ASFMRA AgNews - January 20, 2020

By ASFMRA Press posted 01-20-2020 09:15


Will 2020 Be the Year the Land Market Tumbles?

The land market in 2019 continued the plateau trend of the past several years during which the supply of agricultural land for sale on the market remained lower than average and prices for good quality cropland held mostly steady. Looking ahead to next year, will financial stress from lower commodity prices and poor harvests in some regions cause prices to decline?

Farmland sale activity in the first part of 2019 was slower than it had been for some time with late spring and early summer especially void of farms for sale. Planting delays and prevented plantings contributed to the lackluster activity.

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Why Adaptability Matters on the Farm

The agricultural industry is ever evolving. Not only has the industry experienced paradigm shifts in technology and operational efficiencies, but the market for agricultural investment and management has shifted drastically over the past 30 years. From 2005-17, the number of global farmland investment firms increased from approximately 15 to more than 100. This proliferation has created an opportunity for farm managers to diversify their list of clients and asset owners on a global scale.

With a heightened interest in farmland as an asset class, geographically focused farm managers are primed to continue their function as strategic middlemen between asset owners and the operators. However, without a more modern, global perspective on farm management, local managers may lose out on the opportunity to add additional partners, both on the investor and absentee owner side.

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In Harsh Year, US Crop Acreage Shrinks 5%

The rainiest spring in a quarter century slowed the planting season and helped limit U.S. farmers to their smallest crop area in five decades, said the government in assessing 2019 production. Early snowfall and icy autumn weather prevented growers from harvesting more than 600 million bushels of corn, and the USDA said it would update estimates of corn and soybean supplies, if warranted, “once producers are able to finish harvesting remaining acres.”

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Report Shows Land Value Outside Big Texas Cities Is Increasing

Rural land values in Texas are increasing, driven in part by the state’s population growth, according to a new “Texas Land Trends” report by the Texas A&M Natural Resources Institute.

From 1997 to 2017, Texas’ population increased 48% from 19 million residents to 29 million. That’s roughly 470,000 new residents annually, according to the report.

“More people means a growing demand for rural land which means an increase in value,” said Roel Lopez, Director of the Natural Resources Institute at Texas A&M.

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Farmers Borrow Less, and Tariff Payments May Be Why

Agricultural lending declined during the second half of 2019, and while that reflected lower production costs, it “likely also was due to an increase in revenue from government payments (Market Facilitation Program) connected to trade disputes that lingered through the year,” said the Federal Reserve on Thursday. In a quarterly report, the Fed said lending activity fell by 5% in 2019 compared to 2018, driven by less demand for operating loans, which producers use to pay their bills while waiting to sell crops or livestock.

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The Appraisal Foundation Opens Call for Board of Trustees Members

The Appraisal Foundation announced today it opened a call for qualified candidates to fill three at-large trustee positions for its Board of Trustees, which is the governing body of The Appraisal Foundation. The three individuals elected will serve three-year terms beginning on January 1, 2020.

“Our annual call for applicants is a real opportunity to cast a wide net for candidates that bring leadership and non-profit management experience who also have a deep interest in advancing the appraisal profession,” said David Bunton, president of The Appraisal Foundation. “Those individuals elected will have an impact on a profession that the public trusts to determine the underlying value of assets that bolster the world’s most powerful economy, while also navigating rapid change brought on by technological advancements.”

Read the Full Press Release.

USMCA Passes Senate, President Trump Reaches “Phase 1” Trade Agreement with China

Last week two positive developments finally came to fruition on trade. The Senate passed the agreement on trade between the U.S. Mexico and Canada (USMCA by a vote of 89 – 10. Senate Majority Leader Mitch McConnell scheduled the vote before the Senate’s time is consumed by the impeachment trial after initially saying the vote would wait until after the trial. Once President Trump signs the bill, Canada must approve the agreement. The trade agreement goes into effect 90 days after Canadian approval.

The Senate USMCA vote occurred the day after President Trump signed a “Phase 1” trade agreement with China. China has agreed to purchase $40 billion of U.S. food, agricultural and seafood products annually for the next two years. The agreement becomes effective 30 days after signing. You can read the full agricultural details here.

Agriculture Secretary Perdue has indicated phase 3 of the 2019 MFP payments will go out (no timeline indicated yet), but not to expect additional MFP payments going forward now that an agreement with China has been reached.

USDA Releases 2019 Crop Production Summary

Reflecting the difficult production year farmers experienced in 2019, USDA’s National Agricultural Statistics Service (NASS) released its annual crop production summary. Total plantings of 302.635 million acres for 2019 is the lowest total planted acres since 1970, down 16.7 million from 2018. Additionally, early winter weather prevented growers from harvesting more than 600 million bushels of corn predominately in MI, MN, ND, SD and WI. A special note to the report says NASS will recontact farmers in those states and update estimates, if warranted. Total acres harvested are reported at 285 million acres compared to 299 million acres in 2018.

Senate Agriculture Committee Gains New Member, House Ag Loses One

Georgia Senator Johnny Isakson (R-GA) resigned at the end of last year due to health reasons. Republican Georgia Governor Kemp appointed Kelly Loeffler to the seat and she was sworn into office January 6, 2020. She takes a seat on the Senate Agriculture Committee, which Georgia Senator David Perdue (R-GA) vacated for her. Senator Loeffler grew up on a farm in Illinois.

After switching parties at the end of last year, Congressman Jeff Van Drew, now a Republican, lost his seat on the House Agriculture Committee. The Democrats have not appointed a member to fill his seat. To date, Van Drew has no committee assignments.

House Agriculture Committee Chairman Announces Staff Changes

House Agriculture Committee Chairman Collin Peterson announced several staff changes last week. Jake Chisholm will serve as Staff Director for the Subcommittee on General Farm Commodities and Risk Management. A graduate of North Dakota State University with a bachelor’s degree in Agricultural Economics and Crop & Weed Sciences, Chisholm is a fourth-generation producer and partner in his family’s farm near Gary, Minnesota that produces spring wheat, soybeans, dark red kidney beans, corn and sugar beets. Chisholm replaces Mike Stranz who has moved back to be a policy director at the National Farmers Union. ASFMRA Leadership Institute participants have met with Mike the past couple of years.

Justina Graff will serve as the Deputy Clerk for the House Agriculture Committee. Graff recently served as an Intern for the committee and returns in this new role from Texas A&M University. Graff grew up on a sixth generation working farm and ranch in Hondo, Texas.

FSA Reminds Producers ARC/ PLC Sign-up Deadline for 2019 Coming Soon

USDA’s Farm Service Agency (FSA) encourages agricultural producers to enroll now in the Agriculture Risk (ARC) and Price Loss Coverage (PLC) programs. March 15, 2020 is the enrollment deadline for the 2019 crop year. Although more than 200,000 producers have enrolled to date, FSA anticipates 1.5 million producers will enroll for ARC and PLC. By enrolling soon, producers can beat the rush as the deadline nears.

Until March 15, producers who have not yet enrolled in ARC or PLC for 2019 can enroll for both 2019 and 2020 during the same visit to an FSA county office unless yield updates are requested. Additionally, farm owners have a one-time opportunity to update PLC payment yields that take effect beginning with crop year 2020. If the owner accompanies the producer to the office, the yield update and enrollments may be completed during the same office visit.