ASFMRA AgNews- Vol. 13 Issue II [January 9, 2018]

By ASFMRA Press posted 01-09-2018 08:32


Highly Leveraged Farmers Could Face Distress Amid Volatility in Ag Industry, Pricing

Farmers’ increasing use of credit to finance operations has left some operators financially exposed during a volatile period for the industry.

In West Michigan and nationwide, farmers have turned to debt at a time of declining commodity prices and slumping farm incomes.

When coupled with elevated real estate values that have leveled off after growing rapidly from 2009 to 2014, it’s a pairing that has some researchers recalling the factors that led up to the farm crisis of the 1980s.

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2018 Could Bring Higher Prices for Farmers

By the time you read this, the big ball in Times Square will have fallen. Celebrations and family get-togethers to cheer in the New Year are over, and now we are all settling into a brand new year.

Chances are, you have already asked yourself what the new year will bring.

One thing for certain, farmers and most Americans know changes are coming. Congress has passed a sweeping tax bill, and President Trump signed it into law a few days before Christmas. While there remains a great deal of confusion on just how the new legislation will affect the nation's wage earners, most farm support groups have lauded the legislation as beneficial to farmers.

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Changes to 2018 Crop Insurance Rates for Corn and Soybeans

The Risk Management Agency has released rates needed to calculate 2018 crop insurance premium. Revenue Protection (RP) rate changes suggest slightly higher corn premiums and lower soybean premiums. Given that 2018 projected prices and volatilities are lower than 2017 values, premiums in 2018 could be near or slightly lower than 2017 values. As a result, premium changes likely will not influence 2018 crop insurance decisions.

Crop Insurance Premium Calculation

Information needed to calculate 2018 crop insurance premiums can be divided into two sets:
  • Rates set by the Risk Management Agency (RMA). Each year, RMA adjusts the rates used to set premiums on crop insurance policies. These rates reflect past loss experience associated with crop insurance policies. For 2018 premiums, information for the 2016 cropping year is incorporated into rate setting. Information from 2017 is not incorporated as not all loss information has been compiled to set rates. In addition to loss experience, RMA periodically conducts studies that can changes various items within rates. RMA has released all rates for 2018.
  • Projected prices and volatilities. Projected prices used to set crop insurance guarantees will influence premiums, with higher projected prices resulting in higher premiums. In addition, volatilities influence premiums, with higher volatilities resulting in higher premiums. For corn and soybeans insured in Midwest states, projected prices are averages of settlement prices during the month of February. Volatilities are based on options prices during the last five trading days in February. As a result, all information need to calculate 2018 premiums will not be known until the end of February.

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Why Don't Land Values Match Commodity Prices More Closely?

As we begin 2018, it's interesting to look back on where farming has been recently and where farming is going. For me, one of the most interesting things to reflect upon is the farm economy.

As we go to press, the price of the three big commodities at the local elevator is as follows: Wheat is $5.80 per bushel, soybeans are $8.65 per bushel, and corn is $2.89 per bushel. Using benchmark yields for farmers in my neck of the woods, that means a farmer with 50 bushel wheat would gross just shy of $300 per acre in revenue. Thirty bushel soybeans would gross just shy of $260 per acre in revenue. And 125 bushel corn would gross a little more than $350 in revenue.

Look back to 2011, the base price for hard red spring wheat was $8.38 per bushel, soybeans were at $12.50 per bushel and corn was just north of $6 per bushel. So, the same farmer with 50 bushel wheat was grossing roughly $420 per acre, $375 per acre for soybeans, or a whopping $750 per acre for corn.

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Infrastructure Plan a Priority For 2018

A $1 Trillion infrastructure plan is expected to finally become a priority in the new year, which is good news for agriculture. Michelle Rook looks at what this investment will mean for farmers who rely heavily on exports to market their crop at a profitable level.

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Google Exec: 5 Mega Trends Shape Technology

As Google’s geospatial technologist, or as he refers to himself, geographer in residence, Ed Parsons outlined at least five megatrends driving technology during his keynote at the Farm Journal AgTech Expo.

  1. The world is becoming more urban, not suburban. 
  2. Digital natives have formed a new type of consumer.
  3. Big data is still in its early days, but platforms are providing a massive difference in the shape of business. 
  4. Disintermediation means that if you don’t add value to the process, then you will be removed.
  5. Information has to be accessible.
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Farm Bill Action Possible in Early 2018, With an “If”

There’s an open window for passing a farm bill in early 2018, says Scott Brown, University of Missouri policy analyst. But potential passage gets tough by late spring.

Getting action depends on Congress quickly agreeing to pass a farm bill much like what exists.

Mostly, farmers are pleased with current legislation, Brown told the MU Crop Management Conference. But every commodity group has ideas for tweaks to their parts of the farm bill.

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What the New Tax Law Means for Agriculture

Farm Credit East tax experts have reviewed the 2017 Tax Cuts and Jobs Act — the largest overhaul of the U.S. tax code in 30 years. “Overall, the new tax provisions will provide significant benefits to Northeast farmers,” says Dario Arezzo, Farm Credit East senior tax consultant. “However, certain provisions will unfortunately limit the value for some producers.” Here’s a quick look:

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The Appraisal Foundation Seeks Candidates for the Board of Trustees

The Appraisal Foundation is searching for qualified candidates to serve on its Board of Trustees (BOT). The BOT is the governing body of The Appraisal Foundation and works to promote professionalism and ensure public trust in the valuation profession. In 2018, there are five At-Large Trustee positions under consideration for appointment or reappointment, including one consumer representative seat. 

The BOT provides financial support and oversight to the Foundation’s two independent boards, the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB). The BOT meets in the Spring and Fall, and while Trustees are reimbursed for travel expenses, they are not compensated for their time. One of the five individuals elected as an At-Large Trustee will immediately be seated to fill the remainder of a term ending December 31, 2019. The remaining four individuals elected as At-Large Trustees will serve three-year terms commencing on January 1, 2019.  

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