commodity prices
Do farmers and bankers agree it’s time to cut back on borrowing?
New farm lending is down sharply by agricultural banks, plunging 40 percent during the closing three months of 2016 in the largest year-over-year decline for non-real-estate loans in nearly two decades, says a quarterly Federal Reserve report. "As the outlook for farm income generally has remained weak and farmland values have continued to decline, both lenders and borrowers may have been more apprehensive about adding new debt heading into 2017," said the report.
Exports will be increasingly important as bolster of farm income
Low commodity prices are depressing farm income, farmland values and repayment rates on farm loans, says the Kansas City Federal Reserve Bank, while larger-than-expected farm exports "seemed only to keep prices for some commodities from dropping further."
U.S. farmland values to fall 20 percent in ‘moderate repricing’
MetLife Agricultural Finance says low corn and soybean prices are constraining farm income and will lead to the "first significant correction" in farmland values since the agricultural recession of the mid-1980s, reported Agrimoney. The lender forecast land prices to fall 20 percent by 2018 from their recent peak.
Midwest farmland values dip again in longest decline in three decades
Big baseline possible for crop subsidies in new farm bill
Farm-state lawmakers could have a "quite large" baseline for crop subsidies, "even approaching $100 billion" over a decade, when they write the 2018 farm bill, says economist Carl Zulauf of Ohio State University. In a blog, Zulaug rebuts speculation, based on the decline in pay-out for the Agricultural Risk Coverage (ARC) subsidy, that the House and Senate Agriculture Committees could have a small amount of money available to confront an era of low commodity prices.
Punishingly low hog prices to persist through 2017
Two years after soaring to record highs, "hog prices have collapsed to levels far below break-even," says Purdue economist Chris Hurt. Hog farmers will lose an average $10 a head this year and $16 a head in 2017 because there are so many hogs being fed for slaughter, they could exceed the capacity of packing plants to handle them.
Farmers say they will sit on grain rather than sell at low prices
A monthly Purdue survey says farmers plan to store more of their crop than normal during the fall harvest, likely because of sharp declines in commodity prices since spring. More than 40 percent of respondents told the Ag Economy Barometer that they have priced a smaller portion of their crops than they would in a typical year.
Crop subsidies to provide 10 percent of U.S. net farm income
The USDA says it will disburse more than $7 billion in crop subsidies this fall, "which will account for over 10 percent of USDA's projected 2016 net farm income." The payments, which cover 2015 crops, are triggered under the 2014 farm law because of continued low commodity prices.
Corn prices stall below $4 with few paths for an increase
For the past 27 months, farmers have been paid less than $4 a bushel for their corn crops, "and prices below $4 are expected to persist well into 2017," says economist Darrel Good of the University of Illinois. There are only two paths that could lead to higher prices, he says at farmdoc Daily: a drop-off in South America or a much smaller U.S. crop in the new year.
Weakening farm economy jeopardizes future of some farmers
The third year of weakening U.S. farm income will create "more questions about the ability of some producers to continue to operate after experiencing losses for multiple consecutive years," says the Kansas Federal Reserve Bank. The sour economy is causing ripple effects in farm towns in the Plains, ag bankers told the regional Fed.
Farmers increasingly pledge land as collateral to get a loan
With profit margins weak due to low commodity prices, farmers and ranchers are offering their land as collateral to obtain short-term operating loans — and banks are demanding it amid "a growing sense of risk in the farm sector," said the Kansas City Federal Reserve Bank.
Bumper crops push world grain stocks to record size
With the world headed for record-setting wheat, corn and rice harvests, the inventory at the end of this marketing year will be the largest ever — a three-month supply that would weigh on commodity prices, said the International Grains Council. The council's index of grain and oilseed prices, "pressured by increasing heavy spot supplies," was near a five-month low, as farmers in the northern hemisphere report good overall yields.
Will USDA forecast of soybean crop keep climbing?
Since its first forecast of a record-large soybean crop, the first to top 4 billion bushels, the USDA has twice boosted its estimated size of the crop, now pegged at 4.269 billion bushels. Economist Darrel Good of U-Illinois says history suggests the estimate will keep climbing as the harvest progresses and production data become more precise.
Informa: U.S. to plant more soybeans, less corn and wheat, in 2017
U.S. growers will plant a record 88.5 million acres of soybeans in 2017, up nearly 6 percent from the mark set this year and pointing toward the second crop in a row to exceed 4 billion bushels in the estimation of Informa, a private consulting company, reports Reuters. The USDA forecasts a record soybean crop this year of 4.27 billion bushels, far exceeding demand and driving down prices for the coming year.
U.S. heads toward record soybean exports with bumper crop
The record-setting U.S. soybean crop is even bigger than expected, up nearly 2 percent from USDA's previous forecast to an estimated 4.269 billion bushels. With farm-gate prices at the second-lowest level in a decade, soybean exports will exceed 2 billion bushels for the first time, according to the monthly WASDE report.
Grain prices to remain low into 2017
The global grain glut and weaker demand from China will keep grain prices low into next year, according to analysts at Olam International, one of the world's largest commodities traders, reports Bloomberg.
Warning signs, although farm sector finances are relatively strong
After a review of farm-sector financial indicators, economist Brent Gloy says, "Caution going forward would be appropriate," particularly for operators who are borrowing money. The commonly used debt-to-asset ratio is low, Gloy writes at the Agricultural Economic Insights blog a day before USDA updates its farm-income forecast, but lesser-known yardsticks, such as the debt-service ratio and times-interest-earned ratio "indicate that financial conditions are as poor as any seen for some time."
A softer landing for producers after ag boom collapses
U.S. farm income will fall for the third year in a row, said the Agriculture Department, but the impact is not expected to be as severe as feared at the start of the year. In a tri-annual forecast, the USDA estimated net farm income — the net value of production — at $71.5 billion, much better than the $54.8 billion that it estimated in February although far below the record $123.8 billion of 2013 as the seven-year agricultural boom collapsed under the weight of large crops worldwide.