To keep up with the commodity markets, land values and agricultural finance, farmers have a new resource.
Farmer Mac is now providing a free report -- titled “The Feed” – authored by economist Jackson Takach, who spoke with Delta Farm Press in early November. “We’ll be putting out The Feed on a quarterly basis. Our goal with the publication is to present high level and lots of information in a small package. That makes it more accessible to readers. We take a ton of data and information and condenses it to 10 or 12 pages.
“In January, we’ll have a new report. Every time we issue a new release it’ll be designed for that season and what’s happening in the current market.”
On the current agricultural economy…
“Looking at farm incomes, financial strength and more broad-based measures, it’s tough. All the USDA data and independent research from universities say there’s there a lot less income available to farmers today than a couple of years ago.
“It isn’t just lower prices for corn, soybeans and wheat but the livestock sector is being hit harder in 2015 than expected. Dairy producers are also being hit hard with lower milk prices. There’s a lot of pork on the market and we’re having trouble exporting a lot due to the strength or the dollar.
“From the balance sheet side, there is some good news. There is some financial leverage increasing so loan demand is pretty robust. During off cycles, farmers tend to borrow more to offset their lost income. The overall leverage – things like debt to equity ratios – is still very low historically.”
Grain and farmland values
On grain crops…
“The grain story really is one of oversupply. The 2014 and 2015 corn crops were great bumper crops. There was more acreage planted and higher yields that increased supply and put downward pressure on market prices. Demand is good, though, with commodities being turned into feed or whatever we need to do.
“This situation is true not only in the United States but in Brazil, in Africa, in China, eastern Europe. Everyone decided to get into the grain game in 2013/2014 because the prices were so good. It takes a couple of years to work through the global supply. If we continue to see an increasing strength of the dollar, the low grain prices should continue for another year, or two. Once we reach 2017, there may be a demand pickup and that could increase the price signals for 2018.
“Of course, there’s always the possibility of disruption somewhere in the supply chain. So, a bad weather event or the like could impact global supplies and push prices higher.”
On farmland values…
“Farmland values are highly regional. In the Midwest, as goes Iowa so go other states – they’re highly correlated. However, when you get into other regions where there’s greater crop diversity – the Southeast, for example – there is much more breakage between drivers of land values.
“Looking at university surveys, the Midwest land values are down 5 to 11 percent over the last couple of years. That’s a significant decline that is showing up.
“Look out West, though, and land prices in California haven’t budged. The Southeast and Mid-South have also not been terribly effected. A lot of that has to do with livestock. There’s a lot more pasture and grazing in some of the Southern plain states, in Texas. The poultry and hog sectors have also helped maintain land values in the South.”
On the livestock sector…
“2014 was a great year for livestock producers. If you had cattle in a cow-calf operation you could put them out to pasture. The conditions were pretty good. Even where there was drought in Texas, Oklahoma and California, you could cheaply feed your animals. Prices were high because we came out of the cycle we went through in 2012 when farmers sold a lot of their herds to cut costs.
“Last year, the international dairy market was also booming for U.S. producers. There were great prices for cheese, butter and milk.
“Going into 2015, everyone thought the good times would continue. What we found out was there’s a limit to how high the market will let the prices go. Across the protein board we’re now seeing lower prices than last year.
“Avian influenza is also a fear for poultry producers. There is worry that it will be back this year after devastating some operations. The broiler operations weren’t really affected -- it was more the egg and turkey producers. The big difference this year is producers and officials are better prepared for it. I’m cautiously optimistic the heightened awareness – along with the USDA and CDC being prepared for an outbreak – should help limit the impact of avian flu if it hits.”