IN THE KNOW

AG UPDATE

SEPTEMBER 16, 2024 | AG BANKING

ECONOMIC NEWS, Kiel Roehl, vp - ag banking

Odds favor the Fed reducing their discount rate by 25 bps September 18th. While some economists believe a 50 bps drop is the right tweak to feather into a soft landing, most think the Fed fears such a decrease could cause panic and that 25 sends a better message.The market has anticipated drops in the discount rate evidenced in one way by the another decrease in home loan rates, which now average 6.2% (down from 7.18% one year ago). There has been no change in the discount rate over the last year but home loan rates have now dropped by nearly 100 bps.What can we expect between now and the end of 2025? The Fed Discount Rate futures show a reasonably high probability that the discount rate will drop by a total of 225 bps. This would translate to a Wall Street Journal Prime rate of a 6.25% which impacts operating lines of credit with variable rates based on Prime. We can’t take these projections to the bank though; anticipating discount rate changes is far from an exact science. But, there’s hope to lower the interest expense line on producer cashflows.

MARKET NEWS, Miles Colson, svp - ag banking

The 2024 Pro Farmer crop tour wrapped up on August 23, 2024. Many crop analysts were interested in this year’s crop tour to see if the outing would confirm the lofty yield expectations that were put forth most recently on August 12 by the USDA. For the most part, the answer was yes. The PF tour resulted in an expected national average corn yield of 181.1 bu/acre, compared to USDA’s number of 183.1. In soybeans, the PF tour came up with 54.9 bu/acre while USDA’s current estimate stands at 53.2. In the initial few days following the release of the tour results, both new-crop corn and soybeans moved higher. While markets have since somewhat pulled back, the initial reaction may be an indication that the market has a big crop already factored into prices. Market bulls are certainly hopeful that the grains may have made a bottom for this cycle. Following are state-by-state tour results for corn and soybeans.

corn soybean table

corn table

soy beans table

The next market mover for the grain markets will be the September USDA Supply & Demand report, which will be issued on September 12. Some market watchers believe that this report may reflect a decrease in harvested acreage due to flood, hail and other losses during the growing season. In addition, analysts are anticipating a very slight decrease in corn production and a slight increase in projected new-crop soybean supply. In any case, it will be the last report before the fall harvest season begins.As of September 11:

• Corn SEP $3.80
Bull: USDA lowered harvested acreage and increased usage in August report – will this trend continue? Demand base is building - low prices cure low prices?
Bear: A record yield is forecast and carryover inventory from 2023-24 remains high.
• Soybeans SEP $9.58
Bull: Recently China has returned as a buyer of US beans. A US interest rate cut would be bearish for the dollar and favorable for US exports.
Bear: Record crop is on the way in the U.S. and most recent USDA estimate shows a projected carryover for 2024-25 of over 500 mb.
• KC Wheat SEP $5.34
Bull: Persistent/worsening drought conditions in prime Kansas wheat growing regions. Ukraine/Russia war, uncertainties on exports from that region.
Bear: Seasonal harvest pressure, lost export business due to prices and strong dollar.
• Livestock
Feeders SEP $241
Live Cattle OCT $177
Lean hogs OCT $80

WEATHER, Luke Thomas, ag banker

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

• Hurricane Francine to potentially reach Cat 2. Lower Mississippi Valley and Mid-South to receive remains of moisture after landfall.
• La Nina conditions increase for a higher chance of effecting Fall/Winter conditions in 2024.
• With La Nina development, the forecast is for a drier and hotter end of the year and beginning of next year.

weather maps

Source: “AgWest Commodities - Weather.” Goagwest.com, goagwest.com/pages/weather-new.php. Accessed 19 Sep. 2024.

GOVERNMENT PROGRAMS, Shelby McClung, vp - ag banking

There are options for Farm Service Agency loan customers during financial stress. If you are a borrower who is unable to make payments on a loan, contact your local FSA Farm Loan Manager to learn about the options available to you. Programs available include: Livestock Indemnity Program, Emergency Assistance for Livestock, and Emergency Conservation Program. Source: U.S. Department of Agriculture."Nebraska FSA and NRCS State Office Newsletter." Nebraska State Office, July 2024, 310002024_07.pdf (usda.gov).

EVENTS & LEARNING OPPORTUNITIES

With summer activities and events in the books, we can look forward to some big fall / winter learning and networking opportunities.

•COLORADO AG SHOW - GREELEY COLORADO January 28th - 30th
•33RD ANNUAL BUFFALO BILL FARM & RANCH SHOW - NORTH PLATTE February 7th - 8th

OTHER CURRENT EVENTS, Mike Hamilton evp - ag banking

Farmer Mac. August 30, 2024,
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If we’ve had enough already of high machinery prices, relief may be in sight. Unfortunately, what leads some to believe prices will drop is a tight correlation between net farm income (NFI) and machinery expenditure. The chart shows a dramatic drop in NFI in 2023; lower machinery spending should follow.

farm graphs

Basic economics indicate that lower demand with the same supply will eventually reduce prices. However, anticipating a drop in demand, implement manufacturers are already laying off staff to reduce production and adjusting expectations for 2025 profits. It will be interesting to so see what this and anticipated lower interest expense for manufacturers might lead to a drop in prices.