Farmland Values Edge Downward in Midwest and Plains
The Kansas City Federal Reserve Bank says the prolonged decline in farm income pushed farmland values lower in the Central and Northern Plains, “but at a modest pace” of 3% for nonirrigated land during the summer. The Chicago Federal Reserve Bank said land values, although relatively stable for the past year, fell 1% during the summer.
“Although the magnitude of recent declines has yet to approach the magnitude of the 1980s, the duration of recent declines has yet to approach that of the 1980s,” said the Kansas City Fed in a quarterly report. High inflation and an agricultural recession sapped the farm sector in the mid-1980s. Land values began to decline earlier this decade following the collapse of the commodity boom. “For the 13th consecutive quarter, a majority of bankers reported that farm income was lower than than a year ago, but the pace of the decline was less significant than in recent quarters.”
The Chicago Fed said Midwestern farmland values fluctuated between a 1% decline and a 1% gain for the past four quarters. “Such relative stability … had not occurred in the district since 1970s.” Ag bankers generally expect farmland values to be stable in the closing months of 2017.
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How to Fix Negative Cash Flow
Commodity prices have been low enough for long enough that today’s agricultural landscape has drawn more than a few comparisons to the debt crisis of the early 1980s. That has been met with an equal number of reassurances — “Don’t worry; it’s not like the ’80s.”
But if not — why not?
For starters, the early 1980s was severe — so severe it was considered agriculture’s “own private Great Depression,” says Paul Stoddard, instructor and lecturer with the University of Illinois Department of Ag and Consumer Economics. Even so, what’s happening in farm country is worrisome, he says.
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The Potential of Artificial Intelligence
Sci-fi stories portray computers taking over the world and robots turning against their creators. These popular depictions of artificial intelligence (AI) mask the astounding ways the technology is advancing agricultural production.
The notion machines will replace humans is flat-out wrong, experts say. In fact, machine insights for the agriculture industry are only valuable because technology companies are pairing them with the expertise of agricultural professionals.
“Showing a farmer a satellite image with a map of where their crops are not doing well is not very useful to them, because they know that when they go out and survey their fields,” says Mike Warren, co-founder and CTO at Descartes Labs, a startup that synthesizes satellite and weather data to provide weekly U.S. corn and soybean forecasts. Instead, the value lies in finding ways to provide details that might not be visible, such as where the right application of a chemical can really improve yields.
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Determining The Average Cash Rent Based On Productivity Index
Individuals often desire to arrive at an average cash rent given a farm’s inherent productivity. Herein, a method is presented for determining a 2017 benchmark rent based on that parcel’s productivity index. Given the variability in rents, a parcel’s actual cash rent can vary from the benchmark rent. Landowners should expect farmers to attempt to re-negotiate lower cash rents if the 2017 cash rent is near or above the 2017 benchmark rent.
Productivity Indexes
Productivity indexes (PIs) published in Bulletin 811, entitled Optimal Crop Productivity Ratings for Illinois Soils, often are used to quantify yield potential of Illinois soils. This publication gives PIs for different soil types. Higher PIs typically are associated with higher corn and soybean yields.
Figure 1 shows a map made available by the National Resources Conservation Service (NRCS) of PIs across Illinois, with dark green colors reflecting higher PIs, and yellow and red colors being associated with lower PIs. As expected, the highest PIs are located in east-central, west-central, and northern Illinois. The counties with the highest PIs are Piatt (east central with 138 PI), Macon (east central with 137 PI), Champaign (east central with 136 PI), Logan (east central with 135 PI) and DeKalb (northern with 135 PI). The counties with the lowest average PIs are located in southern Illinois: Williamson (85 PI), Calhoun (89 PI), Johnson (91 PI), and Perry (92 PI), and Monroe (94 PI).
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Ag Economy Barometer: 80% Producers Expect Rental Rates to be Unchanged in 2018
The Purdue/CME Group Ag Economy Barometer remained within the trading range it has been in since last February, coming in at 135 in October 2017 – the third-highest level since data collection began. The barometer has fluctuated between 124 and 139.
The Index of Future Expectations increased to 137 from a reading of 130 in September, whereas the Index of Current Conditions weakened slightly.
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Fed Report: Farm Economy Decline Continues to Slow
While the Midwest farm economy isn’t growing, it continues to decline more slowly.
That’s the assessment from the Kansas City Federal Reserve, which Thursday released its latest Ag Credit Survey.
The KC Fed said in the report that farm income in the seven states in the Tenth District decreased in the third quarter, but at a slower rate.
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Corn Yield, Florida Orange Production Provide Surprise in Crop Reports
There were at least two big surprises from today’s USDA crop reports – record projected corn yields and less-than-expected hurricane damage to the Florida orange crop. That’s according to John Newton, director of market intelligence for the American Farm Bureau Federation.
In its monthly Crop Production report, USDA estimates the national corn yield at 175.4 bushels per acre, up 3.6 bushels from the October forecast and up 0.8 bushel from 2016. If realized, this would be the highest average yield ever and produce a crop of nearly 14.6 billion bushels, down 4 percent from last year’s record but up 2 percent from the October forecast.
“That yield figure was a really big surprise,” Newton said in a phone interview, especially after the stress the crop experienced from drought early in the growing season in parts of the Midwest. “Folks were expecting yield numbers around 172 or 173 bushels,” he said.
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Bayer Launches New Digital Farming Brand Xarvio
Bayer has announced it is marketing its digital farming solutions under the brand name xarvio. The company is launching its brand at this year’s Agritechnica https://www.agritechnica.com/en/, the European trade fair for agricultural machinery with 2,900 exhibitors from 52 countries that starts this week.
“Our objective is to improve farming – for the farmers and for the environment,” said Tobias Menne, global head of digital farming at Bayer, in a company news release. “xarvio technololgies can support farmers all around our planet to optimize the amount of crop protection they need, thus to produce more efficiently and to increase profits while reducing the impact farming has on the environment.”
Bayer officials say xarvio solutions give farmers the opportunity to optimize the potential of their individual fields and field zones. Bayer’s Field Manager https://www.xarvio.com/en/Field-Manager, for instance, will provide farmers with instant access to field-specific actionable strategies for the most efficient application of crop-protection products.
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Steve Forbes on Ag Trade: It Will Happen
“Amend it, don’t end it.”
That’s Steve Forbes’ take on the current trade negotiations on the North American Free Trade Agreement (NAFTA). Forbes, speaking to a group of ag tech companies and investors in Des Moines on Thursday, said that there are clear flaws in the current NAFTA agreement – things that are outdated and need to be fixed. “OK, clean it up, you’ve got to update the thing,” he adds.
Recent reports out of Washington indicate that the NAFTA negotiations – which are crucial to agricultural trade – are not going smoothly. The reports are creating frayed nerves with farmers about NAFTA and ag trade in general. Forbes didn’t seem worried. This is the “sausage factory phase,” he said. “You don’t know how much is posturing, negotiating. You just want to get a better deal.”
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TPP Could be Further Delayed
After a day of confusion, a much-anticipated framework agreement on a Pacific trade deal was at risk of being scuppered, raising the prospect the pact — already many years in the making — could be delayed further.
Trade ministers from the 11 countries in the Trans-Pacific Partnership reached a tentative agreement in Vietnam on Thursday, according to an official with direct knowledge of the talks. However, a Friday meeting of TPP-country leaders to approve the plan was deferred and the deal is now in flux, the official said, asking not to be identified when discussing private matters.
Signs emerged late Friday that Canada could be holding up the process. Japanese Prime Minister Shinzo Abe said the Canadian delegation had said it was not yet ready for a leaders’ agreement, broadcaster NHK reported. Japan’s Economy Minister Toshimitsu Motegi is expected to comment later in the day.
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ASFMRA Participates in the Appraisal Foundation Meeting
At The Appraisal Foundation (TAF) Meeting last week in Arizona, Tom Boyer, AFM, ARA, AAC moved from the Chairman role to the Past Chairman role, as Adam Johnson assumed the Chair role. ASFMRA member Ronnie Johnson with Capitol Farm Credit in Texas is the new Vice Chair. Dick Edmunds, ARA, AAC, chaired the nominating committee and the entire interview process of candidates for positions on TAF Board. Bradley Sweeney, MAI and ASFMRA member, was elected to the Board as well for a one-year term.
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In Memory
Neill S. Thompson, ARA-Retired
Ames, IA
ASFMRA was honored and pleased to welcome Neill Thompson, ARA-Retired into the membership in 1992. Neill obtained his Accredited Rural Appraiser (ARA) designation and later went to the Retired membership classification. He was active at the National level with serving on the Appraisal Education/Accrediting Committee from 1984 to 1988. He was a member of the Iowa Chapter of ASFMRA. Neill formerly worked at Hertz Farm Management. We have just learned of Neill’s passing. He passed away on November 6, 2017. Neill made many friends through his association with the Society who will miss him greatly. Our thoughts and prayers are with his family.
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