A news release yesterday from USDA stated that, “Agriculture Secretary Tom Vilsack today announced a new step to support farmers transitioning to certified organic production, by expanding a crop insurance option to allow producers to purchase insurance coverage that better reflects their product’s actual value. The expanded coverage is part of the U.S. Department of Agriculture’s (USDA) continued commitment to provide farmers with resources and tools to meet the growing demand for certified organic products. The Secretary made the announcement at the White House during remarks to participants at the USDA Market Summit.”

The release added that, “Producers transitioning to certified organic production can now use the Contract Price Addendum to cover their crops at a higher price than traditional crops. The Contract Price Addendum allows farmers transitioning to organic production to insure certain crops at their contract price rather than the published U.S. Department of Agriculture (USDA) Risk Management Agency (RMA) price election.

“RMA has also expanded organic premium price elections to 57 crops, up from four in 2011, providing organic producers the option to protect their 2016 crops closer to the market value. Barley, rice and wheat are among the crops for which organic price elections have been added. New additions for 2017 will include grapefruit, lemons and oranges.”

The USDA also explained that, “Producers can find sales closing dates for the crops in their states by referring to RMA’s regional office state directory. Current policyholders also have until the sales closing date to make any changes to their existing contracts.

“A list of commodities eligible for the Contract Price addendum is available online at www.rma.usda.gov/news/currentissues/organics/cpa_eligibility.html.”

Yesterday, USDA released its Agricultural Projections to 2025.

In part, the report explained that, “Prices for most crops have fallen from highs of recent years as U.S. and global supplies have rebounded from relatively low levels. In response to the associated lower producer returns, planted area for major field crops in the United States has fallen from the highs of 2012-14 and is projected to continue to decline. U.S. planted acreage for eight major field crops (corn, sorghum, barley, oats, wheat, rice, upland cotton, and soybeans) averaged almost 257 million acres in 2012-14 and is projected to fall below 250 million acres by 2017. Wheat, corn, and cotton account for most of the decline between these years.”

More specifically with respect to prices, yesterday’s report noted that, “Larger global production of grains and oilseeds in response to high prices in recent years has raised world supplies and lowered U.S. prices for corn, wheat, and soybeans. Following these near-term price declines, the continuing influence of global growth in population and per capita income along with biofuel demand underlies moderate gains in these prices and keeps them above pre-2007 levels.”

The USDA report added that, “Corn prices are projected to decline through 2016/17 and then increase marginally over the next decade as ending stocks-to-use ratios fall somewhat due to growth in feed use and exports and continuing demand for corn for ethanol production.

“Prices for soybeans also initially fall through 2016/17 as continued high soybean acreage keeps supplies and stocks high. Soybean prices rise moderately through the rest of the projection period, reflecting a reduction of soybean plantings, increasing demand for soybeans and soybean products, and declining stocks.”

In a look at livestock variables, USDA stated that, “The U.S. livestock sector is projected to increase production over the next decade, an expansion that reflects several factors. Feed costs have fallen from recent highs and are projected to rise only moderately over the next 10 years. Also, demand for meats and dairy products in both the domestic market and for export is projected to be strong. As a result, total U.S. red meat and poultry production rises over the projection period. Milk production also increases over the next decade.”

And on the issue of U.S. farm income and federal government payments, yesterday’s report explained that, “Net cash income and net farm income initially fall from recent record highs. Net cash income declines through 2019 before generally rising over the latter part of the projection period. Net farm income, which through 2015 fell more sharply from its peak, generally rises after 2016…[T]otal direct Government payments are projected to increase to more than $13 billion in 2016 and 2017, largely reflecting lower crop prices that push up payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs of the Agricultural Act of 2014. Government payments then fall in 2018 and 2019 as commodity prices begin to rise. Government payments are projected to increase again in 2020 before falling over the remainder of the projection period.”

Emiko Terazono reported today at The Financial Times Online that, “Tough times are continuing for US farmers.

“Rising global inventories thanks to plentiful harvests, the high value of the dollar as well as falling oil prices have meant lower prices for agricultural commodities, weighing on farm incomes.”

The FT article noted that, “‘Persistently low prices for agricultural commodities remained a primary driver of diminished farm income,’ says the Kansas City Federal Reserve, which covers Kansas, Oklahoma and Nebraska, in a report on agriculture and the economy earlier this month.

“A survey of bankers by the Kansas City Fed showed that income conditions of farms in the region were the worst since it started compiling the data in 2002. Sustained weakness in corn, soyabean and wheat prices has had ‘a particularly negative effect on farm income’ as they accounted for about 70 per cent of harvested crop acreage in the region, the report adds.”

(Additional Fed reports regarding the ag economy from Chicago and Texas can be viewed here).

Ms. Terazono explained that, “The ongoing weakness in agricultural prices suggests that farm incomes may well remain depressed. With corn trading at $3.65 a bushel, soyabeans at $8.85 and wheat at $4.69, US farmers are staring at prices that are lower than the cost of production…[T]he cost of production for corn is around $5 a bushel in the US corn belt, and at prices of about $3.50 a bushel, growers will cover their ‘variable’ costs such as seeds, fertiliser and land and fixed costs such as rent.

“However, the price means that their overheads are not covered, says [David Widmar, agricultural economist with the Center for Commercial Agriculture at Purdue University in Indiana]. For soyabeans, the production costs are around $12.60, and again, farmers will struggle to cover their overheads, he adds.”

Meanwhile, Reuters writer Meredith Davis reported yesterday that, “The Department of Agriculture has estimated U.S. net farm income will be $54.8 billion in 2016, down nearly 55 percent from 2013.

“That means tough times for Deere & Co and rivals AGCO Corp, CNH Industrial NV and Claas KGaA mbH.”

Yesterday’s article noted that, “Deere and rivals have kept technology investments a priority even as revenue and net income have fallen. But some farmers said the high-tech gear is out of reach. Jon Soeller, 40, bought a new John Deere planter in 2014 for his family farm in Ripon, Wisconsin. He estimates it would cost him $90,000 to $100,000 to upgrade with a John Deere ExactEmerge retrofit kit that would allow him to plant faster and more precisely. ‘It is not worth it to me. I don’t think John Deere knows the price of corn is $3,’ Soeller said. His father will insteadbuy a new grain bin to store crops in hopes that prices rise.”

On the brighter side, Reuters writer Karl Plume reported yesterday that, “Investments in agriculture technology startups surged to a record $4.6 billion in 2015 despite a steep drop in U.S. farm income and slumping profit at farm-affiliated companies such as machinery producers and seed makers, according to a study released on Wednesday.

“The investments were nearly double the $2.36 billion seeded by venture capitalists and others in 2014, according to the annual report from online food and agriculture investment platform AgFunder.”

DTN Ag Policy Editor Chris Clayton reported earlier this week that, “Supreme Court Justice Antonin Scalia’s death truly qualifies as untimely with the swing vote of the Supreme Court, the discourse between President Barack Obama and Congress, and 2016 election now in the balance. The ripple effect from the death of the conservative justice creates a political tsunami.”

Mr. Clayton pointed out that, “Agriculture will be swept up in the waves. The American Farm Bureau Federation, National Association of Home Builders and 22 states are waiting for the Supreme Court to decide whether to hear arguments in litigation against the EPA over the Chesapeake Bay rule on water pollution. Farm Bureau and others have been building to this point for six years. Litigants were expected to find out as early as this week whether justices voted to hear oral arguments. The case will now be decided by the remaining eight justices. It takes four Justices to decide to hear a case. If the Chesapeake lawsuit goes to a Supreme Court decision, a 4-4 split would basically let the lower court ruling stand. The Third Circuit Court of Appeals had let stand a lower court ruling permitting EPA to impose daily pollutant restrictions.”

Meanwhile, Christopher Doering reported yesterday at The Des Moines Register Online that, “The new justice could not only play a factor in the Chesapeake Bay case, but also on a plan from the EPA and the Army Corps of Engineers to curb pollution in small waterways and wetlands.

“The Waters of the U.S. rule, which would clarify which streams, wetlands and other small waterways are protected under the Clean Water Act, has been put on hold because a federal court blocked the measure, pending the outcome of lawsuits from several states.”

The Register article added that, “Susan Heathcote, water program director with the Iowa Environmental Council, said both the Chesapeake Bay and Waters of the U.S. rule are unique cases because they relate to the EPA’s authority under the Clean Water Act, and there is not enough precedent to determine how the Supreme Court might rule. Still, she said the existing makeup of the Supreme Court doesn’t make things worse for the environment and could potentially help it.”

In his DTN article, Chris Clayton also noted that, “One name being floated as a possible nominee is Sen. Amy Klobuchar, a second-term Democrat from Minnesota and member of both the Judiciary and Agriculture committees. It would put Republican senators in a far more uncomfortable position if they decided to delay hearings and a vote against one of their own.”

Grant Rodgers reported in today’s Des Moines Register that, “U.S. Sen. Chuck Grassley made only one thing clear Tuesday about filling the U.S. Supreme Court vacancy created by the death of Justice Antonin Scalia: He’s taking the issue ‘one step at a time.’

“Iowa’s senior U.S. senator fielded questions from a host of journalists and audience members during an afternoon town hall, but Grassley refused to be pinned down on whether he would hold Senate Judiciary Committee hearings for a Supreme Court nominee named by President Barack Obama.”

“The 82-year-old senator holds influence over the process in his role as chairman of the judiciary committee, which would oversee the confirmation process for an Obama nominee,” the Register article said.

A recent news release from the Department of Justice stated that, “A Monroe County, Kentucky tobacco farmer was sentenced by United States District Judge Greg N. Stivers, to serve eight months in prison followed by a three year term of supervised release and ordered to pay restitution in the amount of $711,958.00 for committing crop insurance fraud, announced United States Attorney John E. Kuhn, Jr.

“Tracy E. Dillard, 45, of Fountain Run, Kentucky, aided and abetted by others, previously admitted in court of knowingly making false statements and reports on insurance claims submitted to Producers Agriculture Insurance Company, a company insured by the Federal Crop Insurance Corporation (FCIC).”

The news item noted that, “Specifically, in 2009 Dillard had four separate crop insurance policies on four different crops, two in Barren County, and two in Monroe County. Aided and abetted by others, Dillard intentionally overstated crop damage for each crop by forty percent (40%) on a crop insurance claim form, resulting in a loss of $125,339.20.

“Additionally, in 2010 Dillard had twelve separate tobacco crop insurance policies on twelve different crops. Dillard, aided and abetted by others, intentionally overstated crop damage by forty percent (40%) for each crop on a crop insurance claim form, resulting in a loss of $504,454.80.

“Finally, in 2011 Dillard had a crop insurance policy on a crop located in Allen County. Aided and abetted by others, Dillard intentionally falsified the crop plant date on a crop insurance claim form, resulting in a loss of $82,164.”

More broadly on the crop insurance issue, last week, Secretary of Agriculture Tom Vilsack testified  before the House Appropriations Subcommittee on Agriculture, and noted that, “The 2014 Farm Bill included several reforms to the Federal crop insurance program; however, there remain further opportunities for improvements and efficiencies. The President’s 2017 budget includes two proposals to reform crop insurance, which are expected to save $18 billion over 10 years. This includes reducing subsidies for revenue insurance that insure the price at the time of harvest by 10 percentage points and reforming prevented planting coverage. These reforms will make the program less costly to the taxpayer while still maintaining a quality safety net for farmers.”

Kelsey Gee reported last week at The Wall Street Journal Online that, “A new Nebraska law ends one of the last state bans in the U.S. on meatpacking companies owning hogs, a move that some critics say will extend the power processing companies hold over farmers and livestock markets.”

The Journal article explained that, “Big companies already own most of the broiler chickens raised in the U.S., which they then contract with farmers to raise on their behalf for a fee. By contrast, most cattle are raised by independent ranchers and feedlot owners who sell them to meatpackers for slaughter and processing. The pork sector has been more of a mixture of the two systems, but company ownership has been increasing in recent years.

“Nebraska, the sixth-largest hog producer, has had a sharp decline in recent years in the number of farms that sell hogs.

“Supporters of the new law, which include the Nebraska Farm Bureau and big meat companies like Smithfield Foods Inc., the largest hog producer and pork processor in the U.S., say Nebraska lagged behind the rest of the country. They say that contracts between packers and hog producers used in Iowa and other states reduce farmers’ exposure to volatile swings in the price of feed and livestock.”

On the other hand, Ms. Gee pointed out that, “Critics argue that the law will make it harder for independent farmers to sell hogs without a contract, thereby weakening the negotiated cash markets that they say encourage greater competition and prop up prices.”

The Des Moines Register editorial board indicated in today’s paper that, “If ever there was an easy time to be a farmer, it’s not now. Crop prices are low and show few signs of rising. Net farm income in 2016 is expected to hit its lowest level since 2002. And producers are under fire for polluting water from here to the Gulf of Mexico.

“Farmers might rightly feel a bit defensive. Much of the debate over Iowa’s dismal water quality has focused on whether farmers are doing enough. That question, however, misses an important point.

“Just 20 percent of Iowa farmland owners who rent out land actually farm themselves, according to the U.S. Department of Agriculture. The rest are ‘non-operator landlords’ — retired farmers, investors and heirs. Some live in cities or out of state. About 40 percent have never farmed before.”

The Register noted that, “Let’s be clear: All farmers must be responsible stewards of the land. But what if their landlords don’t understand the value of planting cover crops or investing in bioreactors?”

Today’s opinion item went on to make the case for additional legislative conservation efforts and added that, “It’s not the time, however, to glibly blame farmers. Iowa needs everyone — landlords, tenants, urban and rural Iowans — working together to make progress.”

The Register explained that, “Of the 105,194 farmland owners who rent out land in Iowa, 80.6 percent do not farm land themselves, a USDA study says. Almost half of those non-operators are individuals, but partnerships, trusts and corporations also own significant amounts of farmland.

“In 2014, Iowa farm landlords received $3.74 billion in rent payments, the second highest total in the nation.”

Conservation payments account for less than 10% of total Farm Bill spending, it seems likely that some policy makers may seek to increase conservation related programs during the next Farm Bill debate.

On Thursday, the Federal Reserve Bank of Chicago released its latest edition of the AgLetter, which stated that, “Farmland values in the Seventh Federal Reserve District experienced an annual decrease of 3 percent for 2015, matching the yearly decline for 2014. Furthermore, ‘good’ farmland values in the fourth quarter of 2015 were down 1 percent from the third quarter, according to 199 survey respondents representing agricultural banks across the District. Nearly 60 percent of the survey respondents anticipated agricultural land values to decrease during the January through March period of 2016, while none expected agricultural land values to increase in the areas surrounding their respective banks.”

This follows additional reports on the farm economy this week from the Federal Reserve Banks of Kansas City and St. Louis, as well as Tuesday’s 2016 Net Farm Income Forecast from USDA.

Yesterday’s AgLetter report noted that, “Along with slumping agricultural prices, the deterioration of agricultural credit conditions extended into the fourth quarter of 2015. Repayment rates on non-real-estate farm loans were much lower in the October through December period of 2015 than in the same period of the previous year.”

More broadly, the Chicago Fed explained that, “There was a strong sentiment among survey respondents that the downward trend for capital spending on farm- land or land improvements, buildings and facilities, machinery and equipment, and trucks and autos would continue into 2016. Moreover, 59 percent of the responding bankers anticipated farmland values to decline further in the first quarter of 2016, and none anticipated them to rise.”

Reuters writer P.J. Huffstutter reported on Thursday that, “Access to such credit tightened in the fourth quarter, and is expected to continue to be squeezed in 2016, as the rate of farmers repaying existing loans slows and the value of their land falls, according to the quarterly farm economy surveys from the Fed banks of St. Louis, Kansas City and Chicago.

“The findings come as the U.S. farm economy continued a downward slide in the fourth quarter of 2015. A strong dollar, sluggish export demand and a glut of grain have kept bearish clouds over the sector and dragged down wheat prices to nearly six-year lows.”

In a related development on the value of the dollar, a news release on Friday from Sen. Heidi Heitkamp (D., N.D.) indicated that, “[Sen. Heitkamp], a member of the Senate Committee on Banking, Housing, and Urban Affairs, pressed Federal Reserve Chair Janet Yellen about the impact of the strong dollar value on commodity prices – particularly agriculture and energy commodities which are crucial to North Dakota’s economy – as Yellen testified before the Committee on her Semiannual Monetary Policy Report to Congress.”

Click here for video of Heitkamp questioning Yellen during the hearing in the Senate Committee on Banking, Housing, and Urban Affairs.

Meanwhile, the Federal Reserve Bank of Dallas recently indicated that, “District land values increased this quarter [4th Quarter, 2015]. Irrigated cropland saw the largest increase; real irrigated land values were up 4 percent over last quarter. Real ranchland values were up 3 percent over the third quarter, while real dryland values were up 1 percent. All land values were up about 2 percent from year-ago levels.”

Cash rents also moved up slightly:

More specifically with respect to Texas land values, a recent New York Times article stated that, “In Texas, where wealth is measured not in dollars but in acres, land prices have for decades followed the price of oil. ‘There is this ongoing love for the land among Texans, to the point that if you are a Texan who gets wealthy, one of the first things you start to look at is a ranch,’ said Charles Gilliland, a research economist with the Real Estate Center at Texas A&M University.

“Oil money helped drive statewide rural land prices to a record high of $2,354 an acre in 2014 — more than double the price per acre in 2004.”

The Times article added that, “Now, after the collapse of oil prices from more than $100 a barrel 18 months ago, [Jay Ellis, an investment fund founder] is wagering that this link between land and oil will create opportunities to buy premium ranches at 2008 and 2009 prices, or about a 25 percent discount.”