Daily Ag News Summary 05/17/2017

House Ag Committee Meets Secretary Perdue

Members of the House Agriculture Committee met U.S. Secretary of Agriculture (USDA) Sonny Perdue at a hearing on Wednesday morning. The hearing was the first opportunity for Perdue to speak on the record with farm-state representatives.

Chairman Mike Conaway (TX-R) spoke about his frustration with Senators Debbie Stabenow (MI-D) and Patrick Leahy (VT-D) who “recklessly” wrecked the farm bill safety net for cotton and dairy producers in the 2014 Farm Bill. “America’s farmers and ranchers have seen their net incomes cut in half in just four years. Times are very, very difficult on the farm and ranch these days. And, if those who are paid to make forecasts about these things are correct, economic times in farm and ranch country will get worse before they get better” he told the Secretary.

“It is my experience as a CPA in farm and ranch country that a bad farm economy can adversely impact the entire economy, while a good farm economy can boost the national economy and job creation” Conaway added. “It is also my experience that strong U.S. farm policy not only sees our farmers and ranchers through hard times, but it mitigates the adverse impacts on the national economy and jobs.”

The Chairman spoke about how the (2014) Farm Bill safety is largely working as intended, with two exceptions: cotton and dairy. “America’s cotton farmers — and the entire industry — have rallied around a way to mend their safety net to make it more effective in mitigating the effects of China’s and India’s predatory trading practices” he said. Then challenging Mr. Perdue “to effectuate this policy and I would urge you with the utmost urgency to exercise your authority” adding that “you have the legal authority. As you know, Congress would have done this a couple of weeks ago but for the recklessness of a couple of folks in the other chamber.”

In closing, Conaway said “the dairy industry continues working on a unified approach to mending its safety net, I believe that there is ample authority for you to help when needed just as your predecessor did. If we can thread these two needles, we will be in a much better position to deliver on the president’s promise of a strong Farm Bill passed on time.”

Ranking member of the Committee Collin Peterson (MN-D) said he supported the Chairman in urging USDA to fix the cotton program.

Fed Cattle Returns Much Brighter in 2017

With the exception of May 2016, monthly fed cattle net returns were negative from December 2014 through November 2016 but prospects for 2017 appear much brighter according to Dr. Michael Langemeier with Purdue’s Center for Commercial Agriculture. In his latest FarmDoc Daily article, he discusses prospects for feeding cost of gain, the feeder to fed cattle price ratio, and cattle finishing net returns.

Current breakeven and fed cattle price projections create an environment that is optimistic through August and cautiously optimistic through the rest of 2017. After a disastrous 2015 and 2016.

Several data sources were used to compute monthly net returns. Average daily gain, feed conversion, days on feed, in weight, out weight, and feeding cost of gain were obtained from monthly issues of the Focus on Feedlots newsletter. Futures prices for corn and seasonal feed conversion rates were used to project feeding cost of gain. Net returns were computed using feeding cost of gain from monthly issues of the Focus on Feedlots newsletter, feeder cattle prices and fed cattle prices reported by the Livestock Marketing Information Center (LMIC), and interest rates from the Federal Reserve Bank of Kansas City.

Given the importance of feeding cost of gain and the feeder to fed price ratio to cattle finishing net returns, Langemeier explains the cost of gain averaged $85.16 per cwt. in 2015 and $77.20 per cwt. in 2016. In the first three months of 2017, feeding cost of gain ranged from $71.83 to $73.05 per cwt. Given current corn and alfalfa price projections, feeding cost of gain is expected to range from $70 to $75 for the rest of 2017.

Fed cattle prices improved from approximately $120 per cwt. in January 2017 to approximately $130 per cwt. in April 2017. At the same time, feeder cattle prices for January through April closeouts fell from $145 per cwt. in January to $130 in April. The price changes noted above resulted in a sharp decline in the feeder to fed cattle price ratio and a dramatic improvement in net return prospects.

Monthly steer finishing net returns from January 2007 to March 2017 were computed using closeout months rather than placement months. Average losses in 2016 were $126 per head, and ranged from a loss $362 per head in January to a net return of $57 per head in May. Net return per head for January, February, and March of 2017 were approximately $56, $149, and $308, respectively. The net return in March represents the first time since November 2003 that monthly net return has been above $300 per head.

Breakeven prices for April through August are expected to range from $106 to $110 per cwt. For the last four months of the year, breakeven prices are expected to range from $113 to $116 per cwt. Current fed cattle price projections suggest that the breakeven prices indicated above could result in strong net returns through August, with net returns being particularly strong through June (i.e., exceeding $150 per head). At this time, at least modest net returns are expected for the last four months of 2017. However, if feeder cattle prices continue to strengthen, net return prospects for the last quarter of 2017 will weaken.

Read the entire report on the FarmDoc Daily website: http://farmdocdaily.illinois.edu/2017/05/cattle-finishing-net-returns-in-2017-different.html

“Oil Patch” Agriculture in Fair Shape, Says Fed

Bankers responding to the first-quarter survey noted moisture conditions were generally good but gave mixed reports on rainfall, with some regions receiving beneficial rains and others still in need of rain entering the spring. This is according to the Dallas Fed’s quarterly Agricultural – a timely assessment of agricultural credit conditions in the Eleventh Federal Reserve District – which includes Texas, northern Louisiana and southern New Mexico, a district sometimes referred to as the Oil Patch.

There were scattered reports of producers paying out their lines of credit, but in general, respondents noted a need for higher crop and cattle prices. Livestock pastures were mostly in good condition, but predators were seen as an increasing issue for ranchers. In addition, demand for agricultural loans overall decreased for a sixth consecutive quarter. Loan renewals and extensions continued to increase, albeit at a slower pace, as loan repayment rates continued to decline. The volume of both non-real-estate and real estate farm loans was lower than a year ago. Operating loan volume, which had been increasing, was flat year over year this quarter; volumes fell in all other loan categories.

Real district ranchland and irrigated cropland values increased this quarter, while real dryland values decreased. According to bankers who responded in both this quarter and first quarter 2016, nominal district land values all rose year over year, with irrigated cropland showing the strongest increase.

The anticipated trend in farmland values index remained negative for a seventh consecutive quarter, suggesting respondents expect farmland values to trend down in the coming months. The credit standards index indicated continued tightening of standards.

Senators Challenge Administration to Engage Canada on Dairy

The Senate Agriculture Committee Chairman Pat Roberts (KS-R) and Ranking Member Debbie Stabenow (MI-D) sent a letter this week to Agriculture Secretary Sonny Perdue and U.S. Trade Representative (USTR) Robert Lighthizer, requesting continued engagement with the Canadian government regarding Canada’s implementation of dairy pricing changes as part of a new Canadian National Ingredients Strategy.

“Since April of 2016, Canadian provinces have been modifying their pricing schemes for certain dairy products,” the Senators wrote. “Currently, Canadian provinces are implementing pricing changes as part of a new Canadian National Ingredients Strategy. These changes have already caused the immediate displacement of U.S. exports of ultra-filtered milk to Canada. This scheme has resulted in a loss of sales for U.S. dairy companies and farmers. The potential for further and greater injury to U.S. producers will only continue to grow if this scheme remains in place.”

“We ask that you continue to engage with the Canadian government to pursue and provide detailed information on the new pricing program. In order for the trade relationship between the U.S. and Canada to function and best serve producers on both sides of the border, the U.S. must insist that Canada be transparent and open about the written policies and implementation of these programs.”

“Additionally, we ask that you evaluate all tools available to help mitigate any damaging effects that directly result from this program and allow U.S. dairy producers to compete with Canada on a level playing field. As the U.S. considers a renegotiation of NAFTA it is imperative that America’s hard working farmers and ranchers remain a top priority.”