IN THE KNOW

AG UPDATE

NOVEMBER 25, 2024 | AG BANKING

ECONOMIC NEWS, Kiel Roehl, vp - ag banking

Expectations for further rate cuts are continuing to decline. CME Fed Watch reports a 55.7% chance of another 25bps rate decrease in December, this is down from 72.0% a week ago. Looking out over the next 12 months, there is a 74.4% probability that rates are between 3.5% and 4.0% (currently 4.75%). This would represent cuts between 75 bps and 125 bps.On November 20, the Treasury Department announced the results of a $16 billion twenty-year bond auction. The high yield was 4.68%, up from the prior month’s yield of 4.590%. Demands for these bonds was well below average, indicating that further rate pressure on the long end of the yield curve may be coming.As President Elect Donald Trump’s cabinet begins to take shape, economist are increasing their focus on the impacts of potential tariffs and Trump’s desire to drastically cut spending in D.C. Tariffs have the potential to lead towards additional price pressures in the US, ultimately leading to higher inflation. However, the strength of the US consumer is also being questioned as major retailers have released Q3 results and expectations. Results have been mixed with lower end retail business seeing increased revenues with the higher end seeing decreased revenues indicating that the more affluent US consumers are trading down. Results from the holiday shopping season will be highly anticipated and scrutinized and likely have a dramatic impact on economists’ view of the US economy. This will likely flow through to decisions made by the Trump Whitehouse, Congress, and the interest rate markets.

MARKET NEWS, Miles Colson, svp - ag banking

What changes are in store for the farmland market as we enter the 2024/25 winter season? Farmland values have been strong the past several years, thanks to low interest rates and good commodity prices. On a regional basis, land value changes from 2023 to 2024 increased 6.8% in Nebraska, 2.3% in Colorado and 8.0% in Kansas.However, the past year has seen several changes in the landscape for farmland prices. How will these changes impact farmland values moving forward?

1) Decline in commodity prices over the past 12 months. There is typically a lag time in the response of farmland values to the relatively more volatile changes in commodity prices that are common in agriculture. However, in time, commodity price changes are a fairly strong factor in the direction of long-term land prices.
2) Increase in interest rates. The US 10-year treasury rate has increased 164% since the beginning of 2022. While long-term interest rates may be at a historically moderate level, compared to more recent times, rates are significantly higher. Higher rates not only make borrowing money for farmland more expensive, but it also provides a more competitive rate of return for potential land investors as CD rates and bond yields become more attractive versus rates of return on farmland.
3) Supply and Demand. The supply of farmland is always under some pressure due to land use changes, as more arable land is used for housing and other development projects. On the plus side, more land supply has reached the market in recent years as an aging landowner population has transferred ownership to the next generation, and some of those acres are sold. Maybe the greatest impact to land supply and demand is change in investor interest in the land market. With the strong performance of other investments such as the stock market and other financial investments, these trends can influence the farmland market by luring capital away from land and into other investments. As investor interest in farmland moves elsewhere, this can decrease the demand farmland and create some downward momentum in prices.

Farm Real Estate Value Map

Keeping an eye on the farmland market is important for many aspects of production agriculture such as negotiating cash rents and pricing other farm inputs for the year. So regardless of whether you are a buyer or seller (or neither) of farmland, the direction of land values over the upcoming winter and beyond will be an important factor for all.As of November 20th:

• Corn DEC $4.30
Bull: Cheap US corn is stimulating demand. USDA did lower estimated 2024 production by 61 million bushels.
Bear: Uncertainty about China’s economic path for growth and appetite for commodities.
• Soybeans NOV $9.90
Bull: USDA cut estimated production 121 million bushels in latest report.
Bear: : What would Trump Administration do on tariffs and how would that impact Chinese purchases of US beans? Mixed signals at this time on soybean crush pace.
• KC Wheat DEC $5.62
Bull: Black Sea region weather and export logistics have not been friendly to wheat production and exports, but may be price friendly.
Bear: : Recent moisture in western wheat production areas.
• Livestock
Feeders NOV $255
Live Cattle DEC $186
Lean hogs DEC $81

WEATHER, Luke Thomas, ag banker

Here are some key developments that have or will have big impact on our weather:

• Precipitation in the Pacific northwest is expected to continue into the weekend, while the plains and corn belt look to be cool and dry.
• The temperature is expected to be below normal nationwide, with higher than normal chances of precipitation.
• Brazil continues to have a favorable summer for their emerging crop.

Weather Map

Source: “AgWest Commodities - Weather.” Goagwest.com, goagwest.com/pages/weather-new.php. Accessed 20 Nov. 2024.

GOVERNMENT PROGRAMS, Shelby McClung, vp - ag banking

• Update on FARM Act in Congress:
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• Beginning Farmer/Rancher resources are available at:
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Source: U.S. Department of Agriculture,
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EVENTS & LEARNING OPPORTUNITIES

Look at these fall / winter learning and networking opportunities!

• NBA Agriculture and Beyond Workshop - KEARNEY, NE December 10th
• COLORADO AG SHOW - GREELEY, CO January 28th - 30th
• 33RD ANNUAL BUFFALO BILL FARM & RANCH SHOW - NORTH PLATTE, NE February 7th - 8th

OTHER CURRENT EVENTS, Mike Hamilton evp - ag banking

KState released farm budget guides for 2025. They can be found at: When you click this link, you can select from crop type and region and get a high level budget and breakevens. You can also review budgets for irrigated crops and livestock.The wheat budget for NW Kansas shows an operating income (revenue minus operating expense) of about $95/ac. This assumes a wheat price of $5.45 and a 60 bu yield. Expenses/ac were estimated to be $232. If you rent your ground for $67/ac and account for costs to replace equipment (wear and tear), that turns into a -$36.98 loss/ac. While operations vary, I find value in reviewing these numbers with my customers. If there are big disparities, we can either explain and justify them, or, possibly, see if there is room to do it for less. Always good to sharpen the pencil but it’s especially important when prices are low.