“As part of this study, we conducted a historical analysis going back to 1980 and found that fertilizer costs tend to go up when corn revenues increase. Notably, these prices tend to go up exponentially even after accounting for natural gas prices and higher demand,”

says Joe Outlaw, Ph.D., the AFPC co-director.

Dee Vaughan, a farmer in the Texas Panhandle, says his farm has felt the impact of climbing prices that account for approximately 36% of a farms’ operating cost.

“In just over 2-years, I’ve seen an astonishing 264% increase in the cost of nitrogen fertilizer alone. My farm’s overall fertilizer cost has increased 241%,”

Vaughan says.

Farms are experiencing this price hit regardless of location. Jim Sugarek who farms near Bee County in South Texas also saw a 264% increase in fertilizer costs on his family farm.

“As I prepare to put a seed in the ground in just a few weeks, I couldn’t wait to see if these price hikes would settle to something close to a normal year – much less risk them surging even more,”

Sugarek says.

In the study’s historical analysis of the nitrogen fertilizer industry, four manufacturers, including CF Industries, Nutrien, Koch, and Yara-USA, account for approximately 75% of the total domestic nitrogen fertilizer production.

Inflation and supply chain issues experienced nationwide have been cited by the industry as key factors to the impact on farmers’ fertilizer prices. However, the study shows there are some trends to be considered to the contrary.

Namely, the industry indicates natural gas accounts for 70-90% of variable production costs for nitrogen fertilizer. The study finds that the increase in one type of nitrogen fertilizer, anhydrous ammonia, the value of natural gas accounts for only 15%, or $102, of recent price increases.

“The study shows that once the value of natural gas has been subtracted from nitrogen, the residual tends to closely track the price of corn,”

Outlaw notes.

While this correlation could nod to increased demand for nitrogen products as corn prices rise, it could also be “due to the exercise of market power by nitrogen product manufacturers,” the study asserts.

“Our findings raise serious questions and clearly help explain the frustration with this situation farmers are feeling nationwide,”

Outlaw says.

The study was commissioned by state corn checkoffs and associations in Texas, Missouri, Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Minnesota, Nebraska, New York, North Carolina, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, and Wisconsin.

As noted in National Corn Growers Association’s release today, looming tariffs would add insult to injury. The AFPC study states,

“Any import tax on nitrogen fertilizers would raise prices for both domestically produced and imported fertilizer by the full amount of the tax rate multiplied by the pre-tax price.

“Fertilizers play an integral role in a crop’s health and success. The steep price hikes hitting farm country are alarming for corn farmers who count on nitrogen and other fertilizers for their plants to thrive. The breadth of how far-reaching this is impacting farmers is telling that something needs to be done to keep America’s farmers from bearing the burden of an industry pushing the limit of how thin they can cut a farms’ margins,”

Vaughan concludes.

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With some exceptions, producers of agricultural commodities (crop, livestock, dairy, or aquaculture) for which prices declined by 5% or more were eligible for a CFAP payment (Johansson et al., 2020). Some commodities (such as hemp, alfalfa mustard, etc.), for which price data were not available, were also eligible for payments under CFAP (Johansson et al., 2020). A third program for which agricultural producers qualified was the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA). The PPP was designed to help small businesses keep employees on the payroll and offset some of their operating costs.

The maximum loan amount, which was forgivable if used during the 24-week period following the first disbursement of the loan on eligible expenses (payroll and allowed overhead expenses), was 2.5 times the monthly average profit plus payroll costs, including eligible overhead costs (employer insurance payments, employer unemployment taxes, etc.) (SBA, 2020). PPP data on each of the loans, including agricultural businesses loans, were released on December 1, 2020. This article examines the PPP participation rate, the average amount received, and PPP distributions relative to labor cost at the state level for the agriculture sector.

Government Support Programs

U.S. agricultural producers rely on the USDA for grants and other government payments administered under the Farm Bill. Ad hoc programs—such as the Market Facilitation Program (MFP), which provided direct payments to producers in response to retaliatory tariffs, and CFAP—are also administered by the USDA. Other federal departments and agencies were responsible for managing other ad hoc support programs created to provide assistance to compensate for losses caused by the pandemic. The 2021 Omnibus Appropriations Bill, which the U.S. Congress passed in December 2020 and President Trump signed into law, renewed the PPP, adding almost $300 billion; small businesses, including agricultural businesses, started applying and receiving loans in 2021. The 2021 American Rescue Plan (ARP) Act also includes an additional $50 billion for continued PPP loans.

Family farms accounted for more than 98% of all farms in 2019 (Whitt, Todd, and MacDonald, 2020). Because such farms play an important role in rural economies, the PPP program had and will continue to have a substantial impact on the economic wellbeing of rural America. Better understanding of various aspects of the PPP loans can provide lessons for the design and implementation of future programs aimed at supporting small businesses in general and rural farm businesses in particular.

Analysis of PPP Loans to Agricultural Producers

We use data at the PPP participant level from the SBA, along with microdata from the Agricultural Resource Management Survey (ARMS) and USDA’s state-level employment data from the Farm Income and Wealth data product for our analysis. ARMS, administered annually by the National Agricultural Statistics Service (NASS) and the Economic Research Service (ERS), is the most comprehensive source of data on economic variables related to the farm sector, including labor expenses. The data released by the SBA provide information on the loan size and number of jobs retained.

However, the SBA data alone do not provide any information on the impact of PPP loans on producers. Data on labor expenses from ARMS and farm income and wealth statistics (U.S. Department of Agriculture, 2020b) help connect SBA data to labor expenses to gain meaningful insights. Ideally, 2020 ARMS data, which collects information on participating farm operations for the year 2020, would show the impact of PPP on producers. The most recent ARMS data, however, are from the 2019 ARMS and, therefore, we use these data to provide a benchmark for the analysis.

Data released by the SBA show that more than $525 billion in PPP payments were disbursed through more than 5.2 million loans in 2020. Based on the 2019 ARMS data, 72% of all commercial farm operations had either positive net income or positive payroll expenditures, and therefore would meet the two most important requirements for eligibility to apply for PPP loans. Individual SBA loan data show that almost 121,000 (17% of eligible farm operations based on ARMS data) applied for a total of $5.9 billion in PPP loans (Table 1). SBA reports an average loan amount of $48,517.

Table 1 shows that crop farm operations applied for PPP loans at a higher rate (21% of eligible farm operations) compared to livestock farms (12% of those eligible). Of the total $5.9 billion in PPP loans, $2.1 billion (35%) went to livestock operations, and the remaining $3.8 billion (65%) went to crop operations. The number of employees paid by PPP loan in the crop sector (501,310) is more than twice that of the livestock sector (235,141). This is most likely because for many crop operations, labor cost as a share of total gross farm income is higher than for many livestock operations (U.S. Department of Agriculture, 2020a).

The major objective of the PPP was to allow employers who applied for and received the loan to pay employees by covering payroll expenses. Producers without employees but with positive net income were provided with funds to cover their income (in this case, their net returns, which are defined and counted as income by sole proprietors). A business had to use at least 60% of the loan amount for payroll expenses in order to receive full loan forgiveness in the 24-week period after receiving the PPP loan.

No information on the proportion of the PPP loans used for payroll expenses, as opposed to the amounts used for other authorized spending, is available. To compare the loan amounts to payroll expenses, we consider an upper bound (entire loan used for payroll) and a lower bound (60% of the loan used for payroll). Neither bound is exact, as more likely than not farm businesses used between 60% and 100% of the loan volume for payroll expenses but the bounds provide insights into annual payroll expenses relative to total PPP loan.

Funds from the PPP loans had to be disbursed within 24 weeks of receiving the loan, largely to allow greater flexibility in planning and use of funds. Table 2 shows that the disbursed PPP loans amounted to 22% of total annual hired labor expenses for the farm sector so if all loans were used to on hired labor wages, they would cover slightly more than 2.6 months of the year (2.6/12 months = 22%). Operations in the livestock sector would cover 26%, or slightly more than 3 months of labor expenses, while those in the crop sector would cover 20% (about 2.4 months). It is important to note that not all farms qualified and not all farms that qualified applied, as stated above, and the labor costs are for all farm operations.

If farm operations were to use only 60% of the PPP loans on hired labor expenses, the minimum required to receive full forgiveness of the PPP loan, this would offset 13% of the labor expenses, or about 1.6 months of payroll expenditures (Table 2). Loans to the livestock sector applied exclusively to wages would cover 16%, or almost 2 months of labor expenses, while loans to the crops sector would cover 12%, about 1.5 months (Table 2).

Three limitations of these results should be noted:

1. We do not factor in profit or net returns that are allowed by the PPP,
2. labor expenses are not uniform throughout the year and therefore may not match up with the 24-week window targeted by PPP, and
3. we assume that all loans will be forgiven.

The third limitation is a significant one that could change the results. We do not know yet whether the forgiveness conditions have been met since the SBA has not released any data on PPP loan forgiveness. If PPP recipient farm operations do not meet loan forgiveness criteria and have to return some money, it will affect the number of months the PPP loans covered, the jobs retained, and the labor costs they offset. Further, changes in the labor situation after receiving the loan could also affect the results. For instance, a farm employee leaving work after the farm operator has received the PPP loan would change the payroll cost thereby changing the results. The number of jobs retained are self-reported numbers by the PPP applicants. The exact number of jobs retained will be known after the loan forgiveness information is available. Because the lenders are still processing new loans, it is unlikely that data on forgiveness will be available in the near term.

The analyses and results in this paper should be interpreted as preliminary, intended to provide insights into the impact of the PPP on U.S. producers. Many producers claim the net returns to the farm enterprise as family income at the end of the year. This analysis does not include these net returns. Finally, since not all eligible farm operations applied for the PPP loans, some farms will not have been able to offset any hired labor expenses.

Distribution of PPP Loans for Agricultural Operations across the United States

The largest loan total of $1.2 billion was made to California producers (Figure 1). The highest average loan ($170,745) was made to California producers and the lowest average loan ($19,931) was received by South Dakota producers. This is expected as California had the highest average hired labor expense ($193,165) and highest average net farm income ($256,953) based on the 2019 ARMS data. Further, the contribution of Californian producers to total U.S. cash receipts was highest, at $53 billion (13% of total cash receipts) (U.S. Department of Agriculture, 2020b). The lowest total loan amount ($3.9 million) was made to producers in Alaska. This is also an expected result as the contribution of Alaskan producers to the total cash receipts was only $61 million (less than 1% of total cash receipts) (U.S. Department of Agriculture, 2020b).

Based on data provided by the SBA, the maximum number of agricultural jobs retained, 136,692, were those of California workers and the lowest number, 396, were retained in Alaska.

These states are part of what the Economic Research Service calls the “Fruitful Rim” (Heimlich, 2000), which is characterized by production specialized in fruit, vegetables, and cotton, which are relatively labor intensive compared with other crop production. The Heartland and parts of the Northern Crescent also realized higher-than-average total job retention. These states make up the Midwest and Upper Midwest and are specialized in cash grains and dairy production.

We use 60% of the PPP loan totals since loan forgiveness was predicated on 60% of each loan going to labor expenses. Some states with relatively high labor costs—like California, Washington, and Florida—were among those with the lowest PPP loans as a share of total labor expenses. Generally, states with relatively high PPP loans as a share of hired labor expenses were those with the lowest total annual labor expenses. However, there is no clear pattern: Missouri received the highest PPP loans as a share of hired labor expenses but had the 15th lowest labor expenses for 2019.

Based on our calculations, only 17% of farm operations participated in the PPP. Figure 4 shows the participation rate across states, calculated as the number of participants divided by the number of eligible farms (farm operations with positive net income or positive payroll). The participation rate varies widely, from 88% in Idaho to 3% in West Virginia. The average loan size for Idaho producers was $96,159 and for West Virginia producers it was $39,194.

There is considerable geographic variation in the participation rates. In addition to Idaho, high participation rates are clustered in the Heartland and Northern Great Plains regions, which specialize in cash grains, wheat, cattle and sheep production. Participation rates were lower in Texas, New Mexico, and states comprising the Southern Seaboard. Data on the number of eligible farms were not available for Hawaii and Alaska.

It appears that the PPP program helped to pay a significant number of employees in the agricultural sector and contributed to the general economic well-being of rural America. However, the participation rate of eligible producers was fairly low, most likely because the PPP program was a new program and was administered by a different agency than the usual contact agency with which farmers are familiar (USDA).

There were only about 121,000 applications for the PPP program, which is significantly lower than the number of applications for the USDA administered CFAP even though both programs are new ad hoc programs designed to provide aid to those affected by the pandemic. As of the end of 2020, there were 652,201 and 880,971 approved applications for CFAP 1 and CFAP 2 programs, respectively, showing a significantly higher participation rate for programs administered by the USDA. It is important to note that the requirements for the two programs, PPP and CFAP, were different.

If all eligible farm operations had applied for the PPP loans, at the average loan amount based on data from SBA, farm operations would have received $35.7 billion compared to the $5.9 billion actually received. Since the PPP program has been renewed in the new relief program and there are additional funds, simply increasing the participation rate would provide more relief to the agricultural sector and rural America in general. Based on the SBA (2021) announcement, the first draw of the PPP loans will be for borrowers who have not previously received a PPP loan.

The post Did the Paycheck Protection Program really help U.S. Producers? appeared first on North America FarmQuip Magazine.

AGCO Corporation supports livestock and hay producers with the newly redesigned Massey Ferguson 5S tractor.

The 5S Series, available in three models ranging from 115 to 145 HP will be available for order and delivery in 2022. The redesigned series delivers tremendous value and capabilities for hay and livestock producers.

“The superior maneuverability and versatility offered by the straightforward and dependable 5S make this tractor the best choice for work on the farm, in the field, or on the road. The 5S really blows the competition away with its high-performance driveline, high levels of comfort, and a wide choice of equipment and options. It can truly tackle any challenge or task on your farm,”

Darren Parker, vice president of Massey Ferguson North America, said.

Built for ultimate comfort, the 5S is designed for straightforward operation, outstanding visibility, and great power in any application. The series offers efficient drivelines to achieve higher productivity and promises to keep operating costs low, all while delivering more power and torque.

“With substantial power, maximum agility, well-engineered quality, and a new distinct style, the 5S is a true utility player on the farm,”

Parker said.

Here’s what sets the MF 5S Series apart:

• Ultimate comfort for a more productive workday
  • The 5S Series features an easy-to-access cab with large windows and a narrow, steep-nosed hood to provide superior visibility.
  • Perfect ergonomics and a new armrest design put controls easily at hand, and the new front axle suspension ensures a comfortable ride.
  • A wide range of specifications available through Classic and Deluxe trims mean operators can choose the best option for their comfort and performance.
  • An optional LED light package provides outstanding visibility for working at night.
• Low operating cost
  • The 5S Series features an AGCO Power, 4-cylinder, 4.4-liter engine that complies with Tier 4 Final emission rules using the compact All-in-One after treatment system.
  • All models deliver more power and torque with reduced fuel and DEF consumption.
  • An electronic wastegate turbocharger further improves performance and reduces emissions.
• Efficient drivelines deliver high productivity
  • The 5S Series features proven transmission technology with either the Dyna-4 (16×16) or Dyna-6 (24×24) for seamless shifting.
  • Super-Eco operation attains 25 mph at a low of 1,530 RPM, helping to significantly cut fuel consumption and increase driving comfort.
• Equipped to work faster with more implements
  • A wide choice of hydraulic systems offers open and closed center systems providing up to 15-29 gallons per minute of flow.
  • Double up operations with the new front linkage design offering lift capacities up to 6,600 pounds while the stronger, rear linkage lifts up to 10,300 pounds.
• Perfect loader partner
  • The 5S combines great maneuverability and a choice of three hydraulic systems to provide exceptional pressure, flow and response.
  • The series also provides ultimate visibility with its slim dashboard and narrow steep-nose hood.
  • The left-hand Power Control lever changes direction, shifts speeds, and selects neutral, while a choice of joysticks operates the loader, as well as change direction and speeds.

The post Massey Ferguson’s 5S Delivers Best in Class for Hay and Livestock Producers appeared first on North America FarmQuip Magazine.

In the recently published DeLaval 2020 Sustainability Report, the global dairy industry leader shares its commitment to addressing animal welfare, reducing environmental impact, and improving working conditions. DeLaval analyzes sustainability through three main perspectives: Environment; Food and Animal Welfare; and Social and Economic.

The post DeLaval Publishes 2020 Sustainability Report appeared first on North America FarmQuip Magazine.

New Holland Agriculture has reached the significant milestone of 30,000 large square balers produced since it entered the segment in 1987. The landmark BigBaler Plus unit was produced at the New Holland Agriculture plant in Zedelgem, Northwest of Belgium, which is the “Center of Excellence” for New Holland harvesters worldwide, and focuses on developing and building combine harvesters, balers, and forage harvesters for global export.

The 30,000th baler bears a commemorative decal created by New Holland to celebrate the milestone.

Carlo Lambro, New Holland Brand President, stated:

“Reaching the milestone of 30,000 large square balers is a big accomplishment for New Holland, and in particular for all the people who have built this rich heritage of innovation, and kept our large square balers in the number one position to this day. I would like to thank the people here in Zedelgem who are keeping this legacy alive, building the BigBalers for our customers across the world, and designing the balers of the future.”

Luigi Neirynck, New Holland Plant Manager at Zedelgem, commented:

“This is an impressive achievement, and all of us at the Zedelgem plant are very proud that the BigBalers designed and built here continue to set the benchmark for the industry. We continuously invest in state-of-the-art manufacturing technologies and operate according to World Class Manufacturing principles, one of the manufacturing’s highest standards for the integrated management of plants and processes. The result is the consistently high quality of every machine that rolls off our assembly line.”

The most efficient large square baler in its segment

New Holland has introduced a host of pioneering industry firsts in its large square baler range that has changed baling across the world. These innovations include double-knot technology, electronic proportional density control, and full bale eject functionality – all of which have now become industry standards.

Today’s flagship BigBaler models are true to their heritage of innovation and industry firsts. The BigBaler Plus landmark model features advanced efficiency-boosting technologies, such as the best-in-class SmartFill sensor for perfectly uniform bales and IntelliCruise, which controls the tractor’s forward speed, increasing productivity, optimizing capacity and delivering ultimate bale uniformity. The BigBaler High Density introduced two unique features, the latest in New Holland’s long string of industry-firsts in baling. The first is the SmartShift gearbox, a unique driveline concept, winner of the Agritechnica Silver Medal at the Agritechnica Innovation Award 2019, that significantly increases productivity, enhances operator comfort, and improves tractor driveline protection. The second is the unique and patented Loop Master knotting technology: the first commercialized double knotter in the world that prevents plastic pollution. The high-density baler was also crowned Machine of the Year 2020 in the Forage Harvesting category by a jury panel of journalists representing the leading European agricultural publications.

More than 100 years of harvesting excellence

The award-winning BigBaler large square balers are designed, developed and produced in New Holland’s Zedelgem Centre of Harvesting Excellence, as well as New Holland’s flagship combine harvester ranges and forage harvesters. The advanced product development process, engineering and manufacturing expertise of New Holland’s dedicated workforce, ensure that the BigBaler range continues to set the benchmark across the world.

The post New Holland Reaches Milestone of 30,000 Large Square Balers Produced appeared first on North America FarmQuip Magazine.

Next week is National Farm Safety and Health Week (Sept. 20-26), with a reminder that “Every Farmer Counts.” This year’s theme is especially true as COVID-19 lingers, adding to the usual physical and mental health and safety concerns on the farm.

Having farm readiness plans ahead of harvest allows farmers to take the time to slow down and think through necessary safety measures. Through planning and preparation, farmers can easily pivot when faced with the unexpected – including COVID-19.

David Gibson, the executive director for Texas Corn Producers (TCP), says:

“This year has been unique for every American. It can be easy to feel isolated in the wide-open spaces of Texas farmland; yet, we know the pandemic and its impact reach even the most remote Texas communities.”

It’s important for farmers to prepare ahead of time so they can easily accommodate a change of plans due to a farmhand or even family member contracting the illness, in addition to the precautions taken every year.

Gibson says:

“It’s important to do our part in taking the necessary measures to limit the spread of COVID-19. As someone who contracted the illness this spring, I know this is not a sickness any farmer wants to battle come harvest time – especially when a halt in operations can be detrimental to the farm business. It’s important to put in place social distancing measures, wear masks in public places, and keep hands clean by using hand sanitizer and washing often.”

National Farm Safety and Health Week organizers note that this year’s theme of “Every Farmer Counts” acknowledges, celebrates, and uplifts America’s farmers and ranchers who have encountered many challenges over the past couple of years, yet continue to work hard to provide the food, fuel, and fiber that Americans need.

TCP encourages farmers to have a farm readiness plan in place, so their operations don’t come to a halt in the event of an accident or illness. Once developed, farmers should place their plans where they can easily be found, and additional copies can be shared with trusted business partners, neighbors, or friends.

FARM READINESS CHECKLIST

Protect Yourself

• Always “take a second for safety.” An extra second could save your life.
• Wear proper Personal Protective Equipment (PPE).
• Drink plenty of water and get enough rest.
• Make it a point to check in with family and loved ones regularly, especially when fall gets hectic.
• Take time for yourself, even if it’s just a quick walk around the farm.
• Monitor yourself for signs of stress. If you notice something odd, say something.
• Follow all safety guidelines for equipment.

General Farm Information to Include

• Hired help contact information and primary job responsibilities
• Typical machinery dealership and/or repair services used
• Crop advisor and/or farm manager name and phone number
• Crop insurance agent name and phone number
• Ag lender name and phone number
• Locations of equipment needed for harvest

Field Plans

• Field names and locations
  • Highlight in a plat book, if possible
  • Note where the field entrance is and what side is best to start working from
  • Location of hybrids that may be sooner to dry down for harvest
  • Do you have irrigation equipment that needs to be moved?
  • Are there any potential hazards for harvest (deep gullies or pivot stops)?
• What still needs to be done? Do you have pivots that need to be checked?

Stored Crop Plans

• What is your intended location for storage or delivery for each field’s crop?
• Are there any bins that need to clean out? Where do you deliver to?
• Are all bins functioning clearly?
  • Which bins may need to be watched more closely than others?
• Do you have any upcoming delivery contacts? List specific contract information.
• Does anyone help market your crops? If so, list their contact information.

Additionally, TCP encourages farmers to take the extra second to think through the necessary safety precautions that are crucial for every harvest.

Gibson says:

“Taking the time to think through equipment safety, entanglement hazards, fall hazards, fire prevention, grain wagon, and grain bin safety can prevent detrimental accidents. It’s time well spent to step back and ensure a safe harvest.”

The post Texas Corn Producers reminds the “Every Farmer Counts” event appeared first on North America FarmQuip Magazine.