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A Weekly Update From Your Friends at the Red River Farm Network

Monday, January 1, 2018

Weekly News Highlights

Reporting Agriculture’s Business — Happy New Year from the Red River Farm Network team! The markets are closed and we’ll be taking a break from our on-air work Monday. We’ll be back on-air Tuesday, January 2. Check out our Top 10 Stories of 2017 featured in this week’s e-Newsletter. We also look ahead to what 2018 brings, including a busy travel month for RRFN.

#1 Story of 2017: Extreme Weather — An intense drought impacted North Dakota, South Dakota and Montana this past summer. In many areas, the drought was categorized as “exceptional,” the most severe level. Droughts typically build over time, but this year it was a “flash drought.” The extreme conditions built up rapidly over a two-to-three month period. Other parts of the country were too wet. Hurricanes and wildfires have also been seen in this historic year for weather. We had many listener-submitted photos during the drought, including this photo taken by Keith Rekow in Marshall County, South Dakota.

Rebuilding After the Fire — Cattle ranchers in western Kansas continue to rebuild following devastating fires last spring. Kansas Livestock Association vice president of communications Todd Domer says it has been a difficult recovery process. “Some of the folks who lost fencing made considerable progress and are nearing the completion of that task. It’s a big task. We had ranchers who lost lots upwards of 250 miles of fence on one ranch.” Ranchers are restocking their herds, but with very dry conditions, others are waiting. “There was good rain after the fire that brought on lots of grass production. There’s lots of fuel out there and it’s dry again in that area. Everyone’s nervous about a spark happening here or there and getting something started again. Hopefully, that will not be the case. Really, everyone is hoping for good moisture to put that fire danger to bed.”

#2: Sonny Perdue Hits Ground Running — The former Georgia governor was the last member of the Trump cabinet appointed and confirmed. Once Perdue came on board this past spring, he packed his bags and has been on a seemingly never-ending travel schedule. That includes stops in Minnesota and South Dakota. The confirmation process for other key senior staff at USDA has been very slow. The nomination of Iowa Ag Secretary Bill Northey for an undersecretary role has been put on hold by Texas Senator Ted Cruz, which has become an example of the numerous vacancies at USDA and throughout the administration.

Perdue Applauds USDA’s 2017 Accomplishments — Agriculture Secretary Sonny Perdue has summarized USDA accomplishments for the past year. The list includes the reorganization of USDA. bringing together the Farm Service Agency, Natural Resources Conservation Service and the Risk Management Agency under the purview of the undersecretary for farm production and conservation. Perdue also created the undersecretary for trade and foreign agricultural affairs, as directed by the 2014 farm bill. Regarding trade, Perdue cited the reentry of U.S. beef to China in 13 years and the reopening of the Japanese market to U.S. chipping potatoes. Since being sworn in on April 25, Perdue has visited 30 states and six foreign countries. That includes RV tours in the Midwest and Northeast.

#3: NAFTA Uncertainty — The U.S., Mexico and Canada have met five times to renegotiate the North American Free Trade Agreement with hopes of finalizing the trade deal in early 2018. The trade talks have been less than successful thus far. President Donald Trump has threatened to withdraw from NAFTA, which amped the anxiety level for many U.S. agriculture organizations and businesses.

#4: Tough Farm Economy — Farmers are dealing with another year of poor commodity prices. In this economic reset, farmers have made adjustments by refinancing and cutting costs. In many cases, yields were better than expected and those bushels will help many farmers hang on for another year.

#5: Dicamba — New dicamba formulations were introduced in 2017. Significant off-target movement was reported with the new technology. The EPA responded with adjustments to the 2018 label. States like Arkansas, Minnesota and North Dakota are enforcing even more stringent rules for next year’s crop.

#6: Regulatory Reform — With the new Trump Administration, the regulatory environment has changed for agriculture. The regulatory roll-back included the withdrawal of the Waters of the U.S. rule. Agriculture Secretary Perdue also rejected proposed regulations for agricultural biotechnology and dropped the GIPSA rules.

#7: Farm Bill Buzz — House Agriculture Committee Chairman Mike Conaway and Ranking Member Collin Peterson hosted farm bill listening sessions around the country. Farm bill hearings were also held in the House and Senate. There seems to be consensus that adjustments need to be made in the cotton and dairy programs and the ARC-County program. With no new baseline funding, money is the No. 1 challenge for the upcoming farm bill.

#8: Tax Reform — Congress finished 2017 by passing the first major tax reform legislation in more than 30 years. For agricultural companies and farm cooperatives, the fate of the Section 199 deduction was a major concern. Section 199 was not included in the House or Senate bills, but an amendment from Senator Hoeven preserved many of its elements.

#9: The RFS Debate — The Environmental Protection Agency mandated refiners use 15 billion gallons of renewable fuels, primarily ethanol for 2018. At the same time, the agency rejected efforts by the biodiesel industry to raise the RFS for the soybean-base fuel. Late in the year, Texas Senator Ted Cruz led the debate against the RFS rules. The White House has heard from oil-state lawmakers and Midwestern farm-state pols, but so far, has not changed the RFS.

#10: Shifting Acres — USDA is forecasting 2018 plantings for corn and soybeans at 91 million acres each. If realized, this would be a new record high for soybeans. USDA also predicts soybean acreage will exceed corn acreage in 2019 and continuing through 2027. Wheat acres continue to decline, now reaching a 100-year low.

A Growing Interest in Soybeans — The global soybean market has been growing on average of 15 million tons each year, causing higher stocks of the commodity. The good news? John Baize and Associates owner John Baize says a drought in Argentina and Southern Brazil could help the situation. “There’s potential of a drought building in Argentina and southern Brazil as a result of the La Nina weather pattern in place. If that continues in the next three months, we’re going to see a substantial cut in production in South America, which will bring down global stocks and it should improve the market position for U.S. soybean farmers this year.” The profitability outlook is poor for 2018, which is why Baize says growers could be interested in planting more soybeans. “With soybeans costing less money than corn to produce, just like they did in 2017, I think farmers will increase their planting of soybeans. It offers the best potential for profit with the least risk.”

Dry Bean Scene — The Dry Bean Scene airs Fridays at 12:37 PM on the Red River Farm Network. This week, we take a look at the 2018 Bean Day.

RRFN On-air and Online — The Red River Farm Network serves its audience on-air and online. If you want farm news headlines, agronomic information, weather, market analysis and RRFN’s daily broadcasts, there are several ways to get it throughout the day. Listen to any of our 19 radio partners or subscribe to RRFN podcasts. “Like” the RRFN Facebook page. Check out the news headlines, our daily programs, the calendar of events and more at  Your way, when you want it. The Red River Farm Network is Reporting Agriculture’s Business.

Grain Piles Everywhere — Corn and soybean growers may not see much price improvement for another couple of years. American Bankers Association Vice Chairman Shan Hanes says commodity prices have been a challenge due to the amount of grain being produced. “It doesn’t matter where you go. There are grain piles everywhere.” With prices decreasing over the past few years, ag bankers are working with farmers to get through the upcoming years. Hanes says 2019 will most likely be the first opportunity for better prices. “We’ve tried to set cash flows accordingly. Cash flows are going to be tight, but I think they’re going to be positive. We’ve done the best we can with low interest rates, using Farm Service Agency options and setting them up to survive these low commodity prices.”

Expecting the Unexpected — Farmers have learned to expect the unexpected when it comes to yield. Gulke Goup owner Jerry Gulke says that’s the biggest lesson of 2017. Looking ahead to 2018, Gulke says there’s an incentive or disincentive to plant other crops. Spring wheat acres could be a shocker. The January USDA report will provide insight. “January 12 is going to be a kicker. That’s the stocks report. That could show more stocks in place and finally, the realization we have to continue to lower export projections. That goes right to the bottom line. All things being equal-normal from here and us planting as many or more beans in the U.S., we could end up with more stocks in the U.S. than we imagined.”

Little Things Make the Difference — Stewart Peterson Senior Market Advisor Brian Doherty says the little things might make the difference between profit and loss in the year ahead. “Keep the pencil sharp. Don’t lose sight of the market. Pay attention for a rally.” Doherty says be watching for quick spikes above your breakeven costs to make sales. “Early on, if you can get rallies and sell into them, get the ball rolling and hope that’s your worst sale, lots of times those early sales will turn out to be pretty good. It’s easier to keep the ball rolling. Those first sales are generally the hardest, but once they’re in place, it gets easier to add to them.”

Tend to the Risks — Farmers spend a majority of their time on the production side of farming, but Commodity Risk Management Group President Mike North says farmers also need to tend to the risks. “We need to tend to the opportunities which present themselves. It requires time spent and some investigative analysis: learning about the different tools available, how they work and what is going to work best for the farmer.” North says farmers need to become a student of the market. “It’s not always the most fun. No one enjoys a lot of paperwork or sitting at the desk for extended periods. Frankly, we have to spend some time there. We have to take a look at that part of our business. In the last several years, it’s made a world of difference in making money and not making money.”

Farm Bill Priority in New Year — While there were farm bill hearings in 2017, not much movement happened at the end of the year on the legislation. There is hope movement will happen soon in 2018. National Corn Growers Association president and Arthur, North Dakota farmer Kevin Skunes says fixing the ARC and PLC programs will be top-of-mind in farm bill discussions. “He told us the new farm bill will look similar to the old farm bill if we can get some of these things fixed that need to be fixed, like the NASS yields. We know in 2014 and 2015, North Dakota had a few counties that didn’t get payments because there weren’t enough NASS yields sent in on the county level. We think we can fix that. There’s a bill going forward that would use RMA yields instead of NASS moving forward. We think that’s a good deal.” Skunes says if the farm bill can get to the floor in the first part of 2018, Chairman Conaway is committed to getting the farm bill done by September of 2018. The 2018 election could make the timeline tricky.

Managing Nitrogen — Nitrogen management is top-of-mind moving into 2018. Farmers’ Cooperative Association agronomy manager Adam St. Germain explains. “Looking at maybe doing a nitrogen stabilizer and start to implement some more of the 4Rs out there: right source, right time, right rate and right placement. Using the NutriSphere-N product to keep it out there and put more bushels in the bin.”

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Source: Red River Farm Network