Farm Service Agency Loans Available for Beginning Farmers

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

Building and managing a successful farm is a significant financial investment and can be especially challenging for those just beginning, especially those unable to obtain financing through commercial lenders.  The United States Department of Agriculture (USDA) Farm Service Agency (FSA) makes and guarantees loans to beginning farmers.

Each year money is allocated to FSA for farm ownership and farm operating loans for beginning farmers.  These loan programs are important as beginning farmers have historically experienced more difficulty obtaining financial assistance.

What is a Beginning Farmer?

A beginning farmer is an individual or entity who:

  • Has not operated a farm for more than 10 years
  • Substantially participates in the operation
  • For farm ownership loans, the applicant cannot own a farm greater than 30 percent of the average size farm in the county, at the time of application
  • If the applicant is an entity, all members must be related by blood or marriage, and all members must be eligible beginning farmers

Additionally, beginning farmers must meet the loan eligibility requirements for the program.

Maximum Loan Amounts

The Farm Service Agency makes available a variety of loans, each with a different maximum loan amount.  The loan types and maximum allowable amounts are provided below:

  • Direct farm ownership: $600,000
  • Direct operating loan: $400,000
  • Microloan: $50,000 each for operating and farm ownership
  • Guaranteed farm ownership or operating loan: $1,825,000
  • EZ Guarantee: $100,000 ($50,000 if the lender is a micro lender)

Down Payment Program

FSA has a special loan program to assist beginning farmers purchase a farm.  Retiring farmers may use this program to transfer their land to future generations.  Requirements are listed here:

  • Cash down payment of at least 5% of the purchase price
  • Loan amount limited to 45% of the least of:
    • Purchase price of the farm
    • Appraised value of the farm or
  • $ 667,000 ($300,150) maximum
  • 20 year loan term
  • Interest rate is 4% below the direct farm ownership rate, but no lower than 1.5%

The remaining balance may be obtained from a commercial lender or private party.  FSA can guarantee up to 95% of the loan if financing is obtained from a commercial lender.  Participating lenders do not have to pay a loan guarantee fee.

If financing is secured from participating lenders, the amortization period must be at least 30 years and cannot have a balloon payment due within the first 20 years of the loan.

Additional Options to Access Capital

Beginning farmers may be interested in participating in a joint financing arrangement.  FSA will lend up to 50% of the amount financed and another lender provides the remaining percentage.  These funds can be used for any authorized farm ownership purpose.  The interest rate is two percent less than the direct ownership rate but not lower than 2.5%.  The term of the loan will not exceed 40 years or the useful life of the security.

Land Contract Guarantees

FSA does provide financial guarantees for land sales to beginning farmers.  The seller may request either of the following:

  • Prompt Payment Guarantee: A guarantee up to the amount of three amortized annual installments plus the cost of any related real estate taxes and insurance.
  • Standard Guarantee: A guarantee of 90% of the outstanding principal balance under the land contract.

The farm purchase price cannot exceed $500,000 or the market value of the property.  The buyer is required to provide a minimum down payment of 5% of the purchase price of the farm.  The interest rate is fixed at a rate not to exceed the direct farm ownership loan interest rate in effect at the time the guarantee is issued, plus three percentage points.  The guarantee period is 10 years.  Contract payments must be amortized a minimum of 20 years.

How to Apply

Direct loans are available through your local Farm Service Agency office.  For guaranteed loans, you must apply with a commercial lender who participated in the Guaranteed Loan Program.  Your local FSA office can provide a list of participating institutions.

Locating Your FSA Office

If you are unsure which FSA office services your county, please visit: https://offices.sc.egov.usda.gov/locator/app?state=oh&agency=fsa

Ohio Farm Custom Rate Survey 2022 Responses – Last Call

by: Barry Ward, Leader, Production Business Management, OSU Extension, Agriculture & Natural Resources

The Ohio Farm Custom Rates Survey 2022 data collection has launched. The online survey for 2022 is available at: https://go.osu.edu/ohiofarmcustomratesurvey2022

If you perform custom farm work or pay for these services, we kindly ask you to complete the Ohio Farm Custom Rate Survey for 2022.

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment, lack of time or lack of expertise for a particular operation.  Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek out someone with the proper tools necessary to complete the job. This farm work completed by others is often referred to as “custom farm work” or more simply “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Custom farming providers and customers often negotiate an agreeable custom farming machinery rate by utilizing Extension surveys results as a starting point. Ohio State University Extension collects surveys and publishes survey results from the Ohio Farm Custom Survey every other year. Past survey summaries can be found at: https://farmoffice.osu.edu/farm-mgt-tools/custom-rates-and-machinery-costs

This year we are updating our published custom farm rates for Ohio.

We kindly request your assistance in securing up-to-date information about farm custom work rates, machinery and building rental rates and hired labor costs in Ohio.

This year we have an online survey set up that anyone can access. We would ask that you respond even if you know only a few rates.  We want information on actual rates, either what you paid to hire custom work or what you charged if you perform custom work. Custom Rates should include all ownership costs of implement & tractor (if needed), operator labor, fuel and lube. If fuel is not included in your custom rate charge there is a place on the survey to indicate this.

 You may access the survey at: https://go.osu.edu/ohiofarmcustomratesurvey2022

If you prefer a document that you can print out and fill out by hand to return, email Barry Ward at ward.8@osu.edu

The deadline to complete the survey is March 31, 2022.

 

 

 

 

USDA Report: Small Family Farms Produce Majority of Poultry and Eggs, and Hay

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County &  Tony Nye, Extension Educator, ANR in Clinton County

The United States Department of Agriculture Economic Research Service (USDA ERS), in their December 2021 Charts of Note, examined the value of production of seven commodities.  The purpose of the analysis was to determine the percentage of each by type (family and non-family farms) and size of operation.

The USDA ERS defines family farms as those where the principal operator and those associated with the principal operator own most of the business.  USDA ERS defines nonfamily farms as those where the principal operator and those related to the principal operator do not own a majority of the business.

USDA ERS classifies family farms by size, according to gross cash farm income (GCFI):

  • Small family farms – GCFI less than $350,000
  • Midsize family farms – between $350,000 and $999,999 in GCFI
  • Large-scale family farms – $1 million or more in GCFI

The table below summarizes the value of production by type and size of operation.  Small family farms produced the majority of hay (59%) and poultry and eggs (49%) in 2020.  Small family farms also accounted for just over one-quarter of beef production.

 

Ohio State University Extension works with Small Farm Producers throughout Ohio.

Since 2005, Ohio State has been addressing producer needs for small farm production. Our two main efforts include an eight-week Small Farm College course and the Small Farm Conference.

The Mission of OSU Extension Small Farm Programs:

To provide a greater understanding of production practices, economics of land use choices, assessment of personal and natural resources, marketing alternatives, and the identification of sources of assistance for new and small farms in Ohio.

Small Farm Program Objectives:

  • To improve the economic development of small farms in Ohio.
  • To help small farm landowners and families diversify their opportunities into successful new enterprises and new markets.
  • To improve agricultural literacy among small farm landowners not actively involved in agricultural production.

Small Farm Conference

‘Sowing Seeds for Success’  –  the 2022 Small Farm Conference is scheduled for March 12th from 8:00 a.m. – 3:30 p.m. at the Mansfield OSU Campus in Ovalwood Hall.  The campus is just minutes from I-71 and US Rt 30.

This conference is for small farm owners who want to learn more about how to make their farms work better for them or expand their operations. This conference is also useful for those new to agriculture who are looking for ways to utilize acreage. Landowners can attend workshops and presentations on these topics:

    • Horticulture
    • Produce Production
    • Natural Resources
    • Livestock
    • Specialty Crops
    • Farm Management
    • Marketing
    • Miscellaneous Topics

This conference is designed to help participants learn tips and techniques for diversifying their opportunities into successful new enterprises and markets. Combined with a trade show, participants learn new ways to improve economic growth and development on their farms.

Cost is $75.00 per person. Please visit: https://morrow.osu.edu/program-areas/agriculture-and-natural-resources/small-farm-conference  for conference and registration details or call OSU Extension Morrow County 419-947-1070.

The New and Small Farm College

The New and Small Farm College is a seven-week program that introduces new and seasoned farmers to a wide variety of topics. The program teaches participants how to set goals, plan, budget, how to manage financial and farm records, and where to find resources if they choose to start a small farming operation. Other subjects include legal issues, farm insurance and marketing.

Coming in August 2022, this program will be available.  Watch this website for updates on times and locations: https://u.osu.edu/gofarmohio/programs/new-and-small-farm-college/

The cost to attend is $125 and includes a resource binder, meals, all programs including Farm Science Review admission, and a soil test. Additional family members can register for $100 per person (excludes binder).

 

 

 

OSU Extension to Host 2022 East Ohio Women in Agriculture Conference

Ohio State University (OSU) Extension will host the 7th Annual East Ohio Women in Agriculture Conference. The conference is planned for Friday, March 25 from 9:00 a.m. – 3:30 p.m. at Ohio FFA Camp Muskingum, 3266 Dyewood Road SW, Carrollton, OH 44615. All women and young women (high school age) who are interested, involved in, or want to become involved with food, agricultural, or natural resources production or small business are encouraged to attend.

East Ohio Women in Ag Conference 2022 Flyer

The conference program features a networking fair and sixteen breakout sessions presented by OSU Extension educators, producers, and partner agencies. Sessions this year are focused around four themes: Natural Resources, Plants & Animals, Home & Family, and Special Interest (includes break-out with Ohio FFA State Officers). The conference keynote will be led by Bridget Britton, OSU Extension Behavioral Health Field Specialist. She and her team will lead participants through “Stoic or Stressed? Talking through difficult topics in a safe space.”

Registered participants, community organizations, or businesses interested in sponsorship can contact 740-461-6136.

Interested individuals can register for the conference online at go.osu.edu/eowia2022. Cost of the conference is $55 for adult participants and $30 for students.  Conference fee includes conference participation, breakfast, lunch, and conference handouts. Deadline for registration is Friday, March 11. For additional information, please contact Emily Marrison, OSU Extension Coshocton County at 740-622-2265.

Stay connected with the Ohio Women in Agriculture Learning Network on Facebook @OHwomeninag or subscribe to the Ohio Women in Agriculture blogsite at u.osu.edu/ohwomeninag .

 

Soybean Farmers Invited to Participate in Survey

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County & David Marrison, Extension Educator, ANR, Coshocton County

Dr. Gary Schnitkey, University of Illinois, and Dr. Carl Zulauf, Emeritus Professor, The Ohio State University, are conducting an online survey of soybean growers in nine soybean producing states, including Ohio. The nine states represent 75% of U.S. soybean production.

The researchers intend to measure the impact of each communication channel – mass media, social media, and interpersonal meetings – on farmers’ decision-making to adopt a new digital technology. This survey is focused on soybean producers in these states: Illinois, Iowa, Minnesota, Indiana, Nebraska, Missouri, Ohio, South Dakota, and North Dakota. The results will support new research and contribute in a practical way to increase knowledge about the most efficient communication channels for the dissemination of digital agriculture technologies.

The survey takes approximately five minutes to complete, and all data will be kept confidential.  If interested, you can provide your email address to receive a copy of the final survey results.

If you are interested in participating in this survey, please click here: https://go.illinois.edu/farmdocsurvey

 

Ohio Farm Custom Rate Survey 2022 Responses Requested

by: Barry Ward, Leader, Production Business Management, OSU Extension, Agriculture & Natural Resources

 The Ohio Farm Custom Rates Survey data collection has launched once again. The online survey for 2022 is available at: https://go.osu.edu/ohiofarmcustomratesurvey2022

A large number of Ohio farmers hire machinery operations and other farm related work to be completed by others. This is often due to lack of proper equipment, lack of time or lack of expertise for a particular operation.  Many farm business owners do not own equipment for every possible job that they may encounter in the course of operating a farm and may, instead of purchasing the equipment needed, seek out someone with the proper tools necessary to complete the job. This farm work completed by others is often referred to as “custom farm work” or more simply “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Custom farming providers and customers often negotiate an agreeable custom farming machinery rate by utilizing Extension surveys results as a starting point. Ohio State University Extension collects surveys and publishes survey results from the Ohio Farm Custom Survey every other year. This year we are updating our published custom farm rates for Ohio.

We kindly request your assistance in securing up-to-date information about farm custom work rates, machinery and building rental rates and hired labor costs in Ohio.

This year we have an online survey set up that anyone can access. We would ask that you respond even if you know only a few rates.  We want information on actual rates, either what you paid to hire custom work or what you charged if you perform custom work. Custom Rates should include all ownership costs of implement & tractor (if needed), operator labor, fuel and lube. If fuel is not included in your custom rate charge there is a place on the survey to indicate this.

 You may access the survey at: https://go.osu.edu/ohiofarmcustomratesurvey2022

If you prefer a document that you can print out and fill out by hand to return, email Barry Ward at ward.8@osu.edu

 

The deadline to complete the survey is March 31, 2022.

 

 

 

 

2022 Agricultural Outlook and Policy Meetings Set to Kickoff

by: Mike Estadt, OSU Extension, estadt.3@osu.edu

The Ohio State University Extension is pleased to announce the Regional Ag Outlook and Policy Meetings for 2022.  Meetings will be held around the state beginning the last of January and ending in March.

Speakers will address a myriad of topics of agriculture interest  here in Ohio as well as across the Corn Belt.  Programs will include presentations on Grain Market Outlook, Ag Law Updates, Dairy Industry 2022, Ohio’s Changing Climate, Farm Policy and Farm Bill, SB 52: Utility Solar Legislative, Farm Real Estate and Cash Rent Trends, Ag Input Price Projections and Federal Tax Updates.

New to this year’s program  is the statewide sponsorship and support of the Ohio Corn and Wheat Growers Association.

“We are proud to partner with Ohio State University  Extension educators across the state to support this year’s agronomy, outlook and grower meetings.  We value this partnership and look forward to supporting programs that bring value to our members farm businesses”, according to Brad Moffitt, Director of Membership and Market Development for the Ohio Corn and Wheat Growers Association.

The following table lists the scheduled Outlook programs with contact information to register.

 

Hosts: Union/Madison/Champaign

DATE: January 28th

Time: 8:30 a.m.

Place: Der Dutchman Restaurant, 445 S. Jefferson Ave, Plain City, Ohio  43064

Speakers:

Barry Ward, Farm Inputs, Rent and Real Estate

Ben Brown, Grain Marketing Outlook

Robert Moore, Farm Transition and Taxes

Contact  Amanda Douridas (douridas.1@osu.edu)

Registration: Go.osu.edu/PlainCityOutlook

 

Host: Defiance County

Date: January 31, 2022

Time: 6:00-9:00 p.m.

Place: Jewell Community Center, 7900 Independence Road, Defiance, OH  43512

Speakers:

Barry Ward, Farm Inputs, Rent and Real Estate

Matt Roberts, Grain Marketing Outlook

 

Contact: Bruce Clevenger (Clevenger.1@osu.edu)

Registration:  https://defiance.osu.edu/

Host: Wayne County

Date: January 13, 2022

Place: Buckeye Ag Museum, 877 West Old Lincoln Way,  Wooster, OH   44691

Time: 8:00 a.m-12:00

Speakers:

Barry Ward, Farm Inputs, Rent and Real Estate

Peggy Hall,  Ag Law Update

Aaron Wilson, Ohio’s Changing Climate

Dianne Shoemaker, Dairy Industry 2022

 

Contact: Haley Zynda (zynda.7@osu.edu)

Host: Clinton County

Date January 14, 2022

Time: 7:00 a.m. Breakfast  7:30 a.m. Program

Place: OSU Extension Office, 111 S. Nelson Ave. Wilmington, Ohio  45177

Speakers:

Barry Ward Farm Inputs, Rent and Real Estate

Peggy Hall, Ag Law Update

Aaron Wilson, Ohio’s Changing Climate

Eric Romich, SB 52 Solar Farm Legislation

Carl Zulauf,  Farm Bill 2023

Contact:  Tony Nye (Nye.1@osu.edu)

Host: Crawford County

Date: February 1, 2022

Place: Wayside Chapel Community Center, 2341 Kersetter Rd., Bucyrus, OH 44820

Time: 5:00 p.m.

Speakers:

Peggy Hall Ag Law Update

Carl Zulauf Farm Bill 2023

Matt Roberts, Grain Marketing Outlook

Aaron Wilson  Ohio’s Changing Climate

 

Contact: Jason Hartschuh (hartschuh.11@osu.edu)

Host: Pickaway County

Date  Feb 2, 2022

Place: Emmett Chapel 318 Tarlton Rd, Circleville, Ohio 43113

Time: 8:00 a.m.

Speakers:

Barry Ward Farm Inputs, Rent and Real Estate

Matt Roberts,  Grain Marketing Outlook

Carl Zulauf,  Farm Bill 2023

 

Contact: Mike Estadt (estadt.3@osu.edu)

Host: Muskingum County

Date: February 14, 2022

Place: Muskingum County Convention Center, 205 N. 5th St. Zanesville, Ohio 43701

Time: 9:00 a.m.

Speakers:

Barry Ward  Farm Inputs, Rent and Real Estate

Peggy Hall,  Ag Law Update

Matt Roberts,  Grain Marketing Outlook

Carl Zulauf,  Farm Bill 2023

Contact: Clifton Martin (martin.2242@osu.edu)

Host:  Darke County

Date: March 25, 2022

Place: Romers Catering,118 E Main St, Greenville, OH 45331     

Time  10:00-2:00 p.m.

Speakers:

Barry Ward,  Farm Inputs, Rent and Real Estate

Peggy Hall Ag Law Update

Aaron Wilson  Ohio’s Changing Climate

Contact Taylor Dill (Dill.138@osu.edu)

 

 

Ladies on the Land Workshops Offered Across Ohio

Ohio has 13.6 million acres of farmland that is increasingly owned, managed, and leased by women of all ages. To help women better navigate farmland leasing issues, Ohio State University Extension developed a “Ladies on the Land” workshop in cooperation with USDA’s North Central Risk Management Education Center. The workshop provides practical information to help women address their questions and concerns about leasing farmland in Ohio.

2022 Ladies on the Land Flyer

Each Ladies on the Land workshop addresses the educational needs of women involved in all stages and aspects of Ohio agriculture – from non-operating landowners to producers and tenant farmers. Workshops focus on enhancing communication skills, delving into the specifics of Ohio land leasing laws, and the nuts and bolts of an effective lease agreement. Participants will also leave with a better understanding of management strategies to minimize their risk in leasing farmland in Ohio.

Through hands-on activities and demonstrations, Ladies on the Land workshops aim to increase confidence, improve communication skills, and provide helpful resources for all women involved in agriculture. Specific workshop topics cover:

  • Assessing the risk-reward continuum for tenants and landowners
  • Farmland leasing best practices
  • Enhancing communication skills
  • Developing equitable rental rates
  • Answers to questions and concerns

Ladies on the Land workshops will take place from January through March 2022 in various locations throughout Ohio, including January 26 in Medina County, February 15 in Ross County, February 24 in Morrow County, and March 3 in Putnam County.

There is a $25 registration fee that includes snacks, a boxed lunch, and all materials. Registration begins at 8:30 am. The program begins at 9:00 am and concludes at 3:30 pm. To reserve your seat for any of the Ladies on the Land workshops, please call 419-523-6294 or register at http://go.osu.edu/ladiesontheland.  Registration fees may be paid via credit/debit card or check.

Factors Behind Production Gains in Brazil

by: Guil Signorini, Department of Horticulture and Crop Science | The Ohio State University

Last month this column featured an article about souring fertilizer and chemical costs faced by Brazilian farmers as the 2020/2021 season unfolds. The latest developments show that the Southern farmers have not changed planting and growing plans due to these challenges. On the contrary, projections from CONAB (Federal Agency of Agricultural Supply) indicate that grain growers intensified production. Soybean production is expected to reach 4.9 billion bushels, a 7% increase over the last season, and the highest production mark ever registered. Projections for the corn crop are just as significant. Estimations indicate that the country will produce 4.6 billion bushels, a vital recovery from last season’s drop in production due to drought.

Nevertheless, what catches our curiosity is how Brazilian farmers have managed to improve production projections considering the pandemic and the severe pressure from high ag input costs. What can we learn from our fellow farmers? What marketing factors are favoring production expansion?

One important factor is the likely price stability for both commodities until May 2022, when most growers should be close to the season wrap-up. Ipea (Institute for Applied Economic Research) reported in December that international prices are expected to remain stable or experience marginal increments. Future prices from CME Chicago corroborate with Ipea. Soybean contracts for May 2022 were settled at $12.73 per bushel, and corn contracts were traded at $5.86 per bushel on December 6, slightly higher than current prices in Chicago.

Two other factors deserve attention: the adoption of sustainable agricultural practices and the use of innovative financial tools to fund the production. On the agricultural practices front, no-tillage, use of beneficial rhizobacteria, and crop-livestock-forest integration systems are examples of practices listed in a recent report from MAPA (Brazil’s Ministry of Agriculture) to explain the findings reported in the USDA International Agricultural Productivity document. In the latter document, USDA estimates a Total Factor Productivity (TFP) index. The TFP index reflects the overall rate of technical and efficiency change in production over time. Computations return positive estimates for the index when total agricultural output grows faster than the sum of inputs utilized. Brazil’s index figures above the world’s average with a 1.7% annual growth rate in the last years of analysis (2015-2019). The world’s average is 1.2%, and the U.S. index holds a yearly growth rate of 0.04%. Brazil has been in many ways a reference in sustainability practices applied to corn and soybean crops. As a result, farmers experience yield gains, reduce reliance on conventional inputs or practices, and help sustain a healthy growth rate of national production.

The third overall factor sustaining production growth in Brazil is the development of innovative financial instruments to borrow operating capital. These instruments were devised out of farmers’ necessity instead of preference. The operating costs of a representative corn and soybean farm in Brazil are considerably higher than those of a Midwest farm. Our estimations suggest that one acre of soybeans grown in Brazil requires five times the operating costs that an average Midwest farm requires. Similarly, the operations of one acre of corn in Brazil cost twice as much as the operations of one acre of corn in a typical Ohio farm. Because the cost of establishing a soybean or corn crop is budget constraining for most growers in Brazil, several financial instruments were devised and continue to evolve to ease the constraint. Eventual challenges associated with spikes in ag-input prices can be managed using the available financial tools. (As long as grain prices at harvest lead to a positive bottom-line result).

We want to call attention to two private financing instruments commonly used in Brazil: the CPR (Rural Product Exchange Title) and the CRA (Certificate of agribusiness receivables). Together these instruments raised $5.1 billion in 2019. Farmers may also access working capital at reduced interest rates through season plans (Plano Safra, in Portuguese) put together by the federal government every season. In 2019 the government made approximately $43 billion available to farmers in need of capital to cover establishment costs, including seed, fertilizer, and chemicals.

A quick discussion about the two private funding instruments is in order. The CPR refers to an agreement between a farmer and a financial institution. The agreement is frequently signed a couple of months before planting, and the expected crop is used as the guarantee. Farmers may choose to use the crop to liquidate the title at the end of the season. The CRA is a type of income security issued by a non-financial institution, often a multinational ag-input firm or a commodity trader. The security is then transacted with a financial institution that agrees on anticipating capital to the firm or trader. In possession of working capital, the ag-input firm or trader signs agreements with growers in exchange for the money.

This latter instrument has gained popularity in Brazil for two key reasons. First, farmers show preferences for borrowing capital from trading partners instead of banks. Second, ag-input firms and traders are in a position that allows scale gains before approaching a financial institution for the working capital. In that sense, they tend to obtain the capital at reduced interest rates, which are passed to growers with little to no additional charges. Ag input firms and traders are primarily interested in selling inputs or originating grain rather than profit via financial transactions.

The point to be made is that Brazilian grain growers count on two resilience factors. The first derives from technical decisions at the farm field. Sustainable practices have paid off as they tend to reduce reliance on conventional ag inputs, favor nutrient cycling, and enhance tolerance to abiotic stresses such as droughts. The second factor refers to financial tools available to help farmers cope with expensive operating costs. From the farm financial management perspective, eventual price increases in fertilizers and chemicals can be managed with appropriate financial instruments, especially when the commodities show signs of stable prices at harvest. Other than that, Brazilian farmers must work their fields and hope for the projections to hold and for abiotic stresses to be easy on the crops. The bottom line shall be safe then.

 

(This article was previously published in the Ohio’s Country Journal on December 13, 2021).

 

Driving forces and challenges as the growing season takes off in the Southern Hemisphere

by: Guil Signorini, Department of Horticulture and Crop Science | The Ohio State University

It is that time of the year again when our fellow farmers from Brazil dedicate time and energy to plant their crops. And as they do, challenges and opportunities in their operations signal factors and trends that may drive our decisions next Spring when the weather permits us to plant our crops again.

Brazilian farmers are fast-paced sowing soybeans due to favorable weather and soil conditions. On Nov. 1, IMEA (Mato Grosso Ag Economics Institute) informed that 83% of the soybean crop has been sowed in the state. The state of Mato Grosso alone grows more soybeans than Ohio, Michigan, Indiana, and Illinois combined. It also grows approximately 60% of the corn area in these four Midwestern states. Although other states of Brazil lag behind in sowing, research agencies estimate that 55% of the total soybean area has been sowed in the country, the highest mark in the last 5 years. Sowing of the first corn crop, considering that tropical conditions allow double cropping, also progresses fast. Analysts estimate that 65% of the first corn crop is on the ground and ready to grow.

At this point in sowing, one can assume that soybean and corn farmers in Brazil have had access to ag inputs such as seed, fertilizer, plant protection products, and beneficial micro-organisms. (It is difficult to believe that the sowing pace would be that fast otherwise). Leading production and agribusiness management agencies in Brazil recognize that, at this point, most operational costs have been realized by farmers, allowing the agencies to release the first projections of sales, costs, and net value.

A recent study prepared by CEPEA/ESALQ (Center for Advanced Studies on Applied Economics of the “Luiz de Queiroz” College — the most prestigious school of agronomy and related disciplines in the country) shows that the 2021/2022 season is not free of challenges for Brazilian farmers. In that report, CEPEA researchers indicate that grain crop growers’ expenditures with fertilizer are up 50.1% approximately across key production regions against last year. In certain regions, growers face prices for N-P-K fertilizers 59% more expensive this season when compared to the 2020/2021 season.

Researchers attribute the steep price increase to international factors that may affect the next season in the U.S. as well. The price for urea in Ukraine and China ports is the highest since July 2012. Prices are 75.5% and 67.2% more expensive in the respective ports. The increase is primarily associated with China’s government intervention in fertilizer companies to favor its domestic supply over exports. The second reason for the steep increase in urea prices relates to sharp increases in natural gas prices, a key input to produce the ag fertilizer.

The CEPEA report proceeds and suggests that monoammonium phosphate (MAP) prices are up 96.3% in Morocco and 94.6% in Russia, the highest increase since 2008. Similar underlying reasons for the spike in urea prices apply here. The prices of two key inputs to manufacturing phosphate fertilizers — sulfur and ammonia — soar due to refinery curtailments associated with the COVID-19 pandemic.

Prices for muriate of potash (MOP) are 9.1% higher in the Vancouver port when compared to last November according to a World Bank report. Analysts consider that high demand for potash fertilizer, pushed primarily by high commodity prices, combined with the broadly spoken sea transportation crisis are the reasons for the moderate price increases of MOP.

Concerning news comes from chemical prices also. A recent study from CNA (National Confederation of Agriculture and Livestock), a farmers-centered research and policy agency, indicates that prices for key chemical products are two times more expensive this season when compared to 2020/2021 season prices. That is the case for glyphosate that soars to a 128% price increase in important production regions. In addition, CNA is currently working on a strategic coalition plan to minimize the probability of chemical shortages this season and in the future.

We conducted an in-depth analysis to understand the origin of such price increases and we found two major reasons. The first relates to a recent merger that took place in China in April 2021. The Chinese government approved the merger of Sinochem and ChemChina to create an international chemicals giant responsible for $152 billion in annual sales. Since April this year, the merged company has struggled to equalize two very different business models under a single umbrella. Manufacturing plants were shut down, operations were adapted, and assets reallocated to maximize economies of scale. However, Chinese analysts evaluate that the reorganization plan is a complex one and it may take 4 to 5 years until the new company starts to enjoy scale gains. In other words, the fusion has triggered a large intra-company reorganization project and disrupted established partnerships. The collateral effect in prices of chemicals and industrial inputs was unavoidable and it may last several years.

The second reason affecting international prices of chemicals refers to regulatory and institutional changes occurring in China. The country is the most import supplier of raw material for the manufacture of ag chemicals. The Chinese government has signalized interest in tightening its national policies to reduce air pollution and save energy. Analysts believe that new or updated environmental programs that were introduced in 2008 will include periodic inspections of chemical manufacturing facilities, which may affect production, distort supply, and affect prices. Considering the impact that these two reasons have on the international supply of chemicals and their prices, distorted trade flows and high sea freight costs resulting from the COVID-19 pandemic are less of a concern.

The take-home message for Midwestern growers is the following. Brazilian grain crop growers are facing increased prices of fertilizers and chemicals. The underlying reasons for high prices are mostly rooted overseas and likely to last a couple of months or years. We consider that fertilizer prices may return to stable levels as soon as regular operations in mining, refinery, energy, and transportation sectors resume around the globe in the post-pandemic era. High prices of chemicals seem to be rooted in reasons other than the COVID-19 pandemic. Post-pandemic operations may pull back chemical prices, but there are deeper roots in factors difficult to assess. American growers should watch the next wave of developments and consider feasible tactics to reduce eventual impacts on availability and prices for ag inputs. Anticipating demand and connecting with reliable trading partners ahead of time is a recommended tactic to better plan for the season in times of uncertainty.

 

(This article was previously published in the Ohio Country Journal on November 15, 2021).