October 30, 2016

This Backslide Is Historic

A report from Agriculture.com. “Just as rising farm incomes place upward pressure on farmland values and cash rental rates, falling farm incomes place downward pressure on farmland values and cash rental rates. In August, the USDA released its annual update on farmland market conditions. After a surge in rental rates that began in 2008, the national average for cropland cash rent fell 6%, to $136 per acre, in 2016. The only other decline in national cropland cash rental rates since 1998 was a 3% decline in 2007. Rental values fell the most in Minnesota, Iowa, northern Missouri, and northern Illinois.”

“Similar to cropland, the average rental rate for pasture in the U.S. also fell in 2016. While we have previously looked at changes in farmland values and cash rental rates during the boom period, 2016 will be marked as the year cash rental rates began to decline at the national level. This is true for both crop and pasture.”

The Farm Journal. “Farming this fertile Indiana ground is both Jason Wykoff’s passion and his livelihood. But after 22 years, he was forced to make one of the most difficult decisions of his career. ‘We’d been previously farming on shares,’ Wykoff says. ‘And when this lease was up, the owner wanted to go to a cash rent. We felt it was just in an area where we couldn’t survive long-term.’”

“Those 12,000 acres were a vital part of Wykoff’s business for the past eight years. He added tile, irrigation and other improvements to make it a better farm, so walking away was a decision he didn’t take lightly. Even so, nearly a year later, it’s one he doesn’t regret. ‘If we were still farming that farm in the current situation, I would have a lot of anxiety,’ he says.”

“Wykoff isn’t alone. A recent Farm Journal Twitter poll shows 57 percent of farmers are willing to walk away on any ground that can’t be renegotiated. Even more telling is ProFarmer’s annual LandOwner survey, showing farmers say if prices don’t come down, they may walk away, too. ‘According to our survey, we find that 44% of our members and subscribers are willing to walk away from a cash lease if that lease is not lowered going into 2017,’ says Mike Walsten, Editor of ProFarmer LandOwner Newsletter.”

The Capital Journal. “South Dakota State University has been doing the land value survey for 26 years and this week is reporting on it and related topics to those who lend money - or maybe don’t, now - to ranchers and farmers at meetings in Pierre, Sioux Falls and Watertown. Ag bankers have told reporters all summer across the region that they are having serious meetings with farm borrowers after two years of lower crop prices have thinned or erased profits for many. Federal officials expect net farm income to drop again, nationwide, this year.”

“The new report from SDSU says the ’sharp declines in crop prices and … beef cattle prices’ are showing up in what land is worth for grazing cattle and growing crops. Ranchers and other livestock market experts say prices for calves coming off pasture in the fall are down 40 percent or more from two years ago. Farmers are looking at prices for corn, soybeans and wheat also down 30 percent to 40 percent or more from historic highs seen three and four years ago.”

“Typically, livestock prices counter crop prices: when crop prices go down, that means feed is cheaper, which usually bolsters prices for livestock. But the past five years, livestock and crop prices tracked higher together - more or less - and in the past two years have dropped back at the same time.”

“This year’s backslide is historic: the first annual decrease since 1991, at least, which is when SDSU began its survey of about 190 experts across the state. Land values went down a lot in the early 1980s during the crisis in farm lending that drove many off the farm. But since then, it’s been a fairly nice run until 2016, as the story was higher land values every year.”

“The value of all non-irrigated ag land - crop and pasture -increased 82.3 percent from 2011-2015 statewide, from $1,374 per acre to $2,505, before sliding back 2.4 percent this year to $2,444. In the central part of the state, including PIerre, the value of all non-irrigated ag land - cropland and pasture - more than doubled from 2011-2016, up 112.4 percent, from $1,450 per acre to $3,080 in 2016, including a 1.5 percent increase this year from $3,035 in 2015.”

The Bangkok Post. “Rice farmers in some provinces have grown increasingly impatient and are imploring the government to help them after prices plunged to a 10-year low. In Buri Ram, farmers say they are in deep trouble as rice prices have dipped well below cost to five baht a kilogramme. They have asked the government to help prop the prices to at least 10 baht per kg, their break-even level.”

“Millers are now paying them only 5,000 baht a tonne for the main crop they are harvesting, citing high humidity and impurities. They claim the price is the lowest in decades, yet they have no choice but to accept it in order to repay debts and have money for daily expenses, harvesting equipment rentals, and school supplies for their children for the coming semester.”

“‘We spent 70,000 to 80,000 baht to farm on our 35 rai this year. Although the output was good, it’s questionable whether our income will cover the costs,’ said Prakong Hoopracone, 49, from Muang district of the northeastern province.”

“In Chai Nat, some farmers reportedly are putting their land up for sale because they can’t bear to lose any more money on their crops. Government spokesman Lt Gen Sansern Kaewkamnerd said on Saturday that the government was speeding up efforts to solve the problem. But he dismissed some news reports as ‘half-truths,’ such as stories linking farmland sales to low rice prices. ‘We’ve checked the facts and found that the people who are selling farmland right now are actually landlords who no longer want to rent it or those with no manpower to work the fields,’ he said.”

“Because of the restrictions and higher rice prices at the time, 80,000 farmers pledged 450,000 tonnes for loans totalling 6.39 billion baht for the 2014-15 crop year, according to BAAC data as of March 31, 2015. Rice prices around the world have fallen as a record crop is forecast for the 2016-17 harvest season, the UN Food and Agriculture Organization (FAO) said in its latest Rice Price Update. The FAO’s All Rice Price Index showed international rice prices in the first eight months of 2016 were 9% below the levels of a year earlier.

“The International Grains Council (IGC) also noted a sharp fall in export prices of Thai rice in August. ‘The market in Thailand was weighed down by sluggish international demand and increasing secondary crop arrivals, while additional pressure stemmed from efforts by the government to offload state reserves through a series of auctions,’ it said.”