Prices Low, Times Tough, but Not Repeat of 1980s
Prices are down and times are tough for farmers and ranchers, but this is not a rerun of the 1980s and isn’t likely to turn into a full-blown crisis, Clark Jackman, regional vice president for the southeast region of Kansas Frontier Farm Credit told an overflow crowd attending a WIBW Radio Farm Profit Conference in Melvern, Kan., on March 7.
Jackman pointed to very low interest rates, stable land values and strong farm balance sheets in terms of debt ratio as positive signs that farmers will weather the current market downturn.
That’s not to say there are not farmers in big trouble — with some even exiting the industry, as income levels that peaked in 2012 continue to fall.
Read More
More News:
ASFMRA: 7 Keys Trends For Agricultural Asset Values In 2018
In 2017, the agricultural loan environment was characterized by lenders replacing diminished liquidity on farmers’ balance sheets with extensive loan restructuring. Lenders will be faced with a much more difficult task in 2018. Collateral valuation and appraisals will be significant in this decision process. During the past 40 years, I have held many roles in agricultural lending, risk management, auditing and appraising for all types of agricultural assets. Here are observations and trends in agricultural asset values and their impact on lending decisions.
Crops
Since the decline in grain prices, we have seen an increase in the instances where farmers converted grain and other commodities that were the lender’s collateral. Lenders have been lax with due diligence. Bins are not sealed, farm inspections and verifications have been reduced, and local and regional buyers have not been notified of the lender’s security interest in the property. It is now a necessity to protect the lender’s interest. Many commodities are now selling below the cost of production, and this affects a farmer’s ability to repay operating loans. It is AgVisory’s opinion that this has been the main driver of the increase in unlawful conversions. Lenders need to be mindful, and the appropriate controls need to be reinstituted, monitored and enforced. Borrowers may push back against such practices; however, it is a sign of the times. Local basis and local cash markets set the collateral value, so stay tuned to what is happening.
Learn More[Back to Top]
Answers to Your Tax Questions
The new tax law offers significant benefits and relatively low setbacks for the majority of U.S. farmers, says Paul Neiffer, a CPA with CliftonLarsonAllen. Now, farmers are digging through the details to understand how the changes will impact them. Here are a couple questions from readers and Neiffer’s responses.
Is 50% bonus depreciation still an option for 2017 returns?
For assets acquired and placed in service after Sept. 27, 2017, 100% bonus depreciation applies. This is for all farm assets other than land, whether new or used. There is a special election that allows taxpayers to elect the old 50% bonus depreciation for the first tax year ending after this date.
Read More[Back to Top]
February Ag Barometer Hits Second-Highest Level In February
For the second straight month, the Purdue/CME Group Ag Economy Barometer ticked higher in February.
The reading of 140 is the second-highest rating since the data collection began in late 2015. The peak surpassed 150 in January 2017.
In the February survey, ag producers remain optimistic that U.S. and ag exports will remain strong until 2023. Of the producers surveyed, 87 percent believe exports will remain the same or increase.
Learn More[Back to Top]
Minnesota Crop Land Prices were Down in 2017, but May be Starting to Stabilize
Prices for farmland declined across Minnesota in 2017, another sign of a weak farm economy that’s been plagued by low crop prices and reduced incomes for the past four years.
Experts say many farmers are dealing with land values about 20 percent lower than when the market peaked in about 2012, when commodity prices were historically high. For 2017, numbers based on fiscal year sales data reported to the Minnesota Department of Revenue and analyzed by the University of Minnesota showed that the median price per acre of farmland was $4,625, down 5.4 percent from the previous year.
“Land values are an important part of a farmer’s equity, so obviously that land component is an important part of a farmer’s collateral,” said Bruce Peterson, a former president of the Minnesota Corn Growers Association who farms near Northfield. “If that drops 30 percent, then it makes for a much more sticky situation for people in a tighter situation financially.”
Learn More[Back to Top]
Industry Leaders Pleased, but Not Surprised, by Crush Report
Wine industry leaders say they’re pleased — but not entirely surprised — that a preliminary state report found that California’s grape crush in 2017 slightly surpassed the previous year’s tonnage.
Last year’s crush totaled just over 4.23 million tons, up less than half a percent from the 2016 crush of nearly 4.22 million tons, according to the California Department of Food and Agriculture’s initial report released in February. A final report is due March 9.
Red wine varieties accounted for the largest share of all grapes crushed, at about 2.24 million tons, down 1.6 percent from 2016. Last year’s crush of white wine varieties totaled about 1.76 million tons, up 7 percent from the previous year.
Read More[Back to Top]
5 Crop Insurance Changes You Should Know About
Five changes to crop insurance rules for 2018 that you should know about are:
1. Prevent plant. The 10% additional guarantee option was eliminated. Only a 5% option is available.
Read the Other Four[Back to Top]
Klobuchar, Thune Introduce Agriculture Data Act
A duo of Midwestern senators have introduced legislation to improve agriculture data research of conservation practices.
Sen. Amy Klobuchar, D-Minn., and John Thune, R.-S.D., introduced the Agriculture Data Act on March 1, 2018. The legislation would direct the Secretary of Agriculture to collect, collate, integrate, and link data relating to the impacts of covered conservation practices on enhancing crop yields, soil health, and otherwise reducing risk and improving farm and ranch profitability. It would also give the Secretary of Agriculture the authority to establish a secure, confidential cloud-based conservation and farm productivity data warehouse to store operational, transactional, and administrative program databases and records that support business, statistical, and other analysis.
“This bipartisan legislation will ensure hardworking farmers are able to capitalize on the United States Department of Agriculture’s vast resources to streamline their operations, enhance yields, and increase profits,” Klobuchar said.
Learn More[Back to Top]
Farm Bill Draft To Be Released This Week
Analysts say the House draft of the Farm Bill could make its way out of the House Agriculture Committee as early as Wednesday this week.
“While reports have surfaced about major Democratic push back on the coming draft, sources say the goal is to get a bipartisan reaction once the language is released,” says Jim Wiesemeyer, Pro Farmer’s Washington Policy Analyst. “The big differences continue to be on SNAP/food stamp language relative to a possible worker requirement for some able-bodied food stamp recipients.”
SNAP was a huge snag during the crafting of the last Farm Bill, he says adding Collin Peterson (D-Minn.) is the member to watch this week.
Read More [Back to Top]