Welcome to Agriculture Economic Tidbits, a weekly e-newsletter (emailed Mondays) for farmer and rancher members of Nebraska Farm Bureau. Agriculture Economics Tidbits will provide you with timely tidbits of economic information and policy analysis focused on Nebraska’s largest industry, agriculture, and its key players, Nebraska’s farmers and ranchers. The newsletter will break down global and national economic trends and what they mean for Nebraska agriculture, stay abreast of latest market movements, and provide the latest results from Farm Bureau research on current policy issues like property taxes, school funding, farm programs and international trade—all with the goal of helping you maintain a viable farming or ranching operation.
“We should never lose sight of the fact that the job of the market is to disseminate the information at hand and attempt to come up with a price that reflects what happens on a global scale.” Dan Hueber, thehueberreport, May 31, 2019.
Monday’s crop progress reports showed 70 percent of Nebraska’s estimated corn acres and 40 percent of the estimated soybean acres were planted as of May 20. In comparison, the 5-year planting progress averages are 86 percent for corn and 54 percent for soybeans. In March the USDA estimated 9.7 million acres of corn would be planted and 5.4 million acres of soybeans in Nebraska.
In Nebraska, for crop insurance purposes, the final planting date for corn in all counties is May 25 and the final planting date for soybeans is June 10. Farmers may be eligible for a prevented planting payment if acres have not been planted due to an insured cause of loss by the final planting date. Prevented planting will provide coverage equal to 55 percent of the original production guarantee in the crop insurance policy.
A recent Agricultural Economic Insights blog highlighted the impacts of delayed planting on national average yields. The article noted that there were only four years since 1980 in which the corn planting progress nationally was less than the progress made this year at a similar time in the planting season (week of May 13).
U.S. gross domestic product (GDP) grew 3.2 percent in the first quarter, higher than most economists expected. The growth marks 38 consecutive quarters of growth. Bob Young, President of Agricultural Prospects and former economist with American Farm Bureau, likens the recent GDP report to knowing what your blood pressure was this morning, “it provides no real information as to how your spouse’s actions will affect those numbers tomorrow.” Peeking underneath the surface in the recent report, Young worries “there’s a dark cast to these seemingly bright numbers.”
The 2017 Census of Agriculture provides another reminder of Nebraska’s high property tax on agricultural property. Figure 1 shows the average property taxes paid per farm as reported in the census. Nebraska ranks second nationally in taxes paid per farm, only behind California. Average property taxes paid per Nebraska farm and ranch operation was $16,107 in 2017.
Domestic production increases and foreign demand drove U.S. beef and pork exports higher in 2018 according to the USDA Economic Research Service. Beef exports increased 10.3 percent last year, the third consecutive year of increases. The growth was driven most notably by increases in exports to South Korea, 35 percent larger than that shipped in 2017.
“Despite a voluminous and often fervent literature on "income distribution," the cold fact is that most income is not distributed: It is earned.” Thomas Sowell
Agricultural exports in 2017 were worth more than $130 million for Cuming, Platte, Holt, Custer, and Dawson counties, the top Nebraska counties in terms of export value. This and other findings are part of a Nebraska Farm Bureau report on the value of agricultural exports to the state’s agricultural producers and counties. This year marks the second iteration of the report and includes comparisons of export data from 2016 and 2017. Commodities included in the analysis were corn, soybeans, soybean meal, beef, hides and skins, pork, wheat, ethanol and distillers’ grains.
Farms in Nebraska in 2017 numbered 46,332, down from 49,969 in 2012 according to the USDA Census of Agriculture. The USDA counts any farm which sells agricultural products of $1,000 or more as a farm. The number of farms in 2017 was the lowest reported over the past 20 years, with the only upswing occurring in 2012. Changes in the number of farms between each census are watched closely, while changes in producers often gets overlooked.
“If corn is a solar panel and seeds are batteries, then livestock and poultry are machines that are ‘hooked up’ to the batteries, which power the animals to produce useful outputs, some of which are food and some of which are not.” Jayson Lusk, Jayson Lusk Blog, Farming Isn’t Just about Food, March 29, 2019.
The outbreak of African Swine Fever (ASF) continues to spread in China and has now been reported in several other countries in Southeast Asia such as Vietnam and Cambodia. The production losses in China stemming from ASF are likely to shape world protein markets for the many years. Bloomberg News reports that more than 80 percent of Chinese farms are choosing not to restock. Reuters reported China’s pork production fell 5 percent in January through March of this year and the USDA projects pork production in China this year will fall 10 percent.
The terms “commoditization” and “decommoditization” are increasingly being used to describe trends in agriculture. Producers will fit into two broad categories: those who produce homogenous commodities like corn, wheat, beef, or soybeans—commoditization; and producers who work through contracts, local markets, and other avenues to produce a commodity with an attribute or quality to more directly supply a consumer demand—decommoditization.
The demand for ethanol is obviously tied to overall fuel consumption. While some ethanol is exported, roughly 10 percent of production in 2018, most of it is consumed domestically. Below is a graph of actual and projected U.S. gasoline consumption based on Energy Information Agency taken from a farmdoc daily article by Scott Irwin of the University of Illinois.
Cargill plans to invest $112 million to expand its corn processing capacity in China. The goal is to expand its corn process capacity in China to 2MMT a year. Thehuebereport, dan hueber, April 23, 2019.
With the release of data from the 2017 Census of Agriculture, “number nerds” will be sorting through the data to examine changes which have occurred over the 5-year period between censuses. The map below is a case in point. The map plots the percentage changes in beef cow numbers in Nebraska counties between 2012 and 2017. Overall, beef cow numbers in Nebraska, 1.97 million head in 2017, were almost 181,000 head greater than the number recorded in 2012, or 10 percent more.
Farmland values have been surprisingly resilient over the past few years. Land values today are lower than the highs seen in 2014, but the declines in values have not been as marked as the declines in crop prices or farm income. According to the Federal Reserve Bank of Kansas City, cropland values in the Tenth District, which includes Nebraska, declined 16 percent from 2013 to 2018.
There’s a silver lining hidden in the latest Farm Bank Performance Report from the American Bankers Association (ABA). Noncurrent farm loans (those more than 90 days past due) account for 0.52 percent of total loans, less than the overall industry noncurrent loan ratio of 1.20 percent. However, the ABA also reports the number of delinquencies did rise.
“. . . just four crops account for about 95% of all planted farmland: corn, soybeans, wheat, and cotton.” Jayson Lusk, Jayson Lusk Blog, Farming Isn’t Just about Food, March 29, 2019.
Tweets and other anecdotal reports indicated a few planters were rolling in Nebraska last week. Time will tell whether the wet winter and spring will cause significant delays in getting this year’s crop in the ground. Conventional wisdom suggests today’s farmers can cover more ground, in less time, due to larger planters and equipment. Meaning farmers today can plant more acres in fewer days compared to the past.
President Trump walked back his threat to close the border with Mexico to trade, but President Trump, if nothing else, has demonstrated he can change his mind on dime. What might be at stake for Nebraska if the border were closed? In 2018, the U.S. exported more than $19 billion in agricultural products to Mexico. Nebraska Farm Bureau estimates show Mexico imported almost $890 million in Nebraska commodities in 2017.
An economist once joked that the future to economists is always straight lines. The economist was making light of projections which show future prices, income, or other economic data as straight lines absent the variation and volatility inherent in the economy. Yet despite this drawback, long-term projections can provide insights into underlying trends evident in the economy.
“He who sees the past as surprise-free is bound to have a future full of surprises.” Amos Tversky quoted in The Undoing Project, Michael Lewis, W.W. Norton & Company, 2017.