Investment Firms Find Value in Farmland
Wall Street type investment firms have found out what most farmers have believed for years—farmland is a good long-term investment. More institutional-type investors are likely to enter the picture and buy land as many farmers, who would
have vied for the property three or four years ago, are holding back and hanging onto their cash.
So, what does this mean to the ag community? It depends on the firm and how its land purchases play out.
Some of the investment firms buying land lease it back to the farmer so he can continue to operate. This is a standard practice for Indianapolis-based US Agriculture, according to Brian Wise, director of acquisitions for the company. In
the process, the grower’s relationships with his retailer and other suppliers usually stay intact because the firm is acting only as a landlord, Wise explains.
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Oklahoma Request for Appraisal Waiver Withdrawn
The City Bank and Trust Company in Guymon, Oklahoma requested a temporary waiver of appraisal certification and licensing requirements on December 5, 2017 claiming a shortage of appraisals. The request was sent to the Appraisal Subcommittee. The request included three counties in the Oklahoma Panhandle: Texas, Beaver and Cimmarron. The ASFMRA had submitted a letter opposing the request as well as a similar request emanating from Tennessee. The Oklahoma request was officially withdrawn on December 26th, 2017 according to the ASC. The Tennessee request from TriStar Bank is still pending.
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Congress Passes CR, Funding Government Through January 19th
Before adjourning for the holidays, both the House and Senate passed another continuing resolution (CR) funding the government through January 19th, 2018. The CR was necessary to avoid a government shutdown as Congress has not completed the 12 annual appropriations bills that fund the government. The vote in the House was 231 -188 and in the Senate 66 – 32. The Senate returns to Washington this week and the House begins its second session of the 115th Congress next week.
House leadership abandoned the idea of funding the Department of Defense for 2018 with a CR for the remainder of the government as Senate Democrats indicated they would not support that approach. The CR provides Congressional and Administration leaders additional time to work out a top-level bipartisan funding agreement for 2018. The agreement has to be bipartisan because Senate rules require 60 votes to end debate and pass annual spending bills.
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House Passes Disaster Aid Bill
The House passed an $81 billion disaster assistance package to alleviate losses from hurricanes and fires. It is the third disaster assistance package this year and the largest of the three. The House vote was 251-169.The agriculture components of the disaster bill include:
- $2.6 billion for agriculture disaster assistance, including crop and livestock losses in disaster designated zones. The crop disaster payments will be paid based on a block grant formula administered by the Secretary of Agriculture and will include:
- Any producer receiving crop disaster payments will be required to purchase crop insurance where crop insurance is available for the next two available crop years;
- The total payment received cannot exceed 85% of losses for producers who previously purchased crop insurance;
- The total payment received cannot exceed 65% of losses for producers who previously elected NOT TO purchased crop insurance;
- The Secretary is charged with submitting a report to Congress within 90 days of enactment that would provide recommendations that can be made to the federal crop insurance program to increase participation, particularly among underserved producers, in higher levels of coverage in future years.
- $541 million for watershed and flood prevention efforts;
- $400 million for emergency conservation efforts to mitigate future disaster risks; and
- $165 million for repairs and mitigation for rural water and waste disposal systems.
The disaster bill also includes a cotton “fix” and lifts the $20 million cap on livestock insurance with the goal of making LGM more widely available for dairy producers. The cotton fix makes cotton seed eligible for ARC and/or PLC payments. The bill sets up an election period starting in 2018 for producers with cotton base to choose enrollment in ARC or PLC. Cotton producers that elect ARC or PLC, are no longer eligible to purchase STAX. It is widely expected that most cotton producers with cotton base would elect either ARC or PLC with STAX sales dropping to those cotton producers who do not have cotton base. At this time, it is unclear that the Senate will support this approach without further dairy assistance. In addition to lifting the livestock cap for insurance, dairy producers are seeking changes to their Margin Protection Program (MPP), which the House bill does not provide.
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CBO Releases Crop Insurance Report
The Congressional Budget Office (CBO) released a report on December 22nd discussing options to reduce the federal cost of the crop insurance program. The report includes various options to cut spending in the program. None of the options increase access or work to improve the program. The report has 4 sections: 1) Program description and background; 2) Outline the case for and against federal involvement in crop insurance; 3) The impact of the program on stakeholders; 4) Various policy options to inform the process.
The policy options included in the report include:
- Eliminate HPO (saves $19.2 billion and results in 2.5 million fewer acres in the program and 20 million acres that reduce their coverage levels);
- Not allow adjustments to APH or limiting YE to a max of 3 years in a 10 year APH;
- Reduce premium subsidy across the board by 15% points;
- AGI in excess of $500,000 does not receive premium subsidy;
- $50,000 payment limit on premium subsidy per entity;
- Reduce company rate of return to 9.2% from 14.5%;
- Eliminate federal administrative and operating (A&O) reimbursement entirely and allow companies to charge delivery costs directly to the producers;
- Change risk sharing agreements between AIPs and government.
Obviously, crop insurance detractors on and off Capitol Hill will pick up various options discussed in this report and use them to offer cuts to crop insurance. No member of Congress requested the report. The CBO periodically publishes reports such as this one. The last one they published was the Supplemental Nutrition Assistance Program (SNAP) in September.
See the Report
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Should Farmers Use Land as Collateral?
It’s a story of tight margins on farms in 2017, and those margins are growing tighter for some farmers. That’s forcing farmers to turn to lenders in search of additional farm loans.
Three ag bankers representing various geographies say using land as collateral can be a viable option, but it’s not for everyone.
“Each person's situation is different,” said Chris Floyd, president and CEO of First National Bank in Syracuse, Kan. “The biggest thing is having the appropriate level of debt on that land and not having too much on there. The worst place to be in is where you have to be a forced seller.”
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Farm Credit: Farm Income Stabilizing
USDA’s latest forecast indicates farm income appears to be stabilizing near its historical average, according to a quarterly report on economic issues affecting agriculture given to the Farm Credit Administration board in December.
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CBO Lists Ways to Carve Savings Out of Costly Crop Insurance
As Congress expanded the role of crop insurance over the past couple of decades, the cost of the federally subsidized program tripled, to $9 billion annually over the past five years. The Congressional Budget Office says that if lawmakers are worried about costs, they could alter the program to cut outlays by 25% or more, with the likely consequence of reducing participation in the largest program in the farm safety net.
Federal crop insurance, created during the Depression and reinvigorated in the 1980s, gained popularity among farmers as the government paid a larger share of the premium, making coverage more affordable. Invention of so-called revenue policies that respond to low prices as well as poor yields enhanced the appeal of crop insurance. The program also is defended as a faster and more equitable way of compensating growers for catastrophic losses than ad hoc disaster bills.
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Breakthrough Allows Wheat Stem Rust Samples to Be Quickly Analyzed
In a world first, science has leaped a step ahead of an old foe that has recently re-emerged in some parts of the world, where it has devastated crops because of its ability to evolve, undoing much of the hard work that began in earnest with the Green Revolution – using natural techniques to isolate the first rust pathogen gene that wheat plants detect and use to ‘switch on’ in-built resistance.
The breakthrough in research targeting the stem rust foe – historically the most dangerous pathogen of wheat – will mean suspect samples could be analyzed within hours in an emergency rather than weeks, potentially saving crops from being destroyed.
“For the first time, it will be possible to do DNA testing to identify whether a rust in a wheat crop anywhere in the world can overcome a rust-resistance gene, called Sr50, which is being introduced in high-yielding wheat varieties,” said Professor Robert Park, corresponding author from the University of Sydney.
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10 Ag Tech Advancements From 2017
There was no shortage of ag tech advancements in 2017. Following are 10 areas seeing innovations that look to transform how farmers do business now and in the years ahead.
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Become a Certified USPAP Instructor
The USPAP Instructor Certification Course (ICC) is a 2.5 day classroom course offered by The Appraisal Foundation once every two years to certify individuals to teach the Uniform Standards of Professional Appraisal Practice (USPAP) courses.
The next ICC will be offered on March 8-11, 2018, in Indianapolis, IN. The registration deadline is coming up on February 2, 2018.
Please note that you will need at least 7 years of appraisal experience and a minimum of 35 hours of direct appraisal-related teaching experience acquired within the last 5 years. These requirements must be met prior to applying to the program.
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