Forrest Laws reported earlier this week at the Delta Farm Press Online that, “Cotton producers were looking at prices 800 points higher than they were as July ended, but, as welcome as the improvement might be, growers still have a ways to go to dig their way out of their current economic dilemma.

“Thus, says Gary Adams, president and CEO of the National Cotton Council, the organization will continue to seek another path for its efforts to have cottonseed designated as an ‘other oilseed’ under the Agricultural Act of 2014 or 2014 farm bill.

“Speaking at the Southern Cotton Ginners Association’s summer meeting in Little Rock, Ark., Dr. Adams said the NCC would like to have a legislative remedy this fall for the impasse that occurred after Agriculture Secretary Tom Vilsack said he did not have the legal authority to make such a designation.”

The Delta Farm Press article added that, “‘If that does not occur, then there’s nothing to prevent us from asking the next Agriculture Secretary if he views the request differently,’ said Dr. Adams, referring to the new administration — Democrat or Republican — that is scheduled to take office in January.”

Additional background and analysis on the “other oilseed” issue for cottonseed is available here, in a BartellPowell update from earlier this year.

Ken Anderson reported yesterday at Brownfield that, “2016 cash rent agreements for Midwest farmland are about five to 10 percent lower than 2015. And some ag economists predict an even bigger drop next year.

“Iowa State University Extension farm management specialist Kelvin Leibold says low commodity prices will be the main factor in 2017 cash rent discussions. But he says additional pressure will come from an expected decrease in Agricultural Risk Coverage (ARC) payments in 2017.

“‘Those payments really ended up getting transferred to the landlords in the form of higher rents,’ Leibold says. ‘So as those government payments disappear, that will put additional pressure on the revenue side and on the rental rate side.'”

Recall that back in May, an Iowa State University survey indicated that cash rents were down slightly, and a separate survey back in March noted that the value of Iowa farmland had dipped by 9%.

More recently, a report from the Federal Reserve Bank of Kansas City stated that, “Persistently low profit margins, increased financing needs for operating expenses and a general softening in the farm economy have continued to place downward pressure on farmland values.”

Reuters writer P.J. Huffstutter reported yesterday that, “The U.S. government’s $2.65 billion operating loan program to help farmers keep their businesses going has already run out of cash, as requests for federal financial assistance grow amid the worst agricultural downturn in more than a decade, U.S. officials told Reuters on Monday.

“As a result, the U.S. Department of Agriculture (USDA) is looking for other money sources ‘to help bridge the gap in farm operating loans as much as possible until additional funds are made available, either this year or in the next fiscal year,’ the agency said.

“The agency declined to say what other funding it was hoping to leverage for assistance.”

Ms. Huffstutter explained that, “Such FSA loan guarantees and direct loans are often considered to be loans of last resort, say banking experts. Without the financial support, some farmers may struggle to survive until the next cash injection in the fall, say rural economy experts.

“Last month, the USDA’s Farm Service Agency (FSA) told Reuters it had expected funding for these loans or guarantees to be depleted before the program restarts Oct. 1.

“As the rural sector struggles with low commodity prices and mounting trade competition, U.S. grain farmers are increasingly relying on the FSA for loan assistance. Agricultural lenders, too, are turning to the agency to help guarantee the loans they are issuing to farmers – whether for operational or real estate needs.”

Meanwhile, with respect to farm operating costs, University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Growth in Crop Costs and Cash Rents“) that, “Crop costs, which include seed, pesticide, and fertilizer costs, have grown more in recent years than have cash rents. Between 2014 and 2015, costs did decline, with most of the reductions coming from cash rents and fertilizer costs. Seed and pesticide costs have not decreased much. Continuing cost cuts are needed, particularly as Agricultural Risk Coverage (ARC) payments likely decrease for the 2017 year.”

More specifically on the issue of potential federal revenue enhancements, DTN Executive Editor Marcia Taylor reported yesterday that, “All signs point to the largest-ever corn crop in history this fall and the third year in a row of plunging farm incomes. But with prices potentially tumbling to $3 by harvest, corn growers with high levels of revenue-based crop insurance could buffer some of the price damage. In fact, many corn growers could trigger 2016 crop insurance payouts with no yield loss.

“Producers sometimes forget revenue-based crop insurance protects against a growing-season price collapse as well as sub-par yields, pointed out Jason Alexander, vice president of crop insurance for Louisville-based Farm Credit Mid-America. Since the Risk Management Agency set the spring guaranteed price for corn at $3.86 per bushel on March 1, prices have fallen to about $3.40 and could bottom near $3 by harvest, many commodity analysts now say.”

Ms. Taylor indicated that, “This is a good time of year to be in contact with your agent and assess your coverage, [Alexander] added. Some isolated parts of Kentucky, Ohio, Tennessee and Michigan could suffer yield damage. ‘But even if you expect an average crop year or even a decent crop, and prices are heading lower, ask what will it do to your bottom line,’ he said. ‘Will you have a claim or not?‘”

The DTN article added that, “DTN Analyst Todd Hultman noted Dec corn closed at $3.41 1/4 Monday, not very far from $3 and certainly within striking distance this fall, especially if the weather continues to provide good crop conditions. ‘Rains in July have been widespread and will likely give us a record crop this fall, possibly near 15 billion bushels,’ Hultman said. ‘With that much production likely, corn prices will have difficulty finding support, at least until harvest time. That just makes Dec corn prices near $3 a reasonable guess this fall.’

“University of Illinois economist Gary Schnitkey echoed that assessment. ‘Right now the market is expecting trendline corn yields, which would produce the largest crop ever in the U.S. and Dec corn futures are running about $3.40. Anything above trendline yields could send corn to $3 at the time RMA is setting that harvest price.'”

Amy Scattergood reported on Friday at the Los Angeles Times Online that, “At Weiser Family Farms in Tehachapi, about 100 miles north of Los Angeles, Alex Weiser is harvesting his fields of Sonora and Red Fife wheat, as well as those of Abruzzi rye and French Black oats, as part of what he and others have named the Tehachapi Heritage Grain Project. The farm, which Weiser owns with his parents, brother and sister, is a mainstay at Los Angeles-area farmers markets, where Weiser is often manning the tables of fingerling potatoes, French melons and Bloomsdale spinach — until three years ago, grain was just a cover crop. Since then, Weiser and a small collective of farmers and friends have been working to bring back landrace grains, a traditional, drought-tolerant crop, as a way of meeting the resurgent interests of local bakers and brewers, as well as a recalibrated climate. If you spend time in Los Angeles’ dining culture, you’ve likely heard of the grain project through a restaurant fundraiser, a bakery class or one of the loaves of bread that have traveled around the city like breadcrumbs embedded in a narrative.

“‘We’re trying to create our own non-GMO grain belt,’ Weiser said recently on the 83-acre farm his family has owned and worked since 1982, in a bowl valley surrounded by the Tehachapi Mountains. Weiser is in his third year of growing heritage grains that he was seeded, literally, by Glenn Roberts, the founder of South Carolina-based Anson Mills, who gave four tons of seeds to local farmers to start a Southern California grain hub. The first year Weiser grew two acres, the second 20; this year, he’s got about 35 acres. ‘We’re getting some momentum,’ said Weiser, gesturing from his vantage point in a field of rye to another of Atlas barley.”

The article pointed out that, “Weiser and Jon Hammond, a fourth-generation farmer whose Linda Vista Ranch is adjacent to Weiser Family Farms, have been working with other nearby farmers, including Nate Siemens of Fat Uncle Farm, not only to grow and harvest successive seasons of grain, but to build an infrastructure for it. It’s a jigsaw puzzle with various pieces, if you consider that the road from grain to table includes a combine and a thresher, as well as a mill, then a bakery — and a knowledgeable, hungry public. And those are just the obvious parts of the equation.”

More broadly, last week’s article added that, “Weiser and Hammond aren’t, of course, the only ones doing this. On about 150 acres in San Luis Obispo County, John DeRosier grows between 20 and 40 acres of oats, heirloom wheat, barley and rye, depending on the rainfall — or lack thereof. And on fields in Hollister and Imperial, Andrea Crawford and her husband Robert Dedlow of Kenter Canyon Farms recently harvested about 75 acres of emmer and wheat that also traces back to the original grant of seeds from Roberts. These and other farmers are part of a patchwork quilt of individual fields knitted together — a kind of cereal mosaic that connects them to other fields, in Northern California and Arizona, where other farmers have been growing heritage grains.”

Nathan Kauffman and Matt Clark, of the Federal Reserve Bank of Kansas City, indicated in a recent paper (“Prolonged Need for Lending Pressures Farm Finances“) that, “The pace of agricultural lending in the second quarter remained strong. Respondents to the Survey of Terms and Bank Lending to Farmers indicated the total number of non-real estate loans made to farmers in the second quarter increased 6 percent from a year ago (Chart 1). Moreover, the number of non-real estate loans larger than $100,000 made to farmers climbed 11 percent, continuing the trend of recent years.”

The authors pointed out that, “Trends in non-real estate lending activity at commercial banks increasingly have been driven by changes in the short-term financing needs associated with agricultural production. The share of non-real estate loan volumes categorized as current operating expenses gradually has drifted higher since the 1990s, but especially over the past five years (Chart 3).”

The KC Fed report also noted that, “Reduced cash flow also has led to extended maturities for many loan categories to help reduce annual debt payments. Loans used to finance machinery and equipment were extended to an average of 46 months in the second quarter from an average of 28 from 2005 to 2014 (Chart 4).”

In addition, Kauffman and Clark added that, “Reflecting some increased risk associated with agricultural lending, interest rates on operating loans increased to their highest level since 2013.”

Last week’s report also stated that, “In the first quarter of 2016, commercial bank Call Report data indicate total farm debt outstanding expanded almost 8 percent from a year ago. The increase was the 19th consecutive quarter in which total farm debt expanded from the previous year (Chart 6). This increase marks the second longest streak of increasing farm debt since 1988, accounting for inflation, exceeded only by the period from 2003 to 2009 (25 quarters). The current growth in farm debt began during a period of improving farm sector profitability, but has more recently occurred during an era of reduced farm income.

“The growth in farm debt during a time of weakening profit margins has led to a modest increase in past due and non-performing loans.”

Nonetheless, the KC Fed report indicated that, “Despite slight increases in loans past due and net charge-offs, returns at agricultural banks remained strong.” (Recall however that, Esther George, chief executive officer and president of the Federal Reserve Bank of Kansas City, recently noted that the current agriculture downturn has small bankers on notice.)

More broadly, Kauffman and Clark noted that, “Consistent with recent trends, respondents to regional agricultural credit surveys reported further increases in demand for non-real estate farm loans…[and]…Similar to the trends in demand for non-real estate farm loans, demand for loan renewals and extensions also continued to rise.”

And with respect to land values, last weeks KC Fed report stated that, “Persistently low profit margins, increased financing needs for operating expenses and a general softening in the farm economy have continued to place downward pressure on farmland values.”