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RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Tidbits From the Kansas City Fed - Part 2

Jun 02, 2011

Following our theme of providing tidbits from the Kansas City Fed Report:

  • Milk producers have had at least three plus years of unprofitable operations.  The Fed estimated that the average US dairy lost $4 dollars per hundredweight in 2006, made about 50 cents in 2007 and the lost $11, $7 and $4 for 2008-2010.  On average, California dairy farmers (the largest producer in the country) is about $3-$5 better on average and Wisconsin farmers are a little worse than the averages.
  • A lot of the pain in the dairy industry has a direct correlation to US dairy exports.  These exports were steadily climbing until early 2008, when the fell off a cliff.  They had peaked out at about $400 million in 2008, dropped to slightly less than $200 in 2009 and have now finally gotten back to the 2008 levels.
  • Even though times appear to be good for farmers, commercial bankers are reporting the highest level of non-performing loans for farmers since the early 1990's.  After bottoming out in early 2008 at about one-half of one percent of total loans being non-performing, this percentage is now up to about 3% or a five-fold increase.
  • The Fed predicted what would happen to farm land prices if corn prices were to fall from current levels and stay there.  Using a base line of Eastern Nebraska irrigated corn land at $5,000 per acre (which may be low now), that if corn was at $5 per bushel, prices would drop 29%, at $4, drop 43% and at $4, drop 57%.  Also, this is assuming a capitalized value at 7%.  If this number goes up with an increase in interest rates, the price would drop even further.
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