2019 Farmland Outlook: Values Stay Resilient
Despite another year of low profit margins for farmers, rising interest rates and global economic uncertainty, the farmland market was flat to even slightly-higher in 2018.
“Farmland values remain relatively resilient given the downward pressure from farm incomes,” says RD Schrader, president of Schrader Real Estate and Auction Company in Columbia City, Ind. “Overall farmland values continue a slight trickle-down trend, as interest from farmers who saved in the better income years and investors continues to provide support.” The first half of 2018 showcased strength for values as limited land was sold. This brought support to the broad Midwestern market, says Doug Hensley, president of real estate services for Hertz Farm Management in Nevada, Iowa. “The bump in grain prices during the late winter/early spring season in 2018 offered solid pricing opportunities for both old-crop and new-crop corn and soybeans, and importantly, established a relatively strong spring price for revenue-based crop insurance policies.”
But the growing season brought too much rain in some places and too little in others. Then the Chinese trade and tariff issues hit, which sank grain prices and optimism.
“Coming into the fall harvest season, producers were generally hopeful for good crop yields, but commodity prices had clearly reset at lower levels,” Hensley says. “This shift lower has impacted the ‘psyche’ of the market and the overall confidence of the 2018 land market.”
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New Congress Seated
The first session of the 116th Congress was sworn in last week. Nancy Pelosi (D-CA) returns as House Speaker, while Senator McConnell (R-KY) remains the Senate Majority Leader. Kevin McCarthy (R-CA) is the House minority leader and Senator Schumer remains the Senate minority leader.
The House has not yet announced its Committee assignments, although the Democrats did set their Committee Chairs late last week. Collin Peterson (D-MN) was elected Chairman of the House Agriculture Committee. He returns to that position having served previously from 2007 - 2011 as House Agriculture Committee Chair. Mike Conaway will be the ranking member of the Committee for the 116th Congress.
The Senate did announce Committee assignments last week. Senator Roberts (R-KS) returns as Senate Agriculture Committee Chair and Senator Stabenow (D-MI) as ranking member. Other members of the Senate Agriculture Committee are: McConnell (R-KY), Boozman (R-AR), Hoeven (R-ND), Ernst (R-IA), Hyde-Smith (R-MS), Braun (R-IN), Perdue (R-GA), Grassley (R-IA), Thune (R-SD), Fisher (R-NE), Leahy (D-VT), Brown (D-OH), Klobuchar (D-MN), Bennett (D-CO), Gillibrand (D-NY), Casey (D-PA), Smith (D-MN) and Durbin (D-IL).
Government Shutdown Continues
Now entering its third week, the partial government shutdown continues as the Trump Administration and Congress have yet to reach an agreement to fund a border wall. The House did pass last week, on a party-line vote, a Continuing Resolution (CR) to reopen the government through February 8th, but Senate Majority Leader McConnell has said he won’t bring up a funding bill in the Senate until the President agrees he will sign it. Although Administration and Congressional leaders continue to search for an agreement, none has been forthcoming.
USDA is one of the Departments that is shutdown. Implementation of the 2018 Farm Bill will have to wait until USDA reopens. The shutdown has no immediate impact on the crop insurance program as farmer’s 2018 claims continue to be processed and paid. All crop reports issued by USDA have been suspended during the shutdown.
The Farm Service Agency (FSA) did shut its doors on December 29th. Market Facilitation Program (MFP) payments for producers that have already certified production with the FSA will continue beyond January 1, 2019. Signup for the MFP ends on January 15, 2019. Secretary Perdue will determine if the deadline should be extended once the USDA reopens. Farmers do not need to be finished with harvest to sign up. Farmers have until May 1, 2019, to certify production.
Due to the shutdown all commodity loan activity has ceased as of January 3, 2019. Farm-stored commodities pledged as Commodity Credit Corporation collateral can be marketed (moved for purchase to a buyer) or fed, however, the following activities will not be processed by FSA while the government is shutdown:
• Loan repayments
• Loan disbursements
• Refunds
• Termination of transfers
During the shutdown, movement of collateral will be treated the same as loan collateral moved on a non-workday (same as a weekend or federal holiday). Producers with farm-stored loans may move loan collateral to non-designated structures during this period without prior written approval, provided the producer requests a CCC-681-1 Marketing Authorization on the next business day either by phone or in person.
By Raising Productivity, Agtech Boosts Value Of Farmland
Against the backdrop of the partial shutdown of the federal government, U.S. farmers and ranchers are no doubt looking for a happier new year in 2019. The burgeoning agtech sector could brighten things up by continuing to boost productivity and reverse the market setbacks of 2018.
Not since the 1980 embargo on U.S. grain exports to Russia have farmers been so pressured by the vagaries of global trade policy. The statistics are telling.
According to the USDA’s World Outlook Board, soybean exports hit by the retaliatory tariffs put in place by top importer China dropped in 2018 by about 11%. That has driven inventories to a record high of 955 million bushels, and pushed down prices. The USDA has calculated that tariffs cost U.S. soybean producers more than $7 billion during 2018 alone.
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Crop Insurance Considerations for 2019
You won’t find a laundry list of new products or major changes as you make your 2019 crop insurance selections. But with continued financial strain and increases in yields, now is a good time to re-evaluate your coverage plan, seek expert advice and analyze the options available.
As you try to whittle down your cost of production, you might be tempted to reduce your crop insurance coverage. Before you make the cut, weigh the pros and cons.“Farmers need to talk to their bankers to find out their banker’s biggest concern with them for 2019,” says Jamie Wasemiller, analyst and crop insurance agent with the Gulke Group. “You may decide you want to reduce insurance to cut costs, but they might prefer you protect more of your crop and revenue with insurance.”
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Weather Tech Is Poised To Prove ROI
The go-to, not-to-miss Christmas gift and standard-issue stocking stuffer for a farmer is still a fresh copy of the Old Farmer’s Almanac.
The almanac has been published since 1792, and it sells 3 million copies per year. It is nothing short of amazing in this day and age of high-tech weather satellites and Doppler radar that farmers still tend to put so much stock in a publication that has been making weather predictions much the same way since the late 1700s.
But let’s face it. Mother Nature is a fickle lady, and she can still make the most seasoned modern-day weather forecasters look like fools.
There is vast room for improvement in weather data and weather modeling. Until recently, the task of understanding and forecasting the weather in this country defaulted to government agencies such as the National Weather Service (NWS) and NASA. On the private side, you’ve got established players such as Weather Underground and The Weather Channel, which are now part of IBM. Meanwhile, companies such as DTN had pioneered weather forecasting services specifically for farmers and the agriculture industry.
But as site-specific precision agriculture technologies continue to evolve, it is clear if hyped-up tech such as big data, artificial intelligence and smart farms are truly going to work, then weather at the most basic and granular level has to get much better. It needs to be delivered in the right format, at the right place and at the right time.
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7 Tips for Farm Management
The calendars say 2019, but many of the same headaches and management challenges from 2018 still linger. While always a component of production agriculture, uncertainty has moved to front and center over the last few years. Compounding the issue are difficult farm financial conditions that have continued to erode.
While it comes as no surprise, 2019 is shaping up as another difficult year in agriculture. As producers begin planning for the upcoming season, they are likely to find a difficult budget outlook. To help with planning over the upcoming year, we sat down and mapped out the 7 biggest uncertainties facing farm managers and offer a few tips and insights into how to approach them.
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Senator Roberts Announces Retirement
Senator Pat Roberts (R-KS) announced last week that he will not seek re-election in 2020. He will serve out his remaining term. In addition to serving as Senate Agriculture Committee Chair during this most recent farm bill, Senator Roberts was Chairman of the House Agriculture Committee and author of the 1996 “Freedom to Farm” farm bill as well as the primary author, along with Senator Kerry (D-NE), of the 2000 Agriculture Risk Protection Act, the last major significant overhaul of the crop insurance program. The good news is we have 2 more years with Senator Roberts as Chairman of the Senate Agriculture Committee.
Appraisal Organizations Request Public Hearing
ASFMRA, along with 15 additional organizations, sent a letter to the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency requesting that the agencies hold a public meeting as part of the process to determine whether to increase the residential appraisal threshold from $250,000 to $400,000.
Read The Press Release.
USDA NRCS Provides Access to Tools
The USDA Natural Resources Conservation Service has a new Soil Tools Web page, a one-stop source for new, leading-edge tools and technologies to help farmers, ranchers, and other land users understand, evaluate, and conserve soils. The new web page offers single-site access to soil data and maps, soil databases, digital soil applications, climate data, official series descriptions, ecological sites, statistical packages, and soil-property calculators.
Access the Tool.
Appraisal Standards Board Publishes Exposure Draft
Reminder that the Appraisal Standards Board has published the Third Exposure Draft of proposed changes for the 2020-21 edition of the Uniform Standards of Professional Appraisal Practice (USPAP). Among several important changes, the draft proposes a reporting model that reduces specificity without diminishing USPAP reporting requirements.
See the Draft.