Ag Management Group

It has been a tough month in the futures markets for most agricultural products. Cotton futures are down as much as 23% while corn, wheat, and other grains have declined as much as 15%. The rationale for these declines vary but revolve around the usual concerns about weather, inflation, recession, and their effect on basic supply and demand.

Weather is always going to influence the market and this summer is no exception. The continuing drought in Texas should provide some support for prices reflecting a decrease in the forecast supply. This of course is the classic dilemma of farming; drought leads to higher prices, precisely when farmers have less crop to harvest and sell. The threat of recession also seems to be creating a price ceiling for most agricultural products (see report links below). Watch for USDA reports to be released this upcoming week, which may impact the markets.

If your crop is viable, falling market prices put pressure on margins and increase the risk of the current crop. If your crop is not viable, you face second-crop considerations and decisions. Both scenarios lead to lower yields, lower profitability, and cash flow.

As you look down the 2022 road and consider your options, call Bart or Tracy for any financial questions you may have.




https://www.cottoninc.com/market-data/monthly-economic-newsletter/

https://www.marketwatch.com/articles/wheat-oil-copper-commodity-prices-recession-inflation-51656368110?mod=mw_quote_news

Home - Ag Management An innovative team providing financial consulting, insurance services and CFO expertise for Ag producers

The U.S. Department of Agriculture (USDA) announced on May 16th that commodity and specialty crop producers impacted by natural disaster events in 2020 and 2021 will soon begin receiving emergency relief payments through the Farm Service Agency’s (FSA) new Emergency Relief Program (ERP) to offset crop yield and value losses.

ERP covers losses to crops, trees, bushes, and vines due to a qualifying natural disaster event in calendar years 2020 and 2021. Eligible crops include all crops for which crop insurance or NAP coverage was available, except for crops intended for grazing. Qualifying natural disaster events include wildfires, hurricanes, floods, derechos, excessive heat, winter storms, freeze (including a polar vortex), smoke exposure, excessive moisture, qualifying drought, and related conditions.

FSA will provide pre-filled applications to producers who already have crop insurance and NAP data on file. The forms will include eligibility requirements, the application process, and will provide ERP payment calculations. The forms must be completed and returned, with additional required documentation, before eligibility will be determined.

https://www.fsa.usda.gov/news-room/news-releases/2022/usda-to-provide-approximately-6-billion-to-commodity-and-specialty-crop-producers-impacted-by-2020-and-2021-natural-disasters

This program is a great opportunity for additional financial recovery for those who experienced natural disaster losses in 2020 and 2021. If you have any questions please contact Bart or Tracy!

Home - Ag Management An innovative team providing financial consulting, insurance services and CFO expertise for Ag producers

There are two relatively new crop insurance policies that could provide benefits to those with pasture and/or forage crops. The Annual Forage Plan (AF) provides drought coverage for acreage planted each year and grown for haying, grazing, or silage. The Pasture, Range, and Forage Plan (PRF) provides drought coverage for farmers and ranchers who rely on perennial pasture, rangeland, and/or forage for haying and grazing.

Both AF and PRF coverages are based entirely on the amount of rainfall during the covered time period and are not based on production or yields. Generally, the policies will pay when measured rainfall is below the long-term average for specific zones and specified time periods. These products could be beneficial to anyone who plants crops used for haying, grazing, or silage. This coverage would be especially valuable during prolonged drought. The sign-up deadline for AF is in mid-July.

Get in touch with Bart or Tracy for more information!

Home - Ag Management An innovative team providing financial consulting, insurance services and CFO expertise for Ag producers

How should your farm respond to inflation and expected policy reactions?

🌱 Use available cash to pay off or pay down debt. The higher interest rates will be punishing those with high debt levels.

🌱 Forward contract as much of your crop as you can. Selling your crop now will provide financial stability and peace of mind. There are ways to sell your crop now and still participate in rising prices if you expect prices to continue to increase.

🌱 Control the urge to push your crop for higher-than-average yields. After the excellent yield that most experienced in 2021, this is a good year to be average.

🌱 Have discipline when considering purchases. Do. Not. Spend. Money.

🌱 Finally, remember the concept “reversion to the mean." In this context it means that crop prices will tend to fall closer to the long-term average, interest rates will rise closer to the long-term average, and overall basic economic behavior will return to normal.

Contact Bart or Tracy today and learn more tips to navigate these difficult times!

Home - Ag Management An innovative team providing financial consulting, insurance services and CFO expertise for Ag producers