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Thursday, May 5, 2016

Ag conference focuses on economic climate

Friday, March 27, 2009

3-30 BarCo Soils main story 3/24

By MURRAY BISHOFF

Doing business in agriculture in the current economic climate and changing federal programs became a major theme for speakers at the 80th annual Barry County Soils and Crops Conference held in Butterfield.

Brian Blount, Barry County executive director for the Farm Services Agency in Cassville, reported a lot of uncertainty remains about the new Farm Bill and the various programs in it. Much of the focus ha been on establishing a new safety net. Producers need to concentrate on documenting actual production history with numbers that show what a farm produces, Blount said.

Proven yields that run over four years, from the current year back, need to be compiled. Verification by a third party is also important. On hay, where crop measurements can be elusive, production from three similar farms may be used or a pre-harvest appraisal, Blount said.

Many programs are linked to crop insurance. Blount said his work has become a lot like selling insurance by getting farmers to sign on to various programs. For example, the new Supplemental Revenue Assistance program (SURE) provides a financial underpinning for producers.

Participating farmers must sign up for Catastrophic Crop Insurance and the Non-Insured Assistance Program (CAT/NAP). Payments come one year after harvest. Getting money depends on either a 50 percent loss in production by a single producer or a disaster designation by the Secretary of Agriculture.

Another new program is the Acreage Crop Revenue Election (ACRE), which looks at target prices for specific crops. If market prices go below the targeted amount, producers can get the difference. Documentation for ACRE goes back five years, and those signing up cannot switch to another program over the duration of the current Farm Bill.

"Instead of less, we're asking more," Blount said. Producers will need to provide documentation and commit to supporting programs and their requirements. "Buy CAT/NAP, build good APH, keep good records and document production, it will be to your advantage in the long run. The sooner you get started, the better," Blount added.

Dealing with banks

Larry Moennig, from First State Bank of Purdy, told the audience money is available for loans to agriculture businesses. Missouri banks have been strengthened by raising the amount covered by the Federal Deposit Insurance Corporation from $100,000 to $250,000. More conservative lending practices in Missouri has kept equity capital stronger than in other parts of the country.

"Most Missouri banks are profitable," Moennig said.

Coming from a position of strength, banks can make loans, though it will not be "business as usual" this year. "Take care of your credit history. It's all about how you handle your business and your character," Moennig said.

Bankers will ask to see a balance sheet, listing assets, debts and net worth. A statement produced last year from the same time provides comparison. According to Moennig, bankers will want to know why net worth is up or down, if debts are up or down and why.

"There will be more emphasis now on cash flow projections," Moennig observed. Bankers will show more interest in decisions like pre-paid fertilizer, locked-in fuel prices and forward pricing on products. Increased farm inspections or more collateral may be sought this year.

"Bankers want a vision statement in the portfolio of cattlemen," injected Eldon Cole, livestock specialist for the University of Missouri Extension Service. "It's all boiling down to more records and what future plans you are thinking of trying."

"We've been asking for the same documents over the last 20 years. In stress times, we ask for more details. Most borrowers know the drill," Moennig said. He recalled a producer who sought a complex loan and got it "because he had a clear vision of what he wanted and how to get there."

Asked about how bankers view wild fluctuations in ag prices, Moennig said, "The ag economy has withstood the economic downturn better than any other sector. We expect that to continue."

Projecting the market

Another way to beat a volatile market, according to Extension Service agriculture business specialist Wesley Tucker from Bolivar, is to watch market trends and respond accordingly. Tucker offered several strategies for predicting what the market will do and how to respond.

Tucker explained how to make money on the futures market by selling a commodity in advance at a set price at a higher seasonal price, then buying your product back at a price less than the commitment when the time comes to sell. The approach works fairly well on grain sales, sold in the spring at a high price and bought back at lower harvest prices.

Livestock futures are much harder to predict, even when looking at trends over 10 years. After showing several charts where the seller would have lost money, Tucker commented, "I'd say it's not worth messing with for the average cattle producer." These days Tucker said the cattle market was driven more by the state of the Wall Street stock market than the cattle

Livestock Risk Protection Insurance has been out since 2003, but few cattlemen use it, Tucker said. Price insurance is also available, based on the feeder cattle price on the Chicago stock exchange. Price insurance only covers a five-to-seven-day average, not the actual price the cattleman can get.

Tucker encouraged producers to watch seasonal trends and sell against the dominant pattern to make money. Most cattlemen sell cows when the calves are being weaned and when the banker needs to be paid. Steer prices are low in September and October when many cattlemen sell, but higher in March and April. Grain markets follow similar patterns that can be spotted by watching trends, Tucker said.

Using more complicated formulas, a standardized performance analysis had to take the cost of feed, operating costs, calf weight and herd size all into account to get the big picture.

"You have [only] a 53 percent chance of predicting a gain if profit is strictly based on the level of feed cost (the biggest expense variable)," Tucker said.

The Barry County Soils and Crops Conference was sponsored by the Cassville Area Chamber of Commerce, Commerce Bank, Freedom Bank, First State Bank, MFA Agri Services in Cassville, the Purdy Farm Center, Security Bank, Community National Bank, Barry County Farmers Cooperative, U.S. Bank and Francis Washick with Mycogen Seeds. James Taylor was chairman of this year's planned committee.

SPECIALIST TALKS ABOUT HERD SIZES

By Murray Bishoff

Do area cattlemen have too many animals in their herds?

That question came up at the Barry County Soils and Crops Conference when University of Missouri Extension agriculture business specialist Wesley Tucker discussed weighing expenses. He said cattlemen have to take into account the amount of forage they have for the number of cattle in their herd, and how the supply of what they grow varies in a dry year.

One cattleman confessed he was confused between the advice Extension livestock specialist Eldon Cole gives regularly on how it is cheaper to grow hay than to buy it, and Tucker's idea about keeping a flexible forage base.

Tucker then asked Cole how many cattlemen are overstocked. Cole said probably 90 percent of cattlemen have too many cattles, compared to their capacity to feed them.

Cole told The Times he understood the desire to keep a higher number of cattle for cash flow purposes, but that preparation comes with a price.



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