Ag Management Group

03/21/2023

03/03/2023

The USDA kicked off this production year with their Ag Outlook forum on February 23-24. Here are a few observations according to a USDA climatologist and economist:

🌱 Drought continues to be a significant factor for approximately 65% of the United States and is expected to continue during the 2023 production year.

🌱 Nationally, farm income reached record levels in 2022, although the South Plains and Texas cotton region experienced one of the worst production seasons in years.

🌱 Farm income is expected to decrease in 2023 due to lower expected yields and decreasing commodity prices.

🌱 The outlook for cotton is mixed. Positively, worldwide inventory is expected to decrease while production is expected to increase over 2022. Exports are expected to increase and demand overall is expected to increase. Conversely, interest rates will most likely increase again, the U.S. dollar will remain strong, and inflation will continue to influence overall consumer demand.

See the articles linked below for in-depth coverage.

https://www.agweb.com/news/policy/politics/top-10-charts-kickoff-usdas-ag-outlook-forum

https://www.agfax.com/2023/02/24/the-2023-outlook-for-u-s-agriculture-from-usdas-chief-economist/

https://www.agfax.com/2023/02/27/thompson-on-cotton-watching-paint-dry/

Call Bart or Tracy for help with any of your financial needs, including cash flow projections, loan renewal preparation, or day-to-day financial questions.

02/15/2023

The economics of agriculture have always been difficult.

Margins are always tight, weather can play the spoiler or the savior, and domestic and international politics seem to play an ever-changing role in the financial success of any agricultural enterprise.

As any farmer or rancher will attest, financial success is never easy. The outlook for 2023 follows this historic reality. See the article linked below from Agweb for a review of the headwinds and opportunities for 2023.

https://www.agweb.com/markets/world-markets/4-macro-factors-impacting-agricultural-economy

If your operation needs more financial expertise to prepare for the continuing economic pressures, call Bart or Tracy at Ag Financial Solutions or visit us at https://agmanagement.net for more information!

01/26/2023

The USDA recently released the 2023 Production, Supply, and Distribution report for cotton. You can access the report with the links below.

One key part of the report is that global demand is forecast to decrease during 2023. This will most likely prevent gains in prices. This expectation, along with increasing production costs, will continue to stress cash flow and profit for cotton farmers.

Here are three helpful suggestions in response to this forecast:

🚜 Continue to carefully manage and minimize input costs where possible.

🚜 Manage debt levels! Higher interest costs combined with lower cash flow is a recipe for financial stress.

🚜 Call Bart Schilling or Tracy Mack with Ag Financial Solutions for help with managing your farm finances!

https://apps.fas.usda.gov/psdonline/app/index.html #/app/downloads

https://www.agweb.com/news/crops/cotton/cotton-tug-war-production-and-prices-battle-it-out-2023

01/09/2023

As we start a new year and a new production season there are several different headwinds that could affect your operation during 2023!

🌱 The South Plains of Texas have continued to be dry and that seems to be the current forecast. The lack of moisture in 2022 had a devastating effect and now is threatening the 2023 crop. Spring moisture will be critical as you prepare for planting.

🌱Input costs will most likely continue to increase. Seed, chemicals, and fertilizer are all expected to reach higher prices. Fortunately, fuel prices have moderated a bit, but that can change quickly as political and international events change.

🌱 As interest rates continue to rise this will have the direct effect of increasing your borrowing costs. Maybe more importantly, as interest rates rise, this will put upward pressure on the value of the U.S. dollar. Historically, agriculture commodity prices suffer when the dollar is strengthening, putting downward pressure on your selling price.

🌱 Finally, Congress will continue discussions about the farm bill. There will be pressure to reduce government spending on agricultural programs.

How should you respond to and plan for these risks?
Spend less, borrow less, and plan for an average yield.

Let Ag Financial Solutions help you plan your financial future! Call Tracy or Bart today!

We are a team of Ag and Finance professionals with diverse knowledge and expertise in both crop and animal production agriculture. We provide solutions to all agriculture challenges while working with you to drive improvements in your operation.

07/02/2022

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

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

06/10/2022

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!

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

05/20/2022

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!

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

05/14/2022

So far, this year has held a cascade of events that are negatively affecting agriculture’s production outlook. The divisive political environment, the pandemic, and international politics are creating a domino effect that is adversely seeping into all areas. Rising input costs, input shortages, and record inflationary pressures combined with the lack of rain are all too familiar in the agriculture industry. The silver lining is the above-average crop prices, which are also a consequence of these current events.

Here are a few reminders as you stare down the barrel of the 2022 crop season:

🌱 As you deal with limited moisture and the possibility of severe spring weather, make sure your expenses stay in line with your insurance coverage

🌱 Do everything in your power to manage input costs

🌱 Do not let the high crop prices seduce you into spending too much too early on the 2022 crop

🌱 Manage risks that are in your control and understand the risks that are out of your control

To learn more about how you can help your business in these difficult times, please call Bart or Tracy today.

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

05/05/2022

As planting season approaches, we are mindful of the unfavorable drought conditions and prayerful that rain will soon quench our dry land.

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

04/29/2022

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!

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