Donnelle Eller reported on the front page of today’s Des Moines Register that, “Prestage Farms’ $240 million pork processing plant will be about 60 miles from Mary Kaye Johnson’s Clear Lake home, but she’s concerned about the facility’s impact on one of the state’s premiere recreation spots.

“More to the point: Johnson is concerned about the plant — as well as a $264 million slaughter facility coming online in Sioux City next year — bringing dozens of new pig confinements to northern Iowa.”

The Register article indicated that, “About 30 members of the Des Moines-based group asked the Iowa Environmental Protection Commission Tuesday to place a moratorium on allowing new or expanded hog confinements in the state. It’s an issue that the Iowa Legislature would need to decide, said the commission, meeting in Clarion.

“Iowa CCI members pointed to state data through Oct. 25 that show applications for new or expanded animal feeding operations in north-central Iowa are about 36 percent higher than last year — and double the applications through the same time in 2014.”

Ms. Eller noted that, “Despite low corn and soybean prices, the pork industry is fighting losses, making it a difficult time to expand, said Gregg Hora, a Fort Dodge area pork producer.

“‘There’s a lot of red ink,’ said Hora, an Iowa Pork Producers Association board member. ‘We’re not breaking even.’

“One reason for pork’s depressed prices this fall is a shortage of packing capacity, said Dermot Hayes, an Iowa State University agricultural economist.”

Today’s article added that, “The lack of capacity is shifting profits to meatpackers from producers, Hayes said. The new Iowa plants will help bring that back in balance, he said.

“‘It will help producers capture more of the value,’ Hayes said. ‘These two plants will help fix things, but it will take a while.'”

“The group blames the facilities for many of the state’s air and water quality problems, saying manure from the facilities used to fertilize Iowa corn fields pollutes the state’s rivers and lakes,” the Register article said.

Laura Cooper reported yesterday at The Wall Street Journal Online that, “Homestead Capital, which invests in U.S. farmland, said it closed fundraising for its second vehicle, gathering $400 million.

“Homestead Capital USA Farmland Fund II LP hit its hard cap and surpassed an original target of $350 million, according to a news release.

“The new fund is more than double the size of the firm’s debut vehicle, Homestead Capital USA Farmland Fund I LP, which closed in July 2015 with $173 million.”

The Journal article indicated that, “Fundraising for the firm’s second vehicle began in late spring, said Gabe Santos, a co-founder and portfolio manager for San Francisco-based Homestead. Mr. Santos said many of Fund II’s backers were returning investors from Fund I, adding that new Fund II investors had been talking to the firm since before the firm’s debut fund was raised.”

Ms. Cooper added that, “The firm, which owns a portfolio of farms in 11 states which produce 16 different crops, said it will continue to invest in farmland throughout the Mountain West, Pacific, Midwest and Delta regions.

“Homestead Capital invests in farms that grow such crops as cotton, rice, wheat, soybeans, apples, tree nuts and citrus as well as both table and wine grapes. The firm buys farms and helps with capital improvements such as irrigation and storage facilities as well as farm management and locating a local operator using the latest technologies or farm management practices, Mr. Santos said.”

Bloomberg writers Jeff Wilson and Megan Durisin reported earlier this week that, “Betting the farm on record crop, livestock and dairy prices has turned into a losing investment for an expanding share of America’s agricultural heartland. The level of debt to income is the highest in three decades, and growers are increasingly unable to make loan payments.

“Four years after record U.S. crop and farmland values boosted purchases of land and equipment, a global surplus has sent prices tumbling and farm income into the longest slump since 1977. The Federal Reserve says growers are borrowing more to pay bills, repayment rates are plunging, and the number of bankers requesting additional collateral is the highest in 25 years.”

The article noted that, “While low interest rates and savings from big paydays not long ago have kept farmers in better financial shape than the bankruptcy crisis of the mid-1980s, signs of stress are increasing, especially for growers who invested during the boom years. Farm income is down 42 percent from a record in 2013, government data show, and MetLife Agricultural Finance predicts farmland values will tumble 20 percent by 2018.”

The Bloomberg article indicated that, “Bankers are getting more bearish about the farm economy. The Rural Mainstreet Index created by Creighton University, based on monthly surveys of lenders across 10 Midwestern states, sank in October to the lowest since April 2009. The banks expect about 22 percent of farmers to suffer negative cash flows in 2016, and some lenders said farm foreclosures will be an increasing challenge.”

Graph From Bloomberg News

Wilson and Durisin added that, “‘Most of the problems are with producers who kept trying to grow at the end of the boom cycle by buying more land, equipment and bidding up cash rents,’ said Joe Kessie, senior vice president at Lake City Bank in Warsaw, Indiana, and chairman of the agriculture committee at the American Bankers Association. ‘The biggest problems are with younger farmers and producers who don’t have a big land base to refinance operating and equipment loans. I have had to pass on some deals that just won’t work.'”

An update at AgriMoney Online Friday by Mike Verdin indicated that, “US farmland prices are heading for their ‘first significant correction since the mid-1980s,’ MetLife Agricultural Finance said, as official data showed that, on some measures, market conditions were already the worst since then.

“US land prices will fall by an average of 20% from their peak – typically set early last year – before the slump peters out in 2018, said MetLife, one of North America’s largest agricultural mortgage lenders, blamed the decline on weaker farm profits.

“While interest rates, one big determinant of farmland market fortunes, look likely to ‘remain low,’ cash receipts, that is income from produce sales, look set to remain depressed by the dent to prices from weak crops.”

The AgriMoney update noted that, “The comments came even as data from the Federal Reserve, the US central bank, showed prices in Midwest states including the so-called ‘I’ states of Illinois, Indiana and Iowa falling by 3% in the year to the July-to-September quarter.”

Friday’s update added that, “However, MetLife said that the market would not stage the kind of ‘crisis’ seen in the 1980s, when a sharp rise in interest rates fuelled a 42% collapse in US land prices, peak to trough.

“‘The crisis in the 1980s was a product of policies that incentivised the sector to take on excessive leverage and an abrupt change in monetary policy that caused interest rates to rise,’ the lender said.

“‘This is not the case today.'”

DTN Executive Editor Marcia Taylor reported on Friday that, “Veteran Ohio farmer Mark Bryant has spent much of his career gleaning lessons from the 1980s. So it’s no surprise his goal for his family’s Washington Courthouse operation in the current ag recession is to minimize losses, conserving strength to prosper when prices rebound.

The article noted that, “‘Bottom risk is what people need to concentrate on,’ said Bryant. ‘For the last 7-10 years, buying 85% crop revenue insurance provided a floor that averaged $50 to $70 per acre below our corn cost. Some years you could even guarantee a profit at 85% levels. But this year, federal crop’s best coverage was $100 per acre underneath our production cost, and prospects for 2017 now look worse.’

“Protecting the farm’s ‘floor’ is what persuaded the Bryant family to test a novel product in 2016 called Production Cost Insurance, a concept first launched by a Canadian insurer Global Ag Risk Solutions five years ago and available in the U.S. on a limited basis in 20 states in 2016. At least two insurance providers — CGB Diversified Services and ARMtech Insurance Services — are offering the plan in 2017, with coverage in more than 30 states. The program is underwritten by Everst Re Group, a respected Canadian reinsurer.

“Like business interruption insurance used by nonfarm businesses, Production Cost Insurance guarantees a fixed dollar amount per acre per farm. ‘The product insures your gross margin above your individual input costs — fertilizer, seed and chemicals,’ said Joanie Grimes with ICAP Crop Insurance, Bryant’s crop insurance agent.”

The DTN article explained that, “Premiums depend on a growers’ actual five-year records for gross income and input cost, so no two quotes are identical. But in 2016, another one of Grimes’ clients found that for an extra $10 or $15 per acre above what he’d pay for 85% crop revenue coverage, he could insure 100% of his production at many more thousands of dollars coverage, she said. The concept takes time for growers to absorb, but she expects more of her clients to enroll in 2017.

“Unlike federal crop revenue coverage, this policy sets a fixed guarantee before planting that doesn’t deviate based on crop yield or price fluctuations during the growing season. It is based on a whole farm’s historic five-year revenues from all commodities, so its revenue guarantees can at least temporarily capitalize on some excellent income years. In 2016, the average whole farm revenues of crop years 2010-2014 established the base.

“Lower income years will eventually replace those peaks, but Grimes believes it would be worth considering, especially if federal crop insurance guarantees stay depressed.”

Ms. Taylor explained further: “Forget what you know about federal crop insurance. Production Cost Insurance is a private policy that operates more like whole-farm revenue protection, not insurance on individual crops or fields.

“On a 10,000-acre farm in Iowa, for example, the farm purchases $300 per acre of fixed-cost margin coverage for all its corn and soybean acres. The farm typically uses $400 per acre of seed, fertilizer, and chemicals for both crops averaged together. So Canadian insurer Global Ag Risk Solutions would guarantee $700 per acre of revenue.

“The farm has $7.0 million of whole farm revenue protection. If input costs rise to $450, due to additional passes of fertilizer, fungicide, etc., the total coverage will increase as well. Now the farm has $450 per acre of inputs, plus $300 of additional margin coverage, equaling $750 per acre of Production Cost Insurance coverage.”

Friday’s update added that, “So this 10,000-acre operation has $7.5 million of guaranteed revenue. If the revenue falls below the guaranteed level, Global Ag Risk Solutions will cover the difference.

“For example, with $7.5 million in guaranteed revenue, if farm revenue is only $4.0 million due to an insured peril, Global Ag Risk Solutions would cover the difference of $3.5 million for that farm.”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “The value of farmland fell across much of the Midwest in the third quarter, Federal Reserve reports showed Thursday, as crop prices depressed by a record harvest pressured farmers’ profits.

“The declines illustrate continued Farm Belt strain as low commodity prices weigh on growers’ incomes and appetite for new ground. Midwestern growers are wrapping up what is projected to be a historic harvest. Corn and soybean crops are forecast to smash records thanks to favorable weather across much of the Farm Belt earlier this year. The huge hauls add to bulging U.S. and world stockpiles fanning a global commodity glut spanning several years.

“As a result, the average price of good-quality farmland in the Federal Reserve Bank of Chicago’s district, which includes major farming states such as Illinois and Iowa, fell 3% from a year ago as financial conditions deteriorated. It was the fourth consecutive quarter of annual declines in cropland values there, the longest downturn since the late 1980s.”

Graph From The Federal Reserve Bank of Chicago

Ms. Newman indicated that, “In the Kansas City Fed’s district, which includes Kansas and Nebraska, the value of irrigated farmland slid 7% versus a year earlier. The value of nonirrigated land dropped 6.1%. That is the steepest annual slide since the mid-1980s. Cropland values in Kansas saw the sharpest decline.

“The average price of ‘quality’ farmland held steady from year-ago levels in the St. Louis Fed’s district, which includes parts of Indiana and Illinois. Bankers across all three Fed districts anticipate prices will drop in the current quarter as incomes deteriorate further.”

The Journal article added that, “Bankers surveyed by the Kansas City and Chicago Fed banks said pressure is building on U.S. farmers, with demand for loans to operate farms rising in the two districts while farmers’ repayment rates fall. In the Kansas City region, that has prompted growth in agricultural bankers’ lists of loans to watch. Lenders are requiring more collateral to secure farm loans while raising interest rates. Still, defaults on farm loans remain low overall, the Fed said.

“Meanwhile, 3% of lenders in the St. Louis Fed district expect borrowers will be forced to shrink farm operations or get out of the business entirely.”

An update today at the USDA blog indicated that, “Since USDA’s Agricultural Marketing Service (AMS) implemented the organic regulations in 2002, the U.S. organic sector has tripled in size to over 22,000 certified organic operations with over $43 billion in U.S. retail sales. Demand for organic products is expected to continue growing. This strong consumer demand outruns supply, providing market opportunities within the organic sector.

“USDA offers many resources for organic producers and businesses – including organic certification cost share assistance, organic price reporting, conservation programs, and so much more – to facilitate growth within the organic sector. We also provide assistance to producers transitioning to organic production, and work to facilitate international trade.

“To learn more about our services, you can now visit the redesigned USDA organic portal. The new site features a more user-friendly design with updated content that allows you to access the USDA resources for the organic community from one centralized location.”

Today’s update added that, “Demand for organic products is not limited to the U.S. domestic market. The global organic market includes over 31,000 certified operations and is valued at nearly $80 billion annually. Organic trade continues to expand to meet the demands of the organic market. AMS works closely with countries around the world to support this growing market. We maintain organic equivalency arrangements with Canada, Japan, Korea, Switzerland and the European Union. These arrangements simplify the process for all farms and businesses to participate in the global organic market to ensure the integrity of imported organic products.”

Matt Pearce reported in today’s Los Angeles Times that, “The drought started months ago. With the region’s fall dry season now in full gear, there’s not likely to be much relief. On Thursday, the U.S. Drought Monitor will release its next report on the massive drought, which stretches from eastern Texas to the Carolinas.

Jacob Bunge and Jesse Newman reported today at The Wall Street Journal Online that, “The U.S. Farm Belt helped propel Donald Trump to his upset presidential win, betting that the New York billionaire will boost the rural economy and shield farmers and agricultural companies from regulation.

“But the election of Mr. Trump, whose campaign was rooted in populism and blistering critiques of U.S. trade deals, injects new uncertainty into agricultural trade that underpins much of the domestic farm sector.

“The election also raises new questions for multi-billion dollar merger deals that would ratchet up consolidation among the handful of companies that supply the bulk of crop seeds and pesticides.”

The Journal writers noted that, “Some in farm country held out hope that the Obama administration could yet secure the Trans-Pacific Partnership, which some agricultural groups and companies have championed as boosting U.S. exports’ competitiveness in key Asian markets.”

Today’s article also pointed out that, “Some farmers anticipate a Trump administration to take a looser approach to agricultural regulations, such as a controversial clean-water rule implemented last year by the Environmental Protection Agency that has drawn legal challenges from farm groups.

“That could be welcome news for the fertilizer industry, which is grappling with a multiyear slump and hopeful that a Trump presidency will usher in ‘a pause from the regulatory onslaught we’ve had from the current administration,’ said Chris Jahn, president of The Fertilizer Institute, an industry group.”

Daniel Looker reported today at Agriculture Online that, “Early in his campaign, Trump talked of eliminating the EPA.

“‘He’s not King and he’s not going to eliminate the EPA, but I think he will target some of the important rules,’ [American Farm Bureau Federation lobbyist Mary Kay Thatcher]  said.”

Mr. Looker also pointed out that, “Both Trump and the Democrat candidate, Hillary Clinton, opposed completing the already negotiated TPP, which President Barack Obama supports. In theory, Obama could ask Congress to approve it during the lame-duck session this fall.”

“‘I think it’s not very likely that the lame-duck Congress takes it up,’ said Thatcher.”

And a Politico article from early this morning noted that, with respect to a Secretary of Agriculture in a Trump administration, “Other names include Kansas Gov. Sam Brownback; Nebraska Gov. Dave Heineman; former Georgia Gov. Sonny Perdue; and former Texas Gov. Rick Perry; as well as Charles Herbster, Republican donor and agribusiness leader; and Mike McCloskey, a major dairy executive in Indiana, according to Arabella Advisors, a firm that advises top foundations and closely tracked both transition efforts.

“Bruce Rastetter, a major Republican donor in Iowa, and Kip Tom, a farmer who ran for Congress in Indiana this year but was defeated in the primary, are also among those being considered, Arabella said.

“Other top Republican insiders expect that Chuck Connor, president and CEO of the National Council of Farmer Cooperatives; Don Villwock, president of the Indiana Farm Bureau; and Ted McKinney, current director of the Indiana Department of Agriculture in administration of Gov. Mike Pence, are also likely to be in the running for the post.”

Reuters writer Mark Weinraub reported today that, “The U.S. Agriculture Department raised its already record-high forecast for U.S. corn and soybean harvests on Wednesday, with gains keyed by increased yield estimates in major production states such as Iowa, Minnesota and Ohio.

“The bumper harvest will leave a larger-than-expected stockpile of both commodities even with increased usage forecasts, the government said in its monthly supply and demand and production reports.”

Graphs From USDA-NASS

More specifically, the article noted that, “USDA pegged U.S. corn production for the 2016/17 marketing year at 15.226 billion bushels, based on an average yield of 175.3 bushels per acre, up from its October outlook of a 15.057 billion bushel harvest and an average yield of 173.4 bushels per acre…[F]or soybeans, USDA said the crop would be 4.361 billion bushels, 92 million higher than its October outlook. The government’s soy yield view was raised to 52.5 bushels per acre from 51.4.”