Town Hall construction project is now underway, led by Bayland Buildings, Inc. The new town hall will be built at 3649 Highway 22, and will be 2,400 square feet.

The project is estimated to cost $350,000 and construction crews for the town hall will employ 50 workers.

The new town hall building expands upon the purposes of the existing building. While the new building contains polling places and an area for community meetings, it’s also a larger, much more energy efficient building which includes a larger meeting area and a community service kitchen.

Construction is estimated to be completed in late October.

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