farmland

Farmland Values Relatively Stable, Despite Downward Pressure

Farmland values slipped some in the first half of 2019. But on the whole, the real estate market for cropland in eastern Kansas and the grain states of Iowa, Nebraska and South Dakota remained stable as values continue to slowly adjust to the current margin environment

The value of 71 benchmark farms tracked by Frontier Farm Credit and Farm Credit Services of America (FCSAmerica) declined an average of 0.83% in the first six months of 2019.

“Despite continued tight commodity price margins in 2018, real estate values remained stable and were supported by a favorable interest rate environment, market facilitation payments and equilibrium in the supply and demand levels for real estate,” said Tim Koch, chief credit officer for the alliance of Frontier Farm Credit and FCSAmerica.

Farmland values in eastern Kansas declined 3%, as a whole, in the first six months of 2019, the largest decline in Frontier Farm Credit’s and FCSAmerica’s latest benchmark farmland study. Compared to a year ago, cropland values are down 1.8% and pasture land is down 3.1%.

While Iowa farmland experienced a decline in 2019, values still are up 2.7% compared to a year ago. Modest declines in Nebraska and South Dakota in the later half 2018 extended into 2019 for a drop of 1.4% and 1.3% since last July.

State (No. of benchmark farms) Six Month One Year Five Year Ten Year
Kansas (7) -3.0% -2.4% Not available Not available
Iowa (21) -1.3% 2.7% -15.3% 71.3%
Nebraska (18) -0.4% -1.4% -15.7% 103.1%
South Dakota (23) -0.7% -1.3% -8.9% 91%
Wyoming (2) 6.5% 9.8% 35.9% 45.9%

 

Three of the seven benchmark farms in eastern Kansas lost some value in the first half of 2019, two increased and two showed no change.

Of Iowa’s 21 benchmark farms, 10 decreased in value, three increased and eight saw no change. Ten benchmark farms in Nebraska lost value, five increased and three were unchanged. In South Dakota, values dropped on five farms. The remaining 18 farms held even. Wyoming continues to see values for cropland and pastureland increase. However, the limited number of farmland sales in the state makes it difficult to accurately track trends.

Farmland sales across the Associations’ territory were down in the first two quarters of 2019 compared to the same period in 2018. Sales in eastern Kansas fell by more than 52%, although public auctions were up 6% compared to the first two quarters of 2018.

South Dakota saw 26.7% fewer sales. In Iowa, sales were down 11%, while Nebraska’s combined sales for irrigated and dry cropland dropped 18.4%.

The average quality of land has not changed in the past year, and buyer demand for high quality ground remains strong.

MFP Payments Will Bolster Income in a Challenging Year

We recently sponsored a webinar, “MFP 2019: From D.C. Policy to Farm Budgets,” featuring Agriculture Economic Insights co-founders Brent Gloy and David Widmar. Register for our next free webinar, ARC/PLC Selection, on August 22 at 12:30 p.m. CST. Highlights from MFP webinar are below or watch the full webinar.


How should you view your MFP payments?

Direct farm payments in 2019 could constitute one-fourth of net farm income, the highest proportion in a dozen years. The Market Facilitation Program (MFP) implemented to offset the impact of trade disputes to U.S. agriculture will provide more than $50 per acre in income to producers in parts of our territory (see map). Click to view Kansas county payment rates on agmanager.info.

A webinar hosted by Farm Credit Services of America and Frontier Farm Credit helps producers better understand the impact of this year’s direct payments – for both their operations and the industry as a whole. Presenters David Widmar and Brent Gloy, co-founders of Agricultural Economic Insights (aei), as well as Derek Mohr, a financial officer based in Perry, Iowa, spoke just hours after USDA announced details about the issuance of MFP payments.

The first payment, expected this summer, will be up to half the announced rate for a producer’s county. Payments can range from $15/acre to $150/acre. There is no guarantee rounds two and three will occur.

MFP payments 2019 - five states
The $14.5 billion earmarked for MFP payments is big, but no record. Direct payments were higher in inflation-adjusted dollars in each of several years between 1985 and 2005, the economists noted.

Real Direct US Farm Payments
Government payments issued in 2018 proved significant for grain-producing states. Overall net farm income for members of the Kansas Farm Management Association increased from 2017 to 2018, with 80 percent of the increase attributed to direct government payments (including MFP, ARC/PLC, disaster payments and conservation payments).

net farm income and govt payments 2014-2018
Gloy and Mohr advised producers to be strategic about how 2019 government payments fit into their financial planning.

“When MFP payments were announced last year, we counseled our customers to retain as much as they are able and use the money to replenish working capital. Liquidity is essential in this ag environment. We are recommending the same this year, especially for those who end up having a good year.”
– Derek Mohr, financial officer based in Perry, Iowa

He noted that crops in his area are looking good – and market volatility offered better-than-expected prices for corn and soybean.

“It is risky to make any plans based on government programs,” Gloy said. “I would not make tax or purchasing decisions driven by this income, for instance,” he said.

Watch the full half-hour webinar below.

MFP Payments Will Help This Year

USDA has announced new details about its $14.5 billion Market Facilitation Program (MFP). One of the most important details for grain producers – payments will be based on your county crop history, not on the crop you grow.

In parts of our eastern Kansas, growers will receive more than $50 an acre in MFP payments. The map below, developed by the consulting company Agricultural Economic Insights (aei), shows MFP payments will range from $15/ to $150/acre, with the highest payments expected in the Delta and cotton areas of other states.

MFP payments 2019

Signup for 2019 MFP payments begins July 29 and runs through December 6. Producers are expected to receive a payment this summer. Experts say there could be three installments of 2019 MFP payments, with the first being the largest – but they also caution that the number of payments and their scheduling remains unknown.

Payment caps will apply. For example, in neighboring Iowa’s Boone and Dallas counties, where the county payment rate is $65/acre, farmers top out at 3,850 acres of nonspecialty crops.

MFP payments for livestock include milk, 20¢/cwt., and hogs, $11/head based on inventory. The payment calculation period for livestock has not been announced. Visit Farmers.gov for full details about MFP.

Frontier Farm Credit and Farm Credit Services of America hosted a live webinar on July 25 featuring aei economists Brent Gloy and David Widmar discussing MFP payments and their impact on farm budgets. Watch frontierfarmcredit.com for a recording of the webinar.

Crop Progress and Condition Remain a Challenge

Crops continue to run well behind average in this week’s Crop Progress report from USDA.

Corn silking

Soybeans blooming

Sorghum headed

7/21/19

Average

7/21/19

Average

7/21/19

Average

Iowa

41

71

47

72

Kansas

54

74

28

52

7

13

Nebraska

40

70

46

71

17

22

South Dakota

9

50

45

65

9

31

18 States (sorghum,
6 states)

35

66

40

66

27

40

Only 5% of the corn in the 18 states has reached dough stage, compared with 10% on average for this point in the growing season. The same is true of soybean podset, which is at 7% in the 18 states vs. a 28% average. Iowa stands at only 4% (28% average); Kansas, 6% (15% average), Nebraska 8% (25%) and South Dakota 0% (21%). Sixteen percent of sorghum is coloring, compared with a 22%.

Corn condition worsened very slightly again, losing 1 percentage point from the prior week. At 57% good/excellent and 13% poor/very poor, it looks much worse than last year’s 75% in the top two categories and 9% in the bottom two.

Soybean condition is unchanged at 54% good/excellent and 12% poor/very poor compared with 70% and 8% at this time last year.

USDA’s condition charts below bring home just how concerning this year’s corn and soybean condition is compared with the prior four years. Grain Sorghum, on the other hand, is enjoying better ratings than recent past years. Please note they run one week behind; the data ends with July 14.

usda nass 2019 corn crop progress

usda nass 2019 soybeans crop progress

usda nass 2019 sorghum crop progress

Winter wheat

Winter wheat harvest has reached 69% in the 18 sates, 10 points behind average. Kansas is at 96% versus 98% average for this week; Nebraska is at only 33%, compared with a 76% average; and no harvest has been reported in South Dakota, while 42% usually is completed by this time.

Top view of agricultural parcels

Painfully Slow Crop Progress

Only 17% of corn is silking, compared with a five-year average of 42% in the 18 top states, USDA reports. Likewise, 22% of soybeans are blooming, against a 49% average. The states we serve are among those lagging well behind average.

 

Corn

Soybeans

 

July 14

Average

July 14

Average

Iowa

8

40

26

52

Kansas

36

56

15

35

Nebraska

11

42

28

54

South Dakota

0

21

32

50

18 States

17

42

22

49

 

Condition is virtually unchanged in the 18 states, with corn and soybeans each improving 1 percentage point on the upper end, to 58% and 54% good/excellent, respectively. No change was seen on the bottom end, with both corn and soybeans at 12% poor/very poor.

Grain sorghum is not as far behind, with 24% headed and 14% coloring in the six reported states. This compares with 31% and 19% averages. Almost three quarters of the crop is rated good/excellent and only 3% poor/very poor.

Spring wheat is 9 points behind average in heading, at 78%. Its condition is rated good/excellent on 76% of the acres (down from 78% a week earlier) and just 4% poor.

Winter wheat harvest in the 18 reported states also is still running late, with just 57% cut compared with 71% on average.

 

July 14

Average

Kansas

81

95

Nebraska

14

52

South Dakota

0

21

18 States

57

71

 

Early end to season?

Naturally, the late start to the spring crop season has raised concerns about whether there will be enough time for crops to mature. Feeding that concern are forecasts by several weather companies that a normal frost date could be the best-case scenario; early frost is a distinct possibility. That would be especially bad for the tardy crops in the northern reaches of the Corn Belt.

For instance, Drew Lerner, founder of World Weather Inc., said: “I do not see this growing season being extended, especially in the northern parts of the Midwest. The odds are really high that we’re going to end up with the northern areas finishing out early.” He bases that observation on a repeating sunspot cycle: In 1965 and 1983 saw early frosts and were tied to solar minimums, which we are approaching again. “Further research also reflects that anytime the solar minimums are at play and we have a slight cooler bias [which he predicts for this summer, despite current heat], we tend to verify with early frost or freezes.” Click to view full forecast on agweb.com.

In the same article, Farm Journal agronomist Ken Ferrie noted that an early frost/freeze can take 30-40 bu./acre off corn yield in some areas.

This worry is keeping December corn futures above $4.20/bu. and November beans above $8.90 – despite 2018/19 corn exports 11% below a year earlier at the same time into the marketing year. In its July supply/demand report, USDA reduced its projected exports for the third time, to 56 mmt, compared with 62 mmt in April. Yet exports are still running below the average weekly pace needed to reach USDA’s projection.

Meanwhile, because of logistics snarled by historic flooding, soybean exporters are struggling to deliver some 7 mmt of beans purchased by China before trade talks broke down last month. Shipments to all locations reached 38.5 million metric tons by July 4, compared with 50.3 mmt a year earlier. Outstanding sales, on the other hand, were 10 mmt, up from 7.2 mmt last year.

Beans not moved this summer could leave bins too full and clog delivery channels this fall for those lucky enough to have good crops. The challenging 2019 season hasn’t yet outlived that adjective.