Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Wednesday 11/25/15

Farm Income a Downer? Try Machinery Sharing
USDA revised projected 2015 farm incomes down from earlier forecasts this week, mostly on worsening prospects for livestock producers, USDA’s Economic Research Service said. But falling prices in 2015 will affect every major commodity sector, from grains to beef, dairy and hogs.[Read Full Blog Post]
Posted at 2:06PM CST 11/25/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 11/19/15

Farmers Split Over Wall St. Landlords
Agricultural REITs--short for real estate investment trusts--may be infant businesses at the moment, barely a ripple in the trillions of dollars of farm real estate. But news that Farmland Partners Inc.[Read Full Blog Post]
Posted at 2:00PM CST 11/19/15 by Marcia Zarley Taylor | Post a Comment
Comments (8)
So much for family farms. Young people might as well go find something else to do. No one can compete with that. What happens when all those investors want out? And they will when something better comes along. Nobody can farm at a loss for long there is no room to take a loss
Posted by Raymond Simpkins at 9:41PM CST 11/19/15
Like Walmart, and others, there is no good to come from this type of monopoly.
Posted by Bonnie Dukowitz at 10:41AM CST 11/20/15
This is the beginning to the end of agriculture as we know it. Land cost was the only input farmers could control. When prices would not support high land cost the price of land would soften. Not anymore with this kind of bull-crap. All states need to follow Iowa and outlaw corporate land ownership.There is no place for this in ag. I hope that someday they get stuck with it when no-one can afford to farm it for the investors.They may have a lot of expensive recreational land.
Posted by Raymond Simpkins at 8:08AM CST 11/21/15
More and more farm land owned by investor groups, rural people doing the actual work farming the land and getting only a W2 --- sounds familiar --- the ones doing all the work and having no vested interest in preserving the land end up not caring what happens to the land. We are moving in the direction of the failed model of the former USSR don't you think ?
Posted by Unknown at 5:06PM CST 11/23/15
More like out of control capitalist to me
Posted by andrew mohlman at 6:23PM CST 11/23/15
We went looking for some historic land relationships to see if there might be an indication of future outcomes. We used information from a USDA website (http://www.ers.usda.gov/data-products/commodity-costs-and-returns.aspx). Illinois land values are base on an index and come from USDA. This information is available at; http://www.farmdoc.illinois.edu/manage/pdfs/index_numbers.pdf . Land as a percentage of other cash expenses since 1996 has been between 39% and 63%. Land tends to be slower to increase and slower to decrease then other cash expenses. This seems to accounts for most of the change in percentage. Since 1996 land rent has only declined twice - 2001; 3.8% and 2006; 1.6%. Land rents did see frequent declines in the early to mid-1980's. Land rents dropped in half from 1979 to 1986. Land value index declined twice since 1996 - 2009; 2.9% and 2015; 0.2%. We divided the cash rent amount by the Illinois value index. This provides a relationship of return from rent as a relationship with land value. This ratio peaked in 1996 at $0.90 per Illinois index value and has declined steadily. The value was $0.51 in 2015. This might be directly related to the decline in interest rates. The average annual prime interest rate was 8.375% in 1996 and 3.25% since December of 2008. The Illinois land value, from the index, increase almost four fold from 1996 to 2015. That increase is 7.3% for the last twenty years. These data sets come from very large areas. Individual experience may be quite different and only very general conclusions might be projected. It looks from historic Illinois data that cash rents will likely not decline any substantial or consistent amount unless a 1980 environment occurs. Land values will likely not decline any substantial or consistent amount unless a 1980 environment occurs, interest rates increase above something like 5% as measured by the prime rate without increasing land rents or a combination as stagnant cash rents and increasing interest rates. This outlook might help explain the trust's purchasing activities. Freeport, IL
Posted by Freeport IL at 7:56PM CST 11/24/15
We Will be in 80s environment sooner than most realize nobody will cares till farmers have no savings left to pay bills. It's okay for a farmer to work the till the day they die well used must be opinion of people that trade commodities they are stealing resources the bear needs to be beat down and hibernate for a while
Posted by andrew mohlman at 8:17AM CST 11/25/15
Migrant workers will save the day. For a while.
Posted by Bonnie Dukowitz at 1:57PM CST 11/25/15

Tuesday 11/10/15

FSA Fixes ARC Payment Glitch
Nearly $4 billion in Agriculture Risk Coverage-County checks were deposited in farmers accounts by early November, but the Farm Service Agency announced late last week it will recalculate payments for growers who farm in multiple counties and who may have been underpaid in 2014.[Read Full Blog Post]
Posted at 4:54PM CST 11/10/15 by Marcia Zarley Taylor | Post a Comment
Comments (4)
Tell me again, what is the reason taxpayers should be funding this nonsense?
Posted by Unknown at 9:47PM CST 11/10/15
Unknown, you may be asking a bigger question about government support in general. I will let the farm audience defend that system. But on the narrow question of ARC-CO, it's to be fair to farmers who (for the convenience of FSA and themselves) simply chose a single county as their administrative office. Some were being penalized to the tune of $20 to $100/acre.
Posted by MARCIA TAYLOR at 9:57AM CST 11/11/15
So why wouldn't he have to pay back the over payment? Sounds like another gov. screw job. Government should just get out of the farm business. If they are going to pay more to the guy that picked the wrong county then they need to collect from the over paid.
Posted by Raymond Simpkins at 11:24AM CST 11/11/15
Your articles raise an interesting sequence of events. Nov. 6 Land Investors in the Wings Nov. 10 FSA fixes ARC Payment Glitch Today I read- Largest Land Deal in Illinois
Posted by Bonnie Dukowitz at 7:06AM CST 11/15/15

Friday 11/06/15

Land Investors in the Wings
Land trends historically trail moves in farm income, so could be due for steeper adjustments than registered to date.[Read Full Blog Post]
Posted at 11:18AM CST 11/06/15 by Marcia Zarley Taylor | Post a Comment
Comments (1)
Farmdoc daily links to a much easier way to find county payment rates than the official FSA link I included in the item above. This article explains how to search: http://farmdocdaily.illinois.edu/2015/11/2014-arc-co-payments-release-county-yields.html
Posted by MARCIA TAYLOR at 9:59AM CST 11/11/15

Friday 10/16/15

Harvesting Profits from Peak Corn
Irrigation, grain bins, drainage boomed with Peak Corn. Farmer investments 2007-2012 will help soften the blow from today's low prices.[Read Full Blog Post]
Posted at 3:20PM CDT 10/16/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Monday 10/12/15

Rx for Low Prices
Economists used to say the cure for low prices was low prices. But that hasn't stopped scores of long-term forecasters from predicting that commodities will be stuck in a price purgatory for at least another four years, barring an epic weather disaster someplace.[Read Full Blog Post]
Posted at 3:10PM CDT 10/12/15 by Marcia Zarley Taylor | Post a Comment
Comments (6)
I still say these prices are the norm. The few years of very high grain prices were not. Soybeans hit 12 dollars in 1972 and took them over 30 years to reach that again. Before this is over we maybe looking at levels of the days of LDPs.
Posted by Raymond Simpkins at 5:05AM CDT 10/13/15
Raymond your to negative there getting to you never seen bankers predict future correctly there are forces that work at keeping prices low cheap food policy there is record consumption going on
Posted by andrew mohlman at 7:28AM CDT 10/13/15
No!just being realistic.
Posted by Raymond Simpkins at 4:40AM CDT 10/14/15
I don't know if I should laugh or cry for you raymond
Posted by andrew mohlman at 8:56AM CDT 10/14/15
You don't have to do either I am going stronger than ever. I hope prices stay this way so I can buy more land cheap
Posted by Raymond Simpkins at 5:35PM CDT 10/14/15
If you were farming in 72 you don't need more ground let someone younger can't take it with you
Posted by andrew mohlman at 10:00PM CDT 10/14/15

Wednesday 09/30/15

Farm Program Payment Jitters
Prices are in for major 2014 crops, but the verdict on what Agricultural Risk Coverage (ARC) pays per county remains unsettled. The Farm Service Agency must fill in the blanks on a number of counties lacking NASS yields for 2014 before it can officially calculate program payments due in October.[Read Full Blog Post]
Posted at 3:29PM CDT 09/30/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Thursday 09/24/15

Cash Renters from Mars, Landowners from Venus?
There's a big gap between what average cash renters need in 2016 rent relief and what professional farm managers and some independent landowners are willing to give, as Elizabeth Williams and I reported in our recent series, "Cash Rent Reset." Obviously, projected budgets with $100 to $150/acre losses on corn don't seem to be making the case with owners.[Read Full Blog Post]
Posted at 4:04PM CDT 09/24/15 by Marcia Zarley Taylor | Post a Comment
Comments (10)
Send em my way. I need more ground.
Posted by Unknown at 9:23PM CDT 09/24/15
Landlords and people in general are missing the point. He who takes the biggest risk should get the biggest rewards. Rent should be valued at how well it can raise a crop, not just because corn hit $7. Farmers don't just hit the high every year with every bushel. When corn was $7-8 most sold around that $6 range. When beans were $13-15 most sold around $12. We have to protect our bottom line first. Greed will get us in the red before most other things do. Yes they took a risk, bought the land, paid for it, and want a return on the investment. But how big a return, and every year? Rent is the same as selling crop, you won't get to hit the high every year. Yes we will get a price support check. But that's why we are getting it. The price stinks for the amount of inputs we have. I don't think the landlord should get to figure it in. If hail or weather wipes out my crop should they get to figure that payment in too? When I am the one paying the premium at 80 to 85% and buying hail coverage? --RB
Posted by Marcia Taylor at 2:12PM CDT 09/29/15
If the asking price is too much, don't agree to pay it. If the landlords expect a percentage of the crop, insurance or farm payment, then put a value on the land productivity and a share of inputs. An agreed to price is an agreed to price.
Posted by Bonnie Dukowitz at 7:41PM CDT 09/29/15
If I were a landlord I wouldn't budge a dime! Not when these idiots are still paying 8-10 thousand an acre for ground. You do the math.
Posted by Raymond Simpkins at 10:28AM CDT 09/30/15
A nickel in hand is worth more than a dime in the bush, usually.
Posted by Bonnie Dukowitz at 12:29PM CDT 09/30/15
Let's try to step away from the emotions and take a trip back in history. If one looks at the prior year's cost of production, including land, as provided by USDA on a nation level (Thanks Todd), divide that by a trend line US yield, one get a feel for the next year's cost on a per bushel basis. When that projected cost (The 2015 costs not available so 2014 were used. Our Ag supply companies are making moves to reduced cost. That might mean lower input cost this spring.) is compares with the fall insurance price ($3.82 was used for 2015) one sees the projections for 2016 is a loss as was 2015. The next nine preceding years had big profit and the last nine since �Freedom to Farm� were losses. The losses in those early years when a fall prices were used were the equivalent of 100% of land cost. The projected loss for 2016 is something like 30% of land cost. When costs were compared to the spring insurance price, profits or very small losses were indicated in the last 10 seasons. The prior nine had a large variation with losses as great as 60% of land cost to profits of around 50% of land cost. This study might indicated projection for 2016 profits/losses, based on a percent of land cost, may not be as bad as the early years after just after "Freedom to Farm". Fall prices tend to make the profit prospects look worst than in the spring prices. One will need to be prudent with cost, including rents, in the coming year but 2016 does not appear as bad as the distant past, if that has any value. Freeport, IL
Posted by Freeport IL at 3:35PM CDT 10/09/15
Freeport what are you talking about?
Posted by Raymond Simpkins at 8:58PM CDT 10/09/15
Sorry, we thought it was a little clearer then it must be. The points are: profits have been great the prior 10 years, prior to that it was common to project cost and revenue using fall price and show a loss (at times the loss was great than the land expense); as time pasted to spring, prices improve making profit outlooks more attractive; this year's projected loss is less than times of old when looked at as a percentage of land cost. So cost, including land may not be as bad as the 1990's - not good but still not as bad. There still is many worries. Some from places no yet discovered. Ag corporation are restructuring to reduce cost which has a chance of working it way to the farm. Spring grain prices will likely be higher - improving profit opportunities. The basic message is we are farming as if it was pre-ethanol. The door is open for those with proper capital, cost structure and marketing plan to move through. Some can and will capitalize on this situation. Freeport, IL
Posted by Freeport IL at 11:50PM CDT 10/09/15
Freeport,You are right there is room to capitalize if you were smart and put money away. But many didn't and wont survive. I feel we are not in a time of low grain prices,but more the norm. The very high prices were the abnormal. Rent is not the whole problem with most ,a lot of guys are way over equipped. Some around here have 2-3 new combines and ran all their beans in 2 or 3 days. Can't do that any more. Marcia had some guy on here last spring,bought new planter and planted corn one day and beans the next and was done.How much did that cost per acre? So most should not be crying over high rent that they drove up in the first place. I rent a large percentage of my ground and it is the least of my concern.
Posted by Raymond Simpkins at 6:20AM CDT 10/10/15
I agree with Raymond Simpkins, the tenants drove the price up on the rent so the guy across the fence didn't get it now they scream poverty
Posted by Wally frey at 5:38AM CST 11/04/15

Monday 09/21/15

Don't Keep Partners in the Dark
It's better to teach respect for confidentiality than keep your potential business successors in the dark, family business consultant Lance Woodbury has found.[Read Full Blog Post]
Posted at 2:26PM CDT 09/21/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Tuesday 09/08/15

Grade the Farm Bill Calculators
When you cut through the technicalities, the "safety net" in the 2014 Farm Act is really designed as insurance against abrupt farm revenue or price disasters. It's not a whole lot different than thinking about Social Security as old age insurance: If you study the system, you know your odds of not running out of money in your lifetime improve if you wait until your full-retirement age (or later) to collect.[Read Full Blog Post]
Posted at 3:54PM CDT 09/08/15 by Marcia Zarley Taylor | Post a Comment
Comments (1)
More like a safety net for end users. When farm bill in question prices were good farm bill puts lid on prices might not work in high consumption world
Posted by andrew mohlman at 8:18AM CDT 09/09/15

Friday 09/04/15

Give Your Skills a Systems Upgrade
The scale of commercial farms today demands professionalism on par with non-farm businesses. Consultant Lance Woodbury suggests areas where he sees biggest needs for a farm's managers to do a "systems upgrade."[Read Full Blog Post]
Posted at 11:31AM CDT 09/04/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment

Wednesday 09/02/15

Renters at Risk
To breakeven in 2016, cash renters need to slash production costs $100/acre. An 11% cut in Illinois corn budgets hasn't happened since 1972.[Read Full Blog Post]
Posted at 3:19PM CDT 09/02/15 by Marcia Zarley Taylor | Post a Comment
Comments (5)
Operators who bought land in the last 3-4 years are exactly what they said,Locked In. With big payments on ridiculous land prices and falling land values. At least with rent they can drop it and walk away. The operators with large rent payments have nobody to blame but themselves,no one told them to give such high rates. The guys in Iowa you mentioned paying 325.00 an acre are not going to make it with 3.25 corn. If you do own the land outright and someone is willing to give those kinds Notof rents you would be better off renting it out. The Illinois figure of 872.00 an acre inputs takes 260 bu. just to breakeven. How many years in a row can you count on that? Not sure if so-called land owners will be better off because most don't really own.
Posted by Raymond Simpkins at 9:01PM CDT 09/02/15
If profits don't return than everybody will be in trouble. Other jobs and people won't be needed.all those taxes won't get paid. Doom for who?
Posted by andrew mohlman at 11:54PM CDT 09/02/15
Agriculture as a whole is in a lot more trouble than anyone is willing to admit. Thanks to the federal government.
Posted by Raymond Simpkins at 11:20AM CDT 09/03/15
The story of the times is "Cut Land Cost". We would like to change that to cut fixed cash cost on a bushels per acre basis. The challenge with just cutting cost by the acre may come back and hurt use. Let's say we have two farms: one with an expected yield of 160 bushels per acre with a rent of $245 and the other a yield expectation of 220 â?“ renting for $320. The rents for both in this environment seems high from the renter's point of view. The 160 bushels/acre is costing us more on a per bushel basis than the other - $1.53 per bushel versus $1.45 ($1.53 = $245/160 and $1.45 = $320/220). When one changes their acres farmed, the installment (equipment) loans are spread over few acres increasing your cost per acre. The same is true when living costs. They are spread over fewer acres so the cost per bushel increases. There will be cases where holding higher priced land than the level desired, maybe cheaper than not farming it and trying to spread other cost over few acres. While negotiating rents lower one may also want to look at the cost per bushel of purchased land. It might be some of the most expense land one operates on a $/per bushel cost basis. Selling land is not what farmers prefer to do. But talk to your lender to see what opportunities the lower debt and extra working capital can do for you. The solution is harder then it appears. One cannot change the size the operation without other major changes without expecting operating cost on a per bushel level to increase. Freeport, IL
Posted by Freeport IL at 5:18PM CDT 09/09/15
Freeport, The money you have let does not cover the rest of input cost. 1.72 times 160 bu.
Posted by Raymond Simpkins at 6:46AM CDT 09/10/15

Thursday 08/20/15

Iowa Land Values Bounce
Don't believe the gloom and doom on Iowa farmland values. Actual sales show real estate has bounced back to 2014-levels.[Read Full Blog Post]
Posted at 4:10PM CDT 08/20/15 by Marcia Zarley Taylor | Post a Comment
Comments (4)
What does after harvest have to do with anything? What I read everywhere is that we have 5-10 years of these prices ahead of us.
Posted by Raymond Simpkins at 7:07AM CDT 08/22/15
Unfortunately values have too much emphasis placed on fictitious, speculative or unrelated factors.
Posted by Bonnie Dukowitz at 1:23PM CDT 08/26/15
I can only hope that the grain prices stay this low for another 10 years. The way to get ahead in farming is to walk when everyone is running and to "RUN" when everyone is walking. This old fella is getting ready to Sprint;-)
Posted by JASON WOLFE at 11:38AM CDT 08/27/15
Jason, You are right there is going to be times to get ahead in the future. Not because of better prices but because of others losses. I wouldn't be in any hurry though to Run, maybe creep for awhile. These times are going to be here for awhile. Guys with a lot of land debt are going to be in trouble if the low prices stick around long.
Posted by Raymond Simpkins at 5:45AM CDT 09/01/15

Friday 08/14/15

Lessons from the 1980s
The recalibration of the grain economy is underway. It's not anywhere close to the 1980s debt crisis, but fathers who lived through that debacle don't want their children to be casualties.[Read Full Blog Post]
Posted at 12:17PM CDT 08/14/15 by Marcia Zarley Taylor | Post a Comment
Comments (2)
Last month, I asked Doug Stark, now president of Omaha-based Farm Credit Services of America, what he learned from the 1980s debt crisis. He was then sitting across the desk from troubled borrowers, a situation neither he nor anyone else in the system wants to repeat. "We weren't prepared. Lenders and borrowers didn't know how long it would last or what we would face. We learned working capital was king," Stark said. In other words, the paper wealth from over-heated land markets in the 1980s couldn't pay the debt when markets crashed. Cash and other liquid assets are what did. Under Stark's leadership, FCS America's operating motto has been to operate conservatively in good times, so they have the courage to stick with borrowers in the bad. In 2008, FCS America instituted caps on their mortgage lending, basing maximum lending based on long-term corn prices of $4.50, not the $7.50 peak hit in 2012. So when Iowa farmland bounced up to $9,000/acre, FCS America capped the "sustainable" lending level at $5,900. Borrowers needed to pony up larger down payments. Danny Klinefelter, a Texas A&M economist and ag finance expert, calls that effort a model policy and credits FCS America (and other Farm Credit institutions with similar policies) for tamping irrational exuberance in farmland markets this time around. "Farm lenders are much more sophisticated than they were in the 1980s," Klinefelter says. They are less likely to over-extend credit, and they now monitor their portfolios with stress tests to simulate how prices will affect credit quality. If they make a 10-year fixed rate loan, they match it with a 10-year fixed rate bond, not an average portfolio rate. What's more, they recognize that dumping too much farmland on the market at one time reduces everyone's equity, further spiraling a crisis.
Posted by Marcia Taylor at 2:43PM CDT 08/14/15
Lessons of the 80's, needs to be expanded quite a bit. Cycles thru out the past 150 years will show many similarities.
Posted by Bonnie Dukowitz at 11:36AM CDT 08/15/15

Wednesday 08/12/15

Minimize Your Burn Rate
When 200 farmers and ranchers under 35 gathered in Omaha for a Farm Credit Services of America conference in late July, someone asked how long the grain industry downturn would last. After all, most Millennials born between 1980 and 1995 had never experienced back-to-back years of farm losses.[Read Full Blog Post]
Posted at 4:49PM CDT 08/12/15 by Marcia Zarley Taylor | 0 Comments | Post a Comment
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Recent Blog Posts
  • Farm Income a Downer? Try Machinery Sharing
  • Farmers Split Over Wall St. Landlords
  • FSA Fixes ARC Payment Glitch
  • Land Investors in the Wings
  • Harvesting Profits from Peak Corn
  • Rx for Low Prices
  • Farm Program Payment Jitters
  • Cash Renters from Mars, Landowners from Venus?
  • Don't Keep Partners in the Dark
  • Grade the Farm Bill Calculators
  • Give Your Skills a Systems Upgrade
  • Renters at Risk
  • Iowa Land Values Bounce
  • Lessons from the 1980s
  • Minimize Your Burn Rate
  • Eligible for Farm Programs? It Depends
  • Why Seller Financing Fits the Bill
  • Grain Losses Mitigated, Not Erased
  • Story Book Endings for Estate Taxes
  • Loss Leaders on Crop Insurance