Associated Press writer Patrick Whittle reported earlier this week that, “Geoff Keating grows a prized plant at the northeastern edge of the country, some 3,000 miles away from the region of America most associated with his crop — hops.

“Americans’ growing thirst for bitter, flavor-packed styles of beer has brought an unprecedented demand for hops, so growers are looking to new places to harvest its flowers.”

“Hops are used to provide bitterness, aroma and flavor to beer. It the U.S., the vast majority are grown in Washington state, with significant numbers grown in Oregon and Idaho. But hop growers in states like Michigan, New York and Maine, where Geoff Keating runs the Hop Yard farm in Gorham and Fort Fairfield, are starting to ramp up production.”

The AP article noted that, “The growth dovetails with craft beer’s growth, and its passion for using local ingredients.”

Mr. Whittle added that, “Prices for hops have also been high in recent years, even as the total amount of hop acreage and pounds of hops produced hits record highs. The price of hops can vary widely based on the variety — there are hundreds, some of which are proprietary — but the average price of U.S. hops rose from $3.67 to $4.38 per pound last year.

“The availability of hops can be a concern for brewers, especially those who trade in hoppy beer, and local growing can help make a difference, said Tim Adams, brewmaster of Oxbow Beer, in Portland, Maine.”

Rick Barrett reported late last week at the Milwaukee Journal Sentinel Online that, “As farmers approach fall harvest, profits remain elusive even as fields are brimming with corn and soybeans.

“This week, a new report from Purdue University and the CME Group showed that falling crop prices are weighing on the minds of farmers.

“Earlier this year, farmer sentiment was buoyed by a rally in key commodity prices. But excellent growing conditions led to improved crop-yield prospects — a point of pride for farmers that also has dragged prices lower.”

Mr. Barrett explained that, “Since June, the price that farmers can expect for corn delivered in December has fallen more than 25% to about $3.25 per bushel – hovering near the break-even point for some growers.

“Soybean prices have plummeted by a similar percentage to below $9 per bushel.

“Farmers who sell their corn and soybeans on the commodity markets could lose money on their crops, said David Widmar, a Purdue University farm economist.”

The Journal Sentinel article pointed out that, “Farmers who are highly leveraged and face continued high expenses are in the most trouble if prices don’t improve soon.

“The downturn will harm the rural economy, too, as each dollar of net farm income results in an additional 60 cents of economic activity, according to University of Wisconsin research.

“This could be a stressful period for rural communities that depend on agribusinesses, according to Widmar from Purdue University.”

And Tim Landis reported on Saturday at The State Journal-Register Online (Springfield, Il) that, “Slumping commodity and farmland prices are rolling through the rural economy as the fall harvest begins in Illinois and across the Midwest.”

Mr. Landis noted that, “Manufacturing layoffs at John Deere, Case New Holland and Caterpillar have been linked to the farm economy slowdown. Closer to home, owners of a German-Bliss dealership said slowing farm-equipment sales were among the reasons for closing the store at the west edge of Springfield last month. Dealerships in East Peoria and Princeville were not affected.”

The Journal-Register article added that, “Based on a Purdue University formula, the profit-loss line is somewhere between $4.02 and $4.39 per bushel for corn and $9.88 to $11.70 per bushel for soybeans, depending on yields and soil types. As of Thursday, according to CME Group, corn was selling at $3.25 for December delivery and $3.47 for March delivery. Soybeans were selling at $9.90 for delivery this month and $9.77 for January delivery.”

Senate Ag Committee Chairman Pat Roberts (R., Kans.) and House Ag Committee Chairman Mike Conaway (R., Tex.) spoke at an agricultural forum at the Kansas State Fair in Hutchinson on Saturday.

Kelly Lenz and Greg Akagi, farm broadcasters for WIBW radio, moderated the forum, and Dr. Allen Featherstone of Kansas State University also joined the two lawmakers on the panel to address questions.

Mr. Lenz began the discussion by asking the panel about a recent report from the Heritage foundation regarding federal agricultural policy.  The report noted in part that, “Title I commodity programs should be eliminated, except for the Permanent Disaster Assistance Programs and the Noninsured Crop Disaster Assistance Program (NAP). This means getting rid of programs such as the Agricultural Risk Coverage and Price Loss Coverage programs, the sugar program, and the dairy program.”

Chairman Roberts assured the crowd at the Kansas State Fair that the recommendations in the Heritage report were “not going to happen.”

Chairman Conaway expounded more generally on the ultimate goal of federal farm policy: To provide citizens with safe, abundant and affordable food.

The Texas lawmaker noted that many citizens don’t realize the good deal they are getting when it comes to affordable food and the costs of federal farm programs.  On average Americans spend 9.8% of disposable income on food.

Chairman Conway pointed out that the folks at Heritage making these proposed changes to policy are typically in the high-income bracket of society and “they don’t care what food costs;” the House Chairman added that, “what I care about is the folks at the bottom 20% of the economic food chain, it’s not 9.8% of their disposable income, they are paying 30-35% of their disposable income for food.”

Before embarking on changes to federal agricultural policies, Chairman Conaway said that he wanted “to know what it does to the cost of food.”  He added that “we have 45 million Americans on food stamps [SNAP],” when he analyses farm policies he thinks in terms of what we are getting in return for government investment- and current policies are working, “there is no denying that,” he said.

In response to a question about the current environment of low commodity prices, which is a challenge for producers, Chairman Roberts indicated that, “We are in a lot better shape than we were in the 1980s, more especially with equity and credit.”

Chairman Conaway noted that low prices have spurred calls for re-opening the Farm Bill and for consideration of ad hoc disaster assistance; he indicated that “we are going to be very resistant to that.”  Similarly, Chairman Roberts pointed out there could be a risk of losing more than could potentially be gained if the Farm Bill was opened back up.

Concern about excessive regulatory influences in the agricultural sector was also an issue that came up at Saturday’s forum.  Actions and policies by the Environmental Protection Agency were mentioned as were the negative impacts the Dodd-Frank legislation has had on the rural lending environment.

Chairman Roberts stated that, “I would repeal Dodd-Frank if we had the votes.  Dodd-Frank was supposed to address the big banks– boy it sure is hurting our small community banks.”

He added that a hometown banker now “has to spend more time, hire more people to fill out more forms on paper work that they don’t need, than ever before.”

“We are at a crisis point with over regulation,” the Kansas lawmaker said.

The two Chairman addressed trade issues and noted that expanded trade opportunities, including the Trans Pacific Partnership (TPP), are very important to agriculture.  Chairman Conway added that for agriculture, the TPP looks like a very good deal on balance.

DTN Executive Editor Marcia Taylor reported yesterday that, “Farmers who need to give their landowners a crash course in Corn Belt economics might want to watch a rebroadcast of University of Illinois Economist Gary Schnitkey’s one hour Sept. 7 webinar on cash rents. It’s a sobering review of how deeply Midwest corn and soybean revenues have tanked since 2013, pushing typical Illinois cash renters deep into the red and necessitating continued cost savings for 2017.

“For starters, Schnitkey dismisses the notion that Illinois’s bumper yields will somehow offset 2016’s lower prices. Grain farm income will look a lot like 2015 in 2016, and is setting up for a potentially tougher 2017, he says. Not only are prices stalled at depressed levels, but only fertilizer prices have offered much relief to corn production costs in the past year. It’s corn’s bloated cost of production that has made it less profitable than soybeans for the past five years.”

Ms. Taylor noted that, “To give you an idea of the scale renters need for 2017’s budget cuts, Schnitkey assumes operators will negotiate an average reduction of $23 per acre cuts in cash rent, a feat that has never occurred in Illinois and compares to the average $7 drop in 2016. They will also need to achieve trend-line yields and shave their nonland costs by another $27 per acre for corn and similar for soybeans. For a high productivity farm in central Illinois, that would still mean a $65 per acre loss on corn, although soybeans could squeak by with a small profit.

“Another way to share the bad news with landowners: To get to breakeven (zero return for a year’s worth of work), a typical Illinois renter could afford to pay $200 cash rent on excellent land with a corn yield potential of 200 bpa. That’s the same ground professional farm managers say they charged $325 per acre in 2016, so most growers would be losing sizable amounts of cash unless there are deep concessions for 2017.”

Bloomberg writers Megan Durisin and Jeff Wilson reported yesterday that, “There’s an avalanche of grain coming as U.S. farmers gear up to harvest record corn and soybean crops. And one question looms large: where will it all go?

“Growers are clearing bin space and elevators are prepping outdoor facilities to manage the surge of grain that will come off combines starting this month. But it may not be enough. U.S. supplies of corn, soybeans and wheat — including newly harvested crops along with leftover inventories from last season — will outstrip all crop storage capacity for the first time in records through 1988, government data and analyst estimates show.”

The Bloomberg writers explained that, “A third straight bumper harvest has paved the way for the storage crunch. Adding to the squeeze, a prolonged slump in agriculture prices made growers less willing to sell reserves from last season.”

“Farmers had been waiting to sell, hoping to see a recovery from a three-year slump in grain prices before the end of the marketing year last month. They’ve had no such luck. Corn futures traded in Chicago last week reached the lowest since September 2009. Corn for December delivery was 0.4 percent lower at $3.37 per bushel at 6:50 a.m. local time,” the Bloomberg article said.

Durisin and Wilson added that, “In a bid to beat the crunch, grain buyers have boosted storage capacity ahead of the harvest. Effingham Equity Cooperative in central Illinois purchased another elevator to bring its storage capacity close to 7 million bushels. Still, the group estimates it will have to dump 10 million bushels of corn on the ground — a practice that’s not out of the ordinary with bumper crops.

“‘You have to be ready with logistics and space or you will be plugged at harvest,’ said Effingham general manager Mark Tarter.”

DTN Executive Editor Marcia Taylor reported today that, “Over the last five years, severe mood swings affected commodity prices, but standard cash rents have remained fairly immune to the 38% cut in corn revenue since 2012. In most states, they’re off a mere 5% to 10% from peak. Even Iowa’s red-hot rents only dipped from an average of $270 per acre in 2013 to $230 this year, according to USDA.

“‘A $25 per acre cut in cash rents won’t get corn growers to breakeven in 2017,’ said Purdue University Economist Michael Langemeier. ‘Another 10% to 15% cut in average rents might be in order though, several years down the road.’

“Even with budget cuts in production expenses, 2017 ‘breakeven’ rents in Illinois would need to plunge to $185 per acre for good soils with 185-bushel yield potential, estimated University of Illinois economist Gary Schnitkey in a webinar this week. That’s down from an average of $230 per acre in 2015 and assumes trend yields, $3.50 corn and $9 soybeans. (Professionally managed Illinois farmland brought $295 an acre on that same type of land last year, so it requires a much steeper shift to keep operators out of the red).”

Ms. Taylor indicated that, “‘Flex’ rents were designed to adjust more quickly to market moves, imposing higher rents when prices and revenue made that affordable for tenants. At the same time, owners agreed in advance to ‘de-escalate‘ rents if commodity prices swooned. In theory it was risk sharing. By 2011, more than 25% of all Illinois leases had been converted to flex terms, largely as professionally managed firms aimed to capture the upside of corn prices for their clients.”

Ms. Taylor stated that, “Flex rents were never universally popular. Some elderly landowners wanted the security of fixed rents, so they could plan their retirement budgets. Large-scale operators balked at the extra record keeping, since some formulas required payment based on actual yields per field. Some growers objected that professional farm managers set the base rent for bonuses too high.”

The DTN article also pointed out that, “Purdue University’s Langemeier believes the key to a sustainable flex lease is to set the base rent at an appropriate level, only paying bonuses in rare and extraordinary years. By that he cites years with a combination of $4.50 or higher corn and ‘fabulous’ yields.

“‘Some formulas set the base too low. They will have angst in negotiations with landowners if their base is 50% of the fair market rent now,’ Langemeier said. ‘If you set the formula right, it should mimic a crops-share lease.’ Long-term, land has been about a third of the cost of corn and soybean production, he said, so flexes should aim for that range.”

Projected record production for both corn and soybeans in the U.S. this year has resulted in lower market prices for farmers.  Subsequently, the U.S. Department of Agriculture recently noted in its Farm Sector Income Forecast, that both net cash income and net farm income are forecast to decline for the third consecutive year.  For 2016, net farm income is forecast to decline by 11.5%, following a 12.9% reduction that occurred in 2015.

The Food & Agricultural Policy Research Institute at the University of Missouri indicated in a report last week that the 2016/17 marketing year average price of corn would only be $3.19 per bushel. The report added that, “Projected average soybean prices remain below $10.00 per bushel over the next five years.”

Some farm policy observers have pointed to other variables in the agricultural economy recently  and noted that, “What’s been a bad-news narrative in agriculture has become a less-bad news narrative.” However, producers have expressed concern about the low price environment and the Federal Reserve Board indicated yesterday in its “Beige Book” report that, “Although agricultural loan delinquency rates remained low, bankers reported increased demand for farm loan extensions and weaker loan repayments rates. Additionally, [Kansas City] District bankers reported modest increases in the severity of agricultural loan repayment problems.”

Ken Anderson reported yesterday at Brownfield that, “U.S. Agriculture Secretary Tom Vilsack held a conference call with ag reporters” and during the question and answer portion of the call, “Vilsack was asked about the economic challenges being felt in many agriculture sectors and if there is anything the USDA can do to help address them.”

In part, Sec. Vilsack noted that, “I think any farmer understands the ups and downs of agricultural prices and I think its important to take a look at five year increments- what have prices done during the last five years?”

Sec. Vilsack observed that, “Over that five-year period we have seen a relatively strong foundation to the agricultural economy. We see continued low debt to equity ratios, notwithstanding the fact that the prices are a little low right now. I think farmers, foundationally, are in good shape to withstand the low commodity prices of today.”

And, despite a relatively strong dollar, the former Iowa Governor pointed to a recent uptick in agricultural exports as well as to investments in rural small business that have contributed to “off farm” employment opportunities for farm families.

Specially, Sec. Vilsack expounded on the fact that overall “farm household” income, which includes “off-farm” income, as well as “farm income,” is significantly above national averages.  This is primarily due to the fact that “off farm” income in farm households remains strong.  Sec. Vilsack noted that what is done in the policy area of rural development is important because it helps to strengthen “off farm” income opportunities.

Sec. Vilsack also noted that USDA has recently assisted the dairy sector by purchasing stockpiled cheese and also indicated that Farm Bill program payments will begin to be sent out in October; these payments will be higher than last year, and could total around $11 billion in additional assistance.

Meanwhile, Kansas farmer Doug Keesling indicated in an update this week that at The Hill Online that, “While commodity prices are largely subject to the laws of supply and demand, there is much we can do to improve farm economies—especially at the federal level.

“First off, there is just too much regulation affecting the daily activities—and pocketbooks—of America’s farmers. In case after case, farmers are forced to absorb the costs of a rising tide of regulations coming out of Washington.”

Beyond regulatory concerns, Mr. Keeling added that labor costs have been on the rise, “attributable in large part to minimum wage requirements;” and noted that, “We also need to create new policies that make it easier to export our agricultural products—whether to nearby Caribbean nations, or to countries on the other side of the world. One of the most expedient moves our government can make today to bolster our exports is to normalize trade with Cuba—a major market 90 miles off our coast that imports much of its food from countries thousands of miles away, all because of dated trade restrictions from nearly 60 years ago.”

With respect to a separate trade issue that could potentially help with U.S. agricultural exports, the Trans Pacific Partnership (TPP), Christi Parsons and Michael A. Memoli reported in yesterday’s Los Angeles Times that, “On a weeklong tour of China and Laos, President Obama is trying to reassure anxious foreign partners that even if he waits till after the election to make a big push for his sweeping Pacific Rim trade deal, U.S. politics won’t jeopardize its passage.”

Yesterday’s article indicated that, “Congressional allies on the issue insist Obama is right to tell trading partners that the fight can still be won.

“‘I would tell them that their presidential candidates’ rhetoric aside, that there is strong support from both Republicans and Democrats in Congress to resolving the outstanding issues in TPP and bringing it forward for consideration,’ House Ways and Means Committee Chairman Kevin Brady (R-Texas) said.”

Beyond forthcoming Farm Bill payments, increased opportunities in “off farm” income, potential changes to regulatory requirements, and changes in trade policy that could further boost exports, U.S. grain and soybean farmers may have to rely on cutting costs and waiting for the aggregate supply picture to change before prices and farm income improve.

Today the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

* Fifth District- Richmond– “Agricultural activity increased modestly since our previous Beige Book report. Farming contacts reported flat demand in the timber and forestry industries, but noted expansion in the poultry industry. Farm input prices were unchanged in recent weeks, while prices of grains, cotton, soybeans, and corn ended the reporting period at low levels.”

* Sixth District- Atlanta– “Agriculture conditions across the District were mixed. Damage and losses from drought conditions in the region caused the USDA to designate many counties in Alabama, Georgia, Mississippi, and Tennessee as natural disaster areas. Additionally, parts of southern Louisiana experienced severe flooding and there are preliminary reports of crop damage. Compared with last year, District cotton production is forecasted to be higher, while soybean and peanut production is expected to be lower. On a year-over-year basis, prices paid to farmers for corn and soybeans increased, while cotton, rice, beef, broilers and egg prices decreased. However, on a month-over-month basis, prices for corn, cotton, soybeans, and broilers were up, while prices for beef and eggs were down.”

* Seventh District- Chicago– “Already low expectations for farm incomes deteriorated over the reporting period as the potential for a record national harvest pushed prices down further. District corn and soybean growing conditions were better than a year ago (with the exception of Michigan), and the U.S. Department of Agriculture (USDA) forecasted near record yields for corn and soybeans for most District states. Corn and soybean prices moved lower, although soybean prices remained above last year’s level. Strong supplies also resulted in declines for wheat, egg, dairy, hog, and cattle prices. The USDA announced limited purchases of dairy and egg products to help address excess supplies.”

* Eighth District – St. Louis– “While the quick return to low crop prices has weakened the near-term outlook for farm income, crop conditions bode well for strong yields. The proportions of corn, cotton, rice, and soybeans rated fair or better were roughly the same as in our previous report, but the proportion of crops rated excellent increased. Contacts also reported good conditions. Multiple contacts noted that expected strong yields, both in the District and elsewhere, are likely playing a role in the return of low prices.”

* Ninth District- Minneapolis– “District agricultural conditions were mixed, with strong growing conditions offset by low commodity prices. District crops were mostly in good condition as of mid-August, with record harvests expected in some cases; parts of western South Dakota and Montana suffering from severe drought were an exception. Winter and spring wheat harvests were progressing ahead of schedule, but high yields were not expected to fully offset the effect of low prices on income, according to contacts. Prices received by farmers increased in June from a year earlier for corn, soybeans, hogs, and turkeys; prices for wheat, hay, cattle, chickens, eggs, and milk fell from a year earlier.”

* Tenth District- Kansas City– “District farm income and agricultural credit conditions softened moderately since the last survey period. Following an early June rally, crop prices declined in late July and August due to expectations that a strong wheat harvest and favorable growing conditions for fall crops would generate excess supply. Cattle prices also remained well below year ago levels, despite a slight uptick in early August. Although agricultural loan delinquency rates remained low, bankers reported increased demand for farm loan extensions and weaker loan repayments rates. Additionally, District bankers reported modest increases in the severity of agricultural loan repayment problems. Financial strain was particularly high in the western portion of the District due to the combination of subdued commodity prices and increased drought stress. Lower commodity prices, softer farm income and weaker credit conditions continued to push farmland values lower throughout the District when compared with a year ago.”

* Eleventh District- Dallas– “Strong crop production prospects materialized into above-average yields for several crops, with double-digit increases expected for the 2016 cotton, corn and soybean crops. This will help offset some of the negative impact of low crop prices for farmers. Livestock grazing conditions have been very good this year, which, coupled with low grain prices, has reduced feed costs. Dairy producers benefitted from a marked rally in dairy prices over the past six weeks.”

* Twelfth District- San Francisco– “Activity in the agricultural sector expanded modestly. Above-average water availability boosted harvests, with record yields recorded for almonds and walnuts, but contacts expressed concern that a return to earlier weather trends would hurt yields over the near term. On balance, increased foreign production, the elevated dollar, and flat overall demand increased inventories of many agricultural goods. Contacts reported that dairies continued to operate at a loss despite lower input prices, while ranchers benefited from somewhat firmer cattle prices.”

Winnie Hu reported in yesterday’s New York Times that, “Lunches at a senior center on the Upper East Side of Manhattan come with organic kale, vine-ripened tomatoes and freshly plucked summer squash — all grown not that far away in the Hudson Valley.

“For a suggested donation of $1.50, regulars at the center operated by the Lenox Hill Neighborhood House can feast on a bounty of vegetables and fruits from the same local farms that supply fancy restaurants like Gramercy Tavern, Craft and Bouley.”

Yesterday’s article noted that, “Arugula and bok choy are not just for food connoisseurs anymore. There is a growing appetite for fresh, local, high-quality produce in New York City at places such as senior centers, schools and soup kitchens, as the benefits of such foods have been embraced beyond the walls of artisanal restaurants and health food stores.

“In recent years, initiatives have aimed to get fresh produce onto more dinner plates, particularly those of low income residents who cannot afford to shop at, say, Whole Foods.

“Now the city is going to get a new $20 million food hub to support these efforts. The New York State Greenmarket Regional Food Hub, which was announced last month by Gov. Andrew M. Cuomo, will be based in a 75,000-square-foot warehouse operated by GrowNYC, a nonprofit that also runs the city’s greenmarkets. It will be used to distribute fresh produce from local farmers directly to community institutions and programs, restaurants and other places that are typically too big to buy piecemeal at local farmers markets and too small to purchase in bulk from commercial food suppliers.”

The Times article added that, “Marcel Van Ooyen, the president and chief executive of GrowNYC, said the new food hub would allow it to ‘dramatically increase the number of farmers we support and New Yorkers we help feed.'”