Weekly AgNews – September 19, 2017

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Why are Land Prices Staying High?

Why are land prices continuing to stay high after multiple years of lower crop prices and reduced profitability in the ag sector? Brad Hayes, an appraiser for Peoples Co., a farm real estate firm based in Des Moines, Iowa., is fielding that question quite often these days.

“Our appraisal team monitors land sale prices on a weekly basis as well as monitors the number of farms publicly for sale in Iowa at any given time,” he says. “Recently, our appraisal database indicated there were 548 farms for sale in Iowa which includes row crop farms, pasture farms, recreational farms, etc. Of these 548 farms, we can extract out how many farms have 85% tillable acres or greater.”

This data set allows him to hone-in on land value trends for highly tillable row crop farms. The data indicated there were 130 farms for sale that have 85% tillable acres or greater. This averaged out to approximately 1.3 highly tillable farms available for sale per county in Iowa. That’s equal to the number of farms that were available for sale midway through 2016.

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USDA Delivers Disappointing News with September Report

This month’s round of Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports shocked the markets and sent corn and soybean prices into the red.

Following the reports’ release, December corn prices dropped around a dime and November soybeans dropped around 17 cents.

For the Sept. 12 reports, USDA forecast corn production at 14.2 billion bushels, down 6% from last year, and the national average corn yield at 169.9 bushels per acre, up 0.4 bushels from the August forecast. If realized, this will be the third highest yield and production on record for the U.S.

See the Report

Senate Agriculture Committee to Hold Censky, McKinney Nomination Hearing

This week the Senate Agriculture Committee will hold a nomination hearing for Steve Censky, President Trump’s nominee to be Deputy Secretary of Agriculture and Ted McKinney, the nominee for Undersecretary of Trade and Foreign Agriculture Affairs. To date, USDA Secretary Perdue is the only confirmed political appointee at the Department of Agriculture. Both Censky and McKinney are expected to be confirmed by the full Senate.

The American Association of Crop Insurers, our trade association in Washington, D.C. joined a letter along with other agricultural groups of support sent to the Senate Agriculture Committee for Bill Northey, the President’s nominee for the Undersecretary of Farm Production and Conservation. His Senate hearing has not yet been scheduled.

Washington Veteran Outlines Farm Bill Watch Points

Chuck Conner knows something about how things work in Congress and in Washington, D.C. The Benton County, Ind., native served as deputy secretary of agriculture during President George W. Bush’s second term. He has his eye on key ag issues right now, and shares his insights with farmers.

Today, Conner is chief executive officer of the National Council of Farmer Cooperatives. He took time for this exclusive interview with Farm Progress.

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House Passes FY 2018 Agriculture Spending Bill

Last week the House passed its annual appropriations bills for FY 2018 by a vote of 211-198. Eight appropriations bills were combined, including the agriculture spending bill. The agriculture spending bill provides funding for the salaries and expenses of the Risk Management Agency along with most of the USDA agencies. The Senate has not approved any of the 12 bills. The government is currently funded by a Continuing Resolution through December 8th.

Senator Roberts: “Farm Bill Faces a High Hurdle”

During a hearing last week on the Supplemental Nutrition Assistance Program (SNAP), Senate Agriculture Committee Chairman said the passage of the next farm bill this fall will face a “high hurdle” in the Senate. He also said that Majority Leader McConnell had agreed that it would be better to pass the farm bill sooner rather than later. Meanwhile, the House Agriculture Committee staff are starting to prepare the House version of the next farm bill.

Florida Growers Cope With ‘Unprecedented’ Citrus, Vegetable Damage

WASHINGTON, Sept. 15, 2017—Florida citrus growers have a lot on their hands – literally – as they begin to pick up the pieces from the devastation of hurricane Irma: Their oranges, grapefruits and tangerines, once a prominent part of the trees they grew on, are littering the ground as waste in waist-deep water, remnants of an industry that is now 50 percent decimated, with statewide losses estimated to exceed $1 billion, according to University of Florida Extension Agent Gene McAvoy.

The brunt of the storm’s impact on citrus crops was felt around Naples and in the smaller neighboring agricultural community of Immokalee in Collier County and north into Sebring, running up highway 29, in Highlands County, McAvoy said.

Damage is also very acute in Glades County, where localized losses to specific farms were between 70-80 percent of the total crop, Florida Farm Bureau Treasurer Steve Johnson said. It will take some two weeks for electricity to return to areas hardest hit.

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Ag Updates from South Florida Disheartening

Agricultural and coastal assessment updates from University of University of Florida’s Institute of Food and Agricultural Sciences experts throughout the state.

County by County Update

How Much Longer Can California Farmers Adapt to Regulatory Change

California growers A.G. Kawamura and Don Cameron might farm in totally different climates and soil types, but they both agree that the state’s regulatory burdens and agricultural policies present challenges that have forced some out of business and will change how they continue to farm.

Kawamura primarily farms strawberries and green beans within the cooling ocean breezes of Orange County and among the old dairy region in nearby Chino, Calif. Cameron works the soil a few hundred miles north in western Fresno County.

Both see agricultural practices in California in a state of change as lawmakers and regulators further tighten restrictions on food and fiber production in America’s leading agricultural state.

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Should Users Of Revenue Protection Add Margin Protection?

Farmers have until September 30th to determine whether to purchase Margin Protection, a new crop insurance product that provides payments when a harvest revenue-cost margin is below a guarantee set based on an expected revenue-cost margin (see farmdoc daily, September 8, 2017). Users of Revenue Protection (RP) could use Margin Protection (MP) to provide an extra band of protection on top of the RP policy. We will discuss this option in this article.

How would MP work with RP?

More detail on MP is provided in a September 8th farmdoc daily article. In brief, MP is not based on farm yields but based on county yields. In this manner, it is like the Area Revenue Protection (ARP) plan of insurance. Unlike ARP, MP is based on a margin that includes costs in its calculation.

Farmers can purchase both RP and MP. In this case, the farmer is getting farm-level protection based on RP and “county” margin protection based on MP. The county margin protection is on top of the farm-level coverage offered by RP. This perspective is similar to an RP user purchasing Supplemental Coverage Option (SCO), although SCO is not a margin contract but a county revenue product.

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Has U.S. Farm Income Turned a Corner?

The agriculture industry is used to weathering peaks and valleys, and this past decade provides ample evidence of that. From 2009 to 2013, net cash farm income saw a robust period of growth, only to fall back down again from 2014 to 2016.

Is 2017 showing signs of a comeback? USDA projections certainly prompt the question. The agency’s 2017 Farm Sector Income Forecast, issued earlier this week, forecasts 2017 net cash farm income at $100.4 billion. That’s $11.2 billion – or 12.6% – higher than 2016. Net farm income (a broader profit measure) is also up $1.9 billion – or 3.1% – over 2016.

Cash receipts are forecast up 4% in 2017 but face a very uneven distribution across the agriculture industry. For example, livestock and dairy captured healthy gains, for the most part, with broiler cash receipts up 15%, milk up 11.1%, hogs up 14.6% and cattle/calves up 5.7%. Meantime, crop cash receipts are only forecast up 0.3% from 2016. Stronger performers include soybeans (6.3%), cotton (26%) and vegetables/melons (6.8%). Corn receipts will likely decline for the fifth straight year.

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What is Stressing Agricultural Lending Portfolios?

In several recent webcasts and lender schools, the pulse of agricultural economics is easy to find; stressed. Of course, conditions and challenges vary depending on the location of the lender: Midwest, Southern or Coastal.

In the latest surveys, lenders were asked what factors were creating financial stress in their portfolios.The number one cause, regardless of geographical region was negative profits and cash flow. As expected, some levels of loss are more challenging than others.Several accounts have experienced negative numbers for three of the past four years. For others, profits have been sporadic, and dependent on weather conditions, type of enterprise, and geographic region. Of the larger farm businesses, some are experiencing six to seven figure losses. And many smaller farms have thus far been able to overcome negative numbers using off farm income, refinancing, and excess land equity.

Lenders from the Midwest region indicated that family living expense was the second largest issue impacting the financial viability of their portfolio. In comparison, family living expense was the number three factor for Coastal lenders. Of course, living expense doubled during the economic supercycle, and while budgets are tightening, this category has a direct correlation to cash flow viability. According to farm record data, today’s family living cost has adjusted approximately 20 percent since the recent supercycle.

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USDA Shocks Market By Raising Corn and Soybean Production, Yield

The U.S. Department of Agriculture surprising the trade with another increase in corn and soybean production and yield.

Corn

USDA projects the national corn yield to hit 169.9 bushels per acre, the third largest corn yield on record. That’s 0.4 bushels above the August estimate, and 1.7 bushels per acre above the pre-trade estimate.

The higher yield forecast also boosting production, with USDA forecasting production to reach 14.2 billion bushels. That’s above the pre-trade estimate of 14.03 billion bushels, and also up from USDA’s August estimate of 14.15 billion bushels.

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Putting a Price on Farm Data

Mastercard’s long-running “priceless” advertising campaign captured the difficulty quantifying the value of certain things in a series of commercials highlighting the ease of specifying the worth of certain physical products. A father taking his son to a baseball game pays $91 for the tickets, food and an autographed baseball — all purchased on credit, naturally. Each item has a clear, fixed value. But the intangible worth of the conversation between father and son during the afternoon outing was deemed to be priceless.

The same contrast can be made on the farm, where land, seed, water, fertilizer, crop protection products, farm machinery, fuel, sensors, labor and software all have a price that’s easy to pinpoint. By contrast, the data generated by working the land with each of these items have no fixed price, but at the same time, there’s a high demand for access to that information. The farm data clearly have value, even if a dollar figure is not easy to assign.

THE VALUE OF DATA IN SOYBEAN PRODUCTION

It might help to consider an example of what farm data can do for soybean farmers to shed some light on the scale of data’s potential value.

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ASFMRA Completes Successful Leadership Institute

Last week over 30 ASFMRA members attended the annual Leadership Institute sponsored by DuPont Pioneer in Washington D.C. Meetings were held with the USDA, the Wixted Group provided communications training session and attendees met with members of Congress, including House Agriculture Chairman Mike Conaway. Attendees also met with Senate Agriculture Committee staff, farm organization representatives, and the farm managers concluded with their visit to Chesapeake Farms in Maryland. In regards to the farm bill, both the Senate and House Agriculture committees would like to complete the next farm bill before the current one is set to expire in September of 2018.

Appraisers held two separate sessions apart from the farm managers. In the first session the Department of Interior (DOI) hosted briefings from DOI, General Services Administration, the Department of Justice and the Internal Revenue Service. The second session was hosted by The Appraisal Foundation (TAF) and included TAF President Dave Bunton, Appraisal Subcommittee Executive Director Jim Park, representatives from the American Bankers Association and the Independent Community Bankers of America. The banking representatives spoke about appraisal shortages in rural America, while Mr. Bunton and Mr. Park gave the group updates regarding changes in the appraisal industry, including regulation and qualifications.