How Will 2014 Crop Input Costs Affect The Bottom Line?

input costsAs farmers reach their last rounds in the combine harvesting 2013’s crop, most are already thinking ahead to 2014. One of their top concerns is input costs and how best to manage them to maximize their bottom line.

The drought of 2012 and its resultant high-demand and low supply of crops led to high commodity prices, but with some drought-relief in major corn and soybean areas of the country in 2013, it is expected that commodity prices will adjust to reflect a better grain supply. With grain prices on the general decline, farmers expect to contend with potentially tight profit margins in the coming harvest year. As a result, analysts expect changes in the money they pay for 2014 input costs such as fertilizer, fuel, chemicals, and seed.

On the whole, fertilizer costs have declined. In particular, potash and phosphate are down 15-17% since last spring, and nitrogen has declined 22% this fall. Depending on how much the weather will allow farmers to get their fertilizers applied this fall will further determine the price of fertilizers next spring. The decrease in the price of nitrogen reflects potential lower corn acres in 2014, as well as an increase in domestic production of nitrogen.

Likewise, fuel costs are expected to be down slightly in 2014. The price of the diesel fuel that runs most farm machinery is expected to be down by 4%. Similarly, the price of natural gas, which is commonly used to dry corn, is projected to be down by 4% as well.

The price of chemicals—in the form of herbicides, insecticides and fungicides—will be mixed. Purdue University farm business management specialist Alan Miller contends that chemical prices will be up slightly, with a 1% increase, with the exception of herbicides, which will remain flat. Experts urge farmers to try to buy chemicals in bulk when possible in order to cut costs. Another way to cut input costs is to consider purchasing seed and chemical package deals when making seed-buying decisions.

Seed prices are predicted to be up in 2014, perhaps as much as 2-3% for the 2014 planting season. However, while producers always attempt to watch their pricing inputs, they will not cut corners when it comes to selecting the type of seed they choose to grow. With the technology that goes into seed genetics and the beneficial ways these hybrids can maximize yields and overall profits, farmers realize that it is in their best interest to choose the right type of seed for their ground, regardless of cost.

Finally, experts predict land and rent prices to remain where they are in 2014. Machinery costs, which have increased an average of 7% per year from 2002-2012, could fall as a result of lower commodity prices, especially if these lower prices are sustained for a longer period of time.

While it is impossible to predict yields and prices for the 2014 growing season, it is necessary for farmers to make input decisions now in order to maximize profit and lower risk where possible.

If you have questions about how input costs will affect the profitability of your land or operation, please contact one of the professional farm managers at UFARM for a free consultation.

 

 

 

 

 

 

Nebraska Fall Wheat Planting Update

Wheat-Field-small

 Along with corn and soybeans, wheat is one of the top crops in Nebraska. Many Nebraska farmers take advantage of wheat’s unique growing capabilities in order to maximize their land use and profitability.

Nebraska is one of the top ten wheat producing states in the country, and Nebraska farmers have produced as many as 84.28 million bushels in 2007, the same year that saw the greatest acreage of wheat planted in the state at 2.05 million.

In Nebraska, wheat is primarily grown in the western half, although farmers from all across the state plant it in the fall to harvest in the spring, known as winter wheat. The recommended winter wheat planting dates vary across the state. The north and western parts of the state have an earlier planting time, while the south and eastern areas can see the fall planting into later parts of September and even early October. Generally, fall planting of wheat in Nebraska is recommended between September 1st and October 1st.

Wheat is also a popular choice of cover crop in Nebraska. The seed is readily available and relatively inexpensive, and it is easy to establish and fast growing. Planting a cover crop has many advantages. It prevents wind and water erosion, can increase yield, improves soil, and adds or preserves soil nutrients that might otherwise be lost to leaching. Animals may also be grazed on the cover crop before spring planting takes place.

Despite its advantages as a cover crop, however, wheat does use up excess soil moisture, and some agriculture experts caution against growing it as a cover crop in the Nebraska Panhandle, since the average rainfall is less and evaporation rate is generally higher than in other parts of the state and country. As a result, the disadvantages of its use as a cover crop in this area of the state may outnumber the advantages.

Winter wheat benefits from snow coverage in order to prevent winterkill. Studies have shown that a blanket of snow 3 inches deep is sufficient to protect it from the cold, and 4-6 inches of snow cover offers the best winterkill protection.

Fall wheat planting across Nebraska was slowed by rains for a week or two in late September, and while proper timing is key for wheat planting, a moist soil profile is still a welcome change to last year’s dry planting conditions for winter wheat.

At the end of September, the USDA reported that 65 percent of Nebraska’s winter wheat planting was complete, compared with a 72 percent average for the end of September. The moisture improved the overall prospects for Nebraska’s next wheat crop. Overall, the USDA reports 56.52 million acres of wheat planted for 2013-14, up slightly from last year’s 55.74 million acres.

As with any crop, weather conditions have the most significant effect on crop growth, yields, and the planting and harvesting of crops. With the majority of Nebraska’s wheat sown, farmers will wait to see what winter weather conditions will manifest.

United Farm and Ranch Management can provide year-around care for your Nebraska property.  If you would like a customized plan for your farm or ranch, please contact a UFARM professional today.

 

When is the Right Time to Sell the Farm?

“Don’t sell the farm,” or “I wouldn’t bet the farm on it,” are well-known idioms, and for good reason: They are a very fair representation of the high stakes that accompany such a venture. Over the last decade in Nebraska, with a growing number of farmers and landowners at an advanced age, knowing how to go about selling their farming enterprises or passing them down to their children is fraught with difficulty, and there are many issues farmers must take into account when going about estate planning and passing along their life’s work to the next generation.

Selling the Family Farm

One such issue that must be taken into account is quite obvious, but often overlooked: Do the children actually desire to carry on the family farm? Often, this fact is simply assumed, and parents make arrangements early-on, only to find out too late that the sons or daughters have very little interest in farming. If this is the case, it is in the best interest of all involved that they hire a professional farm management company or sell the asset to an interested party, so that the money is able to benefit the family and allow them to pursue their own aspirations.

Many experts advise that parents sell—rather than gift—the farm to their kids. This ensures that the kids do, in fact, desire to farm since they are buying it with their own capital. This way, there is “skin in the game,” and the farm benefits as a result.

Perhaps the largest factors affecting the sale of farms are the tax consequences. Navigating the myriad federal and state capital gains, estate and inheritance taxes is tricky. Inheritance taxes, aka the “Death Tax,” can be an especially difficult tax to handle, especially for small businesses and for family farmers and ranchers. Often, those on the receiving end of farmland from the previous generation are forced to sell that land in part or whole just to pay the taxes. Nebraska is one of only six states nationwide that has a separate state inheritance tax, so Nebraska farmers must contend with this extra tax as well. Experts emphasize the importance of seeking sound legal counsel as well as to obtain advice from those with expertise in farm management in order to minimize the often crippling tax burdens that can accompany the inheritance of the family farm.

Above all, it’s important for farmers to have a plan. It’s never too early to start planning one’s own future business succession, and it’s simply another part of farm management.  If working with a farm  management company, have copies of reports sent to adult children, so they can learn about the farm before the parents are gone. A lack of planning can put huge amounts of stress on families, and even sometimes tear them apart due to bickering among siblings about what to do about the farm or land that they’ve inherited, in part or whole. This plan will need to be reviewed often, and perhaps will change many times due to varying outside factors, but at least there will be a plan in place to guard against such instances.

If you need assistance managing your farm or transitioning your land for the future,  please don’t hesitate to contact us at United Farm and Ranch Management .

 

Fall Tillage on your Land: Pros and Cons

Just as the old adage, “A woman’s work is never done,” rings true, so too could one say this about farmers. With Nebraska farmers at or approaching the midway point of the 2013 harvest, most have already thought ahead to the ways they will manage their fields after the crops are out and before winter sets in. There is a wide array of tilling practices across the state, and even among smaller geographical areas. It seems that tilling practices are as individual as farmers themselves, and many factors influence where a farmer will be on the tilling/no-tilling spectrum.

There are two main factors all producers take into account when it comes to tillage decisions. One is soil type, and the other is soil moisture. As such, fall tillage practices vary from operation to operation, and even within operations, since one must consider the soil characteristics of each individual piece of ground. Weather conditions also have a considerable effect on how producers deal with fall tillage of their land.

Fall Tillage

Many farmers think that fall tillage is better than spring tillage, since the soil moisture profile is usually more suitable. Generally, less moisture in the ground during fall tillage leads to less soil compaction, more efficient soil fracturing, less smearing of soil, and less large soil clods, resulting in better soil quality and yields. Experts stress that staying off of wet soils has a tremendous effect on soil structure, as very wet soils compact very easily, in turn affecting yields down the line.

There are many different ways farmers till as well, and these practices also depend upon the type of ground with which they are dealing. There are certain advantages and disadvantages associated with these various forms of tilling, including their effects on soil erosion, moisture loss, fuel  and labor costs, soil structure and temperature, compaction, and dependence on herbicides. This chart illustrates the major advantages and disadvantages associated with the major tilling systems: http://cropwatch.unl.edu/web/tillage/advdisadv.

Many farmers also have livestock to consider, and tilling before putting out livestock to graze the stubble is, of course, not an option. More and more farmers are relying on cover crops to supplement their livestock during the fall and winter months, as well as to control soil profiles, add nitrogen, control erosion, and prevent runoff. Many producers find that not only do cover crops provide excellent forage for their cattle, but they also help soil to retain nutrients and moisture in the long run. Of course, large-scale grazing  of cattle can lead to soil compaction, so farmers must take into consideration both the pros and cons of putting their livestock out on various fields.

Farmers and livestock producers are continually making decisions about what is best for their operations, and realize that just because the crops are out does not mean that work stops until spring planting.

To learn more about how land tillage practices affect the long-term value of your farm, set up a free consultation with one of our experienced farm mangers.

Nebraska Harvest in Full Swing

Combines across Nebraska have been running the month of October, even if the government hasn’t been. With the 17% government shut down, the USDA confirmed that the Crop Estimate and World Supply and Demand report will not be released as usual, since the data analysts and those who compile harvest data from Farm Service Agencies were furloughed the majority of October.  Since being reinstated there is now a back log of data. This leaves market analysts and farmers wondering about the particulars of the harvest data, including projections about corn and soybean acres.

In particular, due to the late, wet spring planting conditions, analysts were interested in seeing the prevented planting acreage numbers that were to be included in this report, and how this data might affect the overall corn and soybean markets. In mid-September, FSA reported that 3.57 million acres of corn and 1.69 million acres of beans were prevented from being planted. For the time being, though, life does go on, and the crops don’t care how soon Congress gets its act together.

Timing-wise, the start of the Nebraska harvest has been average to slightly later, although it has been much later than last year’s atypically early harvest. As of Oct. 8th, the overall corn harvest nationally was at 12% vs. the historical average of 23%. Beans were further behind at 11% vs. 20% historical average. Nebraska farmers were out in force, before a large rain system moved through the eastern half of the state, dumping significant amounts of rain in many areas and stalling harvest for several days. Frost was forecasted for certain areas, but stayed away the first part of October.

So far, corn and soybean yields have been higher than predicted or expected. Private analysts continue to report higher-than-expected yields for corn, with the average September corn yield higher than the 155.3 bushels/acre that was previously estimated. Higher than expected yields have resulted in rather bearish corn market. While soybean yields are also good so far, the USDA already raised last year’s crop size by 19 billion acres, so market adjustments to use should be minimal. Additionally, while early yields from early-planted fields have been favorable for both corn and beans, it’s still questionable whether or not these yield numbers will hold up as farmers begin to harvest from later-planted fields.

Favorable yields have also brought down the basis of both corn and beans, with the bean basis 5 cents lower than the 5 year max average and the corn basis is even with the 5 year max average. (dtn.com)  Some analysts believe the basis will continue a downward trend as harvest continues.

To date, the markets have coped fairly well without the smaller, weekly USDA reports. However, as we approach additional government budget issues, all the markets may feel the effects, including the grain markets. Hopefully negotiations on Capitol Hill will move forward and further shutdowns can be avoided.

If you’re looking for assistance managing the constant changes happening with your farmland,  contact a UFARM manager for a free consultation.

 

Nebraska Farm Land Prices: When’s the right time to buy or sell?

Land PricesIt’s a popular topic at every rural coffee shop: Will land values remain this remarkably high? It’s a good question.  With values that have been rising steadily over the last 20 years, and that have seen even larger gains in the last two to five years, farmers and landowners wonder if conditions will remain in place that will maintain these rates for the foreseeable future.

Rising land values have especially impacted farmers and landowners in Nebraska.  According the USDA, Nebraska’s all-land average value has doubled in the last five years, and in some areas has increased more than 125%. Additionally, the USDA’s land value survey reported a 33% increase for Nebraska farmland—the highest percentage gain of any state in the nation.

Conversations that involve record value gains in any market will include references to booms, bubbles, and bursts, and farmers and landowners in Nebraska are particularly aware of this. Many current producers experienced—or saw their parents experience—the farmland bubble burst in the 1980s, and are keenly sensitive to this issue today. Is the current farmland value bubble about to burst?

The answer to this question requires a basic understanding of what factors affect the rise and fall of prices. What has contributed to these record gains in Nebraska farmland values?

One is the current US monetary policy, with record low interest rates and a weak dollar. The weak dollar encourages agriculture exports, while the low interest rates discourage landowners from selling their land, thus creating a scarcity-driven land market and rising land values. Some agricultural economists predict that land values are set to go down, just because interest rates cannot go any lower than they are currently.

Another factor that affects land values is the US and global economies. Poor economic gains in both the US and global economies will eventually affect the disposable incomes of American households, and will in turn affect food prices.

Finally, and perhaps most obviously, commodity prices affect land values. Last year’s record drought forced commodity prices up, which in turn brought even greater land values to Nebraska and area states. Favorable weather conditions for the 2013 growing season will bring commodity prices down, which in turn might end up bringing farmland values to lower levels.

The outlook for Nebraska land values is up to debate. Some economists think that while there will be some more significant corrections in the land market—especially in states like Nebraska that have seen the most dramatic value increases—the chance of another burst is far less likely, simply due to the fact that today’s farmers are not as seriously leveraged as they were in the 1980s.

One thing is certain: Farmland prices are sure to remain a top concern for Nebraska farmers and landowners as we head into the 2013 harvest season. Please don’t hesitate to give us a call at United Farm and Ranch Management for any questions or concerns you may have when it comes to your land values and rental income.

 

Effects of the US Farm Bill on Landowners and Farmers

Time is running out for Congress to vote on a newly proposed version of the farm bill, leaving some farmers and landowners in limbo when it comes to making decisions regarding varying aspects of their farming enterprises. The farm bill is renewed every 5 years, and has already seen a 1 year extension after it had been set to expire in 2012. The new extension expired September 30, 2013.

Earlier this summer, the House and Senate hammered out new versions of the Farm Bill. The Senate passed their version in June, and on July 11th, the House passed a so-called “Farm Only” version of the bill, seeking to separate out the supplemental food program (SNAP) from the bill and place it in separate legislation.

The Senate version of the farm bill is similar to the last extended 2008 legislation and includes the food program. It also retains the permanent farm laws of 1938 and 1949. The proposed House bill signals a shift in farm law policy by eliminating the supplemental food program from the farm bill, as well as eliminating the farm laws of 1938 and 1949. Eliminating these permanent farm laws would discontinue direct payments and make other adjustments, thereby saving money on commodity programs in the long run. The permanent farm laws in the proposed House legislation would be replaced with a new Title I, which would ensure that farm commodity programs would continue in the event that a new farm bill is not enacted or renewed.

At any rate, how would the proposed farm bill affect farmers and landowners? At the very least, they will face a bit of uncertainty until a farm bill is passed or renewed. The most immediate effects would be a possible end to direct payments and other various subsidies should some form of the House bill pass Congress.  Many area farmers wonder how proposed changes might affect the crop insurance industry, and how these changes may affect their risk management decisions.

On September 19th, the House succeeded in passing another bill that attempts to address the SNAP benefits portions that has traditionally been included in the farm bill. As separate legislation, it contains $40 billion worth of cuts, out of $80 billion. These cuts would be spread out over a period of 10 years.

Now, the House and Senate need to go to Conference Committee and attempt to meld together the Senate’s version and the two separate House versions and then agree on passage of a new bill.  Will they have the votes, and if so, will President Obama sign it into law, should portions of the House version pass committee containing cuts to the food stamp program?  Time will tell, but these proposals will make for interesting political dynamics in an age of huge deficits and amid calls for fiscal responsibility.

To learn more about how the next farm bill may affect your land and tenants and to learn ways to minimize risk, set up a free consultation with one of our experienced farm mangers.

More Options for Sellers and Buyers

United Country Real EstateUFARM joins United Country Real Estate Network

 

UFARM recently announced their affiliation with United Country Real Estate. United Country Real Estate has the largest network of conventional and auction real estate professionals in the U.S., Mexico and Latin America.  They have been an innovator in real estate marketing since 1925 and support 550 offices. United Country marketing websites involve more than 3,500 separate sites and traffic of approximately 3 million visitors per month.

UFARM’s goal is to enhance real estate services by providing additional options for selling and buying a farm, ranch or a variety of property types.  UFARM now has access to exclusive national real estate catalogs, national advertising of local properties in hundreds of newspapers and magazines, and a private database of more than 400,000 buyers.