ASFMRA AgNews - Vol.13 Issue XXVIII [July 10, 2018]

By ASFMRA Press posted 07-09-2018 18:01


What Rising Interest Rates Mean for Farmers

The Federal Reserve raised interest rates in June for the second time in 2018. Matt Monteiro, vice president
of finance and treasurer for Farm Credit Mid-America, gives these points to keep in mind when thinking about
how interest rates may affect farmers.

1. Rates are still historically low.

When the financial crisis hit in 2008, the Federal Reserve Open Market Committee, or the Fed, set the federal
funds rate to zero or a quarter percent to influence economic activity and to bring the economy back. The Fed
kept it there until December 2015. The recession was prolonged and the recovery was slow. Since then, the Fed
has increased rates a few times by a quarter of a percent each time. That impacts the absolute shortest-term
rate: the overnight rate.

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Vital But Unfunded, How Accurate is the U.S. Drought Monitor?

Depicting the extent of drought in the U.S. can be a tricky task. The U.S. Drought Monitor is a tool authored
by various individuals from the National Oceanic Atmospheric Association (NOAA), U.S. Department of
Agriculture (USDA) and the National Drought Mitigation Center. However, it’s a resource that recently sprouted
complaints that it’s too slow in accurately predicting the current level of drought.

USDA meteorologist Brad Rippey said he understands the complaints, but assured that the U.S. Drought Monitor
is still an accurate tool, even though it doesn’t use a single piece of data to compile results each week.

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May Beef Exports Shatter Value Record

U.S. beef exports set a new value record in May while also increasing significantly year-over-year in volume,
according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). May pork exports
were lower than a year ago, though January-May totals for U.S. pork remained ahead of last year’s pace.

Beef export volume was 117,871 metric tons (mt) in May, the sixth-largest on record, valued at a remarkable
$722.1 million, which surpassed the previous monthly high (March 2018) by a healthy 4 percent and was 24
percent higher than a year ago. Through the first five months of 2018, beef exports were up 10 percent in
volume to 547,157 mt while export value was $3.32 billion, 21 percent above last year’s record pace.

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Growing Nuts: California's 2018 Almond Crop Predicted at 2.45 Billion Pounds

Last winter’s freeze in California almonds apparently had little impact on overall crop numbers. Figures
released Friday suggest growers will shake a record 2.45 billion pounds of nuts from their trees starting next
month, an increase of 7.9 percent from the previous year’s production and 150 million pounds higher than
growers predicted earlier in the year in their subjective forecast.

The U.S. Department of Agriculture National Agricultural Statistics Service bases this year’s survey on 1.07
million acres of bearing trees, meaning trees that were planted prior to 2015.

Late-winter concerns related to freeze damage had some in the industry thinking the mid-summer forecast could
have been as low as 2.1 billion pounds. Friday’s announcement is based on objective survey measurements using
standard sampling protocols and becomes the industry’s official crop estimate upon which markets will begin to
set prices for the new crop.

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Canadian Perspective: Can We Afford Trade Patience?

Canada’s retaliatory tariffs against the United States — worth $16.6 billion — will clearly come at a cost,
not only to the American economy, but also the Canadian economy. Despite the likely economic fallout from this
trade spat, both sides in this dispute are talking about being disciplined and patient and trying to take a
measured approach.

The more I hear political leaders preach patience in these seemingly early days of a trade war, the more it
really scares me, and here’s why:

Last week, speaking in Fargo, North Dakota — a state where agriculture is a major economic driver — President
Donald Trump urged the audience to be patient:

“We have things cooking now, you’re going to be so happy. But when people rush it, it’s like rushing the
turkey out of the stove…The more they rush, the worse it’s going to be. The longer we take, the better. Your
farmers, your people are going to be great.”

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Ag Economy: Land Values and Farm Income Considerations

Today’s update looks briefly at recent reports from the Federal Reserve Bank of Dallas and the University of
Nebraska at Lincoln that shed light on trends in farmland values. Also, a recent survey from Iowa State
University that provides statistical insights into farmland owners, is examined. Lastly, news articles that
continue to look at the deteriorating prices of some agricultural commodities, and their resulting potential
negative impacts on farm financial well-being, are also discussed.

Farmland Values

On Monday, the Federal Reserve Bank of Dallas released the results of its 2018 Second Quarter Agricultural
Credit Survey, which stated that, “Demand for agricultural loans overall decreased for an 11th consecutive
quarter. Loan renewals and extensions rose but at a slower pace, while the rate of loan repayment continued to
decline. Overall, the volume of non- realestate farm loans fell compared with a year ago, as did the volume of
farm real estate loans. The volume of operating loans flattened out, and feeder cattle loans stabilized after
nearly three years of decline.”

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Who’s The Bigger Cyber Threat to Ag–Russia or China?

On this morning’s AgriTalk, guest host Clinton Griffiths interviewed Auburn University professor Robert Norton
about the cyber security risks for agricultural businesses.

This is a timely topic on the heels of the investigation of Russian hacking and influence on the U.S.
presidential election as well as the Chinese seed espionage case.

“It's a very important topic,” Horton said on AgriTalk. “Russia is looking at trying to influence as much as
possible around the world. And obviously there's been a lot of controversy about what Russia is doing in the
last few months and years. We've really never left the Cold War.”

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Land Prices Hold in Minnesota, Dakotas

Land prices in the Dakotas and Minnesota are surprisingly good given the low commodity prices, according to
Farmers National Co.

“Prices for good-quality cropland are as good as a couple of years ago,” said Brian Mohr, Farmers National Co.
area sales manager for the region, in a news release. “The somewhat slower overall land market in our region
is mainly due to fewer farms and ranches for sale, especially in western South Dakota.”

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Ag Economy Barometer Increases Slightly in June 2018

The Ag Economy Barometer index rose to a reading of 143 compared to 141 a month earlier. The modest rise in
the Ag Economy Barometer, which is based on a nationwide survey of 400 U.S. agricultural producers each month,
was underpinned by a rise in the Index of Current Conditions, which rose to 138 compared to a reading of 132 a
month earlier. The Index of Future Expectations was essentially unchanged with a reading of 146 in June vs.
145 in May.

Sentiment rises

The modest uptick in sentiment was surprising given the collapse in prices for key agricultural commodities.
Concerns about the potential for reduced exports to China were exacerbated by improving U.S. crop conditions
for both corn and soybeans, pushing yield and U.S. production expectations higher. By the time the June
sentiment survey was complete, nearby corn futures were down more than 10%, nearby wheat futures prices were
down 7% and nearby soybean futures were down 12%, all compared to their late May closing prices.

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