ASFMRA AgNews - Vol. 13 Issue XLIX [November 20, 2018]

By ASFMRA Press posted 11-20-2018 09:51


Various Factors Affect Demand for Land

Crop yields, interest rates, tariff situation and negotiation of new farm bill lead the list. Despite variable growing conditions, strong yield expectations were met (or exceeded) in most regions of Iowa. Strong overall yield results will be supportive to a land market that otherwise faces some headwinds, including higher interest rates, relatively weak commodity prices and significant trade uncertainties.

Localized differences in yield results are playing a slightly larger role in farmland sale results this fall and early winter. Early-season sales already reflect this uneven trend. In areas where another big crop was produced, there is more strength and overall stability in the land market, even in the face of lower grain prices.

Read more.

Have Land Values Bottomed or Plateaued?

The decline in net farm income isn’t losing steam to close out the year. The Kansas City Federal Reserve’s latest report showed the decline in farm income accelerated from July to September. The Kansas City Fed covers the western half of Missouri, Kansas, Nebraska, Oklahoma, Wyoming and Colorado. The Fed says more than half of bankers reported lower farm income, compared to a year ago in that district. Less than five percent reported higher income.

Despite interest rates on the rise, the Fed says rates on farm loans still remain well below pre-recession levels. The Kansas City Fed also showed farmland  values remain stable. Farmers National Company said it’s good quality land still bringing top dollar. However, there is more caution from land buyers across the country. So, have land values found a bottom or plateaued? It’s still too early to tell.

Learn more. 

2018 Election Results

With the election over, members of Congress returned to Washington, D.C. last week. The Senate, organizing for the next Congress, elected its respective leadership teams. Senator McConnell will return as Senate Majority leader with the Republicans retaining their majority in the Senate. Two members of the Senate Agriculture Committee are part of the Republican leadership team: Senator Thune (R-SD) will be the party whip and Senator Ernst (R-IA) will be the Republican Senate conference vice-chairman. Senator Schumer (D-NY) returns as Minority leader and Senator Durbin (D-IL) remains the minority whip.

House Republicans also elected their leadership team for the next Congress. With the Democrats taking the House majority for the next Congress, Congressman McCarthy (R-CA) will become the minority leader with Representative Scalise the conference whip. The House Democrats will vote on their leadership team the week after Thanksgiving. Representative Pelosi says she has the votes to become Speaker, but some members of the Democrat caucus are pushing for a change in leadership. House Committee assignments will likely be decided in December.

Impact of the Election on Farm Bill Prospects

Time is running short to complete the farm bill. Congress is out this week for Thanksgiving and will return the week of the 26th with four legislative days remaining in November and 8 legislative days scheduled in December. The good news is Chairman Conaway and Ranking member Peterson sent an offer to the Senate last week in an attempt to wrap up the conference report. The press reports the Senate is reviewing the offer. Senate Majority Leader McConnell spoke to President Trump about the farm bill last week and stated he wants to complete the farm bill during the lame duck session. We will need to see an agreement announced soon to allow for time to write the conference report, CBO to score it, and votes to take place in the House and Senate during the 12 legislative days remaining in this Congress.

Rising Debt to Asset Ratios in Ag Raising Red Flags

Interest rates continue to climb, with the Federal Reserve expected to raise the benchmark right one more time yet this year. The rising rates are putting a further strain on farmers. Ag Lender Farmer Mac says increased interest rates are having the biggest impact on operating loans since most of those loans are on variable rate.

Rising interest rates also mean land may not be an attractive option for investors. Rising rates, plus a dragging farm economy, is sparking fears that the debt to asset ratios could rise to levels agriculture saw in the 1980's. However, Farmer Mac economist Curt Covington says, that hasn't happened yet. “I don’t see rates rising to the levels of the 1980s, but I think it is a concern,” said Covington. He said when you assess today’s agriculture cycle, rising interest rates, lower profitability on farm properties, means asset values are automatically driven lower, which is land.

Learn more. 

Managing Leases with Absentee Landowners

With a shift in landownership demographics, tenants will likely be working with multiple absentee landlords. It's common knowledge that the average age of farmers and ranchers in the U.S. is increasing. And with that increasing age comes a massive transition of ag land assets in the years to come.

"Landowners are getting older and passing the land on to the next generation of landowners," says Jim Jansen, AAC Nebraska Extension agricultural economist. "To generate a return on those assets, whether in crop shares, rents or flex leases, landowners that are farming are trending toward larger farms, and there's a higher portion of beginning farmers that are renting land than better-established producers with more equity."

Read more. 

Financial Metrics by Age

A review of 2017 financial metrics is in order as we look to preparing 2018 balance sheets. There are six financial metrics addressed in this article and further, we will consider how age of the operator is reflected in this data. The six metrics addressed (as a median, not an average) are: 1) working capital, 2) working capital per acre, 3) working capital to net worth, 4) the current ratio, 5) debt to asset ratio and 6) return on farm assets.

See more of the study

Financial and Risk Management Decisions for 2019

With planning for next year’s crop underway, this article makes suggestions related to financial and risk management for grain farms. Projections for extremely low income in 2019 set the overall backdrop for these decisions. Suggestions include: 1) building working capital in 2018, 2) forgoing investments in capital items, 3) conducting 2018 tax planning, 4) preparing 2019 cash flows, 5) beginning marketing the 2019 crop, 6) discussing the economic situation with landowners, and 7) considering acreage allocations for 2019.

See the suggestions. 

Lower Ag Income Pressures Farm Finances

Farm incomes and agrarian credit conditions continued to erode in the third quarter of 2018, as economic pressure from the U.S.-China trade war has bankers seeing loan repayment rates fall, according to separate reports released on Thursday by the Federal Reserve Banks of Kansas City and St. Louis.

Expectations for farm income and loan repayment rates were particularly low for areas and operations more concentrated in soybean, corn, hog, and dairy production as uncertainties surrounding trade continued, according to the banks’ latest reports on the agricultural economy.

Get the rest of the story.

Global Almond Production Up, Walnut Production Down

Overall global and U.S. almond production forecasts up with global walnut production forecasts expected to decline. The USDA’s Global Tree Nut report paints a general picture of the worldwide nut industry and assists growers and well-known market players by offering a summary look at the global market and the estimated size of that market.

It also provides insight into the current trends influencing the market. The October estimates project that global almond production for 2018/2019 will be higher than last year, at 1.4 million metric tons of shelled nuts, while global walnut production is expected to fall to 2 million tons in-shell as a result of lower than expected production in China.

More on the nut report. 

Future Ag Trends: Less Protein Consumption, More Women Managers

hanging markets and the demands of the millennial generation are just a few of the breathtaking changes that economist Dave Kohl expects in the years 2020 to 2030, a decade of transition on farms.

Kohl, a retired Virginia Tech economist with an interest in a value-added dairy farm that sells directly to consumers, is a popular speaker at
agricultural meetings. He capped off the National Agricultural Bankers Conference in Omaha, Nebraska, on Wednesday with a sometimes upbeat view of the future, in spite of low farm income that’s bringing stress to lenders and farm borrowers.

Read more. 

SBA Proposes Rule Change Impacting Poultry Loans

The Small Business Administration (SBA) published a proposed rule at the end of September that would change its affiliation rule applicable to determining SBA financial assistance. If a small business loan applicant derived more that 85% of its revenue from another business over the previous three fiscal years, SBA would find that small business applicant is economically affiliated to the other business for the purpose of determining the size of the business, possibly making the business not eligible for SBA loans. The concern is that if this is rule change is made, it could make poultry growers and similar contracted agricultural businesses ineligible for SBA guarantees.

We are encouraging ASFMRA members who would be impacted by this proposed rule to make
comments on the rule. The deadline for making comments is November 27, 2018.

You can read the regulation by going to and you can comment by
going to and enter 3245-AG74 in the search box. Then look to the lower right of the screen to find the comment now button.

The Appraisal Foundation Announces Board Appointments

2019 Board Appointments and Reappointments include several ASFMRA Members. The following individuals were appointed to The Appraisal Foundation Boards.

Appraisal Standards Board
Roberta Ouellette
Robert Reardon

Board of Trustees
Michael Christensen
Shaun Fitzgerald
Cindy Charleston Rosenberg
Ray Wagester
Jennifer Wagner

The following individuals were reappointed:

Appraisal Standards Board
Patricia Atwood

Appraiser Qualifications Board
Brad Swinney
John F. Ryan

The following individuals were appointed as Chair/Vice Chair:

Appraisal Standards Board
Chair: Wayne R. Miller
Vice Chair: Patricia Atwood

Appraiser Qualifications Board
Chair: Mark A. Lewis

Appraisal Qualifications Board (AQB) Helps Bridge the Gap

The Appraiser Qualifications Board is building effective training modules to help bridge the gap between supervisor and trainee. Mark Lewis, ARA, RPRA with The Appraisal Foundation feels confident these new changes will add excitement for the younger generations coming into the industry.

Read the interview.