By Nate Birt
Brexit Puts U.S. Commodities on an Uphill Export Climb
Britain’s decision to leave the European Union could “unleash a series of dominoes” across ag markets, says Mike Steenhoek, executive director of the Soy Transportation Coalition.
“Where the end of that leads, it really is up to debate,” Steenhoek tells “Top Producer Podcast” host Pam Fretwell. “But the net result is greater unpredictability.”
U.S. ag producers likely will see the implications of Brexit in the form of market volatility and competitive challenges for ag products abroad. “Capital will flee to [what are] perceived to be safe havens, and the U.S. dollar is certainly regarded as one of those,” he says. “All that does is increase the value of the U.S. dollar compared to other currencies. [It] diminishes our competitiveness to export.”
A perceived lack of representation in Brussels, the political heart of the EU, is among factors that left voters in the United Kingdom seeking an out, Steenhoek says. “It’s not just a matter of going to lobby my member of Parliament. The Brussels government really wasn’t as responsive to those various member countries. People regarded it as insulated.”
Listen to full episodes of “Top Producer Podcast” by downloading the MyFarmRadio app, subscribing to the podcast feed with Apple’s Podcasts app or visiting topproducer-online.com.
Land Update with Mike Walsten
Farmland Values Decline Throughout the Corn Belt, Mid-South and Plains
Midwest land values continue to slide, according to recent surveys from four Federal Reserve banks. The value of good-quality agricultural land in the central Corn Belt slipped 4% through March 31 compared to the previous year, the Chicago Federal Reserve says. Illinois and Iowa reported a 5% decline, while Indiana had a 2% slip. The lower peninsula of Michigan listed a 7% break. Southeast Wisconsin proved to be the exception with a 1% increase.
The southern Corn Belt and Mid-South saw cropland values decline 6.4% through March, according to the St. Louis Federal Reserve. District ranchland and pastureland values did not change on an annual basis.
The Plains states also experienced a decline. The value of dryland cropland fell 4% on an annual basis through March, the Federal Reserve Bank of Kansas City reports. The value of irrigated cropland in the district slipped 2%, and the value of ranchland and pastureland declined 1%. Kansas and Nebraska recorded value declines of 8% and 7%, respectively, for dryland cropland, while Oklahoma noted a decrease of 2%.
The northern Plains saw a 6% decrease in dryland cropland values in the first quarter, the Minneapolis Federal Reserve Bank says. North Dakota fell 10%; Minnesota declined 4%.
To read Mike Walsten’s “Your Precious Land” blog, visit agweb.com/blog/your_precious_land.
By Nate Birt
Ask an Analyst: Mike North, Commodity Risk Management Group
What is your commodity marketing philosophy?
Every client has a different situation. We start with a look at their breakeven, farm logistics, cash-flow needs, storage availability and harvest movement. We have a discussion about their objectives and what they want to accomplish in a given marketing year. Then we build a plan to help defend them and try to offset market risks.
What distinguishes your consulting firm from others?
We have a very strong presence on both dairy and row-crop sides. It’s about 50-50 and helps us see both sides of the balance sheet a little bit better. We can get an idea of trends that are developing.
What’s one action producers should take to manage risk?
There are a lot of producers wishing they’d sold some more grain on the recent rally. For those who are reluctant sellers, you can make a sale and then buy a call to help justify your sales strategy. Put options can cheaply defend current opportunities while waiting for better prices.
Fundamentals don’t support the recent rally in dairy. Yet we could see a bit of a price turnaround. Given those conditions, we recommend using put options in concert with futures contracts or sales to your cooperative or processor.
Which marketing tool is most underappreciated?
Options—largely as a function of understanding. Most producers have had little exposure to how options work and how to use them. They require a little bit of strategizing on the front end. A partnership with someone who has expertise in this area makes sense.
Whose industry advice do you respect greatly? Why?
Several university economists do a nice job bringing together data and how it impacts prices, including Darrel Good at the University of Illinois for grain and Bob Cropp at the University of Wisconsin-Madison for dairy.
What activities do you enjoy?
I’m a farm kid, so I enjoy being outside. Being in an office is tough to do, period. I enjoy hunting and fishing. I love to build and like biking and skiing.