New Survey of Farmland Values Paints a Mixed Picture
A new survey on Midwest farms is painting a mixed picture in regards to the agriculture economy. The AgLetter from the Federal Reserve Bank of Chicago shows farmland values in the third quarter are 1% higher than a year ago, but values for "good" agricultural land in the third quarter were 1% lower than in the second quarter. Agriculture credit conditions for the district seemed worse relative to a year ago. Officials say there are credit uncertainties and they're growing, as more farmers are unable to pay their loans off in full every year. Is it still a good idea to use land as collateral? Sam Miller is the managing director and group head of agriculture with BMO Harris Bank. He says, "absolutely it's wise to use land as collateral. I think a lot of lenders, BMO Harris included, about 7 years ago put a cap on how much we lend on farmland because we anticipated eventually interest rates were going to rise, prices were going to fall. Guess what? That's the circumstance we're in today, so I think lenders are not out of line in terms of the collateral value, but it's still going to hurt on the borrower's balance sheet. No doubt about that."
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Ag Economy Entering Deja Vu - Light Version Of 1980S, Economist Says
If U.S. farmers haven’t experienced it yet, they might be near the point of tougher negotiations when trying to secure an operating loan.
A former Federal Reserve Bank economist and current head of Purdue University’s Extension forecast a tough farm loan renewal season and a worsening trade and interest rate environment for agriculture at the National Agricultural Bankers Conference in Omaha Tuesday.
High interest rates and trade disruptions shape farm downturns, said Jason Henderson, associate dean and director of Purdue Extension. Although interest rates remain low, they’re headed up. And the U.S. is losing $11 billion in exports of ag products due to ongoing trade disputes with Canada, China, and Mexico, he said.
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Call Your Tax Advisor Now
A smart move for one farmer may be a huge mistake for another—thanks to the new tax law, which passed last year. This is not the year to skimp on end-of-year tax planning, advises Paul Neiffer, a CPA and principal at CliftonLarsonAllen and a Top Producer columnist.
Additionally, you should budget for higher tax preparation expenses since your advisors will need to dedicate more time and resources to your planning and preparation, says Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State University.
Questions You Should Ask.
Climate Report Sees Tough Times Ahead for Ag
More extreme heat, drought, wildfires and flooding are just some of the headiest forecasts in the decades ahead from the Congressionally-mandated
2018 National Climate Assessment that the White House pushed out early amid the holiday week - just after Thanksgiving.
Some regions of the U.S., like the Northern Great Plain, might fare better under rising temperatures, but farmers and ranchers just about every where else will have to grapple with declining yields, rising disease, more pests and lower production, according to the report.
Coming changes can be mitigated by technology and farmers’ ability to adapt, but that will only go so far,
according to a section of the report dedicated solely to farming and the rural economy. Despite all amelioration efforts, “any change in the climate poses a major challenge to agriculture through increased rates of crop failure, reduced livestock productivity, and altered rates of pressure from pests, weeds, and diseases,” the report concludes. “Rural communities, where economies are more tightly interconnected with agriculture than with other sectors, are particularly vulnerable to the agricultural volatility related to climate.”
10 Semi-Finalists Announced in 2019 Ag Innovation Challenge
Top 10 finalists all received $10,000. The final four will be announced December 5. The 10 semi-finalist teams in the 2019 Farm Bureau Ag Innovation Challenge have been announced by the American Farm Bureau Federation. “It’s a pleasure to recognize these 10 outstanding rural businesses,” said AFBF President Zippy Duvall. “Recognition of the faith, courage and creativity these entrepreneurs have shown in starting their rural businesses is well-deserved. Startup funds provided to the semi-finalists through the Challenge will
help them take their food and agriculture businesses to the next level.”
Learn more about the top 10!
Consolidation Will Drive Ag Innovation
Population will increase to 10 billion by 2050. Who will feed and clothe them? The stakes have gotten higher in the last two or three years.
Folks concerned about the coming problem of feeding a rapidly growing world population no longer consider 9 billion people by the year 2050 the benchmark. “Now, it’s 10 billion,” says Shannon Hauf, senior vice president and global head of crop technology, soybeans, for Bayer Crop Science.
Hauf, keynote speaker at the 64th annual Southern Crop Production Association meeting at the Grove Park Inn Resort in Asheville, N.C., said Monday (Nov. 12) that the combination of globalization and consolidation of key ag companies would drive the innovation necessary to feed those 10 billion souls in just more than 30 years.
See more on consolidation.
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.
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How the Midterms and Lame-Duck Session are Pushing the Farm Bill to a Deal
House and Senate negotiators are reportedly close to finalizing a framework on a farm bill compromise in hopes it will pass both chambers of Congress and be on the president's desk by the end of the year. According to a spokesperson for Sen. Debbie Stabenow, D-Mich., House and Senate committee staff worked through the weekend and again on Monday "exchanging offers daily"
as last details are being ironed out.
The latest wrinkle in the ongoing negotiations centers around fighting the deadly California wildfires that have claimed the lives of at least 79 people. While surveying the devastation over the weekend, President Trump pledged $500 million dollars in the farm bill intended for forest management. In a press call with reporters on Tuesday, Interior Secretary Ryan Zinke and Agriculture Secretary Sonny Perdue urged lawmakers to include funding in the farm bill for fighting wildfires.
But other factors have caused farm bill talks to intensify in recent days, the outcome of the midterm elections chief among them.
Find out more.
Farmland Values Rise in 7th Federal Reserve District
Farmland values are up 1% in third quarter 2018 compared to third quarter 2017 in the Seventh Federal Reserve District, according to the AgLetter. The 188 agricultural bankers who responded to the Oct. 1 survey indicated district farmland values were 1% lower in the third quarter of 2018 than in the second quarter. This was the first quarterly decline since fourth quarter 2016.
Almost two-thirds of survey respondents expected the district’s farmland values to be stable during the fourth quarter 2018, but 32% expected a decrease in the final quarter of 2018. Only 2% expect an increase.
See results of the survey.
Farm Bankruptcies Are on the Rise
The increase in Chapter 12 bankruptcy filings reflects low prices for corn, soybeans, milk and even beef.
Farm bankruptcies are on the rise in Minnesota and across the Upper Midwest. Eighty-four farms filed for Chapter 12 bankruptcy in Wisconsin, Minnesota, North Dakota, South Dakota and Montana in the 12 months that ended in June, according to a new analysis from '
the Federal Reserve Bank of Minneapolis. That’s more than double the number over the same period in 2013 and 2014, and the number of bankruptcies in Minnesota doubled over the past four years from eight to 20. Farm bankruptcies are rising in the Midwest and bankers worry more are on the way. Farm bankruptcies are on the rise in Minnesota and across the Upper Midwest.
Are more on the way?
The Problem With the Pacific Northwest
Farmers in the northern Plains and upper Midwest find themselves in a bind. What to do with a bean crop when there is no market? While the loss of China as an export market for soybeans is impacting all U.S. farmers, it is especially problematic for farmers in North Dakota, South Dakota and Minnesota, given they are heavily reliant on that market for exports.
There is no significant crushing capacity to absorb the surpluses and access to southern markets or the Gulf by rail is too costly. The growth in soybean production in this tri-state region was predicated on demand from China, and feeding that pipeline through export markets out of the Pacific Northwest export market—the PNW.
There is no fallback strategy.