ASFMRA Ag News - November 10, 2020

By ASFMRA Press posted 14 days ago


Farmer Optimism Rises to Record High On Improving Financial Conditions

Farmer sentiment hit a new record high in October as the Purdue University-CME Group Ag Economy Barometer climbed to a reading of 183, a 27-point increase compared to September. The reading easily eclipsed the previous record high set back in February, before the pandemic’s onset. Both of the barometer’s sub-indices also set new record highs in October. Producers were more optimistic about the future as the Index of Future Expectations rose to 186, 23 points higher than in September, and especially about the current situation, as the Index of Current Conditions reached 178, 36 points higher than in September. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from October 19-23, 2020.

The late summer/fall rally in commodity prices, combined with government program payments arising from the second round of the Coronavirus Food Assistance Program (CFAP 2), appeared to be the primary drivers behind the sentiment improvement.

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2020 Farmland Values: Stable Is Good

As an asset class, farmland doesn’t correlate to other investment opportunities, such as the stock market. As we close out the year, the farmland market is strong and in good demand. Why? Farmland continues to come to the market for the same reasons as in the past — primarily estate settlement — and is being purchased by the same buyers — primarily farmers.

Will this continue? Most believe so, as farmland continues to be a great part of a diverse portfolio, offering stable returns that have been bolstered by government support and further supported by continued low interest rates. This flat response has been in place for the last few years across most land classes, and while stability is not sexy, this static response to these volatile times is most welcome.

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Review of Trade Arrangement Secures Benefits for U.S. Dairy

The U.S. dairy industry commended the U.S. Trade Representative for using its review of Indonesia’s Generalized System of Preferences status to hold Indonesia accountable for issues that had threatened the smooth flow of U.S. dairy exports. USTR announced yesterday the conclusion of its review of Indonesia’s eligibility to continue receiving preferential tariff access to the U.S. market under the GSP program.

“The U.S. dairy industry and all of its supplying dairy farmers rely on the enforcement of fair trade rules. We appreciate the work invested by the U.S. government to use the GSP review process to ensure that Indonesia complies with its trade obligations under the terms of the GSP program,” said Jim Mulhern, president and CEO of the National Milk Producers Federation.

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Nearly 50% of U.S. Experiencing Drought

Nearly half of the contiguous U.S. is experiencing some form of drought, according to the latest U.S. Drought Monitor. As of Oct. 27, the data showed that 46% of the U.S. is in drought, up from 42.5% on Sept. 29. Nearly 64.5% of the U.S. is experiencing some form of dryness or drought, up from about 62% on Sept. 29. Eighteen percent of the U.S. is in extreme to exceptional drought, the majority of which is in the western part of the country.

According to the Drought Monitor, a blast of frigid Arctic air recently invaded the north-central states and was accompanied by a slow-moving storm system that produced light snow across most of the Rockies, Plains and upper Midwest.

“Although outdoor conditions were harsh, the storm and cold were welcome, as it brought a halt to the abnormal warmth and dryness that had expanded and deepened the drought in the region,” the report explained.

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Jennifer Garner Saved Her Family's Oklahoma Farm

Jennifer Garner just might be one of the most likable people in Hollywood. Her Instagram account is full of relatable content about being a mom -- drowning in laundry, homeschooling during the pandemic, you name it. But one of the coolest stories about the popular celebrity is how she saved her family's farm and turned it into an actual business.

Garner's mother, Patricia English Garner, grew up on the family farm in Locust Grove, Oklahoma. Her parents had purchased the land in 1936 with her father's bonus from fighting in World War I. Pat Garner explained to Southern Living that she recalls that her parents had about $700 to purchase the land at the time.

"My parents didn't even have a car, so when they heard about the land that was for sale, they hired someone to drive them to the property. The farm consisted of a two-room house and 20 acres--minus 1 acre at the heart of the property, which was a Native American cemetery. Mother told me the story of Dad leaning on his heels and negotiating all day over $20. When they finally agreed on a price, the deal was sealed, and the land was purchased. It's been in our family ever since."

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Prices Soar in Western Montana as ‘Land Grab’ Continues

This summer, seven empty lots on the face of Big Mountain in Whitefish were put up for sale — the smallest was just over a half an acre and listed at $1.2 million. The owners of the Northern Lights development weren’t accepting offers on the properties until Sept. 1, but once they did, offers came flooding in. By the end of October, six of the seven lots had been sold.

In years past, those lots might have waited much longer for buyers, but in 2020 the quick sales exemplify what Whitefish real estate agent Angie Friedner has been calling a “Montana land grab.” Since May, when Gov. Steve Bullock rolled back a pandemic-motivated 14-day quarantine requirement for out-of-state travelers, real estate prices in parts of Montana have skyrocketed, and properties that are priced well go quickly.

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Homebuilders Run Up Price of East Valley (Ariz.) Land to $245.5m in Controversial State Auction

A state land auction near some of the most lucrative residential real estate in the region opened Wednesday with the lowest possible legal price and only four bidders.

When the gavel came down a little more than an hour later, two homebuilders had pushed the purchase price of the southeast Valley land to more than three times the appraised value of $68 million.

Texas-based D.R. Horton cast the winning bid of $245.5 million for the tract in an area known as the Superstition Vistas. Located just east of the Maricopa County line, the Vistas is a 270-square-mile parcel bigger than Mesa, Gilbert, Tempe and most of Chandler combined.

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ASFMRA Government Relations Update

What Does Biden Administration Mean for USDA?

The Associated Press and other news organizations called the Presidential Race on Saturday for Vice President Joe Biden. Currently the AP has President-elect Biden with 290 electoral college votes (270 are needed to win) with Alaska, Georgia and North Carolina still not decided. While President Trump has not yet conceded, the Biden/ Harris team will begin to plan for the transition to their Administration. The President-elect transition website can be found here.

Assuming the results hold, which seems most likely, President-elect Biden will start to announce his White House staff, a Coronavirus task force and probably sometime in December announce his Cabinet nominees all of whom will require Senate confirmation. There are over 4,000 political appointees throughout the federal government. Most do not require Senate confirmation. But it takes time to fill all of these positions.

Within USDA the Secretary, Deputy Secretary and Undersecretaries require Senate confirmation. Former ND Senator Heidi Heitkamp is the most frequently mentioned likely Biden USDA Secretary pick right now, but it is still early.

The Administrators of the various agencies, including the Farm Service Agency (FSA) and the Risk Management Agency (RMA), do not require Senate confirmation. It could easily take 6 months to a year before we know who the next FSA or RMA administrators will be. The agencies usually go into a holding pattern until new leadership is appointed.

President-elect Biden will also have to produce a FY2022 Budget request to Congress. Typically, the budget is transmitted to Congress in February, except when the Administration turns over in January. President Trumps first budget request was sent to Congress in April of 2017. All 4 budget requests from the Trump Administration contained proposals to cut farm programs and crop insurance. Because the career officials at the Office of Management and Budget (OMB) do not turn over with the change in Administrations, it is highly likely that some of the budget proposals to cut farm programs crop insurance will continue under a Biden budget request. Recall, all of President Obama’s budget requests included proposed cuts to farm programs and crop insurance. So far, Congress has systematically rejected those proposals. Bottomline, in the near-term USDA will be in a holding pattern as the new Administration staffs up the Department of Agriculture.

Impact of Election Results on House Agriculture Committee

House Agriculture Committee Chairman Collin Peterson (D-MN) has lost his race to Michelle Fischbach (R-MN) and will not return for a 17th term. The likely next Chair, by seniority, could be David Scott (D-GA), Jim Costa (D-CA), or Marcia Fudge (D-OH). Both Scott and Costa have announced they will seek the top spot. The Democrat and Republican leadership will make Committee leadership decisions sometime later this year or possibly early next year. On the Republican side, Glenn Thompson (R-PA), Austin Scott (R-GA) and Rick Crawford (R-AR) are vying for the top spot.

Returning House Agriculture Committee Democrats include: David Scott (D-GA), Jim Costa (D-CA), Marcia Fudge (D-OH), Jim McGovern (D-MA), Filemon Vila (D-TX), Stacey Plaskett (D-VI), Alma Adams (D-NC), Kim Schrier (D-WA), Chellie Pingree (D-ME), Jahana Hayes (D-CT), Angie Craig (D-MN), Josh Harder (D-CA), Cheri Bustos (D-IL), Tom O’Halleran (D-AZ),Cindy Axne (D-IA), Sean Patrick Maloney (D-NY), Salud Carbajal (D-CA), Al Lawson (D-FL), Jimmy Panetta (D-CA), and Ann Kirkpatrick (D-AZ).

Representative Xochiti Torres Small (D-NM) lost her race. Representatives Abigail Spanberger (D-VA), Antonio Delgado (D-NY), TJ Cox (D-CA), and Anthony Brindisi (D-NY) races have not yet been called. Cox and Brindisi currently trail in the vote counts while the others hold narrow leads.

On the Republican side of the Agriculture Committee returning members include: Glenn Thompson (R-PA), Austin Scott (R-GA), Rick Crawford (R-AR), Scott DesJarlais (R-TN), Vicki Hartzler (R-MO), Doug LaMalfa (R-CA), Rodney Davis (R-IL), Rick Allen (R-GA), Mike Bost (R-IL), David Rouzer (R-NC), Trent Kelly (R-MS), James Comer (R-KY), Neal Dunn (R-FL), Dusty Johnson (R-SD), Jim Baird (R-IN), Don Bacon (R-NE), Jim Hagedorn (R-MN), Chris Jacobs (R-NY) and Troy Balderson (R-OH).

Senate Agriculture Committee Election Impacts

Of the 20 Senate Agriculture Committee members (11 Republicans and 9 Democrats), six were up for reelection (4 Republicans and 2 Democrats) and one, Senator Pat Roberts, retired. Senators McConnell (R-KY), Ernst (R-IA), Hyde-Smith (R-MS), Tina Smith (D-MN) and Durbin (D-IL) won their races. Roger Marshall (R-KS) won the Kansas race to fill Senator Pat Roberts seat. Kelly Loeffler (R-GA) is facing a run-off election in January as neither candidate received more than 50% of the vote to win outright under Georgia State election rules.

Senator John Boozman (R-AR) will take the committee helm for the Republicans with Senator Roberts retirement. Senator Debbie Stabenow will likely remain the lead Democrat on the Senate Agriculture Committee.

Congressional Lame Duck Session Begins

The House returns next week while the Senate is in session this week. First order of business for both when they return is selecting their leadership for the next Congress. While the numbers are tighter in both the House and Senate, it is widely expected the leadership will remain unchanged with Senator McConnell leading the Senate and Representative Pelosi returning as House Speaker. Senator McConnell has indicated he wants to make a coronavirus relief package a priority now that the election is over. Congress also has to either pass an omnibus appropriations bill for FY 2021 or another Continuing Resolution (CR) into next year to avoid a government shutdown. The current CR runs through December 11th. It is entirely possible that the two efforts will be combined into one massive bill sometime in December. In any case, don’t look for either issue being resolved this month, but rather sometime in mid-December.

CFAP 2 Payments Nearing $9 Billion

USDA is reporting total CFAP 2 payments as of November 2nd, at $8.756 billion. $14 billion was made available by USDA for CFAP 2 payments. 

In Memory: Dr. Barry Flinchbaugh

The ASFMRA is saddened to hear of the passing of Dr. Barry Flinchbaugh, who taught agricultural policy at Kansas State University for nearly half a century. Flinchbaugh was involved to some degree in every U.S. farm bill written since 1968, and served on many national boards, advisory groups and task forces, providing input on domestic food and agricultural policy. You can read more about him here.

The ASFMRA is proud to have hosted the webinar "Historical Perspective and Analysis with Dr. Barry Flinchbaugh," where Flinchbaugh discussed the impact of COVID-19 on agriculture with ASFMRA President Dennis Reyman, AFM, ARA. Members can view the webinar for free by visiting this link.