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December 4, 2023December 4, 2023

2023, the Ag Economy, and a New Year Ahead

What’s the first thing that comes to mind when I say, “Describe the year 2023 farm economy in one word?” Actually, I’m not sure one word would be adequate, especially if you live and work in rural America. The best way to describe 2023 in the agricultural community for many may be “Is it 2024 yet?”

Ag Economy, 2023 — In today’s ag economy, 2023 saw many of us pinching pennies to grow crops.

Dave Widmar is an agricultural economist with Agricultural Economic Insights in West Lafayette, Indiana, and keeps a close eye on the ag economy. We had a conversation during the last National Association of Farm Broadcasting Annual Convention in Kansas City in November, a week before Thanksgiving.

“One of the biggest stories of 2023 is declining net farm income,” Widmar says as the crowd in the Trade Talk event walked by in the background. “That’s not a big shocker to most people in rural America, but we have to put it in perspective. It’s still historically high, so we need to bring it into balance.”

Unfortunately, that income balance doesn’t apply equally to all parts of farm country. He said the Midwest and the Corn Belt did especially well during the last three years combined. In fact, he called the last three years (2021-2023) the “best three-year run” since the 1940s.

“On the other side of the narrative, commodity prices have trended lower,” he said, “especially on corn. We also had another year of below trendline yields combined with higher interest rates.”

AEI isn’t necessarily watching the interest rates the general public hears about during the evening news. Those are the short-term rates the Fed adjusts at their meetings, and, since June, the Fed has raised short-term rates 25 basis points. “On the other hand, long-term rates have increased 150 basis points,” he said.

“That may continue into 2024 as that yield curve un-inverts as we move into a different economy next year,” Widmar said. “As the Fed spent time raising rates, the curve got inverted, meaning short-term interest rates got more expensive than long-term rates. This is often thought of as an indicator that recession may be coming.”

2023 ag economy — The 2023 farm economy showed producers it’s time to keep a tight reign on how they use debt.

Now the Fed has paused interest rate hikes, the long-term interest rates have continued higher. That means the yield curve is starting to un-invert, something he’ll continue watching.

There is some good news for the economy. The unemployment rate remains low, which is a positive trend, and inflation has come down “significantly.” In his words, “the genie isn’t back in the bottle yet.” The country isn’t back to two percent inflation, and the last 150 basis points on inflation are going to be the hardest to reduce. “A lot of moving pieces in 2023,” he added.

So, what do those moving pieces possibly mean for 2024? For those looking for the economy to settle down, they may be disappointed. Widmar said “hold on.”

“The volatility is probably going to continue,” he said ruefully. “That isn’t all bad. Despite record fertilizer prices, the uncertainty around usage, demand, and inflation, the farm economy had a good run between 2011 and 2023.

“We could see some reversion to the mean,” Widmar added. “Farm incomes might be lower next year but not necessarily historically bad. What we need to realize is the last three years are not normal.”

The last three years weren’t typical in terms of government payments, commodity prices, or profitability. Widmar says it’s time to start recalibrating our expectations as to what’s normal and what we should plan on being normal in the future. Speaking of the future, what should producers be thinking about heading into next year?

“One of the big things we’re keeping an eye on is acreage distribution,” Widmar said. “There’s always at least some reallocation. One of the things that we observed in 2023 was that we had a lot of corn acres and not as many soybean acres. That’s resulted in an imbalance in ending stocks.”

That’s put corn ending stocks are above the long-run average, closer to 15 percent than the average of 13 percent. Soybeans are closer to five or six percent instead of the long-run average of eight.

“That means we may see some acreage reallocation,” Widmar said. “Producers should keep an eye on the relative price ratio and how that’s going to impact their budgets.

“They also need to keep an eye on fertilizer expenses,” he added. “Fertilizer has come down a lot recently, and that’s going to benefit corn budgets quite a bit.”

Another thing to watch for is farm debt. One of the things the economists at AEI have observed is new farm loans with different terms than in the past. Take a machinery loan, for example. The payment terms have been stretched out. How does that affect the bottom line?

“For every $1,000 of farm debt one takes on, the payments are going to be about the same as they were the last few years,” he said. “The payment hasn’t changed. What’s changed is the ‘stretching out,’ which means more payments get added to the backside. The extra interest expense is backloaded into the form of additional payments.”

Interest expenses are increasing as we go forward, and it will take more payments to maintain the same level of debt that farmers have had in the past. He said a lot of the economic challenges we face today may be getting “kicked down the road.” But there is one good sign amid some uncertainty looking to the new year and 2024 spring planting.

“Lenders are still confident and comfortable making long-term loans on things like machinery,” he said. “One of the big differences between the 1980s and today is back then, we had very high interest rates and short repayment periods. Some repayment periods lasted less than a single year.”

That created a large problem of no access to capital in the ‘80s. Today, Widmar said there’s a lot of available access to debt markets, which are very accommodating right now. But, he says, just because someone will lend to you at those terms doesn’t mean you as a farmer need to accept them. “Always be thinking about the implications of any loan terms you accept,” he added.

“Stretching the terms out has kept the payments low, but now that we’re in a high-interest environment, how are producers going to adjust,” he asked. If costs like fertilizer, electricity, or gasoline go up, Economics 101 teaches that we should be using less of each input.

“What do we do then with the higher cost of money,” he said. “Using less of an input is one particular approach. We can also shift the way we’re using money, including using more long-term debt last year and then shift it to short-term debt going forward. We always have to be evaluating how we’re using debt.”

In closing, he pointed out that agriculture hasn’t been in many rising interest rate environments in the past. The 1980s was one, and farmers and now in another. Producers need to revisit the strategies they’ve been deploying around farm finances, the use of farm debt, and their cash flow.

February 20, 2023February 20, 2023

Shipping Commodities is Near-Normal, For Now

Shipping commodities up and down America’s inland waterway system got pretty hard to do in 2022, especially along the Mississippi River. Extended drought cut water levels to almost impassable levels and resulted in shipping grinding to a halt in the river. The good news is those levels are finally beginning to rebound.

Mike Steenhoek is the executive director of the Soy Transportation Coalition, a group that keeps a sharp eye on shipping and the waterways year-round. They’re happy to see those river levels starting to rise because ships are once again carrying commodities to southern ports in the U.S.

“Meaningful precipitation has occurred over the past several months,” he said from Ankeny, Iowa. “It’s made a significant impact throughout the entire inland waterway system.”

Steenhoek offered up Memphis, Tennessee, as an example, calling it one of the “ground-zero” locations for the low-water conditions last fall. That location is currently 10-10.5 feet of water depth in relation to the gauge.

“Last year at this time, we were at 19 feet,” he recalled. “So, we’re below last year. To give that some perspective, we were just about at a negative 11 feet in late October. We’re easily more than 20 feet better than we were in October, which is a significant increase making shipping easier.”

St. Louis, Missouri, was another example of “ground zero” in the low water level picture. That location is just a bit higher than at the same time in 2022, so the area has seen a nice rebound from the low levels. He says the moral of the story is the waterways have returned to a degree of “normalcy.” But there is a catch.

“It won’t take a lot of sustained dry conditions to tip us right back into lower conditions,” Steenhoek said. “It could critically impact some of those areas like St. Louis to Cairo, Illinois.”

Shipping commodities is getting back to near-normal levels, for now. The waterways need continued rainfall in case dry weather returns. (Photo by AgFax)

Cairo (pronounced KAY-row) is a significant point in the waterway system. That’s where the Ohio River meets the Mississippi and provides a big influx of water into the system so that St. Louis to Cairo area can be very susceptible to low water conditions.

How dry did some of those areas get? The levels sank so low that ships were actually running aground and getting stuck in the Mississippi River. When that happens, one of two things usually occurs.

“Those ships sometimes had to get dug out,” he recalled. “Sometimes, they had to sit there until water levels rose to the point they could move again.

We also had sediment buildup, or ‘shoaling,’ in multiple locations,” Steenhoek said. “That resulted in shipping having to stop or significantly slow down. That meant there was a lot of dredging activity occurring last year and continuing into 2023.”

The timing for ships getting stuck last fall was awful, as that’s a time when a high percentage of U.S. exports occurs between September and February. “That’s when the U.S. soybean spigot is turned on and we supply a lot of soybeans to the world market,” he said. “Bad time for one of the main ways we move product to our ports to go down.”

Steenhoek monitors shipping in the waterways closely and says there is good movement up and down the waterways right now. U.S. export volumes are comparable to even a little higher than where they were last year.

“That’s really good news,” he said. “The reports I’m getting, particularly from the export facilities down in the New Orleans area, say they are back to a healthy degree of normalcy.

“As I mentioned, we’d love to see steady precipitation continue,” Steenhoek added. “We don’t have a lot of excess water in the tank to rely on if things go that dry again.”

November 30, 2022November 30, 2022

2023 and the year ahead for the ag economy

2023 and the ag economy combine to produce some trepidation as we look to next year. While the ag economy is doing okay despite several challenges like supply chain delays and high input costs, the question is how long this will last into next year. I talked with David Widmar, an agricultural economist with Agricultural Economic Insights in West Lafayette, Indiana.

There are no doubts that commodity prices are showing a lot of volatility at the end of this year, and Widmar says that’s causing a lot of angst. However, it’s generally still a positive story in the farm economy. But what’s ahead next year?

“We do expect that positive story to continue into 2023,” he said during the 2022 National Association of Farm Broadcasting’ annual convention in Kansas City. “One of the biggest reasons why is tight commodity inventories across all commodities in the U.S. and globally.”

The problem is when things get tight for corn, soybeans, and wheat, we really can’t substitute one crop for another. All of those crops will want to maintain their acreage shares. The idea of “robbing Peter to pay Paul” won’t work.

“We can’t plant fewer corn acres to make up for soybeans or vice versa,” he said. “So, everything is tight, and that will continue to be part of the narrative going into 2023.

“We know one thing about2023,” Widmar added. “There will come a point when we oversupply. We’ll bring in new production acres around the world, including South America, Southeast Asia, India, and hopefully Russia and Ukraine in the long term.”

The other thing that will eventually affect the markets is the possibility of big yields. There’s been a recent run of average to slightly below-average U.S. corn yields. “Eventually, more acres and yields will push us over again.”

Here’s the entire conversation during the NAFB’s Trade Talk event in Kansas City.

September 28, 2022September 28, 2022

Ag economic conditions strong, but for how long?

Ag economic conditions are still quite strong in 2022, but how long will that last? Nate Kaufman, vice president and Omaha bank executive for the Federal Reserve Bank of Kansas City, spoke during the recent Agricultural Outlook Forum in Kansas City. He told the audience during a presentation that incomes are still in good shape.

“Economic conditions in agriculture are remarkably strong. And I want to start here because this is not something I would have said probably two-and-a-half years ago. And I think it is an important place to start just because of how significantly different conditions are today relative to what we might have said back then. Incomes are incredibly high. We’ve seen commodity prices pick up, and yes, there are very high input costs that are leading to some concerns, but generally speaking, economic conditions in agriculture, with some caveats, are quite strong.”

Land values are a good example of the strength of the ag economic conditions.

“Land values, for example, are about 25 to 30 percent higher than what we might have seen before the pandemic. That was a time that land values had been declining the first couple of months of the pandemic, and it was maybe thought that we would see further declines, but here we are a couple of years later and seeing that conditions are much stronger. Before the pandemic, we worried about gradual increases in loan defaults. We looked at bankruptcy rates, we looked at other things that we thought there was going to be more financial stress and not less going forward. And the reality is that loan delinquencies are at one of their all-time lows, working capital levels are very high, and producers are generally in a strong position. And so, we’re seeing again from a financial picture things are rather strong there too.”

Despite the current strength of the ag economy, analysts expect slower economic growth next year.

‘Six percent growth in 2021 and 2022, that number is expected to be less than one percent, and there are concerns about economic growth in 2023. The second one is inflationary pressure. For those 10 years that we spent in the longest economic expansion on record after the financial crisis, inflation was generally less than two percent. And the Federal Reserve, as many of you may know, has a goal for inflation at two percent. We’re at eight percent, and that’s significantly higher than two. There are concerns about what inflationary pressures might do concerning some of the costs that have been mentioned.”

The other significant headwind is the interest rate.

The last one that I’ll mention then is interest rates. At the end of 2020. If you were to look at some of the projections that Federal Reserve officials would have suggested would be appropriate interest rate policy for 2022, many would have indicated that rates were likely to still be approximately zero by the end of this year. Instead, we’re in a different environment. And this is in large part because of inflation, where we’re now seeing interest rates closer to four to four-and-a-half percent by the end of this year.”

The Ag Outlook Forum was sponsored by the Ag Business Council of Kansas City and Agri-Pulse.

September 22, 2022September 22, 2022

Commodities, Sports, and Prognostication

Commodities and sports typically don’t go together most years. However, this fall, the two topics have come together in an interesting way.

Being a long-time sports broadcaster, I’ve noticed that when the major sports seasons wrap up, certain sports media love to immediately do what they call a “way-too-early” look to the next season. Evidently, it’s not just a sports thing.

I know harvest is just ramping up in many areas as I write this, but Farm Futures took what some might think is a “way-too-early” survey of planting intentions for 2023, and I couldn’t pass it up. It looks like corn will be king once again next spring among all commodities.

Commodities — Corn looks to be king when it comes to 2023 spring planting (photo from agriculture.com)

Jacqueline Holland is the grain market analyst for Farm Futures, and she wrote an article about the survey. She says the way-too-soon survey results are favoring corn for spring planting despite some challenges that come with the commodity.

“Even with higher fertilizer prices, farmers are still prepared to go all-in on corn,” she said. “Our survey found that farmers expect to plant 94.3 million acres of corn, a five percent increase from USDA’s current acreage estimates.”

If that prediction is realized, it would be the most corn planted in the U.S. since 95.4 million acres went into the ground in 2013. While soybean acres will be behind corn next year, U.S. growers are still sowing a lot of beans during spring planting in 2023.

“We expect farmers to plant 87.3 million acres of beans,” Holland said. “That’s almost a one percent decrease from this year’s acreage.” Cotton is one of the reasons that soybean acreage is going to drop a little. In the Mississippi Delta, a lot of acres in that region are going to provide “stiff competition” for soybeans during spring planting.

They also expect wheat acres to rise in 2023 thanks to more winter wheat acres in the Eastern Corn Belt. Farm Futures expects growers to plant 36.6 million acres of winter wheat. With more winter wheat acres going in the ground, spring wheat acres will back up from this year, with the 2023 estimate at 12.3 million acres.

“That means a grand total of 48.9 million acres of wheat will be planted in 2023,” she said.

Holland admits she was a little surprised at the survey results. She says there was a lot of price responsiveness to the rapidly-rising fertilizer prices heading into spring planting this year.

“When farmers were making their planting decisions in December last year, soybean prices were rallying strongly,” Holland recalled. “But with all of the issues we’ve seen with the flow of corn in the Black Sea this year, as well as the U.S. corn crop struggling with drought, corn has some bullish prospects for next year.”

She says if we do see a larger corn acreage next year, that might lead to some expansion back in the cattle market. In turn, that would likely revive some corn acreage in the Plains. Remember, about three million acres of corn went into prevent plant in the spring of this year.

“A lot of those acres were in the Dakotas and Minnesota,” she said. “Barring another bad weather event next year, I expect those acres to go back into corn in 2023.”

Farm Futures also has other questions in their survey beyond commodities and planting intentions. Those questions include where farmers are headed with input costs next year. Based on the survey responses, Holland says profit margins are going to shrink next year. The question is, how much?

“As of right now, it doesn’t look like growers are going to skimp on any fertilizer applications,” Holland said. “Most responses show farmers are ready to lock in their fertilizers at the lowest prices they can get. That will hopefully keep at least some liquidity in these crop budgets.

“We’ll see how these things ultimately shake out for planting and commodities,” she added. “There’s a long time between now and next spring.”

August 10, 2022August 11, 2022

Rain Finally Shows In Farm Country Last Weekend

Rain. Finally. Last weekend saw at least some rain in parts of farm country. Had a chance to talk with John Baranick (rhymes with mechanic), ag meteorologist for DTN, who lives just down 169 from me in Jordan, Minnesota. He says while the rain benefitted the parts of rural America stuck in a drought, other areas didn’t need a lot of rainfall.

“It wasn’t just here in southern Minnesota. We also saw that it was even heavier south of the border in Iowa, with a lot more four-to-six inch amounts there. Very helpful for some areas, but not a lot of those areas needed it. It also extended down through southern Wisconsin and into Northern Illinois. A lot of those crops, again, didn’t really need it, but it’s definitely helpful wherever it hit. And that front is starting to come through the eastern half of the Corn Belt. Again, a lot of these areas are doing much better than we are out here in the West, but Illinois, Indiana, and Ohio are all seeing bouts of rain this week. They’ve had some flooding in some of these areas, but the rainfall that’s gone through is mostly favorable. It’s just those Western states that just haven’t.”

The Dakotas saw mixed results from the weekend rain.

“South Dakota got some pretty good rainfall. The eastern half of it did, but the western half didn’t, really. North Dakota has kind of been missing out on a bunch of rain lately, although their soil moisture, for the most part, and the crop conditions are still pretty good.”

The Plains States are still struggling with drought…tape

“It’s the states of Nebraska, Kansas, kind of northern Missouri that have missed out on a lot of the rainfall even with these fronts coming through, and they’ve had a lot hotter. Temperatures have been up near or eclipsing 100 degrees very consistently all summer long, so the heat has been putting on a whole lot of stress for those areas.”

There may finally be some cooler air on the way into the Plains next week and may bring at least a little rain with that front…tape

“We’re seeing late next week, maybe mid-to-late next week, a push a cooler air move through and that’s gonna come with a bit of showers too, so it’s not a whole lot of rainfall and probably on the order for most people have a half inch or less, But the temperatures are going to cool back down. Instead of seeing highs in the 90s and up near 100. It’s more like the 70s and 80s for several days, so it’s actually gonna be below-normal temperatures for a bit. That kind of occurs late next week into the following week, so it’ll be a nice relieving break for them.

Unfortunately, many parts of rural America are still stuck in a drought. We’ll talk about that more later this week.

Again, that’s DTN ag meteorologist John Baranick

April 27, 2022April 27, 2022

Port Slowdowns Continue – What’s Behind the Congestion

Port slowdowns are still clogging up the nation’s supply chains, and it’s a big problem to solve. Ray Bowman is Director of the Small Business Development Center of Santa Barbara and Ventura counties in Southern California. He’s also the program chair for the District Export Council of Southern California. The business veteran and trade consultant said things have improved a bit but only on one side of the import-export equation.

“Many things are going on to help with the port slowdowns,” he said on the phone from his office in Camarillo, California. “Most of us have seen the news footage of ships backed up and waiting to unload their cargo. A big part of the backup is the unprecedented buying demand we saw during COVID-19.”

He says the Biden administration moved to get the nation’s ports operating on a 24-hour basis or, at least, get that framework in place to help relieve congestion. Bowman says it’s helped somewhat on the import side of the business, where he says things are about 30 percent better than before.

“Unfortunately, I don’t see that it’s improved on the export side,” Bowman says. “So that’s been tough on American shippers who need to move their goods overseas.

“We knew there would be a significant increase in buying during COVID-19,” he said. “Up until recently, we haven’t seen much of a slowdown in purchasing. Companies are likely still trying to fill orders backlogged for months.”

Ray Bowman is an international trade consultant from southern California with over 30 years of experience. (Photo from edcollaborative.com)

With so much demand for containers on the import side, it’s very difficult for shippers to simply find export containers to load their goods in. Companies started focusing more and more on the import side because they were making so much more money.

When it comes to export containers, fewer goods are leaving the country, so it tends to be cheaper to purchase export containers. They aren’t worth as much to the steamship lines as the larger volume of goods coming into the country. “Because of the demand for imports, steamship companies put all their space availability on the import side,” he said. “They didn’t pay as much attention to the export side, making containers much harder to find.

“The price of those containers is another limiting factor,” Bowman said. “As demand increased, the price shot higher at an unprecedented rate. We knew the price would increase because those costs have gotten suppressed in recent years, but we didn’t expect it to climb by ridiculously huge amounts.”

Limited amounts of containers and exorbitantly high prices hit the small and medium-sized companies harder than the larger businesses. He said the larger companies have economies of scale built into their business structures. Many typically have contracts for consistent shipping availability and trucking services regularly available.

“Small and medium companies buy their services primarily off the spot market,” Bowman said. “So, those higher prices hit those companies even harder than their larger competitors. These things like container shortages haven’t come out of the blue. This has been going on for some time, but when buying spikes as we’ve seen recently, there’s a point at which a system can’t efficiently handle the excess demand. That’s when we get significant port slowdowns.”

In addition to the small pool of available containers, Bowman said warehousing space for unloaded goods is almost maxed out. American warehousing only has roughly three percent of its total space available, which is not a good thing. He says the West Coast ports have less than two percent of space available.

“That only makes the container shortage worse because you have to be able to empty containers to make them available,” he said.

Many truckers who deliver to ports run into something called a “dual transaction” requirement. Bowman said that means if a trucker has a container to drop off, they’d better have another one to pick up. If a driver has a container to pick up, they’d better have another one to drop off. It’s efficient on paper, but if a driver doesn’t have that second part of the dual transaction, they’ll have to go find one.

“Another big challenge at the ports is something called the ‘Box Rule,’” he said. “When a trucker drops off a container to a particular shipping company, you have to have a chassis. Those are the wheels on the bottom that you load the container on.

“These steamship companies have contracts with different chassis makers,” Bowman said. “A steamship line will say, ‘if you’re going to tender one of our containers, you also have the chassis of the company we’ve contracted with.’ If you don’t have the right chassis to go with the right container, you’ll find yourself with cargo, the booking, and nowhere to unload it.”

Bowman, a business veteran with over 30 years of experience, says there is a lot of conversation about not having a Box Rule at the country’s ports. Shippers don’t want to worry about where the chassis comes from. Instead, they want the companies to bill whoever needs to get billed to use a chassis.

“Because of rules like this, roughly 30 percent of truck drivers miss their appointments,” Bowman said. “if you aren’t there on time for whatever reason, such as looking for a chassis, there’s no recourse. You’ve missed your appointment. It’s not unusual, at all, for a trucker to get there hours early and miss their appointment because they’re stuck in a queue.”

Another big reason that things get bogged down is a backlog. A lot of the shipments coming in right now got booked 90 days ago, if not longer.

While shippers, port officials, and government officials are looking at how to rectify these different challenges, Bowman says one of the biggest challenges is a lack of adequate infrastructure at the ports. Most of America’s ports were built when ships were typically much smaller than they are today.

“When I started in the shipping industry, a large ship was around a 4,000-container capacity,” he recalled. “In the 1980s, that was a big ship. Now, we have ships that can hold between 10,000 and 20,000 containers.

“Not only are they bigger, but these ships also just aren’t one carrier like they used to be,” Bowman added. “It used to be one carrier, one ship. You now have what are called ‘Shipping Alliances.’ In fact, there are three big ones in the U.S. As many as four or more steamship lines can be sharing space on one ship.”

Bowman said one of his biggest personal concerns is agricultural goods. If a shipment of consumer electronics takes a long time to get where it needs to go, the products aren’t in any danger of spoiling. Agricultural shipments contain perishable products that won’t wait long for a container and ship.

“A lot of attention needs to get paid to that,” he said. “Those are some of our best exports, and we need to protect that part of the supply chain.”

Bowman is an internationally-respected business consultant who says he’s never seen anything like this before. “There have been port slowdowns in the past, but this is truly unprecedented,” he said.

February 8, 2022February 8, 2022

Planting questions in 2022

Planting questions abound here in the late stages of winter. How many acres of corn, soybeans, wheat, and other crops will get planted in 2022? The acreage battle is a hot topic of conversation in the markets and in coffee shops across rural America. This year’s acreage battle is far from over and actually began last year.

That’s the opinion of Joe Vaclavik of Standard Grain in Nashville, Tennessee. The long-time market expert says this has gone on for months for a variety of reasons, led by fertilizer issues.

“Even going back to last fall, the market was very aware of upcoming fertilizer challenges,” he said on the phone from his Nashville office. “It was widely known that fertilizer prices were rising rapidly and would have an impact on this year’s acreage mix.”

He said for a moment in time, they saw the ratios and new-crop prices seem to favor corn. It appeared the market was trying to buy corn acreage back because of the potential of losing acres due to fertilizer prices. The fact of the matter is no one has a clue what the crop rotations are going to look like.

“There are several well-respected analysts like the University of Illinois that had an estimate of 96 million corn acres,” he said. “That would be an increase near 2.5 million over last year.

“And then, Farm Futures did a customer survey and came away with an estimate of 90 million acres,” he added. “The difference between 96 million and 90 million acres in terms of pricing implications, balance sheets, and fundamentals is phenomenal. Those are two totally-different markets and totally-different worlds.”

In any given year, Vaclavik says trying to predict or estimate what the acreage will be is a near-impossible task. Occasionally, someone will predict accurate numbers, but no one is consistently accurate. There are always “curveballs,” and this year will feature more curveballs than ever.

“This uncertainty doesn’t just apply to corn and soybean acres,” he said. “You have another bunch of crops that also make money for farmers. Spring wheat makes money; oats make money; small grains make money.”

The “other piece of the pie” among the planting questions is that principle crop acreage has trended lower for the last 7-8 years. Things are in a state of flux, and he feels the unknown might actually be more supportive than not for the markets. The fertilizer question and its impact depends on where you’re located.

“I’ve talked to people who have their fertilizer needs covered, and they feel good about the situation,” Vaclavik says. “The thing is that most farmers really don’t want to change their rotations. I did a survey of my customers a while back and most said they’re rarely in favor of switching rotations, if ever.

“If they can stick to their rotations, that’s what they’ll do,” he added. “But it still could be tricky.”

Even a farmer who’s already locked in their fertilizer for the 2022 season can still run into fertilizer problems. Actually, getting the physical delivery of that product could be a different story because of serious supply chain issues.

Corn is also a more input-intensive crop, so farmers can’t have their fertilizer not show up when it’s time get moving on spring planting. While not everyone is going to struggle to get fertilizer, there is still a risk going into springtime. Consequently, fertilizer will be a major deciding factor in answering those planting questions.

Small grains could be an interesting topic in the spring. Vaclavik says he would not be surprised to see more spring grains in the acreage mix. One thing that people might not be talking about a lot is some of the northern United States and even into Canada are still experiencing drought.

“Things are still dry in the Dakotas and over the border in Canada,” Vaclavik said. “They are still in a drought, and that will be an additional factor when it comes to acreage. It all depends on what farmers are comfortable planting into the dry conditions. I know it’s not as bad as last summer, but there is still a drought in that region.

“I haven’t seen a year like this in recent memory where it’s so hard to predict the answers to the planting questions that we’re asking,” he added.

October 11, 2021October 11, 2021

Harvest 2021 deep dive shows variability

Harvest 2021 is proceeding along at a good pace. Mike Zuzolo is the Founder and President of Global Commodity Analytics in Atchison, Kansas. He took a deep dive last week into the crop progress numbers and found a lot of variability in the results.

“Comparing the pace of the corn harvest 2021 versus the pace of the soybean harvest suggests that the corn yields are indeed a little more variable than beans,” Zuzolo said. “I hate to say lowered because of the issues that we’re seeing with the yields coming in. We’re seeing very good, very top-end yields coming in down in Kansas and Nebraska.

“My business clients and subscribers say strong yields are coming in through certain parts of Illinois,” he added. “However, my question is whether they’re top-end yields. Probably 90 percent of the producers I work with throughout Nebraska and Kansas would say ‘yes,’ we have top-end corn yields, and we’re close to wrapping up. However, central Illinois and central Indiana are probably around 50 percent complete, by comparison.”

Illinois and Indiana farmers are probably close to 75 percent done with soybean harvest 2021, but recent rainfall has slowed them down a bit. His clients in both states are saying they have top0-end yields in just 25 percent of their corn, but everything else is above average.

He thinks the numbers are showing the corn yields are more variable, especially because our corn and soybeans both have low moisture content. Six of the top 18 corn-producing states are at 50 percent or greater on corn harvest. About 29 percent of the national harvest 2021 is done compared to 24 percent at the same time last year.

“Those kinds of numbers are completely upside down when it comes to the soybean harvest,” Zuzolo said. “Just two of the 18 major soybean-producing states are at 50 percent or greater on harvest pace. The national soybean harvest is at 35 percent compared to 34 percent at the same time in 2020.”

Here’s the rest of the conversation.

September 24, 2021September 24, 2021

Banks worry about funding mechanism in Infrastructure Package

Banks across America would like to let you know about a small provision in the massive 3.5 trillion-dollar infrastructure package trying to make its way through Congress and get to the president’s desk. That’s a big piece of legislation to pay for, and one way that Democrats behind the bill want to fund it involves the IRS and your bank accounts. All of the bank accounts.

Paul Merski is the Executive Vice President of Congressional Relations and Strategy for the Independent Community Bankers of America. He said one way the administration wants to foot the bill for the infrastructure legislation is “horrible.”

“They would have the IRS look into everyone’s bank account transactions,” Merski said. “The legislation will force all banks to report on any transaction going into or out of an account worth 600 dollars or more. What it means is every account in America will then get monitored by the IRS as banks are forced to send in your information.”

To generate revenue like legislators envision to help pay the cost, Merski said the IRS will basically be assuming that most everyone in America is a “tax cheat.” It’s going to involve banks across the country sending in large amounts of information to the IRS, who will then have to sort through all of it to figure out what’s happening in each account.

The accounts in question include savings accounts, checking accounts, business accounts, personal and business loans, cash transactions, and even international transactions. To find any potential infractions, the IRS would be looking for a needle in a haystack.

“What we’re fearful of is this idea is going to cause a lot of false audits, a lot of false positives, and a lot of white noise,” he said. “The IRS will then be able to subpoena additional information on people’s accounts, to freeze people’s accounts, to garnish people’s accounts if there’s a dispute with the IRS.

“It’s crazy,” Merski added. “They pretend that they are going after millionaires and billionaires, and our question is, why then, do they need everyone’s account transactions sent to the IRS? The last thing we need is to be sending more information and more data to the IRS.”

This is especially concerning for rural bankers. He points out that community banks do 80 percent of all the agricultural lending in the nation, as well as over 50 percent of all the small business lending. They want customers to know that if this goes through, those banks are going to have to report all of your financial transactions, even loan information, to the IRS.

The Independent Community Banks of America are concerned about the privacy of bank accounts across the country.

“We’re worried that our customers don’t know what’s happening with this proposal,” Merski said. “We want you to know it’s not the bank’s idea to be sending all this information to the IRS. It’s the IRS, the Treasury Department, and the administration demanding that the banks report all these transactions.”

He says the typical small business owner, farmer, or rancher has to know about this idea and understand what’s happening in Washington, D.C. They also want farmers, ranchers, and small business owners to weigh in on the topic.

“If this is something that concerns you like it concerns our community bankers, you need to contact your congressmen and senators,” Merski said. “This is overkill: This is a dragnet, and this is the IRS looking to profile people based on their transactions.

“This is a stop-and-frisk against average Americans,” he added. “It’s going to add a lot of cost and compliance burdens against both bankers and the general public.”