USDA: Farmland Values Rise
If you bought U.S. farmland from 2000 to 2016, the land most likely is worth more now than what you paid for it. But economic returns to the farmland don't justify its current price, suggesting that "a decline in values is possible."
Those are among the conclusions of "Farmland Values, Land Ownership, and Returns to Farmland, 2000-2016," which recently was released by the U.S. Department of Agriculture's Economic Research Service.
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Farm Bill Finish in 2018 Dwindles as Months Tick On
One of the biggest issues to solve in farm country is the farm bill, and leaders in the House and Senate Agricultural Committees say they are committed to finishing the legislation this year.
According to Mary Kay Thatcher, senior lead of federal government relations with Syngenta, 80 percent of the bill is causing a hold up.
“The biggest issue that we had in the 2014 Farm Bill was nutrition food stamp programs, and that’s probably going to be the big issue for quite a long time,” she said on AgDay. “If we do too much reform, we won’t have the votes to pass it, so a very fine line to figure out.”
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House Agriculture Committee Approves FY 2019 Budget Letter
Last week, the House Agriculture Committee unanimously approved its budget views and estimates letter for FY2019. The letter, similar to last year’s letter, requests no further cuts in farm program spending. The letter cites U.S. farm policy’s role in reducing the deficit by $100 billion, despite experiencing a 52 percent drop in net farm income.
Ranking Member Colin Peterson (D-MN) issued a statement at the start of the business meeting to consider the letter. The statement, in part, indicates that the Committee does not plan to cut farm spending as it considers the next farm bill despite President Trump’s budget request to cut farm spending; and that the Committee plans to unveil its version of the next farm bill in the coming weeks.
Ranking Member Peterson’s Statement:
We have a new farm bill to write this year and, quite frankly, it’s not going to be easy without any new money. But I think we all understand that is the situation we are operating under and we should be able to work together to make sure our farm bill programs are operating as efficiently as possible.
“It is important that we are united in opposition to cutting our programs. The Administration’s budget proposal calls for $265 billion in mandatory farm bill cuts and I would anticipate some members looking to that document as a blueprint when it comes time to debate the farm bill on the floor.
“With that said, I’m proud to say the Chairman and I are still working together to reach agreement on a bipartisan farm bill that can hopefully be unveiled in the coming weeks. I look forward to continuing this collaboration throughout the farm bill reauthorization process. I yield back.
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Northey Confirmed by Senate
Iowa Agriculture Secretary Bill Northey has been confirmed by the Senate as the Undersecretary for the Farm Production and Conservation after a 4 month wait. Senator Ted Cruz (R-TX) finally lifted his hold on the nomination after a White House renewable fuels meeting last week. The Senate wasted no time once the hold was lifted to confirm Secretary Northey. Now that he has been sworn in, Secretary Perdue has said he expects Northey to fill the Administrator positions at RMA, FSA and NRCS.
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Senate to Consider Banking Bill
The Senate will consider S. 2155, a banking bill that loosens some Dodd-Frank provisions this week. The bill has strong bi-partisan support in the Senate and is expected to pass the Senate. In addition to making changes to capital requirements for some smaller banks, the bill includes a provision, Section 103, that would allow an appraisal exemption under certain circumstances in rural areas. The exemption applies to Federally Related Transactions only of $400,000 value or less. A financial institution may seek the exemption if it has contacted at least 3 appraisers and can demonstrate that no State certified or licensed appraiser was available within a reasonable amount of time to complete an appraisal. The bill does not define “reasonable amount of time.” ASFMRA is keeping a close eye on this legislation.
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USDA Announces Cotton Ginning Payments
Secretary Perdue today announced at the 66th Annual Mid-South Farm and Gin Show the USDA is taking action to assist cotton producers through a Cotton Ginning Cost Share (CGCS) program in order to expand and maintain the domestic marketing of cotton. The sign-up period for the CGCS program runs from March 12, 2018, to May 11, 2018.
Under the program, which is administered by the Farm Service Agency (FSA), cotton producers may receive a cost share payment, which is based on a producer’s 2016 cotton acres reported to FSA multiplied by 20 percent of the average ginning cost for each production region. CGCS payments are capped at $40,000 per producer. To qualify for the program, cotton producers must meet conservation compliance provisions, be actively engaged in farming and have adjusted gross incomes not exceeding $900,000. FSA will mail letters and pre-filled applications to all eligible cotton producers.
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Bayer Selling Vegetable Seeds Business to Complete Monsanto Merger
Bayer and Monsanto are closer to completing their long-awaited merger, but Bayer will divest its vegetable seeds business to complete the deal.
In its most recent earnings report, Bayer touts gaining approval of the Monsanto acquisition from more than half of the 30 worldwide authorities involved. However, there is still work to be done so they’ve pushed the deal, which was originally slated for early 2018, back to the second quarter of the year.
Bayer will divest its entire vegetable seed business to complete the deal. This commitment comes on the heels of Bayer divesting its LibertyLink business, associated herbicides and soybean businesses, to BASF.
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13 Farm Program Payment Questions FSA Must Answer
Two Midwest senators are raising concerns regarding farm program payments to the estates of deceased farmers.
“We must be careful stewards of taxpayer money and work to avoid wasteful payments,” said Sens. Debbie Stabenow, D-Michigan, and Chuck Grassley, R-Iowa, who wrote a letter to the USDA Farm Service Agency. “As we prepare to write the next Farm Bill, we write to request information so we can understand more about USDA payments to an estate after the death of a farmer.”
Under current law, farmers are required to be “actively engaged in farming” in order to receive farm program benefits by providing labor or management. USDA recently issued guidance that considers an estate to be actively engaged – and thus eligible for farm payments –for up to two years after the death of a farmer without review. The Government Accountability Office has criticized USDA payments to estates which have allowed some heirs to game the system and evade payment limits by collecting benefits on behalf of the deceased in addition to their own property.
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Syngenta Seeks Seed Company Acquisitions and Partnerships
Chinese-owned Syngenta is upping the ante on seed investments, with $400 million earmarked for growth and expansion in the next few years. The company is adding a significant number of staffers, expanding research capabilities and “aggressively seeking acquisition and partnership opportunities.”
“You can expect that we’re going to be aggressive in the pursuit of any acquisitions that complement our portfolio,” says David Hollinrake, Syngenta seeds president for North America. “Nidera is a recent acquisition that is a proof point. They offer market leading genetics in South America for soybeans and corn, which is supplemental to our capabilities there.
“We’re doubling down on the U.S. seeds business and adding incremental investments that support the growth of the business,” he adds. “We want to improve on our current [market share] position at a distant No. 3, to a closer No. 3 with an eye on No. 2.”
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DowDuPont's Agriculture Division Will Become Corteva Agriscience
The Agriculture Division of DowDuPont will become Corteva Agriscience when it is spun off, which is expected to happen by June 1, 2019. Corteva is derived from a combination of words meaning “heart” and “nature.”
“This is the start of an exciting journey,” said James C. Collins, Jr., chief operating officer, Agriculture Division of DowDuPont. “Corteva Agriscience is bringing together three businesses with deep connections and dedication to generations of farmers. Our new name acknowledges our history while looking forward to our commitment to enhancing farmer productivity as well as the health and well-being of the consumers they serve.”
Corteva Agriscience brings together DuPont Crop Protection, DuPont Pioneer and Dow AgroSciences to create a standalone agriculture company with leading positions in seed technologies, crop protection and digital agriculture.
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USDA-ERS Report: Farmland Values, 2000-2016
Today’s update looks briefly at farmland values in the United States, with a specific focus on a recent report from USDA’s Economic Research Service (ERS) that examined farmland values from 2000 to 2016. The ERS report noted that, “The value of farm real estate accounts for over 80 percent of the value of farm-sector assets and is an important indicator of the sector.”
On Wednesday, ERS released a report (“Farmland Values, Land Ownership, and Returns to Farmland, 200-2016,” by Christopher Burns, Nigel Key, Sarah Tulman, Allison Borchers, and Jeremy Weber) which stated that, “Economic theory suggests that farmland values will change in response to changes in the underlying factors that support them, namely, returns to farmland. One measure of returns to farmland is net cash farm income per acre, or the net return that an acre of farmland generates.”
“Values for both cropland and pastureland, two major uses for farmland, increased substantially in 2004-14, nearly doubling in real, or inflation-adjusted, terms.”
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Rural Bankers Report Economic Growth
The February Rural Mainstreet Index (RMI) reveals a slight improvement for farmers’ financial conditions—increasing to the highest level since May 2014. The monthly survey of bank CEOs in a 10-state Midwest region increased to 54.8 in February. In January, the index was 46.8, which was below the growth-neutral rating of 50.
“Given that fewer than one in four, or 23.9%, of bankers reported economic growth in their area, the solid February reading surprised me,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “However, weak agriculture commodity prices continue to weigh on the rural economy.”
Bank CEOs were asked how their organizations were dealing with low farm income. Around half said they are increasing collateral requirements, while around 20% said they have rejected a higher percent of loan applications. Around 12% said they have reduced the average size of farm loans. Meanwhile, the remaining third reported no change in their farm lending practices.
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Appraisal Standards Board Meeting
The Appraisal Standards Board (ASB) will conduct a Public Meeting on April 20, 2018, in Las Vegas, NV, where input will be solicited on the Discussion Draft of Potential Areas of Change for the 2020-21 edition of Uniform Standards of Professional Appraisal Practice (USPAP). For the first time, the ASB will also be live streaming the meeting. All are encouraged to attend the meeting in person or watch remotely via live stream.