Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Monday 11/24/14

Brazil's Transport Handicap
The American Society of Civil Engineers perennially grades the nation'stransport systems as deficient and in need of major investments. What we can be thankful about is that some of our competitors work with even more neglected networks.[Read Full Blog Post]
Posted at 3:56PM CST 11/24/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Tuesday 11/18/14

Tick, Tick, Tick on Higher Rates
A poll of chief financial officers for Farm Credit lenders in 15 states found that the cost of borrowing is expected to rise midway through next year as the Federal Reserve tightens monetary policy.[Read Full Blog Post]
Posted at 5:45PM CST 11/18/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Monday 11/17/14

Call a Truce Between Ag Lenders
I hate to admit how long I've been reporting on ag lending, but let's just say Ronald Reagan was president, Ghostbusters was a popular movie and Tina Turner belted Top 40 hits like, "What's Love Got to Do With It." One thing that hasn't seemed to go out of vogue in all those decades is the sibling rivalry between country banks and the Farm Credit System, as Texas A&M ag finance professor Danny Klinefelter writes in this week's DTN "By the Numbers" column.[Read Full Blog Post]
Posted at 9:24AM CST 11/17/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Friday 11/07/14

Spooky Forecasts for Grain Income
A Halloween forecast by Purdue University paints a grim outlook for the grain economy through at least 2015, and possibly the next three or four years. Indiana grain farm incomes are expected to tumble 30% in 2014 and another 35% in 2015, even including government payments under the new farm bill, Purdue Economist Chris Hurt said.[Read Full Blog Post]
Posted at 3:36PM CST 11/07/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Just call the neighbor. He'll be more than happy to cash rent your ground.
Posted by Unknown at 7:15PM CST 11/09/14
the gloom and doom crowd could face a different reality it is a different world with no normal or good old days of 2 or 3 dollar corn likely are gone
Posted by andrew mohlman at 8:46PM CST 11/09/14
 

Thursday 10/30/14

Up in the Air on Farm Programs
Despite unprecedented efforts to educate farmers on 2014 farm bill choices, most growers remain foggy about which options to elect or which might provide the best long-term protection against low prices or revenues. Unlike any other farm bill, consultants and land grant educators have gone viral with online analysis this year, scheduling weekly webinars, offering pre-recorded podcasts to answer common questions (https://www.afpc.tamu.edu/podcasts/fpm/) and attempting to simplify the most sophisticated online tools ever to measure the probability of yield and price outcomes with YouTube presentations.[Read Full Blog Post]
Posted at 4:00PM CDT 10/30/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Overly complicated messed up farm bill. Must have been thought up by some Colorado and Washington congressmen during an evening of "Who can roll up the fattest doobie". Otherwise, how would you think up this stuff?
Posted by Mr. Brandy at 4:21PM CDT 10/31/14
Pretty funny, Mr Doobie..I mean Bandy
Posted by Unknown at 8:37PM CST 11/05/14
 

Friday 10/24/14

Landlords Refuse to Blink
My inbox is filling with irate landowners who took offense at a column I wrote for the October issue of Progressive Farmer on "fat cat rents." Actually, the thrust of the article was that average and below-average rents weren't likely to budge in 2015, only the "fat cat," above-average leases like we've seen at those $400-to-$500/acre Iowa cash rent auctions a few years ago.[Read Full Blog Post]
Posted at 3:00PM CDT 10/24/14 by Marcia Zarley Taylor | Post a Comment
Comments (14)
So how far under water are typical Midwest grain producers who rent most of their land? University of Illinois economist Gary Schnitkey forecast the steepest losses in at least 15 years for an average Illinois cash renter who paid $262/acre with corn production. For 2014 losses could average $109 an acre and in 2015 $143. "These are large losses from a historical standpoint," said Schnitkey. The only other time since 2000 corn growers averaged losses was in 2009, when gross revenue minus costs equaled negative $21/acre. Get Schnitkey's full report at: http://farmdocdaily.illinois.edu/2014/10/cash-deficits-projected-for-corn-2014-and-2015.html
Posted by Marcia Taylor at 3:42PM CDT 10/24/14
How about this to describe the mess on all sides? It is not the cost of living that is high, it is living high that cost. (author not known)
Posted by Bonnie Dukowitz at 7:22PM CDT 10/24/14
As a landowner in SD I receive 1/3 crop as rent. No renegotiating necessary and I have skin in the game. Farming is about risk.
Posted by greg schimkat at 11:06PM CDT 10/24/14
Thanks Greg. I appreciate (and I am sure your renter does as well) that you have skin in the game. Your cash rental equivalent should be the highest of all (i.e. share, flex, straight cash). I understand the quibble from the landowner's side. They are the only ones being asked to lower their rents because they are the only input that is "negotiable". Every other input price is set by someone else that is selling a product. Hence that is where everyone goes to seek relief. Now for the farmers who had the high flat cash rents, they will be hurting and those rates are most likely not long term sustainable. For the landlords, stop going back to $7 corn as a tag line. Most producers did not have corn to sell at that price (the reason corn got so high was small supply). Even if they did have corn that year, there was a substantial amount pre-priced. Everyone needs to understand that you can pick the high's and low's and claim I got "screwed" on each end of the scale. Be reasonable to each other. Renting ground is a relationship between the landowner and the tenant. If you make it a transactional relationship, don't complain either way.
Posted by Pedro Sanchez at 8:42AM CDT 10/27/14
Because most farmland has no alternative use it remains in production no matter what it is paid. We saw this in the 1980s when land values fell but almost all land continued to be farmed. This suggests that if prices remain low land owners will have no choice but to accept lower rents, because farm operators simply cannot afford to pay what they did in the past. While other input suppliers can reduce production or sell to other counties farmland has no alternative options that can generate money for the owner. An important question in this environment is what will the recent buyers of farmland who thought it was going to continue to appreciate do if their income falls? Do they walk or stay? --David Freshwater, University of Kentucky economist
Posted by Marcia Taylor at 10:42AM CDT 10/27/14
Not true, Marcia. Rented Farmland is a commodity just like imputs subject to market influences. As we all know too well, markets can remain irrational as long as it takes to bust the out of position trader.
Posted by Unknown at 8:43PM CDT 10/27/14
As a renter, and a landowner, I can see both sides. But what about those landowners who are all out for the almighty dollar no matter who farms their land. There has been life long friendships and relationships broken up the last few years over landlords getting renting their land to complete strangers just for the top dollar. Well guess what, those are the landlords that get to drop their prices considerably and now they have no idea who is going to be "farming" their land or "taking care" of their land. Who do you think benefits the most from high commodity prices...? DING DING DING, the landlords always come out of high commodity price cycles better than most farmers. I do agree that yes seed, fertilizer, chemicals, machinery etc etc is also very expensive, but that is less negotiable on a personal level than land rent. To drive down the rest of those prices it takes a significant decrease in farmers' business nationwide. But, land rent is one input the farmer can negotiate.
Posted by RJZ Peterson at 9:05AM CDT 10/28/14
Sorry landlords but there is going to come a point when even the the big operators aren't even going to be paying you your coffee shop money. And btw...do you really think mr 10k+ acres farmer who is paying you money is REALLY taking care of your land???? You know, it really ticks me off when the small guys do all the little things, maintain fertility, organic matter, cover crops, manage every little detail and then you greedy landlords say the heck with it! Do all that AND pay me more money even though it means you go in the hole! Worse yet is landowners who inherited ground, don't have a dime in it, and could care less about what goes on in the field and only care about their pocket book, this whole system is broken! Give me a Tylenol!
Posted by Farmer Johnson at 1:44PM CDT 10/28/14
I farm, I rent and I own.I don't want to hear any crying about how you can't afford your rent. After all who agreed to that rent figure in the first place?Did you really think prices would last forever? talk about greed, you only rented it because you wanted to keep up with Joe Blow who is now in the same position as you.I had lots of opportunies to rent the past few years but when these guys got stupid you let them have it.Made more money doing a good job of farming what we have.
Posted by Raymond Simpkins at 3:36PM CDT 10/28/14
Show me the money, baby. If you don't, one of your neighbors will.
Posted by Unknown at 7:20PM CDT 10/29/14
Not many "neighbors" left, mostly competitors now.
Posted by TOM DRAPER at 8:56PM CDT 10/29/14
Unlike other businesses like retail where there are way too many income & expense transactions to have anything else other than a rental agreement....in farming you only have a few if not one income instance(s)/inflow w/ only a few major expenditures/outflow i.e. fertilizer, chemicals, seed, etc. to put out a crop. So I say legislatively outlaw agricultural cash rents & everybody operates on 50/50 crop share basis/agreement. This would probably crash land values because it could chase the non-farmer/city/absentee land owner from ownership, leaving a much more affordable land price for the ONLY ones who should be buying/owning farmland in the first place....the U.S. farmer. Another result would be the importance of the farmer who does a better job of marketing than his neighbor competitor. Not just in overall picking a higher CBOT/cash price....but having a better marketing plan in place w/ specialty crops garnering a premium such as white corn, specific corn traits for ethanol, high oleic or food grade soybeans, etc. But finally, w/ the now obvious trend of volatile grain prices a foreseeable trend in agriculture due to the emergence & reliance on ethanol which has left no room/cushion for a supply shock not only in the U.S. but in any major world supplier (the double edged sword aspect of ethanol).....it will have a ripple effect w/ every aspect in agriculture for inputs, cash rents, etc. as they become more volatile as well. If I was a land owner I wouldn't want such volatility in determining cash rents....the constant renegotiating or being too low during the boom/grain price periods like the past few years or too high on rent during the price slide now or in the expected near term future just as you're trying to catch up for any delay on the increase up. However, if the landowner doesn't want to be caught in the middle between the "hassle" of having to renegotiate cash rents much more frequently now than in the past due to grain price volatility OR having to price/market their crop under a crop share arrangement due to the same volatility....they can do the same thing as the city/absentee/speculative land owner (if they are not one in the same person anyway) mentioned above.....they can sell their land & leave this now volatile agricultural landscape to again.....the American farmer!! (I was raised on an East Central IL grain farm) And by the way if legislatively outlawing crop cash rents doesn't work in the favor of the U.S. farmer the law can always be changed back to the way it is now. Nobody said it has to be permanent. But I sure would like to see it tried. I'm betting that it wouldn't be the end of the world.
Posted by Todd Young at 1:27AM CDT 10/30/14
That idea Todd, is the most ridiculous concept I have ever read or heard of. The only thing mandates mandate are more mandates. What in the world would a landlord, without livestock, do with a couple of hundred acres of hay or corn silage. Whoops, more mandates?
Posted by Bonnie Dukowitz at 5:16AM CDT 10/31/14
Todd What collage did you learn all you farming expertise?
Posted by Raymond Simpkins at 10:32AM CDT 10/31/14
 

Thursday 10/23/14

Forgive and Forget Disaster APHs
Matt Huie of Beesville, Texas, could hardly contain his relief when he heard that USDA would implement a new farm bill rule in time to patch his crop insurance coverage for 2015 after all. The surprise reversal means growers of most major crops--except winter wheat--will be able to exclude extreme yield disasters from their 10-year Actual Production History (APH).[Read Full Blog Post]
Posted at 9:57AM CDT 10/23/14 by Marcia Zarley Taylor | Post a Comment
Comments (1)
Glad the farmer in Texas is happy. However, dropping 4 of the past 8 years of your ACTUAL YIELD HISTORY because of weather is a horrible actuarial decision. You are talking about a 50% write down of bad production. Maybe what should happen is farmers in high risk areas drone to drought, hail, and other weather related issues assume more of the financial risk than the tax payer. I get we want to keep farmers in business, but at what cost? With cash rent and input costs at obscenely high levels relative to gross revenue we need corrective action. If the government is going to play this game, we will artificially raise the price level of what we have to pay for inputs as the floor of loss moves up. If the support wasn't nearly as good, we would see input prices and rental rates drop faster in corrective fashion. Granted most of the above is purely my humble opinion, but I deal with enough business persons and know enough about economics to understand the "mentality" out there. The risk-reward dynamic is completely out of whack because of our crop insurance program. Yet we farmers happily (or grudgingly most likely) pay the price to the landlords and input suppliers.
Posted by Pedro Sanchez at 9:22AM CDT 10/24/14
 

Wednesday 10/22/14

Defend Against Reversals of Fortune
Given the abrupt drop in commodity prices this year, "the solvency of some farm customers could shift quickly," David Lynn, a senior vice president for Farm Credit Mid-America cautioned ag economists attending a conference in Louisville this month.[Read Full Blog Post]
Posted at 11:05AM CDT 10/22/14 by Marcia Zarley Taylor | Post a Comment
Comments (1)
Sometimes interesting insights are provided by trying to answer a stupid question. The question was; "What needs to happen for corn yield protection crop insurance (YP) to equal a corn harvest option revenue product (RA) in Northwestern Illinois?)" A lot of assumptions were needed to provide our outcomes. We tried to narrow the variables to spring insurance price and US planted corn acres. We assumed a farm yield to US yield relationship and an ending corn stocks to price relationship. Beginning balance, imports and use were assumed from the current WASDE report. The conclusions were: 1. For the harvest option price of RA to kick in (trigger), the farm yields need to be at the same yield levels for YP to kick in (trigger). 2. RA always has scenarios were it will have a higher indemnity than YP because there is always a chance for harvest insurance prices to be above spring. 3. For our assumptions, it looks farm yields could drop below 85% of an adjusted APH about 20% of the time. RA looks to have an indemnity above YP and its additional premium 75% of those times YP is triggered. A scenario with the lowest possibility of an indemnity occurs with low planted acres and a low spring price. RA's indemnity minus premium will net more than YP at least 15% of the time (20% X 75% = 15%) with above price outlook. RA with harvest price exclusion rarely to never have an indemnity in this low chance of an indemnity scenario. Those expecting a low spring price with low planted corn acres may want to review their insurance coverage if RA with harvest price exclusion is to be used this coming season. 4. If planted corn acres for the 2015-16 marketing year are north of 90 million acres and spring price is around $4.00 per bushel, there appears to be at least a 40% chance of an indemnity in Northwestern Illinois with the assumption used. Those chances drop to about a 20% minimum chance with a $3.50 price with the same scenario. 5. If corn planted acres come in at 85 million acres both a $4.00 and a $3.50 spring price has a 20% chance of an indemnity. It seems at this chance level of an indemnity, the spring price is too low or the assumptions of fall prices are too high. This is the scenario were YP may work if price assumptions are close to being correct. The same could be said for $3.50 on 90 million spring acres. When looking for places to reduce cost this coming growing season, your crop insurance decision appears to hinge on the relationship of the spring insurance price against the expected fall harvest price. The challenge, in part, becomes guessing the number of acres planted to corn this spring. Spring planted acres will be a large factor in fall prices. The USDA releases the spring acreage estimate after our crop insurance decisions are made. So fall expected price is very much a guess at insurance sign up. If spring price feels high for the expected fall price, RA with the harvest price exclusion might save some premium and provide some revenue protection. With this choice, one needs to acknowledge a high fall price may make this choice worthless. If springs price feels low for the expected fall price, YP could have the same trigger yield as RA. With this choice, one needs to acknowledge RA with harvest options will, most of the time, net a higher indemnity. One needs to weigh the higher premium and lower chance of indemnity with this scenario against the higher net payout - when it occurs. At least for Northwestern Illinois and barring an extreme spring price compared to expected fall price, the highest level of RA one has used in the past seems reasonable. Freeport, IL
Posted by Freeport IL at 4:26PM CDT 10/22/14
 

Thursday 10/16/14

Beware Gaps in SCO
Your actual losses may not mirror the county average, leaving you unprotected in the event of yield disasters.[Read Full Blog Post]
Posted at 2:27PM CDT 10/16/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Friday 10/10/14

Possible 2014 Insurance Pay Day
Steep drop in corn prices could make claims possible for corn growers with revenue insurance policies, even with average or slightly above average yields. Not since 2008 has difference between planting and harvest prices tumbled so far so fast.[Read Full Blog Post]
Posted at 3:52PM CDT 10/10/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Tuesday 10/07/14

More on Wall Street's Dive Into Land Pools
Farmland Partners CEO Paul Pittman doesn't want to perpetuate the image of a big, bad institutional investor. He knows insurance companies who promised 50-year horizonsthen ditched their farm portfolios during the 1980s credit crisis.[Read Full Blog Post]
Posted at 1:09PM CDT 10/07/14 by Marcia Zarley Taylor | Post a Comment
Comments (4)
This will be the start of the end of private farmer land ownership. Farmland should be allowed to follow the market for individuals. The chance for young farmers to get back into the land market with the future pull back in land prices will be hindered if this is ignored and allowed to happen. In the end, this will make our food supply that has been supplied by independent individual farmers be put at risk. Surely this is not what our founding fathers had in mind.
Posted by Unknown at 7:27AM CDT 10/08/14
Unknown, you make a great point. The large, wealthy investment funds will suck up excess land. One solution that could stem the purchase and flow of farmland by corporations would be to create a different property tax category that would make their returns "unattractive". I find it interesting that FPI claims to be in it for the long haul, hoping to get 4% returns on the land they purchase. Does he actually follow what is happening in the commodity market and input side of farming? There is a huge disconnect. I don't know what they are charging for cash rent, but to get those kinds of returns, it is a large number. Cash rental rates should be based on the near term to 3 year expected commodity price. Have you seen the CBOT prices for the next 3 years? Where is the risk/reward payoff for farmers in this scenario?
Posted by Pedro Sanchez at 8:28AM CDT 10/08/14
And after years of watching farmers and ranchers turn from their local grocers and going to Costco, Walmart and other national chains when they go to town, I don't see a problem here.
Posted by CRAIG MOORE at 10:38AM CDT 10/09/14
Good point, Craig. Do not forget the Government financing to promote the same. Along with Government approval of gigantic mergers and financing, direct or indirect of banking institutions, railroads, trucking firms, food processers, packers, do I need continue? Then try to finance local growers. I say, GOOD GRief, already.
Posted by Bonnie Dukowitz at 9:14PM CDT 10/09/14
 

Monday 09/29/14

Let Watson Pick Your Farm Program
Computer simulators do the heavy lifting on your farm program choices.[Read Full Blog Post]
Posted at 4:49PM CDT 09/29/14 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Forgot to mention that the University of Illinois is hosting free webinars every Friday at 8 am- 9 am central time to coach you on farm bill decision aids. For our full schedule of webinars visit www.farmdoc.illinois.edu/webinars. Or pre- register for the hour-long webinar at https://www1.gotomeeting.com/register/752956945
Posted by Marcia Taylor at 3:51PM CDT 09/30/14
$2.70 corn futures -0.95 basis --------------------- =$1.75 cash corn I hope I never have to paddle that raft.
Posted by Unknown at 12:33AM CDT 10/03/14
 

Friday 09/26/14

Reshuffling Crop Insurance
News this week that John Deere had appointed Citigroup to sell its crop insurance unit opens the door to more jostling among the nation's 19 multi-peril insurance providers. The company's chief financial officer told an investor conference in Brazil that proceeds from the potential sale would be used to repurchase Deere stock, J.P.[Read Full Blog Post]
Posted at 12:29PM CDT 09/26/14 by Marcia Zarley Taylor | 0 Comments | Post a Comment
 

Tuesday 09/23/14

The Cash Rent Squeeze
Cash rents rarely back pedal, but 2015 could turn out to be the exception to the rule for a large number of growers.[Read Full Blog Post]
Posted at 11:09AM CDT 09/23/14 by Marcia Zarley Taylor | Post a Comment
Comments (3)
What about the guys that bought? nobody is going to change their payments. Like I stated on Katies blog theres going to be alot of auctions next year.
Posted by Raymond Simpkins at 11:29AM CDT 09/23/14
Property tax increase lag? I think the past increases have more than covered those expenses. I believe the pinch is going to be felt by the LANDOWNER, FARMER AND MAINSTREET RURAL AMERICA. Many of these landowners have been living high on the hog!
Posted by Unknown at 1:55PM CDT 09/23/14
Soys in my area typically yield 35 bus/ acre direct costs are at $292.00/acre this year and will be similar next year NOT including land rent . Corn yields about 165bus/acre direct costs are at $413.00 NOT including land rent ( and also not including drying charges) Right now today's local cash prices are $8.32 for soys and $2.28 for corn. How much are you willing to give for rent ?
Posted by Unknown at 12:15AM CDT 10/03/14
 

Monday 09/22/14

Farm Payments a Moving Target
Six months of bearish news for corn prices means farm programs are suddenly relevant.[Read Full Blog Post]
Posted at 1:00PM CDT 09/22/14 by Marcia Zarley Taylor | Post a Comment
Comments (1)
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Posted by Shahid Afridi at 8:06AM CDT 10/29/14
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Recent Blog Posts
  • Brazil's Transport Handicap
  • Tick, Tick, Tick on Higher Rates
  • Call a Truce Between Ag Lenders
  • Spooky Forecasts for Grain Income
  • Up in the Air on Farm Programs
  • Landlords Refuse to Blink
  • Forgive and Forget Disaster APHs
  • Defend Against Reversals of Fortune
  • Beware Gaps in SCO
  • Possible 2014 Insurance Pay Day
  • More on Wall Street's Dive Into Land Pools
  • Let Watson Pick Your Farm Program
  • Reshuffling Crop Insurance
  • The Cash Rent Squeeze
  • Farm Payments a Moving Target
  • Q+A on Farm Bill Choices
  • Land Costs Hamper US Competitiveness
  • Help for Farm Program Homework
  • Debate Rages Over APH Forgiveness
  • Expert Advice to Pick a Farm Bill Contingency Plan