Purdue University agricultural economist Chris Hurt indicated on Monday at the farmdoc daily blog (“Weekly Outlook: Hog Prices Join Corn and Wheat at Ten-Year Lows“) that, “It is interesting to be an observer of agricultural price movements. However, for many producers of agricultural commodities, prices are a key driver of their financial wellbeing. Wide ranging price movements over time can vastly alter their financial conditions. It is clear that the financial impacts of price movements affect many agricultural input businesses as well.

“What can happen to prices of agricultural commodities in a decade, and why look at the last decade? It is because it was 10 years ago in the fall of 2006 that agricultural commodity prices began to head upward in what can be described as a boom/moderation price cycle. Nearby futures prices are used to compare prices over time. Measured this way, prices for wheat, corn and lean hogs in the fall of this year fell to 10-year lows, dating back to 2006 or earlier. Unfortunately, costs of production are not at 10-year lows and this means narrow margins or losses are likely for many producing these commodities.

“Focusing on lean hog futures prices, the low this fall was on the October 2016 contract at $40.70. The previous time lean hog futures had been this low was in October of 2002. This means lean hog futures in the fall of 2016 were the lowest lead contract price in 14 years.”

Dr. Hurt noted that, “With current costs estimated at $49, this means losses for this quarter of about $34 per head and for the first quarter of 2017 of around $27 per head. The second and third quarters should be about breakeven, with loses of $19 in the final quarter of 2017.

“The forecast of annual losses of about $11 per head in 2016 are expected to continue for 2017. More packer capacity will help hog prices in 2017. In addition, retail pork prices are expected to continue to drop and provide stronger domestic usage and pork exports are expected to grow in 2017 as well. Nevertheless, these positive factors will not be enough to bring the industry back to the breakeven level. The industry will need to consider a reduction in the breeding herd in the last half of 2017 in order to boost prices back closer to breakevens in 2018.”

Kristen Leigh Painter reported recently at the Minneapolis Star-Tribune Online that, “General Mills has made its largest contribution to help save pollinators, announcing a $2 million commitment that will add more than 100,000 acres of bee and butterfly habitat on or near existing crop lands.

“The five-year agreement with the U.S. Department of Agriculture’s Natural Resources Conservation Service and the Xerces Society, the world’s oldest and largest pollinator conservation group, will focus its efforts in Minnesota, North Dakota, California, Nebraska, Iowa and Maine. The USDA and Xerces will match this donation with another $2 million toward the project.

“Gaining support from large corporations is a key step, conservationists say, in reversing the decline of pollinators that are needed to reproduce food crops and plants.”

The Star-Tribune article noted that, “The investment will support six new field biologists in these regions who will work with General Mills’ suppliers to implement a pollinator habitat plan. With private landowners managing more than 70 percent of all land on the United States mainland, the USDA and nonprofit organizations must rely on corporate and other private partners if they are to stop the decline of pollinators, said Jason Weller, conservation service chief of the federal department.”

Ms. Painter added that, “Farmers and ranchers will opt-in to the new program and receive a science-based plan from these field researchers tailored to their individual situations. [Jerry Lynch, chief sustainability officer for General Mills] said they have found ‘a great willingness to experiment’ among their suppliers.

“‘Farmers are very open to putting habitat into their farming operations because they care a lot about the land that produces the food,’ Lynch said.

“These habitats will vary from farm to farm, but will seek to address three core issues contributing to the decline in pollinator populations: flowers to eat, places to nest and refuge from pesticides. Some may be changes in processes while others will be the addition of plants and grasses in buffer zones of fields, areas that are not being used to grow crops.”

Donnelle Eller reported on the front page of Friday’s Des Moines Register that, “It could be the agriculture equivalent of rolling snake eyes: Crop and livestock production in Iowa and the U.S. are both suffering financial losses simultaneously, a rarity.

“And those shortfalls are causing farm income to stumble yet again.

“Typically, low prices for corn and soybeans means reduced expenses and improved profits for hog, cattle, chicken and other livestock producers.

“That’s not happening, and massive supplies are to blame, said Chad Hart, an Iowa State University agricultural economist.”

The Register article noted that, “U.S. farm income this year is projected to drop 17.2 percent over last year to $66.9 billion, a U.S. Department of Agriculture report this week shows.

“It would be the third consecutive year U.S. farm income has tumbled, dropping to levels not seen since 2009. The projected income would be about 46 percent lower than its peak in 2013.”

Ms. Eller pointed out that, “Livestock receipts, however, are expected to fall 12.3 percent to $166.4 billion, with cattle receipts falling nearly 15 percent.

“Stats like those are creating financial stress across Iowa, an agricultural powerhouse. The state leads the nation in pork, egg and corn production; is second in soybean production; and is fourth in beef production.”

The Register article added that, “Jim Plagge, CEO of Bank Iowa Corp., said cattle producers are getting hit the hardest.

“‘It’s not been a good year for cattle. It’s not been a good couple of years,’ Plagge said, adding that hog producers also have seen losses, but not as large as those in the cattle industry.

“‘There’s been pain in both livestock sectors,’ he said, adding that the egg industry also is suffering from low prices.”

DTN writer Todd Neeley reported on Wednesday that, “The coming of a new presidential administration, particularly one expected to stand the status quo on its head as is the Trump administration, has many groups pondering what change might be coming to their corner of the world.

“Ag policy and farm bill creators are no exception. Speakers representing think tanks, environmental and agriculture groups on a Farm Foundation panel in Washington, D.C., Wednesday, seemed to agree new political and economic realities will dictate where farm policy goes.

“Chuck Conner, president and chief executive officer of the National Council of Farmer Cooperatives, told the panel’s audience that rural America’s voice in the presidential election showed how much influence those voters can have and likely will wield on members of Congress.”

The DTN article noted: “‘Farmers and ranchers feel like they have been under attack,’ Conner said.”

Mr. Neeley explained that, “Though environmental interests including the Environmental Working Group [EWG] and think tanks such as the Heritage Foundation [Heritage] are pushing to play a bigger role in shaping conservation provisions and in reforming current farm programs, Conner said they may take a back seat in the new administration.

“‘I don’t expect other groups to have a big impact on the farm bill because of grassroots involvement,’ said Conner, who also will be a featured speaker at DTN’s Ag Summit next week in Chicago.”

The DTN item also pointed out that, “Both groups [EWG, Heritage] question the need for revenue insurance programs including those for shallow revenue losses.

“In addition, both organizations have pushed for separating the farm programs from nutrition programs. The thought is doing so would encourage Congress to make reforms to farm programs.

“However, an attempt to separate the two died in the lead up to the passage of the 2014 farm bill. Conner said he believes they will stay together as part of the next farm bill, though he questioned the wisdom of talking about particulars at this early stage in the game.”

Recall that earlier this week, the Associated Press reported that, “A bill creating a tax break for New York state farmers who donate food to food banks is awaiting action by Gov. Andrew Cuomo.”

The article noted that, “The Hunger Action Network of New York State has made the bill a priority, saying it will address a growing hunger problem around the state.”

However, an Associated Press article from Wednesday indicated that, “Anti-hunger advocates and agriculture groups are criticizing Gov. Andrew Cuomo’s opposition to legislation that would give farmers a tax break for donating surplus fruits, vegetables and other locally grown products to food banks to address New York state’s growing hunger problem.

“The Democratic governor vetoed the bill this week. It’s the second year the bill has passed the Legislature only to be blocked by Cuomo. He says that while he supports the idea, the measure would reduce state revenue and should be handled in the state budget process.”

Wednesday’s article added that, “Several states including California and Colorado already offer similar tax incentives to farmers.”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “Income for U.S. farmers will fall 17.2% this year to a seven-year low, as falling livestock revenues add to pressure from lower grain prices across the Farm Belt.

“The Agriculture Department on Wednesday said net farm income will drop to $66.9 billion, its lowest point since 2009 and the third consecutive decrease since farm profits hit record highs in 2013.

“The forecast points to a continued decline in the U.S. agricultural economy, prompted by four straight years of bumper corn and soybean harvests as well as record global grain supplies.”

Specifically, USDA’s Economic Research Service (ERS) indicated that, “Net cash farm income is forecast at $90.1 billion and net farm income at $66.9 billion for 2016. Both measures are forecast to decline for the third consecutive year after reaching record highs in 2013 for net farm income and 2012 for net cash income. Net cash farm income is expected to fall by 14.6 percent in 2016, while net farm income is forecast to decline by 17.2 percent. These declines follow the 19.8- and 12.7-percent reductions in net cash income and net farm income, respectively, that occurred in 2015.”

Graph From USDA-ERS

Yesterday’s ERS report noted that, “Overall, cash receipts are forecast to fall $23.4 billion (6.2 percent) in 2016 due to a $23.4-billion (12.3 percent) drop in animal/animal product receipts; crop receipts are forecast essentially unchanged from 2015.”

In addition, ERS stated that, “Direct government farm program payments are forecast to rise by 19.1 percent in 2016 to $12.9 billion (see table on government payments). The Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs are expected to account for 64.4 percent of all program payments.”

Graph From USDA-ERS

Meanwhile, with respect to production expenses, the ERS report stated that, “After reaching record highs exceeding $390 billion in 2014, farm production expenses are forecast to dip for the second consecutive year in 2016.”

Graph From USDA-ERS

Separately yesterday, ERS indicated that, “The median income of U.S. farm households increased steadily over 2010-14, reaching an estimated $81,637 in 2014. After dipping in 2015 to $76,735, median household income is forecast to remain essentially unchanged in 2016, at an expected $76,839. Median farm income earned by farm households is estimated to be -$765 in 2015 and forecast to be -$1,412 in 2016. In recent years, slightly more than half of farm households have lost money on their farming operations each year; most of these households earn positive off-farm income—median off-farm income is forecast to increase 2.7 percent, from $67,500 in 2015 to $69,317 in 2016.”

Graph From USDA-ERS

And in a statement yesterday, USDA Secretary Tom Vilsack noted that, “As we saw in the August forecast, the estimates again show that debt to asset and debt to equity ratios — two key indicators of the farm economy’s health — continue to be near all-time lows, and more than 90% of farm businesses are not highly leveraged. Median household income for farming families remains near historic highs and is expected to remain stable relative to 2015. In 2016, higher off-farm earnings are expected to help stabilize losses due to low commodity prices.”