All right everyone, thanks for coming in this weather. It is really throwing it winter at
us. Those on livestream, thank you for being on livestream as well. What I'm
going to do today is talk about three things mostly into my presentation, talk
about sort of an overview of the farm income projections for 2018. They're down
again. 2019 looks like another year of tight margins but there are signs of improvement.
Then we're gonna see some mixed signals on the state of the farming
sector here in the state. I'm calling it a tale of two farms.
I'll get to more of that in a bit. And then the last thing I want to talk about
is the 2018 farm bill, what to expect on the crop side as well as the the market
facilitation program. That's not part of the farm bill but is part of where it
fits in and how it provided short-term help. And the last thing I'll do a little
bit on the on the dairy chain programs that came with the new farm bill.
This is USDA data on the net farm income or the cash version of it. The the net
farm income takes into account the inventory adjustments but especially
depreciation. These other non-cash costs and what you see is this: down 2017 was a
bump up as we sort of thought we hit the bottom and then this last year we're
going down again relatives so down 8 to 12 percent from the previous year 2017
these are the forecasts this is revenues from crops the last five years this is a
USDA tech data as well the total revenue from crops is up one and a half percent
corn is up four plus percent soybeans almost over four and a half percent the
other crops are down but you can see there there's more revenue prices
haven't been the best where we had large yields and so overall the revenue from
crops is up this is at the national level though on livestock products it's
down beef is down over a percent dairies down big time over seven percent
decrease this is the gross revenues and this is part of what's really dragging
down the farm income is this reduction in what happened on the particularly
dairy for us but you can see broadly beef government payments in the midst of
these revenue declines have been up a lot 18
are on the crop these are primarily going to be the crops arc and PLC are
the two programs they're down 4.6 billion dollars that's if you go from
1718 that yellow section up there that's the decrease in arc and PLC
payments those have been paying its big and also they really fell off 4.6
billion last year at the national level made up for roughly by a four point
seven billion increase in the market facilitation program saw what was lost
for arc and PLC support for commodity crops was compensated by MFP and then on
top of that yet is disaster payments and so farmers aren't better off they're
better off not having disaster payments because there's no disaster but disaster
payments help when there is a disaster and so that's why they're operate there
that's in the hurricanes primarily but government payments are up
however revenues for crops are up revenues for livestock were down
expenses are up more particularly interest expense if you really look at
that number there's been a 18% increase in interest expenses fuel energy is also
up feed labor also up that's partly kicking into the y the livestock sector
revenues are down that's really hurting there because of the feed costs rising
so that's why we have doubt farm income is down though revenues are up for crops
that costs or isn't more so if you look at the state of Wisconsin here this is
our farm income about 1.7 billion but it's down this year from the previous
year so with just like the national level those same brands have been
projected down these are still estimates we don't get the state level data yet I
mean a few more months but you can see I'm somewhere around with 6 percent it
could easily be more we'll see how it all settles out a lot depends on the we
had a good production here for corn and soybeans in the state in terms of total
bushels it's what they get for prices the cropping year is still on it's still
ongoing for the marketing year for corn and soybeans so a lot that where the
uncertainty is where the prices are going to be for 2018 crop of corn and
soybeans so income is down this is interesting here is there's some signs
that they're still strength in the farm economy land values for cropland I
should say here is up 2.3 percent in the state this is the leads the Midwest in
Minnesota is down over a percent Michigan's down point four percent
across the only other state in the Midwest that's higher is Missouri at
over ten percent but they started at a lower much lower base last year we were
up 9 percent plus that was your second in the nation and so it's surprising our
land values are still creeping up in the state that's a sign of strength the
balance sheets are not eroding for the farmers that are owning land
dude land values falling the other one that's the state average rental rates we
don't get the broken down by district and County yet this year but up over a
percent edited dollar went up to a dollar $140 breaker is the average of
land rental rate so you can see the rate of increase is really slow but it's
still creeping up these are signs of strength that the farm economy is still
rental rates are going up these are looking forward some into 2019 these are
the margins there's the price of milk and then below it is a feed index that's
what these are this is from the D map page what you can see there is we went
through some bad margins but the 2019 margins looking forward are somewhere
between eight to nine dollars nine and a half dollars above the feed Cost Index
better than we've been seeing previously and these are corn and soybean margins
these are from Iowa State University what's nice is they have a nice
consistent format for decades it goes back to 1975 so everything's been
converted to dollars per bushel and what you see that you can see the zero line
there Green is porn brown and soybeans and a couple things I want to point out
is whenever they go down below zero and negative margins they go down for a
while then they get it figured out and they come back up again sort of that
cyclical nature of these crop production systems as we work these large crops
through the system they don't go down then by gyrate up and down and so that
gives me hope now that we're starting to come out of that here on corn and
soybeans at the national in iowa here but everywhere as well there are some
we're probably going upwards the worst of it is over you see that last year
projected for 2018 is the loss of the second last year that's the trade war
which I'm trying to really cut in there soybean margins that year but if these
was the prices are in fact turnout for the 2016 crop the herbs our
2018 crop here of 364 corn we're have been be about a break-even deal for 2018
crop on on the march of the corn in Iowa but something similar here the other
thing I'd like to point out is this would be if that happens we're at like a
five-year negative mark to soar corn we had this before if you look back there
at the late 90s early 2000s we had a nine year negative margin run for corn a
seven year negative run marched for soybeans this one isn't it's gonna be as
bad if we do come out of these so we'll see what the crop outlook is but they're
looking better than they have once we get into 2019 Murray the signs of
improvement we're around the corner it's still bad or it's not good but it's
getting better speaking of bad well Scott's led the
nation in Chapter 12 violence last year this is the farm bankruptcy we had 47
farmers in the fiscal year of 2018 declare bankruptcy in the state that's
higher than was that year before the next state is Nebraska 31 there's still
a lot of farm financial stress out there and what you really notice is these are
the data now the top one is the various states and what they've done since 2013
this is number of bankruptcies per year you can see 2013 to 2018 there the last
year's been added we are we were the first three there are Wisconsin Michigan
in New York as dairy states we were all about the same 20 13 14 15 and then in
2016 we all of a sudden jumped up here in the state whereas they flattened out
you can see there's some general trend we're upward in those other states our
neighbors Michigan Minnesota Illinois Iowa they're all trending upward we're
still nowhere near where we are you normalize it per 10,000 farms each state
has a different number of farms there's a recent paper by den termen at all out
of ohio state they have that 20 year average for our bankruptcies for 10,000
farms Wisconsin in Michigan both at about 3 is the long-term average for
every 10,000 farmers on average 3 declare bankruptcy
Wisconsin way about that long run average
five to six almost seven farms per 10,000 firm to clinic bankruptcy in the
state whereas Michigan was above it and then they've quickly come down below it
they're still on their long-run average we're something unusually hot that's
going on here map on the left there is where they were was counties we're
talking about the it's hard to see the colors but the rage I guess how it
turned out now that's one the yellow is too for that County three is the orange
Monroe and green counties the red is full counting up there with four and
then Dodge County at five you can see these where they are concentrated
they're happening a lot along that Driftless area along the Wisconsin the
Mississippi River Valley and then some of our other Dare areas this was in the
newspaper this weekend the Sunday's on the State Journal I'm sure some of you
saw that the suicide rate in Wisconsin is at a record high it's not all dairy
farmers it's not all farmers you can't necessarily it can't differentiate you
don't alert that were they what the who they were exactly in terms of profession
and everything but the paper article is all about the various stories of farmers
that have considered it or have actually committed suicide Wisconsin dairy farms
the numbers are down almost half of what they were over 15 years yet the number
of cows is roughly the same in the state so consolidating that's why we're
talking about this afternoon so dad cap seemed very busy with the
farms of farming and stress that has got to farm cider you got the number there
it'll be on the slides people are dealing with some serious troubles here
and at the same time in the middle of this you see all these signs of
struggles I've been out talking to farm to visit it some dairy farm with some
students I went to visit a specialty crop farm they're in the process of
expanding in the midst of some of these lowest margins some of these crops they
are still seeing a future those land valleys are holding and so I've been
calling it a tale of two farms some farms are doing fine or okay some parts
are very much struggling and this is the quote rate and I think this is really a
good look what's going on out there right now for some farmers it is this
you know that Charles Dickinson is opening to the The Tale of Two Cities it
was the best of times it was the worst of times it was a season of light was a
season of darkness it was the spring of hope it was the winter of despair we had
everything before us we had nothing before us
I think we have farmers in the state feeling both sides some feel one side
some feel the other so it's it's kind of a bimodal distribution here in the state
so switching now to the farm bill and then we'll be done what is the farm bill
done for it so just past this year I want to talk about commodity crops first
the big one is loan rates have increased this is important USDA FSA provides
these marketing assistance loans these are low-interest loans at one point
above the federal rate so like three and a half percent um use your harvested
grain as collateral they have been stuck at a dollar 95 to $5 per bushel that you
enroll for a long time they've increased them what this is is going to provide
farmers facing higher interest costs and low interest loans if you can help cash
flow things after harvest before they sell their grains help pay off mortgages
help fund the incoming crop they want to plant you know to buy input so I think
that'll be really good in this time of lo of high interest rates coming PLC and
arc are a primary commodity support program so for corn and soybeans a
little bit of wheat in the state they updated the payment yields are gonna
come around two people are gonna go in and increase your yields that they use
the calculating payments so go do that that's an FSA we'll be announcing that
soon and I'm sure the reference prices for PLC were fixed at 372 corn 844
soybeans they created a new effective price it'll float higher if the markets
are higher so at the 85% olimpic of the five-year Olympic average the reality is
this the tweak that won't matter for corn soybeans until our market prices
get up but it looks good on paper but in the short term the next few years we
need a price of corn to hit the five-year Olympic average has to hit 435
before that starts hoping we're not we're a long ways from that yet arc made
some small changes mostly to increase the 20 revenue guarantees it provides so
they're gonna be higher and more likely to trigger payments when they happen but
the reality is I'm telling people do not expect large art payments for the 2019
in 2019 for the 2018 corn and soybean crop they're gonna be low if they're
even paid the next big one is program selection the first farm bill on the
with arc and PLC was 2014 and you had to choose one or the other for the whole
life of the farm bill by crop 20 1920 we combine to make a choice which one
you want arc or PLC and then every year after that it's gonna be an annual like
annual election so farmers are gonna have to make a choice every year going
on arc or PLC which of these commodity support programs they want what we're
anticipating given the the markets we're seeing and stuff is really expecting
farmers to make a big move to PLC which is we have that's like payments program
so we've been relying in art payments we're gonna be switching to PLC most
likely this kind of helps put it into context here the orange bars or how many
millions of dollars came into the state of Wisconsin for arc these are the year
they were paid to like 2015 was two hundred and roughly twenty million
dollars that was art payments that came in from the 2014 crop paid in 2015 you
can see the first couple years that we really got paid a lot on arc really fell
off in 2017 just as the the wheels are falling off the bus on some of these
prices what happened 2018 is payments for arc and PLC were less than 20
million in the state one-tenth of what there were three years before what
happened is MFP the mark facilitation program if everyone signs up for it I
did the math at the maximum we're talking somewhere around two hundred and
seventeen million more dollars to come into the state on this would primarily
be through the soybean I'm over one hundred and seventy-five million
reviewed all the soybean production in the state enrolled in this program so
you can really see that will put us back at those levels in this time of tight
margins and low farm income a sign of deadline if you haven't done this is
still it's been extended at the shutdown so I farmers if you haven't done this
yet or people who talk to farmers get him in there and get him signed up for
this if they grew soybeans met conservation compliance and have three
years of adjusted gross income information that should be eligible the
last one is the dairy margin coverage I'm not a dairy policy person I've
worked more on corn and soybeans and specialty crops but MPP the margin
protection program was the dairy program in the 2014 farm bill we'll call it
ineffective and unpopular they really took a lot of heat to do a better
program that's been replaced with DMC dairy march and coverage what they do it
really is gonna help the smaller dairy farmers in the u.s. or the state
particularly particularly the first five million pounds of production so we'll
say roughly two hundred ten twenty paulo operation
first that first five million pounds you can Abell to get a higher margin the
margin is the farm the milk price and then there's a feed cost index the gap
between them as the margin is that market is thinner you have less money to
pay your own self to pay labor to pay your overhead costs and that's how you
above your feed costs so you want a higher margin that means you've got
money to pay these other inputs you can get up to 950 now we used to only be
eight dollars and it's cheap 10 to 15 cents a hundredweight for your
production your historical production and you can coverage get for almost up
to 95 percent of historical production so we're that will be very useful for
those first 5 million pounds once you go above that 5 million pounds all that
production out there so if you have 6 million pounds the next 1 million pounds
the margins most likely gonna be close it is somewhere in the four to five
dollar range much lower it's more of a catastrophic coverage and its really
cheap again only it's half a cent 100 wait for that for the $5 margin once you
go above the $5 margin the costs start to rise really quickly what's really
nice now you can get that DMC for that five million or the other tier the per
your production about 5 million it can combine with the new insurance policy
it's called dairy revenue protection that will be out there as well for more
price protection so farmers on the dairy side I can have some really new tools
here and there's some incentives to sign up for the DM C as well so what's really
gonna happen is farmers are gonna really find it valuable to sign up for the 8 9
update 950 dollar margin probably 950 for 15 cents a hundredweight for your
first 5 million pounds and then probably take the $5 margin for a quarter cent or
a half a cent per hundredweight for all your production above 5 million pounds
and then some are gonna buy d RP so I think we're gonna see some tremendous
this is really gonna help the smaller dairies in the state so my overall my
thoughts are farm income is gettin down for 2018 slightly and 2019 will be
another year of tight margins and income uncertainty its the problems aren't over
they're just there's some signs of improvement we'll see what the markets
are bringing in the future hear from the other speakers farm bill is gonna help
dairy mfp market facilitation program program provided some short-term help
don't expect art payments or PLC payments to the 2019 in 2019 through the
2018 crop MFP is a temporary program it's not
supposed to happen again so it's gonna be tight out there and there are a lot
of farms out there that are suffering a lot of financial stress farm families
are been stressed over these several years of low income and so some are
struggling but some are doing okay and so we're kind of seeing a bifurcation or
two types of farms out there the bat cat farm centers they're there if some of
you work with farmers there's some publications at the back and the table
right by the door they're on helping tain farm stress it's a one page or
two-sided document I'm John Schott ski at UW Madison here's put that together
for helping people working with stressful farm and the other one is a
much longer document there there's materials back there if you're
interested all right thanks your attention we'll take
questions if people want