Thursday August 13 Ag News

Signs of Financial Strain but Repayment Problems Still Minor
Nathan Kauffman, Assistant Vice President and Omaha Branch Executive, KC Federal Reserve

Agricultural credit conditions in the Tenth District of the Federal Reserve continued to weaken in the second quarter of 2015, but despite that weakening most bankers reported few significant problems with loan repayment. Bankers also reported that a weakening agricultural economy has further boosted loan demand, lowered cropland values and generally slowed Main Street business activity in the District’s agricultural regions. Demand for non-real estate farm loans increased in every state, but only a small percentage of operating loan applications was denied. Lower crop prices continued to put downward pressure on cropland values, especially nonirrigated cropland values, which fell significantly from the previous quarter. Ranchland values, however, continued to increase, supported by strong profit margins in the cow-calf sector.

Farm Loan Demand and Credit Conditions
Loan demand continued to grow in the second quarter, and credit conditions weakened slightly, according to respondents in the Tenth District Survey of Agricultural Credit Conditions. Loan repayment rates continued to decline, and loan renewals, referrals and extensions increased modestly from the previous year. Although bankers overall reported further declines in loan repayment rates, 75 percent of respondents reported repayment rates were unchanged from a year ago. Furthermore, the number of bankers reporting lower loan repayment rates than in the last quarter declined 8 percent.

Although repayment rates declined in most of the District, the deterioration over the past year has been relatively minor. Bankers reported only slight increases in minor repayment problems compared to last year. In addition, bankers reported that few operating loan applications were denied, and most of the denied applications were for new rather than existing customers. The survey index for availability of funds remained steady, and only 1 percent of banks reported that loans were reduced or refused due to fund shortages.

Survey measures for loan repayment, renewals and extensions varied slightly across the District, but demand for loans was consistently higher in all states. Specifically, low crop prices and variable weather conditions led to a more pessimistic outlook in crop-producing states. Compared with other states, more bankers in Nebraska reported lower repayment rates and more loan renewals and extensions. Similarly, 30 percent of bankers in Kansas and western Missouri indicated they expect loan repayment rates to be lower in the next three months compared to the same period last year. In contrast, bankers in Oklahoma reported slightly higher loan repayment rates from a year ago, and loan renewals and extensions in the Mountain States were expected to decline over the next three months.

Farm Income
Expectations of increasing loan demand and weakening repayment rates were likely due to continued declines in farm income. More than half of survey respondents reported lower farm income in the second quarter compared to last year, marking the ninth consecutive quarterly decline. Regionally, farm income declined in every state but Oklahoma, where incomes continued to be supported by positive profit margins for cow-calf producer. Prospects in Missouri were especially pessimistic, where none of the responding bankers reported higher farm income compared to a year ago. Low crop prices and variable weather patterns also appeared to be holding down expectations for farm income in the next three months.

Several survey respondents mentioned the challenges of wet weather conditions and lower crop prices in the midst of steady input costs. A large portion of the Tenth District experienced abnormally heavy precipitation in the second quarter, with some areas receiving rain totals as much as 300 to 400 percent more than the historical average. Bankers in Colorado commented that recent rains filled reservoirs, improved crop yield potential and increased optimism (despite low crop prices). However, bankers throughout Kansas, Missouri and Nebraska commented that too much rain had resulted in wheat rust, delayed the wheat harvest, prevented planting of soybeans and limited opportunities to cut and bale hay. The heavy spring rains, however, had varying effects on winter wheat yields in the District. Compared to last year, wheat yields in Oklahoma and Kansas were expected to improve dramatically, while yields in Nebraska were forecast to decline.

Abnormal weather and yield variability generated some uncertainty in agricultural commodity markets in the second quarter, and recent prices have been volatile. In early May, for example, wheat prices were near annual lows, and corn prices were trending downward. Then, after spiking in the last week of June due to expectations of reduced crop yields, corn prices again declined significantly as crop conditions evolved further during key summer growing months.

Not all commodities produced in the Tenth District, however, have experienced increased price volatility. For example, cotton prices remained relatively steady in the second quarter, partly due to the significance of global developments in that market. Although reduced demand from China, increased production in India, Brazil and Bangladesh, and improving conditions for the 2015 U.S. cotton crop could put downward pressure on cotton prices, upward price pressures could offset these effects. For example, U.S. cotton production was still expected to be 11 percent less than 2014 levels due to decreased planted area.

Although crop prices generally have remained depressed relative to recent years, feeder cattle prices have remained historically high. High prices for feeder cattle, combined with increases in cow-calf returns and improved forage and pasture conditions, have encouraged cow-calf producers to rebuild their herds. Some bankers commented that cow-calf producers had continued to maintain solid profit margins, supporting farm income in their areas. For feedlot operators, however, the break-even cost for cattle surpassed cattle prices at the beginning of 2015, and profit margins have been negative since January.  Hog prices rebounded slightly in May, but looking forward, increasing feed costs were expected to dampen producers’ profit margins.

Persistently lower crop prices and emerging stress in the farm economy have affected the overall economic outlook on Main Street. In evaluating the relationship between the local agricultural economy and general business activity, many Tenth District bankers reported that a weakening agricultural economy had weakened Main Street business activity in their lending areas. In 2014, 39 percent of bankers reported weaker business activity as the agricultural economy began to soften, but that number increased to 59 percent in 2015. The largest evidence of weakening occurred in Nebraska, where 84 percent of survey respondents reported that a weakening agricultural economy was adversely affecting Main Street, up from 38 percent in 2014. In contrast, regions not as dependent on crop production as Nebraska, such as Oklahoma and the Mountain States, were less pessimistic about the connection between the agricultural economy and Main Street.
Chart 10: Effect of Current Agricultural Economy on Main Street Business Activity

Farmland Values
Amid lower farm income and expectations that crop prices may not improve significantly, cropland values continued to soften. Nonirrigated cropland values declined almost 3 percent, on average, from last year. The declines were largest in Nebraska and Missouri, while values increased modestly in Oklahoma and the Mountain States. From the first quarter to the second, nonirrigated cropland values declined more than 4 percent. Although irrigated cropland values remained steady on a quarter-over-quarter basis, irrigated cropland values were 3.6 percent lower in the second quarter when compared with the previous year, driven mostly by declines in Nebraska and Kansas. In contrast, ranchland values posted modest gains due to continued profitability in the cow-calf sector. Although bankers expected nonirrigated and irrigated cropland values to decline further, they also expected ranchland values to moderate in the coming months.

As in 2013, weaker farm income was not the only factor driving farmland values in the second quarter of 2015. Similar to two years ago, District bankers reported the overall wealth of the farm sector, the current interest rate environment and a lack of alternative investment options have had significant effects on farmland values. However, unlike two years ago, more agricultural lenders cited farm income expectations for next year as a primary contributor to recent developments in farmland values. With the recent downturn in oil prices, land-lease revenue from mineral rights was identified as less important than in 2013.

Conclusion
Agricultural credit conditions were expected to weaken further in coming months alongside subdued farm income and a growing demand for farm loans. In the second quarter, bankers were concerned that potential yield losses, coupled with lower crop prices, could put further pressure on crop producers’ profit margins. Although loan repayment problems were reported to be only minor thus far, and few loan applications were denied, weaker cash flow could continue to intensify financial stress for some producers as the fall harvest approaches.



USDA Invests $63 Million to Support 264 Renewable Energy and Energy Efficiency Projects

Agriculture Secretary Tom Vilsack has announced $63 million in loans and grants for 264 renewable energy and energy efficiency projects nationwide that USDA is supporting through its Rural Energy for America Program (REAP).

"This funding will have far-reaching economic and environmental impacts nationwide, particularly in rural communities," Vilsack said. "Investing in renewable energy and energy efficiency projects supports home-grown energy sources, creates jobs, reduces greenhouse gas pollution and helps usher in a more secure energy future for the nation."

Fifteen Nebraska projects have been selected for funding.  The projected energy savings from these projects is equivalent to the amount required to power 219 homes.  Among the projects approved include....

Antelope - Gustman, Michael O. – Plainview - $14,985 – Replaced two diesel irrigation motors with more efficient electric motors.

Knox - Smith, Brian – Orchard - $11,102 – Replaced three diesel irrigation motors with electric motors.

Wayne - Bauer Elevator, Inc. – Randolph - $12,487 – Replaced existing inefficient grain dryer with a new, more efficient model.

Funding for the projects is contingent upon the recipients meeting the terms of the grant or loan agreement.

Eligible agricultural producers and rural small businesses may use REAP funds to make energy efficiency improvements or install renewable energy systems, including solar, wind, renewable biomass (including anaerobic digesters), small hydroelectric, ocean energy, hydrogen, and geothermal.

The next application deadline for REAP grants is November 2, 2015. USDA will issue a notice of available funding with more details on how to apply in the coming weeks. REAP was created by the 2008 Farm Bill and was reauthorized by the 2014 Farm Bill.



SOUTH CENTRAL AG LAB TO HOST FIELD DAY AUG. 19

The University of Nebraska-Lincoln South Central Agricultural Laboratory near Clay Center will host a field day Aug. 19 from 8:30 a.m. to 3:30 p.m. Growers, crop consultants and educators interested in crop production are encouraged to attend.

Speakers will present research focused on cover crops, nutrient management, soil water management and pest management for improved crop production and profitability. A total of six Continuing Education Units will be provided in nutrient management, soil and water management, integrated pest management and crop management.

Keynote lunch speaker at the event will be Ronnie Green, Harlan Vice Chancellor of the Institute of Agriculture and Natural Resources and interim senior vice chancellor for academic affairs at UNL. 

There is no cost to attend the field day. However, pre-registration is requested by calling 402-762-3644 or emailing jrees2@unl.edu.

The South Central Agricultural Laboratory is five miles west of the intersection of Highways 14 and 6, or 13 miles east of Hastings on Highway 6. For more information, including maps and directions, visit http://scal.unl.edu.

The field day is sponsored by Nebraska Extension, Nebraska Corn Board, Nebraska's Natural Resources Districts and several industry sponsors.



IOWANS INVITED TO “GET YOUR AG ON” AT THE STATE FAIR

Iowa Secretary of Agriculture Bill Northey today invited Iowans attending the Iowa State Fair to learn more about the many exciting opportunities available in Iowa agriculture and then share their experiences using the #GetYourAgOn hashtag on social media.

“Agriculture is everywhere at the Iowa State Fair and we wanted to invite the more than 1 million visitors to the fair to learn more about Iowa agriculture and then share their experiences.  Whether it is seeing the animals in the livestock barns, visiting the animal learning center, seeing the 4-H and FFA students compete or just enjoying some of the amazing food, everyone at the fair will be able to experience and share Iowa agriculture,” Northey said.

The Iowa Department of Agriculture and Land Stewardship’s display in the Agriculture Building will have information available about the Iowa Water Quality Initiative and will be handing out sunglasses with CleanWaterIowa.org on them, a website is created to help all Iowans learn about what they can do to help protect water quality.  Also, coordinators from Iowa Water Quality Initiative Demonstration Projects will give presentations in the Agriculture Building at 1 p.m. on Thursday, Aug. 13 and Saturday Aug. 15 and at 5 p.m. on Tuesday, Aug. 18.

The Iowa Soybean Association, the Iowa Corn Growers Association, the Iowa Egg Council, Midwest Dairy Association, Iowa Turkey Federation, Iowa Pork Producers, and the Iowa Beef Industry Council will also be participating in the display in the Agriculture Building and have information available about Iowa agriculture.  The movie “Farmland” will also be shown daily at 1:00 p.m. at the Maytag Family Theaters building and is presented by the Iowa Agriculture Literacy Foundation.

The Iowa Egg Council will be offering eggs on a stick to fairgoers from 9 a.m. to 6 p.m. every day of the fair. The Department will also have posters and handouts about Avian Influenza at both booth locations to help answer any questions fairgoers have about the recent outbreak.

In the Varied Industries building the Department will also have a display to educate Iowans about the activities of the Department and continue the tradition of weighing fairgoers on a scale certified by the Weights and Measures Bureau.

The Iowa Century Farm and Heritage Farm Awards will be presented on Thursday, Aug. 20 starting at 9:00 a.m. at Livestock Pavilion.  This is a new day and location for the awards and everyone is invited to attend and help recognize the families receiving the awards.  Century Farm awards recognize farms that have been in the same family for 100 years and Heritage Farms awards recognize farms that have been owned by the same family for 150 years.  This year there are 366 Century Farm winners and 101 Heritage Farm winners.  These awards are sponsored by the Iowa Department of Agriculture and Land Stewardship and the Iowa Farm Bureau.

On Wednesday, Aug. 19 starting at 9:00 a.m. Gov. Terry Branstad, Lt. Gov. Kim Reynolds Northey and Iowa DNR Director Chuck Gipp will recognize 95 Iowa Farm Environmental Leader award winners.  The awards will be presented at the Penningroth Center inside the Cattle Barn and recognize the efforts of Iowa’s farmers as environmental leaders committed to healthy soils and improved water quality.  It seeks to recognize the exemplary voluntary actions of farmers that improve and protect the environment and natural resources of our state while also encouraging other farmers to follow in their footsteps by building success upon success.  Hagie Manufacturing sponsors a luncheon for award winners following the ceremony at the Farm Bureau shelter that Northey will also attend.

At 10:00 a.m. on Tuesday, Aug. 18 the Department will be recognizing the winners of the 2015-2016 From the Farm to You Calendar drawing contest in the Agriculture Building.  Kids from across the state submitted pictures for the calendar.  Copies of the calendar are available to fairgoers at the Department’s booths in the Ag Building and the Varied Industries Building.

Northey will also participate in the 2015 Governor's Charity Steer Show on Saturday, Aug. 15, at 4:00 p.m., in the Pioneer Livestock Pavilion at the Iowa State Fair.  Northey will be showing a steer owned by Shau Landt from Charles City.  Immediately following the competition the steers will be sold at auction with proceeds going to the Ronald McDonald House Charities of Iowa.

The Iowa State Fair runs from Aug. 13 to 23 at the state fairgrounds in Des Moines.



Oelwein Woman Crowned 62nd Iowa Dairy Princess

Kate Stewart, an 18-year-old from Oelwein, was crowned the 62nd Iowa Dairy Princess during an evening ceremony at the Iowa State Fairgrounds in Des Moines tonight (Wednesday, August 12). Stewart, daughter of Matt and Diana Stewart, will spend the year serving as a goodwill ambassador for Iowa's dairy farmers. Throughout her year-long reign, she will make public appearances to connect with consumers and help them understand the dedication of dairy farm families to their cows and their land, and the pride they take in providing wholesome milk and dairy products to consumers.

Stewart represents Fayette County and will attend Iowa State University in the fall studying global resource systems. She was also named Miss Congeniality by her fellow contestants.

Leslie Sivesind, 17, of Waukon, was named Alternate Iowa Dairy Princess. Sivesind is the daughter of Dan and Jane Sivesind, and will share duties with the princess. She represents the Iowa Guernsey Breeders Association and will start her senior year at Waukon High School this fall.

Each princess receives a $1,000 scholarship from Midwest Dairy Association, which sponsors the Iowa Dairy Princess program on behalf of Iowa’s dairy farmers.

The outgoing Iowa Dairy Princess is Mikayla Lien, daughter of Gary and Patty Lien of Calmar, and the Alternate Princess is Rylie Pflughaupt, daughter of Jordan and Traci Pflughaupt of Vinton. Their reigns will be completed at the end of the Iowa State Fair, and the new Princess and Alternate will begin their duties on September 1.



Leadership At Its Best Class Begins in Minneapolis

Soybean farmer-leaders from 15 states met this week in Minneapolis, Minn., for Part I of the 2015-2016 American Soybean Association (ASA) Leadership At Its Best program, sponsored by Syngenta. This valuable program recognizes up and coming soybean farmer-leaders and provides them with extensive training to further develop their leadership skills and provide additional education on communication styles, strategic planning, forecasting, media training and business etiquette.
Field photo

At the beginning of the program, attendees had the chance to hear an update on ASA’s policy efforts from President Wade Cowan (TX) and First Vice President Richard Wilkins (DE). Later in the week, the group had a chance to learn about current pest and weed control innovations, during a visit to Syngenta’s offices and research facilities in Minnetonka and Stanton, Minn. Portions of the training and social events were held jointly with the Leadership At Its Best class from the National Corn Growers Association (NCGA), allowing an opportunity for participants to visit with NCGA farmer-leaders as well.

Leadership At Its Best Program participants are nominated by their state soybean association and serve in a leadership role within their states. This year’s class participants include: Adam Cloninger, Keo, AR; Cory Atkins, Seaford, DE; Elaine Gillis, Dunkirk, IN; Bill Shipley, Nodaway, IA; Caleb Ragland, Magnolia, KY; Brian McKenzie, Cassopolis, MI; Christopher Hill, Brewster, MN; Robert Alpers, Prairie Home, MO; Shane Grieving, Chapman, NE; Joe Ericson, Wimbledon, ND; Kerrick Wilson, Sommerville, OH; Cliff Barron, Johnsonville, SC; John Krutzfeldt, Wolsey, SD; Hunter Grills, Newbern, TN and Brad Kremer, Pittsville, WI. The leaders will begin the second phase of their training next March, in conjunction with the ASA Board Meeting in Washington, D.C.



Midwest, Plains Farmland Values Lower

Farmland values were flat to lower in parts of the U.S. Midwest and Great Plains in the second quarter, according to Federal Reserve reports Thursday, reflecting the continued impact of lower grain prices on farmers' incomes and the broader agricultural economy.

The average price of nonirrigated cropland in the Federal Reserve Bank of Kansas City district, which includes Kansas, Nebraska and Missouri, dropped more than 4% compared with the first quarter and was down nearly 3% from the year-earlier period, the bank said.

Irrigated land values held steady on a quarter-to-quarter basis but fell more than 3% from a year earlier, according to the Kansas City Fed. Irrigated cropland, common in the region, depends on man-made water systems for moisture rather than rainfall.

In the St. Louis Fed's district, which also includes parts of Illinois, Kentucky and Arkansas, prices for "quality" farmland remained largely the same in the second quarter compared with a year ago, despite lower farm incomes in the region. Cash rents -- the rent paid by farmers to landowners -- posted "notable" declines in the second quarter, the St. Louis Fed said. A majority of lenders in the district expect continued erosion of farm incomes to further weigh on land values in the current quarter, as well as cash rents, farm household spending and capital-goods expenses.



Japanese Journalists Get Look at U.S. Beef Industry

To gain insight into the U.S. beef industry and learn more about prevention of animal disease and foodborne illnesses, a team of Japanese technical journalists recently visited offices of the U.S. Meat Export Federation (USMEF), the National Cattleman’s Beef Association (NCBA), research facilities at Colorado State University (CSU) and cattle-production operations in Colorado. Funding support for the team’s visit was provided by the Beef Checkoff Program and the USDA Market Access Program (MAP).

According to the journalists who met with USMEF in Denver, a small number of Japanese consumers cling to a bias against U.S. agriculture, though it is not the actual products that concerns them. Rather, it tends to be the technology used in the U.S and an overall lack of knowledge about U.S. beef production.

To that end, the team’s visit showcased the beef industry, current disease-prevention methods and U.S. agricultural-research methods.

“The team met with a number of professionals who provided a firsthand look at the U.S. beef industry and its management structure,” said USMEF-Japan Senior Director for Technical Services Susumu Harada, who guided the team during its visit. “Those journalists on the visit evaluated highly the overall structure, including safety and prevention measures of animal disease and foodborne illnesses.”

At USMEF, the visitors learned about the structure of the U.S. beef industry – where and how cattle are fed and slaughtered, and the role of USMEF for the checkoff and other aspects of the international marketing of U.S. red meat.

During the team’s visit to NCBA headquarters in Centennial, Colo., the Japanese journalists were presented with information about the checkoff’s Beef Quality Assurance (BQA) Program. BQA is a national program that provides guidelines for beef production and raises consumer confidence by detailing proper management techniques and fostering a commitment to quality within each segment of the beef industry.

Harada said the presentation and follow-up discussion was especially helpful because it provided details of actions taken during past foodborne-illness and BSE outbreaks.

“The discussion confirmed to the team that the U.S. beef industry, in cooperation with the U.S. government, research institutes, the Centers for Disease Control and other agencies take great precaution and make immediate efforts to communicate on issues,” said Harada.

A tour of CSU’s research and experimentation facilities in Fort Collins, Colo. included a look inside the school’s veterinary teaching hospital. There, the journalists witnessed practical uses of technology for prevention and treatment of animal diseases.

Visits to Colorado cattle operations included the Running Creek Ranch in Elizabeth and the Silver Spur Ranch in Elbert. Running Creek has been raising Limousin cattle since 1979 and is said to have registered more Limousin cattle than any other seedstock producer. Silver Spur, a multi-site ranch, is one of the top 10 commercial cattle operations in the country.

“The ranch visits helped give the team confidence that U.S. cattle producers have detailed management practices that address the concerns of the Japanese general public,” Harada said. “Learning about the BQA program went hand-in-hand with that notion, further confirming the efforts of U.S. producers.”



POET releases first-ever economic impact study

Today, POET, one of the world’s largest ethanol producers, released its first-ever economic impact study, revealing the significant impact POET made to national economic growth and job creation in 2014, including:
-    Generating a total of $13.5 billion in sales for U.S. businesses;
-    Adding $5.4 billion in national gross domestic product; 
-    Supporting an estimated 39,978 full time jobs; and
-    Contributing $3.1 billion in income for American families.

The report further details POET’s contribution to the economic prosperity in each of the seven states where it operates – South Dakota, Minnesota, Iowa, Missouri, Indiana, Ohio and Michigan.  POET, which is headquartered in Sioux Falls, S.D., operates a total of 27 dry mill corn ethanol plants with an annual capacity of 1.7 billion gallons – more than 11 percent of the total U.S. ethanol output.

“Ethanol provides us the means to produce our own clean fuel and keep the enormous economic benefits within America’s borders,” POET CEO Jeff Lautt said. “The impact flows from the plants to farmers, communities, throughout the states in which they operate and across the nation.”

In addition, the report cites POET’s impact on reducing foreign oil dependence.  According to the study, POET’s production of 1.7 billion gallons of ethanol displaces nearly 1.2 billion gallons of gasoline, which requires 61 million barrels of crude oil to produce. This displacement potentially reduces the outflow of money to foreign producers of oil by nearly $5.5 billion.

The use of POET ethanol also reduces greenhouse gas emissions relative to gasoline. Burning a gallon of ethanol opposed to gasoline results in a 35 percent reduction of carbon dioxide (CO2) emissions.  Reflecting this, the production of 1.7 billion gallons of POET ethanol cuts CO2 emissions by approximately 874,000 metric tons.

POET employees, stakeholders, family and friends are celebrating the announcement today at a series of POET Ethanol Day events in its operating states, where attendees can enjoy food, activities and hear from local officials.

To read the full report and find additional information on state-level data, please visit: http://www.poet.com/impact.



Argentine Farmers Plant Defensively

Argentine wheat and corn area will fall dramatically in 2015-16 amid political and economic uncertainties and rising costs that lead to tight margins.

The Buenos Aires Cereals Exchange estimates wheat area will fall by 16% in the current season, while corn area will drop by 15% and soybean acres will stay flat.

Heavy recent rains have created good soil moisture conditions in many regions, but flooding has inhibited wheat in some areas.

According to the AACREA farmer group, in terms of percentage of land planted in 2015-16, soybeans will account for 57%, up sharply from 47% last year; wheat will account for 11%, down from 14% in 2014; and corn for 17%, down from 25%.

With the leading candidates in Argentina's election not being drawn on whether or when grain export taxes may be reduced and the timing of a devaluation of the Argentine peso uncertain, farmers are being very cautious.

That's because without a bump from these two factors, margins look very tight with prices in the doldrums and costs on the rise.

Some 88% of Argentine farmers believe the economic situation is worse than one year ago, said AACREA. Meanwhile, only 27% believe the situation will improve in the medium term, down from over 50% at the same time last year.