Keith Good: Farm Incomes, Capital Spending Show Decline in 2nd Quarter

    Agricultural Economy

    An update yesterday from the Federal Reserve Bank of Minneapolis stated that, “Farm incomes fell from April through June, according to results of the Minneapolis Fed’s second-quarter (July) agricultural credit conditions survey. Capital spending decreased, while household spending held roughly steady, lenders responding to the survey indicated. Falling incomes pushed the rate of loan repayment down slightly, while renewals and extensions increased, though most lenders reported that both were flat. Respondents noted further signs that cropland values were moderating, with prices falling in some areas, though the volume of land sales appears to have decreased. The third-quarter outlook is for continued contraction, with survey respondents predicting further decreases in income, capital expenditure and household spending.”

    Yesterday’s update added that, “Recent quarterly surveys have indicated that land prices have moderated following a multiyear period of strong growth, and the second-quarter results continue this trend; values decreased in some cases, along with cash rents. The average value for nonirrigated cropland in the district fell by almost 2 percent from a year earlier, according to survey respondents. Irrigated land fell slightly more (between 2 percent and 3 percent), while ranchland values increased 4 percent, likely owing to strong livestock and dairy prices. The district average cash rent for nonirrigated land fell 6 percent from a year ago, more than the decrease in value. Rents for irrigated land decreased 4 percent, while ranchland rents, which had continued growing in recent quarters, fell by nearly 2 percent.”

    The Minneapolis Fed update also noted that, “Not surprisingly, expectations are slightly pessimistic, on balance. Across the district, 52 percent of lenders predicted that farm income will decrease in the third quarter of 2014, compared with 12 percent forecasting increases.”

    With respect to U.S. farm income, USDA’s Economic Research Service (ERS) has indicated that, “[ERS] will release a new forecast for calendar year 2014 income, assets, debt, farm business performance and the outlook for farm operator households on August 26, 2014 at 11:00 AM. This is the second forecast for 2014, and it will incorporate new information on production expenses, land values, and the outlook for commodities.

    “ERS Economist, Mitch Morehart, will present ‘Farm Sector and Household Income Forecasts’ and take questions from the audience in this exclusive USDA webinar on Tuesday, August 26 at 1 PM. The presentation will last approximately 30 minutes with questions and answers immediately after.”

    Just click here to sign up for the ERS webinar.

    Meanwhile, Elizabeth Williams reported yesterday at DTN (link requires subscription) that, “Steady as she goes seems to be the general consensus concerning 2015 cash rents across the Midwest. ‘In the farm visits I’ve made the past two weeks, I’m finding farmers were a little more relaxed than I thought they would be,’ reported Randy Luze, land manager with People’s Company in Cedar Falls, Iowa.

    “Preliminary 2015 crop budgets released by the University of Illinois earlier this summer forecast statewide operator losses of $44 per acre next season if corn growers paid average cash rents of $295 per acre, fertilizer costs dropped $50 per acre and yields stayed at trend levels. So far, however, early rent negotiations in Iowa, Illinois and Indiana seemed to be resisting adjustments.

    “‘This seems like a transition year,’ Luze added. ‘Some people are thinking they can pay the same as last year for one more year. Many farmers have pre-sold 30% to 40% of their crop [before the price collapse]. When you average that in, and a possible revenue claim on their crop insurance for drowned-out areas, then they might be OK. But next year, it could be a different story.'”

    The DTN update explained that, “Over in central Illinois, eye-popping rents may be matched by eye-popping yields this year. ‘Two weeks ago, we checked 20 farms we manage in central Illinois and in our corn yield check, the average yield was 250 bushels per acre,’ noted Dale Aupperle with Heartland Ag Group in Forsyth, Ill. ‘That’s a 20% increase over last year, which was a bumper year. These are the best yields we’ve ever seen.’

    “‘With these yields and having sold ahead 60% of the corn crop, even if we sold the rest at $3.40 per bushel, we’ll still make a profit,’ Aupperle explained.

    “‘Low commodity prices may drop farm income only 5% to 10% in our area, because we’re going to make our money in bushels per acre this year,’ said Aupperle. A slight drop in income is not enough to pester a landowner for a lower rent, he added.”

    Reuters writer Naveen Thukral reported today that, “U.S. corn ratings unexpectedly rose in the latest week, as rains helped crop health in key production states such as Illinois and Nebraska, according to a U.S. government report.

    “The USDA said in its weekly crop progress and conditions report that 73 percent of the corn crop was rated good to excellent as of Aug. 24. That was the best late August rating since 1994.”

    “Soybeans were rated 70 percent good to excellent, down 1 percentage point from a week ago but still the best for late August in 22 years,” the Reuters article said.

    Bloomberg writer Phoebe Sedgman reported today that, “Soybeans fell for a second day to match the lowest price in almost four years on expectations farmers will harvest a record crop in the U.S., the top grower.”

    With respect to demand variables, University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdocDaily blog (“Looking for a Corn Consumption Response“) that, “In the newsletter of August 11, the prospects for corn consumption to respond to lower prices during the 2014-15 marketing year and the potential for a subsequent price recovery were discussed.  With the start of the new marketing year only a week away, the process of monitoring corn consumption and corn consumption prospects in the three major categories of feed, ethanol, and exports is underway. Not much is yet known about consumption prospects, but we start what will be an ongoing process of updating those expectations.”

    Yesterday’s update noted that, “In the case of feed and residual use of corn, the USDA’s quarterly Grain Stocks reports are the only source of data on actual consumption. The September 1, 2014 corn stocks estimate to be released on September 30 will allow the calculation of the magnitude of feed and residual use of corn for the final quarter of the 2013-14 marketing year and will provide some guidance for potential use during the year ahead. Expectations of feed use for the year will be derived primarily from weekly, monthly, and quarterly USDA reports of livestock and poultry inventories. Feed use of corn will not receive much support from the beef sector. The liquidation of the cow herd and the smaller calf crops of the past few years mean there are fewer cattle available for feeding and that deficit will continue for an extended period. The USDA reported that for feedlots with capacity of 1000 head or more, there were two percent fewer cattle on feed as of August 1 this year than on August 1 last year. Seven percent fewer cattle were placed on feed during July 2014 than during July 2013.

    “The poultry and dairy sectors, however, appear to be experiencing some very modest expansion. The USDA reported that the number of broiler chicks placed for meat production during the two weeks ended August 16 was up two and one percent, respectively, compared to placements of a year earlier. Two weeks do not constitute a trend, so that placements will continue to be followed closely to determine if expansion is actually underway. The average number of layers has been running one to two percent above those of a year ago each month this year. The USDA also reported that milk cow numbers in 23 selected states were up about one percent in July.

    “The most uncertainty about livestock production comes from the hog sector. The USDA reported that the June 1 inventory of market hogs was five percent smaller than the inventory of a year earlier, but producers expected to increase the number of sows farrowed by four percent in the June-September quarter. Production prospects continue to be clouded by the ongoing impact of the PED virus on the number of pigs actually weaned. The USDA’s monthly Livestock Slaughter report showed a seven percent year-over-year decline in hog slaughter in July. That decline was partially offset by a five percent increase in average slaughter weight. The USDA’s Hogs and Pigs report to be released on September 26 will provide additional information about pork production prospects during the 2014-15 corn marketing year. Since feed consumption of corn includes an unknown and sometimes surprising ‘residual’ component, only the quarterly stocks estimates will provide a measure of actual disappearance.”

    Also yesterday, Reuters writer Ros Krasny reported that, “Retail prices for many U.S. meats, already at record highs, continue to rise on a combination of drought and disease, but overall food cost increases remain near long-term averages, the U.S. Department of Agriculture said on Monday.

    “The agency now forecasts pork, beef and veal prices to rise by 6.5 to 7.5 percent in 2014, up from 5.5 to 6.5 percent forecast a month ago. The overall ‘meats, poultry and fish’ category will rise by 4 to 5 percent.

    “Overall U.S. food inflation – items bought in grocery stores and in restaurants – will be 2.5 to 3.5 percent in 2014, in line with historical norms, and is expected to be slightly lower at 2 to 3 percent in 2015, the USDA said.”

    The Reuters article pointed out that, “Record high pork prices are partly due to the impact of a virus that has killed millions of piglets, as well as the higher cost of pork imports from Europe. For this year through July, retail pork prices jumped almost 11 percent.

    “Meanwhile, the lowest U.S. cattle inventories in more than 60 years are expected to drive up wholesale beef prices by 10 to 11 percent this year, with much of that increase passed down to consumers.”

    Transportation Issues

    Ron Nixon reported in today’s New York Times that, “The furious pace of energy exploration in North Dakota is creating a crisis for farmers whose grain shipments have been held up by a vast new movement of oil by rail, leading to millions of dollars in agricultural losses and slower production for breakfast cereal giants like General Mills.

    “The backlog is only going to get worse, farmers said, as they prepared this week for what is expected to be a record crop of wheat and soybeans.”

    Today’s article added that, “Although the energy boom in North Dakota has led to a 2.8 percent unemployment rate, the lowest in the nation, the downside has been harder times for farmers who have long been mainstays of the state’s economy. Agriculture was North Dakota’s No. 1 industry for decades, representing a quarter of its economic base, but recent statistics show that oil and gas have become the biggest contributors to the state’s gross domestic product.”

    An update yesterday from Rep. Kevin Cramer (R., N.D.) stated that, “Today [Rep. Cramer] announced BNSF Railway and Canadian Pacific Railway (CP) have publicly filed updated weekly status reports on the backlog in grain shipments. The figures from BNSF show a total of 1,336 past due rail cars in North Dakota averaging 10.2 days late as of August 22, compared to the report last week which indicated 1,262 past due cars were averaging 19.6 days late. The CP report shows a total of 10,266 open requests in North Dakota with an average age of 12.71 weeks. The previous report showed 21,518 open requests with an average age of 12.7 weeks… . [I]n June the two companies were ordered by the STB to report their plans for resolving the backlog of grain car orders, and begin issuing weekly status reports until the problem is resolved. The BNSF report can be viewed here, and the CP report can be viewed here.”

    Rural America

    USDA’s Economic Research Service (ERS) released a report yesterday (“Rural Employment Trends in Recession and Recovery“) that “examines the effects of the recent major recession, and gradual recovery, on employment and unemployment trends, with an emphasis on rural America.”

    In part, the ERS update stated that, “Regional differences in the effects of the recession are striking, with the column of States running from North Dakota to Texas faring much better in terms of employment and unemployment rates than most other regions. The Great Plains States in particular experienced smaller spikes in unemployment largely because their initial industrial composition was skewed toward relatively stable economic sectors (in particular, agriculture) and away from some of the hardest hit sectors (e.g., manufacturing) [See related graph].”

    Danielle Paquette reported yesterday at The Washington Post Online that, “Rural Nebraska needs lawyers. Young, single, college-educated people keep leaving the Heartland, enticed elsewhere by more money or exposed brick lofts or mimosa-drenched brunches. The young have long fled small towns for big city lights, but the trend has been worse in recent years, aggravated by recession and a historic concentration of resources in urban areas. Nearly 60 percent of America’s rural counties lost residents last year. That’s up from 50 percent in 2009 and 40 percent in the late ’90s, according to Census data.”

    Farm Bill Issues

    The Los Angeles Times editorial board opined yesterday that, “Taking stock of other changes in criminal justice that moved through the [state] budget process, one item looms particularly large — in a good way. Californians saddled with drug felony convictions will now, finally, be able to navigate their return from prison or jail with the help of food stamps.

    “It’s hard to overstate how important, and how belated, that change is for California.

    “The foolish lifetime ban on food assistance for convicted drug felons dates back to an act of Congress in 1996, when the war on drugs was in full swing and common sense and compassion were at a low point. Drug users and low-level dealers were so vilified that it was deemed necessary to continue their punishment even after they had served their time.”

    news release yesterday from USDA indicated that, “[USDA] today announced that up to $200 million in competitive grants is available for state SNAP agencies to design and conduct employment and training (E&T) pilot projects to help Supplemental Nutrition Assistance Program (SNAP) participants find jobs and increase their earnings. A portion of these funds will be used to fund an independent evaluation of the E&T pilots. The solicitation for the evaluation contract was also released today.”

    And a news release yesterday from Sen. John Hoeven (R., N.D.) stated that, “[Sen. Hoeven] today hosted Michael Scuse, USDA Under Secretary for Farm and Foreign Agricultural Services, at a farm bill roundtable with state and local officials and agriculture groups. Hoeven invited Scuse to North Dakota to meet with North Dakota producers and pressed USDA to work with the state’s farmers and ranchers as they finalize rules for farm bill programs.”

    The release added that, “Hoeven asked Scuse to provide timelines and information about USDA’s plans to:

    ” * Finalize Safety Net Programs and producer sign-ups.

    ” * Provide Supplemental Coverage Option (SCO) for all commodities and counties. SCO is designed to help strengthen and expand insurance coverage options for producers, enabling them to purchase a supplemental policy beyond their individual farm-based policy and protecting them from market volatility. In July, RMA announced the availability of SCO for spring and durum wheat in the 2015 crop year. Hoeven has been pressing USDA for timely implementation of SCO for all insurable crops in all counties in order to provide North Dakota farmers with important risk management tools.”


    Jacob Bunge reported in today’s Wall Street Journal that, “A federal judge ruled against a new law in Hawaii curbing genetically modified crops, handing a victory to seed and chemical companies in a battle over modern agricultural techniques.

    “Units of DuPont Co., Syngenta AG, Dow Chemical Co. and BASF won a judgment in the U.S. District Court for the District of Hawaii, blocking an ordinance adopted this past November by the island of Kauai, according to a court order dated Aug. 23 and filed on Monday.”

    Mr. Bunge noted that, “U.S. Magistrate Judge Barry Kurren, in his judgment, wrote that ‘the Ordinance is pre-empted by state law and is therefore invalid,’ and blocked Kauai from implementing or enforcing the law.”

    An update this week The Oregonian Online by Dana Tims stated that, “A 20-member citizens panel has narrowly voted against recommending passage of the Oregon Mandatory Labeling of GMOs initiative.

    “The Citizens Initiative Review Commission voted 11-9 to oppose Measure 92, which would require the labeling of food products containing genetically modified ingredients.”

    Mr. Tims added that, “The panel’s findings will appear in the Official Voters’ Guide this fall.”

    And Henry I. Miller indicated in a column in today’s Wall Street Journal that, “A handful of patients in the largest-ever Ebola outbreak have been treated with an experimental drug called ZMapp. American missionaries Dr. Kent Brantly and Nancy Writebol both received the drug and were recently released from the hospital. A Liberian doctor treated with the drug died on Sunday. The medicine is made through ‘biopharming,’ a relatively new and promising way to create drugs through genetic engineering, but the technology is stymied by regulation and fear-mongering.”

    The Latest

    Send press releases to

    View All Events

    [ecs-list-events limit="5" key="start date" order="asc"]
    Send press releases to

    View All Events