Washington Insider: Where the Tall Stocks Grow
(DTN) With the rewrite of the expiring 2012 farm bill looming, both officials and pundits are sharing and re-sharing the view that the next bill will be different-a little-and, what they generally mean is that they will have less money to spend. They expect at least some pressure from budget cutters, a theme Secretary of Agriculture Tom Vilsack tried out at the Iowa State Fair on Friday in the form of a plea for conservation programs which he says are losing their appeal. It is not clear who he was appealing to.
"There was less interest by farmers in the last round of [Conservation Reserve Program] signups," Vilsack said, "In an era of high commodity prices and high costs, farmers are under more pressure."
The secretary also said that the next farm bill may be one of the fastest assembled in the last eight decades, since the special House/Senate special committee tasked with cutting another $2 trillion from the federal budget must have its plans in place by late October.
Farm interests say they are divided about whether they prefer to lobby the special joint committee for favors and programs, or push to have the committee back away from specific recommendations and let the automatic triggers kick in, since some believe that could result in modest, 4-to-5-percent across-the-board reductions in all programs, and that social programs would cough up most of the real savings.
Either way, Vilsack said, he and USDA won't submit their own farm bill, because he thinks that "does not work." He does plan to work with congressional committees throughout the process.
Vilsack warned that the future of direct payments is endangered because of budget constraints and an era of high commodity prices and farm incomes raises questions about their need. Actually, questions about the effectiveness and need for that program have arisen independently of the current budget constraints, a fact Vilsack did not mention.
However, there is yet another potential driver for the farm program debate that is emerging from the urban press but is not much heard in Washington policy circles. It involves a fundamentally restructured farm policy vision and generally looks over the top of proposals to simply rearrange programs that are increasingly criticized by producers.
If you have any doubt that the world of agriculture really is different these days, you would find a Washington Post feature story on Sunday instructive. It featured Perry Vieth, a former Wisconsin farm boy now re-tooled after a 38 year career as a securities lawyer and fixed-income trader. He returned to the farm, sort of, to help found Ceres Partners, a Granger, Ind.-based investment firm where he oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. Vieth told the press that Ceres Partners produced an average annual gain of 16.4%, after fees, from January 2008, just after the firm started, through June of this year.
Ceres Partners works, Vieth says, because the growth in demand for food –– spurred by the rising middle classes in China, India and other emerging markets –– shows no signs of abating.
The article did not mention the farm bill or government safety nets, but concentrated on surging markets and competition for resources. And, it focused on macroeconomic trends and the use of farmland as a respite from the cyclical price swings of the commodities market. It observed that the average value of an acre of farmland tracked by USDA has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
It notes that the Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In that connection, it quotes Greyson Colvin, who started the farming fund Colvin & Co. in Anoka, Minn., in 2009, and who dismisses the idea of an overheated market. "After the housing bubble, people are a little too quick to assign the word bubble these days," says Colvin, who oversees 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Colvin, a former analyst at UBS and Credit Suisse, says U.S. farmers aren't carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23%, is expected to fall to 10.7% in 2011.
This is not to suggest that land investment has ended the need for farm safety nets, but, it does suggest the obvious fact that the agricultural and resources economy is no longer tied to the image of your great-grandfather's farm economy, with its narrow, unsophisticated markets and opportunities and its crying need for social development in the form of farm-to-market roads, electricity and telephones, the backbone of the New Deal agriculture programs. Today's producers are educated, sophisticated, well informed and depend on armies of consultants to plan and organize to deal in global markets.
About the only thing that is the same now as then is the views of the government officials and the phalanxes of lobbyists who are pushing calculations regarding which loophole in the special debt commission will work out best — meaning, change things the least-and the forced draft farm bill rewrite may, in fact, mean only small changes. Most likely, though, things will change sharply this time to accommodate the fast pace of reality.
http://www.dtnprogressivefarmer.com/
"There was less interest by farmers in the last round of [Conservation Reserve Program] signups," Vilsack said, "In an era of high commodity prices and high costs, farmers are under more pressure."
The secretary also said that the next farm bill may be one of the fastest assembled in the last eight decades, since the special House/Senate special committee tasked with cutting another $2 trillion from the federal budget must have its plans in place by late October.
Farm interests say they are divided about whether they prefer to lobby the special joint committee for favors and programs, or push to have the committee back away from specific recommendations and let the automatic triggers kick in, since some believe that could result in modest, 4-to-5-percent across-the-board reductions in all programs, and that social programs would cough up most of the real savings.
Either way, Vilsack said, he and USDA won't submit their own farm bill, because he thinks that "does not work." He does plan to work with congressional committees throughout the process.
Vilsack warned that the future of direct payments is endangered because of budget constraints and an era of high commodity prices and farm incomes raises questions about their need. Actually, questions about the effectiveness and need for that program have arisen independently of the current budget constraints, a fact Vilsack did not mention.
However, there is yet another potential driver for the farm program debate that is emerging from the urban press but is not much heard in Washington policy circles. It involves a fundamentally restructured farm policy vision and generally looks over the top of proposals to simply rearrange programs that are increasingly criticized by producers.
If you have any doubt that the world of agriculture really is different these days, you would find a Washington Post feature story on Sunday instructive. It featured Perry Vieth, a former Wisconsin farm boy now re-tooled after a 38 year career as a securities lawyer and fixed-income trader. He returned to the farm, sort of, to help found Ceres Partners, a Granger, Ind.-based investment firm where he oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. Vieth told the press that Ceres Partners produced an average annual gain of 16.4%, after fees, from January 2008, just after the firm started, through June of this year.
Ceres Partners works, Vieth says, because the growth in demand for food –– spurred by the rising middle classes in China, India and other emerging markets –– shows no signs of abating.
The article did not mention the farm bill or government safety nets, but concentrated on surging markets and competition for resources. And, it focused on macroeconomic trends and the use of farmland as a respite from the cyclical price swings of the commodities market. It observed that the average value of an acre of farmland tracked by USDA has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
It notes that the Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In that connection, it quotes Greyson Colvin, who started the farming fund Colvin & Co. in Anoka, Minn., in 2009, and who dismisses the idea of an overheated market. "After the housing bubble, people are a little too quick to assign the word bubble these days," says Colvin, who oversees 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Colvin, a former analyst at UBS and Credit Suisse, says U.S. farmers aren't carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23%, is expected to fall to 10.7% in 2011.
This is not to suggest that land investment has ended the need for farm safety nets, but, it does suggest the obvious fact that the agricultural and resources economy is no longer tied to the image of your great-grandfather's farm economy, with its narrow, unsophisticated markets and opportunities and its crying need for social development in the form of farm-to-market roads, electricity and telephones, the backbone of the New Deal agriculture programs. Today's producers are educated, sophisticated, well informed and depend on armies of consultants to plan and organize to deal in global markets.
About the only thing that is the same now as then is the views of the government officials and the phalanxes of lobbyists who are pushing calculations regarding which loophole in the special debt commission will work out best — meaning, change things the least-and the forced draft farm bill rewrite may, in fact, mean only small changes. Most likely, though, things will change sharply this time to accommodate the fast pace of reality.
http://www.dtnprogressivefarmer.com/
Posted by Colvin & Co. at 9/6/2011 5:30 AM 
Categories: Farmland
Tags: agriculture commodities Farm Bill farmland Land Value USDA
Categories: Farmland
Tags: agriculture commodities Farm Bill farmland Land Value USDA
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