ASFMRA AgNews - Vol. 13 Issue XXXIX [September 5, 2018]

By ASFMRA Press posted 09-04-2018 19:13


Number of U.S. Farms Declines While Size of Farms Increases

Dow and DuPont. Monsanto and Bayer. John Deere and Blue River Technology. AGCO and Precision Planting. In almost every segment of the agriculture industry — from chemical and seed, to farm equipment and technology — consolidation is taking place. And the cause of these major mergers is a direct reflection of what is taking place on the end user side: farm consolidation.

“The strength in the number of farms is going to determine how many dealers there are, and to a certain extent it’s going to determine how many manufacturers there are,” says Charles R. Glass, president of Glass Management Group and former director of Farm Equipment Manufacturers Assn. “With equipment sales, it’s net farm income.”

Over the last 3 decades, farm production has continued shifting to larger operations, with crop acreage being concentrated into fewer, but larger farms, according to statistics by the USDA Economic Research Service (ERS). But while the number of large farms is decreasing, the number of small lifestyle farms is growing rapidly. All of which will impact the number of farm equipment dealers there are and the size of equipment they’ll sell, Glass says.

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A Wild Week of Ag News, Analyst Says

It’s been a wild week in ag news.

In the last seven days, China negotiators appeared in Washington to discuss trade issues (tariffs mostly) between the two countries, and the Trump administration moved on a temporary trade solution with Mexico.

China actually started applying tariffs first to U.S. products a few years ago with a 10% tariff on soybeans. Then last December they added a huge tariff (over 80%) on sorghum, which effectively eliminated imports of U.S. sorghum.

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Midwest Scores Big on Trump Tariff Payments

Nearly half of the $4.7 billion in Trump tariff payments will go to five midwestern states that are the largest soybean and hog producers in the country, said a farm group analysis on Tuesday. At the same time, an environmental group challenged the USDA to explain its opaque development of the bailout package. The USDA also announced that around Dec. 3, it will announce details for a second round of payments, if it is needed.

Groups representing corn, wheat, and produce growers said the payments outlined by Agriculture Secretary Sonny Perdue were inequitable. President Trump pledged last winter to shield U.S. agriculture from retaliatory tariffs imposed by China and other trading partners in response to U.S. duties on imported steel and aluminum. The White House, which has accused China of pirating U.S. intellectual property, has placed additional steep duties on a wide range of Chinese products.

“Combined, Illinois, Iowa, Minnesota, Indiana, and Nebraska are estimated to receive more than $2.1 billion, or 45 percent, of the first round of MFP [Market Facilitation Program] payments,” said economist Veronica Nigh of the American Farm Bureau Federation, the largest U.S. farm group. Based on the payment rates announced by the USDA and on the most recent USDA production data for the seven commodities — cotton, corn, milk, hogs, soybeans, sorghum, and wheat — eligible for payments, Nigh calculated that Illinois would receive $597 million, Iowa $578 million, Minnesota $360 million, Indiana $312 million, and Nebraska $305 million.

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12 Great Plains Bankers Share Insights

Signs of stabilization for the farm economy have been put on hold, according to the latest Ag Credit Survey by the Federal Reserve Bank of Kansas City.

“A sharp drop in the price of corn and soybeans contributed to a bleaker view of the District’s farm economy in the second quarter,” write Nathan Kauffman , vice president and Omaha Branch executive and Ty Kreitman , assistant economist. “For many agricultural borrowers, cash flow already had been a significant concern, but likely was exacerbated by the recent drop in prices amid ongoing uncertainty surrounding the future for agricultural trade.”

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USDA Announces Trade Aid Details

USDA released details last week about how it plans to spend the $12 billion trade aid package for farmers that it announced last month. The main component of the aid is the Market Facilitation Program (MFP). MFP is established under the statutory authority of the Commodity Credit Corporation (CCC) and administered by FSA. For each commodity covered, the payment rate will be dependent upon the severity of the trade disruption and the period of adjustment to new trade patterns, as determined by USDA. USDA has set the payment rates for the initial payment by commodity as follows:

Cotton -- $.06 per pound, estimate total payments of $277 million

Corn -- $.01 per bushel, estimated total payments of $96 million

Soybeans -- $1.65 per bushel, estimated total payments of $3.6 billion

Sorghum -- $.86 per bushel, estimated total payments of $157 million

Wheat -- $.14 per bushel, estimated payments of $119 million

Hogs -- $8 a head, estimated payments of $290 million

Milk -- $.12 a hundredweight, estimated payments of $127 million

The initial MFP payment will be made on 50% of actual 2018 production. An additional payment could be made later. Interested producers can apply after the 2018 harvest is 100 percent complete in order to report their total 2018 production. Beginning September 4th, MFP applications will be available online at Producers will also be able to submit their MFP applications in person, by email, fax, or by mail.

MFP payments are capped per person or legal entity at a combined $125,000 for corn, cotton, sorghum, soybeans and wheat. This payment cap applies to MFP only. The $125,000 payment cap for ARC and PLC payments is a separate cap.

MFP payments are capped per person or legal entity for dairy production or hogs as well. Payment for dairy production is based off the historical production reported for the Margin Protection Program for Dairy (MPP-Dairy). For existing dairy operations, the production history is established using the highest annual milk production marketed during the full calendar years of 2011, 2012, and 2013. Dairy operations are also required to have been in operation on June 1, 2018 to be eligible for payments. Payment for hog operations will be based off the total number of heads of live hogs owned on August 1, 2018.

Eligible applicants must have an ownership interest in the commodity, be actively engaged in farming, and have an average adjusted gross income (AGI) for tax years 2014, 2015, and 2016 of less than $900,000. Applicants must also comply with the provisions of the “Highly Erodible Land and Wetland Conservation” regulations.

The other major component of the trade aid package is the Food Purchase and Distribution Program. The amounts of commodities to be purchased are based on an economic analysis by USDA of the damage caused by unjustified tariffs imposed on the crops listed below. Their damages will be adjusted based on several factors and spread over several months in response to orders placed by states participating in the Food and Nutrition Service nutrition assistance programs. Commodities to be purchased include apples, apricots, beef, blueberries, cranberries, figs, grapefruit, grapes, hazelnuts, kidney beans, lemons, limes, lentils, macadamia nuts, navy beans, oranges, orange juice, peanut butter, pears, peas, pecans, pistachios, plums, prunes, potatoes, rice, strawberries, sweet corn and walnuts. Purchase amounts vary by commodity.

Federal Register Notice

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Farm Bureau Analysis of Trade Aid

The American Farm Bureau Federation (AFBF) has posted its analysis of the trade aid. AFBF’s economist Victoria Nigh concludes 5 states (IL, IN, IA, MN, NE) will receive nearly 45% of the total payments or $2.1 billion. The estimates are based on the USDA’s August 2018 crop production report. You can read the analysis here.
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Farm Bill Conference Committee to Meet this Week

The first meeting of the 2018 farm bill conference is set for September 5th starting at 9:30 am. Senate Agriculture Chairman Pat Roberts is chair of the conference and set the meeting in August. This will be the first official meeting of the conferees and will most likely be taken up by opening statements of the conferees. The goal remains to have a conference report completed and to the President for signature before the current farm bill expires at the end of the month. You should be able to watch the hearing by going to either the House or Senate Agriculture Committee’s website and clicking on the appropriate link.

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