FOCUS ON AG

Written by Kent Thiesse

Farm Management Analyst and Vice President, MinnStar Bank
August 12, 2019

FARMFEST FORUMS ATTRACT LARGE AUDIENCES

Each year many key issues are discussed as part of the various feature forums at Farmfest. The 2019
farm show was held on August 6-8 in Redwood County, Minnesota. A variety of National and State
agricultural leaders and policy makers, including the U.S. Secretary of Agriculture Sonny Perdue,
attended Farmfest and discussed many of the current key issues affecting farm families and rural
communities across Minnesota and the Midwest.

Whether it was comments by Farmfest forum panel members or the farmers attending the event, the
current tight margins and low profitability in farming was on everyone’s mind. Profit margins in crop
production have been quite tight in recent years, and for many producers are at a negative level for the
2019 crop year. Crop production expenses and land rental rates have remained relatively high for many
producers, while crop prices for corn, soybeans and wheat have remained below breakeven levels. For
farm operators that may have below average crop yields in 2019, due to weather issues, the financial
situation may be even more severe.

The livestock sector is not faring much better from a profitability standpoint. Dairy farmers have been
dealing with very low milk prices for the past several years, which has resulted in many dairy
producers exiting the industry in the past couple of years. Cattle feedlot operators have also faced
negative margins at most times during the past year or so. Hog producers were able to show a slight
profit margin earlier in 2019, following a short-lived rapid price increase; however, the return to lower
market prices in the Summer of 2019 has again created profit challenges for the hog industry.

Most farm operators attending Farmfest expressed concern about the continuing “trade war” between
the United States and China, as well as the associated tariffs. Shortly before Farmfest, the Trump
administration announced added tariffs on a wide range of Chinese goods being imported into the U.S.
China countered by announcing that they were restricting all U.S. ag imports into China. In the past
year, added Chinese tariffs on ag imports from the U.S. has greatly lowered U.S. exports of soybeans,
pork and other ag products to China, resulting in much lower commodity prices in the U.S.

The other trade issue that garnered considerable attention at Farmfest was passage of the United States-
Mexico-Canada Agreement (USMCA) by the U.S. Congress. USMCA was agreed to by the leaders of
the three nations earlier this year and has been approved by Mexico. USMCA would replace the
current North American Free Trade Agreement (NAFTA) between the three countries, which has been
beneficial for many agricultural products. Canada and Mexico, along with China, are the three largest
trading partners for U.S. ag exports. USMCA now awaits approval by the U.S. Congress, which many
ag leaders hope will occur later this year.

Due to the ongoing trade issues with China and other countries, USDA has announced another round
of market facilitation program (MFP) payments in 2019. The first round of MFP payments was made
in 2018, based on actual farm-level crop production levels and a set price for various commodities. In
2019, the MFP payments will be based on planted crop acres by farm operators, regardless of the crop
that was planted in 2019, with a set payment rate per acre. There is a minimal MFP payment per acre
for 2019 crop acres that were prevented planted due to weather conditions, provided that an approved
cover crop was planted. Producers should contact their local Farm Service Agency (FSA) office for
more details or to enroll in the 2019 MFP program.
Crop conditions and yield potential, following a challenging Spring planting season in 2019, were a
frequent topic of discussion at Farmfest. Many areas of Minnesota and the Upper Midwest had corn
and soybeans planted much later than normal this past Spring. Even though more favorable weather
conditions in late July and early August have improved crop prospects in some areas, many concerns
remain with the 2019 corn and soybean crop. Most crop experts agree that the Upper Midwest will
need to avoid a frost until October and have some favorable growing conditions late in the growing
season in order for the later planted crops to reach maturity. Most farm operators and agronomists
expect highly variable corn and soybean yield levels in 2019.

Many farm operators, agriculture and rural community leaders, as well as investors in renewable
energy plants, are concerned about government policies related to the development and use of
renewable energy. Many States in the Upper Midwest have a very strong and well established corn-
based ethanol industry, which utilizes over 35 percent of the corn produced each year in the United
States. In the past couple of years the U.S. Environmental Protection Agency (EPA) has issued
numerous waivers to gasoline refiners, which has reduced demand for ethanol and resulted in over-
supply in some areas. The ethanol industry has also been concerned by the slowness to implement E-15
as an ethanol fuel blend.

There has also been a growing biodiesel industry in the U.S. that utilizes a significant amount of
soybeans each year, which is very important at this time due to the challenges in the soybean export
markets. In addition to the direct benefits to farmers, renewable energy plants have become
cornerstones in rural communities by providing jobs, adding to the local tax base, and enhancing the
overall economic vitality of the communities. Even with all the economic, environmental, and
community benefits of renewable energy, many special interest groups are calling for reductions or
elimination of the Federal renewable fuel standards (RFS), and other measures that would hurt the
current renewable fuels industry.

Most farmers and residents of Minnesota have ideas on how State Government can better serve
families and industries in the State, including farm families and the agriculture industry. Governor
Walz addressed a large audience at Farmfest, which was followed by a panel of ten State agency
commissioners and deputy commissioners. The State agency leaders discussed programs and efforts to
work with farm businesses, families and rural communities in a variety of ways. This included dealing
with the economic challenges currently being experienced by farm operators and rural businesses,
family health care challenges, and other issues affecting rural communities. Those in attendance had
numerous questions regarding specific State programs, as well as application methods or
implementation of various programs and services.

**********************************************************************************
Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960);
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/