Featured Agriculture News

06/23/2017 - Dicamba Drama

Arkansas sidestepped banning dicamba for the rest of the growing season Tuesday, but a voting error pulls the question back up again on Friday.

06/23/2017 - Ag Lenders Take Caution

There are pockets of more severe financial strain, such as dryland wheat country in the western Plains and in the Southeast U.S., although lenders at last week's the Kansas City Federal Reserve Bank's annual Ag Symposium did not report an excessive amount of troubled loans.

06/23/2017 - Trump Salutes Ag

President Donald Trump used his trip to Iowa on Wednesday to hit on many of the issues important to farmers and ranchers.

06/22/2017 - Firm Fined for Cattle Trades

The CFTC settled charges against McVean Trading and Investments LLC of Memphis; its chairman and CEO, Charles Dow McVean Sr.; and firm president, Michael Wharton, as well as a consultant for the investment firm, Samuel Gilmore. Collectively, the company and employees agreed to pay $5 million in fines.

06/22/2017 - Pest Roundup

Growers are old hands at spotting soybean aphids and Japanese beetles, but bacterial leaf streak of corn is likely to be less familiar to most this year.

06/22/2017 - NFU to USDA: Open up CRP

The National Farmers Union wants USDA to open up emergency haying and grazing on CRP acres in Minnesota, Montana, North Dakota and South Dakota.

06/21/2017 - Todd's Take

An admitted skeptic tips his hat to Leonardo of Pisa, a.k.a. Fibonacci.

06/21/2017 - Machinery Chatter

The Progressive Farmer's Jim Patrico, who traveled to Cuba last fall, looks at what the Trump administration is saying about U.S. and Cuba and how this might affect agriculture in the two countries.

06/21/2017 - By the Numbers

When most farmers look at their financial ratios, they analyze either their trends over time or relative to benchmarks. But it's also helpful to dig into what is driving their bottom line and to do "what if" analysis to see the impact different changes would have.
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06/23/2017 Dicamba Drama

By Pam Smith
DTN Progressive Farmer Crops Technology Editor

DECATUR, Ill. (DTN) -- Dicamba herbicide could have its own mini-series in the state of Arkansas. The question of whether to ban in-crop use of dicamba for the remainder of the growing season will be back on the table in the state on June 23 because of a voting discrepancy.

Tuesday, June 20, it initially appeared Arkansas State Plant Board (ASPB) did not have enough votes to carry the measure, despite eight members voting for the dicamba ban and six against the proposal. It was assumed nine yes votes were needed for passage since there are 16 voting board members on the 18-member board.

As an alternative measure, the group then decided to recommend tacking additional application restrictions on Engenia, the only dicamba product that can be legally sprayed over the top of soybeans and cotton in Arkansas. The ASPB voted 11 to 3 to require applicators to use hooded broadcast sprayers when spraying Engenia and increased the downwind buffer to 1 mile (originally 0.25 mile).

However, soon after the special session adjourned, the vote on the proposed ban was called into question when it was realized that only 15 voting board members had participated in the meeting either in person or by phone and that the original 8-to-6 vote should have carried the measure. Adriane Barnes, communications director for the Arkansas Agriculture Department, told DTN via email it was then decided that the board would re-vote to consider a ban of in-crop use of dicamba due to this "procedural error."

The follow-up meeting is scheduled for Friday in Little Rock. Any proposal that might be passed would require the signature of Arkansas Governor Asa Hutchinson.

EYES ON ARKANSAS

While the actions would apply to Arkansas farmers only, the drama is being closely followed on many fronts. Dicamba drift complaints in 2015 and 2016 were often blamed on the fact farmers were able to plant dicamba-tolerant varieties, but had no low-volatility dicamba herbicide available to use in the crop.

Arkansas took a harsher line than other states when the Environmental Protection Agency (EPA) finally approved new herbicide formulations for the 2017 season to be used with what is known as the Xtend cropping system. The state cut off the use of DGA-based dicamba herbicides (XtendiMax and FeXapan) after April 15 until more studies could be conducted. Engenia was sanctioned because it had weathered university testing. Arkansas also required mandatory applicator training, extended Engenia buffer zones around the entire field at application and established a 0.25 mile downwind buffer to sensitive crops.

"The thought during development of these restrictions was an attempt to minimize the amount of injury from off-target movement this season," said Tom Barber, University of Arkansas weed scientist. "Unfortunately, that has not been the case."

At end of day June 20, the Arkansas Agriculture Department (AAD) had received 141 dicamba misuse complaints. Arkansas farmers told DTN herbicide spraying is likely to continue for the next week or so and that the crop is late in some regions after being replanted due to flooded conditions.

It generally takes one to three weeks for the cupped soybean leaves characteristic of dicamba injury to appear. How much yield loss is associated with injury depends on the dose the plant receives. In the case of soybeans, plants injured in the reproductive stage have larger yield losses, but may have less visual injury. Tomatoes, peanuts, sweet potatoes and many other plants are also highly susceptible to the herbicide.

Reed Storey, who farms near Marvell, Arkansas, traveled to Little Rock to testify in support of the ban on Tuesday. He had 600 acres of soybeans damaged by dicamba drift last year that amounted to an estimated $70,000 in unrecoverable losses.

Storey said he planted some Xtend soybean varieties this year as a defense mechanism in fields where he knew neighbors would be spraying dicamba nearby. "I don't intend to spray dicamba on my own fields, but I paid for the protection against drift," he said. While those fields got by unscathed, he has already found dicamba-puckered-up beans in some of his other fields that did not contain the trait protection.

He said he understands why farmers that chose to pay for and plant varieties containing the Xtend technology would prefer not to be told they can no longer use the tool. Without dicamba, they are limited to glyphosate and PPO-inhibitor post-emergence options and tough-to-control weeds like Palmer amaranth have shown an increasing ability to resist those types of herbicides. "However, if we all start planting Xtend, that technology will likely become resistant too," he said. "And I really don't want to be forced to plant a technology to protect myself."

The ASPB allowed eight testimonies -- four on each side of the proposal for a temporary ban, according to Terry Walker, ASPB director. Additional written comments were received from farmers and citizens and presented to board members regarding the emergency proposal for 120-day halt to dicamba spraying.

OTHER STATE REPORTS

On June 19, the state of Missouri was reporting 52 pesticide misuse complaints statewide for the year. As of June 20, the Mississippi Department of Agriculture and Commerce told DTN it was investigating 28 complaints of suspected off-target movement of dicamba, compared to 13 cases in 2016.

For Arkansas dicamba updates go to: http://www.aad.arkansas.gov/…

Pamela Smith can be reached at Pamela.smith@dtn.com

Follow her on Twitter @PamSmithDTN

(AG/)

06/23/2017 Ag Lenders Take Caution

By Elizabeth Williams
DTN Special Correspondent

KANSAS CITY (DTN) -- The winter/spring of 2017 did not see the financial shake-out many financial experts expected after three consecutive years of declining net farm income. In fact, lenders and other ag industry representatives at the Kansas City Federal Reserve Bank's annual Ag Symposium last week were not wringing their hands -- yet.

There are pockets of more severe financial strain, such as dryland wheat country in the western Plains and in the Southeast U.S., though lenders at the symposium did not report an excessive amount of troubled loans.

"We've had to rely on equipment equity and land equity as farmers re-balanced their loan portfolios [this winter]," reported Rob Keil, senior vice president and chief credit officer with Dacotah Bank in Aberdeen, South Dakota. "Working capital has disappeared," said Keil, "as we are in our fourth year of [cash flow] bleeding."

LAND VALUES SUPPORT LOANS

Land values are staying relatively stable -- on highly productive ground. For example, central Iowa land sales in May brought $10,000 to $10,500 per acre on highly productive (CSR2 above 90) 80-acre parcels, according to Peoples Company, based in Clive, Iowa. This, despite farm incomes that are about half of their peak of 2013, said Nate Kauffman, assistant vice president and Omaha Branch Executive, Federal Reserve Bank of Kansas City.

Kauffman reported, "Despite increases in financing needs by farmers and ranchers, we're not seeing delinquencies rising much" in the 10th Federal Reserve Bank district. That district covers Nebraska, Kansas, Oklahoma, Wyoming, Colorado and parts of Missouri and New Mexico.

"Soybeans paid the bills last year," noted White Cloud, Kansas, farmer Ken McCauley, president of the Kansas Corn Growers. "As for corn, I'm still trying to sell last year's crop."

Lower input expenses helped, McCauley said. "Fertilizer was the big one; seed costs were stable for a change, and cash rents declined some. Our cash input costs this year went down $50 an acre compared to last year. That really helped, especially with our banker," McCauley added.

McCauley reported a northeast Kansas row-crop farm sale of $7,600 per acre, down from peak levels of $10,000 per acre, which is relatively strong for his area.

Jim Farrell, president of Farmers National Company based in Omaha, Nebraska, agreed that row-crop farmers dodged a bullet last year. "Soybeans made money last year, and a lot of 2016 grain still has to be sold. We didn't see very many financial issues crop up over the winter. But there is definitely some troubled pockets."

Farmers National Company provides farm/ranch management and real estate services in 28 states.

"Dryland wheat areas did not have a good crop, subsequently land values have deteriorated," Farrell said. "It is hard to sell dryland wheat ground right now in many areas. It could be a stressful fall."

In cattle country, the outlook is more upbeat. Cattle prices have recovered. In fact, "the cow/calf, stockers and feeders are all making money now. That doesn't happen very often," explained Todd Welch with the Bank of Kremlin in Kremlin, Oklahoma.

That scenario could change later in the year if feedlot placements continue to increase, said John Harrington, DTN livestock analyst.

"My guess is relatively aggressive placement activity will continue through the balance of the summer, setting the stage for much larger beef supplies in the second half of 2017," Harrington said. Solid evidence of ongoing expansion in the pork and poultry sectors means that total meat supplies in 2018 and 2019 will make sustained cattle profits very challenging, he said, without steady growth in domestic and foreign beef demand.

FINANCE MAKEUP CHANGING

Keil, with Dacotah Bank, said 40% of its loan portfolio in North Dakota, South Dakota and western Minnesota is in agricultural loans, making it the 16th largest U.S. ag lender. The makeup of those loans are changing along with the rural economic landscape.

"Ten years ago, a good portion of our operating lines were half a million dollars. Now, that's risen to over $1 million, and some are in the $4 million to $6 million range," said Keil.

The bank is now offering more "inventory notes," versus traditional cash shortfall notes, as producers take longer to market grain.

On the downside, Keil is seeing more cash-flow leverage problems. "Operators who mostly rent their land are more challenged and have fewer options to weather the storm," he said. Keil has also seen some large operations dramatically drop in net worth in the past four years. One 15,000-acre operation saw its net worth fall $4.2 million, a 59% drop in net worth, since 2013; another 8,000-acre operation lost $2.5 million, or 47% of net worth, in the past two years, Keil noted.

The Farm Service Agency guaranteed loan programs have "absolutely been a saving grace for rural banks and young farmers," said Keil, allowing banks to stay with their younger borrowers who don't have the capital to service loans. Farmer Mac has also helped agricultural lenders reduce risk in these tough times. "We're watching these loans carefully," explained Keil. He adds that loan officers are working closely with farm borrowers to cut expenses to the bone and to keep track of where every penny is going.

But bankers are nervous. "At a recent credit conference I attended, the general consensus was a normal crop would produce a stressful year," said Farrell with Farmers National Company. That makes it another year of touch-and-go for ag lenders and their borrowers.

Elizabeth Williams can be reached at elizabeth.williams@dtn.com

(GH/BAS)

06/23/2017 Trump Salutes Ag

By Todd Neeley
DTN Staff Reporter

CEDAR RAPIDS, Iowa (DTN) -- President Donald Trump told Iowa farmers and ranchers Wednesday evening that he will continue to stand with them on a number of issues.

During a campaign-style rally, Trump said he will defend attacks on ethanol, work to eliminate the estate tax, continue to cut back regulations that hurt farmers and ranchers, all while lauding now-former Iowa Gov. Terry Branstad as the next U.S. ambassador to China.

Ahead of the rally that was filled to the rafters, Trump made a stop at nearby Kirkwood Community College to recognize the school's precision-agriculture program. There, Trump was joined by Branstad and new Iowa Gov. Kim Reynolds.

In the nation's largest ethanol-producing state, the president gave a nod to an industry that wants expanded markets.

"Your ethanol industry has been under attack," he said during the rally, although he stopped short of providing details.

The U.S. Environmental Protection Agency may soon release the latest renewable volume obligations in the Renewable Fuel Standard, the first such release by the Trump administration.

When the president nominated Scott Pruitt to head the EPA, there were concerns in some agriculture circles that the pro-oil Pruitt might dismantle the RFS.

Trump seemed to lay that notion to rest.

Maynard, Iowa, corn and soybean farmer and Iowa Corn Growers Vice President Mark Recker attended the Trump event at Kirkwood. Recker said it was good to see the president visit Iowa and show support for agriculture.

Now, he said, it's time for action.

"We want to see action steps, moving away from campaign rhetoric," Recker said. "Let's get to selling E15 year-round. Let's take care of trade agreements. Let's start talking about locks and dams. If we're going to grow larger crops, we need infrastructure. I wish he would have mentioned locks and dams."

Although the president "pushed all the right buttons" when it comes to talking agriculture, Recker said there still is concern on the ethanol front about EPA's Pruitt who was a noted critic of the industry.

"We're still on the defensive a bit," Recker said. "I hope we can build and get policies in place. I take him for his word that he wants to build rural America. The fact that he came to Iowa and talked agriculture issues is good."

The president received uproarious applause when he talked about his decision to eliminate the waters of the United States, or WOTUS, rule. The EPA has started a process that could lead to a rewrite of the rule.

Agriculture groups were against the rule because it expanded federal jurisdiction on private land. The rule was placed on hold nationally as part of a number lawsuits filed.

In offering red meat to his supporters, the president essentially mocked the WOTUS rule.

"If you have a puddle in the middle of a field, it's considered a lake," Trump said. "Can't touch it. If you touch it, bad, bad things happen to your family. We got rid of that one too."

Trump said his administration is working to reform the EPA. Another media outlet this week reported the agency is set to offer a buyout for some 1,200 EPA employees as part of a downsizing of the agency.

"No longer will EPA be telling you how to run your life or your business," he said.

When it comes to Branstad, the president said he was impressed by the nation's longest-serving governor's relationship with the Chinese.

"He has been making good deals for Iowa, and he will make good deals for America," Trump said.

Before Trump won the presidency, he said he had a conversation with Branstad about China.

"He said, 'Donald, can you do me a favor and don't say anything bad about China?'" Trump said.

"I remember a year ago I called him up and said, 'How would you like to be the ambassador to China? He wants to do what's right for the country. He said, 'When my president calls me to help with our great country, I do it.'"

For years agriculture interests have called for the elimination of the estate tax. Trump said the tax is hurting family farms.

"We're working hard to get rid of the death tax so you can pass along your farms to your children and your grandchildren," he said.

Farms make up about 2.6% of all assets declared by estates that paid the tax in 2015, the last year of available data. Real-estate and partnerships assets made up about 9% of all assets claimed in estates that paid the tax. The bulk of assets involved in estate taxes are stocks or bonds held by the deceased.

On trade, Trump reiterated that he's willing to re-examine trade deals made by the previous administration. He pointed to backing out of the Trans-Pacific Partnership, renegotiating the North American Free Trade Agreement, reversing the previous administration's policy on Cuba and backing out of the Paris Accord, as successes.

"It (Paris Accord) would have cost millions of lost jobs, billions of lost dollars and put us at a big disadvantage," Trump said.

While declaring Democrats as "obstructionists," Trump used the occasion to press Republicans and Democrats alike to work together to pass health care reform, tax cuts and infrastructure legislation.

"We will rebuild rural America," he said. "In this great national rebuilding, we will buy American and hire American."

Following the president's stop at Kirkwood Community College, Iowa Gov. Kim Reynolds said in a statement Wednesday the president's visit was positive for agriculture. Reynolds highlighted the president's comments on rural broadband.

"He understands the important role technology plays in that mission and is committed to helping innovation thrive," Reynolds said. "On our visit to Kirkwood Community College, President Trump and I saw the high-tech equipment used in the school's precision agriculture program. Precision agriculture optimizes yields while conserving resources. Each advance made in technology is another step in the right direction for both farmers and the environment."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(CC/AG)

06/22/2017 Firm Fined for Cattle Trades

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- A trading and investment firm in Memphis, Tennessee, and two of the company's senior leaders have been fined more than $5 million by the Commodity Futures Trading Commission for intentionally trying to avoid contract limits on live cattle contracts in 2012 and 2013.

The CFTC entered into an order and settled charges against McVean Trading & Investments LLC of Memphis; its chairman and CEO, Charles Dow McVean Sr.; and firm president, Michael Wharton, as well as a consultant for the investment firm, Samuel Gilmore.

McVean Trading & Investments issued a statement that the investment firm settled with the CFTC without admitting or denying the commission's findings, "avoiding the need for ongoing discussions and litigation that could have created significant distraction from McVean's primary goal of serving its clients."

McVean also noted that the CFTC order did not allege that the company or executives acted contrary to the interest of McVean's clients or affect the trading company's clients or capital.

The CFTC claimed McVean and its executives used feedyards to try to bypass limits on spot month contracts. They reached a point where McVean executives held as much as 43% of the open interest in the February 2013 live cattle contract. It created a false appearance that there was wider market interest and participation in the contract than actually existed.

According to the CFTC, the executives at McVean sought to increase the company's in-house contracts for live cattle futures at or near the delivery month for the contracts above the legal cap on contracts set by the Chicago Mercantile Exchange.

Charles McVean and Wharton worked with Gilmore to sign agreements with four unnamed cattle feedyards "as straw purchasers" to buy hundreds of long live cattle futures contracts. The four feeders were paid a fee of $100 for every live cattle contract they traded at McVean Trading's request. Because the feedyards' transactions were controlled by the trading firm's executives, the company had effectively concealed its positions in the market and made it appear there was more open interest and participation in the spot month of the contract than actually existed.

McVean executives increased the company's total positions in the market through the feedyards in the December 2012 live cattle contract and the February 2013 contract. In each contract, McVean Trading was "over limit" on contracts by several hundred contracts. In February 2013, for instance, Charles McVean and Wharton each held the limit of 300 contracts, but each also had feedyards with hundreds of contracts as well. The CFTC noted that Charles McVean "controlled as much as 23% of the open interest in the February 2013 live cattle futures contract during the delivery period, approximately four times what his control would have been absent the positions in feedyard accounts."

Further, Wharton controlled as much as 20% of the open interest in February, or roughly double what his control would have been without the feedyard accounts.

The CFTC charged that Charles McVean, Wharton and Gilmore violated the Commodity Exchange Act's prohibition against using a manipulative or deceptive device to unlawfully influence the cattle market. McVean Trading is liable for those violations.

Breaking down the fines in the settlement, Charles McVean agreed to pay $2 million and McVean Trading agreed to pay $1.5 million. Wharton agreed to pay $1 million and Gilmore agreed to pay $500,000.

In 1993, McVean Trading, Charles McVean and Wharton were also penalized by the CFTC for violating CME position limits on cattle futures contracts and agreed to stop. That case generated $2.22 million in combined fines.

The full CFTC order on the McVean case can be viewed here: http://www.cftc.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/CZ)

06/22/2017 Pest Roundup

By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- With most of the country's corn and soybeans in the ground, insects and diseases are ramping up in their usual summer fashion.

Some Midwest and Mid-South growers are facing rising Japanese beetle populations, and soybean aphid populations also are picking up in the northern Cornbelt. Meanwhile, a brand new corn disease first found in 2016 is already surfacing in Nebraska cornfields and more reports of it are sure to come.

Let's dig in!

BACTERIAL LEAF STREAK

Farmers should get used to hearing this disease's name.

Bacterial leaf streak of corn snuck into the country by unknown means and has been found in nine U.S. states since its official identification last year: Colorado, Illinois, Iowa, Kansas, Minnesota, Nebraska, South Dakota, Oklahoma and Texas. It infects field corn, seed corn, popcorn and sweet corn.

Last week, the disease was again confirmed on V4 field corn plants in Adams County in south-central Nebraska. Likely but unconfirmed reports also are coming in from southwestern Nebraska, Kansas and Colorado, University of Nebraska Extension plant pathologist Tamra Jackson-Ziems told DTN.

As a brand new disease, researchers have little information on yield loss or management, which is frustrating, Jackson-Ziems admitted. Like all bacterial diseases, fungicides won't affect bacterial leaf streak, and it clearly overwinters easily on infected corn residue. New research shows that some grassy plants might also help host it.

Most importantly, there were reports of significant yield loss in certain hybrids last year, and Jackson-Ziems urges growers to scout for it.

"It's important to know if it's out there and how bad it is," she explained. "And if you have yield loss at the end of the season, maybe this could help explain that."

"Look for narrow, brownish-yellow stripes between the veins on the lower leaves," she said. "They can be short or as long as the whole leaf."

These symptoms mimic gray leaf spot symptoms, but that fungal disease has never been found this early in Nebraska, Jackson-Ziems said. Also, the lesion edges of bacterial leaf streak tend to be wavier than those of gray leaf spot, she added.

For more information, see the most recent article on the disease from the University of Nebraska here: http://bit.ly/….

JAPANESE BEETLES

Japanese beetles are making a pest of themselves in states such as Missouri, Kentucky and Illinois. Although the beetles prefer ornamentals and orchard trees, they can make themselves at home in corn and soybean fields, said Burrus Seeds agronomist Stephanie Porter.

"They really, really like corn silks," she said. They will also feed on corn leaves and can defoliate a soybean plant with surprising speed.

For now, infestations mostly are below threshold levels where she's scouting in Illinois, Porter said. Populations are rising quickly in Missouri, and Porter has spotted fairly heavy infestations in western Illinois, as well.

Pollinating corn fields and soybean fields entering reproductive stages are most at risk from beetle feeding. Although many replanted fields are behind schedule, early planted corn and soybean fields are nearing these critical growth stages, Porter said.

Keep in mind that soybean plants can withstand a surprising amount of leaf feeding. Don't spray without consulting this chart from the University of Wisconsin: http://bit.ly/….

Spraying may be justified in corn fields if you find three or more beetles per corn ear, clipping silks to within 1/2 inch of the ear, when fields are less than halfway pollinated, that same guide states.

Windshield scouting won't cut it with this pest, especially given the low market value of corn and beans this year, Porter warned.

"The damage will often start on field edges," she explained. "That's why we tell people you have to walk into the field and look through it before deciding to spray, because things could look a lot worse on the field edge than throughout the entire field."

SOYBEAN APHIDS GEARING UP

Soybean fields may be behind schedule in parts of the Midwest, but the soybean aphid is right on time.

Reports of aphid sightings are starting to roll in from Minnesota, Wisconsin and Indiana, but most are still far from threshold levels.

Remember that spraying too early can not only waste money, but also kill off valuable beneficial insects and lead to rebound infestations later in the season.

"Populations can build quickly, and treatable infestations (i.e. over 250 aphids/plant) in June are not unheard of, although they are relatively rare," Purdue scientists Christian Krupke and John Obermeyer wrote in a pest alert. "Soybean aphids can be finicky about weather and conditions that include high heat and strong storms can prevent populations from building."

Minnesota growers should be especially alert, now that populations of pyrethroid-resistant aphids have been found in the state for the past two years. (See the DTN story here: http://bit.ly/…).

See scouting and threshold recommendations from the University of Minnesota here: http://bit.ly/… and read Krupke and Obermeyer's article here: http://bit.ly/….

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com.

Follow Emily Unglesbee on Twitter @Emily_Unglesbee.

(GH\SK)

06/22/2017 NFU to USDA: Open up CRP

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- The National Farmers Union and state affiliates in the Northern Plains are calling on Agriculture Secretary Sonny Perdue to allow emergency haying and grazing on Conservation Reserve Program acres.

In a letter to Perdue, National Farmers Union wrote that farmers and ranchers in the upper Great Plains are facing significant drought. Specifically, the state Farmers Union presidents of Minnesota, Montana, North Dakota and South Dakota joined NFU President Roger Johnson in signing the letter.

"Reports from our members have painted an alarming picture of deteriorating feed supply," the letter stated. "While recent rainfall has helped, it has done little to significantly alter conditions in the long term."

The threshold under the Drought Monitor Index has not been released for allowing haying and grazing on CRP, but the NFU letter stated that hay is in short supply right now. "Many producers are left with the difficult choice of downsizing their herd or driving hundreds of miles to purchase hay."

Typically, USDA approves emergency haying or grazing of CRP acres when an emergency authorization is approved by the national Farm Service Agency office or by the state FSA committee using the Drought Monitor.

NFU asked Perdue to approve the emergency grazing as soon as possible. Waiting until August would leave the grass with a lot less nutrient value, the group stated.

If approved, landowners who request emergency haying or grazing are assessed a 10% payment reduction.

Minnesota has 1.13 million acres in CRP, Montana has 1.36 million acres, North Dakota has 1.53 million acres and South Dakota has 978,000 acres.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG)

06/21/2017 Todd's Take

By Todd Hultman
DTN Analyst

For the first time in three years, DTN's national index of cash HRW wheat prices posted a new one-year high on June 16, a significant bullish change from the 13-year low that prices fell to last August.

HRW wheat prices are being helped by the lowest planting of all U.S. wheat acres in more than a century, but also by drought in the Dakotas. USDA posted its lowest crop rating for spring wheat since 1988 and, I suspect, the winter wheat harvest may be discovering problems from this year's numerous weather challenges. Threats included an early spring in February, snow in late April, and excessive rains in May. There are also losses to wheat stripe mosaic virus that the Wheat Quality Council's HRW Wheat tour cited in early May.

While wheat regions outside of North America appear to be doing well, this year's challenges in the U.S. have helped DTN's National HRW Wheat Index gain $1.27 a bushel from the Aug. 30 low of $2.80. Forty-five cents of the gain came from higher cash prices relative to the futures board, which suggests improved domestic demand is another bullish factor.

So far, USDA is not expecting any decline is world ending wheat stocks in 2017-18 but, frankly, its estimate of slightly lower world wheat demand may be too bearish. There seems to be no argument that U.S. ending wheat stocks will be lower in 2017-18 -- we just don't know by how much yet.

At best, the fundamental outlook is only moderately bullish for winter wheat, but Friday's new one-year high in DTN's cash index and July K.C. wheat's new three-month high on the futures give prices their most bullish potential in at least three years.

There is one other aspect of HRW wheat prices that I mention reluctantly, more out of curiosity as a long-time observer of markets. When it comes to Elliot wave theory and Fibonacci ratios, I would not describe myself as a regular church-goer, but more of a curious passerby who enjoys the music from a distance.

Looking at the monthly chart of DTN's National HRW Wheat Index however, I couldn't help but notice that the bearish decline of prices from February 2008 to August 2016 displayed an obvious three-waves down and seemed to have a certain sense of proportion.

Wondering if this fit Elliot wave's A-B-C format, I counted 28 months from the peak to the bottom of the A wave and 45 months from the top of the B wave in November 2012 to the bottom of the C wave in August 2016. Sure enough, plugging Fibonacci's golden ratio of 1.618 into my calculator times the 28-month duration of the A wave equaled 45.3 months, very close to a classic C wave proportion.

Elliot wave and Fibonacci enthusiasts may cheer this as proof of a long-term bottom, but I reserve the right to be keep asking questions. From my perspective, I am more impressed that HRW wheat prices are lifting off their lowest prices in 13 years and, going by USDA cost estimates, 2016 was the least profitable year for wheat producers in several decades.

Those kinds of deeply bearish markers are rare contrarian indicators that tend to coincide with long-term lows. The sight of HRW wheat prices conforming to a ratio that the mathematician, Leonardo of Pisa (a.k.a. Fibonacci) explained to Europeans in the 13th century is a little eerie, but it sure makes a person wonder.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

(ES/CZ)

06/21/2017 Machinery Chatter

By Jim Patrico
Progressive Farmer Senior Editor

When I traveled to Cuba last fall, I met American businessman Saul Berenthal. He's a 70-something man with more energy than a 20-year-old and so much charm he stood out even in Havana, a city full of characters.

A Cuban native and a longtime American citizen, Berenthal's parents in 1960 sent the boy to live in New York. They were sure he would have a better future in America than in communist Cuba. Indeed, he became a successful businessman and today lives in North Carolina with his wife CeCe.

Berenthal was in Cuba last year because he still has family and friends there, and because he provides services to groups of Americans who want to travel on the island. He also connects entrepreneurs to persons of influence who might be able to help them do business there.

I called Berenthal the other day to see what he thought of President Donald Trump's new policy toward Cuba.

Characteristically, he was frank: "Mostly cosmetic, pretty much to appease [anti-Castro Cuban-Americans] and to be able to take credit for something."

Berenthal went on to say that he was, "not sure if it is going to make much difference yet. We will have to see when the actual regulations come out in 90 days."

From his friends in Cuba, he has heard much the same: We don't know all the facts, yet. We will be patient.

Berenthal said Cuban are confused by Trump. Trump says he is for free trade, yet he restricts trade to Cuba. He says he is for freedom, yet he restricts Americans' right to travel to Cuba.

Cubans tend to be realistic, Berenthal said. They know that politics from both their government and from the U.S. could turn on a dime and put them right back in the limbo where they have languished for decades.

ALL ABOUT POLITICS

Politics were a key factor in Trump's announcement last week that he was "cancelling the last administration's completely one-sided deal with Cuba." Keeping a segment of his voters happy was one obvious "why" Trump decided to do what he did. The "what" is less clear.

During the presidential campaign, Trump promised to obliterate most everything connected with Barack Obama, and the Cuban "deal" was high on his list. Besides keeping his promise, Trump's recent announcement gave some measure of payback to the anti-Castro Cuban American community in Florida. That community helped deliver him a narrow (less than 2%) victory in Florida during the election. That put the state's 29 electoral votes in the Trump column. "The Cuban American community ... so much love ... Oh, I love you too," the president on June 16 told a Miami audience who responded, "Trump. Trump. Trump."

Cancelling President Obama's executive orders -- which loosened travel and trade restrictions with Cuba -- did not play so well with some in the American agricultural community, however.

As DTN Political Correspondent Jerry Hagstrom reported the day of Trump's announcement, farm organizations were not pleased: "The Republican-leaning American Farm Bureau Federation, the Democratic-leaning National Farmers Union, the U.S. Grains Council and wheat groups all said that the [policy] changes, while not related directly to agriculture, could hurt U.S. exports."

Just prior to Trump's announcement, several Congressional figures urged Trump to rethink his impending change to Cuban policy. "Please consider the economic potential this decision could have on the farm economy, rural America and any future opportunity for the expansion of export markets for American farmers and ranchers," wrote Democratic Senator Heidi Heitkamp of North Dakota in a letter to Trump.

Rural states don't have as much clout as Florida. Consider: Taken together, North Dakota, South Dakota, Nebraska, Iowa and Indiana gave Trump a total of 28 electoral votes. The contests were not even close. A few voters lost in those and other rural states will not make much difference in 2020 if Trumps runs again.

MEAT OF THE MATTER

The "what" of Trump's announcement probably won't be clear for at least three months. The State Department, Treasury Department and Commerce Department will have to figure out what the cancellation of Obama's executive order really means. We already know that some business transactions completed since Obama's executive order will be grandfathered. Construction on new American-owned hotels will be completed; air carriers will continue to fly to Cuba; cruise lines will still visit Havana.

Trump said new regulations would be aimed at preventing American dollars from finding their way into the Castro government's coffers. He was correct when he said that much of the business Americans do with Cuba profits the government and military. By one estimate, the military oversees 50 to 60% of the entire Cuban economy through an agency called, Grupo de Administración Empresarial S.A.

But Trump may have exaggerated the scale by which the Obama executive order has enriched the Cuban military and government. In May 2016, the U.S. Department of Commerce (DOC) explained that the Obama executive orders applied mainly to private enterprises, not to state-owned enterprises. "Companies and corporations that are government owned, operated, or controlled are not considered private sector," according to a DOC document. Business with Cuban government entities would be subject to a "case-by-case review policy."

How the Trump administration will untangle what is government owned and what is in the private sector is uncertain. Indeed, the outline of the new approach to trade with Cuba is still a vague point on the horizon.

To illustrate: Trump's Treasury Department on June 16 issued a document to explain how the new policy would affect 12 key areas of Cuban/U.S. relations. Eight of the areas described were about travel, tourism and sending remittance from the U.S. to Cuba. (Americans -- including those in Little Havana section of Miami -- can continue to do so.)

Only four of these areas had anything to do with trade, and they basically said, "Check back with us later."

What's next? Most trade between the two countries is not restricted by presidential executive orders. Instead, today's trade restrictions were established by various acts of Congress, which taken as a whole are called the embargo.

For instance, American farmers and commodity organization legally can sell goods to Cuba. But the embargo has placed credit limitations on such transactions. In general, Cuba has to come up with cash (U.S. dollars only) to buy a shipment of, say, rice from American farmers. Countries such as Brazil and Vietnam are not bound by the U.S. embargo and can sell shiploads of rice on credit. The result is that Cuba currently imports about 600,000 metric tons of rice annually, valued at more than $300 million, and none of it comes from U.S. rice farmers.

Executive orders cannot change that fact. It will take an act of Congress -- actually a vote to end the embargo -- to accomplish that. Ironically, some observers think that such Congressional action is more likely under Trump than under Obama.

The reasoning goes like this: Republicans -- who control both houses of Congress -- were never going to vote to end the embargo with a Democrat (especially Obama) in office. Now that one of their own is in the White House, however, ending the embargo could become a Republican idea. A lot of red states represented by Republicans are rural states with a significant agricultural community. Constituents in those states could convince their congressmen and senators to give them a chance to increase exports of rice, chicken and wheat to Cuba in a post-embargo era.

Seed companies, chemical companies and the farm equipment industry that would benefit by an open Cuban market could also put pressure on Congress. "Continuing to normalize relations in Cuba is the only way to effectively bring about political change on the island while opening a new market for goods, products and ideas," wrote Brian McGuire, President and CEO of Associated Equipment Distributors in a letter to Trump. "Preserving, not reversing, recent efforts to engage Cuba fit directly in line with your desire to put 'America first."

Berenthal agrees. Just as we hung up, he told me to, "Keep encouraging your readers that Cuba is still a great place to visit and that interactions between people will go a long way to getting us to work together again."

Jim Patrico can be reached at jim.patrico@dtn.com

(ES)

06/21/2017 By the Numbers

By Danny Klinefelter
DTN Farm Business Adviser

Most farmers that do look at their financial ratios analyze either their trends over time or relative to benchmarks; e.g., their own history, published numbers, other farmers or their lender's standards. All of these are useful, but it's also helpful to dig into what is driving their bottom line and to do "what if" analysis to see the impact different changes would have, i.e., where they would get the biggest bang for their buck. It is also useful to take a deeper dive to determine causes rather than treating symptoms when they review their results.

What I'm really talking about is the DuPont Financial Analysis Model. Because of the limited space, this will be a fairly brief summary. The model was originally developed as a tool for analyzing the rate of return on assets (ROA), but with a simple step, it can also be used to analyze the rate of return on equity (ROE).

At the heart of the analysis are two financial measures: your operating profit margin (OPM) and your asset turnover ratio (ATR), or "earns" and "turns," as Mike Boehlje often refers to them.

OPM measures the businesses before tax returns in relation to total revenue and is calculated: (net income from operations + interest expense - family living withdrawals) / gross farm revenue.

The ATR measures how efficiently the business' assets are being used to generate revenue and is calculated: gross farm revenue / average farm assets.

The ROA measures the business before tax returns in relation to the business' total assets and is calculated: (net income from operations + interest expense - family living withdrawals) / average farm assets.

Because the numerator in the OPM is the same as the denominator in the ATR, when the two are multiplied, gross revenue cancels out and you are left with the ROA.

In order to increase OPM, the business needs to increase the average price received through better marketing and/or decrease operating costs or lower family living costs.

In looking for ways to decrease costs, it is insightful to first look at the percent of total operating costs made up by each expense category. Options some farmers have used include auto-steer; variable rate applications of seed, fertilizer and chemicals based on site-specific performance records; selling unproductive assets; double shifting; leasing versus purchasing some assets; or having some work custom done when the asset required is very underutilized on the farm. Others collaborate and jointly share some assets, people or equipment in order to spread the costs.

Centrec Consulting and Wittman Consulting both have downloadable spreadsheets to do the calculations:

http://www.centrec.com/…

http://www.wittmanconsulting.com/…

Using the DuPont Financial Analysis Model, net farm income from operations can be analyzed in more depth by breaking costs into categories as a ratio of the individual costs relative to net farm income from operations. This can help you analyze what effect cutting back specific costs would have on ROA or ROE. Furthermore, you could look at the effect of changing interest rates on specific loans or reducing assets by getting rid of unproductive assets. The same could be said for looking at a reduction in living costs.

I just think it is a good tool for analyzing causes and doing "what if" analysis. It gets away from looking at symptoms and guessing what caused the result.

Danny Klinefelter can be reached at Talk@dtn.com

(AG/BAS)