January 21, 2020

Federal Reserve Bank of Dallas Third-Quarter Agricultural Credit Survey

The Federal Reserve Bank of Dallas recently released its Quarterly Survey of Agricultural Credit Conditions for the third-quarter of this year, which stated in part that, “Bankers responding to the third-quarter survey continued to report concern for producers’ financial positions due to low commodity prices.  Low prices for crops and livestock were the chief concerns among bankers. Farmland conditions varied by region, with most in good shape due to summer rains but some suffered from excessive rain.

“Demand for agricultural loans decreased for a fourth consecutive quarter. Loan renewals and extensions continued to increase as loan repayment rates continued to decline. Overall, the volume of non-real-estate farm loans was lower than a year ago. Operating loans continued to increase year over year; all other loan categories fell in volume year over year in the third quarter.”

The report from the Dallas Fed also indicated that, “District land values increased in the third quarter. Real irrigated land values rose the most, up 7.2 percent over the previous quarter. Real ranchland values were up 6.5 percent, and real dryland values were up 5.6 percent (Figure 2). According to bankers who responded both in third quarter 2016 and in third quarter 2015, ranchland and dryland values increased year over year, while irrigated land values were mostly unchanged from a year ago.

Figure 2

The anticipated trend in the farmland values index remained negative for a fth consecutive quarter, suggesting respondents expect farmland values to trend down in the upcoming months. Comments from bankers point to poor crop production, low commodity prices and concern about the economy as causing slowing land sales and depressing values. The credit standards index indicated continued tightening of standards (Figure 4).”

Figure 4

Additional comments from District Bankers were also included in the Dallas Fed Survey, including the following:

“- 2016 is shaping up to be financially challenging for ag producers. Low grain and cattle prices will place many producers in a position of large equity losses and partial fixed asset liquidation to remain in business.”

“- Due to weather-related issues and low commodity prices, we are expecting some producers to fall short of paying off operating lines for 2016. There is an increased concern for the upcoming crop year with overall low commodity prices and possibly higher debt carry by producers.”

The Dallas Fed Survey also included this graph related to cash rents:


Sec. Vilsack at the National Press Club Yesterday

Joseph Morton reported today at the World-Herald Herald Online that, “The efficiency of modern American farming certainly looks like a success story.

“Agriculture Secretary Tom Vilsack said Monday that over the course of his lifetime, the country’s agricultural production has risen 170 percent — all while using 26 percent less land. But the production gains since he was born in 1950 also reduced the number of farmers needed.

“‘The challenge was that our country didn’t ask the question as we were becoming more efficient in production agriculture: What are we going to do with the 22 million families that are no longer farming?’ Vilsack said during an appearance at the National Press Club. ‘How can we create opportunities for them if they so desire to stay in their small community, in their rural area? How can we create job opportunities for their children and grandchildren?‘”

Mr. Morton noted that, “Vilsack’s session with reporters focused on expanding economic opportunities in rural America. He talked up the importance of trade exports, renewable energy sources and bio-based products from textiles to cleaning supplies.”

Today’s World-Herald item added that, “In particular, [Sec. Vilsack] talked about the need to continue supporting renewable fuels and the bio-based industry.

A new report says that industry contributes $393 billion to the economy, he said, adding that it has helped rural areas recover from the Great Recession by supporting 4.2 million jobs.”

And Christopher Doering reported yesterday at The Des Moines Register Online that, “Iowa is the nation’s No. 1 ethanol producer, but 27th when it comes to creating jobs from the manufacture of bio-based products. California leads the nation with 145,000 bio-based jobs.

“Nearly all of Iowa’s bio-based impact on the state’s economy came from forest products, at $1.5 billion. Smaller contributions came from bio-based chemicals and enzymes.”

Also yesterday, Jack Fitzpatrick reported at the Morning Consult Online that, “In addition to supporting biofuels, Vilsack said the federal government can help rural areas by investing in the community college system, improving high-speed broadband connection.”

The update added that, “Vilsack, who was seen as a possible running mate for Hillary Clinton, was cagey when asked about his political future, whether it includes serving as Clinton’s chief of staff or running for office in his home state of Iowa, where he previously served as governor. Vilsack did say he enjoyed executive positions more than when he served in the Iowa state Senate.

“‘Here’s what I know about myself. I’m an executive. I like to make decisions. I like to implement decisions,’ Vilsack said.”


A Case for GMO Technology in Today’s Wall Street Journal

Categories: Biotech

Robert T. Fraley, the executive vice president and chief technology officer of Monsanto, penned an opinion item in today’s Wall Street Journal, where he noted that, “Genetically modified crops, which have generated both controversy and widespread adoption, are hitting 20-year milestones. Perhaps the anniversary slipped your mind, but 1997 was a dark one for the European corn worm. That was the year Bt corn, the first to bear its own protection against the larvae of the rapacious corn worm, was commercially introduced.

“The European corn worm had long ago invaded the U.S. and by the mid-1990s was causing more than $1 billion in annual damage. But now no insecticide was needed, thank you, because Bt corn had been genetically modified to pack its own. It produced a protein toxic to the corn worm and some of its fellow travelers, while benign to most other insects.”

Mr. Fraley indicated that, “What have been the effects of this technology? In May a committee convened by the National Academies of Sciences, Engineering, and Medicine completed a two-year review, ‘Genetically Engineered Crops: Experiences and Prospects.’ The committee, which examined about 900 studies, painted a highly positive picture.

“The academies’ report found ‘no differences that would implicate a higher risk to human health from eating GE foods than from eating their non-GE counterparts.’ It also ‘found little evidence to connect GE crops and their associated technologies with adverse agronomic or environmental problems.’ In some cases, the review said, ‘planting Bt crops has tended to result in higher insect biodiversity,’ by reducing pesticide use.

“The report supported genetic modification in a fundamental way: It called for ‘strategic public investment in emerging genetic-engineering technologies and other approaches to address food security and other challenges.'”

Today’s opinion item also pointed out that, “These conclusions could not have surprised anyone who follows the issue. They’re consistent with the findings of the American Association for the Advancement of Science, the American Medical Association, the World Health Organization and other highly respected groups. Thousands of independent researchers have consistently found that GMOs benefit not only farmers and the public, but also biodiversity, soil quality, water quality, carbon sequestration—in short, the environment.”

After citing studies that pointed to GMOs’ positive impact on crop yields, farmer profitability, and cost reductions, Mr. Fraley stated that, “To keep current production without the gains from GMO crops, more than 97,000 additional square miles—an area larger than Ohio and Indiana combined—would have to be cultivated globally. Instead the carbon in all that land, which would be released to the air during tilling, stayed in the dirt.”

Mr. Fraley conlcluded by noting that: “The rapidly growing global population and warming climate will make agricultural innovations a necessity, not a luxury. In my view, the next two decades will bring even more innovations than the past two.”

Meanwhile, a recent news release from Purdue University indicated that, “Purdue University professor of animal sciences William Muir recognizes the potentially immense benefits of genetic modification technology, commonly known as genetic engineering or gene editing.

“‘It could cure or prevent cancer, increase food production to feed a rapidly expanding global population, alleviate pain and suffering among livestock animals and prevent the spread of mosquito-borne diseases such as Zika or malaria,’ says Muir, a biotechnology specialist.”

The release added that, “‘While it’s important to keep in mind all of the wonderful things we can do, we need to be cognizant of what the risks are and make sure we have the appropriate safeguards in place,’ [Muir] says. ‘This is a tremendously powerful technology, and it is absolutely vital that we make sure it is used responsibly.'”


Buildup of Livestock Supplies “Crushing” Meat Prices

Kelsey Gee reported on the front page of the Money & Investing section of today’s Wall Street Journal that, “Cattle and hog prices hover near the lowest levels in years as U.S. meatpackers produce the largest volume of meat in history.

Last week’s 9.2% slide in hog futures on the Chicago Mercantile Exchange was a dramatic turnaround for what was the best-performing commodity market in the first half of this year thanks to strong pork exports to China.”

Ms. Gee noted that, “The buildup has stoked concerns over a glut of meat, poultry and other agricultural products in the U.S. Producers are on track to send a record number of hogs and chickens to slaughter this year, and beef production is rapidly increasing.

“Dairy farmers are spoiling excess milk in their fields as warehouses pile up excess cheese. Also, corn, soybean and wheat growers are preparing for a fourth consecutive year of bumper harvests this fall.

“The U.S. Agriculture Department on Friday pegged the size of the nation’s hog and pig herd on Sept. 1 at 70.851 million head, the largest on record for that time of year. That compared with 69.946 million hogs predicted by a Wall Street Journal survey of analysts.”

USDA-NASS, Quarterly Hogs and Pigs

Today’s Journal article added that, “The figure illustrates how producers responded to lofty prices and profitable margins at the start of the summer by breeding more animals—before a sharp drop in prices to multiyear lows reversed the economics for many farmers.

“The U.S. hog herd is still growing, even as the profit potential for many producers evaporates and export demand begins to cool.”

Also, Boomberg writers Lydia Mulvany and Jen Skerritt reported earlier this week that, “Ham, bacon, ribs, pork loins — if it has to do with pigs, prices are in the doldrums.

Hog futures were the worst investment in commodities last quarter and in the past year. That’s because there are simply too many pigs. They’re so numerous these days that slaughterhouses will have to add shifts and operate on Saturdays in November and December to process them all into food, according to Will Sawyer, an Atlanta-based vice president for Rabobank International.”

The Bloomberg article added that, “The huge supplies are coming at a time of tepid export demand. China, which more than doubled U.S. pork purchases in the first half of the year, has now put the brakes on buying. Devaluation of the peso also threatens shipments to Mexico, the destination for 40 percent of U.S. hams. Wholesale prices for pork cuts such as ham and ribs are the lowest for this time of year since 2009. Hedge funds are signaling the meat will probably stay cheap, as speculators cut their bets on a hogs rally in four of the past five weeks.”

Meanwhile, Christopher Doering reported recently at The Des Moines Register Online that, “Costs for beef and veal are expected to drop 5 percent, as the industry grapples with too much supply and reduced demand. Pork prices are expected to drop 2.5 percent in 2016.”

Mr. Doering also pointed out that, “But things have changed. Now [Dave Hommel, who raises swine in Grundy County, Iowa, is] receiving 35 cents a pound for his hogs, compared with around $1 per pound two years ago.

“‘There is a fair amount of pain in the livestock industry here in the Midwest,’ [Hommel] said. ‘Our plan is to hunker down. I don’t know how much longer this will last.'”


FAPRI Baseline Update: Farm Income, Government Outlays- Cash Rental Rates Decline

Yesterday, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, released a report titled, “Baseline Update for U.S. Farm Income and Government Outlays.”

In part, the FAPRI report stated that, “Net farm income is expected to decline for the third straight year in 2016 and is likely to remain well below recent peaks for the next several years.”

More specifically, the report noted that, “Sharply lower cattle and egg prices contribute to a $23 billion reduction in projected livestock sector receipts in 2016. Crop receipts also decline slightly, as lower prices for corn, wheat and other crops offset the impact of increased production.

“Projected net farm income declines by $10 billion in 2016, as the drop in receipts outweighs reductions in production costs.”

Other highlights of yesterday’s FAPRI update included:

“August USDA reports indicated cropland rental rates and average farm real estate values declined in 2016 after years of sharp increases. Additional declines are projected for 2017‐2019 in response to sharp reductions in crop returns relative to recent peak levels.

“With reduced asset values, the projected ratio of farm debts to assets increases from 12 percent in 2015 to 14 percent in 2019.

“Government farm program outlays peak in fiscal year 2018, when many payments associated with the 2016/17 marketing year are made.”

Table from yesterday’s FAPRI update

Meanwhile, a news release last week from University of Missouri Extension stated that, “The latest USDA cash rental survey shows decreasing rental rates in some areas of Missouri, says University of Missouri Extension agricultural business specialist Joe Koenen.

“USDA’s National Agricultural Statistics Service (NASS) released its annual survey Sept. 9. View data on Missouri counties at

“‘Some of the better crop counties in central and north Missouri showed a decrease in rental rates, reflecting lower crop prices,’ Koenen says. Other counties remain unchanged, and pasture rates held stable or showed slight increases.”

The news release added that, “Low prices and high corn yields will put pressure on rental rates, [Koenen] says. Soybean prices dropped, but not as much as corn prices. A decrease in soybean prices also will likely affect rent prices. ‘How much is still to be determined.’

“Koenen says it is important for landowners and renters to know yields on cropland. Yields and land quality affect what the renter pays.”