FNC: Cash rents market flat, land values gain

While the cash rent market in much of the Midwest is flat, Farmers National Company President Jim Farrell says land prices have stabilized and have started to go up. He tells Brownfield the previous drop in commodity prices has been stemmed somewhat by the really wet fall which has made for “nice increases” in commodity prices in the past 50 days or so. That’s affected land prices, “The cash rent market, however, in much of the Midwest is flat going into 2010, especially if the cash rents that were negotiated in 2009 were market,” he says.

Farrell says there’s a “tremendous discrepancy” in cash rents from farm to farm right now, “Cash rents escalated almost as rapidly as land values did. So, when we had 70 to 80 percent appreciation in five years, cash rents went up at least that much as well in many locales. Many landowners didn’t raise their cash rents that much. They were still going up five percent a year.”

Farrell says it’s not unusual in the central Midwest to have 50 to 125 dollars an acre difference from one farm to the next. He says it simply depends on how well informed the land owner is.

As long as farmland remains demand driven, Farrell says, land values will likely continue to grow strong, “Generally in agriculture we’re in a supply market and it’s how much supply we have which drives the price. Right now we’re in a demand market which has been highly unusual for my experience in ag – on the grain side especially, not so much on the meats, but on the grain side.”

Farrell tells Brownfield it’s a seller’s market in this recession. With the uncertainty of getting as good a return on it if they sold it – coupled with government uncertainty, Farrell says, more people are holding on to their land, “The potential tax law changes that are being considered, the health insurance program, cap and trade – it seems like everything is in a state of flux right now and people are very reluctant to make big decisions.”

Farrell says people are selling fewer farms as a result. Farmers National’s land sales are down about 25 percent this year.

Farmers National is the largest farm and ranch management company in the U.S.

Farmers National Company

AUDIO: Farmer’s National Company, President and CEO Jim Farrell (5 min., MP3)

Closing Grain and Livestock Futures: November 20, 2009

December corn closed at $3.91, down 4 cents
January soybeans closed at $10.46, up 7 cents
December soybean meal closed at $317.10, down $1.30
December soybean oil closed at 39.71, up 26 points
December wheat closed at $5.59 and 3/4, down 2 and 3/4 cents
December live cattle closed at $83.95, up 27 cents
December lean hogs closed at $57.60, up $1.62
December crude oil closed at $77.20, down 44 cents
December cotton closed at 70.41, up 159 points
December Class III milk closed at $14.72, up 52 cents
Dow Jones Industrial Average: 10,318.16, down 14.28 points

Cash cheese moves higher and futures jump

Cash cheese prices moved higher on Friday and Class III futures jumped in response. Barrels increased 5.75 cents to $1.50 and blocks gained 1.75 cents to $1.60. Those increases really prompted some optimism for Class III traders with December gaining 52 cents, January 51, February 42, March 34 cents and 5 to 30-cent gains from April through December.

Traders had been nervous about that 14-cent differential that developed between blocks and barrels afraid both would go lower in a move to bring the ratio back into line. So, when the margin narrowed to a dime with both going up…futures jumped.

One other note, so far 1054 loads of blocks and 520 loads of barrels have been sold on the CME this year, the largest combined total for any year and we have six weeks left in 2009.

A holiday-shortened week should see more milk available for manufacturing as schools close down for Thanksgiving.

The Class I base for December milk is $13.99, up $1.13 from November.

Strong demand fuels soybean rally: November 20, 2009

Soybeans were higher Friday on strong demand and technical buying. The supply is tight and demand is solid. Gains were limited, however, because of some pressure from the outside markets with the dollar higher and the Dow and crude oil lower.

Corn was lower on the large available supply, and outside market direction. There’s also some harvest pressure with most of the progress in the Western Cornbelt. Even with demand concerns, Mexico bought more than a million tons of corn this week and they plan to get more because of their worst drought in decades. Other export destinations, however are sitting on their hands because of high prices and abundant supplies.

Wheat was lower on profit taking and the higher dollar. Strength in the dollar raises the price of U.S. goods on the export market, limiting competition. It’s anticipated that there will be losses to U.S. winter wheat production because of the late fall harvest, but negative supply and demand fundamentals for wheat are trumping that.

I.C.E. subpoenas Vermont dairy farms

Federal immigration officials served subpoenas to at least five dairy farms in Vermont on Thursday. Kelly Loftus with the Vermont Agency of Agriculture says the farmers have three to four days to provide paperwork to show that any foreign workers at their farms have proper documentation.

John Morton with Immigration and Customs Enforcement (ICE) said his agency is conducting workplace audits on 1,000 businesses around the country which were selected on “investigative leads and intelligence.” Morton says ICE is stepping-up enforcement of immigration employment laws with a focus on employers who hire illegals.

Vermont Senator Patrick Leahy called the crackdown “poorly timed” as dairy farmers are in the midst of a price crisis and now their labor supply is threatened. Leahy says this is an example of a problem with U.S. immigrant labor laws which do not allow workers to stay in the country year-round…something dairy farmers need. Leahy has called Homeland Security Secretary Janet Napolitano to appear before his Senate Judiciary Committee on December 9th to further discuss the situation.

Brazil receives WTO okay for US sanctions

Brazil reportedly has received formal authorization from the World Trade Organization to impose trade sanctions on the US for its support for cotton. According to Reuters, Brazil’s request to impose sanctions in the nine year complaint follows the award by WTO arbitrators in late August to allow Brazil to impose sanctions and is also in response to the US failure to comply with earlier WTO rulings that condemn the subsidies. The award allows Brazil to “cross-retaliate” against other goods, not just cotton – for a total of about 300-Million dollars. Brazil, the second largest cotton exporter after the US – says the illegal US subsidies are harmful and distort international trade. Other developing countries agree. 

Reuters says Brazil, however, isn’t ready to levy sanctions yet because it’s still analyzing U.S. data and that the WTO diplomat for the U.S. has told the dispute body that Washington WILL comply with the ruling and Brazil won’t have to levy any sanctions.

New leadership at Tyson Foods

New leadership for Tyson Foods. Donnie Smith, a vice president in the poultry and prepared foods division is the new president and chief executive officer while Jim Lochner, vice president in the fresh meats division is the new chief operating officer effective immediately.

Smith has been with Tyson since graduating from the University of Tennessee in 1980 with a degree in animal science. Lochner has bachelors and masters degrees in meat and animal science from the University of Wisconsin-Madison. He was with Oscar Mayer then moved to IBP eventually becoming president and CEO. Lochner joined Tyson when the company purchased IBP in 2001.

Read more details from Tyson:

WTO will form dispute panel on COOL

The World Trade Organization will rule on Country of Origin Labeling (COOL) in the United States. Both Canada and Mexico had requested a WTO dispute panel in the matter and in both cases the U.S. exercised its one-time-veto to the request. Canada has now made a second request and the WTO has accepted the request.

Canada contends COOL is an unfair trade barrier because U.S. meat processors have chosen not to use Canadian products rather than label them separately. The U.S. argues consumers have the right to know where their food comes from.

The dispute panel is expected to issue a report later next year. WTO does not have the authority to enforce compliance with its rulings but can authorize trade sanctions against those who do not comply.

EPA ag advisor on climate change legislation

The agriculture counselor to EPA administrator Lisa Jackson says new revenue streams for producers are among the various climate change legislation directions taking shape, although legislation is not likely to pass this year. Larry Elworth told Brownfield at the NAFB Convention last week that the impact of climate change on agriculture due to shifts in related weather conditions and the issue of energy independence are important considerations. And Elworth says that whether other countries address climate change should not be a factor in whether the United States does. “Those are things that in the United States we can continue to take leadership on, irrespective of what the rest of the world has done. The United States has taken leadership on economic development and on fighting terrorism – and all of those. Our responsibility and our opportunities to take action – and bring the rest of the world along with us in that situation – because of our leadership has been a key to our policies,” Elworth says.

In less than a month international negotiators will be at the table in Copenhagen for UN-sponsored talks with a goal of reducing global greenhouse gas emissions. The Obama administration wanted climate change legislation passed in the U.S. before then.

This week, Senate leadership announced that debate on climate change legislation this year is being crowded out by health care, financial regulation reform and other measures and likely won’t be taken up next year.

The American Farm Bureau Federation and other ag groups applaud the decision.

U.S. Environmental Protection Agency (EPA)

AUDIO: Larry Elworth, agriculture counselor to EPA Administrator, at Trade Talk during 2009 NAFB Convention (11 min., MP3)

Cattle on feed up one percent

The number of cattle on feed in the U.S. on November 1st –eleven-point-one million head—is up one percent from a year earlier. 

The monthly cattle on feed report also shows placements into feedlots during October were one percent above 2008, while marketings were three percent less than one year ago, but Brownfield analyst David Kohli doesn’t give a lot of weight to the marketings number.  

“I don’t put a lot into that number for one good reason–that these numbers just aren’t up in the feedlots and so the marketings couldn’t have been any higher,” says Kohli, “so that’s not a big negative for me.”    

In fact, Kohli says the report may result in a neutral to bullish open Monday for cattle futures. 

Nebraska’s on feed numbers were up four percent; Colorado up eight percent; South Dakota up three percent; and, Iowa up 11 percent.

Tom Steever also contributed to this story.

AUDIO: David Kohli (2 min MP3)

Next Page »