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Articles from 2021 In January


This Week in Agribusiness, Jan. 30, 2021

Max talks about the ripple effect through the ag economy, and its impact on plant development. Cory Mills and Kenny Melton, BASF, share the innovations happening at BASF.

Duwayne Bosse, Bolt Marketing, talks with Mike about market volatility, South American soybeans and new-crop sales.

Duwayne Bosse is back, sharing corn market insight, including call options, as well as the wheat and cattle markets.

Chad Colby highlights weather technology and use   with Greg Sauder, 360 Yield Center.

Max talks with Robert Paarlberg about his book, Resetting the Table, focusing on busting modern ag myths.

David Jolly, Herschel Parts, joins the broadcast to talk about planter replacement parts.

Greg Soulje is in with a weather forecast for the week ahead, and an outlook for the next few weeks.

There's a 1950 Farmall H in Max's Tractor Shed.

Mark Stock, Big Iron Auctions, shares a preview of what's coming across the block.

The FFA Chapter Tribute salutes Molly Schempp, Illinois state vice president.

Orion talks about ag policy and trade agreements under the new administration in Samuelson Sez.

The Farm Progress Virtual Experience segment features the Balzer Field Floater 7 grain cart.

 

This Week in Agribusiness features market news, ag technology, weather and farm management and equipment information and opinions. This leading ag news program airs weekly on RFD-TV, and can be found each week on FarmProgress.com

FFA Chapter Tribute: Molly Schempp

Molly Schempp talks about her FFA experience and how she got involved in FFA and what she's done during her involvement in the organization. She also talks about her duties as state vice president.

The weekly FFA Chapter Tribute is an opportunity to shine a spotlight on the good work of your local chapter. Tell us about what you're doing, give us some history from your group and tell our viewers of the work you do in the community. FFA chapters across the country deserve recognition for the work they do, make sure we include yours.

To have your chapter considered for this weekly feature, send along information about your group by e-mail to Max Armstrong at max@agbizweek.com. They'll get your group on the list of those that will be covered in the future. It's a chance to share your story beyond the local community. Drop Orion or Max a "line" soon.

The National FFA Organization, formerly known as Future Farmers of America, is a national youth organization of about 650,000 student members as part of 7,757 local FFA chapters. The National FFA Organization remains committed to the individual student, providing a path to achievement in premier leadership, personal growth and career success through agricultural education. For more, visit the National FFA Organization online www.ffa.org, on Facebook at facebook.com/nationalffa, on Twitter at twitter.com/nationalffa.

Would you accept this burndown performance?

Tom J. Bechman ironweed and wild garlic growing in young no-till soybean field
TOUGH CUSTOMERS: You don’t have to worry about pests like ironweed and wild garlic in every field. Those are two weeds still standing in this field. Here’s how to fine-tune burndown sprays.

Before you criticize the burndown performance in this field, here is some information you should know. It’s below-average land, mostly silty-loam soil without good drainage. The field was custom-farmed for years. Despite all that, these no-till soybeans, just emerging here after being planted around June 1, averaged 53 bushels per acre in 2020. A postemergence spray was applied, and weeds weren’t a problem at harvest.

“The first thing to do before you apply a burndown ahead of no-till is to identify which weeds are in the field,” says Bill Johnson, Purdue University Extension weed control specialist. “The escapes here include two tough weeds, ironweed and wild garlic.

“You won’t get those if you’re just applying glyphosate as the burndown. Adding something like Sharpen wouldn’t help that much because it isn’t great on those weeds either.”

So, what could have been sprayed to deliver more effective results? “2,4-D or dicamba might have been a better choice,” Johnson says. “If there are dandelions in there too, 2,4-D would work on them. To get the wild garlic, you would probably need to add something like Harmony.”

Weather conditions when the application was made and the rate applied also would make a difference, he says. If it’s cool or you shave rates and what you’re applying is marginal at best on a weed species, you’re not going to kill it, he says.

Whether you could spray dicamba or 2,4-D and plant immediately would depend on whether the soybeans have tolerance to the herbicide, Johnson adds. Consult the label for possible waiting times before planting. There would be no wait for planting Xtend or XtendFlex soybeans following dicamba, or for planting Enlist 3 soybeans after spraying 2,4-D.

China buying spree supports prices

Grain-Market-Week-in-Review-Video-Audio-Art-Final.jpg

Missed some market news this week? Check out the latest marketing news from Jacqui Holland, Ben Potter and our guest Ag Marketing IQ bloggers.

Ag Marketing IQ

Instead of playing the guessing game, your time is probably better spent building a marketing plan that enables you to embrace the unpredictable nature of the market. To do so, I would encourage you to focus on 3 things each year: Get control, build flexibility into your marketing plan, and retain opportunity.

Putting on hedges during the spring and summer was a drag on revenues, according to my long-term study of selling strategies. Locking in a price, whether with futures, options or average price contracts, led to lower net revenues than just moving the grain across the scales off the combine. Those who held on to grain after harvest, whether in the bin or on paper, were the big winners -- at least so far. The unusual 2020 rally – and mediocre yields – made this year the exception that proves the rule. Preharvest hedges continue to offer better long-term average returns compared to the harvest price. But years with rallies later in the marketing year show the risks of relying too much on seasonal averages that work most – but not all -- of the time.

Between 2010 and 2012, grain prices were higher due to lower global supplies and strong demand. Some feel that 2020-21 may be trading in a similar manner, where prices could overall trend higher into summer. In those years, there was a direct correlation that whenever corn prices would head north of $6, wheat demand for domestic feed needs would increase as wheat became a substitute.

Our new number one buyer stepped in again today and bought 2.1 million metric tons (mmt) of U.S. corn , the second largest daily purchase in history. China’s purchase was in addition to the purchases made earlier this week , putting weekly totals at 5.848 mmt to China and 0.316 mmt to the unknown category. That brings total weekly corn sales (that we know of) to 6.1644 mmt, or 242 million bu. Other sales may show up in the weekly report if they were below the 100,000 tonne, the standard for reporting to USDA.

Exports

The latest grain export inspection report from USDA, out Monday morning and covering the week through January 21, held mixed but mostly bullish data for traders to digest. Corn climbed moderately higher from a week ago and topped all analyst estimates. Wheat also bested all trade estimates after nearly doubling the prior week’s volume. Soybeans moved modestly lower but still stayed on the upper end of trade guesses

In the latest export sales report from USDA, corn sales climbed another 61% above its prior four-week average and surpassed all trade guesses. Wheat sales also posted week-over-week gains while landing in the middle of analyst estimates. Old crop soybean sales were relatively disappointing but were propped up by a healthy dose of new crop sales

Daily sales were reported four days this week, with China taking more than 230 million bushels of corn.

Outlook

Is the recent rally in the soybean market driven by supply or demand? The short answer is first supply, next demand, and then supply again. There are several pronounced factors currently influencing soybean prices. Here is a deep dive look at them.

Recaps

Corn prices moved higher again in overnight trading, anchored by ample optimism over rising Chinese demand and a slowdown for the South American harvest amid dwindling domestic stocks. Despite a modest setback yesterday, overnight gains have prices positioned around 8% higher this week, making it possible to see the biggest weekly gain since June 2013. Soybean prices are ready to close out a very volatile week, trending nearly 1% higher in overnight trading, thanks in part to spillover strength from corn. Wheat prices tacked on moderate gains in overnight trading, following corn and soybean prices higher. Traders continue to balance slightly bullish domestic demand against staunch overseas competition. Prices remain below but near multiyear highs captured earlier this month

Corn prices lurched higher in a sometimes choppy session Friday but ended more than 2% higher after another big round of technical buying today. Soybean prices saw gains of around 1% Friday on a round of technical buying spurred by spillover strength from corn and a new large sale to China announced this morning. Wheat prices followed corn and soybeans higher Friday with a round of technical buying that lifted most contracts more than 2% higher.

China drives another good week for U.S. corn farmers

RGtimeline/iStock/Getty Images Truck unloading grain

Today was another historic day for the corn producers of America. Our NEW number one buyer stepped in again today and bought 2.1 million metric tons (mmt) of U.S. corn , the second largest daily purchase in history.

China’s purchase was in addition to the purchases made earlier this week , putting weekly totals at 5.848 mmt to China and 0.316 mmt to the unknown category. That brings total weekly corn sales (that we know of) to 6.1644 mmt, or 242 million bu. Other sales may show up in the weekly report if they were below the 100,000 tonne, the standard for reporting to USDA.

Demand keeps growing

Obviously the selloff in corn and soybean futures has resulted in bigger demand, which creates a math problem for the Jan. 9th WASDE Supply/Demand report.

daily corn sales

There is no gentle way to resolve the supply and demand numbers that USDA put out. In the January report they pretty much cut demand 100 million bu. here and there in order to keep carryover at a reasonable level. But the reality of our industry is that demand has not dropped 100 million bu. here and there. Exports are running nearly 300 million bu. above USDA's projections, ethanol is on course to exceed USDA's numbers and be closer to the previous months. To top it off we all know there are a lot of livestock to feed.

We understand USDA is trying to forecast how we will end up the year’s carryover. But in order to get there we have to cut demand. We will not cut demand at these prices.

If we use current rate of demand and project out the balance of the year, carryover might be down to 1.1 billion bu. and stocks-to-use could be in line with the lowest number on record ($8 corn?)

Soybean numbers are even more of a challenge. If we were to cut off export demand right now, there probably would not be any carryover. Thus we either need to import a lot of beans or cut demand. Probably a combination of both.

Economically, the down and dirty of the story is our markets require a higher value in order to achieve economic redistribution of old crop supplies and the proper incentive to produce new crop supplies.  

Today’s profit margins

Although all economic studies suggest higher prices, we as managers need to look at profit margins based on what the market offers today as there is no guarantee to what tomorrow will bring. We use the AgMarket.Net app to calculate these margins as well as using one of our tools to optimize strategy for your operation.

We are using strategies that protect your farm income no matter what happens to the market on the downside, while leaving the upside open.

Some of our analysis shows farms will make nearly as much money on the upside as they would if they did not sell one bushel. However, having the position in place provides solid returns that cannot be given up.

This is a market where everyone should evaluate the current return they can generate and balance that with how much risk your operation is in a position to take. Call us anytime and we would be happy to show you what your farm could be doing.

Reach Bill Biedermann at 815-404-1917 or bbiedermann@agmarket.net
 
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading infromation and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you. 
The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

Soybean Outlook: Bullish signals support 2021 expansion

alffoto/iStock/Getty Images Close up of ripe soybeans in open  pod

Is the recent rally in the soybean market driven by supply or demand? The short answer is first supply, next demand, and then supply again. There are several pronounced factors currently influencing soybean prices. Here is a deep dive look at them.

Supplies shrink to historic levels

U.S. soybean production for 2020 dropped slightly from previous USDA estimates based on the January 2020 WASDE and Crop Production reports. Yields fell half a bushel to 50.2 bushels per acre – still the third highest yield in U.S. history. Production dropped marginally from earlier estimates to 4.135 billion bushels. It marked a 16% increase from 2019 yields and notched the fourth highest volume for U.S. soybean production on record.

Though residual usage was cut for the 2020/21 year and 20 million bushels of imports were added to the U.S. soy balance sheet, ending soybean stocks shrunk even more as export and domestic crushing demand increased. U.S. soybean supplies remain at their 2nd tightest level on record as strong global and domestic demand sends global buyers scrambling for U.S. soy.

US Soybean stocks to use ratio  2010-2020

Quarterly stocks data found December 1, 2020 U.S. soybean stocks at 2.9 billion bushels – the lowest for that time of year in four years. It’s no secret that demand is high. Revised usage data finds that June – September consumption rates recovered to the second highest on record in the wake of the pandemic.

Blistering export paces

As of January 21, 1.67 billion bushels of 2020/21 soybeans have been shipped into international channels. The total represents nearly 79% of all current soybean export commitments for the 2020/21 marketing year.

Chinese purchases have made up the lion’s share of this year’s increased soybean demand as its hog herd inches closer to a full recovery from African Swine Fever. At 1.14 billion bushels of soybeans exported to China so far in the 2020/21 marketing year, 68% of all U.S. soybean exports have ended up in China.

And it’s not just China that has a healthy appetite for soybeans. The two next largest soybean buyers from the U.S. in 2019/20 – Japan and Mexico – have already purchased and shipped 2.8 times as many bushels of soybeans since the 2020/21 marketing year began last September compared to the same period a year ago.

Countries in the Middle East, Southeast Asia, and Europe also increased soy demand this year. Current marketing year to date soybean export loading paces to all countries less China, are 41% higher than the same time in 2019.

US  Weekly  Soybean  Exports

In the January 2020 WASDE, USDA raised old crop soybean export forecasts to 2.23 billion bushels, which would set a new record high for U.S. soy exports, if realized. With over 75% of that total already shipped to international buyers less than five months into the marketing year and weekly loading paces at record levels, market participants are justifiably concerned that soybean supplies will run out before next fall’s harvest.

Demand rationing could take one of several forms. Prices could rise high enough that buyers can no longer afford U.S. soybeans. Slow farmer sales could also keep domestic usage rates low. At the moment, it remains unclear if the chicken or the egg will come first. But by the end of this summer, market incentives for soybeans will likely look vastly different than the current trading environment.

Logistics of demand rationing

Demand rationing will be necessary going forward to maintain adequate stocks through the end of the current 2020/21 marketing year. But that is easier said than done. Through early 2021, soy crush margins were largely positive. A weak dollar did little to deter export interest for both commodities, especially after price corrections in the futures market in late January.

Export demand for soymeal shipped out of the U.S. Gulf weakened in late January. Livestock and poultry producers are increasingly being pushed out of the market amid high soymeal futures prices, limiting demand potential. Futures gains have some support from concerns about supply availability from South America, namely in Argentina where economic turmoil continues to disrupt grain flows.

As U.S. soy stocks dwindle, processors are rapidly snapping up any extra soybeans on the market. Reports of processors across the Midwest buying record forward purchases as far out as May are not uncommon in today’s trading environment. Poultry production is forecast to decline in the second half of 2021 due to increasing soy prices.

It suggests that processors could start to reduce crush rates, compete for bushels with exporters, and possibly import South American soybeans – at a premium.

Increased soymeal exports in 2020 following an atypically slow shipping season from top global soymeal exporter, Argentina, as well as an increase in soy diesel, powered 2020 crush volumes to the highest on record. But the near future is less certain.

"They've got a program in place that will keep crush rates strong until maybe about May. Thereafter there is some openness to it," Dan Basse, president of Chicago-based consultancy AgResource Co told a reporter with Reuters.

Phase 1 goals…met?

Soybeans have been one of the crown jewels of the Phase 1 trade agreement between the U.S. and China. Chinese and unknown buyers represent 278.9 million bushels of remaining exports – or 62% of total outstanding sales of U.S. soybeans. U.S. export loading paces to China in the next month will be critical to price stability, before the cheaper and larger Brazilian crop takes over export channels in March.

The Phase 1 trade deal was negotiated on the basis of currency, not volume. The agreement stipulates that Chinese purchases of U.S. ag goods would be $12.5 billion over the 2017 baseline in 2020 and $19.5 billion over the same benchmark in 2021. China purchased $24 billion of U.S. ag products in 2017, placing the 2020 target at $36.5 billion and 2021 goal at $43.5 billion.

January-November 2020 U.S. Export Values

The latest Census data for January through November 2020, shows that China purchased nearly $24 billion of U.S. agricultural goods. That is 12% higher than the same period during the 2017 baseline. Strong harvest loading paces – and grain prices – in December 2020 suggest that China will come within striking distance of meeting Phase 1 goals for 2020.

South American crops

Help for tight stocks may be on the way as Brazil’s newly harvested soybean crop hits export channels. Steady rains in Brazil during December and January helped yields to somewhat recover from dry La Niña weather conditions. Brazilian farmers are about a month behind filling soybean export orders due to the planting and rain delays.

Brazilian soybean harvest experienced early-season rain delays as well. The Brazilian soybean growing season was already playing catch-up after dry soils delayed plantings last fall. AgRural, an ag research firm in Brazil, estimates only 0.7% of Brazil’s planted soybean acreage has been harvested as of January 21, down from 4.2% during the same period last year due to the rain delays.

Estimates peg January 2021 soybean export out of Brazil at a mere 8.3 million bushels, down from last week’s forecast for the month, which was estimated at 37.7 million bushels. The rain delays compounded with last fall’s planting delays continue to keep the lucrative Brazilian soy crop from reaching export terminals as quickly as international buyers – mainly China – would like.

Chinese Soybean Imports

While the showers will benefit late-planted soybeans in Brazil’s more parched Southern regions, the additional delays will limit acreage and yield potential for the second corn crop, known in Brazil as the safrinha crop. The safrinha makes up 75% of Brazil’s corn production, most of which is sent into export channels upon harvest.

The Brazilian currency, the reais, tumbled to new lows last year as the pandemic sent foreign investors flocking to the U.S. dollar. But the drop benefited farmers, AgroBravo’s CEO Julio Bravo points out, as the exchange rate against the dollar led Brazilian farmers to their most profitable year on record. In the latest South American Crop Watch column, Bravo reflects that consumers have borne the burden of a weak currency as the cost of basic goods increase. As long as Chinese demand for soybeans remains steady, Brazilian farmers could see another lucrative year.

In the January 2021 WASDE report, 2020/21 Argentine soybean production was slashed another 73.5 million bushels to 1.76 billion bushels as drought concerns persist. USDA left Brazilian soybean production unchanged for now at 4.886 billion bushels, as dry conditions do not currently seem to be as detrimental to the crop as its Argentine counterpart. Even with a slight shortfall, the 2020/21 Brazilian soy crop will be the largest on record ever – for any country in the world.

New crop acreage intentions

USDA’s deputy chief economist, Cynthia Nickerson, says USDA expects to see higher corn and soybean acreage planted in 2021 based off current market pricing. "Since the price of both soy and corn are higher, the price signals are really to plant more of both, and that's what we expect to see - expansion of both into 2021," Nickerson stated.

Farm Futures’ January 2021 survey questioned farmers about planting intentions for the 2021 season. Will farmers truly expand acreage as USDA suggests? Stay tuned. Those results will be released Friday, February 5, 2021 at 7 am CST.

Of course, 2020’s crop shortfalls, record demand from China, and a recovering economy are playing no small part in corn’s comeback this year. But the new crop price ratio continues to favor soybean acreage this spring, albeit not as strongly as before USDA’s surprising January 2020 reports.

Nov.  21 Soybean to Dec.  21 Corn spread

Deferred contracts provide some insight to this phenomenon. March and May 2022 corn contracts have more storage incentives priced into their value than March and May 2022 soybean futures. The lower priced new crop soybeans suggest markets are concerned about higher soybean acreage this spring.

The new crop soybean – corn price spread also indicates farmers who plant beans will likely make top dollar this coming fall and winter. However, corn growers with storage options could be poised to take advantage of springtime rallies based on the current price spreads. Expect this year’s acreage battle to be the most contentious since 2018.

U.S. weather woes

As of late January, nearly 94% of acreage in the U.S. High Plains was categorized in some sort of abnormally dry or exceptional drought condition. Winter snow storms in the Midwest helped replenish soil moisture conditions, but scattered areas of dryness remain from last summer’s late season drought, as abnormally dry acreage in the Midwest hovers just over 40%.

With planting season on the horizon, soil conditions in many areas of the Heartland are hardly conducive to healthy crops this spring. Without substantial moisture over the next few weeks, 2021 could turn in to a third straight year of crop shortfalls.

U.S. Drought Monitor

The weather forecasts will continue to have substantial impacts on grain prices this year, both in terms of livestock and poultry feed consumption and production potential. As early 2021 rallies were supported by drought conditions exacerbated by La Niña weather patterns in South America, similar weather shifts in the U.S. will also impact global grains prices this spring.

Potential acreage shifts?

While most planting decisions have been made, it is always the acres on the margins that have the potential to swing markets. Growers in the South have more market options for different crop rotations, so rising prospects for cotton and sorghum could compete against corn and soybean acreage this spring.

If Chinese soybean demand completely reverts to Brazilian supplies in the next couple months and fuel demand finally rebounds, corn acreage will be a more lucrative bet for farmers going into 2021 planting season. On the other hand, soybeans could win the battle if crop shortfalls in South America are substantial.

As always, profit opportunity will come down to timing. Fundamental supply and demand factors support current price levels though rallies remain vulnerable to corrections. The seemingly ever-present global COVID-19 pandemic will continue to influence prices and input availability as spring approaches, leaving farmers to come up with creative solutions to stay on track.

Click the download button below to download this report.

What those in agriculture can expect under a Biden administration

Rudy Sulgan/iStock/Getty Images Plus White House Joe Biden
NEW RESIDENT: A change at the top brings new issues for farmers as President Joe Biden executes his slate of issues. We review our five-part series looking at what's ahead.

As past Farm Progress surveys show, farmers traditionally vote more conservatively and now find themselves trying to reconcile what the future political outlook will be under the Biden administration after four years of President Donald Trump. As we recently detailed in our five-part series, the sky is not falling, but farmers need to be aware of what could be coming to best navigate the waters ahead.

The first 100 days of any presidency lay the groundwork for what can be accomplished by that administration. There is undoubtedly a push and pull over different agendas, especially with a shift to complete Democrat control from a Republican-controlled White House and House and Senate just four years ago. It’s hard to claim a voter mandate and hopefully bipartisanship will find its way into proposals. The 50-50 split in the Senate and the narrow majority in the House elevates more moderate members on both sides of the aisle and offers hope for Congress to avoid gridlock.

“I try to tell farmers, divorce yourself from the politics of it and deal with the reality of it. The problem is right now, we don’t know what the reality is going to be until we see how the politics of this plays out,” says Roger McEowen, professor of agricultural law and taxation at Washburn University School of Law in Topeka, Kan. “It’s horrible to have your business dependent on what people in Congress do who don’t understand the full impact.”

McEowen made the comments regarding the tax outlook under the new Congressional and White House makeup, but the same can be said of all the issues facing Congress. As McEowen notes, “Plan for the worst and hope for the best.”

Climate tide changing

If there is one issue that has risen to the top of all the agendas in Washington, D.C. it is an extreme focus on climate change and an integrated strategy to address it domestically; and elevating its importance within national security efforts and foreign policy decisions.

President Joe Biden has created a team of advisers that start at the top with the appointment of both former Secretary of State John Kerry as his international climate envoy and former Environmental Protection Agency Administrator Gina McCarthy as domestic climate czar. Several additional nominees including Secretary of Agriculture Tom Vilsack at USDA. and staff appointments solidify Biden’s desire to direct focus on addressing the climate

Be prepared to hear more about “environmental justice” and not only eliminating greenhouse gas emissions but a move towards net-zero emissions. For farmers, it will be important if agriculture can offer a new revenue stream for actions taken.

Randy Russell, president and partner at the Russell Group, says there is a real opportunity for the agriculture and food industry to get away from the defensive mode and instead turn to offense to change the value proposition of the discussion and gear the focus to how to generate new revenue for growers and producers.

Russell was involved with the Food & Agriculture Climate Alliance formation which now stands ready with a comprehensive plan of more than 40 recommendations in place as discussion heats up on Capitol Hill and with a new administration coming in. Both agricultural and environmental groups came together outlining what provides opportunities for agreement in the climate debate.

Read our full climate coverage here: Biden administration: Tide shifting on climate change discussion

Taxes on the rise

Many agricultural groups put blood, sweat and tears in making significant tax policy advances for agriculture in the 2017 Tax Cut and Jobs Act, and that could all be back on the chopping block with Democrats in control. For farmers, the paramount issue pertains to how the Democrats’ tax policy addresses the estate tax and capital gains taxes on how much capital changes hands at death as well as how farm businesses are set up.

Some proposals include eliminating step-up basis on capital gains. McEowen explains if you don’t get that step-up basis, even a very small farming operation worth $500,000 could see the effective combined federal and state capital gain tax rate of 25-30%. 

Biden’s proposed increase in the corporate tax rate from 21% to 28% could incentivize a move away from C-corporations for operating entities, and instead into S-corporations. Farmers need to pay attention to how to best structure their businesses.

Read our full tax story here: Biden administration: What will happen to your taxes?

WOTUS woes return

Over the past four decades, all three branches of government have struggled with how to interpret the meaning of a waters of the U.S. or WOTUS. This has resulted in extensive litigation and confusion on the county level. Rolling back regulations was a cornerstone of the Trump administration and welcomed by farmers. Trump’s end of the Obama-era WOTUS and reintroduction of his revised Navigable Waters Protection Rule offered more power to states on what constitutes a water and addressed the concerns farmers had with the 2015 proposal.

“The big wild card is going to be what courts do on the Clean Water Act,” says Don Parrish, AFBF senior director of regulatory relations. Currently, 14 cases are challenging Trump’s Navigable Waters Protection Rule. He expects the Biden administration to pause defending those cases.

Meanwhile, the Biden administration will have to decide how it wants to remedy finding that sweet spot of what is a waters of the U.S. Parrish says they’ve signaled two key areas of the rule needing changed: ephemeral waters and increasing the amount of waters covered under adjacent wetlands.

Read our full WOTUS story here: Biden administration: Will farmers see another WOTUS redo?

Laboring over labor

As economic issues become elevated in the post-COVID environment, Biden came into office making bold statements on the federal minimum wage and comprehensive immigration reform.

On his first day of office, Biden sent an immigration proposal to Congress, the U.S. Citizenship Act of 2021, that establishes an earned path to citizenship for 11 million undocumented immigrants. It offers immigrant farmworkers, dreamers and individuals with Temporary Protected Status an expedited path to citizenship and would immediately receive green cards. After three years, all green card holders who pass additional background checks and demonstrate knowledge of English and U.S. civics can apply to become citizens.

Allison Crittenden, director of congressional relations at the American Farm Bureau Federation, says broader immigration could provide a legislative vehicle for agriculture’s workforce issues to be addressed. Worker shortages proliferated in 2020, and the H-2A guest worker program does not allow for year-round workers for the livestock and dairy sectors.

Biden’s $1.9 billion American Rescue Plan to combat the COVID-19 included an increase to the federal minimum wage to $15/hour. The $15 level may not be the right amount, particularly in rural areas, however, a scaling or regional approach with ramping up to that level may be more palatable. Although many ag jobs are above that level to try to solicit workers, it could be extremely difficult for the restaurant and foodservice industry.

Read the full labor story here: Biden administration: Labor issues offer pros and cons

Difference in ag trade policy evident

When Biden served as the vice president under President Obama he was chosen because of his experience in Congress on international affairs. As one lobbyist notes, trade and foreign affairs are “Biden’s bread and butter.”

Trump took a more bilateral, individual approach to trade matters, whereas Biden is expected to form more coalitions with like-minded world trading partners to counter China. But Trump’s tariffs against China are not likely to come down immediately as Biden is expected to evaluate his options. The million-dollar question is whether Biden will continue or not continue the phase one agreement and if there will be a phase two.

Biden re-entering or re-engaging with Trans-Pacific Partnership countries could be “something worthy of consideration,” says American Farm Bureau Federation Chief Economist John Newton.

It will be interesting to watch how much Biden follows the precedent President Trump set of running more trade policy out of the executive branch rather than the legislative.

The incoming nominee for the U.S. Trade Representative Katherine Tai speaks fluid mandarin and has previous experience as a China enforcement head with the U.S. Trade Representative. She’s also praised for her help on the House Ways & Means Committee staff in getting the U.S.-Mexico-Canada agreement across the finish line.

Read the full trade outlook story here: Biden administration: New trade approach ahead

Unsung heroes

Boyloso/Getty Images Plus GettyImages-1227368288-web.jpg

Crises. They are often a turning point, or a life marker, "This was before the diagnosis or after the accident or before the hailstorm of such-and-such."  

They can be life-altering but also revealing, exposing unknown strength, perseverance and faith. But they can also uncover weaknesses, previously known to exist, but magnified in stressful situations.  

Crises also have a way of unmasking everyday people for the heroes that they are.   

In January, I reached out to a dear college friend who is treating COVID patients in an ICU in Austin, Texas.  

Over the last nine months, her Facebook posts have revealed very little about her reality as a registered nurse during a pandemic. In December she posted a few photos of herself dressed in scrubs and a mask. In one photo, she was posed next to a Christmas tree, her neck adorned with a Christmas bulb necklace, wishing friends a "holly, jolly day." The other photo was taken Christmas Day on her ICU floor, surrounded by fellow nurses clad in antler ears and Christmas-print masks with a post that read, "With this family for Christmas."  

As my friend and I caught up, she talked about purchasing 100% cotton scrubs. "I thought of you," she said. But we also discussed the last nine months — a stretch where she's lost more patients to COVID than she's lost in nine years of nursing.  

She described it like treating the injured during war. "You feel useless, like what you are doing isn't helping." But as more is learned about how to treat the virus, she says treatments seem to be more effective — a sign of hope for those in the trenches and those in their care.  

She was frank about her fatigue and feelings of dread, even asking herself if she could keep doing what she's doing. She is. She returns for each 12-hour shift. That's what heroes do.  

But even heroes have heroes. She referenced the teenage transporters who risk their lives to move COVID patients throughout the hospital. Or the housekeepers, often in their 50's, who put their lives on the line to clean the critical care units so the medical staff can focus on patient care. "I'm humbled they are willing to do that for us." 

She described the doctors as incredible, daily gearing up for every challenge and after being exposed, "still have to go home to their families." 

She also named grocery store workers and educators. "The teachers are coming together in a Petri dish, making huge changes to how they teach students who are also going through something difficult." 

As she looks ahead, she's encouraged about the vaccine. She challenges us "outsiders" to put ourselves in others' shoes. Wear masks, social distance and do what you can to minimize transmission, she said. We can all be heroes. Let's do our part! 

A powerful rally leads to…?

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Over the holidays I made a conscious effort to unplug from the markets. I read the morning paper but avoided the business section, and I avoided surfing the web for grain quotes and commentary. You can imagine my surprise when I reconnected in the New Year – corn, soybean and wheat markets traded higher nearly every day after Christmas until the end of the year.

And the market is still trading higher – the January WASDE report led to another price spike and life-of-contract highs in major grain futures markets.

It’s time for a little history and a modest attempt to ask what this means for prices in the year ahead.

The price rally from early August to harvest was impressive. Since 1980 in corn, only 2011 showed a greater percentage increase in price. In soybeans, only two other years were stronger (2004 and 2008). But August to harvest was just the start! From harvest to the end of the year, March corn and soybean futures rose another 19% and 28%, respectively. The accompanying tables show the years since 1980 that featured the most powerful price rallies in March futures – at least 10% higher and as much as 50% higher - during the last 5 months of the calendar year. The year 2020, as measured with the Mar’21 futures contracts, ranks with the best.

 

Corn futures prices in the last 5 months of the year

(seven best years since 1980)

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Soybean futures prices in the last 5 months of the year

(seven best years since 1980)

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Data source: CME Group closing prices, all figures in cents/bushel

Note that early August and end-of-year refer to the previous year, i.e., for Mar’21 futures, early August and end-of-year refer to 2020.

I imagine that readers are impressed with my little history lesson. You’re thinking, “So what? This tells us nothing about where prices are going.” You have a point here, so let’s carry the analysis one step further and ask a question. What happened to new crop futures prices in the year following these powerful rallies?

The evidence in mixed, depending on whether you are looking at corn or soybeans. In corn, it appears that new crop sales might be the right way to go. In only one of six years – 2011 – did new crop futures go even higher from the first of the year until harvest. Prices stayed the same or trended lower in the remaining five years. In three of the years – 2008, 1994 and 2004 – prices moved significantly lower.

In soybeans, the way forward has been a coin flip with three years higher and three years lower.

December corn futures in years following a strong rally

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November soybean futures in years following a strong rally

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Data source: CME Group closing prices, all figures in cents/bushel

 

It is worth noting that in most of these years, planted acres increased from the previous year. Should we be surprised that producers respond to higher prices with more acres?

Source: Ed Ussetwhich is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

Rural small businesses get largest share of PPP money in latest round

money fist floating

By Polly Mosendz, Zachary R. Mider, Laura Davison and Yueqi Yang

Small businesses in Nebraska, Oklahoma and other rural states have been the most successful at getting federal pandemic relief in the $284 billion round of aid that opened this month, buoyed by a new rule that authorizes loans to many farms that didn’t qualify before

Measured by their share of the nation’s small-business payroll, four states, also including North Dakota and Wyoming, got more than twice their share of Paycheck Protection Program loans, based on an analysis of data from Jan. 11 to Jan. 24 released by the Small Business Administration this week.

It’s still early days, and there’s evidence of pent-up demand across the country. Lenders and applicants say the process is simpler but slower than last year. Overall, $35 billion of forgivable loans were approved in the first two weeks of the January rollout, a fraction of the $349 billion disbursed in the first 13 days of the program last April.

The latest PPP funding included rules aimed at fixing the program’s flaws: Restaurants can draw more debt and applications are more deeply scrutinized for fraud.

One change benefited many small farmers and ranchers shut out last year. The Nebraska Farm Bureau, the largest member of the American Farm Bureau, and other agricultural groups successfully lobbied Congress to allow farm owners without paid employees to get aid even if they didn’t earn a net profit. The special rule for farmers was the result of a bipartisan effort led by Representative Ron Kind, a Wisconsin Democrat.

“We are helping folks that could’ve used the help before but didn’t qualify,” said John Hansen, president of the Nebraska Farmers Union, which represents over 4,000 family farms and ranches.

“The SBA is glad that newly eligible audiences are speaking with their lenders to participate in the Paycheck Protection Program to secure funding that keeps their workforce employed and on payroll during the pandemic,” the agency said in a statement.

The main goal of the PPP was to help business owners retain their employees. For the self-employed, aid was meant to replace earnings they relied on to pay themselves, meaning if the business hadn’t made a net profit in 2019, they weren’t eligible for aid. The new rules enable unprofitable non-employer farms and ranches to access the program, but exclude other self-employed in the same financial situation, such as barbers

The industry category that includes agriculture, forestry, fishing and hunting represented 15% of PPP loans so far in 2021, compared with 3% last year, SBA data show. By dollar volume, the sector has been approved for 3.5% of PPP funding, compared with 1.6% in 2020.

The loan size for the industry has decreased, from $54,000 to $20,000, reflecting farm and ranch owners taking advantage of the new eligibility rules. The most a single business owner without paid employees can receive is $20,833.

The uneven pattern of aid distribution, with early money favoring the predominantly White areas of the Great Plains and upper Midwest, echoes what happened in early April. At the time, those regions benefited in part because their local banks proved more nimble at accessing aid quickly.

Larger national banks and financial technology companies eventually helped other parts of the country catch up. One result was that urban areas with mostly Black and Hispanic residents tended to get aid later than majority White and non-Hispanic areas.

This year community and regional banks also have been instrumental getting borrowers approved for PPP funding rapidly in rural states

“In small states like ours, personal relationships still matter for small business,” said Richard Baier, president of the Nebraska Bankers Association. “Our boots-on-the-ground bankers have those personal relationships with their small business customers. Their kids go to school together, they go to the same church, they might go to the same health club. It’s really a partnership rather than a transaction.”

The Nebraska Bankers Association held a Jan. 21 webinar with its members and the Small Business Administration regional staff, attended by 300 local bankers.

The comparison of states’ payroll shares relies on 2019 payroll estimates for businesses with fewer than 500 employees provided by Evercore ISI’s Ernest Tedeschi. By that metric, Hawaii and Washington, D.C., are faring worst in the latest round, getting less than half their share of PPP dollars. Hawaii’s tourism-dependent economy was among the worst hit by the COVID-19 crisis.

Many small businesses have been eagerly waiting for the new lifeline, which came after a months-long stalemate in Washington over a new stimulus package to prop up the economy

Liberty SBF Holdings LLC, a small-business lender, has processed about 20,000 loan applications and received SBA approval for about 2,500, said Alex Cohen, its chief executive officer. It can take as long as 12 days to get the money, he said.

Zawadi Bryant, CEO of NightLight Pediatric Urgent Care in Texas, said her application for a second PPP loan is taking longer to process than her first. Her hospital used all of the about $1 million first-round PPP loan, and has cut hours for staff to save costs.

“It’s been overdue for us,” Bryant said.

--With assistance from Michelle F. Davis.
© 2021 Bloomberg L.P.