READ the NAFB’s National Ag News for Wednesday, November 13th

Sponsored by the American Farm Bureau Federation

Farmers Turning to Riskier Loans to Stay in Business

Weather challenges, trade tensions, and long-term financial struggles continue to make life difficult in the U.S. agricultural sector. The Wall Street Journal says those headwinds are forcing an increasing number of farmers and ranchers to take on high-interest loans from lenders outside of the ag sector, just to stay in business. The more traditional farm banks are offering less money and placing tighter restrictions on their loans. That’s forcing cash-strapped farmers to go to other lending sources for the capital they need to stay afloat. Financial services providers that are less regulated can offer significant help to producers. However, those loans can be treacherous to farmers that fall behind, with interest rates twice those charged by the more typical ag lenders. Heath Jobe is a farmer from Arkansas who recently lost a crop to dry weather. His loan payments carried a nine percent interest rate and piled up quickly, while his request for a new loan was rejected. Producers are increasingly falling behind on their loans and it’s putting a squeeze on ag lenders too. Farmers face almost $416 billion in debt this year, which is the highest number since the 1980s farm crisis.

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Opportunity Ahead for More U.S. Wheat Exports to Brazil

Brazil is set to open a tariff-rate quota on wheat imports, a potential opportunity for U.S. wheat producers. The quota will allow 750,000 metric tons of wheat to enter Brazil duty-free from outside of South America. The agreement comes 24 years after Brazil joined the World Trade Organization in 1995. The Fence Post Dot Com says both U.S. Wheat Associates and officials in the U.S. Government have worked for years to open the tariff rate quota and establish a more accessible market in Brazil for U.S. hard red winter wheat and soft red winter wheat. USW President Steve Peterson says, “Brazil is a quality-focused wheat market and its flour millers recognize that U.S. wheat can help them to better meet their customers’ needs. “ Opening the TRQ gives their millers more consistent access to our wheat classes while still having an option to source from other countries if they choose to.” He says that’s how markets are supposed to work. The Brazilian government is moving ahead on a formal process and date for implementing the TRQ. U.S. Wheat Associates Chair Doug Goyings says, “This is a perfect example of how fulfilling commitments can work for all trading partners.”

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Ag Lender Survey Shows Lower Profitability and Higher Concerns

The American Bankers Association teamed up with Farmer Mac for their Fall 2019 Ag Lender Survey. The biggest takeaway from the report is that the agricultural economy and farm income remain under stress, with little if any signs of improvement ahead in 2020. Over 82 percent of lenders in the survey said farm profits were being squeezed this year, with every region in the survey reporting profitability declines in their respective areas. The top concerns for producers in the survey included income, liquidity, and leverage, but trade, tariffs, and weather moved up on the list. The top concerns for lenders included credit quality, competition for loans, as well as weaker loan demand. Lender sentiment remained cautious between August of 2018 and August of 2019. A similar percentage of lenders reported farm profitability declines, increasing farm leverage, and increasing loan default rates. Dairy, grains, and cattle were the sectors that gave lenders the most concern, while they were less concerned about the swine, poultry, and vegetable sectors. Survey respondents generally expect higher loan delinquency rates going into 2020 for both production and real estate. In spite of quality concerns over credit, lenders remain positive about approvals.

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America’s Largest Milk Producer Files for Bankruptcy

Dean Foods, a 94-year-old milk producer, is filing for bankruptcy. The largest milk producer in the country is struggling as Americans are no longer drinking as much milk from cows. This year has been especially difficult as company sales dropped seven percent in the first half of this year, with profits falling 14 percent. A CNN Dot Com article says Dean Foods stock has lost 80 percent of its value. The company manufactures some of the more recognizable milk and dairy products in the country, including Land O’ Lakes and Organic Valley. The company blames its struggles on declining consumption in white milk. Company debt has made it difficult for Dean Foods to fund all of its workers pensions. In a statement, the company says it’s working with the Dairy Farmers of America cooperative on a potential deal in which the cooperative would buy almost all of the company. Sales of cow’s milk has declined for the past four years. Over the past 52 weeks, white milk sales totaled around $12 billion dollars. Another problem Dean Foods faced is Walmart. Once one of Dean Food’s biggest customers, Walmart dropped them last year after building its own dairy plant.

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Senate Democrats Report Says Trump Trade Policies Pick Winners and Losers

Senate Ag Committee Ranking Member Debbie Stabenow and Senate Minority Leader Chuck Schumer led a group of fellow Democrats in releasing a report on the Trump Administration’s trade policies. The report says the administration’s agricultural trade aid program “is picking winners and losers in their attempt to aid farmers affected by President Trump’s turbulent trade agenda.” The Democrats say the data shows that in the wake of trade uncertainty created by the president’s actions, the $25 billion in mitigation payments to help farmers has been distributed “unevenly” across the country, benefiting some regions of the country more than others. The senators wrote a letter to Ag Secretary Sonny Perdue, saying “instead of taking a careful approach as Congress did in the recent bipartisan 2018 Farm Bill, the USDA has replaced markets with short-term inequitable payouts that lack transparency.” The report goes on to say that “the administration’s Market Facilitation Program has treated farmers “unfairly” by sending 95 percent of the top payment rates to farmers in the south, who they say have been hurt less by the trade disputes than farmers in other regions of the country. They also say the administration’s policies have helped farms owned by billionaires and foreign-owned companies. As an example, the Democrats point out that $90 million in purchase contracts went to a Brazilian company.

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Justice Department Asks for Stay in Sugar Decision

Late last week, the U.S. Justice Department filed a motion requesting a 90-day stay in the Court of International Trade’s ruling that an amended Mexico-U.S. trade agreement wasn’t valid. The Hagstrom Report says an agreement on Mexican sugar imports to the U.S. was amended in 2017. However, the court said that the amended agreement wasn’t valid because the Commerce Department didn’t release all the notes of meetings held during the negotiations. The American Sugar Alliance says U.S. sugar producers, as well as Mexico’s sugar industry and government officials, support the U.S. request for a stay. Phillip Hayes, an ASA spokesman, says, “This 90-day stay is necessary to ensure that everyone has enough time to file comments with the Department of Commerce on the suspension agreements, as well as gives the Commerce Department time to follow proper procedure during the process.” Hayes points out that it’s important to remember the court didn’t comment on the merits of the amendments and was instead based purely on record-keeping procedures by the Department of Commerce. “Mexico’s government and sugar industry have both asked the U.S. government to reinstate the suspension agreements without change, something U.S. producers support,” Hayes adds. The Commerce Department has now published the suspension agreements without change and is looking for comments from interested parties.

SOURCE: NAFB News Service

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By Brian Allmer - The BARN

Brian Allmer & the BARN are members of the National Association of Farm Broadcasting (NAFB), the Colorado FFA Foundation, the Colorado 4H Foundation, the Colorado Farm Show Marketing Committee, 1867 Club Board Member, Denver Ag & Livestock Club Member, the Weld County Fair Board, the Briggsdale FFA Advisory Council, Briggsdale 4H Club Beef Leader & Founder / Coordinator of the Briggsdale Classic Open Jackpot Show.