Smarter water

Written by Kerri Lotven on .

Technology can connect virtually anything these days. Computers are connected to tablets, which are connected to phones, which are connected to numerous other devices. Now, that connectivity extends to irrigation equipment in the field.

In January, Valley Irrigation, based in Valley, Neb., unveiled a smart panel for center pivot irrigators that could change the game for growers like Scott Everidge, who operates a 3,000-acre farm in Dooley County, Ga. The cotton, peanut, corn, wheat and soybean grower was one of the pilot testers for Valley’s new ICON series, which allows for app-based remote management of center pivots.

Everidge says connectivity and ease of use are what sets this new product apart and offers advantages for his 2,500 acres that are under pivots.

“We do a lot of multi-cropping, so we do a lot of pivot moving—picking cotton, mowing stalks, putting in cover crops,” Everidge said. “When you have 40 pivots, the ease of not getting in and out of a tractor all day long made my job just a little bit easier. I think back to my dad in the ’70s; everything was diesel-operated with generators at the pivot point. We had 10 pivots and a flying service, and my dad worked seven days a week. Now I’m 45 years old. I’m running 40 irrigation pivots, a flying service, bookkeeping and three trucks, and I have five hired guys. All this system is going to do is make my life easier.”

After on-farm pilot testing, Valley released four models of these smart irrigation panels for sale to the public: the ICON 10, the ICON 5, the ICON 1 and the ICON X. The smart technology is based on the idea that better control remotely allows for better water and fertilizer management practices, according to Len Adams, president of global irrigation at Valmont Industries, parent company of Valley Irrigation.

“Fresh water availability is very limited,” Adams said. “Of all the water in the world, only 3 percent is fresh water, and of that 3 percent, two-thirds is in the ice caps. Of the last one-third, agriculture uses two-thirds. With limited water and expected population growth, the issue is how we continue to feed the world. What we provide is a way to achieve this while using every precious drop of water in the most efficient way.”

In 2014, Valmont acquired 51-percent ownership of AgSense, a technology company based in South Dakota. Through this partnership, Valley extended its connectivity and data-gathering capabilities. AgSense offers a cloud-based app that allows growers to monitor field conditions and farming operations through smart devices, much like Valley’s own BaseStation 3, also a remote-operated irrigation management system. By teaming up, both companies cornered more of the market share. The ICON panels are compatible with both AgSense and BaseStation 3 telemetry and offer “edge-of-field WiFi” technology, meaning that a grower can connect to the machine based on proximity without needing a cellular connection or transmitting data radio signals.

Operated with touchscreen controls, the ICON app’s interface is simple with customizable screens giving growers preference options and varying data collection abilities, including soil moisture, soil chemistry, as-applied water and weather history. The ability to set variable-rate irrigation prescriptions also comes standard on the new ICON models. The panels’ modular design allows older Valley analog equipment to be upgraded and lends compatibility with other center pivot brands.

“It’s the only product that sits on a field almost year-round,” Steve Kaniewski, Valmont’s president and chief operating officer, said. “So, we have a unique ability to provide data from the fields, but to do that we have get the analog equipment to now move into the new millennium.”

Valley products are distributed all over the world, including places like South Africa, Dubai, New Zealand, Australia, Argentina and Brazil, Kaniewski added.

“We’re in 23 countries,” he said. “In the irrigation space, anywhere that it makes sense for agriculture, you’ll find us.”

Such global distribution is important because water consumption is a global issue, said John Campbell, Valmont’s manager of technology advancement and adoption, pointing out that the world’s population is estimated to reach 8.5 billion within the next 15 years and 9.7 billion before 2050.

“Even though they’re already impressively efficient, the world’s farmers are going to be tasked with becoming even more so,” Campbell said. “They’re going to be asked to produce higher yields with fewer inputs, including water. The key to that efficiency is technology.”

Making an impact on precision ag

Written by Allison Jenkins on .

From a handful of early-adopting growers in 1999 to widespread use across its entire trade territory, MFA Agri Services in Bernie, Mo., has grown its precision agriculture program exponentially over the past 18 years.

Now, the program has not only gained the attention of growers who see the value in these high-tech services, but Bernie MFA has also captured national recognition as one of three retailers that received the 2016 Precision Impact Award.

The award, sponsored by the Agricultural Retailers Association (ARA), SST Software and AgPro Magazine, recognizes local retail operations for their use of technology, input efficiency, grower engagement, environmental stewardship, innovation and profitability. A panel of precision technology experts and AgPro staff evaluated the nominations and determined the winners, who were honored during the annual ARA meeting Dec. 1 in Orlando.

“This award shows how committed MFA is to stewardship and improving growers’ efficiency in all parts of their operation,” said Thad Becker, MFA Incorporated precision agronomy manager. “I know all of the Bernie employees work hard to deliver the best product possible for their customers. Whether it’s collecting data from the producer, pulling soil samples, advising the grower on the results or making careful application of product, the Bernie team strives to put the ‘4Rs’ into practice—the Right Source, Right Rate, Right Time and Right Place.” 

MFA Agri Services in Bernie was the South Region winner, joining the West-Plains Region honoree, Simplot Grower Solutions of Wray, Colo., and North Region’s Southern States of Richmond, Va.

Jarrod Smith, manager, and Tayler McLane, precision agronomist for the Bernie MFA location, received a complimentary trip to the meeting to accept the award on behalf of MFA. McLane is one of the first two women to be part of a Precision Impact Award-winning team, according to AgPro Editor Rhonda Brooks. Simplot’s Amanda Krebs is the other.

“It’s a big honor—I didn’t realize how big until I got there,” McLane said. “It’s good for us, good for MFA and good for the growers who have supported our precision ag program. We couldn’t have done this without them.”

Retailers who want to compete for the award submit an extensive entry that explains how they work with farmers, what technologies they use, how they invest in employees’ knowledge, how they maximize input efficiency and how they follow the “4R” philosophy.

“The main factor that caught the judges’ attention was how Bernie MFA has helped farmers save money and make money by using precision technology,” Brooks said. “And they have the data and expertise to demonstrate it.”

Bernie MFA’s precision program offers grid soil-sampling, variable-rate applications of fertilizer and lime and custom spraying for the region’s corn, soybeans, cotton, wheat, rice and cover crops. McLane handles the precision sampling, conducted on 2.5-acre grids to cover the widely varying soil types in southeast Missouri. She then makes input recommendations based on the results.

She sampled some 8,500 acres last fall and provided growers with variable-rate prescriptions for crop nutrients, crop protection and planting rates and assistance with seed selection based on management zones within the field.

“Tradition runs deep in the Bootheel, and we had some guys who were slow to get on board,” McLane explained. “At first, they’d only let us do one field here and there, but as soon as they saw how much they could save by allocating their input dollars where they should go through precision sampling and variable-rate applications, they changed their whole farm over to the technology.”

Overall, the Bernie MFA team custom-applied fertilizer on more than 75,000 acres and custom-sprayed around 35,000 acres last year. The staff is continually trained and equipment updated regularly to stay current with the latest technology and satisfy customer needs.

“We put a lot of emphasis on precision ag at Bernie MFA,” Smith said. “We feel like if you’re not on the precision train, you’re going to be left behind.”

Along with cost savings from input efficiency, yield increases have also helped drive adoption among growers, he added. In some instances, precision ag practices have helped customers boost corn yields from averages of 170 bushels per acre to 230 bushels per acre and increase soybean yields by 15 to 20 percent.

“We have landlords calling us now—not just farmers—wanting us to sample their fields because of the yield increases we’ve seen,” Smith said. “We’re not just providing a service here. We’re building farms.”

Time to roll

Written by Nancy Jorgensen on .

While producers are planning their 2017 crops, purchasing inputs and preparing equipment with the inherent optimism a new growing season brings, they’re also feeling the pinch from lower commodity prices and looking for ways to succeed, or at least survive, in the coming marketing year.

During this preseason prep, take some advice from three top farm financial experts—Kevin Gabbert, vice president of commercial lending, FCS Financial; Danny Klinefelter, Extension economist, Texas A&M University; and Raymond Massey, Extension economist, University of Missouri—who offer practical, real-world guidance based on what they’re hearing in the field. All three meet with farmers and farm bankers regularly, positioning them to provide sound business strategies for the challenging times ahead.

Lower your costs—including living expenses.

Massey: The Kansas City Federal Reserve recently asked bankers in our region how much their farm borrowers have increased or decreased capital and household spending. The survey reveals that farmers have cut farm capital expenditures substantially, but lowered household expenses by a much smaller percentage. For example, you might have a tough time telling your college-bound child that while older siblings were given a new car, the younger student will drive an older model. My advice: Get buy-in from your family on the need to reduce household spending.

Gabbert: During the prosperity of the recent past, some producers built a cost structure that may not be sustainable in a lower-margin environment. These overhead costs fall into three categories: land, equipment and labor. You can adjust land costs by reducing rents or stretching out amortizations on real estate notes. You can renegotiate equipment loan terms and liquidate nonessential equipment. Labor costs, including family living draws, have increased significantly in some operations; adjustments in this area can be challenging but necessary.

Sell when you can at least break even.

Massey: A lot of farmers failed to lock in prices when corn hit $4.50 a bushel last year. They wanted $6 like they got a few years ago and were disappointed when corn fell to $3 in the fall. In the coming year, lock in when the market reaches a price that covers your costs.

Gabbert: As margins are squeezed, marketing discipline becomes essential. Know your cost of production and pull the trigger when the market offers a profit. Price rallies in recent years have been short lived, making a defined marketing plan more critical than ever.

Build working capital.

Gabbert: Working capital is king. It provides the first line of defense against low profit margins and positions you to take advantage of marketplace opportunities. Ideally, you should build working capital through retained earnings, but you can enhance it by restructuring debt to longer terms or selling nonessential assets. In this environment, it is critical to weigh the risk/reward of any decision that draws down working capital.

Massey: Agricultural lenders tell me that some of their customers are running out of operating capital and lines of credit. Many are restructuring loans. Don’t wait until you run out of options—talk to your lender now.

Renegotiate rents.

Massey: We are seeing a visible decrease in land rental rates. Bankers are suggesting that borrowers renegotiate rental prices to reduce operating costs. Farmers are talking to their landlords, and some landowners are reducing rents by $25 to $50 an acre—in a few cases up to $75. On the other hand, a number of landlords are putting their land out to bid rather than lowering rents. For the working farmer, losing rented land can hurt if you’ve been spreading equipment costs over 2,000 acres, and you can now only spread it over 1,800. But if you can’t make a profit, you’re better off letting it go.

Improve communication.

Massey: Most farmers who rent land need to step up their communication with landlords. The farmers most likely to negotiate cash leases downward communicate with landlords on an ongoing basis. Provide regular financial reports to landlords throughout the year—not just when it’s time to negotiate the annual lease.

Gabbert: During adversity, there is a tendency to keep to oneself. But it’s now critical to communicate more frequently with key associates, including business partners, lenders and accountants. This applies to spouses, family members and partners as well. Too often, without good communication, negative assumptions fill the empty space. Financial stress often magnifies interpersonal relationship issues. Broken relationships can be devastating on a personal as well as a business level.

Boost your financial management capacity.

Gabbert: Financial management takes on more importance during times of economic stress. Regardless of your operation’s size, most farmers need more detailed and timely financial reporting to make good management and marketing decisions. The information will also improve communication with business partners, lenders, marketing advisors and accountants. Invest in resources to enhance your financial reporting. Purchase more robust off-the-shelf accounting systems, or ask your accountant for help beyond tax preparation.

Use accrual accounting.

Klinefelter: Every farmer should evaluate his or her business performance using an accrual-adjusted income statement. All it takes is a balance sheet for the beginning and end of the income period you’re evaluating and a cash basis income statement for the period between the balance sheet dates. Then it’s just a matter of making some adjustments to the cash basis income using changes in accrual assets and liabilities from the current section of the balance sheets. Most extension services and the risk management online library at the University of Minnesota have publications that guide you through the process. Cash basis income, while good for tax purposes, can lag behind accrual-adjusted income by two to three years in recognizing downturns or upturns in a business’s true profitability.

Don’t count on last year’s yields.

Massey: In 2016, farmers in Missouri and throughout the U.S. achieved the highest-ever yields for soybeans and the second-highest for corn. Don’t plan on this yield level for your 2017 crop. Base your forecast on average yields over the past five years.

Share costs and pool resources.

Klinefelter: To lower costs, consider joint business arrangements such as pooled input buying or shared machinery. Arrange with several farms to employ accounting or risk management personnel with a higher skill set at a much lower cost per farm. A good accountant can dig deeper than the typical bookkeeper. They can obtain real cost and return data on different enterprises and farms to learn which rental properties are making money and which aren’t. They can also find which zones perform better. Combining this information with soil data, application and seeding rates, you can use variable-rate technology to improve profitability. Too often, aggregated data on the whole operation just provide averages, which don’t differentiate between winners and losers.

Join forces with another operation.

Klinefelter: If your farm is in serious financial difficulty, consider merging with top operations that are looking for additional land and good employees. This helps you preserve what you have left in exchange for a minority interest in a larger operation. It can also preserve jobs for you and your family members. You can trade small or obsolete equipment for upgraded equipment and lease it back to the new entity to avoid the tax consequences of selling. Or, if you operate a traditional small farm with high costs and less up-to-date technology, collaborate with other small farmers. You’ll gain economies of scale while maintaining individual land ownership. Your operations could grow stronger as you better utilize different talents. This new, larger operation can afford to hire more specialized expertise. These arrangements can also be good for a farmer nearing retirement who wants to cut back and get to know potential tenants for when he finally retires. In addition, this approach helps assure the continuation of traditional-sized operators.

Add a second shift.
Klinefelter: Consider double-shifting equipment and labor to improve efficiency and lower overhead during busy seasons. Recruit retired farmers who want to work part time or young people who grew up on a farm but now work an off-farm job. The extra work can help them pay for a new vehicle, Christmas gifts, vacations or credit card debt.

Try something new.

Klinefelter: Do you have tillable land where you haven’t applied chemicals in the last few years because it’s been in pasture? Think outside the box, and try something new such as organic or specialty crops. These can often garner a premium price in the market as as compared to traditional commodity crops.

Limit your risk exposure.

Gabbert: As profit margins are squeezed, the entire industry feels the impact. Be aware of counterparty risk—the risk that the person or institution with whom you’ve entered a financial contract will default on the obligation. Limit your exposure to any one party at a level that your business could sustain the loss if that party does not perform according to your contract.

In this Feb 2017 Issue

Written by TF Web Editor on .

Who's buying farmland?

Written by Nancy Jorgensen on .

A pervading myth among some urbanites is that big corporations own most U.S. farms. This, despite USDA statistics showing that the vast majority of farmland is owned by a farmer, retired farmer or farm family member. But is this changing? Are non-farm corporations, such as institutional investors, buying up more land, and if so, what will it mean to farmers?

Bruce Sherrick, professor of agricultural and consumer economics at the University of Illinois, is known for his research in farmland ownership. “Nonfamily farms account for only about 1 percent of the farms and about 10 percent of production,” he said, citing a USDA study titled America’s Diverse Family Farms.

Daniel Bigelow, an agricultural economist with USDA and another leading farmland researcher, says his 2016 study, U.S. Farmland Ownership, Tenure and Transfer, shows a slightly lower farmer ownership share.

“Sixty-nine percent of all farmland is owned by current farm operators, while 31 percent is owned by non-operators who rent land out to farmers,” Bigelow said. When you consider that the huge share of these non-operator owners either previously farmed or acquired land from a family member, Bigelow added, a total of 83 to 94 percent of all farmland is owned by a current or former farmer or family member connected to agriculture.

While some farm families organize as corporations for legal purposes, they’re still considered family farms.

Looking at the numbers by state, Bigelow reported that Illinois has the highest percentage of non-operator ownership, with 50 percent. Arkansas, Indiana, Iowa and Kansas all report more than 40 percent. Missouri and Mississippi run quite a bit lower, at 27 percent and 29 percent, respectively. Bigelow is in the Farm Economy Branch of USDA-Economic Research Service’s Resource and Rural Economics Division.

Sherrick addressed the misconception that giant corporations dominate farming. “Judging by popular and fringe press headlines, there seems to be some impression that there is a large number of non-family corporate farms somehow increasingly controlling farmland, with public press references to factory farms and the like,” he said in a report titled Farmland Ownership: Trends and Future Implications. “Some also believe the livestock sector is owned by big corporations, but this fallacy fails to account for contract production with individual farmers,” he said.

Actually, according to Bigelow, non-farmer corporate ownership of farm acreage has declined over the past 17 years. “In 1999, corporate entities owned just under 42 million acres, which compares with 32 million in 2014,” he said. The non-farmer corporate share doesn’t add up to much when you consider that a total of 911 million acres are farmed in the contiguous 48 states.

Institutional investors take a look

It’s clear: Big corporations have not taken over farmland. Recent declines in farm profitability may slow non-farmer interest. But as Sherrick pointed out, institutional investors such as insurance companies and pension funds take a long-term view and could recognize rising global food demand and positive returns on farmland compared to other investments. 

Sherrick is director of the TIAA Center for Farmland Research. His relationship with TIAA is significant because this organization—which provides retirement services for academia, medicine and other industries—is one of the largest institutional investors in farmland. In 2015, TIAA raised $3 billion for its second global farmland investment partnership, on top of $2 billion raised for its first, which closed in 2012. Most of these investments involved overseas properties, but some investors are taking a look at the U.S.

NCREIF Total return—the average annual return on farmland owned by institutional investors—helps explain the interest in farmland investments. According to Sherrick, NCREIF Total provided a better return (12 percent) compared to equity funds from 1990 to 2015, including the S&P 500 (6.8 percent) and NASDAQ (9.2 percent). “Farmland returns are reasonably high and have low relative risk,” Sherrick said.

Tim Maverick, writing in Wall Street Daily in late 2015, predicted that institutional investors’ share of farmland ownership is sure to rise. “It’s the perfect investment for institutions with long-range investment goals, such as pension funds. It’s a real asset, not correlated with stocks and bonds. And it pays steady income, as farmers pay rent on the land.”

Real Estate Investment Trusts (REITs) have been around for years, offering retail investors the opportunity to buy shares of property that have been grouped and securitized. To date, only three REITs specialize in farmland, including Gladstone Land Corporation, the first to form in 2013, followed by Farmland Partners Incorporated and American Farmland Company. While they represent a small share of farmland today, Sherrick believes REITs may make an impact over the long run. “But it will take a while to get to scale,” he said.

Competing for available land

No matter who’s buying, there’s plenty of interest in purchasing farmland. “It’s certainly a competitive market, particularly in more productive ag regions of the U.S. such as the Midwest,” Sherrick said.
Ray Massey, an agricultural economist at the University of Missouri, keeps his ear to the ground as an Extension economist. He says farmland supplies seem tight, and farmers are competing to purchase land that may not be available in future years.

“I’ve heard of a few institutional investors looking for large tracts of land,” Massey said. “But with our high percentage of small farms, Missouri is probably not on their radar as much as other states.”
Sherrick doesn’t believe farmers should be concerned about outside interest in farmland. “Institutional investors provide an important source of liquidity, and the land still needs to be farmed by the tenant,” he said. “The seller sees no impact; the farmer often has a more stable relationship as a result.”

Still, Sherrick sees an increasing separation between operators and ownership. “That is the long-run force that is beginning to push the financialization of farmland forward,” he said.

As farmers age and retire, more land may come available. Bigelow’s study predicted that 10 percent, or 93 million acres, of all U.S. land in farms would be transferred during 2015-2019. “Most will change hands through gifts, trusts or wills,” the report said, adding that some of that land may be sold by the new owners, bolstering the supply of property available for purchase.

Renting farmland may still be a good deal

Many economists believe that farmland rental prices tend to lag behind changes in farmland purchase prices. But USDA Economist Daniel Bigelow says the agency’s recent national statistics don’t agree.

“Overall, in the past year, we’ve seen a 1 percent ($40) decline in cropland values and a 5.5 percent ($8) decline in cropland rents, so the percentage drop is actually bigger for rents,” Bigelow said. “Land values depend on expectations of the future stream of income from land, while rental values are based on net returns expected in the current year.”

The percentage of land rented in the U.S. has been relatively constant since 2002, he added, noting that cash agreements have grown more popular over the same period. Today, fixed cash rent payments make up more than 70 percent of all leases.

In 2014, about 35 percent of farmland in Missouri was operated by tenants, Bigelow said, compared to 32 percent of total U.S. farmland.

The average cash rent per acre paid by U.S. farmers in 2016 was $136 an acre, according to Bigelow. Crop acreage attracted much higher rents than grazing land. Bigelow illustrates rents values in Today’s Farmer country by comparing cash rents paid on irrigated versus non-irrigated Missouri cropland over the past five years:



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