Thank you.
This year, we are going to go with tighter, short presentations and we'll get right to
it here.
I want to talk about 3 things about 2019 and into 2020.
The first one is, 2019 was a very bad production year.We had it across the upper midwest here,
it was just widespread production problems beginning with prevented plant.
The U.S. record of 20 million acres of prevented plant.
It hits Wisconsin, you can see the pictures there of where it was in Wisconsin.
But, nationally, it hit really hard like in South Dakota, North Dakota, Minnesota, and
lots of pockets elsewhere, like over toward the Indiana, Ohio.
We had it here in Wisconsin.
You can see counties that were hit pretty hard there.
In the state, we had 593 acres of prevented plant.
That was according to the FSA. 12% of our corn and 7% of our soybean acres were prevented
plant.
Those are records for census of data, so like over 30 years.
The previous high was only 6.6% and 5.4% for soybeans.
So you can see, some of those in the southeastern part there- 25%-30% of their acres were prevented
plant.
They weren't even able to plant.
So, that's the beginning and you can see the cross there.
These are the top 15 counties, but pretty much it had problems everywhere.
That continued throughout the year.
Pretty much, the USD has these weekly crop progress reports and in general, corn and
soybeans were a couple behind all summer long from where they were in terms of emergence,
tasseling, the dough stages--all the different phases of the plants.
Then, harvest came.
The last report came out December 8th.
That's when everything is done, you can see the 100% of harvest and for corn and soybeans
is pretty typical.
This year, we had 74% of the corn harvested on December 8th in the state and 88% of the
soybeans is all.
Way worse than usual.
If you look at that north central region there, that's Marathon County, Clark County and North.
We only had 46% of the corn that was harvested on December 8th.
That's just-- that's a mess.
The corn out there, still frozen, means it's a little better, but, I mean, the lowest was
East Central at 75% of the soybeans harvested.
So, that's just giving an example of how rough the production year was.
Crop insurance is about 75% of corn and soybeans are insured.
You can see there, and these data are put out each week.
As of Monday, $204 million dollars are spent on crop insurance in the state and we've got
a ways to go yet, this is far from done.
I expect that to break and be the third worst, third largest payout.
All you need is another $80 million in ademnities paid and you'll be tied at our third worst.
2012-2013, they're the worst there.
The other one that people don't think about much is hay stocks.
The USDA puts a report out in May and December.
Hay stocks in May of 2019 were the lowest they've ever been since 1950.
Then we had a really bad production year.
In December, we tried our best to make hay, but it was wet.
A lot of wet.
They were the second lowest haystocks in December we've ever seen as well, since 1950.
So, farmers had a hard time making hay.
Silage.
We harvested over a million acres of silage in the state.
The only other time we did that was in the drought of '88.
Lots of silage often means bad crop.
We also had shortage of forage.
So lots of late corn, lower quality, it was wet.
Might dry it and turn it into silage, but it's low quality, the test weights aren't
there.
I've talked to some crop consultants that were dairy farmers in the Green Bay, Appleton
area- west of there.
They were worried about production falling because they just don't have the feed quality.
It rained a lot.
The other part is, just a lot of soil damage out there.
People were desperately trying to harvest or do other activities in the spring to plant,
to, you know, put out herbicides or whatever and I don't think we've ever really write
assessed the soil damages we've done out there.
And water plenty places, the roads are flooded, the ground water is really high right now
in a lot of places.
So, that is the production issues.
The other one is, look at farm income.
This is the USDA at the national level with net farm income without doing depreciation
and some of the inventory adjustments.
It's always the lower one in general, but you can see it was up 12.9% or 8.2%, depending
on which farm income measure you use.
So, okay, farm income it's been slowly creeping up there in the last couple of years.
Corn is up about 2% at the national level.
Bean is down 5%.
Beef was pretty flat, down a percent.
Big one for us, which is nice, dairy was up 13% in cash revenues.
That's good for the state of Wisconsin and the farmers.
Here's where the money came from.
This is the direct payments over the last 10 years to farmers.
You can see the different programs have changed over the years, but the yellow stuff act the
last couple of years there, that's MFP.
Some of those payments for the 2018 crop were paid in 2019, that's why the 2019 is so large.
You can see, we really poured a lot more money into the farms income based off of these MFP
payments as well as the other program payments there.
Big for us, dairy was also important.
If you take away those payments, the MFP payments, farm income doesn't look so good.
It was down basically, depending on which income measurement you use.
So, without MFP, we are seeing a fall in farm income at the national level and I expect
in the state as well.
This is where they went, this is the payment rates in the state of Wisconsin.
You can kind of see, it tracks primarily the soybean acres, but you can see, we brought
$260 million from FSA went into the state from MFP.
Crops got about $214 million, dairy picked up $37 million from that, specialty crops,
that's primarily cranberry and ginseng, we're seeing some payments as well.
With that, dairy margin coverage paid almost $70 million into the state in 2019.
So, farm programs were a big deal this year for farm income in the state of Wisconsin.
Put those together, you get almost $333 million.
So, farm income.
Now, let's look ahead here: Where are we going?
Farm income government programs were a big part of it.
2019 and 2020, the costs were fairly stable between 2018 and 2019.
This is a USDA price index or cost index.
Looking at crop budgets and such, the 2020 crop, what it's looking at is pretty flat,
a little down it depends on, lower in general.
Nitrogren and phosphorus fertilizers are down.
Field costs, healthy gas, are gone, but labor is up and the rent went up a little bit on
average in the state of Wisconsin.
So, generally costs are stable.
Revenues are looking good, solid and costs are flat, so that's a good sign.
Land values are holding in the state.
The upper midwest here, it's plus or minus a percent.
Wisconsin, state average, crop value went from 4900 to 4950 an uptick of 1%.
So, this is a good sign.
The land values are holding, ag is still a good investment.
But, you look at some of the lending portfolio.
This is from the federal reserve bank in Kansas City for their ag sector broadly, not just
the region.
Commercial Banks, it's been falling heavily after the Great Recession, but ag banks, those
are heavily concentrated, showing a trending upward since 2016.
Right about 2 and a half percent of loans are delinquent.
So, it's been worse back in the Great Recession in the 2000s, but it's disturbing to see that
keep going upward.
This just came out yesterday.
The ABA-Farmer Mac, there's a survey there, the link is at the bottom.
The number one issue that they're worried about, ag lending, and this is across the
midwest or the U.S. really.
Credit quality and the ag loan deterioration-- that's number one on the list.
74% are concerned about that.
The next is only at 34%, it's creditworthiness, the ag loan portfolio deterioriation is a
really big issue for ag lenders right now.
You can see there on the map how much percentage of customers are profitable through 2019-2020,
about half in the corn belt.
Though that means that there's another half that aren't doing so well and that's the part
that worries me and that's, I think, that 74%.
Someone, I am guessing there are ag lenders here; it should be a topic of conversation
how the Wisconsin farmers are doing.
The dairy, we will let Mark talk to us about dairy and hopefully, it's better.
The other one there, that hemp comment, there.
About half of the ag lenders in the country reported someone asking them or a farmer about
financing hemp.
It's on a lot of peoples' minds, hence the afternoon.
This is the one that always disturbs me, is the dairy farmer attrition.
We have the numbers on herds in the state of Wisconsin, 10% difference from last year
to this year, we lost 10% of it.
The average is 2.2 dairy herds left the state or were sold this year per day.
Herd size has gone up from 132 cows in 2016 to 173.
Basically, 31% higher.
So, consolidation is a big deal.
We are still leading the state bankruptcies, farm bankruptcies in the state.
This is 12 filings which show up in the federal data.
You can download each quarter, and this is the most recent one available, September 30th.
48 in the state, we're ahead of everybody else again.
I'm sick of us being good at this.
It's really quite sad.
So, in summary, production issues dominated in 2019.
There are still a lot of unharvested crops, there are especially damaged fields, a shortage
of quality forage out there.
Hopefully 2020 will being us better weather.
I don't know about weather forecasting, I am not going down that route.
Farm income was a tight year in 2019.
2020 looking to be about the same, pretty tight.
But farm programs were a very big help this year, between MFP, the dairy margin coverage,
ARC, PLC, crop insurance-- all that stuff was very important for farmers this year.
Over $500 million came into the state so far.
We're getting mixed signals on the farm financial sort of health and the 2020 outlook.
Some are doing okay, some are not.
Signs of strength are stable costs, land values holding, and the price expectations we'll
hear from Brenda and Mark.
Signs of financial stress are--there's plenty of them out there-- dairy attrition, loan
delinquency, the farm bankruptcies.
So, it's kind of a mixed bag out there.
All right, thanks for your attention.