By Roy C. Ferguson II, CMC/CAC - USDA released its forecast for 2014 on February 11th containing observations that some contrarian economic and financial analysts have been contending since last April/May. Admittedly, USDA’s economists must obviously be more cautious than private sector analysts to avoid sharp condemnation, but the prevailing rationale among most nongovernment sources until just early last month was “not to worry, U.S. grain prices are due to begin a rebound at almost any time.”
So, USDA’s forecast on February 11th headlined that U.S. Farm Income is slated to plunge some (27%) this year as Net Farm Income slumps to $95.8 billion compared to an estimated $130.5 billion during 2013. Included in the forecast, Corn Receipts are expected to decline sharply by ($11 billion) and Soybean Sales slip by more than ($6 billion).
Surprisingly, USDA’s accompanying commentary indicated that “Corn prices fell 40% by the end of 2013, and soybean prices fell too, but many growers had already locked in the higher prices using futures contracts. Annual wheat prices are also expected to decline in 2014. The real hit is expected this year.”
In fact, AgReport’s contacts with two national marketing firms and one regional during December and January had received radically different responses. All three indicated that a disappointing, comparatively small number of grain producers had actually protected themselves adequately from the ensuing market price declines by using either futures contracts or a combination of futures and options.
A University of Missouri economist noted, however, “That even with the expected drop, the USDA expects Incomes to remain well above the previous 10-year average. Livestock operators are expected to fare slightly better in 2014. USDA forecasts a 0.7% increase in Livestock Receipts this year, driven largely by an (11.3%) drop in feed prices. The outlook is brightest for dairy farmers.”
Even though USDA predicts Production Expenses for farmers will drop in 2014 for the first time since 2009, they are still expected to be the third highest on record in Inflation-adjusted Dollars. USDA’s report also noted that, “Between falling prices and stubbornly high Costs, concern is growing among farmers that a lean year means operating below the Cost of Production.”
Various features in the newly adopted five-year Farm Bill were reportedly also credited with causing Income Projections to fall. The new legislation eliminates a media-labeled “controversial” system of direct payments to farmers by the federal government.
Speaking at the annual Commodity Classic meeting in San Antonio last week, Secretary Vilsack gave a broad outline of how the Department will begin to implement various sections of the 2014 Farm Bill. Implementation of livestock disaster programs has received top priority and the Secretary promised applications for assistance will begin on April 15th through the Farm Service Agency (FSA) county offices. He did not indicate when payments would be made.
Implementing the commodity title will take a while longer. The Farm Bill provides $3 million to develop decision tools and educational materials to help farmers decide between PLC and ARC. That money will be made available soon with the FSA following sometime this fall with implementing regulations. He indicated that farmers will be given an opportunity to update base and program yields later this summer/ fall and the decision to choose PLC or ARC will occur at the end of 2014 or early 2015.
With regard to crop insurance, the Department is placing top priority on implementing the Stacked Income Protection Program (STAX) for cotton growers. Since cotton is not covered by PLC or ARC, the Department plans to make every effort to provide STAX to most if not all cotton growers for 2015. A transition payment will be made to cotton growers for 2014. The new Supplemental Coverage Option (SCO) will also roll out for 2015 with intended availability maps published later this summer/ fall. The Secretary also said the new conservation compliance requirement will begin with the 2016 crop, not the 2015 crop.
Regarding conservation programs, NRCS continues to take EQIP applications and awards will be made on or around May 17, 2014. CSP contracts are expected to be awarded around June 1. The new easement program is expected to start enrollment around May 1. No news was provided regarding a CRP signup for this year.
If you’d like to read the Secretary’s speech, you can find it at: http://www.usda.gov/wps/portal/usda/usdahome?contentid=2014/02/0032.xml&navid=TRANSCRIPT&navtype=RT&parentnav=TRANSCRIPTS_SPEECHES&edeployment_action=retrievecontent
Representative Dave Camp (R-MI), Chairman of the House Ways and Means Committee, released a discussion draft of the Tax Reform Act of 2014 last week. While not expected to get much traction this year, the proposal could be a starting point for possible tax reform in the next session of Congress. Overall the reform would seek to eliminate loopholes and deductions, lower overall rates and consolidate the number of tax brackets, while still bringing in roughly the same amount of revenue. The proposal does repeal section 1031 land exchanges (Page 409, section 3133 of the draft). It would also eliminate biofuels tax credits along with oil and gas subsidies.
The draft can be found here: http://waysandmeans.house.gov/uploadedfiles/statutory_text_tax_reform_act_of_2014_discussion_draft__022614.pdf
A Section-by-Section description can be found here: http://waysandmeans.house.gov/uploadedfiles/ways_and_means_section_by_section_summary_final_022614.pdf
Congressional Tax Proposals Would Cost Agriculture $4.8 Billion
AFBF – The Voice of Agriculture - WASHINGTON, D.C., February 20, 2014 – Proposed changes to the tax code restricting the use of cash accounting by agricultural operations would reduce agriculture’s access to capital by as much as $12.1 billion over the next four years, according to a study released today by Kennedy and Coe, LLC and Farmers for Tax Fairness. Continue reading: http://www.fb.org/index.php?action=newsroom.news&year=2014&file=nr0220.html
New “Crop Insurance: Just the Facts” website explains 2014 farm bill changes
Farm Press Staff | Southeast Farm Press – How does the new farm bill affect crop insurance and farmers. The newly released version of “Crop Insurance: Just the Facts” website helps answers such questions, including major and minor policy changes, and includes introduction to new products like SCO and STAX. Continue reading on the Southeast Farm Press: http://southeastfarmpress.com/management/new-crop-insurance-just-facts-website-explains-2014-farm-bill-changes?NL=SEFP-01&Issue=SEFP-01_20140224_SEFP-01_496&YM_RIDemail@example.com&YM_MID=1451227&sfvc4enews=42&cl=article_3
Technology, data privacy concern farmers and ranchers
FBNews – Feb. 13, 2014 —One of the most important issues related to “big data” goes directly to property rights and who owns and controls farm-level data that may be collected, the American Farm Bureau Federation told Congress earlier this week. Risks to privacy that farmers face are of great concern, according to Farm Bureau. – See more at: http://fbnews.fb.org/FBNews/Top_News/Technology,_data_privacy_concern_farmers_and_ranchers.aspx
‘Significantly different’ farm bill will need education on provisions
Hembree Brandon | Delta Farm Press – The ink has hardly had time to dry on the finally-passed 2012 farm bill, but says John Anderson, farmers need to be spending time delving into its provisions and getting ducks in a row to comply with new, often complex rules.
“It’s still early in the game, and a lot of regulations will have to be written and a lot of work will have to be done for implementation,” he said at the annual Producer Advisory Council conference attended by farmers from across north Mississippi. Continue reading on the Delta Farm Press: http://deltafarmpress.com/government/significantly-different-farm-bill-will-need-education-provisions?NL=DFP-01&Issue=DFP-01_20140225_DFP-01_23&YM_RIDfirstname.lastname@example.org&YM_MID=1451585&sfvc4enews=42&cl=article_1