A recent Successful Farming magazine’s article caught my attention because it indicated that today, farmers are retiring in greater numbers than in the past decade. It pointed out that when profit margins are tight, more transitions occur, but the next generation isn’t eager take over operation of a farm because cash returns are declining. So in many instances, rather than following in mom and pop’s footsteps, the kids are more likely to want to sell the farm, because good Midwest farmland is selling for $10,000 or more per acre, which looks like a better deal for children to consider. However, some farmers are placing their farms in trusts so they can’t be sold, to protect a legacy that retiring parents worked to build through hard work and sacrifice throughout their lives. They aren’t about to see their children sell off everything.
Good morning. This is Bob Bragg. Welcome to the March 3rd edition of Farm News & Views
Drought conditions are intensifying in the western U.S.,with the Four Corners Region having the largest area of extreme drought. California’s snowpack is at 46% of normal, which is concerning because the Sierra Nevada mountains provide about one third of state’s water supply and when storms don’t come from California, the Four Corners Region is usually shot of snow. This is borne out by the latest SnoTel Report, which indicates that the Dolores, San Juan and Animas River watersheds are less about 90% of normal. However, snowfall during March often adds significant moisture, and the National Weather Service long range forecast indicates that there is some chance of more normal precipitation over the next 30 days both in California and the Four Corners Region.
Last week, Farmers for a Sustainable Future Coalition was launched by 21 U.S. farm groups with the intent of promoting environmental and economic sustainability. The coalition intends to serve as a primary resource for policymakers as they consider sustainability and climate policies important to agriculture. Some of the organizations that have founded Farmers for a Sustainable Future include American Farm Bureau Federation, National Farmers Union, National Cattleman’s Beef Association, National Corn Growers Association, National Pork Producers Council and 16 other organizations representing all of the major commodities produced in the U.S. Guiding principles of the organization call for policies that support science-based research, voluntary incentive-based conservation programs, investment in infrastructure, and solutions that ensure vibrant rural communities and a healthy planet. The organization points out that although farmers and ranchers have recently received criticism for their production practices from environmental activists, they have in reality already made great strides in moving toward sustainability. For example, no-till and conservation tillage is practiced on half of the country’s approximately 400 million acres of crop land, and farmers have enrolled 140 million acres of land into USDA conservation programs, and farmers are leaders in using geoexchange heating in their shops and livestock buildings, embraced solar energy for electricity and have installed windmills and methane digesters on many livestock operations.
Drought monitor reports continue to indicate that the Four Corners Region is in moderate to severe drought, but the NRCS Snotel reports offer some hope to farmers, ranchers and residents. As of yesterday’s report, both the Dolores-San Miguel and Animas River Basins’ snow water content is 107% of the 30 year average, the same as it was year ago. Southeastern Utah river Basins are at 133% of average, 4% higher than a year ago, and the San Juan River is 10% lower than a year ago at 100 % of average. The entire Upper Colorado River basin, which includes includes tributary rivers in southwest Wyoming, western Colorado, Northwestern New Mexico, eastern Utah, and northeastern Arizona is also 107% of average.
While we’ve heard a lot about international trade recently, we may not think about states in the Four Corners States Region as participants too, but exports from the Region amounted to several billion dollars worth of ag products in 2018. Colorado sent almost $1.9 billion to export markets, followed by Arizona with about $1.5 billion, New Mexico with over $750 million and Utah rounded out Four Corners exports with $430 million.
Both commodity and stock markets were down yesterday due to concerns about the coronavirus outbreak in China. Investors dumped stocks related to travel, consumer products and companies with close links to China, while commodity traders and farmers were spooked by the possibility that China might declare an emergency and pull back on purchase commitments made to buy U.S. agricultural commodities. Corn, soybeans, wheat, live cattle and lean hogs were all down at the end of trading yesterday afternoon.
The almost two year wait for clarity concerning the U.S/China trade war finally ended with the signing of a Phase One agreement last Wednesday. The agreement was touted as a great win for agriculture, with promises of increased purchases of a wide variety of agricultural goods, including grains, oil seeds, pork, poultry and beef. But details of exactly how much China has agreed to purchase varies with who’s telling the tale. Just prior to the signing the agreement, China’s Vice Primer Lieu stated that three factors would help determine Chinese purchases: 1st, domestic demand, commodity prices around the world, and by both nations encouraging trade.” He went on to say that as the living standards of the large Chinese middle class rises, China will import fine quality agricultural products from around the world. On the other hand, speaking at the American Farm Bureau Federation Convention in Austin, Texas last Sunday, President Trump said, “I’ve told everyone you’ve got to buy a lot of land and we’ve got to get much bigger tractors right now. We’re going to sell the greatest product you’ve ever seen. He went on to say that under this landmark agreement, China will be purchasing $40 billion to $50 billion of American agricultural products every single year, tripling our agricultural exports to China.” But on Saturday, attendees had heard a more cautious talk from John Anderson, the former deputy chief economist of the American Farm Bureau Federation and a professor of agricultural economics at the University of Arkansas. He pointed out that the U.S. and China signed a phase one agreement that calls for China to purchase $36.5 billion in U.S. agricultural goods in 2020 and $43.5 billion in 2021. In 2017, the Chinese purchased $24 billion in agricultural commodities from the U.S. But, Anderson pointed out, that if a rebound in the supply of agricultural commodities gets ahead of demand, it could mean a “fairly negative outlook for agriculture in the near term. Time will test how well the new agreement will impact farmers and ranchers.
The 2019 hemp rush reminds me of stories about the 1859 Pikes Peak Gold Rush, that attracted thousands of gold seekers to the central Rocky Mountains, many of whom painted Pikes Peak or Bust on the canvas covers of their wagons when they headed west. Within a couple of years, many of these miners headed back east with signs on their wagons reading Pikes Peak or Bust with Busted by Thunder! Added. By late winter last year, hemp was being promoted as a sure thing for instant wealth. Newspaper articles were quoting promoters who claimed that hemp growers would make $50,000 per acre for anyone who planted the crop. Businesses to supply potted hemp plants and seeds to eager growers and to buy and process the crop for CBD oil that has sprung up in 2018. But Extension specialists and management consultants were recommending that both farmers and potential growers take a cautious approach to growing the untested crop, and start out with no more than an acre of hemp to learn how to grow it. At the same time, the number of licenses to grow hemp in the U.S. grew from about 3,500 in 2018 to almost 17,000 in 2019. But undeterred, many neophyte growers borrowed money or used retirement accounts to finance land leases and purchasing inputs that amounted to $15,000 to $20,000 per acre. In February of 2019, the price for hemp biomass used for CBD oil extraction was quoted at $50 per pound, indicating that at a yield of 1,000 pounds per acre, a gross return of $50,000 per acre was possible. But the Devil’s in the details. Hemp is a crop not unlike wheat, beans or corn. Weather, irrigation, weeds, pests and disease can impact the crop, and like all other crops, supply and demand come into play. By the end of 2019, many hemp fields had been abandoned in the Four Corners Region. Whether it was because of the lack of knowledge about how to care for the crop, the hard work involved, weed infestations, and plummeting hemp biomass prices, the end result was that some of the optomistic growers were like many of the 1859 miners, busted by thunder. Currently, most growers who harvested a crop are holding it, waiting for prices to return to a profitable level when the demand again matches the supply.
Here in the Four Corners Region, farmers and ranchers keep an eye on moisture, both in the soil and in the mountain snow pack. The U.S. Drought Monitor indicates that all of the Region is in severe drought, and the Four states have abnormally dry to severe drought over more than half of their land mass. However, at this point in time, the NRCS Snotel Update Report indicates that the Upper Colorado River Basin has 118% of normal snow pack, measured in snow water content, with the Dolores watershed at 126% of normal, the Animas is 121%, the San Juan is 111% and Southeast Utah is a great 176% of normal. Farmers wonder, will it last? National Weather Service 90 day forecast predicts that the Region will have below normal to normal temperatures and average precipitation, Generally, winter weather in the western U. S. is influenced by weather patterns generated by El Niño, the cooling phase or La Niña, the warming phase of sea temperatures across the tropical Pacific. When active, these patterns send regular train loads of moisture-laden storms across the United States, dropping snow in the Rockies, providing most of our annual precipitation in the winter. When these patterns are in neutral, as they are this winter, the trains don’t run as often, and predicting their schedules is harder.
As 2019 ends, so does the decade. Many farmers and ranchers will agree that 2019 has challenged them with unfavorable weather, trade wars and uncertain markets, but farm income increased by over $10 billion from 2018, mainly due to federal trade mitigation payments. Farmers are looking forward to an end to Trade war with China in early 2020. The decade of 2010s has been quite a ride for agriculture. Net farm income will amount to $92.5 billion this year, which is pretty close to where we started the decade, but income charts look like a roller coaster, going from $90 billion in 2010 up to $135 Billion in 2011, down to $110 billion in 2012, back to $140 billion in 2013, and sharply down to $55 billion in 2016. The ride back up to over $90 billion has been slow the past three years resulting in farm debt rising this decade from about $320 billion to a projected $416 billion this year, which is just slightly less than in1980, at the height of the farm debt crisis. That number could be interpreted as a significant problem, but non real estate debt has remained static this decade, and although real estate debt is higher than in1980, farm real estate values have risen at a consistent rate, keeping pace with the increasing amount of real estate related debt.