Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Tuesday 07/22/14

Why Rents May Be Slow to Tumble
Farmers stand to lose money on cash rented land in 2014 and 2015, if average lease rates don't adjust to new economics. On the other hand, landowners may be slow to budge.[Read Full Blog Post]
Posted at 4:47PM CDT 07/22/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
If I remember correctly, the last major correction ended with about 80% ,give or take, of the farm land in Iowa being in receivership.
Posted by Bonnie Dukowitz at 6:45PM CDT 07/22/14
Your right Bonnie and I don't think lenders are going to be to eager to carry someone losing money every year.Why would you feed a dead horse? I feel this is just the first of many low or no profit years to come.I am glad we have no debt at this time and can farm at these prices.
Posted by Raymond Simpkins at 8:01PM CDT 07/22/14

Monday 07/21/14

Cash Rent Needs a Relief Valve
Dan, an Iowa farmer, summarized the problem in a 16-word Twitter post last month: "$4 cash corn. Same as when I started in 2010, but cash rents are $100 higher." He could have added: Something's gotta give. DTN's national average cash price index--a collection of cash bid data from almost 3,000 locations across the U.S.--slid to $3.52 last Friday.[Read Full Blog Post]
Posted at 4:40PM CDT 07/21/14 by Marcia Zarley Taylor | Post a Comment
Comments (4)
Don't drive in the yard driving a loaded up $50,000 pickup. Practice saying the word no - many times over. You may lose some ground, but if you're losing money, I guess I don't see why losing ground isn't the lesser of two evils. Get real good at telling your favorite seed guy no. There are many, many good choices out there. Figure out who wants to be Monte Hall. Also, show your land partner (a term I picked up on DTN) the money trail. Explain what a good sustainable fertilizer program costs. Explain what a good resistant weed avoiding chemical program costs. No land partner in their right mind wants their farm mined for nutrients or get resistant weeds started because their land partner (tenant) needed to skimp somewhere to make ends meet. Explain what your crop insurance costs, what it covers, and what it doesn't cover. Explain what the 2014 Farm Bill covers. Say the farm had $40/acre in Direct Payments under the old Farm Bill, and you're looking at less than that now; that should come off the rental value of the farm. Show what your take home pay is. Be prepared to be embarrassed or called out if it's too high. If you get to the end of a discussion like this and still can't see eye to eye, you're probably better off without that farm. - Jason Bode
Posted by Unknown at 9:10PM CDT 07/21/14
An acquaintance once quipped: When everyone else is running-You Walk! When everyone else is walking-You Run! Now if you were running when you should have been walking, Pay the price of the shifting load when the brakes lock up.
Posted by Bonnie Dukowitz at 5:23AM CDT 07/22/14
Don't worry. The large mega-farmers will be floated by the ag lenders, equipment manufacturers, seed, chemical and fertilizer dealers. If one or two of these guys go bad in a community it will have a ripple effect throughout. Not what the input providers want happening. They may be upside down on paper but they will be out there farming your land. SO GET YOUR RENT, CASH UPFRONT!
Posted by Mike Estadt at 9:05AM CDT 07/22/14
Mike I don't think that will happen.We have some large farms close to us that are struggling and I have seen they have changed who they do business with this spring.New seed company, fertilizer and some equipment.So that kinda tells me they have run the gament with the others.But yes, you are right when they go out they're going to take others with them.Like elderly landlords that won't get paid.
Posted by Raymond Simpkins at 11:07AM CDT 07/22/14

Friday 07/18/14

Spring Fling Lifts Land Markets
Midwest farmland values bounced back to life at mid-year, a new FCS analysis finds. But whether the rally survives lower prices remains a question.[Read Full Blog Post]
Posted at 5:06PM CDT 07/18/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 07/17/14

Why Succession Plans Stall
Young farmers often voice frustration at the pace they transition into an existing family business. Why do seniors keep a tight hand on the reins?[Read Full Blog Post]
Posted at 10:00AM CDT 07/17/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Friday 06/27/14

Pick Estate Advisers Who Make the Grade
How do you know if you've picked the right technical team to lead you through a business transition and estate plan?[Read Full Blog Post]
Posted at 1:22PM CDT 06/27/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Wednesday 06/18/14

Farmland: Trophy or Investment?
Timing when you buy or if you overpay can erode farmland's natural advantage over stocks.[Read Full Blog Post]
Posted at 2:03PM CDT 06/18/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Question Marcia, Do the numbers being compared take into account all expenses of owning the land, taxes insurance, interest. etc.? Someone with $1,000.00 cash in 1950 was rather well off.
Posted by Bonnie Dukowitz at 8:08AM CDT 06/19/14
Have you ever ate paper? cant believe it tastes as good as a tomato
Posted by Mark Knobloch at 3:36PM CDT 06/23/14

Tuesday 06/17/14

Landowner Appeals Landmark CRP Case
Conservation Reserve Payment checks have been called "rent" for nearly 30 years, treated much like similar payments during the 1950s Soil Bank and free from self-employment taxes. But unless a 2013 Tax Court case is overturned by the 8th Circuit Court of Appeals later this year, non-farmers could owe whopping new 15.3% self-employment income tax on their contract proceeds.[Read Full Blog Post]
Posted at 2:32PM CDT 06/17/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Monday 06/16/14

Watch Sticker Prices on Farm Loans
Farm borrowers aren't like No. 2 Yellow Corn, so their interest rates can vary by risk, kind of collateral, size of loan or even the size of lender.[Read Full Blog Post]
Posted at 9:43AM CDT 06/16/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 06/12/14

Sec. 179 Depreciation in Limbo Again
Farm equipment sales have hit the skids this year, thanks largely to more modest farm income projections that could cut net revenues far below 2013 levels for crop producers. But uncertainty over the status of Sec. 179 depreciation rules for small business is compounding the problem.[Read Full Blog Post]
Posted at 9:58AM CDT 06/12/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 06/05/14

A 20% to 25% Land Crash? Really?
A skeptical reader asks for explanation of a regulator's farm real estate forecast.[Read Full Blog Post]
Posted at 2:06PM CDT 06/05/14 by Marcia Zarley Taylor | Post a Comment
Comments (16)
I see a correction coming.Be it 20-25% I don't know,but land value will have to follow what grain prices will support.Although I did just read in Progressive Farmer of land selling for 12,500 an acre to a investor and being leased back to the seller.I figured that guy can take the 5.5 million and pay his rent for 32 years and have a good retirement off the interest.So I don't think that invester hopes to see a 25% drop. Thats a 1.5 million lose.What did Cal mean crop prices have nothing to do with land ?
Posted by Raymond Simpkins at 8:51PM CDT 06/05/14
Folks: The land value equation has changed from the eighties. First, ethanol has turned corn into both an energy and food source. With 40% of the nation's corn crop going to ethanol production, that has permanently increased the demand for corn in the marketplace. Secondly, we had a president, Jimmie Carter, who put a ban on exportation to Russia. That hit the market very hard. Thirdly, the developing world is consuming more animal-source protein, requiring not only more grain for exportation, but more general demand across the globe, with much going to China. Finally, as long as we are in this zero-interest rate environment to lenders, people have very few options to their short term investments, outside of the stock market, which many people don't like nor trust. In the early eighties I purchased a 2.5 year CD that carried a 17.5% interest rate. Today, that same federally insured CD would carry a 1.0% rate. Also, if inflation picks up and interest rates start to rise, I want to own tangible assets, not financial paper. For me, I sleep much better knowing that my family owns farmland and paper promises. Now, I do worry about our government taking farmland away from people, but at that point, I would hope farmers would rebel.
Posted by tom vogel at 7:09AM CDT 06/06/14
One of my favorite Tweets this week was from an Iowa farmer who noted corn was $4--the same as when he started farming in 2010. Only problem is his rents are $100/acre higher. So it sounds like something has to give.
Posted by Marcia Taylor at 12:28PM CDT 06/06/14
This story doesn't focus enough on the seller's perspective. Recent increases in taxes on land sales mean that a seller could easily be robbed of 1/3 of their land for state and fed taxes. Sellers astute enough to resist being robbed will hold onto land (a desirable, tangible investment in the first place) and doing so will keep land off the market and support the price. But note that I'm not predicting land prices will go up.
Posted by Curt Zingula at 7:06AM CDT 06/08/14
When you think about profit margins in farming right now, based on the high priced land (and rent) there isn't a lot of wiggle room. If I am buying $12,500/A land, just accounting for principle, and a 20 year payback, my land cost is $625/A. Is that long term feasible? If I included a simple 5% interest cost on that that payment balloons to $1003 on an annual basis. If I factor in real estate taxes, you can probably add another $30 to $40/A easily. Looking at these numbers, you can clearly see that land cannot pay for itself in 1 lifetime. It takes additional land to do that. So in order for me to get this into a long term acceptable repayment range of say $250 to $300/A, I need to look to have either 75% of the purchase price in cash, or I need to mortgage 3 acres of land for 1 acre purchased or some combination of both. I personally believe a lot of the cash generated in the last 5 to 10 years has been spent already on either land, capital improvements, or machinery. I think until crop input costs start to moderate/drop, we will be 1 or 2 large crops away from potentially starting to see the start of the downhill slide. If you look back in the 80's, it only took the tailenders having to liquidate real estate that brought the whole system nearly to ruin. There are not enough available purchasers to soak up all the land if bottom 5% have to liquidate land. There will be too much surplus, which will start the downward spiral. How fast, long and deep will be known after it passes.
Posted by Pedro Sanchez at 10:00AM CDT 06/09/14
Curt I don't see that around here.There has been more land sold in the past 12 months than the last 10 years.If your going to sell, sell now.Land prices and taxes are not going to get better.Some investments have run their course.$700.00 land 30 years ago now selling for $10,000 don't see those kinds of returns sticking around much longer.
Posted by Raymond Simpkins at 10:03AM CDT 06/09/14
Cal, the price of crops DO have a bearing on the price of land. Historically, it has been the single most important factor affecting land prices over a period of time. You may not have noticed an effect of $4.00 corn (harvest price) corn on current land prices yet in your area because we are still in the very early stages of this change of the agricultural economic cycle. In the last break down of land prices, the effect of Pres. Carter's grain embargo in 1979 did not definitively show up in the land prices (in my area) until the fall harvest of 1981. It will take a year or two for farmers' cash reserves/flow to get dwindled down from the relatively lucrative/recent grain prices (of only this past year).
Posted by Unknown at 10:11PM CDT 06/09/14
Ray - Wow, that's way more land selling than what I've seen in Eastern Iowa! Where is "here"? Do those sellers understand that they've just accepted a 30% loss in value after taxes? And their new C.D.s (assuming they're not paying off mortgages as others suggest) won't offer the return of land rent. Other investments are risky too. Still, there are messy estates to settle, and that will always offer land to the market at any value!
Posted by Curt Zingula at 7:00AM CDT 06/10/14
Curt we live in southern Michigan where there has been a huge turnover of land.These sellers are mostly retired people with no mortgages.You are going to pay taxes on that money someday, Today 30%, 10 years down the road maybe 40%.Rents in this area are not all that high, you would be looking at rents in the $300-$350 range to compare to other investments and rents are not close to that.Dutch dairy farmers here will pay whatever it takes to buy land.Im not selling, but Im not buying at these prices either.
Posted by Raymond Simpkins at 8:52AM CDT 06/10/14
I think land is poised for a large correction. Unfortunately for me, I've thought that for 5 years now :)
Posted by Unknown at 12:23PM CDT 06/10/14
Ray, You're right about taxes going up - far left has made popular a book by an author proposing 80% tax for the top bracket! However, I'm not sure your "mostly retired" have considered stepped-up basis which will allow heirs to avoid capital gains if they don't see the tangible value you and I see for holding land. For most of the non-farming land owners in my area, land rent ($300 or more for good land) is supplemental to their own income or retirement benefits and they're not selling. Anyway, my point is basic Econ 101 - price discovery is a function of demand AND supply. If you're right and the land supply is surplus (like all the corn predictions) the value can only go down.
Posted by Curt Zingula at 7:07AM CDT 06/11/14
Curt, you touched on a topic (as well as Ray) about surplus land for sale/turning over. How much land do you think would have to hit the market in a region to produce a surplus? I wonder if this has ever been researched. With land running in the $10k+ acre range, my guess is it wouldn't take long to start to see saturation (2 to 3 land sales a month??)
Posted by Pedro Sanchez at 8:22AM CDT 06/11/14
I am not convinced that a large correction is coming. Being very close to the ag real estate market here in Nebraska, I have way more Buyers than I have Sellers. That plays into higher prices sticking around. If it is an Investment Buyer, they are a bit more conservative and are beating the bushes for good deals. I am seeing Investment Owners beginning to liquidate to take advantage of increased value...but they are not doing it in a wholesale way. And they are wanting to 1031 right into another land purchase. Conversely, the area farmers are scooping up almost any property when it becomes available for sale or lease and will hold onto it for the long term. Many have adequate financial reserves to not bat an eye at the price as they can leverage the cost across their entire portfolio. Others may sell some land and rent back freeing up cash to purchase a different farm. I do believe the marginal farms...those that have issues such as less desirable soils, power lines, canals, roads, etc. on them will not continue to bring top dollar. Nor should they. Now, if Capital Gains laws ever revert back to what they were a few years ago...you would see older landowners more willing to sell and that could potentially push the prices down some. Do I think that prices will drop 20-25%? I will know more in about 5 months...but if today is the barometer...my answer would have to be a definite NO.
Posted by Mike McCann at 8:25AM CDT 06/11/14
If the FED slows the printing presses, regardless of debt to asset ratios and rent rates there may well be a drop in $. Corn, milk and apples might not be a major factor in the per acre $ value. The Stock Markets, as well as other factors , here and abroad, are all part of the big picture.
Posted by Bonnie Dukowitz at 5:12AM CDT 06/12/14
Perhaps Marcia could answer our questions about seller motivation with a story based on Realtor responses. It appears that there are significant regional differences. BTW, I had to groan at Mike's inclusion of power lines lowering land values because I'm in the path of RICL's proposed wind transmission line. Those jokers want to commandere my field driveway to build their 14 story high line across the the entire section and not offer me a single dime more than my neighbors. Wind energy transmission to far away metro areas will lower a lot of land values!
Posted by Curt Zingula at 7:19AM CDT 06/12/14
Thanks for the assignment, Curt! I'm on the case. But it seems to me we see more motivated sellers among farm heirs and estates than retired farmers who want to cash out. Capital gains on farmland--especially land owned for decades--still provide retirees major tax reasons to keep a grip on land until death, when all lifetime gains are forgiven. What I am noticing is that large farmland investment firms are having success with sale-leasebacks to older farmers with no successors. The owners think now might be the time to pick their price, but retain a leaseback on their land for 5-7 years. Anybody in this camp?
Posted by Marcia Taylor at 10:11AM CDT 06/12/14

Monday 05/19/14

Contrarians Counter Ag's Doomsday Decade
Official government forecasts understate the potential for commodity markets to reignite, contrarians at the Global AgInvesting conference argued.[Read Full Blog Post]
Posted at 4:03PM CDT 05/19/14 by Marcia Zarley Taylor | Post a Comment
Comments (10)
Crop Insurance = Welfare for the wealthy. As long as the taxpayer is asleep at the wheel big ag will roll. Thank U President O!
Posted by Unknown at 8:15PM CDT 05/19/14
"Growers recognized the benefit of insurance"? Government mandates in the banking industry might be a more correct statement.
Posted by Bonnie Dukowitz at 5:16AM CDT 05/20/14
Good for your Bonnie Dukowitz. I concur completely!!
Posted by Kent Wilke5 at 6:49AM CDT 05/20/14
Posted by Unknown at 8:34PM CDT 05/22/14
Concur with what?
Posted by Don Thompson at 1:09PM CDT 05/23/14
Take a look, Don, at who or what, has much interest of title ownership of the insurance companies. Then expand the analytical thought process a bit.
Posted by Bonnie Dukowitz at 9:53PM CDT 05/23/14
Again, huh?
Posted by Unknown at 8:19PM CDT 05/26/14
One thing you all over look is that in 2012 corn was 7.00 so crop insurance payed big. But what happens when corn is sub 4.00.85% of 4.00 corn protection will not cut it.Even 200 bu. corn at 3.40 won't even cover cost let alone the insurance premium on top of inputs
Posted by Raymond Simpkins at 9:08PM CDT 05/26/14
You are correct Raymond. In many situations the covered amount might be almost enough to pay the bank. The bank might also be the owner of the insurance company. Kind of a win-win deal for them. I wonder if anyone obtains a crop operating loan w/o crop insurance. There is much more to the Agriculture Act than crop ins.
Posted by Bonnie Dukowitz at 5:59AM CDT 05/27/14
Ray, spring price set the floor for the year, but your point still stands. There is little protection for grain farmers this year. The biggest driver of survival going forward will be land costs, either owned or rented. Think about the PP acres and how bad that would be for the bottom lines, 60% of the guaranty. Bonnie, the only bank that I know that owns an insurance company is Wells Fargo. They own RCIS through a subsidiary, but there could be others. As far as getting an operating LOC without crop insurance, well I suppose that it is possible, but with margins so tight, I don't know many bankers who would do it. There is too much at risk. How many farmers could stomach a complete crop failure? With the high input costs, machinery, building, and land debt or rental prices, you might be able to stomach 1 year of loss. 2 years and you would be out of business. Even with a CAT policy it wouldn't be pretty. For as cheap as crop insurance is priced, to not take it out, you are not balancing the risk/reward very well.
Posted by Pedro Sanchez at 9:45AM CDT 05/28/14

Friday 05/09/14

Avoid the Marketing Blame Game
Joining me today to discuss another topic on family values is Lance Woodbury, DTN and The Progressive Farmer's family business columnist who is based in Garden City, Kan. Lance trained as a professional mediator and has more than 20 years experience counseling small business owners on family conflicts, succession and transition issues.[Read Full Blog Post]
Posted at 9:08AM CDT 05/09/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 05/08/14

If You Farm, There's No Place Like Home
Starting 15 years ago, I took four trips and about four dozen farm leaders onvisits to the Brazilian frontier. Outposts were so remote, we chartered our own planes to criss-cross a region the size of our 12 Midwestern corn states.[Read Full Blog Post]
Posted at 3:04PM CDT 05/08/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Marcia: Thank you for the superb information. I agree with you on the notion that the U.S. infrastructure and political stability are a real blessing to us. However, I could see a scenario in which food prices reach such a high level that an over-zealous government could start to confiscate land "for the common good." I know at first blush, this may seem unthinkable. However, look at what has happened to some of the Western lands. I hope and pray we keep our traditional representative republic with private property rights, but I am a bit of a skeptic given what I have seen in recent years.
Posted by tom vogel at 9:34PM CDT 05/11/14
We all know Marcia how privileged a select group of growers are that are targeted with massive government crony capitalistic benefits. What some people like you Marcia do not comprehend is how many Americans are financially harmed by big government schemes such as federal crop insurance and corn ethanol mandates that work to raise the costs of growing food and the costs of buying food.
Posted by T Kuster at 1:59PM CDT 05/12/14

Tuesday 04/22/14

Not 1979 All Over Again
Crop insurance has been a huge buffer to protect against another 1980s debt crisis, analysts say.[Read Full Blog Post]
Posted at 3:11PM CDT 04/22/14 by Marcia Zarley Taylor | Post a Comment
Comments (9)
Big government just keeps on creating disasters. In the 80's big government was on an insane ag credit extension binge. Now big government has embarked on an insane crop insurance guarantees binge marked be spending billions targeting those with the most wealth the largest income guarantees. These insane guarantees have produced a disastrous bumper crop of skyrocketing land costs with minimal margins of per acre profitability as well as driving many smaller farmers out of business. We can depend on the liberals to continually grow the national debt, flush billions down big government rat holes, and raise the costs of growing food or procuring health care.
Posted by T Kuster at 7:17AM CDT 04/24/14
Koenig points out that you repay debts with cash flow (i.e. income) and not with assets. This is exactly the truth, but when others say we are fine because we have such good D/A numbers, there lies THE fallacy. That number only means something when the asset is sold. I don't know how many times I have had to tell farmers that equity does not repay debt. Profit does. It isn't a hard concept. The numbers to look at are working capital to gross revenue, and the Debt coverage ratio. Those 2 are better measures of farm profitability. If you take out the inflated real estate prices of just the past 5 years, what kind of D/A ratio do you get? If the land on my balance sheet that I paid $1000/A for in the 90's is now worth $8000, but I still owe $400/A on it what does that tell me. In completely simplistic terms, my D/A ratio went from 40% to 5% but my payments didn't change. For this reason, I think we are ignoring the facts that the farm economy is much more unstable than economists think. Sure I have plenty of equity to refinance losses, but I sustained those losses because I did not make money. Adding to my debt by restructuring is a short term bandaid. I need to generate more income (net income preferrably) to service that debt. Crop insurance helps limit my downside, but how much? Do I have 20% operating profit margin on my operation so that when I have a crop failure I can repay all my input costs, make all my payments, and have money to live on? I think the real answer is no for the majority of the operations out there. If they don't have working capital, they have to refinance and you just dig yourself a little bit deeper in the hole.
Posted by Pedro Sanchez at 9:04AM CDT 04/24/14
Reasonable margins of profitability are the result of farmers prudently and carefully budgeting for agronomic and financial risks rather that government assuming risks agronomic and financial. When government assumes all risks financial and agronomic margins of profitability disappear as aggressive farmers quickly and habitually bid land and other production costs higher when they spend the guarantees big government throws at those operations.
Posted by T Kuster at 9:56AM CDT 04/26/14
Republicans have actually supported the subisides more than the liberals. If you were paying attention to the farm bill debate, democrats in the senate wanted to limit the amount of crop insurance farmers could receive based on income, but the Republicans were against that and got rid of that bill in the house. I do agree with some of your statements in regards to the guarantees from the last couples years that have lead to some spikes in prices such as land. However, if farmers have another crop year like last year or better, the margins are very tight and possbily negative even with crop insurance. (Getting back to how it's been for the majority of most farmers lives)
Posted by Ryan E at 10:20PM CDT 04/26/14
Too many republicans aka rinos aka liberals.
Posted by T Kuster at 9:12PM CDT 04/27/14
Farm loan repayment is always based on cash flow and profit. But bankers also look at balance sheets taking fail safe asset repayment possibilities and their values into consideration. Today we enjoy more diversity of markets for corn and soybeans we grow, but we lack diversity of products because so many of us these days grow just that...only corn and soybeans. And yield could not be expected to make up the difference if prices for what we grow were to fall because if it did, prices would likely fall further. In that case cash land rent would need to adjust lower. With that so too should land prices. It wouldn't be interest rates that would place borrowers under stress even if prime rates were to triple. It would be nervous lenders who saw equity levels plunge as land values were forced to a new accounting. That is why renewable fuels are crucial to maintaining market diversity and cash flows. Concerns about the environment and climate are lynchpins of biofuel policy. Remove those concerns and all government support of renewable fuel is reduced to nothing more than a hasty vote by an urban-controlled Congress.
Posted by Richard Oswald at 7:44AM CDT 04/28/14
Ethanol mandates are just another big government disaster. See http://thehill.com/blogs/congress-blog/energy-a-environment/328423-renewable-fuel-standard-mandate-is-a-failed-policy and see http://www.forbes.com/sites/williampentland/2013/12/06/bye-bye-biofuels-why-u-s-renewable-fuels-standard-failed/ and see http://www.heritage.org/research/reports/2013/06/the-ethanol-mandate-dont-mend-it-end-it and see http://www.businessweek.com/articles/2014-01-06/u-dot-s-dot-ethanol-mandate-would-be-eliminated-if-bipartisan-legislation-passes
Posted by T Kuster at 6:57AM CDT 04/30/14
Crop insurance and the new billions for millionaires farm bill have been a huge buffer by big government to protect and stack the deck in favor of those who mathematically have the greatest wealth and income. That smaller farmers are discriminated against by these schemes is irrelevant to those who insist the durability of mindless government farm programs are more important than those smaller farmers financially harmed by this big government largess.
Posted by T Kuster at 7:51AM CDT 05/01/14
A few thoughts from a farmer. Why should the public treasury subsidize insurance for farmers and not widget makers? This is why. All wealth comes from the earth. That simply means we must extract, catch or grow the material and energy (commodities) we need. Without this first step nothing else is possible. We can I think, agree on that? It is very much in the interest of the nation to encourage risk taking to originate wealth. Original or new energy or material is then used, processed, refined, traded, there by generating margins (a living) for most, ideally all. I would argue The United States is a wealthy country in large part because we have a great deal of land and we have a society and system of government that has encouraged the origination of wealth. Agriculture is an activity that if successful produces original wealth (grain) and perhaps a margin. You are subsidizing the attempt to produce original wealth not guaranteeing a margin. They are entirely separate yet easily confused. Making widgets dose not produce original wealth nor does writing software or driving a truck or building a road they only support or make more efficient the origination of wealth. Iâ?™m sure these thoughts are not original but they are correct lol. Some part of our lives depend on the widgets and software and services but ALL peoples lives depend completely on the production of food. For this reason it makes sense to have as many people trying to farm as possible. If the number of farms dwindles to a few, then all will be dependant on a few for the necessity of life, food. Subsidizing the insurance of farmers is a small price to pay to insure production in as many hands and areas as possible. I do think the subsidy should not be a guarantee of a margin and it should be phased out as the size of an operation grows If an individual is ambitious and aggressive and wants to farm the whole township I have no problem with that, but they should have to take that risk on their own beyond a certain point. One more thing. Grain is unique among commodities because it is not existing. That means the production or existence of grain is assumed. Oil and copper and coal are in the ground and we just need to extract them. Where is next yearâ?™s grain crop? If the environment dose not allow the production of grain no power on earth could do anything about it. There simply would be none. Grain can be efficiently stored maybe we should think about doing more of that? Regards
Posted by Steven Wegner at 9:43PM CDT 06/14/14

Friday 04/04/14

The Great ARC or PLC Debate
Your irrevocable 2014 farm bill decisions are getting complicated by this spring's surprise price rally. While it was widely assumed commodity prices were headed for a multi-year crash when the farm bill was being drafted, few experts considered what your best risk management options would be if markets stayed near levels achieved over the last two months.[Read Full Blog Post]
Posted at 5:27PM CDT 04/04/14 by Marcia Zarley Taylor | Post a Comment
Comments (14)
"When the people find that they can vote themselves money, that will herald the end of the republic. Ben Franklin" Amazing that Ben Franklin could foresee federal crop insurance investment/profit guarantees as well as the billions for milllionaires farm bill.
Posted by T Kuster at 7:02PM CDT 04/04/14
Is this Barnaby an idiot,I will be as happy as can be to farm without goverment help if grain prices stay up.Sounds like he is hoping the bottom falls out so we can use the new price protection.I would like to farm alone don't even sign up for farm program.KEEP THEM GUESSING.
Posted by Raymond Simpkins at 7:05AM CDT 04/07/14
See the expanded story in DTN Top News today. Ray, I think Barnaby's main message is to keep conventional crop insurance coverage as your mainstay, if you're not as bearish about prices as some of the experts.
Posted by Marcia Taylor at 11:48AM CDT 04/07/14
After reading your farm bill article it occurred to me that FAPRI had a lot of input to congressional members in tying the new farm program to their forecasts. The assumption that farmers will continue to grow corn at prices below cost of production seems odd. That assumption is built in to a program that farmers must choose for a five year period? No one can survive losing money for 5 years even with gov. assistance. Do they expect farmers to be totally dependent on subsidies with no chance for the free markets the US has touted around the world for decades to operate? What am I missing?? --Barry Mumby
Posted by Marcia Taylor at 1:04PM CDT 04/08/14
Good question, Barry. It's possible farmers will be in no-man's land--prices not high enough to trigger much aid but still below cost of production for many. Do you think rents, fertilizer, seed costs can come down again to rebalance for 2015?
Posted by Marcia Taylor at 1:08PM CDT 04/08/14
I'm with you Ray. Don't sign up. Don't report acres or bushels. Keep them guessing. With volatility comes opportunity.
Posted by KC at 11:14AM CDT 04/09/14
I wish you would have been concerned about skyrocketing crop production prices Marcia when government was busy awarding massive guarantees of profitability to the largest most profitable farm businesses and many other farmers as well. When government guarantees profitability, harvest time has arrived for everyone and their brother.
Posted by T Kuster at 1:38PM CDT 04/09/14
Hey Kuster, Did you ever listen to a broken record? Never gets to the next song.
Posted by Bonnie Dukowitz at 5:52AM CDT 04/10/14
Your energy (positive and negative) on crop insurance needs to directed towards development of a insurance product that is not dependent on government support. Crop insurance not supported by tax dollars and not run by the government is the answer to all your comments on both sides. Fighting among the farm community does nothing to forward progress.
Posted by John Finley at 8:52AM CDT 04/11/14
We had that in the health insurance industry and now we have the un- affordable care act. Nice thought though.
Posted by Bonnie Dukowitz at 6:35AM CDT 04/12/14
Affordable Health care for everyone should be an adopted into the Bill of Rights.
Posted by Unknown at 8:50PM CDT 04/14/14
Yeah, I wouldn't want to put my name to the statement directly above this one either. I don't even know where to start on the lunacy of that comment.
Posted by Brandon Butler at 9:24AM CDT 04/16/14
"It is difficult to free fools from the chains they revere." Voltaire
Posted by Brandon Butler at 10:22AM CDT 04/16/14
At this time I probably will not be signing up for the new farm bill. ARC ( the Association of Retarded Crop growers ) and PLC ( Please Lose Control ). Well if they do pay out things are not going to be good. The other benefit to not signing up is you just got rid of a whole pile of paperwork. The plus side is. You have lost no money and have gained a lot of free time to do something the no body ever does any more. NOTHING!!! Take that new found time and eat lunch with the guys and find out what is really going on. I am also sorry to say that crop insurance is a sad safety net this year. It was good last year but this year isn't .much better than the farm bill.
Posted by Crawford McFETRIDGE at 8:26AM CDT 04/28/14
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