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The American Farm Bureau Federation on Monday published a study underlining changes in the U.S. farm economy in the eight years since the 2018 farm bill was written. It comes as members of Farm Bureau and other agricultural organizations swarm Capitol Hill in an effort to build support for a new farm bill that has stalled in the Senate (see item below).
The study breaks down the rise in expenses and capital intensity over the last eight years, which has put intense pressure on margins for producers.
Among the findings:
- Input costs vs. crop prices. Prices paid for production inputs are up over 38% over the period, outpacing the 24% rise in crop prices received.
- Production expenses: Total nominal operating expenses are up by almost 44%, or around $150 billion, to a projected $492.8 billion. Adjusted for inflation, the study puts the rise in real expenses at more than 11%.
- Debt and interest: Farm sector debt is up by 50%, hitting $605.1 billion, the study found. Together with higher interest rates, annual farm interest expenses have surged 63% from $20.7 billion to $33.8 billion, according to Farm Bureau.
- Land values and rent: Average cropland values are up almost 46% to $6,020 an acre, while cash rents are up 16% to $160 per acre. Rising land values can increase equity and strengthen borrowing capacity, the report acknowledged, but noted that land isn’t a particularly liquid asset and that higher land values can make a farm look stronger on paper without necessarily providing the cash needed to cover operating expenses or service debt.
Market recap: Corn and soybean futures pushed back to the upside after the soy complex led the way lower in the wake of Friday’s USDA data. The rally was capped by losses for wheat after President Donald Trump said Russia and Ukraine had agreed to halt attacks on each other’s infrastructure and Ukraine President Volodymir Zelensky said his country had proposed an agreement to spare food and energy infrastructure from further attacks.
- December corn rose 3 cents to end at $5.33 ¼.
- November soybeans gained 7 ¾ cents to $13.04 ¼.
- December soft red winter wheat fell 3 ¼ cents to $7.22, hitting a three-week low.
- December cotton dropped 151 points to 84.55 cents, hitting a four-week low.
- October live cattle rose $2.575 to $222.25, notching a four-week high. November feeders gained $4.60 to close at $332.775, ending at a five-week high.
- October lean-hog futures lost $1.925 to $79.60, falling to a 15-month low.
Crop condition update: USDA data on Monday showed a tiny but unexpected improvement in corn conditions for the week ended Sunday as early harvest activity continues, while soybean conditions held steady.
- USDA said 57% of the corn crop was rated “good” or “excellent,” up from 56% the previous week. Analysts surveyed by Bloomberg, on average, looked for an unchanged figure. Harvest was 8% complete, up from 5% a week earlier and one percentage point below the average estimate.
- The Pro Farmer Crop Condition Index (0 to 500 scale: 500 equals perfect) offers a single figure weighted by state production that serves as a popular, easy-to-track gauge of overall crop health. The corn CCI saw a 0.5 point increase from last week. Increases were seen in a majority of states, though Iowa and South Dakota did note declines of 0.50 and 1.2 points, respectively, that cut into those gains.
- USDA said 58% of the soybean crop was rated good to excellent, unchanged from the previous week and in line with the average forecast. Harvest was 6% complete, compared with a five-year average of 3% for this time of year.
- The soybean CCI fell 0.66 point, with most states seeing very little change. South Dakota (down 0.84 point) and Ohio (up 0.43 point) saw the largest change in each direction from last week. For a full breakdown of this week’s Pro Farmer CCI ratings click here.
- USDA found the spring wheat harvest 93% complete, up from 86% a week ago and in line with the average forecast.
- Winter wheat plantings were pegged at 8% complete, matching expectations and up from 2% a week earlier.
Farm bill fly-in: Several key farm and biofuel groups are taking part in “fly-ins” this week. Politico reported that the goal is to visit each Senate office to discuss agricultural policy. Participants include Farm Bureau, the National Corn Growers Association, the American Soybean Association, USA Rice, the National Association of Wheat Growers; the Farm Credit Council, the American Bankers Association and the National Sorghum Producers. Members are on the Hill Monday and Tuesday.
Senate Agriculture Committee Chairman John Boozman, R-Ark., said last week he would press ahead with a vote on farm bill legislation that failed to clear committee last month in a party-line 10-11 vote regardless of whether Sen. Mitch McConnell, who missed the previous vote due to being incapacitated after fall, is able to return. Boozman told Politico he was encouraging farm groups to keep pressure on lawmakers.Democrats have insisted on a two-year delay to SNAP funding changes, while Boozman has called his offer of a one-year delay his final offer.
- “They have been putting pressure on not just Democrats, but also making sure that the support is there on the Republican side in getting this done,” he told Politico’s Morning Ag newsletter.
Wet spell: It’s shaping up to be a rainy week across much of the Corn Belt. World Weather Inc. said 80% of the Midwest will receive rain Monday into Wednesday with eastern Nebraska and nearby areas to Wisconsin and central Michigan wettest where totals will be 0.50-2.0” and locally more, with some bands of heavier rain. Most other areas will receive 0.15-1.15” and locally more, with the Ohio River Basin seeing the least rain, the forecaster said. Then 75% of the Midwest will receive rain Thursday into Saturday with central and northern areas wettest where totals of 0.30-1.30” and locally more will be common with some bands of heavier rain while rain is lighter elsewhere with many southern areas dry, World Weather said. The forecaster said 80% of the Midwest will receive up to 0.75” of rain and locally more Sunday into Tuesday of next week with northern and eastern areas wettest.
Rail fuel surcharge record: According to Reuters, U.S. railroad fuel surcharges on grain shipments are up 153% year over year to 48 cents per car-mile, putting a further squeeze on farmers at the start of harvest season. The rise reflects escalating crude oil and diesel prices, which have been driven up by the conflict in Iran and the Russia-Ukraine war. That’s pushed fuel surcharges to 11% of total grain rail shipping costs, the report said, up from 5% last year.
Reuters said major railroads last year collected nearly $3 billion in second-quarter fuel surcharges, covering around 90% of their diesel expenses. These freight increases get passed down by grain elevators, impacting basis and leaving growers with lower cash prices.
Interest rate milestone: The yield on the U.S. Treasury note, which serves as a benchmark for mortgage loans and global bonds, traded as high as 5.01% on Monday, according to Bloomberg. That’s the first time the rate has topped the 5% level since 2023. The Treasury Department has been boosting buybacks and taking other steps in an effort to halt a rise in long-term interest rates that threaten to slow economic growth.
Don’t miss this week’s Pro Farmer Podcast, which takes a close look at Friday’s USDA data and what it means for grain markets heading into harvest.