Thursday February 2 Ag News

FARMLAND VALUES DECLINE AT SLOWER-THAN-EXPECTED PACE

The overall trend of weakening cropland prices continued through 2016 in the grain belt states served by Farm Credit Services of America (FCSAmerica) and Frontier Farm Credit.  However, the pace of decline remains slower than expected.

The large 2016 corn and soybean crops through much of the region helped profitably levels and contributed to continued demand for quality tracts, said Mark Jensen, chief risk officer for FCSAmerica and Frontier Farm Credit.

“That being said, overall margins remain tight and input costs still are adjusting downward,” Jensen said.  “As a result, we anticipate continued pressure on real estate values.”

FCSAmerica and Frontier Farm Credit track all farmland sales in Iowa, eastern Kansas, Nebraska, South Dakota and Wyoming.  Appraisal teams also update values on 71 benchmark farms every January 1 and July 1.  The resulting data is the largest and most comprehensive snapshot of farmland values in the region.

Below are state-by-state trends based on land sales completed through Dec. 31, 2016:

While values on Iowa farmland had been dropping at a faster rate than in other states served by FCSAmerica and Frontier Farm Credit, the market stabilized somewhat in 2016, particularly in the last half of the year. The average 2016 price for an acre of Iowa farmland  $8,123 – was 2.8 percent lower than in 2015 – $8,370. Since the market’s peak in 2013, the average sale price is down 17.3 percent.

Public auctions dropped 3 percent in 2016 and completed sales were down 7 percent compared to 2015.

Nebraska’s average 2016 sale price for dryland – $4,432 per acre – was down nearly 4.8 percent from the previous year and 13 percent since 2013.  The average 2016 price for irrigated Nebraska farmland – $6,805 per acre – was 6.6 percent lower than in the previous year and 9 percent lower than in 2013.

Public auctions were down 14 percent from 2015 and sales declined 18 percent.

In South Dakota, farmland prices gained ground in 2015 only to drop 8.6 percent in 2016 to $4,813 per acre.  Since 2013, the average price of South Dakota farmland is off 14.8 percent.

The number of public auctions was similar to 2015.  Total sales declined 8 percent.

In eastern Kansas, farmland sold for 3.7 percent less in 2016 than in 2015 – $4,097 vs. $4,256 per acre.  Prices are down 12.5 percent since 2014, when the associations began tracking farmland sales in the state.

Completed sales were down 12 percent compared to 2015.

Wyoming had too few sales – 45 percent fewer than in 2015 – to identify trends.



Commodity Price Stabilization Expected in 2017

After a volatile year, stability is returning to global commodity markets, at least for the time being, said CattleFax CEO Randy Blach this morning during the popular CattleFax Outlook Session at the 2017 Cattle Industry Convention and NCBA Trade Show.

“After the ag market shocks of the past year and an approximate correction of 50 percent in all commodity markets, prices are beginning to stabilize,” said Blach. “That doesn’t mean that we’re past this, or that prices have bottomed, but on a global basis, we’re not likely to see as much volatility during the year ahead.”

He said the industry is continuing to become more current in its marketings and cattle feeders are seeing a return to profitability, the first step in helping to stabilize prices for cow-calf and stocker operations.

Blach said that in the near-term, capacity is going to continue to be a significant issue for packing companies in both the beef and pork sectors. A shortage of available labor and an increase in protein production in beef, pork and poultry will continue to keep the packing sector in the driver’s seat during the year ahead.

“With limited processing capacity, the leverage shift in the marketplace will continue toward the packing, retail and foodservice segments for the time being,” said Blach.

During 2017 and beyond, margins are likely to tighten for cow-calf producers with more stability but also an expectation for lower highs and lower lows. CattleFax analysts noted that the cow-calf sector will shift focus to finding efficiencies, reducing cow costs and improving productivity to remain profitable. Analysts estimated 2017 price expectations for 550 pound steers at $150 per hundredweight (cwt.) with a range of $130-170/cwt. while 750 pound steers will average $130/cwt. with a range from $120-140 during the year ahead.

Blach reported that the historical cattle cycle remains intact, although the price break experienced in 2016 was the fastest and deepest of any in recent history.

“Even with the rapid growth in the U.S. cow herd, numbers are expected to continue higher for the next two-to-three years,” said CattleFax Senior Analyst Kevin Good. “Absolute price lows likely will not be realized until that period of increasing cow herd numbers is behind us.”

Good echoed the expectation for prices to stabilize during 2017, making price and production risk management an easier task for producers. He said fed steer prices will average $110/cwt. with a range of $98-$124/cwt. and the composite Choice cutout will trade from $168 to $204/cwt. with a 2017 average price of $185/cwt. for the year. Grain prices have also stabilized and corn is projected to trade from $2.90-$3.95 per bushel with an average of $3.45 per bushel.

Meteorologist Art Douglas, professor emeritus at Creighton University, said the signs of a return to El Nino conditions are already becoming apparent in the Pacific Ocean, which bodes well for portions of the country.

“The upcoming spring forecast calls for improved moisture from Texas to Minnesota and this will be an ideal setup for spring wheat. The drought in the Southeast will be retracting in the spring while a drier spring weather pattern is forecast for the northern Rockies. Persistent high pressure ridging will keep the western third of the country warmer than normal in the spring and the dry areas of the far Southeast will also be warmer than normal,” said Douglas. “Temperatures will be cooler than normal through the Corn Belt in the spring and with wet weather forecast for the western Corn Belt, there could be problems with field work and spring planting.”

He said the upcoming summer is expected to follow the typical pattern observed with developing El Nino events.

“Midwest summer temperatures will be near to slightly below normal. A persistent trough of low pressure is forecast to persist through the Mississippi Valley through the summer and this will favor cooler than normal temperatures in the plains and above normal precipitation from the Gulf Coast to the mid-Mississippi Valley and Ohio Valley as well as the Southeast,” said Douglas. “The summer monsoon in the Southwest is likely to be weak as the monsoon high pressure struggles to become established in the plains. The Northwest is expected to have a warmer- and drier-than-normal summer due to persistent high pressure ridging.”



Producer Support Of Checkoff Softens, But Remains Strong

An independent survey of producers found 69 percent continue to approve of the Beef Checkoff Program. Importantly, the more producers know about the program, the more supportive they are. The survey also found that producers are generally more optimistic about the cattle industry than they were a year ago.

“We’ve all experienced a very challenging year, both within the industry and in other aspects of our lives,” says Jo Stanko, Investor Relations Working Group (IRWG) co-chair.  “That’s why we’re not surprised by a decline in support for the checkoff,” said the Steamboat Springs, Colo., producer. “But it is heartening to see producers becoming more optimistic about the future.”

The random survey of 1,252 beef and dairy producers nationwide was conducted by the independent firm Aspen Media & Market Research in late December 2016. The survey found that while support of the checkoff is down from a year ago, a substantial majority of beef and dairy producers continue to say their beef checkoff is a good value:
-    76 percent of producers say the beef checkoff has contributed to a positive trend in beef demand,
-    73 percent of producers say the beef checkoff has value even when the economy is weak,
-    66 percent of producers say the beef checkoff contributes to the profitability of their operations,
-    67 percent say the checkoff represents their interests,
-    58 percent believe the checkoff is well-managed.

“Although most indicators have declined in the past year, 76 percent say ‘if producers don't promote beef through the checkoff, nobody else is going to pay to promote it’,” says Stanko. “This tells me producers believe in what our checkoff is accomplishing, believe in the programs their investments support, and believe that they have control over their own future through the Beef Checkoff Program. That’s even more reason to be actively engaged and learn, then share, what your checkoff is doing.”

The key priority of the working group is to develop strategies that communicate checkoff-funded program results, educate, and build relationships with checkoff investors to gain a better understanding of the Beef Checkoff Program, says IRWG co-chair Kristin Larson, a producer from Sidney, Mont. “One way to start becoming more engaged with your checkoff is to read the 2016 Beef Board Annual Report”... http://www.beefboard.org/click.asp?id=20487&url=http%3A%2F%2F2016annualreport%2Ebeefboard%2Eorg%2F. 



Beef Exports Increase U.S. Carcass Values

Mouthwatering steaks, juicy burgers and delectable roasts. That’s what consumers here in the U.S. love. But what about the underutilized parts of the beef animal? If we don’t consume them here in the U.S., where do they go, and who uses them?     

“I think about the world of possibility and potential that’s floating out there, especially if we are able to gain access to China,” says Louisiana beef producer Amelia Kent. “This past year, our checkoff has invested $7.2 million in export growth programs, primarily conducted through the U.S. Meat Export Federation. That’s investing in work in international communities on how to utilize American beef and why it is safe. We just need to think not only about our marketing environments today but also think about the beef industry for the future.”

The leading beef export  markets (by value) in 2016 were Japan, Mexico, South Korea, Canada, Hong Kong and Taiwan. Additional promising markets are located in the Middle East, Southeast Asia, Central and South America and Africa.

What Beef Cuts are Exported Internationally?
Japan:  Short plates, chuck eye rolls, briskets, short ribs, tongues, hanging tenders and outside skirts
Mexico:  Rounds, shoulder clods, inside skirts and variety meats
South Korea:  Short ribs, chuck rolls, chuck short ribs, briskets and hanging tenders
Hong Kong: Short plates, short ribs and chuck rolls
Taiwan:  Short plates, shanks and rib fingers 
Egypt, Southeast Asia, South Africa and South America: Variety meats

Overseas Sales Add Value
International Beef Cuts Through aggressive promotion of the unique attributes (quality, safety, sustainability and nutritional value) of U.S. beef in more than 80 countries worldwide, an average of $258.48 per head for fed slaughter is added in value back to U.S. beef producers.

Strong international demand raises the value of beef cuts from every carcass. For example, the following cuts, of which a large percentage are exported, achieved an increase in 2016 Choice wholesale prices compared to the 2011-2015 five-year average:
-    Chuck roll wholesale prices averaged $2.70 per pound in 2016, up 3 percent from the previous five-year average
-    Chuck short ribs averaged $2.90 per pound, up 6 percent
-    Short ribs averaged $4.34 per pound, up 7 percent
-    Ribeyes averaged $7.52 per pound, up 13 percent
      + (NOTE: prices are freight-on-board, plant wholesale)

By comparison, the 2016 Choice beef cutout was down 1 percent from the 2011-2015 average.

In addition to the value added by these muscle cuts, beef variety meat exports contributed $36.18 per head of fed slaughter in 2016. For Japan alone, per-head value of variety meat exports has increased from $11.90 in 2011 to $15.46 in 2016, reflecting excellent returns for beef tongues shipped to Japan.



BQA Certification Now Free, Online, 24/7

You read the headline right. The checkoff’s Beef Quality Assurance (BQA) certification is now always FREE online! It’s a new interactive online experience that beef and dairy producers can sign up for and complete at their convenience.

Why BQA? Because it tells consumers that you have a commitment to delivering a product that is backed by science-based standards. Certification also addresses many questions that consumers have about beef production. BQA ensures consumers that cattle producers are committed to responsibly raising, safe, wholesome, high quality beef.

“It only takes a few hours of watching modules and answering questions, but serves as a checklist for producers to make sure they are using the latest management practices,” says Josh White, Executive Director of Producer Education for the beef checkoff. “We have seen time and time again how consumer confidence is positively affected when BQA standards are followed, and producers have shown their commitment to producing quality beef by being BQA-certified.”

So whether you need to get certified for the first time, or recertified, do it today! It’s always free!



Pork Checkoff Offers Webinar on New FDA Antibiotic Rules

The Pork Checkoff will present “How to Succeed with the New Antibiotic Regulations,” a free online webinar on Feb. 21 at 1 p.m. CST for producers and allied-industry participants.

The 60-minute presentation will feature three veterinarians and will offer the opportunity for both live and pre-event questions. Speakers include Dave Pyburn, vice president of science and technology at the National Pork Board; Liz Wagstrom, chief veterinarian at the National Pork Producers Council; and Harry Snelson, communications director at the American Association of Swine Veterinarians.

The veterinarians will focus primarily on the major keys to successfully navigating and complying with the new antibiotic rules. They will give special attention to record-keeping protocols, how to maintain a valid veterinary-client-patient relationship and what to expect if you have an on-farm inspection.

“With the new FDA antibiotic regulations in effect for over a month, we felt it was a good time to get additional insights into what producers and veterinarians are experiencing at the farm level,” said Jan Archer, a North Carolina pork producer and president of the National Pork Board. “The webinar also offers producers a convenient way to ask the experts what they should do to fine-tune their antibiotic compliance as part of their overall stewardship efforts.”

Registration for the free webinar is now open at www.pork.org/antibiotics and clicking the webinar link.



ACE reaction to Senate committee approval of Scott Pruitt

Brian Jennings, the Executive Vice President of the American Coalition for Ethanol (ACE), issued the following statement after the nomination of Scott Pruitt to head up the U.S. Environmental Protection Agency, (EPA) passed a Senate Environment and Public Works Committee vote this morning. 

“We congratulate Mr. Pruitt on the approval of his nomination in the Senate Environment and Public Works Committee.  If confirmed by the full Senate, we look forward to working with him to help keep the promises that President Trump made about ethanol, namely to ensure the successful implementation of the Renewable Fuel Standard to drive the use of higher ethanol blends, to maintain the RFS point-of-obligation with refiners and importers, and to lift unnecessary restrictions on ethanol use such as the Reid vapor pressure limit.   Further, we anticipate working with EPA to address other important issues and to lay the groundwork for additional ethanol demand based on performance metrics such as octane.”



NMPF Urges Senate Agriculture Committee to Confirm Sonny Perdue as Agriculture Secretary

The National Milk Producers Federation today urged the Senate Agriculture Committee to swiftly confirm former Georgia Gov. Sonny Perdue as the next U.S. Secretary of Agriculture, as NMPF, its 29 member cooperatives and numerous state dairy associations joined more than 600 other farm and agriculture groups in a letter endorsing Perdue for the position.

In backing Perdue’s nomination, NMPF told Agriculture Committee Chairman Pat Roberts (R-KS) and Ranking Member Debbie Stabenow (D-MI) that the former Georgia governor’s extensive experience in public policy, business and agriculture provides him with the proper skills to be the next Agriculture Secretary. In addition to serving as governor for eight years, Perdue is the founder of three agribusiness firms and was trained as a veterinarian.

“Gov. Perdue is a small businessman from an agricultural state, who appreciates the challenges our industry is facing, both today and in the future,” said NMPF President and CEO Jim Mulhern. “The new secretary will have many issues on his plate of great concern to dairy farmers, such as fixing the dairy safety net program, developing export markets, updating child nutrition policies, helping ensure that we have agricultural workers, and implementing new food labeling laws. We will be working closely with him on these and other issues in the coming months.”

The letter noted that, as the former governor of a state that produces billions of dollars in food, fiber, specialty crops, nursery crops, dairy products, poultry and livestock each year, “Gov. Perdue understands the critical role of feeding our country and the world. He is also keenly aware of the importance of agriculture in powering our nation’s economy, providing jobs from farm to table.”



New Bill Would Help Rein in Health Insurance Costs
 
A recently introduced bill to help lower health insurance costs for small business owners has the backing of farmers and ranchers. Offered by Reps. Kristi Noem (R-S.D.) and Krysten Sinema (D-Ariz.), the legislation (H.R. 246) would repeal the annual fee on health insurance providers enacted as part of Affordable Care Act.

“The bill addresses one of the major concerns that farmers and ranchers have related to health insurance – cost. The health insurance tax (HIT) has increased health insurance costs for farmers, ranchers and other small businesses by imposing a levy on the net premiums of health insurance companies, which is passed on to consumers. During 2014, $8 billion of excise taxes were levied, and $11 billion were collected in 2015 and 2016 each,” American Farm Bureau Federation President Zippy Duvall said in a letter to House members urging them to support the bill.

While a one-year moratorium on the tax is in effect for 2017, the HIT, which increases year-over-year, will be back in 2018. “Providing one year of relief from the HIT was a welcome and critical first step, but Americans need the certainty of a full repeal,” Duvall said.

AFBF is encouraging farmers and ranchers to ask their representatives to support H.R. 246.



USDA Dairy Products December 2016 Production Highlights

Total cheese output (excluding cottage cheese) was 1.05 billion pounds, 1.3 percent above December 2015 and 3.0 percent above November 2016.  Italian type cheese production totaled 461 million pounds, 1.1 percent below December 2015 but 5.5 percent above November 2016.  American type cheese production totaled 416 million pounds, 3.9 percent above December 2015 and 5.1 percent above November 2016.  Butter production was 164 million pounds, 6.7 percent below December 2015 but  13.3 percent above November 2016.

Dry milk powders (comparisons with December 2015)
Nonfat dry milk, human - 156 million pounds, up 3.2 percent.
Skim milk powders - 51.6 million pounds, up 18.7 percent.

Whey products (comparisons with December 2015)
Dry whey, total - 79.6 million pounds, down 13.3 percent.
Lactose, human and animal - 93.4 million pounds, up 2.5 percent.
Whey protein concentrate, total - 36.9 million pounds, down 12.8 percent.

Frozen products (comparisons with December 2015)
Ice cream, regular (hard) - 50.3 million gallons, down 11.0 percent.
Ice cream, lowfat (total) - 25.6 million gallons, up 0.7 percent.
Sherbet (hard) - 2.14 million gallons, down 1.6 percent.
Frozen yogurt (total) - 4.35 million gallons, up 8.6 percent.



Eli Lilly Reports Higher Revenues, Net Profit in 2016

For the full year 2016, Eli Lilly reports worldwide revenue up 6 percent compared with 2015 to $21 billion. Higher revenue was due to increased volume, as realized prices and the impact of foreign exchange rates were relatively flat. The worldwide volume increase was primarily driven by Trulicity and other new pharmaceutical products, including Cyramza, Jardiance and Taltz, as well as Humalog and Erbitux.

Revenue in the U.S. increased 14 percent to $11.5 billion, driven by increased volume for several pharmaceutical products, including Trulicity, Humalog, Erbitux (due to the transfer of commercialization rights in North America to Lilly), Taltz and Jardiance, partially offset by lower volumes for Zyprexa. U.S. revenue also benefited from reductions to the Cymbalta reserve for expected product returns of approximately $175 million in 2016, favorably affecting both volume and price.

In the fourth quarter of 2016, worldwide animal health revenue totaled $837.6 million, an increase of 3 percent compared with the fourth quarter of 2015. U.S. animal health revenue increased 2 percent to $389.0 million, due to increased revenue for companion animal products reflecting new launches and expanding relationships with distributors, largely offset by decreased revenue for food animal products due to market access pressures. Animal health revenue outside the U.S. increased 4 percent to $448.6 million, primarily due to increased revenue for food animal products. Excluding the impact of foreign exchange rates, worldwide animal health revenue increased 4 percent.