We'd Like to Mention
The New Math
There is something seriously wrong with the new farm math. Land was once worth what it would return. If you rented ground, your copilot was a landlord, often with ties to agriculture, who understood your challenges and knew your value.
Today's "new-math" landlords believe the return on ownership is a piece of everything tied to the land. They tally yields, market prices, government payments and crop insurance before setting next season's rental rates. It's often a gain on a risk they didn't share.
A recent report from the Farm Credit System (FCS) shows that average 2019 crop margins without Market Facilitation Program (MFP) payments are underwater. Using data from USDA, Iowa State University and Kansas State University, the FCS projects the 2019 Iowa soybean crop at a loss of 91 cents per bushel. But, add in the MFP payment, and the numbers jump into the black at a positive margin of 29 cents per bushel. Iowa corn margins were flat without the MFP; with it, the margin climbs to 41 cents per bushel. Kansas wheat margins were at negative 41 cents until MFP took that to a positive margin of 86 cents. The same report issues a cautionary note: Land values in Iowa are elevated relative to the state's net cash income. In addition, U.S. farm sector debt-to-income remains historically high. It's a wake-up call that tells us the new farm math isn't working for everyone.
In this challenging landscape, innovators will be the first to cut a way through to the other side. To see how they map out a course for the future, consider their growing diversification into new crops such as hemp or how some are building market alliances. For others, turning up the dial on technology is proving to be a valuable cost-management tool. Many innovators are even finding opportunity in reinventing relationships with lenders and landlords. It's all about building positive, balanced accords where everyone is headed in the same direction -- regardless of the math.
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