Farmer Mac recently released their quarterly perspective on agriculture. The Feed, provides some in-depth analysis on trade, tax deductions and land values, among other topics important to farms and ranchers.
Here are some of the key highlights from the quarterly report. To view the full report click here: Farmer Mac: The Feed
Interest Rate Outlook
The Federal Open Market Committee (FOMC) of the Federal Reserve has raised rates three times in the last 12 months but is likely to pause in 2017. Long-term real estate rates moved up significantly in early 2017 but have reversed to give producers another opportunity to lock in low rates for a long term time horizon. Future fed activity may target long-term rates more than short-term rates. Producers should expect operating loan rates to tick higher in 2018 by about 20 percent.
Livestock Update
Cattle and hog production is expected to continue expanding in 2017 and 2018, but strong export demand has helped keep prices higher than projected at the beginning of the year. Fewer cattle on feed for at least 120 days has meant lower weights for marketed cattle, helping to support prices. Beef exports may not be able to keep up their robust pace with the recent increase in Japan’s tariff on frozen beef imports. With much of the U.S. beef supply ineligible for export to China due to requirements in the agreement, due not expected a demand surge in the near future.
Farm Machinery Investments
Farm machinery is a complex investment, and it is important to understand the whole picture before making large purchases. Tax deductions, such as those taken under Section 179 of the Internal Revenue Code, are very beneficial, but machine productivity and expected resale value should drive investment decisions. It is important to consider long-term effects on working capital when making large-scale investment decisions.
Corn and Soybeans
Historically high levels of last year’s corn and soybeans remained in bins this summer. Producers reported average crop conditions in July, with growers in North and South Dakota experiencing poor conditions. Demand is holding up for both corn and soybeans, but there are very few paths that would lead to significant price improvements this fall.
Land Value Update
The USDA Land Value Survey indicates farm real estate values rose 2.3 percent nationally. The increase was driven by rising building values rather than increases in the value of land. Many Midwestern states are still showing declining land values, but the pace appears to be moderating.
Photo: NAN
