Farm And Ranch Country Posts

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farm size matter part 2I just continue the discussion on farm size from part 1. My first morning’s periscope created lots of comments and discussion so I did a follow up the next day. People are real sensitive when it comes to farm size. Big guys think you are trying to make them look bad. Smaller farmers think the big guys get unfair advantages from input suppliers. The downturn in the farm economy has probably hit the big farmers harder. I also discuss the role of off farm jobs in making a successful operation.

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I do a periscope #BreakfastWithBill every morning at 7:30 am central time on the periscope app. You can eitherDoes farm size matter? listen there or on twitter. This is part 1 of a 2 part series I did a couple mornings back to back on farm size.

I discuss size of farms. I talk about a farm outside of San Francisco that is a direct marketing operation and this farm said their “sweet spot” for profitability was 10,000 broilers sold a year, 5000 laying hens and 300 hogs marketed which were raised farrow to finish. This is a pasture operation also. Which is a pretty big size for a direct marketing operation.

I talk about how if you do not have many acres how you probably need to be in livestock and / or vegetables and in a direct marketing or community supported agriculture. I also mention you probably will not be able to drive big 4 wheel drive tractors over lots of acres and drink beer in your shop all winter.

Size is relative to the type of operation one has. 10,000 acres of small grains way out west is not the same as 10,000 broilers direct marketed to individuals in a large city.

Enjoy the discussion.

My marketing plan for 2016.

The following video is about ARC-County Farm Program.

There is a problem in how multi tract multiple county farms are paid.  They are paid at the rate of the county they are administered in, not the county the tract of ground is actually located in.  This could pay you more or pay you less depending on the individual county rate.

 

Farm Service Agency

Lets face it, the ARC program is complicated.  Payment rates and coverage levels are figured on each individual county.  FSA farms often times consist of multiple tracts and they are often in more than one county.  Here is where the problem is at.  If you pay at the rate the farm is administered in and not where each individual tract is located then payment rates are not correct.

USDA/FSA probably just needs to re-write the software but that costs money.  Money that has already been spent implementing the program and is there no more.  This falls directly on whoever was at the top making decisions about how these programs were administered.  This is why you need a couple farmers at least in the top decision making roles, especially ones who have had experience in farm programs, writing or helping to write the rules.

Farm Programs

My advice is whether or not you received a post card telling you about this and what your options are to go check it out at your county office if you have multiple county FSA farms.  This also stresses the need for Congress and the administration to make sure there is enough money to implement programs correctly.  So much money is wasted on “feel good” stuff and the actual commercial production agricultural programs suffer from lack of funds to administer them.

I talk about computer software upgrades.  Some of the problems are on how FSA keeps historical information at the tract level on each farm.  This information and the desire to keep it causes problems every time you try to improve both the hardware and software of USDA.  Maybe at some point in the future we need to just move forward “leave” the old data behind and start all over building a new data base.

FSA Deadline

For right now you can request a “special” waiver and this has to be SIGNED BY APRIL 15th and get 2014 and 2015 payments done at the correct levels.  For 2016 and beyond FSA is suggesting that you move the tracts in different counties back to their “home” county to avoid this in the future.  Well this is a step back in customer service.  This means for all the years FSA said you could move farms to fit your business patterns and where you did all your business to now go travel around for a couple days to visit multiple county offices.  Confuse your landlord into having to sign more papers not less.  Increasing the numbers of FSA farms and trips, and office visits, etc., etc., etc.  Just fix the software to pay at the tract level not the farm level.  Somebody was not thinking here.

I also suggest that the average Washington D.C. USDA government employee has no idea how commercial production agricultural actually operates.  Heck, most of the average politicians and political aids don’t really understand commercial production agriculture.  Some do, most of our rural Congressmen and aids do, but the vast majority from cities and suburbs don’t.

Direct Payments

My advice to agricultural producer groups in the future is make it real simple because we all are real stupid at times.  And, complication costs money to implement.  I was a big fan of direct payments.  I discuss that at some length.  Yes, we were doing some things to qualify for those payments.  We were complying with the environmental rules of wetlands and conservation compliance and we were required to report acres to qualify for the payments.  They were easy to make, easy to administer and understandable.  Maybe that is why they were a target.  Remember money to administer a new farm program comes from the pool of money available to farmers and ranchers for the programs.  Less is more.

I also discuss what I think is the coming battle for continuation of farm programs, especially crop insurance.

Maybe I should just do a full blown podcast on this.  Thanks for listening, all for now.

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strong dollarI started out doing a podcast on how Africa is running out of US dollars and how that is bad for commodity prices, agricultural food exports, and those countries themselves.  Getting tied up with the “#breakfastwithbill”  in the mornings has me behind on podcasts.  In the time since I first started this podcast a whole lot of other economic news has come out.  Most of it BAD.

So in no particular order I will go through some of these.  They all will affect the profitability of agriculture.  Big time problems on the horizon.  Will we muddle through or run aground or sink the ship.

Low commodities and wage growth will lead to a “low growth” new cycle whenever we recover from the bust we are going through.  How big or small a bust?  Don’t know yet but we are in one.  Just ask a grain farmer, oil producer, or transportation company.

Risk Off investing, Gold, silver, YEN, US dollar, US Treasuries

European Banks in trouble?  Italian banks, Deutsche Bank.

Dividend Cuts, we just surpassed the 2008 total in companies cutting dividends.

Currency Wars, everybody wants a lower currency so they can export deflation to your competitors and neighbors and also maybe your neighbors.

Gold sales, 2 countries are selling gold reserves, are there more to follow?

World shortage of U S Dollars.

S&P Financial Index worst performing sector of the market, down 20% since July 2015 highs, banks in trouble?

Lots to talk about.  US farmers are losing lots of money because we have the highest priced currency in the world.  Which means we need lower prices, much lower prices to be competitive with our competitors around the world.  Japan went to negative interest rates.

Farmers in Brazil and Canada are getting prices in their currencies that are higher than this time last year.

 

Africa is running out of U.S. dollars.  Countries dependent on commodities, especially oil are short of US dollars.  This was explained to me this spring, but I did not pick up on it until now.  This is leading to a stronger dollar and lower commodity prices in dollars.  This hurts American agriculture.  Part of the problem is not just price, as America becomes more energy independent we just don’t need to import as much oil and the dollars are not flowing out to other countries.

Nigeria in the worst shape, 90% foreign currency comes from oil.  Really wrecking economies.  Angola not far behind.

Currency controls to keep currencies from crashing, but that then puts another whole wrinkle on things.  Black market currency rates, government controls who gets dollars and who doesn’t.  Of course alternative is:

immediate devaluation

hyper inflation

social unrest

change in leadership

Of course Argentina and Swiss National Bank could not defend their currencies.

Exchange rate set by the government and not the market is not sustainable in the long run.

Chaos, hyper inflation, and social unrest is coming if not fixed soon.

Fed raising rates, dollar gets stronger, commodity bust continues, global commodity collapse, global deflationary forces, strong dollar = rest of the world going down.  Strong dollar causing world chaos.

Western world doing this to punish Putin???  Keep Wall Street in the money???  Just this economic ignorant???

US agriculture depends on exports for profits.  Strong dollar killing ag.  World deflation in US dollars, but not in local currencies.  Gold price is up when priced in Canadian dollars.  New Zealand, Australia,  South African currencies all getting devalued but giving them an export advantage against US goods.

Africa does not have enough money to buy food.  Angola, South Africa, Ethiopia, and other places are facing a food crisis.  No money to buy food with.  We need to get out in front of this or Africa is going to get ugly.  South Africa – 29 million people, Ethiopia – 10 million.

Africa selling gold??? Libya did to buy weapons.  Others also?  Commodity route continues.