Farm Management Minute: Observations from the 2014 Ag Bankers Conference
Instructor, S.D. Center for Farm/Ranch Management
I recently attended the annual Ag Bankers Conference in Pierre, S.D. It was an informative event, and featured an excellent set of presentations. I will summarize the sessions I attended:
Alan Featherstone, Kansas State University: An excellent presentation of ten points to consider about the potential “Bubble and/or Bust” we may be seeing in land values. I reported on his similar speech at the National FBM conference last year. A take-home of this presentation is “Can your farm withstand a 65.3 percent interest rate increase or a 15.7 percent decrease in the value of farm production, or both?” These were the two key factors in the 1980s farm crisis.
Ernie Gross, PhD at Creighton University spoke extensively about the present profitable times in today’s agriculture, opportunities such as low interest rates and an ever-growing population fueling foreign trade. The threats, of course, are easily the potential inverse of the opportunities. Concerns of our national debt, number of workers available to support one retiree (two now versus 42 in 1945) were displayed and created interesting discussion. This is a worldwide issue, as life expectancy increased by 30 years in the 20th century.
Next, Randy Blanchfield of CattleFax, gave an exciting presentation on the potential for continued profits in the beef sector. Do bred cows seem high? A chart displaying the number of 550#-pound steer calves needed to pay for said cow shows it has been about 1.5 for the last 30 yrs. Although the October blizzard has affected Western South Dakota producers dramatically, the lost numbers will have little effect on the nationwide cow herd of slightly over 29 million head. Most of this bullish news is targeted at the cow/calf segment of the industry, but lower feed costs and a strong demand for beef will create profits for the feeders as well.
Dr. Barry Flinchbaugh, PhD gave another of his signature speeches providing a bit of humor along with very serious reflections. He discussed the recently passed Farm Bill. Some points I took away: Crop insurance participants must meet the same requirements as are in place for FSA programs; Farmers will have a choice between ARC (Agricultural Risk Coverage) based on county or an individual’s revenue and PLC (Price Support Levels) based on price alone. I encourage you to take every opportunity to educate yourself on these program options before enrolling. Official details are yet to come to your FSA offices for a likely fall signup. The Livestock Indemnity Program (LIP), and LFP (Livestock Forage Program) are now enacted. Contact your local FSA for information and eligibility.
Lessons learned from the 2014 passage of the Farm Bill: 1) Must pay more attention to macroeconomics. 2) There is more diversity than ever between political parties, crops vs. livestock, farmers vs. agribusiness.3) The bill was nearly scrapped again with the debt ceiling scare. A more local issue was presented by the president of the South Dakota Bankers Association, Kevin Tetzlaff. He noted the differences in required fees paid by the different lending institutions in the U.S.
It is our goal at SDCFRM to keep abreast of as many issues as we can to ensure our farm participants have the most relevant information available to make management decisions. Watch for news releases with highlights of the 2013 SD Annual Report soon. It is also available to view online on our website: http://www.sdcfrm.com. Wishing you a productive and safe planting season!