In this file:
· 2019 Financial Health: Plan For Turbulent Times Ahead
· As loans and aid dry up, U.S. farmers face fresh challenge from shutdown
· Farmers thankful for payments, but prefer market access
2019 Financial Health: Plan For Turbulent Times Ahead
By Sonja Begemann, Farm Journal, Seeds and Crop Production Editor
via AgWeb - Jan 3, 2019
It’s not news to you that the ag industry has been in a tight spot financially for the past several years—and 2019 looks to offer more of the same.
“I meet with farmers and I meet with bankers, and they give two different stories of the industry,” says Ernie Goss, Creighton University professor of economics, who runs the Mainstreet Economic Conditions Index. “Bankers are more optimistic as they’re not seeing as much bankruptcy and foreclosure as they might otherwise expect.”
That doesn’t mean farmers are staying in business, though. Unlike the 1980s, more farmers today are choosing to retire instead of filing chapter 12 bankruptcy, says Curt Hudnutt, head of rural business, North America for Rabo AgriFinance.
“We are seeing more loan defaults in the industry as a whole. There’s a little uptick in chapter 12 bankruptcies, but that’s from a low base, and I don’t expect to see anything like what we had in the ’80s,” Hudnutt says.
The most recent Rural Mainstreet Index predicts farm loan defaults will rise by 5% this year. While 2019 might not be as bad as it was nearly
40 years ago, expect it to be harder to gain access to capital, and prepare for interest rate increases.
The Federal Reserve recently raised the interest-rate target range by 25 basis points, with a range from 2.25% to 2.5%, the ninth-highest interest rate increase since 1990.
“Importantly, the Fed indicated they stand ready to raise short-term rates by another one-half of one percentage point in 2019,” Goss says. “Further- more, the Fed intends to continue to sell long-term bonds in its portfolio, thus putting upward pressure on long- term interest rates.”
Ag is at a turning point—it’s either going to get a whole lot better or a whole lot worse. While the Fed has said it will likely increase interest rates three times in 2019, keep an eye on more than just interest rates.
“The factors driving the economy are the Federal Reserve and the new interest rate policy and the value of the U.S. dollar,” Goss says. “Rate hikes increase the price of borrowing and push up the value of the dollar, which makes U.S. ag commodities less competitively priced globally.
“The other factor is the trade skirmishes with China and other nations,” Goss adds. “Soybeans and pork were hit the hardest, and that’s spilling over. The $12 billion provided by the Trump administration [in farmer payments] just isn’t enough.”
While interest rates are on the rise, a trade agreement with China could help propel the ag industry in the right direction, though it might be more gradual than immediate.
“There are some bright spots in what this downturn has done,” says Alan Hoskins, president and CEO of American Farm Mortgage and Financial Services. “Producers understand the importance of a written marketing plan in the success of their operations. Second, producers as a whole do a much better job managing their operation than during the $8 corn era.”
Another potential bright spot:
As loans and aid dry up, U.S. farmers face fresh challenge from shutdown
By P.J. Huffstutter, Reuters
via WHBL (WI) - January 03, 2019
CHICAGO (Reuters) - U.S. farmers, already battered by the U.S.-China trade war, are facing increasing anxiety as the partial government shutdown nears the two-week mark, leaving crucial aid and loan payments in limbo.
The shutdown has blocked assistance for many farmers, who at this time of year apply for federal loans as they pay bills due from the previous year and begin budgeting for next season's planting. It is also affecting aid payments promised to allay the effects of the trade war.
The timing is particularly bad for U.S. farmers, who are already suffering the fallout from the trade war's raised tariffs and low prices for a top export crop, soybeans, with purchases by China lagging previous years.
"It's just bad news on top of everything right now," said Brian Duncan, whose family farms corn and soybeans and raises hogs in northwestern Illinois.
The partial shutdown was triggered last month by President Donald Trump's demand for $5 billion to fund a U.S.-Mexico border wall. Democrats now controlling the House of Representatives have vowed to fund the government through legislation, but Trump has insisted that any measure to fully reopen the government include wall money.
Pressure on Trump and lawmakers to end the partial shutdown is growing from the agricultural sector. Many of the nation's 3.2 million farmers and ranchers are Republicans, and have been steadfastly loyal to the president. But some farmers have warned their support for a Trump campaign in 2020 is not guaranteed if the farm economy worsens and trade disputes continue to threaten demand for U.S. crops.
About a quarter of the federal government, or 800,000 workers - including some from the U.S. Department of Agriculture - are off the job.
The USDA's Farm Service Agency (FSA) managers and supervisors were instructed to cancel all previously arranged loan closings when the shutdown started, according to the agency's shutdown plan posted online. Agency officials could not be reached for comment Thursday.
Commodity traders and farmers alike are also growing nervous that the USDA will also push back or possibly cancel a slew of global supply and demand grain reports set for release on Jan. 11. The data is watched by farmers when making their planting plans.
LEVELS OF UNCERTAINTY ...
Farmers thankful for payments, but prefer market access
By Chris Kick, Farm and Dairy (OH)
January 3, 2019
SALEM, Ohio — Although they’d rather have free trade and market access, farmers say the $12 billion in commodity assistance being offered by President Donald Trump is worth applying for, in a year of high yields and low prices.
Known as the Market Facilitation Program, the program compensates farmers who grew various crops — including corn, soybeans and wheat, and for livestock, including dairy — for price losses due to the trade war of 2018, and retaliatory tariffs that China enacted on U.S. farm goods.
Farmers can receive $1.65 per bushel of soybeans, 14 cents per bushel of wheat, 1 cent per bushel of corn, 12 cents per 100 pounds of milk, and $8 per head of hogs. Sorghum, almonds, cotton and cherries are also included, and the program also sets aside funds for developing new foreign markets, and purchasing more than two dozen select products, including fresh fruits and vegetables, nuts, meat and dairy.
The deadline to apply is Jan. 15, and the deadline to certify production is May 1. There is a cap of $125,000 per producer, for livestock claims, and the same amount for crop claims.
Is it enough?
But even with the help, farmers question whether it will be enough to cover their losses, and for how long.
“It’s really not even going to come close to making up for the damage that the market has experienced,” said John Torres, director of government and industry affairs for the Ohio Corn and Wheat Growers Association.
“What’s going to be most beneficial to farmers is resuming national trade,” he said.
Ron Elliott, a dairy and crop farmer from Knox County, said that assistance “does help,” but that the program is basically a way of compensating for the market potential that the government disrupted.
“I’d much rather get my income from the marketplace,” he said.
Elliott and his brother, Bob, milk about 130 head on a farm that’s been in the family since the early 1800s. He said farmers will have to do some paperwork, but that depending on the size of their operation and what they grow, “it’s going to be worth the effort.”
Reason for hope ...
Restoring trade ...
Political support ...
Significant payments ...