Summit

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Partners, 

Meeting season has begun, and Phyllis and I attended the DTN Summit this past week in Chicago. Here is a brief summary:

Global Outlook
Look for inflation and interest to gradually rise
Under Obama regulations were implemented at the rate of 1-2 per day--rate now is 0
Oil prices relatively flat

Landslide or Landrise?
Land values predicted to soften 2-4% in 2018
Farmers are struggling to pay for land (rent or principal payments) or capital investments (equipment)
Today's rent implies 4.23/bushel corn price

Your Farm, Their Food (General Mills, Kellogg's)
Food transparency is vital today--where did this food come from?
Safety and quality of products is a priority company decision
People are interested in progress toward the goal of food sustainability--not necessarily perfection

Do You Need a CFO?
How are growing operations keeping a grasp on financials during periods of expansion?
Outside eyes on business operations can be very objective and beneficial

Over The Wall: Think Like an Athlete by Andy Papathanassiou
Racers must be safe and conservative to stay in the race but also aggressive to win
We must look for new ways of thinking and solving problems
1. Iteration
2. Coaching
3. Overcoming distraction
4. Do the impossible

How Will Technology Producers Compete
There will be increased cooperation between ag tech suppliers to make farm data more accessible and useable
Data will become easier to collect and more useable
Sustainability is doing more with less, something farmers do all the time

Market Outlook
Huge stocks of corn, beans, wheat
Strong carry in market now--near 70% in corn
In pattern of lower highs and lower lows

Social Media Tips
Riverview Farms, Wild Farms--Education strategy; why are we doing what we're doing
Silent Schade Planting Co
Bryant Agricultural Enterprises, Ohio--community outreach, history and future
Tom Farms, Indiana--clear up misunderstandings, engage followers, not everything needs to be positive--post things happening right now

Weather
La Nina with ocean cooling now predicts some weather patterns in Midwest
Winter colder than normal with above average snowfall
Spring time above normal temps and rainfall
SA weather--rainfall returning to normal--predicted normal weather ahead

Fine Tune your Financials, Rabo and Farm Credit 
Recovery still 3 years out--production costs still average above farm gate prices
Planting discipline--reduce seeds per acre to lower costs
Cost of debt is increasing
Debt coverage ratios are expected to continue negatively
Cost of land has adjusted--needs to adjust lower over next two years
Diversify, Peer benchmarking, Data Management, Analysis, Cost levers

 

On the farm we are working on many projects--tiling, tree clearing, grain delivery, equipment cleanup and major year-end office tasks. The weather has been great--clear and dry--and the forecast is for no precipitation for the next two weeks (looks like no white Christmas).  We are in the process of breeding about 80 heifers this month which puts them calving next fall. 

Farmers are watching our president's handling of our various trade agreements with some major trading partners. We understand it is a global economy today and we cannot wall ourselves off from the rest of the world and have a very vigorous economy. The tax bill in Congress is not even a step toward simplification, as very few loopholes are being addressed. Our children and grandchildren will be dealing with these huge deficits and not eager to make sacrifices to live on a balanced budget.

The family is doing well and looking forward to Christmas break with some down time from school and studies. Looks like we will be spending a quiet day on the 25th and will get everyone together after the holiday week.

Current prices:

Corn 3.29

Soybeans 9.49

Keep in touch and any questions welcome!

Steve

Changing Times

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Partners,

Phyllis and I attended the annual meeting of the Association of Agricultural Production Executives (AAPEX) this past week.  

The keynote address was given by Marci Rossell, PhD (Former Chief Economist at CNBC & Leading Financial Expert). She is currently the Senior Economic Advisor for Delphin Investments. I will bullet-point some of what she shared so you can have a quick read about her observations and opinions about developments in the world.

  • Since the November election there have been great returns in the stock market because of anticipation of tax cuts and deregulation in financial sector -- this is probably not going to happen 
  • There will be a lot more volatility in the stock market
  • A Border Tax Adjustment (tariff) will strengthen the dollar which will cripple ag exports even more
  • The European Union is not an 'Optimal Currency Union' (she had several points about this), and the euro is failing (Brexit only the beginning)
  • Mass communication is contributing to the breakdown of commonality of the US
  • China is giving way to India economically -- India is the "fasting growing economy on the planet"
  • India has a youthful and entrepreneurial population and is accepting of the West
  • Over the next 15 years, the Boomer generation will give way to the Millennial generation because they (Millennials) outnumber the GenXers.  Millennials are generally laid back/not in a hurry about life; tend to be risk adverse, and typically have not chosen to vote. Their generation was hit hard by the downturn in 2008 and have experienced unemployment in a way the GenX generation has not.
  • one key question is will the millennials become more conservative as they age (like the Boomers have)

Her presentation was excellent, and very fast-paced so it was challenging to jot notes. This is just an overview of what I heard.

On the farm we are taking advantage of the open weather to cut brush, haul grain, prep equipment for spring, paint a tractor, relax the pace a bit before spring, get inputs delivered, and finalizing field operation plans for 2017.

Families are doing well. Marcus is taking a leadership development class and planning a family trip during spring break. Phyllis and I are appreciating our 40th year of marriage.

Fall prices:

Corn 3.64

Soybeans 10.17

Keep in touch,

Steve

Management Time

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Partners,

Into the new year! The last few weeks, work-wise, have not been too intense due to holidays and personal time. We have most of our crop inputs ordered for the 2017 crop year: seed, fertilizer, and herbicide. For the most part seed prices and herbicide are steady from last year and fertilizer is down 20-25%. We tried some different herbicide products in 2016 to reduce costs and are looking at more generic products this year. We're also considering ordering some products direct from distributors to cut out middlemen. We have evaluated our equipment situation and are planning very little tweaking to our current lineup. We are replacing a few worn out items—auger and backhoe—but will inspect and repair all other items and put a few more dollars in the repair and maintenance budget. We have come up with a list of some surplus items, mostly livestock stuff, that we are marketing on several sites. We are also planning on raising our bean acreage; due to the increasing prices in the bean market, soy is getting more competitive with corn, especially if we can keep increasing yields. Our labor force is remaining stable although we feel for Marcus being the only employee under 60 on the full-time payroll. 

As for the ag economy, it is interesting that the president elect is waiting to choose a candidate for Secretary of Agriculture till the end of his nomination process. With a new farm bill on the list of legislation in the next two years, the background of the pick will probably play huge into the favored crop legislation process. But with the tighter budget constraints expected, the hope for larger ag subsidies are bleak. We keep in mind that over 60% of the agriculture budget is for the SNAP food assistance program.

On the home front we celebrated a great holiday season. Our whole family was together the day after Christmas. I had a new right knee put in on December 13—recovery going as expected. Marcus and Shanna celebrated a 10 year anniversary with a trip to a warmer climate for a week. The Lord has truly blessed us! 

Hope everyone is having a great 2017—we hope this year is your best ever! 

Steve   

Something for Everyone at the Ag Summit

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Phyllis and I recently returned from the DTN Summit in Chicago - here are the quick takes from the presenters and their topics.

DTN 2016

China and World markets
U.S. Will lead the way in global macro economy
Global demographics that drive food demand are still in place
For global markets there is a supply issue-not a demand problem

Farm Safety Nets & Farm Bill
2012 farm bill not passed till 2014-expect next bill passed quicker as economy worsens
For next cycle a late farm bill will be almost as bad as no farm bill
Farm Policy battle lines- payment limits, crop ins, regulations, snap vs farm programs

Tax Habits - Built to Last
Possible revisions to tax law and estate taxes
Dealing with the IRS-don't go it alone
Lessons on tax planning-need to do every year

Using Precision Ag
Food production must increase by 70% by 2050
We are competing with lower cost producers around the world

Weather
Ocean warming back up now-trending toward normal growing season-trend line yields

Teamwork fundamentals - astronaut Mike Mullane
1. Guard against normalization of Deviance
--Challenging but attainable goals
2. Responsibility & Accountability
--See something-Say something-Do something
3. Courageous self-leadership
--We are better than we think & so is our team!

Checking Ag's Vital Signs - Farm Credit & Rabobank
These financial times are not 80s ag economy repeated
Continued corn & soybean losses in 17 & 18
Producers will exit - just shifts acres to better producers
Need 6-8 mil acres to come out of production-CRP?
The greatest danger in times of turbulence is not turbulence ; but to act with yesterday's logic

Market Outlook-Darrin Newsom
Bean outlook not bullish technically or fundamentally
Ditto corn-stocks to use over 17%-ending stocks 2.4 billion bushels
Wheat is a very ill sister--record stocks globally
Challenges are gifts from Heaven
To achieve without risk is to win without glory
Problems are only opportunities in work clothes
Corn is strong cash price against record stocks
SB weak cash against record demand
Futures & cash will only decouple for so long
Don't look for soybean basis rally throughout this year
Action-buy Dec 3.80 puts .25-.30
Action-HTA 2017 bean production at 10.30

Lots of bullets here - if you have any questions or comments please contact us - very easy through the website!

Have a great holiday season!

Steve

Giving Thanks

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Partners,

We took advantage of the great mild November weather to work on many projects. Last week we completed NH3 fall application--in the fall we apply a half rate of nitrogen along with a nitrogen stabilizer to reduce the chance of leaching. We are also completing a rather large waterway renewal and upgrade project which included two new dry dams. There are pics of the earthwork and seeding above. With the rolling, more fragile type of ground we farm (we do have some nice flat fields as well) we have taken the charge to keep erosion control a priority. This includes regularly maintaining waterways, cleaning and maintaining the over eighty dry dams we have on the property we farm, and maintaining fences and field edges. Even without livestock, on a crop farm of this size there are always projects to keep us busy in the non-crop season.

The Thanksgiving season has given us time to pause and reflect on our blessings. Last week was filled with family, friends, and too much great food! There was plenty of political discussion around the table about what to expect in the next few years--how many campaign promises can be turned into real action? We appreciate the freedoms we enjoy in these United States, and recognize the processes which have led to many of the systems that we have in place--i.e. electoral college, health care, drawing of representative districts. The strength of the dollar since November 8th is one of the indicators we are watching. That affects our competitiveness globally and our commodity prices locally. We are in the process of putting together our crop budgets for this next year, and marketing will again be a very challenging part of our process!

Families are doing well and we look forward to having everyone together during the Christmas season. I will be having knee surgery in a couple of weeks. Marcus and Shanna are going to be celebrating their tenth anniversary this month. 

Fall 2017 prices:

Corn 3.47

Soybeans 9.93  

Let us know what you want to hear about--please leave comments and "Likes" below!

Steve