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

 

“Planning for the Future of Your Farm” Workshops offered by OSU Extension

by: David Marrison, OSU Extension-Coshocton County, marrison.2@osu.edu

To kick off 2022, OSU Extension will be offering “Planning for the Future of Your Farm” workshops to help farm families actively plan for the future of their farm business. The workshops are designed to help farm families learn strategies and tools to successfully create a succession and estate plan which can be used as the guide to transfer the farm’s ownership, management, and assets to the next generation. Learn how to have the crucial conversations about the future of your farm.

Topics discussed during this series include: Developing Goals for Estate and Succession; Planning for the Transition of Control; Planning for the Unexpected; Communication and Conflict Management during Farm Transfer; Legal Tools & Strategies; Developing Your Team; Getting Your Affairs in Order; and Selecting an Attorney.  This workshop will be taught by members of the OSU Farm Office Team.

Families can choose to attend the workshop virtually or in-person at regional workshops which will be held across the state. These sessions being offered include:

Virtual “Planning for the Future of Your Farm” Workshop

A virtual version of this workshop will be held on January 31 and February 7, 21 & 28, 2022 from 6:30 to 8:00 p.m. via Zoom. Because of its virtual nature, you can invite your parents, children, and/or grandchildren (regardless of where they live in Ohio or across the United States) to join you as you develop a plan for the future of your family farm.

Pre-registration is required so that a packet of program materials can be mailed in advance to participating families. Electronic copies of the course materials will also be available to all participants. The registration fee is $75 per farm family.  The registration deadline is January 25, 2022. More information and on-line registration can be obtained at go.osu.edu/farmsuccession

In-Person “Planning for the Future of Your Farm” Workshop

In addition to the webinar series, 3 regional in-person workshops will be held in February and March of 2022. Each of these programs will be held from 9:00 to 4:00 p.m.  The base registration cost for each of these meetings is $85 for 2 attendees, lunch and 1 notebook.  Additional participants can attend for a $20 fee and extra sets of the course material can be purchased for $15. Registration is due 1 week prior to each event.

The locations for each for the meetings are:

February 10, 2022 in Greene County

Location: Greene County Extension Office

100 Fairground Road, Xenia, Ohio

On-line registration can be made at go.osu.edu/greenefarmfuture

More details can be obtained at corboy.3@osu.edu or 937-372-9971

 

February 25, 2022 in Wayne County

Location: Fisher Auditorium

1680 Madison Avenue, Wooster, Ohio

More details can be obtained at zynda.7@osu.edu or 330-264-8722

 

March 4, 2022 in Wood County

Location: Wood County Fairgrounds- Junior Fair Building

13800 W Poe Road, Bowling Green, Ohio

More details can be obtained at eckel.21@osu.edu or 419-354-9050

 

Specific details about each of the workshops can be found at: go.osu.edu/farmsuccession

 

A New Year…An Updated Farm Balance Sheet

by: Eric Richer, OSUE Fulton County

 Many of us make New Year’s resolutions as we turn the corner to a new calendar year. One of the best financial management resolutions you can make is to update your balance sheet in a timely and precise fashion. The balance sheet is a “snap shot” in time of your farm’s financial position, including what assets you own and how they are financed. The balance sheet is also known as the net worth statement. When completed precisely and timely, the balance sheet and corresponding ratios can be a very valuable tool to determine farm financial health. The balance sheet objectively measures farm business growth, liquidity, solvency, and risk capacity.

Categorizing Balance Sheet Items

Balanced sheets are organized with two sides: assets and liabilities. The left side contains items categorized as assets and the right side contains liabilities. Assets are items owned by the farm business that contribute value such as cash or grain inventory. Assets also include items such as equipment or farmland that, although they are being financed, contribute to the general value of the farm business. These assets will be shown on the balance sheet with the liability or debt that needs to be paid, such as farmland with a mortgage or a tractor with a loan. Other liabilities listed on the balance sheet include outstanding financial obligations for farm expenses such as feed or fuel oil. In addition to financing with debt or liability, assets can be financed with equity, or a mix of equity and debt. Equity for financing is the debt-free capital (or cash) retained by the farm with no financial obligation.

The assets and liabilities on the balance sheet (including the financing of the assets) are used to determine the equity, or net worth, of the farm owner. The owner’s equity is used by lenders and insurers to determine a farm business’ value.  There are two ways to calculate the owner’s equity, or net worth. The first simply subtracts the liabilities from the assets:

Assets – Liabilities = Owner’s Equity

The second calculation adds the owner’s equity with liabilities to determine the assets:

Liabilities + Owner’s Equity = Assets

Terms of Assets and Liabilities

Beyond the broad categories of either an asset or liability, a balance sheet categorizes items into “time compartments” or terms of useful life. Useful life is a term for the amount of time an item can be utilized for the farm business. Depreciation allocates the cost of this asset over its useful life. Both assets and liabilities can be categorized into current, intermediate, and long, or fixed, terms of useful life.

Assets – Current assets can be converted to cash in one year or less. Common current assets are cash, growing crops, harvested crop inventory, market livestock, accounts receivable, and other similar items. Intermediate assets have an assumed useful life or depreciable value of one to ten years. Common intermediate assets are breeding livestock, machinery and equipment, titled vehicles, and not-readily-marketable bonds and securities. Long term, or fixed, assets are typically permanent items with value—depreciable or not—for more than ten years and include farmland, buildings, farmsteads, and other similar items.

Liabilities – Current liabilities are obligations that are due and payable in the next twelve months. Most common current liabilities include accounts payable (bills), credit card bills, operating lines of credit, accrued interest, and the current portion of principal on loans due this year. Intermediate liabilities are obligations that due to be paid back within one to ten years and are usually associated with intermediate farm assets on the left side of the balance sheet. Common intermediate liabilities are the principal remaining on machinery and equipment loans or breeding livestock purchases. Finally, long term, or fixed, liabilities are debts with terms greater than ten years like the principal balance remaining on a farmland or building mortgage.

Assets: Market Value vs. Cost Value

The asset side of the balance sheet may have two columns for value: market and cost. Both values should be on a balance sheet to help the farmer and farm advisors, and indicate changes to the owner’s equity.

Market value – Today’s market values minus selling costs are used to determine market value. For example, a fully depreciated 15-year-old tractor certainly has a current market value greater than zero, especially in today’s environment. A realistic current market value for this tractor can be obtained with an appraisal, or by looking at current sales of similar tractors online. Similarly, farmland bought 30 years ago likely has a different current market value today. In general, lenders may prefer the use of current market values in a balance sheet for asset valuation.

Cost value – The net book value, or the cost of the item minus accumulated depreciation, is the cost value. For example, a fully depreciated 15-year-old tractor has a cost value of $0 in a cost-based balance sheet. No appraisal is needed; only record the cost minus accumulated depreciation. Farmland (a non-depreciable, long term asset) purchased 30 years ago has a balance sheet value of the purchase cost.  In general, accountants prefer cost value balance sheets as a more clear reflection of business success, based on business decisions rather than inflation, depreciation, or appreciation of investments.

In a precisely completed balance sheet, the cost value and the market value columns usually produce different total asset values.

Keys to Completing the Balance Sheet

Several keys can help farmer improve their accuracy, effectiveness, and efficiency for completing year-end balance sheets.

  • Complete the balance sheet on the same date each year, usually as of December 31st. The information will never be more accurate than immediately after the end of the year.
  • Items like investment/retirement account balances or principal loan balances make take several weeks to arrive unless you use online accounts; nevertheless, December 31st is the reference date you should use.
  • Inventory all assets, including standard weight and measure units (ie. Lbs, head, bushels, bales, etc).
  • Utilize current market prices for crop and livestock inventories.
  • Calculate cost value for growing crops.
  • Include government payments and insurance indemnities yet to be received in accounts receivable.
  • Apply conservative breeding livestock values, avoiding large year-to-year changes.
  • Maintain a separate, easy-to-update depreciation schedule for depreciable assets like equipment.

Balance Sheet Tools

Several methods for completing balance sheets are available, including hardcopies like the Ohio Commercial Farm Account Book available through your local Ohio State University Extension office, spreadsheet-based software programs with templates and accounting formulas, or accounting software linking balance sheet values with online resources. Ohio State University (OSU) Extension has a Microsoft Excelâ spreadsheet-based balance sheet with farm templates that can be found at https://go.osu.edu/BalanceSheet.  The most important aspect is timely and accurate entries, regardless of the method used for creating the balance sheet. Each method has drawbacks and advantages and the choice of computer versus paper based systems usually comes down to personal preference.

Balance Sheet Ratios to Evaluate Financial Health

A balance sheet is an accounting statement needed by a farmer to evaluate his or her financial health. An income statement and a statement of cashflows are also needed to provide the entire financial picture. These three statements can be used with the Farm Finance Scorecard available online by searching the University of Minnesota’s Center for Farm Financial Health.

The scorecard uses these three accounting statement to determine financial ratios and measurements to benchmark a farm operation against acceptable industry standards.

An annual comparison of the same farm, referred to as a vertical analysis, can be used to evaluate the health of a balance sheet. With vertical analysis, one year’s balance sheet totals can be added to a spreadsheet with entries from previous years for comparison. Additionally, the spreadsheet would be used for upcoming years to continue the vertical analysis. This analysis does not benchmark a farm against the industry but, instead, shows the growth achieved and trends developed by the farm over time.

References:

Hachfeld, G. A., D.B. Bau, C.R. Holcomb. 2016. Balance Sheet. Farm Financial Series, #1, University of Minnesota Extension.

Langemeier, M. R. 2011. Balance Sheet—A Financial Management Tool. MF-291, Department of Agricultural Economics, Kansas State University Extension. Available online at: www.agmanager.info

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).

 

Farm Office Live Returns on December 15 & 17

The OSU Extension Farm Office Team invites you to join them for the December edition of Farm Office Live which will be held on Wednesday, December 15 from 7:00 to 8:30 p.m. and then repeated (live) on Friday, December 17 from 10:00 to 11:30 a.m. You are invited to attend the session which fits your schedule best.

The topics which will be discussed this month include:

  • USDA NASS Update with Special Guest Cheryl Turner
  • 2022 Dairy Margin Coverage Signup and Supplemental Coverage
    Opportunity
  • Meat Processor/Federal Program Updates
  • State and Federal Legislative Updates
  • Farm Tax Update
  • Looking Ahead to 2022
  • Q&A

Presenters for this webinar are Cheryl Turner from USDA-NASS and OSU Extension Farm Office Team members: Peggy Kirk Hall, David Marrison, Dianne Shoemaker, and Barry Ward. Registration for the December Farm Office Live webinar can be made at http://go.osu.edu/farmofficelive.  Future webinars will be held on January 19 & 21, February 16 & 18, and March 16 & 18. More information can be obtained at http://farmoffice.osu.edu

Ag Policy and Outlook Conference Recordings Available

by: Holly Davis, Communications and Outreach Manager
CFAES | Department of Agricultural, Environmental, and Development Economics

Each year the Department of Agricultural, Environmental, and Development Economics (AEDE) in the College of Food, Agricultural, and Environmental Sciences (CFAES) hosts the premier forum for Ohio’s agricultural and food industries. Our experts cover topics and issues important to producers, agribusinesses and elected officials. Recordings of these sessions are now available on AEDE’s YouTube channel. The full playlist of all six sessions can be accessed by clicking below. Topics covered include:

  • Consumers, Shopping, and Local Food: What’s Next?
  • Now Hiring: An Ohio Food and Agricultural Labor Update
  • U.S. Trade Policy and Prospects for Agricultural Trade
  • Agricultural Commodity Markets: Trends and Prospects
  • Agricultural Finance Recovery
  • A Conversation About the Next U.S. Farm Bill

Sessions in bold indicate AEDE faculty presenters who are available to do a winter/spring updated presentation upon request (capacity varies by presenter). Please visit our conference website to access presenter contact information if you would like to request an updated virtual session for your population, and to access PDFs of the presentations.

 

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).