NE Current Events
Largest cattle feedyard north of the Rio Grande:
SW Financial Literacy
’24 3rd Quarter Outlook
Time for our quarterly update! Where applicable I am going to share what my opinion was at the start of the year compared to where we are today.
To read the previous outlooks:
Let’s see where I got it wrong!
Interest Rates
(January comments: While there have been expectations in Wall Street that we see 3 rate decreases in 2024, I’m not buying it.)
FedWatch (Source: CME FedWatch Tool – CME Group) is still calling for two rate decreases, while I feel the most we see this year is one. I don’t believe the election has anything to do with what the Fed is doing. Any change made will have to do with inflation and the economy.
The bond market was moving lower at the end of 2023 but has been staying higher most of 2024. 10 year treasury bonds are .32% higher than where we were at the start of the year. Land notes aren’t getting any cheaper. (Source: Resource Center | U.S. Department of the Treasury)
Land Prices
(January comments: I feel we have peaked over the past 18 months and are on our way down.)
I have yet to see a higher price in 2024 for my area than what was sold in 2023. Lower commodity prices from January-March put a damper on the farmer’s mood and created more conservative spring land sales. The early private deals I am aware of going into this fall have followed the spring trend.
Yields
There has been late plantings, replants, and flood across many areas of the corn belt. While this certainly has an impact on yields, I’m a big believer that rain makes grain. If the wet trend continues, I expect close to record yields and don’t expect lower estimates until yields start coming in or a bigger drought event forms.
1st cuttings of hay were fantastic!
Equipment Prices
(January comments: I don’t expect new equipment prices to move lower, even in an ag recession.)
I disagree with my January comments here. News I am hearing is that dealerships are rejecting the trade-in of certain high-priced items because of the lack of a resale market. Dealership lots are filling up with equipment again and reports like the John Deere layoffs (Source: John Deere Layoffs: What We Know So Far | AgWeb) are never a good sign of things to come.
Yes, I am still hearing of dealership salesmen claiming this is the only combine they have access to and you better buy it now because they don’t know if they will have another one available in time! This line is as certain to happen annually as Christmas coming in December.
Operation Improvements
Equipment sales may have slowed, but there are still plenty of buildings, irrigation improvements (converting motors to electric), and tile work that went in. Steel prices have been holding steady, but labor is a huge expense with raises being demanded. Supply chain issues on parts is mostly resolved.
Commodity Price Direction
(January comments: If you overlay an ending stocks to use ratio with corn prices, it doesn’t paint a pretty picture. Our current figure is around 14%, which historically would imply corn prices below $4/bu.)
The ending stocks to use ratio has decreased some and commodity prices experienced a nice rally in April-June to allow for strong sales, helping preserve working capital levels. With my yield opinion above, I’m not expecting a positive commodity price direction from now through harvest.
Marketing and Weather
(January comments: Some reports show the possibility of a wet spring which would be beneficial for a spring rally.)
Nailed it! Don’t thank me though. I get my weather updates from Eric Snodgrass with Nutrien Ag Solutions, you should sign up for his e-mail, eric.snodgrass@nutrien.com, and check out his videos on www.youtube.com.
Eric notes that La Nina has been delayed, which has resulted in higher amounts of moisture in late June. Hopefully this continues through crop maturity.
I have sold a good portion of my ’24 crop, some of my ’25 crop, and dipped my toes in the water for ’26 sales. Every marketing plan needs to be personalized based on your personal position and appetite for risk.
Working Capital Trend
Thanks to the spring rally, working capital recovered slightly from the lows that were experienced in March due to lower commodity prices from unhedged grain on the balance sheet. This was a relief as working capital levels were disappearing. Now we hold our breath to avoid unwanted repairs and expenses before harvesting the next crop.
Overall Financial Picture
(January comments: Every operation, regardless of their Working Capital or Net Worth movement in 2023, will need to be very careful with all expenses, decision making, and marketing in 2024 to be profitable. Farm made projections are very tight even with some overly optimistic commodity prices.)
We will go into 2025 in a tighter position than 2024 without fantastic yields. Favorable crop conditions to this point are helping the overall financial picture.
Final Summary
Every operation is different and needs alternative advice compared to their neighbor. Nothing mentioned above is a one size fits all approach. While I hope this is helpful, what is better for your operation’s well-being is to update your own financials, run them by a trusted financial advisor, make your own plan for the upcoming year, and adjust that plan when necessary.
If you have been impacted by flooding or severe weather, my thoughts are with you. Keep your head up and stay resilient.
Good luck and have a great week!
Grant
All views expressed on this site are my own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated. Information provided is authentic to the best of my knowledge, and as such, is prone to errors and the absence of key details. The content of this blog is for entertainment and informative purposes and should not be seen as professional advice to finances or any other field.