ASFMRA AgNews - February 5, 2019

By ASFMRA Press posted 12 days ago

  

3 Factors Could Topple Farmland Values

Since hitting bottom in the early 1990s, the price of agricultural land has soared, rising 169% in real terms between 1994 and 2015, according to Erik Norland, executive director and senior economist of CME Group. 

“Moreover, agricultural land values were largely untouched by the financial crisis, experiencing only a small dip in 2009,” he says. 
Since 2015, however, farmland prices have gone sideways. Could they be in for a big decline in value? The answer depends on three factors, Norland says.

Read the 3 Important Factors.

Farmland Values Normalize in Grain Belt States


The pace of farmland-value drops has slowed in several areas but remain stable, according to a recent report from Farm Credit Services of America (FCSAmerica). Values largely held steady through the last half 2018 for the 64 benchmark farms FCSAmerica monitors in Iowa, Nebraska, South Dakota and Wyoming.

Iowa farmland values are largely unchanged from a year ago, while Nebraska and South Dakota each saw modest declines for the year. Only Wyoming experienced an uptick in benchmark farmland values. 

“The softening of the market in the latter half of 2018 wasn’t unexpected and, in fact, it better aligns farmland values to profitability in the grain sector,” says Tim Koch, chief credit officer for FCSAmerica. “While producers in many areas of our territory benefitted from strong yields in 2018, the industry continues to be challenged by compressed margins. For producers who rent farmland, softening in the market will help their bottom line.”

Learn More About Normalizing Values.

ASFMRA Comments on Proposal to Raise Residential Appraisal Threshold


ASFMRA joined other appraisal organizations in joint comments to the Federal Reserve, the FDIC and the OCC opposing their proposal to raise the residential appraisal threshold to $400,000 from $250,000. You can read our extensive comments here.

House Agriculture Committee Line-up Complete 


House Agriculture Committee Chairman Collin Peterson (D-MN) and Ranking Member Mike Conaway (R-TX) have announced their Subcommittee Chairs and Ranking Members respectively. Congressman Filemón Vela (D-TX) will lead the General Farm Commodities and Risk Management and Congressman G.T. Thompson (R-PA) is the Ranking Member.  Congressman Jim Costa (D-CA) will chair the Livestock and Foreign Agriculture Subcommittee with Congressman David Rouzer (R-NC as Ranking Member.  Congressman David Scott (D-GA) will head the Commodity, Exchanges, Energy and Credit Subcommittee with Austin Scott (R-GA) as the Ranking Member.  Congresswoman Marcia Fudge (D-OH) will lead the Subcommittee on Nutrition, Oversight and Department Operations with Congressman Dusty Johnson (R-SD) as the Ranking Member.  Delegate Stacey Plaskett (D-U.S. Virgin Islands) will chair the Subcommittee on Biotechnology, Horticulture and Research with Congressman Neal Dunn (R-FL) as the Ranking member.  Congresswoman Abigail Spanberger (D-VA) will lead the Conservation and Forestry Subcommittee with Congressman Doug LaMalfa (R-CA) as the ranking member. 

The Republican members of the House Agriculture Committee are mostly familiar faces. The House Agriculture Committee Republican members by order of seniority are:  Ranking Member Mike Conaway (TX), Glenn 'GT' Thompson (PA), Austin Scott (GA), Rick Crawford (AR), Scott DesJarlais (TN), Vicky Hartzler (MO), Doug LaMalfa (CA), Rodney Davis (IL), Ted Yoho (FL), Rick Allen (GA), Mike Bost (IL), David Rouzer (NC), Ralph Abraham (LA), Trent Kelly (MS), James Comer (KY), Roger Marshall (KS), Don Bacon (NE), Neal Dunn (FL), Dusty Johnson (SD), Jim Baird (IN), and Jim Hagedorn (MN). The last three are freshman and new to the committee.

Former Chairman Frank Lucas (R-OK) is not returning to the House Agriculture Committee for this session. In a statement he said he will return for the next farm bill. Since he is serving as ranking member on the House Science, Space and Technology Committee he was not able to attain a waiver to remain on the House Agriculture Committee. Also not returning is Steve King (R-IA). He has been stripped of all committee assignments by the House Republican caucus.

The Farm Service Agency Extends Some Program Dates Due to Shutdown


The FSA extended program deadlines because of the government shutdown. The sign-up deadline for the Market Facilitation Program (MFP) is now February 14, 2019. Marketing Assistance Loan deadlines were extended as well as sign-up for FSA run disaster programs. You can see the full list here.

Supplemental Coverage Option Sales Opportunity?


Last week the Congressional Budget Office (CBO) released is January budget baseline estimate. The CBO estimate is the first look at USDA budget projections since the 2018 farm bill was signed into law last December. CBO is predicting that most farmers will choose PLC for crop year 2019 and 2020. The 2019 crop year decision also applies to the 2020 crop year. 

Given the choice between ARC and PLC back in 2014, over 90% of corn and soybean base elected ARC County, while wheat base was roughly split between ARC and PLC. Farmers who elect ARC are not eligible to purchase SCO, by law. However, farmers who do elect PLC are eligible for the Supplemental Coverage Option (SCO). Unfortunately, the 2019 election is going to occur after major crop insurance sales closing dates. The Farm Service Agency (FSA) has not yet announced when the sign-up period will commence to elect ARC or PLC for the 2019 crop year. The shutdown has delayed the 2018 farm bill’s implementation. Most likely the sign-up will run sometime this summer. You might recall we faced a similar situation when the 2014 farm bill was implemented. In that case, RMA allowed the cancellation of SCO policies for farmers who ended up electing ARC after the sales closing date. RMA has not announced whether it will follow the same procedure for the 2019 crop.

Cannabis, Wine Still a Murky Mixture


Experts see the legalization of cannabis as a “game-changer” for the wine industry, with value-added products such as teas, edibles and infusions that may appeal to some of the educated, affluent consumers that have been drawn to wine.

However, extensive government controls and complexities within the world of cannabis make it still unclear how the two will coexist in the marketplace, the experts acknowledge.

Read About the Potential Pairing.

Farmland Sales: Western Illinois Land Tops $10,100 Per Acre


Judging by his obituary, James Kettelkamp’s life was well-lived. The Stronghurst, Illinois, farmer served in the Army Air Corps in World War II and the Korean Conflict, after which he farmed and worked for the Illinois Department of Agriculture. He and his wife, Jeanne, had three children. He was devoted to his family and their church, until he died in 2012 at age 87. Jeanne, a homemaker, school cook, and childcare provider, died in December, 2018.

On Jan. 29, the Kettelkamp Trust sold the family’s 238.20 acres of Class A farmland, in Henderson County, west-central Illinois.
Auctioneer Van Adkisson says these high-quality tracts are the kind of sale that draws a number of potential buyers. There were 18 registered bidders, seven of whom participated in the sale.

See Other Major Sales.

Minding Ag's Business


Farm sector debt hit a record in 2018, coming in at an estimated $409.5 billion dollars, according to USDA. It's an increase of 4.2%, or $16.4 billion from 2017 levels. Both real estate and non-real estate debt increased to new record highs of $250.9 billion and $158.6 billion respectively.

These trends should come as no surprise. Farmers have increasingly turned to their lenders for financing as cash cushions thinned out after years of low prices and stubborn profit margins. In the days of $8 corn, it wasn't unheard of for a farmer to buy a tract of land in cash or operate without borrowing from the bank. USDA's data highlights how that trend has reversed.

Get to Know the Trends.

Arizona Ranchers Share Experience with Border Security


The U.S. border with Mexico spans 1,954 miles, and ranchers are on the front lines for most of it.

For the past few decades, border enforcement and security has increased to halt illegal immigration and drug smuggling. In 1989, construction on the first major border fence began in San Diego, stretching 46 miles east.

President George W. Bush signed the Secure Fence Act of 2006 on Oct. 26, 2006, adding nearly 700 miles of fencing structures and more enforcement officials.

More recently President Donald Trump campaigned on a platform of border security, much of it hinging on building a wall. From the start of his presidency, funding for a border wall has been under scrutiny. The debate finally reached its boiling point on Dec. 21, 2018, when Trump opted out of signing a bill that would fund the government because it lacked $5.7 billion to pay for a border wall.

Hear the Ranchers' Thoughts.

'Big Crops, Low Prices,' For a Long Time Ahead, Says CBO


Farm-gate prices for corn and soybeans, the two most widely grown crops in the United States, are stuck in a rut for years to come, said the Congressional Budget Office (CBO) on Monday in its long-term budget outlook. Farmers will grow near-record corn crops to generate revenue while slowly working down a soybean stockpile that is expected to approach a billion bushels this summer, the largest inventory ever.

Farm income plummeted with the collapse of a seven-year commodity boom in 2013. The USDA forecast of $66.3 billion in income last year was half of the 2013 peak and a reflection of persistently low commodity prices. The CBO outlook, focused on farm subsidy costs, said corn would stay below $4 a bushel for the decade to come and soybeans would not top $9 a bushel until 2023. The last time corn and soybean prices were that low for an extended period was the early to mid 2000s.

Will Prices Stay Low?

Opinion: Is a Farmland Price Crash on the Horizon?


Land prices are always a hot topic in farm communities, and like most farmers, I’ve gathered with neighbors after an auction of local farm ground to forecast the imminent financial demise of the farmer who bought that piece of ground I would have loved to own. Of course, me and the rest of the coffee shop experts were wrong, as land prices have been on an extended bull run. Since the early 1990s, U.S. agricultural land prices have increased 169 percent in real terms.

That extraordinary bull market is likely coming to an end.

Yeah, I know I’ve been wrong for a generation, but this time I really mean it!

Is a Crash Coming?
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