Dodge ran a 2 minute commercial during the Super Bowl utilizing the Paul Harvey “On the 8th Day God created Farmers”. I thought it was one of the best commercials during the game and Entertainment Weekly thought the same thing. It was very well done and we just wanted to say how proud we are of the American Farmers. Without them, America would not be as great as it is today.
Paul Neiffer, CPA
One of our local newspapers – The Tri-Cities Herald – is running a 29 part series on the various types of crops that are grown in the Columbia Basin region of Washington and Oregon. So far, they have run about 10 parts, but it is an excellent review of the various crops grown in the part of the country.
It is my estimate that only California will most likely grow more types of crops than our Columbia Basin. The newspaper has set aside a specific section of their web-site for this series so I think you would enjoy reading some or all of the articles.
Many of the farmers listed in the article are clients of our firm and we are very proud to see them listed.
Paul Neiffer, CPA
In a meeting with one of my clients in Northern Illinois yesterday, we discussed one of their options for increasing their current land holdings without adding more land. They are in an area where farmland is costing $12,000 or more and none is available. Additionally, land rents are approaching or exceeding $400 per acre.
One option is to put an irrigation pivot on a 240 acre plus parcel. Although this land is already yielding at least 200 bushels on average, putting in the irrigation system would cost about $200,000. The return would be increasing their yield to around 300 bushels per acre. If their normal variable costs are around $400 per acre, the additional $200 k investment would yield about $60-80 thousand per year or a less than three year pay back.
This probably beats paying $200 thousand for 16 acres of land.
In your operation, are you doing everything to maximize your current land production before going after other, possibly, more costly options.
I was riding on the tractor on Wednesday with Chris Barron, my fellow columnist for Top Producer magazine, and we had a good discussion about how farming is different from other “manufacturing” operations when it comes to the right equipment size.
In most manufacturing operations, the weather plays no role in the production process. The equipment is housed inside of building and other than a tornado or hurricane, the weather does not effect the ultimate production for the day.
However, during planting and harvesting, the weather can have a dramatic effect on the production process. There is a small window to get planting done and if the weather is not cooperating, not having the right sized equipment can prevent you from getting your crop planted. Conversely, having too much equipment can be costly if you never need to use it if the weather cooperates.
There is no perfect answer to this question. If you decide to err on the less expensive smaller side, there may be years when you will not get the crop fully planted or have to switch to an another crop. However, the reduction in equipment cost may offset this. If you err on the high side, you will always be able to get the crop in, but your overall equipment cost may make your operation less profitable compared to other leaner farmers.
I think my tractor riding is done for the trip since the farmer client I meet in Illinois today just finished planting last night. Tomorrow I am in our Stevens Point office for a meeting then fly home on Saturday. My wife has already told me we are going for a motorcycle ride on Sunday (so I think everybody knows what I am doing on Sunday).
On Tuesday, I had a quick meeting at our Des Moines office. After that, I met Moe Russell at the local Village Inn for a quick cup of coffee (or in my case, a Coke since my mother bred out of me the coffee gene). Moe and I caught up with business and then had a quick discussion on the perceived premium of comparable farmland in Iowa over most other states.
For example, near my farm in Northwestern Missouri which might yield on average 165 bushel corn and 55 bushel beans, a 320 acre farm just went under contract for $4,550 per acre. This yield is very consistent from year-to-year. This same yielding farm in most counties in Iowa would probably cost closer to $8-9,000 per acre or a premium of perhaps 2 to 1 or more.
From a purely business decision standpoint, it may make sense for certain Iowa farmers to sell their farmland and reinvest it in comparable farmland in other states that cost much less. This, perhaps, makes the most business sense, but most farmers have an emotional attachment to their farm, which, in many cases outweighs the purely financial consideration.
In the afternoon, I had a quick meeting at our Cedar Rapids office and then headed up to Rowley, Iowa to ride on the tractor for about three hours planting corn. For an old farm boy, there is not much more therapeutic than to ride a tractor or combine. These new 24, 36 and even 48 row planters with airfeeds, insecticide attachments, etc. are much more advanced than what I grew up with. We actually used a set of grain drills and one of my best memories on the farm was taking a gallon coffee can from drill to drill putting wheat into the low spots. There was no control from the tractor cab to control the feeding of the wheat into the drill. It was all mechanical.
Today, I spend more time in this area and then start to head over to Northern Illinois for a meeting.
Most of you are aware that the number of farms in the US continues to get smaller, but they produce more and more. In the dairy sector, one report from the Idaho Dairymen’s Association indicated in 2008, there were over 800 dairies in the state of Idaho. Just three years later, this number had dropped to 569, a reduction of almost 30%.
However, on the production side, you guessed it, the amount of milk produced in the state continues to climb and the number of dairy cows during this period increased by about 35%.
In 2011, there were 51,481 dairy operations licensed to sell milk in the US. Just slightly more than 50% of the milk produced comes from dairies with more than 1,000 cows. Of that 50%, about 70% comes from those with more than 2,000 head. In essence, 6% of the nations dairy farms produce more than 60% of the milk.
11 counties marketed 25% of the nation’s milk. 7 of the 11 were in California and in order, they are:
This trend of bigger dairies producing a greater share of milk production in the US is not going away anytime soon.
Tomorrow I head out from warm and sunny Yakima, Washington (after 4 inches of snow the night before) and travel to Nashville, Tennessee for the Commodity Classic. I will be walking the trade show on Friday and on Saturday, Nick Houle from our Minneapolis office will be giving a keynote speech on estate planning from 1:30 to 3:30. I will be helping him with this event and if you are attending this or see me around the show, please stop me and say hi.
Just finished up my last farmer (at least the ones due on March 1) this afternoon and we have less than 50 days of tax season left.
It is not too often that we do a post on fruit ag news, but we just recently came across an article in the Good Fruit Grower which is based in my home city of Yakima, Washington.
In the article, a Washington State agricultural economist predicted the apple production in the state for 2021. For many decades, the largest produced apple in our state was the Red Delicious (Washington is by far the largest producer of apples and for 2012, the total apples sales may be close to $2 billion dollars). However, this variety is expected to decline from 33 million boxes (42 pounds) to 25 million boxes.
The Gala apple will overtake Red Delicious by about 2018 and be the number one variety in 2021 with a production of about 29 million boxes. The Fuji variety will be number three at about 21 million boxes.
The big mover, however, will be the Honeycrisp, which appears to be the current favorite apple with consumers. This variety is expected to jump from the current annual production of about 4 million boxes to well over 13 million boxes in 2021. I know this apple is probably my favorite one to eat and we have had several plantings of this variety near our house in the last couple of years.
Just to give you some numbers on potential revenue from Honeycrisp based on current all-time prices. Assume a corn grower is able to get 250 bushels of corn at $7 per bushel. This is a gross of about $1,750 per acre, which is probably an all time high. Some Honeycrisp growers may get production in excess of 100 bins per acre, a pack-out of 14 boxes per bin and $35 or more per box. This equals gross revenue per acre of $49,000 per acre or more in many cases. Before all the corn farmers start growing Honeycrisp, you need to realize the costs of growing and packing this crop are extremely higher than corn growing.
Total apple production in Washington State is expected to increase from the current 105-110 million boxes to about 115-130 millon boxes by 2021. Apple growers like most farmers are having better revenue years than in the past, but the future trend of production still appears positive.
Wow, what an action packed day. First, breakfast was at 6 am to get the day started. At 7 am, we had the taping of the show for the US Farm Report to air this weekend.
At 8:15, my breakout sessions started. Each one last 55 minutes and were back-to-back-to-back. I thought the last session would be the smallest, but it actually turned out to be the largest and each session had many good questions (and I think I gave good answers).
Ann Duignan of JP Morgan gave a presentation on how the global economy is affecting the farm machinery business and then its affects on our farmers. The presentation was very informative.
Last night we had the Top Producer of the Year award dinner. There were three finalists and based on the video presentation for all three, I could not tell who was going to win. Each farmer has been very successful and will continue that success. The one thing that was brought out to me by all three was each of their passion for the employees that work for them. They are part of their family and it showed.
I think this is the first time that I have ever seen a farmer use a pink flamingo as part of their branding process.
I won’t tell you the winner here since it will be posted on the Top Producer section of www.agweb.com.
The Top Producer Seminar started out today with a bang. Peter Zeihan with Stratfor Group gave an interesting presentation on the economic outlook in general and for ag. It was very interesting to see a map with an outline of the world’s river systems and how that has affected the world’s economy over the last couple hundred years or so.
America, with the Mississippi River system and inter-coastal waterway has by far the best series of cheap river and water systems in the world. That is why it is cheaper for an American farmer to ship his corn from Minnesota all the way to New Orleans than for a Brazilian farmer to ship his corn by truck for a hundred miles.
The only other water system that comes close to our is Argentina with three rivers that flow eventually down to Buenos Aries. Because of this waterway system, Argentina’s standard of living in 1900 was about 90% of ours.
There was a group panel on where the new farm bill was headed. Consensus was a bill in 2013, but may still get one this year. Direct payments will no longer be there and some expanded form of crop insurance is most likely to happen.
The value of peer groups was discussed in the afternoon and I believe that these have great potential value to all farmers. It is always good to get another opinion that you value and it is much easier to held accountable by a peer.
All in all, the first day of Top Producer was very productive and I had several readers of the blog come up and say hi. I hope to see more tomorrow and with three back-to-back presentations, I know I will be more tired tomorrow.
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