Finance-Accounting

The Scoop Podcast: Ag Retail Shifts to Selling Proof, Not Selling Products

Mon, 24 Nov 2025 18:54:22 GMT

Grower’s Edge CEO Matt Hansen shares how his company has grown and changed in the ag fintech space to help ag retailers and manufacturers grow and improve their marketing, product placement and revenue.

He says the company’s technology has been a catalyst to change the conversation in ag retail from selling products to selling proof.

“If a retailer or a manufacturer is trying to introduce something innovative or new and encourage adoption, in the grower community, traditionally, it relied on trying to sell them on the proof, talk through the data, the statistics, the claims, but they’ve heard it all before,” he says. “And so Crop Plan Warranty is a way to really distill that down into ‘Look, we’re also putting our money where our mouth is, and we’re going to guarantee the yield.’ That is generally the last thing a farmer needs to hear before he decides to hit the buy button.”

As Hansen explains, Grower’s Edge launched in the federal crop insurance and data space, and then developed its Crop Plan Warranty, which has shown how the fintech tool can combat risk aversion.

“Our first product provides downside protection, or a guarantee on farmers’ yields, if they buy products from their retailer that are warranted,” he says. “And that’s both on a white label and non-white label basis.”

The company reports dramatically higher takes rates and sell through rates with the products enrolled in the Crop Plan Warranty.

“On spend for mature programs as much as, if not more than, 10 to 1. So for every dollar that’s warranted, they sell $10 of product,” he says. “It should also be noted you’re only paying for the warranty if the product sells. So it’s one of those rare marketing bullseyes where you know that the marketing’s effective because you’ve sold the product.”

Earlier this summer, the company acquired Farm Test, a performance testing platform.

“The acquisition of Farm Test is what accelerates our newest version of the crop plan warranty, which is the side-by-side,” Hansen says. “We can do an in-year side-by-side comparison. It’s something that was on our product development roadmap, but it was 12 to 18 months out, and this acquisition just brought it to the present.”

So far, 144 million acres have been covered by farmland valuation tool and one million protected by Crop Plan Warranty program

Additional Fintech Tools

Grower’s Edge now has four pillars to its product offering. In addition to the warranty program, it developed a white label input financing program for retailers and manufacturers.

About a year ago, the company acquired AQUAOSO, which includes its Agcor software for ag lenders for mapping, data and analytics.

And next, the company will launch new financing tools.

“We closed the largest deal in history for us,” Hansen says. “It’s a mortgage lending platform. We set out to create the Rocket Mortgage for ag, to make a full digital end-to-end mortgage, and rapid mortgage possible.”

Hear more from Hansen in the Scoop Podcast:

Peel Back The Curtain: Boosting Farm Efficiency With Business Tech

Tue, 15 Apr 2025 20:05:49 GMT

While relationships remain the foundation of the farmer business ecosystem, technology is brining a new structure to how everyday business is done.

“You have to have the relationship, maybe to start, but if it is inconvenient, you will lose business,” says Jake Jorandstaad co-founder of Bushel. “If you still only send paper invoices in the mail, and you don’t accept an online payment, you’re in trouble. You’re literally making it inconvenient for the 35-year-old who’s about to be your biggest customer in the next ten years to do business with you.”

Joranstaad highlights this as a takeaway from the latest State of Farm Report published by Bushel. Started in 2018, the goal of the survey is to answer questions about farmer tech adoption, which provides takeaways not only for technology but also payments and business operations.

This year’s findings are from over 1,300 respondents, and of which 59% of respondents farm more than 500 acres.

To support the importance of ease of doing business, the study found more are shifting to digital options. Only 39% of farmers prefer submitting grain offers in person, and 34% prefer ordering inputs face-to-face.

“Five years ago it was like most farmers didn’t really use software in the farm in their mind,” he says. Now, per Bushel’s survey, on average a farmer uses three software programs in their farm business.

In each year, the younger demographic shows a stronger use of technology in general. Joranstaad says with successful adoption over time, the demographics are shifting.

“50 is the new 40. 50 is the age range that tips the scale. If you’re 50 or younger, you are very much interested in adoption of technology on your operation. There’s very little resistance anymore in that range. And of course, more and more of those folks are also running the operations,” he says.

This underscores the need for businesses who serve farmers to outfit their operations for the future.

For example, 61% of farmers under 40 prefer mobile apps for payments and fund transfers.

And record-keeping has seen a jump in digitization: in two years, the use of pen and paper dropped from 65% to 21%. From the 2025 survey, spreadsheets are used by 39% of respondents—in 2024 it was 61%.

(Bushel)

One of the next leap frog’s in tech use will be software and apps for decision making beyond just simple record keeping.

Per this report, farmers under the age of 50 value software to help with improved decision making at a higher rate. And with the data spliced by size of operation, one-third of farms more than 10,000 acres use software for improved decision making.

The trends in the State of the Farm Report have been used by Bushel with production introductions, such as Bushel Wallet.

“We expected the farmer to want to start doing business with their farm operation, like they can at home,” Joranstaad says, referring to Venmo and Paypal services. “Now our report shows the 40 year olds and under expect to be able to use technology and tools to do payments and handle their business. Even though 80% of people get paper checks, but the preference to get paper checks is less than half. And so we’ve got to work on that as an industry.”

He says in the past 18 months, Bushel has seen a growth in farmers enrolling for direct deposit online. Earlier this year, the company added a feature to Bushel Wallet where the online account can earn interest—right now around 3%.

“It’s been one of the things we were working on–how can we make a compelling place for your money to initially get it quickly so you can manage it, move it to your different banks, and now earn almost 3.5% interest,” Joranstaad says.

Other takeaways:

Farmer payments: Among farmers under 50, a 30% gap exists between how they are paid and how they prefer to be paid when it comes to paper checks.
Purchasing trends: 70% of farmers cite using a credit card at least one time per month; yet only 8% of farmers prefer the use of a credit card. 49% of respondents said that their ag retailers had some sort of policy regarding using credit cards. 40% of respondents say retailers are passing those fees onto the farmers to help recoup those costs.
Financial management: 32% are currently using apps or digital tools from their bank for financial management for their farm.
Digital payments: Up to 53% of respondents use Venmo and up to 46% use PayPal, which provide baseline experiences with digital payment processors for sending or receiving money.
Ordering inputs: 34% of respondents think the process of ordering inputs via their ag retailer could be improved—with the top examples being price information, easier access to quotes, and input comparison tools.

$10 Billion in ECAP Aid Now Available to Qualifying Farmers

Fri, 28 Mar 2025 19:34:08 GMT

Applications are now open through August 15, 2025, for farmers interested in participating in the $10-billion Emergency Commodity Assistance Program (ECAP), which is being administered by USDA’s Farm Service Agency (FSA).

The aid comes available at a crucial time as farmers are experiencing low commodity prices, high input costs and a variety of trade uncertainties going into the 2025 production season.

The American Relief Act of 2025, which was passed by Congress late last year, authorized the $10 billion for ECAP payments to help offset losses growers incurred during the 2024 crop year.

Payments will be made to farmers on a flat per-acre rate on 100% of planted acres, or 50% of those prevented from planting, Paul Neiffer, Farm CPA, told AgriTalk Host Chip Flory earlier this week.

“Eligible farmers are those planting commodity crops like corn, soybeans, wheat, legumes, dry peas, oilseeds,” Neiffer said.

Acres planted for harvest, grazing, haying, silage or other similar purposes in the 2024 crop year also qualify. In all, a total of 22 different crops are included in the program (see list below).

Neiffer addresses many of the questions farmers are asking him about ECAP in his discussion with Flory on AgriTalk. Listen here:

Specific Requirements For Eligibility
To be eligible, farmers must meet the following requirements, according to Betty Resnick, American Farm Bureau Federation economist:

Be actively engaged in farming.
Have an interest in input expenses for a covered commodity.
Have reported acreage of eligible commodities to FSA for the 2024 crop year planted and prevent plant acres to FSA on an FSA-578, Report of Acreage form.
Have reported acres that were prevented from being planted to FSA for the 2024 crop year on an CCC-576 Notice of Loss form (if applicable).

Producers who have not previously reported 2024 crop year acreage or filed a notice of loss for prevent plant crops, must submit an acreage report by the August 15, 2025 deadline.

Notably, the initial round of payments will only amount to 85% of the per-acre payment to ensure that enough funding is available for all farmers who sign up for the program, Neiffer told Flory.

After the ECAP application period closes on August 15, a second payment may be issued with the remaining funds up to the additional 15% of the per-acre payments. Farmers can estimate their total expected payments using an online calculator available at fsa.usda.gov/ecap.

Producers can also contact their local FSA offices with additional questions.

Farmers can use the ECAP calculator provided by USDA-FSA to get an idea of what their payment could be potentially.

(Lori Hays)

Eligible Crops And Rates
Commodities included in the program are:

Wheat: $30.69
Corn: $42.91
Sorghum – $42.52
Barley – $21.67
Oats – $77.66
Upland cotton & Extra-long staple cotton – $84.74
Long & medium grain rice – $76.94
Peanuts – $75.51
Soybeans – $29.76
Dry peas – $16.02
Lentils – $19.30
Small Chickpeas – $31.45
Large Chickpeas – $24.02

Eligible Oilseeds:

Canola – $31.83
Crambe – $19.08
Flax – $20.97
Mustard – $11.36
Rapeseed – $23.63
Safflower – $26.32
Sesame – $16.83
Sunflower – $27.23

Your next read: What USDA Corn and Soybean Acreage Estimates Would Shock the Market On Monday?

Traction Ag Partnership Into Ag Retail Showcases ‘Next Generation of Farm Accounting’

Tue, 11 Mar 2025 01:15:52 GMT

For the past five years, the team at Traction Ag has been working to put all of a farmer’s accounting records in one place as easily as possible. And this past week, they unveiled the next level of achieving that goal via a partnership with Growmark’s FS member companies to enable seamless synchronization of FS bills directly into Traction Ag’s cloud-based platform.

The integration with FS and its ag retail businesses brings three key benefits, according to Brian Stark, co-founder of Traction Ag:

Simplifying billing with automation
Reducing errors or miskeys in data input
Saving time

“No one really likes the manual process of accounting, but accuracy in business is important,” Stark says. “At the same time, we can save farmers time so bills don’t pile up and everything is accurately accounted for.”

He shares an example of a manual bill process that may take three minutes or more for every bill, however with the new Traction Ag functionality, the same bill took less than a minute to enter.

“We are using cutting-edge technology in farm accounting, and it also makes our partners easier to do business with,” he says. “Farmers can avoid the paperwork nightmare and focus on farming—the time savings is super important.”

Traction Ag’s cloud-based accounting software also has APIs with John Deere Operations and Climate Field View. Stark says it’s unique offering is being focus on agriculture and providing for breakeven per bushel, field level profitability, inventory management and more.

“Our new integration with FS shows how we can also bring in the retail inputs and agronomy side of the farm business, and now we have a foundation layout so we can continue to work with other retail partners and make accounting easier for farmers and everyone they do business with,” Stark says.

Bushel Adds Four Financial Tools, Including Interest Bearing Accounts

Thu, 27 Feb 2025 15:37:09 GMT

Financial tech company Bushel has announced updates coming this spring to its payments platform, which includes added features for both farmers and ag retailers/agribusinesses.

With the goal to provide an all-in-one platform to manage farm operations and finance, Bushel Farm will include a digital wallet.

Four additional financial tools include:

1. Interest-bearing business account: competitive interest rates currently 3.43% as of Feb 26, 2025 and will be eligible to be FDIC-insured up to $5 million through sweep program banks. Farmers and agribusinesses will gain access to a Bushel business account*, offered by The Bancorp Bank, N.A. Member FDIC, a wholly owned subsidiary of The Bancorp, Inc.

“When you consider the whole package, this continues to strengthen the business relationships between farmers and agribusinesses. When a farmer can immediately begin earning interest on their grain settlement, that’s meaningful to the bottom line. When a retailer can collect payments online with lower fees and ensure on-time payment, that is meaningful to the bottom line,” said Jake Joraanstad, CEO of Bushel.
For grain elevators and ag retailers, Bushel’s updates provide a strategic to generate returns on operational float. The business account offered by The Bancorp, provides for businesses to keep funds in the account, earn competitive interest, and maintain liquidity for daily operations.

2. Send and request payments directly on the platform to help streamline transactions.

3. Access and Repay Lines of Credit: Users can manage lines of credit within Bushel Farm

4. Additional features in 2025: which includes high-limit mobile check deposits for grain settlement checks, online bill pay, and debit card access.

Bushel emphasizes how this handful of new features continues its progress to remove physical payments via check which rely on U.S. mail and its inherent security risks with check fraud. Bushel’s State of the Farm Report shows a 12% decrease in farmer usage of paper checks for business payments.

The company highlights existing features of Bushel Farm, including field-level rainfall data, activity tracking, profit and loss reporting, and more, will continue to be available.

This is the Year to Re-Evaluate Your Crop Insurance

Mon, 10 Feb 2025 20:17:50 GMT

According to Cole Patrick, director of insurance strategies at Compeer Financial, farmers need to take a serious look at their crop insurance strategies before the 2025 deadline because last year’s coverage isn’t going to cut it.

“This is not a “set it and forget it” year - it’s not the year to renew without considering changes to your coverage options,” Patrick explained during a Compeer Financial webinar in January. “Last year’s coverage might not be adequate for the cost of production, and coverage might not have the same effect it did last year or even two years ago.”

Patrick provides this example:

In 2023, 75% revenue protection (RP) with 230 average production history (APH) and a $5.91 corn price equaled $1,019 in liability.
In 2024, using a corn price of $4.66, that came to $804 in liability.
In 2025, using a corn price of $4.40, that only supplies $760 in liability.

Data from Farmdoc at the University of Illinois estimates total expenses for a farmer in northern Illinois would average about $1,000 per acre - making it important for liability to come closer to 2023 numbers.

“Many don’t want to increase costs by increasing coverage, but they also maybe can’t afford to leave hundreds of dollars at risk,” says Brandon Pezanoski, state insurance product officer with Compeer Financial. “There are a couple of different routes to get this number closer to $1,000 an acre of coverage.”

Look Beyond Base Coverage
Expanding on base coverage, there are two sets of options.

Title 1 through FSA: Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC)
Stacked: Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO)

Patrick shares four main differences for farmers to consider:

ARC/PLC cover base acres, while SCO/ECO are planted acres.
ARC/PLC have no premium.
ARC/PLC pay in Oct. 2026, and SCO/ECO pay in June 2026.
ARC and SCO cannot be combined, but a combination of SCO and/or ECO can be added to PLC.

“In the past few years, we’ve largely seen preference toward ARC - which is typically more favorable when you have a few years of high prices in that 5-year Olympic average. Because PLC uses a statutory reference price, that hasn’t been as attractive,” Patrick says.

When To Use ECO
In 2025, he expects ECO to gain in popularity.

“We think this is going to be hugely advantageous for producers out there,” Patrick says. “It’s a very effective shallow loss coverage tool.”

ECO is an optional, area-based policy endorsement with a coverage band that goes from 85% to 95%. It is available regardless of your ARC or PLC election and can be purchased with or without SCO. However, it does need to be purchased at the same time as your underlying multi-peril crop insurance (MCPI).

“Most of the products we have that are 95% coverage are private product, not subsidized and simply cost a 2:1 or 3:1 ratio,” Pezanoski says. “Here we’re looking at a 5:1 ratio, and there’s no ARC conflict.”

Patrick adds that if crop insurance prices fall more than 5% between the spring and the fall, you’re in ECO territory.

“In the last 10 years for corn, that price has dropped from the spring to the fall price seven times, and six out of those seven times it was greater than 5%,” he says. “If I’m just playing my odds, and I think the price is going to drop more than 5% between 60% to 70% of the time, those are pretty good odds.”

Your Next Read: ARC or PLC? Enrollment is Now Open and Coverage Levels Could Hit Near All-Time Highs For Some Crops

The Scoop Podcast: Deliver Every Penny Out of Every Bushel

Mon, 30 Dec 2024 16:13:25 GMT

Today’s ag economy has changed the way United Prairie is partnering with its farmer customers. The focus is still keenly on return on investment, but CEO Curt Miller explains, there are key considerations for how United Prairie is showing up differently for their customers.

“Our major focus is return on investment for our customers,” he says. “In the past that return on investment has really been about yield and about increasing their bushels, but now more it’s about making sure the expense we are asking them to take on to increase those bushels does show a return on investment. As far as all these bushels we’ve helped them raise–make sure they get every penny out of them.”

Miller is the fourth generation in his family to be in ag retail. His family’s fertilizer business was acquired by United Prairie in 2019, and he became CEO in March of 2021.

“I’ve been a fertilizer buyer for 18 years—tracking the Chicago Board of Trade close of business every week, what that number is for corn, and then how many bushels it takes to buy a ton at the crop nutrient levels today,” he says. “But when you’re buying fertilizer, you need to sell grain to cover it. That’s the best hedge that you can use.”

The ag retailer spans 14 locations across east central Illinois. Their team out of Tolono, Ill., is the 2024 recipient of The Scoop Business Innovation Award , sponsored by Ever.Ag Agribusiness.

As they have digitized their business and their customer experience, the biggest ROI has been on efficiencies gained. Miller says that has been realized with their employees’ time, customers’ time and equipment.

“It’s trying to take all the pieces of the puzzle and put it together to where we can serve the grower efficiently. Give them the customer experience they want, give employees good work-life balance, and still be known for the return on investment piece,” he says. “It’s about giving the best service a retailer can offer, and not just from an application standpoint but also getting farther in to getting growers the information they need, the way they want it. And today that is electronically or digitally.”

As highlighted with receiving the Business Innovation Award, the team at United Prairie is motivated to try something new, and do things in a new way.

“We have to be honest right now the ag economy has challenges. And we need to accept the fact we’ve had several good years. History tells us we’ll have some that aren’t so good and are challenging. But with challenges come opportunities,” Miller says. “We just need to be able to take the pieces to the puzzle be more efficient.”

One way United Prairie is putting together those puzzle pieces is an all-in approach to its company culture.

“When our employee engagement survey come back, culture was one of the things one of the topics that the employees knew and enjoyed,” Miller says. “So we really took a deep dive. We know we have to adapt to change in the future. They see that, too. If return on investment for customers is there that’s something that they grab a hold of and take ownership of every day.”

Hear more about how they’ll partner with growers in 2025 and Miller’s insights in managing an ag retail business in The Scoop podcast.

Tax Turbulence: How Sunsetting Provisions Could Change Your Bottom Line

Thu, 19 Dec 2024 14:31:59 GMT

With 30 tax provisions set to expire at the end of 2025, the tax liabilities for family farms could increase at a time America’s farm families can ill afford any additional hits to the budget. Uncertainty surrounds the 2017 Tax Cuts and Jobs Act (TCJA) and American Rescue Plan Act (ARPA)–especially as a new administration is in route to the White House.

“The cost of the TCJA is significantly higher than was originally estimated in 2017. The newest estimate we’ve seen is that a full extension of the TCJA is going to cost $7.75 trillion through 2035,” says Pinion’s Beth Swanson. “With the budget reconciliation process and the expected cost, we’re worried that Congress is going to have to pick and choose which provisions of the TCJA are going to get extended next.”

According to research from USDA ERS, the impact of these expiring federal income tax provisions would increase tax liabilities for farm households by almost 9 billion. That’s a $2,200, or 12%, average increase per farm.

Increase in tax liabilities resulting from expiring Tax Cuts and Jobs Act (TCJA) provisions that would increase tax rates, decrease deductions, and restore personal exemptions.

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Broken down by farm size, that looks like:

Low sales farms: Tax increase of about $700
Moderate sales farms: Tax increase of about $2,300
Very large farms: Tax increase of nearly $28,000

“Interestingly, in percentage terms, moderate sales farms are expected to have the greatest increase in tax liabilities at about 16%,” says Tia McDonald, USDA ERS. “They’re in an in-between area where they’re not quite getting some of the exemptions that higher income folks can take advantage of like bonus depreciation and even 179.

Farm CPA and Top Producer columnist Paul Neiffer adds, “Another part of it is the percentage increase of going from a 12% tax bracket to a 15% tax bracket. A lot of those moderate-income farmers also have 2, 3 or 4 kids that, under the current rules, qualify for the $2,000 tax credit, which is going to drop down to a $1,000 tax credit.”

As far as which provisions are the most important for farmers and ranchers, McDonald says the biggest impact will come from be provisions providing reduced individual income tax rates, an increased standard deduction, a cap on state and local tax deductions, and the elimination of the personal exemption, which would create an increase in total tax liability of $4.5 billion for all farm households.

“The reason for that is that it touches almost every farm household. So, the reach is quite broad,” she explains.

The Qualified Business Income Deduction
The second most important provision set to expire that McDonald lists is the qualified business income deduction, which provides farm households with positive business income a deduction equal to 20% of their qualified business income.

“Approximately 40% of low sales farms to almost 80% of very large farms receive that qualified business income deduction,” McDonald says.

Estimated Impact of Expiring QBI Deduction

(USDA, Economic Research Service and USDA, National Agricultural Statistics Service, 2018–2021 Agricultural Resource Management Survey)

Referring to the results of a recent survey, Kent Bacus of National Cattlemen’s Beef Association (NCBA) says even though this deduction hasn’t been around long, it’s been valuable to producers.

“As far as the 199A qualified business income deduction, with that being relatively new, we still had over half of the [1,200] respondents who have used it, and they’ve considered a very important tool,” Bacus says. “I think that’s something that we want to see continue in the next package.”

Child Tax Credit and Bonus Depreciation
McDonald says additional provisions, such as the child tax credit, the estate tax exemption, alternative minimum tax provisions and bonus depreciation, will likely have less of an impact on tax liabilities overall.

“Those are really targeted toward higher income farm households, so they don’t have quite the reach,” she explains.

Swanson, however, says the loss of bonus depreciation would still be notable for many.

“For bonus depreciation, sunsetting is a concern – especially because Section 179 isn’t really a one-for-one trade. With commodities that are heavier on equipment, producers tend to use bonus depreciation year after year,” Swanson says. “It’s more than just a timing difference. The loss of bonus depreciation will be a significant annual effect to many of the farmers that we work with [at Pinion].”

This is echoed by the results of NCBA’s survey as well.

“When you look at Section 179 and bonus depreciation, one of the key things we ask is, ‘If these tools weren’t available, how would that impact you?’,” Bacus says. “What we found is without access to these tools, about 25% to 30% of the respondents would have had to pay an additional $20,000 in taxes.”

The Timeline
Once the new administration is in place, Bacus believes we can expect Congress to act quickly.

“We have new leadership in the Senate and new leadership in the administration. They’re going to try to prioritize a couple of key things that will be important to the new administration, and a couple of those are going to be border security and taxes.” Bacus explains. “We’re looking for a lot of movement in those first 100 days.”

But Swanson says it’s possible that movement may not be focused on extending these provisions in the beginning.

“We are worried about President-elect Trump’s varied tax commitments and the distraction those might provide to getting the TCJA extended,” Swanson says. “I think the best thing we can do is wait and see. We will hope that the legislative process goes fairly quickly and Congress is able to avoid all of those distractions that may prevent us from getting TCJA expansion done.

Once these provisions are in focus, Bacus believes there are a few avenues it could take.

“With those tight margins in the House and the Senate, you are going to have to have some kind of bipartisan package that comes together. The big question is, are they going to update the tax code? Are they just going to extend it? Or will we potentially see a default if all these efforts fail,” Bacus says. “I think it’s unlikely that the efforts have failed, but the aggressive timeline that’s been proposed is always subject to the minutia and the swamp nature of Washington. That tends to slow things down.”

Neiffer expects an extension with a few key changes.

“I don’t think we’re going to see a permanent TCJA,” Neiffer says. “We’re going to see another three to five or five to seven years. Some of the provisions may become permanent and some will disappear. And you’re going to see some new ones come into effect.”

Your Next Read: Will the Tax Cuts and Jobs Act Get a Second Life?

USDA: Family Farms Still Dominate A Majority of U.S. Farms

Tue, 10 Dec 2024 20:38:54 GMT

Here are eight takeaways illustrating the landscape of U.S. farm productivity and financial resources.

Released on Dec. 10, USDA-ERS published its 2024 edition of America’s Farms and Ranches at a Glance . This publication, which pulls from survey data collected at the end of 2023, aims to give a snapshot of the U.S. farm economy.

Takeaway 1: In total, family farms accounted for about 96% of total farms and 83% of total production in 2023.

A big part of the study breaks down different characteristics of farms by type. The first differentiation is between family farms and non-family farms. Per the USDA, a family farm is a farm in which the majority of the business is owned by an operator and/or any individual related by blood, marriage, or adoption, including relatives who do not live in the operator’s household.

Among family farms, farms are divided by farm size measured by gross cash farm income (GCFI).

Most U.S. farms (86%) are small family farms (GCFI less than $350,000); these farms operate on 41% of U.S. agricultural land and account for 17% of the total value of production
Midsize family farms (GCFI between $350,000 and $999,999) accounted for 18% of agricultural land and 18% of the total value of production.
Large-scale family farms (GCFI of $1,000,000 or more) accounted for 48% of the total value of production and 31% of agricultural land in 2023.
GCFI includes sales of crops and livestock, government payments, other farm related income, and fees received by operators from production contracts.

Takeaway 2: Large-scale family farms dominate the production of many selected commodities

Large-scale family farms accounted for the majority of the value of cash grains and soybeans (52%), cotton (71%), dairy (77%), and specialty crops (59%) production
Small family farms produced 45% of the value of hay and 46% of the total value of U.S. poultry and egg output
22% of the value of beef production occurred on small family farms, while 39% occurred on large-scale family farms. Small family farms often have cow-calf operations, while large-scale family farms are more likely to operate feedlots
Compared with 2022, nonfamily farms comprised a larger share of the value of production, with their value of beef production increasing from 11% in 2022 to 26% in 2023.

Takeaway 3: Small family farms and non-family farms are potentially more financially vulnerable.

The data in this report was collected when net cash income was above the 10-year average. USDA measures financial performance by operating profit margin (OPM), with a noted high-risk zone of less than 10 OPM.

In 2023, between 52 and 85% of small family farms, depending on the farm type (retirement, off-farm occupation, low sales, moderate sales), had an OPM in the high-risk zone.
Around 53% of nonfamily farms had an OPM in the high-risk zone.

Takeaway 4: Use of credit and loans is an important resource for all farms.

The share of farms (28%) using credit in 2023 was lower than the previous 10-year average of 31%.
Within every type of farm, on average, 80% or more of debt came from traditional lending sources, including the Farm Credit System, USDA, FSA, and commercial banks, compared with trade credit or other sources.

Takeaway 5: Less than one-quarter of farms use government payment programs.

The percentage of farms receiving government payments ranged from 21% for small family farms to 44% for midsize and large family farms.
Small family farms received 76% of all payments from USDA’s Conservation Reserve Program (CRP)
41% of all USDA, Natural Resources Conservation Service (NRCS) working lands program payments were received by small family farms, which includes Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP).
Midsized and large-scale family farms accounted for 66% of the total value of production and received 71% of countercyclical-type payments, which include Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) and 61% of all other payments, which include Dairy Margin Coverage, agricultural disaster, and ad-hoc payments

Takeaway 6: 16% of farms participated in federal crop insurance programs. This is a slight increase from 14% in 2022.

66% of farms producing row crops (cotton, corn, soybeans, wheat, peanuts, rice, or sorghum) purchased Federal crop insurance.
17% of farms growing specialty crops, such as fruits, vegetables, and nursery crops, and 12% of farms producing livestock purchased Federal crop insurance.

Takeaway 7: Many farms rely on off-farm income.

Most (85%) of all U.S. farm households earned the majority of their total household income from off-farm sources
52% of family farm households had negative farming income
Overall, 42% of farm households have income below the US median in 2023.

Takeaway 8: New insights on unpriced stored grain highlight the risk management tool.

For the first time, the study asked about unpriced stored corn, soybeans and wheat.

The largest volumes were in post-harvest months.
The average share of total stocks as of December 2023 that was unpriced was 38.6% for corn, 32.9% for soybeans, and 20.4% for wheat
Unpriced off farm storage is less commonly used

Click here for the full report from USDA-ERS

Bushel Expands Digital Payment Network

Mon, 25 Nov 2024 20:38:29 GMT

Agronomists, truckers, custom harvesters and more can now be part of Bushel’s payment network. The company says this helps farmers and agribusinesses avoid the hassle of traditional checks and ACH delays, achieving near real-time payments tailored specifically for agriculture.

This new feature in Bushel Wallet allows verified farmers and agribusinesses to invite their trusted partners into Bushel’s digital payment network for fast and secure payments.

Bushel Wallet account holders can click the “Send An Invite” button. Bushel then works with trusted identity verification services to ensure that only legitimate businesses join the network, meeting strict banking standards.

For agribusiness accounts, this new feature gives an efficient way to bring an entire customer base into digital payments.

Bushel highlights how its invitation-only model strengthens business relationships—enabling transparent payment status and reducing time spent managing the process.

Additionally, Bushel now integration with Levridge (an ERP system built on the Microsoft Dynamics 365 platform.)

The Levridge integration includes real-time access to contracts, tickets, settlements, and commodity balances, helping both staff and farmers access critical information instantly through the Bushel customer portal.

Bayer's Shares Sink to 20-Year Low on 2025 Earnings Fall Forecast

Wed, 13 Nov 2024 21:39:23 GMT

By Ludwig Burger and Patricia Weiss

Bayer said on Tuesday that weak agricultural markets mean its earnings are likely to fall further next year, sparking a sharp fall in the German company’s shares and piling pressure on its CEO to deliver on his turnaround efforts.

Chief executive Bill Anderson has started cutting jobs, speeding up decision-making and slashing red tape in a bid to turn around the embattled industrial group, while putting plans to break up its diversified businesses on hold.

Shares in Bayer were down 11.6% to 21.57 euros at 1004 GMT, their lowest level in 20 years following its update.

“We’re in the midst of a big agriculture downturn. And that’s very frustrating for people ... We understand the investor sentiment, but we remain very optimistic that we’ve got a strong future,” Anderson said in the statement.

He also pointed to strong launches for Bayer’s new drugs Nubeqa for prostate cancer and Kerendia for kidney disease.

However, Markus Manns, a portfolio manager at Bayer shareholder Union Investment in Germany, criticized the CEO for not having publishing medium-term financial targets, which need to be addressed to win back trust.

“Bayer’s transformation needs to be urgently accelerated and management needs to finally communicate a sustainable growth strategy with specific mid-term targets for sales, earnings and debt reduction,” said Manns.

Chief financial officer Wolfgang Nickl said in Bayer’s quarterly earnings statement it expected “a muted outlook on top and bottom line next year with likely declining earnings”.

Based on earnings before interest, tax, depreciation and amortisation (EBITDA), and adjusted for special items, the 2025 forecast would mean a third consecutive annual decline, after the group on Tuesday also lowered its projection for 2024.

Bayer said that the earnings measure, when adjusted for currency impacts, would likely be between 10.4 billion euros ($11.1 billion) and 10.7 billion euros, down from a previous 10.7-11.3 billion euro forecast and last year’s 11.7 billion.

Its July-to-September EBITDA, adjusted for one-offs, fell almost 26% to 1.25 billion euros, missing the average analyst estimate of 1.31 billion euros posted on Bayer’s website, with Bayer citing weak Latin American agricultural markets.

Regulation
Bayer’s $63 billion purchase in 2018 of seeds and pesticides maker Monsanto under Anderson’s predecessor was a long-term bet on robust growth in farming supplies which has so far misfired.

Debt and costly U.S. product liability litigation over disputed claims that Monsanto weedkiller Roundup causes cancer are further burdens which Anderson is struggling to shake off.

Bayer shares have lost close to 80% since the Monsanto deal was closed in 2018 and about 70% since it was agreed in 2016.

U.S. agrichemicals competitor Corteva and the agriculture unit of Germany’s BASF have also been hit by lower prices as weak produce prices weighed on demand.

Bayer’s shares trade at 4.6 times forward earnings over the next 12 months, well below BASF at 12 and 18.8 for Corteva. The ratio is widely used to gauge the relative value of stocks.

Bayer said its business is set to suffer more because U.S. approval for new soy seeds to be used with weedkiller dicamba will not be in time for the 2025 sowing season and EU regulators will pull insecticide Movento from the market under the bloc’s environmental agenda known as the Green Deal.

In addition, cost-conscious U.S. farmers are turning to cheap generic copies of Bayer’s pesticides, it said.

Bayer said that special charges of 4.1 billion euros, mainly from write-downs on intangible assets in its Crop Science division, resulted in a quarterly net loss of 4.18 billion euros, compared with a 4.57 billion euro loss a year earlier.

It confirmed its previous currency-adjusted guidance for 2024 sales and earnings per share before certain items.

(Reporting by Ludwig Burger, Editing by Rachel More, Kirsten Donovan and Alexander Smith)

How To Get The Most Out Of A Business Sale

Fri, 01 Nov 2024 13:00:00 GMT

Exit planning is more than just preparing to walk away from the business. It’s about crafting a compelling narrative that shows where the company has been and where it’s headed. In preparing to sell, business owners need to assess levers that unlock incremental value. This includes demonstrating a clear growth trajectory, including expansion opportunities, to potential buyers.

A crucial aspect of this preparation is cleaning up financials. Business owners must ensure they have solid financial statements that justify a business’ valuation. This often involves seeking a third-party audit to verify financial measures such as EBITDA (earnings before interest, taxes, depreciation and amortization) and confirm the quality of earnings. Streamlining operations to optimize earnings is also key as buyers look for operational efficiency and profitability.

Consider Personal and Business Planning
As essential as it is to prepare the business for sale, it’s equally important for owners to engage in thorough financial planning. Consider your personal life objectives and financial needs post-sale. What do you want to do with the proceeds? What are your long-term financial goals, and how much do you truly need? Understanding these objectives early on ensures you’re fully prepared for life after the sale.

On the business side, preparing for a sale includes deciding whether to use a business broker or investment banker. The choice will depend on the company’s size. For businesses valued at less than $5 million, a business broker may be the best option. Brokers typically market to a broad audience and negotiate with a single buyer. For larger companies—especially those with valuations exceeding $15 million—a controlled auction process involving an investment banker is often more suitable. The banker contacts potential buyers and creates a competitive bidding environment with multiple phases and rounds of negotiations.

Controlled Auction Process and Due Diligence
In a controlled auction, an investment banker helps the business owner develop a compelling narrative and reach out to potential buyers. The auction process usually starts with a teaser—a brief document describing the business while keeping its identity confidential. Interested buyers must sign nondisclosure agreements before receiving a detailed confidential information memorandum, which outlines the business’ financials, operations and growth opportunities.

From there, buyers submit an indication of interest to articulate their interest and ability to meet the seller’s expectations. The top potential buyers then submit a letter of intent. Due diligence follows for 60 days to 90 days as the company’s financials, operations and legal documents undergo inspection.

The Role of Culture & Terms
Beyond the financial aspects, potential buyers consider the company’s culture and how well it aligns with their own. The sale terms, including the structure of the deal, can greatly impact both sides. Sellers should work with their legal and financial advisers to draft the final purchase agreement—whether that is an asset purchase agreement or a stock purchase agreement.

Contact me if you would like to conduct a free in-depth valuation to discover the asset, liquidation, equity and enterprise values of your business and see how your 12 financial ratios stack up against your competition’s. I would be glad to take your ownership through the process, provide the resulting 26-page report and show how to optimize your value.

A Few Other Key Points:

Never negotiate alone.
Avoid selling to one buyer. “If you have one buyer, you have no buyers.”
Build and execute on your growth strategy before you sell. Demonstrate it can be accomplished. Often your potential can be your most valuable asset, and proving it can be golden.

___________________________________________________________________________________________
Mark Faust
513-621-8000
mark@em1990.com
@markfaustsr

Chasing Dollars (or Pennies) With Carbon Farming

Wed, 23 Oct 2024 21:36:21 GMT

The move to climate-smart farming practices has felt like a disorganized and chaotic movement of different opinions and attitudes toward an elusive and dynamic end point.

That is — herding cats.

The original plan for carbon farming was carbon offsets. Eastern Iowa farmer and carbon-market early adopter Ben Riensche explained that approach very clearly during a recent farmer forum on “ AgriTalk .”

“It’s like paying you to go to Jenny Craig to lose weight for me,” he said.

There are still carbon offset opportunities, but the broader market is in transition. Instead of an individual farmer contracting to change production practices to offset the carbon output of another producer, the effort now is to maximize crops with the lowest carbon footprint in the production of biofuels.

The theory is other end users will eventually need to compete to have the crops with the lowest carbon footprint to produce whatever they produce. Maybe even if that’s beef, pork or poultry.

Enter 45Z Tax Credits

Starting Jan. 1, 2025, registered biofuel producers will be eligible for 45Z tax credits totaling as much as $1.75 per gallon. The biggest incentives are expected to be paid to producers of sustainable aviation fuel (SAF), which use ethanol and bio-based diesel produced with crops with the lowest combined carbon intensity (CI) score.

If an ethanol or oilseed crush plant can convince all growers who send crops to its plant to make an effort to lower their carbon intensity score, they might be in line to capture a chunk of that $1.75 per gallon and distribute it to their suppliers via higher corn and soybean bids.

Another option is to put all producers feeding crops into biofuel facilities on the same footing by capturing CO2 and locking it up underground. That would likely make the facility eligible for 45Z credits.

But Is It Worth It?

The beauty of this is many producers are already using production practices that lower their CI score. The key will be to document and certify sustainability efforts. If you are doing the bare minimum to reduce your CI score, you might be eligible for a small share of the 45Z tax credit.

If what you’re doing now generates the greatest return, including the 45Z incentive, you should feel no pressure to change what you are doing. If, however, a change here or there on the production side will lower your CI score enough to result in a payment that would more than offset increased costs or lower production, then maybe that’s something to think about trying.

The analysis is straightforward: If a change in production practices will earn you more net income per acre, it’s a change worth considering.

Your Next Read: Treasury Dept. Finally Releases Guidance on the Sustainable Aviation Fuel 40B Tax Credit

Understand Costs, Build Confidence

Fri, 27 Sep 2024 14:20:49 GMT

There are two financial benefits in calculating your cost of production: support marketing decisions and develop accurate budgets. There also tends to be psychological benefits.

“There is a lot we can’t control in farming, but certain costs can be,” says Brian Stark with Traction Ag. “Understanding (and controlling) your costs of production is key to profitability. You can’t improve what you don’t measure.”

He says having your own financial understanding aids in making good crop marketing decisions and identifying profitable fields/crop zones; it also helps budget toward expansion.

Buoy Your Marketing
Knowing your cost of production additionally boosts your confidence in marketing. Via an online survey with 1,350 farmer respondents conducted by Bushel, over half of respondents said they were satisfied with their grain marketing results, while 42% said they were neutral, and another 5% said they were dissatisfied.

“When we dug deeper into the data, we saw a correlation between marketing satisfaction and understanding and use of cost of production data,” says Julie Christensen, product marketer for Bushel Farm. “The most satisfied farm marketers were more likely to know their cost of production and use it to set the price where they begin pricing their crop.”

According to the survey, 95% of farmers who were “very satisfied” with their marketing results also said “I have a very good understanding of my cost of production.”

“It can be overwhelming to pull together all the information to calculate actual cost of production,” Christensen says. “Fortunately, digital tools like Bushel Farm can make it a whole lot easier than it has been in the past. When armed with those insights, farmers can make the best decision for their operations, down to the field level.”

A large majority of the survey respondents said technology is important to the future, and nearly half are willing to experiment with new technology. When it comes to software use, 24% use four or more software programs for their farm business, and 44% use one to two software programs for farm business. One-fifth of respondents use no software programs at all.

Cost Calculations
Two numbers derived from your cost of production are helpful for two different applications.

Stark explains knowing your cost per acre is ideal for budgeting and can help with strategies in controlling input units.

“This is extremely important when budgeting costs for fertilizer, seed and pesticides, energy, machinery and land for the upcoming year,” he says.

Using the data differently, having your cost per bushel gives you the ability to budget and market based on output units.

“There are three good reasons to budget on outputs — ease of decision making, recognition that per unit fixed costs can decline dramatically with increases in output, and recognition in the trade-off between productivity and cost,” he says.

7 Ways To Be A Lifeline For Farmers

Wed, 25 Sep 2024 19:43:17 GMT

When times are tough is when farmers need their trusted advisers the most, says Greg Martinelli. For the past eight years, he’s coached ag sales professionals specifically in the retail/inputs category.

“When I worked in corporate ag, there was a moment when this idea hit me like a ton of bricks,” Martinelli says. “I was visiting a Midwest row crop farmer in 2011, when corn was $6 and breakeven costs were close to $3.50. He told me, ‘I don’t need you now, I needed you when corn was $3.50.’”

Martinelli says there are opportunities to bring value in this current economic environment. To help refocus your efforts in sales and marketing, he offers seven steps to find success with customers despite the tough economic times of the cycle.

1. Don’t jump into the quick sand with them.
“Farmers love to complain and commiserate about how hard it is. And as sales people we love to commiserate with them on how you understand the farmer’s business,” Martinelli says. “But if you do that, you aren’t doing anything different than what they hear at the coffee shop.”

He equates reiterating the negativity as not throwing them a lifeline but rather jumping into the quicksand with them.

“Farmers are looking for someone with a solution. You show up on the farm with all of your company tools and resources and instead of using them to help, you jump into the quicksand with them. This is where a trusted advisor can set themselves apart,” he says.

2. Keep them moving.
With the magnitude and quantity of factors farmers consider, they can fall victim to analysis paralysis.

“Farmers are seeking ideas but more so clear answers,” Martinelli says “This is where you can—not in a gossipy way—share your insights from other farms. Every day all day you’re on farms. You can share in a professional way what you are seeing and what you are learning.”

This combination of experience and credibility can serve the purpose to keep farmers considering new ideas as well as help prevent someone from going too far or all-in on a risky choice.

3. Provide perspective.
“If you’re lucky enough to be in the middle or late in your career, you’ve gone through downturns before,” Martinelli says. “That means you know things change, and there will be an upturn.”

He cautions sales people from encouraging negativity and rather engaging in a positive way.

“You have to acknowledge what is going on, because the financial pain is real,” he says. “Often as salespeople we can seem like we’re acting like a psychiatrist, and the opportunity is to not let the negativity persist any more in the conversation than it needs to.”

4. Shed light.
“There are places farmers aren’t looking where there are opportunities for you to help them uncover,” Martinelli says.

As an illustrative example, he talks about crop marketing.

“This is a weak area across crop production because there are no right or wrong answers, and the skills required usually mean the oldest person on the farm does the work,” he says. “The thing to do is admit you don’t have the answers, but ask what they are doing with their marketing plan.”

He says many of those conversations unveiled farmers with even 30 years of experience didn’t understand crop insurance, which provided another valuable exploration of additional services.

5. Show them a path.
“Instead of selling an idea, explain why a change of approach is an asset to their business,” he says.

One common trap is to talk broadly about precision agriculture and not detail exactly what product and service fit an individual field.

6. Put your customer on your org chart.
While this may sound a bit off the wall, Martinelli advocates identifying where the customer fits into your business by the simple task of putting them on your company’s organizational chart.

“We all need an org chart to know who manages who, but if you really want to start the engines of the thought process, ask where on your org chart is your customer. Where would you put them.”

This helps illustrate how marketing, accounting and other teams are taking into account what customers are trying to accomplish.

“If things are changing, and times get tough for the customer, it’ll get tough on your agribusiness. How are we organizing around the customer?” he says.

7. Let them know they aren’t completely alone.
“At first, it may not be well received or completely understood that everyone is experiencing this downturn,” Martinelli says. “Farming and making decisions can be a lonely business for our customers. As their trusted adviser, this can be your chance to provide support. Let them know they are not alone in their struggles.”

He says when customers are venting, don’t interrupt them, but rather when they are done ask them with all of the negatively for how things are, what are they going to do different.

With the seven steps, Martinelli coaches advisers to take their three biggest customers, and list the steps they will do in 30, 60 and 90 days.

“Having a plan is certainly better than just showing up on the farm and kicking tires,” he says.

Your Next Read: New Study Looks At The Relationship Between Farmers And Their Advisors

Is the Fed Running Out of Reasons to Not Cut Interest Rates? Important Insights From Powell's Testimony Today

Thu, 12 Sep 2024 15:29:15 GMT

Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee provided several key insights into the current economic landscape and potential future monetary policy actions. Here are the main highlights:

Cooling job market and economic slowdown. Powell noted a noticeable cooling in the job market, with the unemployment rate rising to 4.1% for the third consecutive month. Despite this, hiring remains solid, indicating a slowdown rather than a halt in economic activity. He also mentioned a general deceleration in economic growth following a period of robust expansion last year.
Inflation and interest rates. Powell emphasized that while significant progress has been made in controlling inflation, it remains above the Federal Reserve’s 2% target. This persistent inflation, coupled with the slowing job market, has led to discussions about the potential for interest rate cuts soon. Powell’s testimony suggested a shift from the Fed’s previous focus on combating inflation to a more balanced approach that also considers economic growth and employment.
Potential rate cuts. Market participants and economists are anticipating a possible interest rate cut at the Federal Reserve’s Sept. 17-18 meeting. Powell’s remarks have bolstered these expectations, with many interpreting his statements as a signal that the Fed is open to adjusting rates to support the economy. Democratic senators, including Elizabeth Warren (Mass.), have been vocal in urging for rate cuts, aligning with market sentiments.
Political implications. The testimony comes at a politically sensitive time, with the presidential campaign season underway. Voters’ dissatisfaction with high prices has put additional pressure on the Federal Reserve’s decisions. Powell’s cautious approach aims to balance economic needs without appearing to influence political outcomes. His emphasis on avoiding delayed policy adjustments that could harm economic activity and employment was well-received by the markets.
Market impact: Markets want to believe the Fed will cut rates in September, so they are taking the basic remarks and now taking them as suddenly backing a rate cut in September. But the Dow is flat and CME Fed funds futures for September have a 70% probability of a rate cut. Yesterday that was 71%.

“We continue to make decisions meeting by meeting. We know that reducing policy restraint too soon or too much could stall or even reverse the progress we have seen on inflation. At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face. Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said during his testimony.

Powell was asked when the Fed would cut rates. “I’m not going to be sending any signals about the timing of any further actions,” Powell said.

Overall Outlook
Powell highlighted the importance of monitoring economic indicators closely to avoid past mistakes of delayed responses to inflation. Thursday’s release of the Consumer Price Index for June is expected to show a slight decrease, further indicating a gradual moderation in inflation.

“The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,” Powell said during his testimony.

Bottom Line
Powell’s testimony underscored a cautious optimism regarding inflation control, a recognition of a cooling job market, and a potential shift towards interest rate cuts to support the economy amidst evolving conditions.

USDA’s Latest Farm Income Data Looks Brighter Than Early 2024 Numbers

Thu, 05 Sep 2024 21:17:51 GMT

USDA–Economic Research Service (ERS) has released updated projections for 2024 farm income, and though it’s still anticipated to decline, the outlook doesn’t look quite as dim as it did earlier this year.

The new numbers show net cash farm income for the 2024 calendar year will fall $12 billion, which is about 7% down from 2023, and net farm income will fall $6.5 billion or 4.4%. This is compared to projections released in February of this year that suggested net farm income would fall 26%.

“There are a lot of factors going on here, but to me, the primary ones are that the revisions reflect expectations that animal and animal product cash receipts will increase while production expenses will fall,” says USDA–ERS economist Carrie Litkowski. “This is largely due to the incorporation of new data.

Litkowski shares the primary cause for the fall in 2024 farm income comes from commodity prices. Cash receipts or sales are expected to decrease by $27.7 billion. When combined with the inventory adjustment for crops, the value of crop production is forecast to decrease $25.6 billion from 2023. The largest decline comes from corn and soybeans, though wheat producers are expected to have a nearly 50% decline in average net cash farm income in 2024.

USDA ERS Row Crop Cash Receipt Projections 9-5-24

(USDA ERS)

But it’s not all bad news for crop farmers. Fertilizer expenses are expected to fall almost 10%.

Better News in Livestock
The outlook for livestock producers is more positive. Total animal and animal product recipes are expected to increase by $17.8 billion, or 7.1%, with the main driver coming from egg prices.

“Receipts for eggs are perhaps the biggest story here, in that they are forecast to see the largest increase in 2024 at 35%, or about $6 billion. Eggs alone account for a little more than half of the total increase in animal and animal product receipts,” Litkowski says. “Back in February, we did not anticipate that egg prices were going to increase as much as they have. That’s due to supply restraints we’re seeing due to the avian flu.”

Dairy farm businesses can expect to see the largest increase in average net farm income at 47.2%. Litkowski attributes this to higher milk receipts and lower expenses in 2024.

Farm businesses specializing in hogs are forecast to have an 11% increase but remain low relative to prior years. Beef farm businesses are projected at a 9.7% increase and poultry will see an 11.7% increase.

USDA ERS Livestock Cash Receipt Projections 9-5-24

(USDA ERS)

These operations should see big savings in feed as well, with an anticipated decline of 12%.

Geographic Breakdown
Looking at the data by region, six of USDA’s nine regions will see lower average net cash farm income. Farmers in the heartland states will be hit the hardest with a 23% decline.

Income increases are forecast for producers in the northern crescent and fruitful rim regions — between 1% and 4%. Litkowski says this is where many dairy farms are located and can be attributed to the expectations for higher dairy receipts and lower expenses.

“Regional performance of farm businesses can vary considerably due to the strong geographic concentration of certain production specialties or average farm size,” she explains. “Across all farm businesses, average net cash farm income is forecast to decrease 9% from 2023 to 2024 in nominal dollars.”

USDA ERS Farm Income By Region 9-5-24

(USDA ERS)

Household Income Remains Unchanged
Total farm household income is projected to increase 1.7% in 2024 to $99,683. However, when inflation is taken into consideration, Litkowski says she categorizes it as “relatively unchanged”.

“1.7% is less than the expected rate of inflation in 2024, so it’s really more like a decline of 0.7% in real dollars,” she explains.

The Big Picture
While this year’s income projections may have producers concerned about their bottom line, USDA–ERS stresses the importance of looking at the numbers with the past 20 years in mind.

“The farm sector balance sheet is projected to remain strong,” Litkowski says. “Net farm income fell 22% from 2022 to 2023, and in 2024 net farm income is forecast to fall nearly 7%. Even with these expected declines, both sectors in 2024 are forecast to remain above their 20-year-average.”

USDA ERS Farm Income 20-year Average 9-5-24

(USDA ERS)

Click here for the full report.

Your Next Read: How Do You Know When Agriculture Is In A Recession?

The 3 Biggest Updates to USDA's Farm Loan Programs You Need to Know

Thu, 08 Aug 2024 18:50:10 GMT

With commodity prices down and farm returns expected to significantly decline , USDA’s Farm Service Agency (FSA) has released three major changes to its farm loan programs in an effort to increase the opportunities farmers and ranchers have to be financially viable.

“The analysis of what has gone into these rule changes is nothing short of tremendous,” says Zach Ducheneaux, FSA administrator. “Our team has poured over hundreds of thousands of loans in our portfolio and really identified some things that FSA can, should, and with this rule, will be doing better to support our producers and their economic viability in the countryside.”

The three most notable policy changes, which will go into effect on Sept. 25, include:

1. A new, low-interest installment set-aside program for financially distressed borrowers
According to Ducheneaux, this program was modeled after the Disaster Set-Aside program, but the difference is a borrower doesn’t have to be affected by a declared natural disaster in order to qualify. However, it’s important to note producers must be in FSA’s portfolio by the time these updates go into effect in order to be eligible.

“Oftentimes, what the producer needs is just a little breathing room,” Ducheneaux says. “We have the ability to do that for producers that are in our portfolio as of Sept. 25.”

The program essentially allows eligible, financially distressed borrowers to defer up to one annual loan installment per qualified loan at a reduced rate.

“When we set that payment aside, instead of accruing interest at the already established rate, it’s going to accrue interest at 1/8 of a percent,” Ducheneaux explains. “We’re really setting aside a payment, and it’s not going to balloon on you in a way it jeopardizes your operation as you’re coming to the end of that term.”

2. Access to flexible repayment terms
Some of these more flexible terms include smaller interest-only payments and longer loan terms. The idea behind this change is to allow producers to increase their working capital and give them the ability to save for education and retirement.

“Having a retirement fund built into this can help ease that generational transfer and help enable us to recruit young farmers and ranchers back to the farm,” Ducheneaux says. “Because FSA can make adjustments to our terms, it might help them step out of that job they’ve got in the town 40 miles away for health insurance and pay for that for their family on their own terms.”

He adds that the concern this could add more interest to the loan over time is valid, the point is to increase available cash flow for the operation.

3. Reduced additional loan security requirements
This update reduces the collateral requirements for direct loans from requiring available security equal to 150% of the loan amount down to 125%. One of FSA’s main goals with this change is to reduce the frequency borrowers need to use their personal residence as additional collateral for a farm loan.

“If you think back to 40 years ago, some of the most heart-wrenching stories you hear are when you’re losing the family home,” Ducheneaux says. “With this rule, if we do not need it to get to a one-to-one security position, we will not take the primary residence as additional security.”

In addition, FSA will release liens on collateral the borrower initially provided as additional security after establishing a history of on-time payments.

Additional improvements include streamlining and automating the Farm Loan Program process with a loan assistance tool, online loan application, online repayment feature and a simplified direct loan paper application.

“We think these changes to the terms are really transformative,” Ducheneaux says. “Any of these three provisions on their own would be a great transformation, but taken as a collective, this really signals a new day in ag finance, where FSA is going to position itself as the leader and the example for how our friends in the lending community might consider doing this.”

Ducheneaux explains a robust training process on the changes is underway for FSA employees and asks for patience and grace as the team comes to understand the new tools they have.

One Forgotten Step In Strategy Than Can Uncover Significant Revenue

Fri, 02 Aug 2024 13:37:33 GMT

How much untapped potential lies within your existing customer base?

For one $120 million ag retailer, the answer was staggering. We calculated eight figures of growth potential within just its top 30 customer relationships.

After implementing a process to capture that revenue and pursue other objectives, the company realized more than $30 million in incremental growth. Subsequently, the business sold a newly grown division for more than $30 million and reinvested that capital into its core business to accelerate its growth by an additional eight figures annually.

Peter Drucker, who founded modern management, introduced the term “strategy” to the business lexicon. Publishers initially resisted the word, so he used “self-assessment” instead. Regardless of terminology, one of the most crucial components of Drucker’s self-assessment is the quarterly depth interview process with customers.

When I asked Drucker about priorities of the strategy process, he emphasized focusing on customers—understanding what they value and the potential in relationships with them—could best be realized by depth interviews. Inevitably, the process leads to uncovering these opportunities:

Innovation
Growth potential
Relationship (improving, growing, solidifying)

For decades, I have seen how the depth interview process can significantly enhance both the top and bottom lines more effectively than most any other effort.

Because customers would never tell a sales or service person some things, these interviews are best conducted by a third party to ensure customers feel secure and can be candid—with the option to share insights anonymously.

How to find the potential
It is surprising what customers tell a third party. I’ve had them share that my client isn’t charging them nearly enough. I’ve even had them share that their salesperson’s breath stinks. Most importantly, I consistently hear them say what it would take to earn more of their business.

Customers will share what you do or don’t change might cause them to leave for your competitor.

When I’ve led depth interviews as the core project, I’ve not failed to see the process uncover seven-, eight- or nine-figure potential for clients of $20 million or greater in revenue. At one company named ENTEK, a half-billion-dollar IT products company similar to Dell, we discovered well more than $1 billion in growth potential, and the business soon captured almost $200 million of that.

We were able to increase the valuation and sale price of the company by nine figures as it was being sold.

Depth interviews are one of the most powerful tools private equity and M&A firms can take advantage of to clarify the growth potential they or a buyer might be able to garner before or after selling a company. I have run dozens of valuations, but in choice circumstances (like those described above), combining depth interviews with the valuation process is able to significantly increase the enterprise value and sale price of the company.

Yet, when was the last time you engaged a third party to uncover the hidden potential within your customer base?

If you are thinking you might have seven, eight or nine figures of untapped potential within your customer base or you might be interested in evaluating the sale and valuation of your company, then feel free to schedule time with me. I’m glad to engage in a complimentary customer potential and growth strategy session.

2023 And 2024 Will Go Down As The Largest Drop In Net Farm Income Ever

Wed, 31 Jul 2024 16:09:42 GMT

There’s a silent stress growing across rural America. Farmers are focused on growing this year’s crop, hoping to outyield the low commodity prices. They’re keeping their head down and trudging through the day-to-day grind, but their angst can’t be ignored. Many farmers say they have a gut feeling 2024 will go down as the worst financial year they’ve ever had.

The reality is glaring. USDA’s net farm income forecast for 2024 is a $43 billion drop from 2023 to $116.1 billion. That is a 25.5% decline in just one year. What makes it even more jarring is that follows the 2023 net farm income figure, which saw a 16% drop from 2022. If USDA’s forecast holds true, that will mark the most significant two-year farm income decline in U.S. history.

“The $90-billion drop over a two-year period is certainly the largest dollar value drop, adjusted for inflation, that we’ve seen in our history,” says Ben Brown, an agricultural economist with the University of Missouri. “It exceeds the previous record set in the mid-1970s. When it comes to percentage changes, we’ve seen larger percentage changes. But you’d have to go all the way back to the Great Depression era and the early 1930s to find bigger percentage declines.”

However, 2023 may end up being even worse than what USDA currently has projected.

As USDA showed in the June Grain Stocks report, farmers are still holding onto a lot of their 2023 crop. In fact, USDA thinks on-farm storage is the highest since the 1980s. The reason: as commodity prices fall, farmers are reluctant to sell below the cost of production. That means USDA’s 2023 net farm income forecast may be even worse than what it is today.

“The big change I think we could see in an update would be the 2023 farm income numbers revised lower even from where they were,” says Brown.

Farmers aren’t just caught trying to market the current crop growing in fields today. Many still have last year’s crop sitting in bins. And corn and soybean prices are seeing another bloodbath to close out July.

Farmers Hope to Outyield Low Prices

Wading through a sea of soybeans, Arkansas farmer Becton Bell stares at one of his best crops ever, and he’s trying to focus on that positive right now.

“We’ve had a pleasant year,” says Bell, who farms in Mississippi County, Ark. “Rains have been, for the most part, pretty timely.”

The reality for Bell and other farmers marketing 2024 crops currently is they face, potentially, deep economic losses.

“It’s been the markets, to be honest,” says Bell, when asked what his biggest challenge is this year. “There just hasn’t been a good marketing opportunity. It’s kind of like catching a falling knife, trying to market soybeans and corn. Nobody wants to catch that falling knife.”

In his area of Arkansas, farmers rely on irrigation. And even though he’s irrigated some this season, timely rains have helped reduce the need to irrigate as much as usual.

“We’ve probably irrigated half of what we normally do so, you know, it could very easily mean several hundred-thousand-dollar savings to our bottom line,” he says.

Those doses of rain and short spurts of heat in northeast Arkansas mean growing conditions there have been like a greenhouse this year.

“It’s just almost scary to say this, but rains have been almost perfect as far as our timing goes,” says Bell. “Our corn crop looks like it could be one of our best corn crops we ever had, as does our soybean crop. So, I’m optimistic about the crops.”

While input costs remain relatively high, he’s hopeful the extra bushels will help soften the blow of lower commodity prices, but nerves are still high. And that’s the case for not just Bell, but many other farmers this year.

Stress in Farm Finances Already Showing Up

Farm financial stress is already showing up in the form of liquidity. One ag banker painted that dismal picture for Congress when he testified about the state of the farm economy on Capitol Hill earlier this week.

“With rising input costs and lower commodity prices, farmers and ranchers have worked through the liquidity and working capital they built up over the past few years at a more rapid rate than anticipated. Now they’re beginning to leverage equity through refinancing debt,” says Tony Hotchkiss, chairman of the Ag and Rural Bankers Committee for the American Bankers Association. “This has made ag bankers feel like they are looking over the cliff when it comes to the farm economy.”

Ag industries are struggling as well. Just last week, Deere announced more employee layoffs, citing the severe headwinds in the ag economy. Farm Journal Washington Correspondent Jim Wiesmeyer says other agribusinesses are feeling the pain of similar costs of production and labor issues faced by farmers and ranchers, as well.

There are some silver linings, Wiesemeyer reports. He says while ADM’s earnings for the second quarter were somber, Juan Luciano, chairman of the board and CEO, expressed confidence in the company’s full-year expectations, citing anticipated improvements in crush and ethanol operations. So, despite all the obvious gloom in ag, Wiesemeyer says it’s not all doom.

Is Agriculture on the Brink of a Farm Economy Cliff? The Emotional Testimonies from Capitol Hill this Week

Fri, 26 Jul 2024 18:25:04 GMT

Is agriculture on the brink of an impending farm economy cliff? A panel of experts testified before the House Ag Committee this week about the severe challenges facing agriculture, all the way from the farmer to the supply chain.

The hearing on Capitol Hill comes as net farm income is forecast to decrease by $43 billion from 2023 to 2024, marking the most significant two-year decline in history. Meanwhile, production expenses are forecast to increase by $17 billion.

During the hearing the Chair of the House Ag Committee expressed his concerns about another farm financial crisis brewing.

“We are living through the largest two-year decline in farm income in history,” said Rep. G.T. Thompson (R-PA), House Agriculture Committee Chair during the hearing on Tuesday. “At the end of 2024, total farm sector debt will be the highest the U.S. has seen since at least 1970. 3:45 Most farmers and ranchers, including those here with us today, are likely to be worse off financially by years’ end.”

Dana Allen-Tully provided insightful comments and testimony during the hearing that captured the anxiety and price downturn in U.S. agriculture She and her family run a diversified farm in Eyota, Minnesota, producing dairy, corn, soybeans, and alfalfa. She also serves as President of the Minnesota Corn Growers Association, representing 7,000 farm families across the state.

“Unless conditions change we’re facing a ‘perfect storm’ although I don’t think it will be fully understood until next year when farmers are unable to secure loans because they can’t cash flow,” said Allen-Tulley. “Plummeting crop prices, high production costs, doubling interest rates, natural disasters and tightening credit are just some of key culprits, as well as depleting working capital.”

She discussed the importance of passing a stronger farm bill this year, and shared the economic challenges producers are facing. We’re heading into a “perfect storm” of plummeting crop prices, high production costs, rising interest rates, natural disasters, and tightening credit, leading to depleted working capital, she stressed.

She noted recent analyses by the Federal Reserve Bank and the Farm Bureau highlight the brewing trouble, with John Deere’s layoffs as an early warning sign. An extension of the current farm bill won’t prevent economic issues, she informed, and a new farm bill, while essential, may not be timely enough. She said Sen. Martin Heinrich (D-N.M.) recently emphasized the need for a disaster supplemental to address these challenges.

Alley-Tully cited USDA estimates projecting a drastic fall in farm income this year, marking the largest year-to-year drop ever recorded. From 2022 to 2024, net farm income will have fallen by 40%, explaining the declining farmer sentiment and increased mental health issues in rural America.

For farmers to break even this year, she detailed, national average corn yields must be 219 bushels per acre, and soybeans 56 bushels per acre — both significantly higher than the past 10-year average. Losses per acre are projected to be over $150, with even higher losses in Minnesota.

Her bottom line: Farm and ranch families need help. The Commodity Title and Crop Insurance provisions in the House farm bill, she concluded, provide a meaningful safety net, with a $4.10 PLC/ARC reference price and improved revenue thresholds. These measures are crucial, especially under current conditions, she said. While she supports these provisions in the next farm bill, she added it’s important to resume ERP payments for 2022 and consider a disaster supplemental for near-term assistance.

Other witnesses pointed out a host of economic issues are converging to lower net farm income by 25 percent from 2023 to 2024, which is depleting working capital and worsening credit conditions.

“With rising input costs and lower commodity prices farmers and ranchers have worked through the liquidity and working capital they built up over the past few years at a more rapid rate than anticipated and are now beginning to leverage equity through refinancing debt,” said
Tony Hotchkiss, Chairman, Ag and Rural Bankers Committee, American Bankers Association. “This has made ag bankers feel like they are looking over the cliff when it comes to the farm economy.”

Other witnesses urged policymakers to enhance risk management tools through a new farm bill to avert a crisis. And the Chairman agreed that is his goal.

“There are a few pundits that have taken the last few months to spread misinformation about this committee’s bipartisan product in an attempt to sow division. 5:00 Let me be clear; this is a farm bill that provides significant improvements for all producers,” Thompson said.

Thompson also said resources dedicated to the total farm safety net have declined 30 percent in the last 22 years with the commodity title seeing an 81-percent reduction. He says they want to change that with the new farm bill and he’s still open to trying get a bill passed in 2024 to avert a farm financial crisis.

Beyond the farm bill, Allen-Tully noted issues like trade deficits and flawed regulations impact farm families. She urged new trade agreements and better rules for biofuels to support domestic producers. “We face high stakes in farming, risking everything annually for thin margins. This discourages young people from farming, posing a problem for food security. Policies must reflect modern farming realities to address global hunger.”

Ag Economists Weigh In On the Biggest Opportunities for the Ag Economy in the Months Ahead

Tue, 02 Jul 2024 13:10:31 GMT

Ag economists are growing more negative regarding the financial health of the crops sector of agriculture, but their views on livestock is becoming more positive. The latest Ag Economists’ Monthly Monitor , a survey of nearly 70 ag economists from across the U.S., shows the lack of exports, as well as the current crop prices, are eroding outlooks on the crops side. While strong beef demand and cheaper feed prices are creating more optimism in cattle.

The June Ag Economists’ Monthly Monitor, which is a joint survey between the University of Missouri and Farm Journal, continues to track the volatility in ag economists’ views of not only what’s impacting agriculture today, but what to watch on the horizon. The June survey marked the one-year anniversary for the monthly survey, and it showed the risks to agriculture remain a major concern.

Even though economists’ views on the ag economy eroded slightly in June, their projection for net farm income in 2024 actually increased to $113.9 billion, which is up from the $110 billion in projected by economists in May.

Ag economists’ project a slight increase in net farm income, compared to the previous month. The June projection rose to $113.9 billion, up from the $110 billion in May.

(Lindsey Pound)

Weighing in on the Most Negative and Positive Aspects of the Ag Economy

When asked what economists view as the most negative aspect of their outlook of the ag economy, economists said:

Crop output prices retreating more rapidly than input costs
Commodity prices below economic break-even production costs
Export outlook from the U.S., specifically the lack of Chinese demand
U.S. trade policy regardless of party affiliation with more international trade competition
Constant challenges to demand and policy that adds barriers to existing and potential new demand streams

“Some farmers made production and investment decisions assuming that earlier wider margins would persist,” noted one economist.

While the negativity seems to outweigh the positives of the ag economy right now, the June Ag Economists’’ Monthly Monitor also asked economist to weigh in on the most positive aspect regarding the outlook of U.S. agriculture. Economists said:

Over the next couple of years, cow-calf operators should have good profitability, especially in areas of the country with good forage conditions
Adverse world weather boosting U.S. exports
The possibility of good yields that will help farmers hit their financial goals
Discipline by producers to keep acreage expansion in check and U.S. prices being more competitive in the global market.
Farmers eager to make adaptations necessary to stay in business

“There are some really bright producers that are positioned for some quick growth in the next 5 to pp10 years,” said one economist in the anonymous survey. “They will be positioned to buy farmland as older producers transition.”

Ag economy outlook in the June Ag Economists’ Monthly Monitor.

(Lindsey Pound)

The outlook for the U.S. production picture is anybody’s guess right now, but Scott Brown, interim director, Rural and Farm Finance Policy Analysis Center (RaFF), University of Missouri who helps author the Monthly Monitor, says weather continues to be one of the biggest variables in what happens with commodity prices in the months ahead.

“Number one, at the top of the list of almost all of these commodities, of course, is weather,” says Brown. “I think some are seeing some demand weakness as a big factor with soybean prices in particular, and seeing some other vegetable oil substitutes entering the picture. What’s maybe even a bigger factor on the soybean side is Brazilian supplies. A strong dollar continues to be important, in terms of our ability to move product out of the United States.”

Brown says one prime example of this is with cotton where the lack of Chinese trade has had an impact on prices.

“As we look at this month’s Monitor, and when you look at the survey results that comes through with almost all of these commodities with the exception of cattle, survey respondents are saying we’re slightly more pessimistic this month than we were last month,” Brown adds.

The June Ag Economists’ Monthly Monitor showed economists think the following factors will have the biggest impact on the outlook for corn prices:

U.S. and world weather
Better precipitation across the Corn Belt compared to the previous growing season
Growing end stocks continuing to a burden on prices

As for soybeans, economists say U.S. and world weather will also play a significant role in the direction of soybean prices, but other factors that are impacting outlooks on soybean prices include:

Demand is soft and imports of cheaper vegetable oil substitutes is creating more competition
Biofuel and sustainable aviation fuel (SAF) developments will have a bigger impact on prices in the months and years ahead
Expectation for larger soybean supplies in Brazil
Strong U.S. Dollar

The bright spot in the ag economy continues to be cattle prices. According to ag economists, the outlook for prices in the months ahead really hinges on three main factors:

If record beef demand can continue
Growing crop supplies creating lower feed costs
Strong U.S. Dollar

“It‘s hard to keep suggesting higher prices when we’re already at record levels, but when you look at where we’re at in terms of cattle inventory, we’re only going to get tighter,” says Brown. “USDA’s 2025 estimate for beef production is a decline of more than 1 billion pounds. That tells me we’re not done getting tighter.”

Brown says the one wild card for beef prices is demand. So far, demand has seem unfazed, despite record prices. Export demand remains strong, but so does demand for beef within the U.S. Those are underlying factors that are also supporting cattle prices. keep saying I’m not sure we’re done with record prices. So I think all hinges on demand staying strong for us beef, especially here in the United States.

The “Why” Behind a Growing Ag Trade Deficit in the U.S.

While meat exports have been strong, other commodities continue to struggle and at the same time, the U.S. is importing more ag products and goods. USDA’s Ag Economic Research Service (ERS) now projects the agricultural trade deficit to climb once again to $32 billion in fiscal year 2024, an increase of $1.5 billion from the February projection.

What factors are most important to the increase in the trade deficit? The June Ag Economists’ Monthly Monitor asked economists that exact question. Nearly every ag economist noted the strong U.S. dollar as one reason the trade deficit continues to grow, but other factors, according to the economists, include:

Increased used cooking oil imports for renewable diesel
Increased imports of horticulture products
Softer U.S. ag exports

ERS also projects Mexico to beat out China as the top buyer, with China projected to fall to third biggest importer of U.S. ag goods at $27.7 billion. ERS expects Canada to claim the number two spot and Mexico to reach number one at $28.7 billion, an increase of $300 million.

The rise of Mexico’s imports have come in spite of the ongoing GMO corn battle between the U.S. and China. In 2023, Mexico officially banned GM corn for human consumption. That same year, Mexico also made its largest corn purchase from the U.S. of 15.3 million metric tons.

Some economists say Mexico is treating U.S. corn as a threat, and while exports are up, it’s having a big hit on GM corn demand.

“It has impacted white corn demand specifically, and the reason that when we look at overall corn demand and we still see Mexico as being a big buyer, is because white corn is such a small percentage of our total corn,” says Krista Swanson, lead economist for National Corn Growers Association (NCGA) who also participates in the Monthly Monitor survey. “So, if you look specifically at white corn exports, you do see that impact. When we talk about the total corn complex, though, Mexico’s had a drought that has reduced their production. They already consume quite a bit more than they produce, so they tend to be an importer. But this year they’ve had to import more than normal. And so that’s where we’re seeing those big buys coming in from, from Mexico and where that’s really boosted U.S. corn exports this year.”

Future of Interest Rates

Higher interest rates are impacting farmers and major equipment manufacturers. On the heels of the Federal Reserve deciding to leave interest rates unchanged during their June meeting, the June Ag Economists Monthly Monitor asked the economists how many rate cuts, if any, we will see this year. 73% said one. 18% think two rate cuts this year. And 9% say there will be no rate cuts in 2024.

73% of ag economists think the Federal Reserve will make one interest rate cut this year, according to the Ag Economists’ Monthly Monitor.

(Lindsey Pound)

With the expectation for higher-for-longer interest rates, farmers are scaling back on big-ticket item purchases, which includes buying equipment.

The May Ag Economists’ Monthly Monitor asked economists to rank where they think farmers will look to cut costs. While all economists said scaling back on equipment purchases is either most likely or somewhat likely, 65% of economists think farmers will look for lower operating interest rates and 17% think it’s most likely.

Purchase changes

(Lindsey Pound )

Supply Chain Realities: Just-In-Time Dictates More Planning Ahead

Mon, 01 Jul 2024 15:40:24 GMT

Since 2020, a series of black swan events in just a few years time resulted in sporadic product shortages and concern about how to react and plan for the future. Because of those events, the crop input industry’s supply chain has been front of mind for suppliers, distributors, retailers and farmers.

“We’ve worked through a period of time when everyone grabbed everything they could,” says Jeff Tarsi, Nutrien’s executive vice president and president of of global retail. “Inventories were way too high as product became available again.”

But full warehouses and fully stocked retail sheds are less common today. In the current economic environment, the focus has become to minimize the cost of capital. With higher interest rates than the 10-year average, inventories have been worked down to avoid draining working capital.

“Managing working capital is one of the most important things we do,” Tarsi says. “There is not unlimited capital in this industry. And as such, at Nutrien, we’ve done a good job managing our inventory down.”

What This Means for Farmers and Retailers

Matt Plitt, president and CEO of Valent U.S.A, says now is the time to refocus efforts on future on-farm needs.

“Our customers are running at low inventory levels. And growers are looking at just-in-time purchasing,” Plitt says.

To alleviate tightness in the market and potential stress, industry leaders are encouraging everyone to plan ahead.

“Forecasting and timeliness are key. Especially in light of current interest rates, everyone needs to be smarter in how they manage inventory,” Plitt says.

The team at Nutrien Ag Solutions agrees saying there is great value up and down the supply chain for communication and conversation to inform product demands.

“Collaborating with an agronomist is more important today to plan for the crop and type of chemistries needed,” says Rob Clayton, Nutrien’s senior vice president of retail North America. “The best of the best are thinking three to five years out for a crop plan.”

Manufacturers Move to Just In Time Supplies

Brendan Deck, GM of Nufarm in North America says, “With the cost of capital we are having to manage cash more than we’ve ever done before. What is going to be key in this market is surge capacity to meet demands just in time.”

Deck adds Nufarm has grown its business from $300 million to $1 billion in annual sales in 10 years. And the company has invested in infrastructure to manufacture in the U.S. and closer to where the products are used.

The forecasting is becoming critical because managing inventories and using surge manufacturing are shortening the time frames products are made and products are being applied.

Valent’s Plitt says, “Internally, we are focused on how to meet the challenges of a dynamic marketplace. We must plan to be early because retailers and distributors make decisions early. In this industry, there’s still a mindset around destocking. It’s not about reducing inventory, but more about how long we carry it. We now manufacture the products closer to the time of application, which is why forecasting is so important.”

The Subtle Change To Notice From The Latest Fed Reserve Meeting

Wed, 19 Jun 2024 23:02:21 GMT

The latest Federal Reserve board meeting left interest rates unchanged, but there’s a subtle shift in its monetary policy Vince Malanga, Pro Farmer economic consultant and president of LaSalle Economics, says should be noted.

“It’s back to the dual mandate,” he says. “It was all about inflation. Now with inflation coming down, they’ll start to watch the economy carefully.”

With the next Federal Reserve board meeting not until the end of July, Malenga says there’s a lot of data to come out between now and then that will inform and drive any potential rate cut.

“There’s a 25% chance that they could cut the rate in July, but I think regardless, we’re going to see at least two, maybe three rate cuts before the end of the year,” Malanga says.

The indicators he says are most influential are labor market data and personal consumption expenditures price index.

Jobless claims are tracked and reported weekly. The Bureau of Economic Analysis will release two updates to its price index before the end of July.

“If there’s an easing in labor market conditions, that would encourage them, especially in front of the election to cut rates, even if the inflation target is not met,” he says. “If the unemployment situation is softening, especially three or four months before an election, I think you’re going to start to hear some people yelling at the Fed, that they’ve overdone it.”

Malanga says we are in an affordability crisis, especially for first-time home buyers. And while the housing market was previously a leading indicator, that is no longer the case.

“The affordability issue (home loans, vehicles, etc) is a major constraint on the economy. There’s not much that they can do about that in the short run, but it’s clearly showing up in the data. You’re starting to see a trend toward weakness in consumption.”

Hear the full interview with Malanga from AgriTalk

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Is the U.S. Ag Economy Heading Toward a Recession? A One-on-One with the President of the Chicago Fed

Farmers’ Time to Know Their Breakeven Is Now

Farmers' Time to Know Their Breakeven Is Now

Sat, 15 Jun 2024 14:04:48 GMT

At its June meeting, the Board of Governors for the Federal Reserve System left federal interest rates unchanged.
And with only single digit percentages of the corn and soybean crops left to plant, John Maman of Nutrien Financial encourages farmers to revisit their financial plan now that the crop is in the ground and agronomic conditions can be assessed.
“Any time there is a switch or change or enhancement to the agronomic conditions, farmers should consider a change to their economics so the breakeven point doesn’t move or be reduced. This is how they can continue to grow and be successful regardless of uncertainty,” Maman says.

He adds financing should be a complement to optimize yields—not an impediment.

As such he offers three key steps.

Know your breakeven for every crop
Develop an economic plan
Review the plan through the season at key times

“When you are taking the time to evaluate your plans and make adjustments it can take the worry out of the uncertainty,” he says.
The Federal Reserve is expected to cut interest rates 2% via multiple swaths, but their meeting this past week did not contribute to that projection.
Maman adds while every farm pays attention to dollars and cents differently, all can benefit from having a foundational understanding of their breakeven. From there, adjustments can be made in light of economic or agronomic conditions.

The benefits of such include:

Maximize liquidity, cash flow
Keep multiple financing lines up
Know the levers to use for terms, rates and incentives on products
and maintain the integrity of the crop

And Maman says an early season review is a good place to start.

“For example, we are building awareness of our programs that pair with our strategic suppliers. We need to be able to assess on the agronomic intent of the crop. So as farmers look at their fungicide application, we can also provide financing for adjuvants to make that spray pass more effective and adding a nutritional to make that application more efficient. At the same low rates, we can match a bundled solution to the acre.”

Nutrien Financial products are available to all Nutrien Ag Solutions customers pending credit application and approval. With offers that started around seed purchase financing, today, products also include crop protection, fertilizers and full acre solutions.

“Our goal is to meet the growers at their farm’s end row with advice built to their acre—all encompassing conversations around agronomics and economics,” he says. “Regardless of interest rates and commodities prices, we can bring value to the farm gate.”

While the current ag economy is in a downcycle, Maman says now is the time to double down on financial planning.

“When commodity prices were high and rates were low, it wasn’t front of mind, but you need to keep the breakeven top of mind,” he says. “There’s money to be made managing the agronomic and economic plan. And even more so when things tighten up. Always know you’re breakeven so even in challenging years you can be more successful.”

He adds, “Somebody in a down market will always succeed. Some will grow. There’s an underlying success individuals can find, especially when they are able to surround themselves with the right people. And I see great success for those who revisit the plan as often as they need, no matter what the market or economy throws at them.”

Here Are The Notable Changes In The House Farm Bill

Tue, 04 Jun 2024 19:04:11 GMT

The House Ag Committee recently released and approved their initial version of the long-awaited 2024 Farm Bill, which included changes to several areas important to production agriculture – such as reference prices, base acres and federal programs. During an episode of the Top Producer podcast, Farm CPA Paul Neiffer explained how farmers could expect those changes to affect them.

Reference Prices
According to Neiffer, the proposed farm bill would increase reference prices across the board, with the smallest increases in barley, oats and corn and the largest in rice. The changes for other crops include:

• Legumes: ~19%
• Peanuts: 17.8%
• Cotton: 14.4%
• Wheat: 15.5%
• Soybeans: 18.5%

It’s important to note, however, these likely won’t be the final numbers in the farm bill.

“I think this is going to increase the cost of the farm bill by – over a 10-year period – maybe $15 billion to $20 billion,” Neiffer says. “If they need to cut some, they can cut it out of here.”

Base Acres
Another update includes base acres. In the new House-approved language, if you have planted more acres than you have base acres, the excess acres will now qualify to be increased to reflect what your plantings were over the average of 2019 to 2023 crop years.

“This is a pretty good deal. It’s a one-time opportunity – not a reallocation of your current base,” Neiffer says. “Let’s say you have corn and soybeans, but the last five years you only planted corn. This base acre update will be based on what you planted. So, if you only planted corn, you’ll get an increase in corn base acres.”

In addition, non-covered commodities, such as potatoes or onions, can now be used on up to 15% of total farm acres.

The House proposal does not restrict who qualifies for the program.

Agriculture Risk Coverage Program
Like reference prices, the Agriculture Risk Coverage program (ARC) also sees an increase in this proposal.

The guarantee of benchmark revenue jumps from 86% to 90% and the maximum payment also rises from 10% of benchmark revenue to 12.5%.

Marketing Loans
Neiffer says that while some may go up slightly more than others, almost all marketing loans increase by about 10%.

“There are a couple of situations where that helps. If you want to get a loan, you can get more of a loan,” he says. “But it could also hurt you in a way.”

He goes on to explain price loss coverage (PLC) payments are calculated as the difference between the effective reference price and market year average (MYA) price and the MYA price cannot drop below the loan rate. So, with the increase in the market loan rate, PLC payments could be smaller.

Livestock Programs
On the animal side, changes have been made to the dairy margin program and livestock indemnity payments.
“The big one [for the dairy margin program] is the tier one coverage gets more of a subsidy from 5 million lb. up to 6 million lb. That’s a 20% increase,” Neiffer says.

The payment rate for livestock indemnity payments is also increased to up to 100%. Neiffer says that increase is for animals that have been killed by a federally protected species, such as wolves.

He adds if a pregnant animal is killed in this situation, the owner could be paid up to 85% of the unborn animal’s lowest weight class.

Partnership Tax Payments
Another payment change to watch involves how operations are classified. In the past, Neiffer says, operations taxed as partnerships – such as an LLC or S corporation – were limited to one payment. The new proposal does not have a payment limit for qualified pass-through entities, which could be any LLC not electing to be a C corporation, any S corporation or any general partnership or joint venture. The one-payment limit would still apply to C corporations.

“I don’t know if this will happen,” Neiffer says. “The 2018 Farm Bill had certain provisions similar to this in the House bill but didn’t happen.”

Farm Income Definition
The House proposal also broadens the definition of what counts as farm income.

“Under the current definition of farming, gains from trading in farm equipment typically is not considered to be farm income. This farm bill specifically states that is farming, as well as agritourism and direct-to-consumer marketing,” Neiffer says. “That’s good news.”

Conservation Reserve Program
The maximum Conservation Reserve Program (CRP) payment more than doubles in this draft – jumping from $50,000 to $125,000.

“For farmers who maybe have acres that really shouldn’t be farmed, this is allowing more of those acres to get enrolled,” Neiffer says.

Crop Insurance
The final area Neiffer highlights with notable changes is supplemental crop insurance.

He shares the 85% cap on revenue protection policies is increased to 90% for individual yield or revenue coverage, but it’s aggregated across multiple commodities. The supplemental coverage option (SCO) is also increased from 86% to 90%.

“This is really welcome news for farmers in North Dakota, Texas, Oklahoma or southern Missouri where the cost of crop insurance is so high,” Neiffer says. “By increasing the subsidy, this is probably going to allow a lot of those farmers to buy revenue protection at 60% or 65% and then use SCO to go up to 90%.”

There’s also a 10-percentage point subsidy increase for those who qualify as beginning or veteran farmers. This has been expanded from five years to 10 years as well.

Landus Launches Farmer First Technology Initiative, Zero Interest Input Financing

Wed, 01 May 2024 13:05:31 GMT

Today Landus announces the launch of Conduit, a first of its kind initiative that the cooperative says combines the best elements of a farmer-owned cooperative and a technology company.

Conduit will offer 0% financing to qualified borrowers on all input purchases in season, addressing one of the biggest challenges for farmers as they battle the rising cost of operating capital. Additionally, Conduit will be making financing opportunities available in certain states for land, input, and equipment loans.

“The farmer of tomorrow will need a different set of tools to succeed,” says Landus President and CEO Matt Carstens, “With Conduit, we are focusing on the needs of the farmer of tomorrow using cutting-edge technology to serve them.”

Conduit plans to draw upon the experience and knowledge of committed farmers throughout the technology development process, ensuring the farmer remains at the center as Conduit makes products and services more accessible than ever.

Landus has also brought on former FBN executive Amol Deshpande as an advisor. Amol is a proven innovator across multiple industries who brings the necessary technical expertise and proof of concept as Conduit makes this digital transformation, Landus says.

Deshpande confirms his participation via a LinkedIn post . He states that “the intention is to make 0% (financing) a ‘permanent’ opportunity” and “other initiatives in sustainability where Landus has been a leader and ecommerce are on the way.”

“Farmers today are expecting greater speed and agility with products and services,” says Iowa farmer and Landus board member Matt Chambers. “They deserve access to financing, to inputs and materials in whatever manner they want, and they need options that are easily available so that they can stay focused on execution.”

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Fallout From Falling Net Farm Income and Stubborn Interest Rates: Ag Economists Reveal What’s Now at Risk in 2024

Mon, 11 Mar 2024 18:40:51 GMT

As farmers face the reality of falling commodity prices and tighter margins in 2024, the latest Ag Economists’ Monthly Monitor shows a projected major drop in net farm income this year with interest rates not expected to improve much if any in 2024.

The Ag Economists’ Monthly Monitor is a survey of 70 ag economists from across the country. The latest survey shows pessimism is growing regarding the farm economy.

“I think there were really two things that were important from the February Monthly Monitor,” says TaylorAnn Washburn, program director for the University of Missouri Rural and Farm Finance Policy Analysis Center .

“Each month we ask our economists to share their sentiment on the economic situation of the U.S. ag economy and, since December, our respondents have continued to be pretty pessimistic about the state of the ag economy compared to previous months and the previous year.”

Economists surveyed expect net farm income to shift down to $117 billion in 2024, which is much lower than what USDA anticipates. The USDA is projecting $121.7 billion for net farm income this calendar year.

At the same time, operating costs are expected to stay high due to elevated interest rates. The February Monthly Monitor shows more than 40% of those surveyed expect interest rates to fall no more than 1% this year, and 44% of economists are becoming more pessimistic about any interest rate cuts in 2024.

With net farm income expected to take a hard fall this year, the latest Ag Economists’ Monthly Monitor asked economists to outline the potential fallout that could occur in the ag economy over the next couple of years.

“Generally, the consensus was the immediate fallout was likely pretty minimal. But if farm income continues to drop in 2025 and beyond, there are some concerns that the fallout will grow,” says Washburn. “Some potential impacts that were mentioned by our economists include a slowdown of equipment sales, some moderation of land values and rental rates, consolidation across farm businesses on the service side of things, and then some negative impacts to financial ratios.”

The anonymous survey revealed several possible outcomes from a sharp drop in net farm income. One economist pointed out for those producers who thought 2021-2022 was a new normal for commodity prices, they and may be overextended heading into the latest downturn. Another economist said corn farmers could face the steepest losses this year.

“It looks like corn prices will be below production costs for many producers. We have not had that for a long time, especially since the ethanol boom started almost 20 years ago. The struggles this time will be for corn farmers. Producers of other crops like cotton, wheat and rice have had difficult years,” said one economist.

The ripple effect of the sudden downturn, according to other economists, could be a slowdown in new equipment sales and a correction in land values.

“A slowdown in new equipment sales, slow upward creep in loan defaults, some leveling off of growth in land values,” responded one economist, citing his concerns.

“Moderation of land value gains on the one hand, and deteriorating financial conditions for farmers involved in U.S. wheat enterprises,” said another economist in the latest survey.

“Producers without significant cash reserves will start to get squeezed. I would expect rental rates to slow down or even fall,” said one economist.

According to the latest survey, some economists think a slump in net farm income could be cushioned by Congress. One economist stated that a Congressional push, during an election year, could cause more money to flow to farmers. Other economists think the strength of the U.S. balance sheet will also help cushion the fall.

“The 2024 net farm income is similar to the average since 2007. Given the strength of the U.S. balance sheet, I expect the fallout to be minimal unless net farm income is even lower in 2025,” said one economist in the anonymous survey.

“This forecast is following the outlook that there will be a cost-price squeeze in agriculture and that it could be more severe in 2024 than earlier thought. This may be the financial pressure needed to complete the next farm bill,” said another economist.

Economists were also asked to outline the most negative and positive aspects regarding the outlook for U.S. agriculture. On the positive side, economists said they expect:
• Relatively strong farm balance sheets to weather periods of stress and handle downturns.
• Demand for biofuels and opportunities for new markets.
• Declining costs for some inputs.
• Strong consumer demand, specifically for beef, and broader strength for other commodities.

Among the negative aspects of the ag outlook, economists in the Monthly Monitor said they anticipate:
• Higher interest rates for longer than anticipated.
• Over-production and creation of a situation when the U.S. is oversupplied relative to demand.
• Volatile, declining commodity prices and broader declines in profitability, which creates uncertainty.

“There was one sentiment made that I really like about the spirit and resilience of the American farmer, which is a really positive piece of what’s going on here with the U.S. farm economy. That general theme of resilience really came through in this month’s responses,” Washburn says. “Some of our economists rallied around the sentiment of being able to withstand some periods of stress and potential downturn due to some relatively strong farm balance sheets over the last few years, and being able to weather the storms that are possibly ahead.”

Washburn says another positive that stems from the latest Monthly Monitor is ramped-up demand from renewable fuels, specifically renewable diesel and Sustainable Aviation Fuel (SAF) and the opportunity to grow that new demand source in the months ahead.