Ag News

ASFMRA AgNews - May 7, 2019

By ASFMRA Press posted 05-06-2019 08:56


Farmland Values Continue to Rise in Canada

Average farmland values in Canada continue to rise according to Canada's lead agricultural lender.

Farm Credit Canada’s (FCC) 2018 Farmland Values Report shows the average value of Canadian farmland increased 6.6 per cent in 2018, following gains of 8.4 per cent in 2017 and 7.9 per cent in 2016.

Alberta saw a 7.4 per cent increase in the value of its farm acres, which FCC says is a relativity stable trend considering the 7.3 per cent increase in 2017.

However, Southern Alberta saw the highest increase in value compared to other regions of the Province with a 12.7 per cent jump.
FCC says there was strong demand for irrigated land in the Southern region to grow more potatoes in preparation for the new Cavendish Farms processing plant in Lethbridge.

What Does This Do for Producers?

Trade War and Sagging Prices Push U.S. Family Farmers to Leave the Field

Shuffling across his frozen fields, farmer Jim Taphorn hunched his shoulders against the wind and squinted at the auctioneer standing next to his tractors.After a fifth harvest with low grain prices, made worse last fall by the U.S.-China trade war, the 68-year-old and his family were calling it quits. Farming also was taking a physical toll on him, he said; he’d suffered a heart attack 15 months before.
It took less than four hours to sell off all the tractors, combines and other farm equipment at the Taphorn retirement sale, ending a family tradition that had survived nearly a century.

“We went through the bad times in the ‘70s and ‘80s,” said Jim, 68, broad-shouldered and stocky. “In some ways, this is worse.”

Why Are Farmers Choosing to Leave?

Increase in Saskatchewan Farmland Values

Farmland in the west central region, and across the province, saw another increase in the average value per acre in 2018.

According to Farm Credit Canada 2018 Farmland Value Report Saskatchewan’s farmland value increased by 7.4 per cent in 2018. The average price per acre in the west central region was reportedly $1985/acre with values coming in between $900 and $3300 per acre, excluding the top and bottom 5 per cent sold in the province.

Last year the province saw a 10.2 per cent increase with 2016 showing a 7.5 per cent increase and J.P. Gervais, chief agricultural economist for FCC, said with the continual increase in farmland, producers are making more strategic investments, “Whether it means paying a higher price for land that has potential to become more productive or buying in blocks to improve efficiency of their operations, producers are sharpening their pencils with an eye on variable commodity prices."

Farmland Value Saw 7.4% Increase Last Year.

Experts Tell How Water Availability Affects Land Values

One of the most frequently recurring themes of last week's business conference of California agricultural appraisers was the impact the Sustainable Groundwater Management Act, known as SGMA, is having on land values.

A packed audience of rural appraisers and other related professionals attended the three-day conference of the California Chapter of the American Society of Farm Managers and Rural Appraisers in Sacramento, where they heard a detailed presentation on agricultural land values by appraisers Janie Gatzman and Tiffany Holmes.

"Everything is all about SGMA these days," said Gatzman, who runs an appraisal business in Oakdale.

Read What the Experts Have to Say.

Debt Levels vs. Interest Rates:  Which is Driving Farm Interest Expense Higher?

One of the biggest stories out of the U.S. economy has been the recent Federal Reserve interest rate hikes. In 2018, the Fed decided to raise rates four times. These rate hike announcements sparked concerns about the impact of higher interest rates on farm interest expense. This week’s post takes a look at farm interest expense and the two key drivers; interest rates and debt levels.

While the uptick is concerning, context is helpful. On the one hand, $22 billion is the highest level observed since 1990 when farm interest expense was $23 billion. Second, 2019 marks the sixth-time interest expense exceeded $20 billion since 1990 (1990, 1991, 2000, 2009, 2018, 2019).

On the other hand, farm interest expense peaked at $49.9 billion (in 2019 dollars) during the farm financial crisis of the 1980s. While real farm interest expense has only exceeded $20 billion a few times in recent years, this level was a level regularly exceeded in the past. From 1973 to 1991, real farm interest expense exceeded $20 billion for 19 consecutive years.

What Drives Farm Interest Expense Higher?

Is 'Empty Planet' Too Little Worried About the U.S.?

What do you worry about?

Climate change? The concentration of wealth and growing inequality?  Robots taking all the jobs?  Our crumbling infrastructure?  Public disinvestment from higher education?

I worry about babies. A lack of babies.  Too few babies.

A few years ago my family visited South Korea.  The total fertility rate (TFR) in South Korea is 1.3.  That means that, on average, a South Korean woman will give birth to 1.3 babies in her lifetime.

Should We Be Worried?

USDA Extends MFP Certification Deadline

USDA extended the deadline to May 17 from May 1 for agricultural producers to certify 2018 crop production for payments through the Market Facilitation Program (MFP). USDA’s Farm Service Agency (FSA) extended the deadline because heavy rainfall and snowfall have delayed harvests in many parts of the country, preventing producers from certifying harvested production.

Payments will be issued only if eligible producers certify before the updated May 17 deadline.

USDA Announces New Dairy Decision Tool 

Agriculture Secretary Sonny Perdue announced last week the availability of a new web-based tool – developed in partnership with the University of Wisconsin – to help dairy producers evaluate various scenarios using different coverage levels through the new Dairy Margin Coverage (DMC) program.

The 2018 Farm Bill authorized DMC, a voluntary risk management program that offers financial protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer. It replaces the program previously known as the Margin Protection Program for Dairy. Sign up for this USDA Farm Service Agency (FSA) program opens on June 17.

USDA Announces Repayment Options for Dairy Producers

The FSA announced that dairy producers who had coverage under the previous Margin Protection Program for Dairy (MPP-Dairy are eligible to receive a repayment for part of the premiums they paid into the program.

To be eligible for this repayment, which was authorized by the 2018 Farm Bill, a dairy operation must have participated in the MPP-Dairy during any calendar year from 2014 through 2017, have the repayment calculated and verified by FSA and elect one of two options by September 20, 2019. Operations whose established production history has been transferred to an heir or new owner also are eligible.

An operation’s repayment amount is calculated for each applicable calendar year in which that dairy participated in MPP-Dairy, from 2014 through 2017. The repayment amount is equal to the difference between the total amount of premiums paid by the dairy operation for each applicable calendar year of coverage and the total amount of payments made to the MPP-Dairy participating dairy operation for that applicable calendar year. An operation either can elect to receive 50 percent of the repayment amount as a cash refund or take 75 percent of the amount as a credit that can be used toward premiums for the new Dairy Margin Coverage (DMC) Program. 

Senate Nearing Deal on Disaster Bill

Senate appropriators are reportedly nearing a deal to deliver aid to the areas devastated by hurricanes, wildfires, and floods.  Senate Appropriations Chairman Richard Shelby (R-AL) and Ranking Member Patrick Leahy (D-VT) could take the agreement to the floor as early as this week.  The package currently contains just more than $3 billion for ad hoc agriculture disaster payments and includes crop year 2019 losses due to ongoing flooding issues with very little detail on how destroyed grain in bins or grain piles on the ground will be addressed.  

The agreement also reportedly includes an additional $304 million for Puerto Rico which has been a sticking point.  President Trump is reported to be “on board” with the compromise being ironed out. If the Senate passes the bill, the House would either have to pass the same bill or a conference committee would be set to iron differences between the House and Senate passed bills. The House passed its version back in January before flooding in the Midwest took place and includes more aid for Puerto Rico than the Senate compromise.