Podcast Summary
Farm Bill, Commodity Prices, Tariffs: The absence of a new Farm Bill, declining commodity prices, and uncertainty surrounding tariffs with China are causing significant challenges for farmers in Central Illinois, increasing financial risk and uncertainty in the agricultural community
Farmers in Central Illinois are facing significant challenges due to the absence of a new Farm Bill, declining commodity prices, and the uncertainty surrounding tariffs with China. Chad Hart from Iowa State University joined Back Roads of Illinois to discuss these issues and their impact on the commodities markets and farmland value. The markets for corn and soybeans have been overwhelmed by large supplies, both from the old crop and the current harvest. Prices for these commodities have dropped significantly, increasing the financial risk for farmers. Additionally, the quality of the wheat crop in the Central U.S. and Kansas has been good, but the harvest season is underway, and the markets for beans are falling apart. The biofuels sector is also in a state of flux on the campaign trail. Farmers are facing a greater risk of income net and tariffs, and the uncertainty surrounding these issues is causing anxiety and financial instability in the agricultural community.
Commodity Prices & Farmland Values: Despite large crop harvests putting downward pressure on commodity prices, cash prices remain stable due to stronger basis levels in areas with high ethanol and feed mill concentrations. Declining net farm income may lead to decreasing land values, but the USDA report predicts stability or slight declines over the past year.
The expected large harvest of crops this fall is putting downward pressure on commodity prices, leading to significant drops in futures prices. However, cash prices have not fallen as much due to stronger basis levels, especially in areas with high concentrations of ethanol plants and feed mills. Lower commodity prices are projected to lead to declining net farm income, which historically has resulted in decreasing land values. The USDA is expected to release a report on land values later this week, with predictions of either stability or slight declines over the past year. In Central Iowa, anecdotal evidence suggests a slight reduction in farmland values, but the decrease is relatively small, around 2-3%. The progress on a new farm bill is slow, and many farmers are likely to keep the existing one for another year.
Farm Bill programs, crop insurance, soybean prices: Farm Bill programs, such as ARK and PLC, have increasing reference prices due to escalator clauses, while crop insurance remains a topic of debate in the Farm Bill discussions, and soybean prices may face pressure due to abundant supplies in storage and upcoming harvests.
The Farm Bill programs, specifically ARK and PLC, have seen an increase in reference prices due to escalator clauses, providing higher support prices for farmers. However, prices have not dropped low enough yet to trigger payments. As the Farm Bill debate heats up, crop insurance will be a major topic, with most legislators looking to maintain or boost the program, but it remains a potential target for budget cuts. Farm organizations like the American Farm Bureau Association, National Corn Growers Association, and American Soybean Association are advocating for its protection. Soybean futures may face pressure in the next few months due to abundant supplies in storage and upcoming harvests. Overall, the agricultural sector is dealing with price support through Farm Bill programs, ongoing discussions about crop insurance, and market pressure from ample supplies.
Agricultural economy recovery: Strong global demand for corn and soybeans may help the agricultural economy recover from its downturn more quickly, but job losses and industry challenges persist
The agricultural economy is currently experiencing a downturn, similar to what was seen a decade ago around 2013-2014. However, this economic cycle may recover more quickly due to strong global demand for corn and soybeans, with projected usage reaching nearly 15 billion bushels for corn and similar levels for soybeans. While the agricultural downturn is impacting industries and causing job losses, it may not necessarily lead to a general recession if the Federal Reserve can manage interest rates effectively. It's important to note that net farm income projections are coming down from record high levels over the past few years. Despite the challenges, the agricultural economy has historically recovered, and this downturn is expected to be no different.
Green market downturn, fund management impact: The green market, particularly agriculture, is experiencing a downturn due to funds managing money to push the markets lower. Producers remain content with the current market situation despite some rain alleviating concerns about drier areas, but there's no significant weather premium in the market.
The market is experiencing a downturn, and income levels are readjusting to historically average levels after a recent boost. The green market, specifically the agricultural sector, is dealing with a pushback from funds looking to manage money and push the markets lower. Despite some rain alleviating concerns about drier areas, there is currently no significant weather premium in the market. Producers seem content with the current market situation. Greg McBride and Cloud Bumstead from Allendale further discussed the bearish forecast and the role of fund management in market movements.
US Crop Yield: Despite some regional issues, the US crop yield in 2022 is predicted to be large, with Northern Illinois exceeding 200 bushels for corn and 60-80 bushels for beans. The market does not require significant weather premiums yet.
The current crop yield in the US is expected to be large despite some production issues in certain regions like the southeast and parts of the Dakotas. The market does not yet require any significant weather premium, and it's too early to consider South America as an additional factor. In Northern Illinois, the corn crop is predicted to exceed 200 bushels on average, and the bean crop is expected to be around 60 to 80 bushels. The forecast for Northern Illinois indicates sufficient rain for the upcoming stages of crop growth. The cash market in central Nebraska had a good planning season kickoff.
Farming Challenges: Farmers face market fluctuations and extreme weather conditions, putting dry land crops at risk and necessitating extensive irrigation to keep irrigated crops alive.
Despite a successful planting season for recent forage crops and promising prospects for a sizable crop in the area, farmers are currently dealing with weakening cash markets and extreme heat conditions. The dry land is at risk of burning up during the upcoming week, and irrigation is being used extensively to keep crops alive. The irrigated corn crop looks excellent and could potentially yield a record harvest, but the dry land crops are a concern due to the lack of rain. Farmers are managing the best they can, but the situation is challenging with the combination of weather extremes and market fluctuations.
Cattle market uncertainty: Experts advise caution due to lower placements, potential production issues, and higher box beef numbers, suggesting producers consider getting protection in place
The cattle market is currently experiencing lower placements in the coming months, which some experts find unusual and concerning. While there is a bit of expansion happening, many ranchers are considering selling their heifers and paying down debt due to high interest rates. The fat side of the market has seen a move to the high side, but there's been little follow-through in cash trade. Experts advise producers to be cautious and consider getting protection in place due to potential production issues and higher box beef numbers. Overall, the market is facing uncertainty and it may be wise for producers to reassess their strategies for the coming year. If you're looking for market insights, you can find them by connecting with the experts mentioned in the discussion.
Managed Money Short Position, Agricultural Market: Managed money's short position in crops like corn and soybeans could lead to oversold markets, creating opportunities for short covering and potential price bounces. Traders should be cautious and look for signs of market turnaround before adding to positions.
The managed money is currently controlling the market and maintaining a record short position in crops like corn and soybeans. At some point, these markets will become oversold, providing an opportunity for short covering and potential price bounces. However, it's not recommended to lift hedges at this time. Instead, traders should be on the lookout for opportunities to add on to positions if the market starts to turn upward. The livestock market saw losses for cattle futures, lean hogs, and feeder cattle, while crude oil finished with gains and the Dow Jones was up slightly. The agricultural market and farm bill were topics of discussion on the campaign trail recently. Greg McBride and Kyle Bumstead from Allendale, Inc. shared these insights during an episode of "Back Roads of Illinois."
Ethanol demand decrease: Decreasing ethanol demand in US, particularly Midwest, due to changing consumer preferences and government policies, may impact farmers and rural communities significantly.
There is a decreasing demand for ethanol production in the United States, particularly in the Midwest. This was discussed on the latest episode of "Back Roads of Illinois," featuring experts Chad Hart from Iowa State University Extension and Ames, as well as Kyle Bumstead and Greg McBride from Allendale. The panel discussed the implications of this trend for the farm industry, specifically in Illinois, which has been a major producer of ethanol. The experts explained that the demand for ethanol has been declining due to various factors, including changing consumer preferences and government policies. As the conversation came to a close, it was clear that this shift in demand could have significant consequences for farmers and rural communities in the Midwest. Listeners are encouraged to tune in to the full episode for more insights on this topic.