Karen Macdonald, Farm Credit AGgregator
| Nov 10, 2016
Courtesy of The AGgregator, Farm Credit
Today, ag journalists at the National Association of Farm Broadcasting (NAFB) convention in Kansas City, Missouri, are stopping by the Farm Credit booth to interview Mark Jensen and Carl Horne with FCSAmerica and Tanner Ehmke with CoBank, which finances ag exports as well as cooperative and rural infrastructure providers.
Here is a preview of some of the insights and expertise on industry trends, challenges and opportunities you might hear in coming days on regional and national ag broadcasts:
International market forces are dramatically impacting domestic grain producers, says Ehmke, a senior economist.
“So far this year, exports have been excellent, in large part because our major international competitors all faced production issues: Brazil with corn, Europe with wheat and Argentina with soybeans,” Ehmke says. “Looking forward, Argentina, Brazil and Russia are all expected to increase their production over the next few years. With the dollar as strong as it is against their currencies, it will grow difficult to compete on the export front.”
Ehmke points out bright spots domestically: grain elevators benefit from the demand for storage, wheat is working its way into the livestock feed mix and ethanol production is at a record high. According to Ehmke, the challenge for producers will be to recognize and take advantage of rallies, which will be brief. Producers will need to know where their profit point is so they know when to sell their inventory.
Jensen, chief risk officer, points out that Midwest commodity producers are facing high cash rents, high overall costs of production, significant levels of machinery debt and increased living expense. Many producers are well-positioned in terms of cash flow and liquidity, but some who were not as strong financially are bearing more of the brunt of the current market cycle.
“We’re working with our customers individually to help each assess their operation and their financial position today, and how they’ll be positioned over the next few years,” Jensen says. “For those in less favorable positions, we’re helping them figure out how they can reduce costs to a more viable level to weather this cycle.”
One ongoing issue is land values, which trended up for many years but are now seeing a lot of variability, though Jensen expects values to regulate over the next couple of years. Dropping land values can mean lower cash rent costs for producers who lease but can signal hardship for owners. In Iowa, for example, 65 percent of farmland is owned by those older than 65 years and nearing retirement, so the upcoming land transfer will be significant. Such an unprecedented land transfer in sight represents a tremendous opportunity for many.
Some purchasers of the land coming available may well be young, beginning or small farmers. Horne, young, beginning and small program and outreach manager, says that there’s a lot of reason to be optimistic. Even in difficult times like what the grain sector is facing, there is much opportunity for those who are prepared.
“Beginning farmers are actively taking advantage of the vast amount of information available to them in today’s environment, gaining more insight and creating more collaboration,” Horne says. “This means we have producers today who are better prepared than ever to access the information that’s available, sift through it, and find perspectives to help them make better decisions about identifying and capitalizing on new market opportunities.”
Horne recommends that all producers – beginning producers in particular – also build a network of advisors, including their lender, accountant and other producers. Sharing information, asking questions and soliciting opinions on new ideas can help identify opportunities worth pursuing, even in a challenging market environment.