Ep. 22 Farm Policy Outlook for 2025

00;00;11;16 – 00;00;13;07
Dr. Hunter Biram
Roll on 18 Wheeler!

00;00;13;10 – 00;00;18;26
Riley Smith
All right. Good morning. Good morning. 32.50 now 35 will you give 37.50 how about 40. I’m just kidding.

00;00;18;26 – 00;00;20;25
Dr. Hunter Biram
Oh lord. Just couldn’t help it.

00;00;20;25 – 00;00;43;25
Riley Smith
So that was just for Hunter and get so fired up about it. I’m. Good morning. Good morning. Welcome to another episode of Morning Coffee and AG Markets with your host, Riley Smith. On today’s episode, episode 22, we’ve got a farm policy roundtable discussion. And we got Dr. Hunter Biram in the studio sitting right next to me. Present, present.

00;00;43;28 – 00;00;52;04
Riley Smith
And then on the zoom, since we’ve only got a two mic studio, we’re doing two zooms. We’ve got, Dr. Ryan Loy.

00;00;52;07 – 00;00;53;06
Dr. Ryan Loy
How’s it going, Riley?

00;00;53;08 – 00;01;01;28
Riley Smith
It’s going good. Glad to see your face. And then we got Mr. Scott Stiles in Jonesboro on too.

00;01;02;01 – 00;01;03;05
Scott Stiles
Good morning men.

00;01;03;08 – 00;01;10;01
Riley Smith
Good morning. Good morning. So today is going to be a, very intense topic. I feel.

00;01;10;01 – 00;01;10;23
Riley Smith
Like very.

00;01;10;23 – 00;01;37;10
Dr. Hunter Biram
Sensitive topic. Relevant, given that we’re at the end of the year now. Everyone’s got a lot of questions in mind. I mean, you know, we’re gonna talk about these things, but think about loan renewal. Think about being able to pay off, 24 loans and some people even thinking about 23 loans, and they’re trying to renew 25 loans and, low prices, costs, farm bill, farm act, the fed, anything, I mean, BRICS.

00;01;37;10 – 00;01;40;15
Dr. Hunter Biram
I mean, we’re going to talk about all those things. We got a lot of, topics to cover here.

00;01;40;22 – 00;02;12;22
Riley Smith
All the all the episodes we’ve done previously, and, and they’ve been great episodes and very informative. We’ve had really great guest and good podcast, but I want to say this one is probably the most sensitive, being that every producer out there screaming for a farm bill right now. And, I couldn’t think of the three best people in the state to talk about a farm bill, or farm policy to cover of every, every aspect of it.

00;02;12;25 – 00;02;19;25
Riley Smith
But we’re going to start out, Mr. Scott, I’ve got a question for you to open this floodgate if you’re ready.

00;02;19;27 – 00;02;21;01
Scott Stiles
Fire one ready. You.

00;02;21;01 – 00;02;21;23
Dr. Hunter Biram
Know, he’s ready.

00;02;21;23 – 00;02;34;01
Riley Smith
All right, here we go. So my first question I have is, what is the economic state of play? We just talked about low prices and elevated cost. Is there any cite from you as to why this is.

00;02;34;03 – 00;03;01;15
Scott Stiles
A couple of things that come to mind? Just, generally just have a balance sheets here in the U.S, but not not just here in the US, but on the, on world balance sheets as well. So usually and, close to record production, again this year in the US and heavy balance sheet, heaviest as we’ve seen really in the last four years.

00;03;01;15 – 00;03;32;08
Scott Stiles
And you’re also seeing, very, solid production out of, out of Brazil, some record, production there in the past year and outlook for another record crop there. So I’d say that’s really two factors that are, depressed and, commodity prices, particularly in, corn, soybeans, cotton, those three, crops in particular that, we compete heavily with, with Brazil and, and, they’re producing great crops there.

00;03;32;08 – 00;03;39;06
Scott Stiles
And we have as well. So I’d say that’s, that’s a that’s a big factor in comparison, commodity prices right now.

00;03;39;08 – 00;04;02;26
Dr. Hunter Biram
Scott, you know, we talk about balance sheets and these are things that, you know, some looking at markets and talking with economists and other industry professionals are quite familiar with it. But could you maybe talk a little bit about in just a minute to put you on the spot here? But I mean, you know, about stocks to use, I know that, we talk about that a lot and talking about what that what that measure is and, maybe how current stocks to use look, look like compared with recent years.

00;04;02;26 – 00;04;39;05
Scott Stiles
Yeah. You know, as far as, you know, the level of stocks that we have and, and, and stocks to use, what you’re referring to is a carryover as a percent of, of total total demand. We’re seeing those at levels that, that are reminiscent of where we were. And 2019, 2020 marketing year. And, you know, looking back at it, at that point in time, we saw, soybean prices, at the low end were the eight eight in front of them, in the low eight and the end of the year nine.

00;04;39;05 – 00;05;01;21
Scott Stiles
So it was, it was a period of time where, you know, supplies are heavy, but then you had this other issue that we may get to, as is the trade, the trade war was also going on at the time, and, and, it remains to be seen if all if that will show up again, but it’s certainly something on our minds, at, you know what?

00;05;01;25 – 00;05;15;28
Scott Stiles
What is our trade relationship with China? Our number one customer, for soybeans. What does that look like going forward? That’s something that, you know were wondering, were wondering a lot about at this point.

00;05;16;01 – 00;05;16;18
Dr. Hunter Biram
Oh.

00;05;16;20 – 00;05;41;22
Dr. Hunter Biram
For sure. And this is this, you know what what you said there reminded me of, whenever we were, we were at the, Ag Council of Arkansas, summer meeting, if you remember that, Scott, we were updating our updating them on, these economic issues and talking about farm bill proposals. And in your presentation, you had hit on, how you, how the so many market had been impacted by the trade war hit.

00;05;41;25 – 00;06;06;08
Dr. Hunter Biram
You know, when you start looking at stocks to use and look at the prices, you never would you have any idea, any comments on, you know, the degree to which the price was hit based on, you know, looking at the balance sheet versus the, versus the trade war? I mean, was it primarily driven by the balance sheet, would you say, or, you know, did the trade war really play that by that much of that price drop?

00;06;06;10 – 00;06;31;17
Scott Stiles
I think initially, yeah, the trade trade war was certainly a a factor there because China is just, by far our largest market for, for soybeans and, and cotton, not so much corn, but, and maybe corn was spared a bit from the, you know, from the trade war because, you know, because we don’t rely on China so much.

00;06;31;17 – 00;07;16;24
Scott Stiles
I mean, we do export a fair amount of corn, but the largest, you know, portion of corn uses feed and feed and, ethanol. But, but something like at that time, you know, we were exporting maybe, you know, half of total demand. For beans was exports 85% or so of total demand, for cotton as the exports, though, China, you know, certainly the top market for us for and both of those and, when you take that away, you don’t replace that, that level of demand and, you know, in any short amount of time if you, if you can at all.

00;07;16;24 – 00;07;23;24
Scott Stiles
And, so that was a big that was, that was a big void in export demand really for two years there.

00;07;23;27 – 00;07;50;10
Dr. Hunter Biram
Man. That’s, the that’s just tough news. Raleigh, last week you were talking with Brianna about the budget. So live in oh, move more into the, the cost side of things. So Scott’s going to give us this bleak picture on the crisis. What are some things that you ran a thought about or some things that you, I like from last week’s episode and, you know, you or Scott, even if you all want to talk about what potential returns look like given expected prices.

00;07;50;12 – 00;08;14;15
Riley Smith
Me and Brianna definitely talked about the, change in seed prices. This coming 2025 farming year. She saw a spike in the seed cost and what there’s going to be and probably a less amount of seed. Which is. Right, because, I mean, it kind of balances one another. I think Mr. Scott and you correct me on this.

00;08;14;17 – 00;08;35;11
Riley Smith
But they take inventory of, their seed and how much seed costs ahead or how much seed sales they had last year. And that determines what I’m going to say they’re going to sell this coming year. And so that will that way they know how to determine accurately how to price that seed. The the isn’t that correct?

00;08;35;14 – 00;08;37;07
Scott Stiles
I think so, yeah.

00;08;37;10 – 00;09;06;11
Riley Smith
But as far as equipment sales, I mean, obviously the steel, that’s another thing with the trade war. Definitely saw. And I don’t want to get Mr. Scott, fired up because I know he’s really sensitive about this part, but, the trade war that we had with China, in 2018 and 2019, 2020, when we had, when they put a tariff on soybeans, the steel market also got affected by that as well.

00;09;06;14 – 00;09;23;24
Riley Smith
And, equipment sales is went up increase or the price of equipment has went up as well because of steel. But that’s is what as far as what she, has seen, that was the biggest changes that’s coming for the 2025 crop year. From what we discussed.

00;09;23;26 – 00;09;39;17
Dr. Hunter Biram
Scott, could you hit on it? And Scott, have you started looking at, potential returns going into 2025. I know that it’s still a little early looking at prices, but, I mean, I think it’s it’s pretty well set at this point, wouldn’t you say?

00;09;39;19 – 00;10;11;24
Scott Stiles
You know, I mean, there’s when you I think this is typically, you know, bleak time to look at commodity prices right after harvest. And, we may see some improvement, potentially and in early, you know, in early 2025 and just, you know, for what it’s worth, when you look at seasonality of commodity prices, they’re, they’re kind of, maybe, maybe past the low point, maybe starting a slow climb.

00;10;11;24 – 00;10;49;27
Scott Stiles
And we may see some better prices by February, but but, more this does, if you plug in today’s prices are very, very weak at this point. With, you know, new crop soybean beds are looking yesterday, if you look at new crop being bids, they range anywhere from $9.43 I was at some locations around the state at the low end, maybe the 979, 75, you know, was kind of the kind of a 30% range where we’re in right now for main bean bids.

00;10;50;00 – 00;11;16;15
Scott Stiles
So if you if you plug that in, it’s, it takes incredibly good yields to you know, to make that to make that work and that that price level. So I’m hopeful at least that we may things may look a little better by the time we get into February. And, which is typically at that point, we’re kind of kind of at a higher point price wise, and we are today.

00;11;16;17 – 00;11;46;07
Scott Stiles
But I mean, to get to your point, I mean, everything I mean, prices for everything, or, you know, this at a, a level that, you know, it’s just not not going to pass along as I look at next, December cotton .7228, where we’re trading that right now. 1427 so anyway, you can’t you kind of get the idea that this is not typically seasonally is not the best time to to make a judgment about prices that we’re going to have in a year.

00;11;46;07 – 00;11;47;19
Scott Stiles
Ahead, that.

00;11;47;19 – 00;11;51;12
Riley Smith
Bout the only one you could is wheat wouldn’t it.

00;11;51;14 – 00;12;15;15
Scott Stiles
You know, it’s it’s pullbacks. It’s, you know, it’s $5.60 area right now. And, so it’s, you know, it has pulled back a good bit since, September. I think we’re, we’re at, at some levels above $6. So, so I had to also self and long was with other crop prices. But.

00;12;15;17 – 00;12;35;25
Riley Smith
Well, I think we’re going to flip the conversation now. We’re going to go over to our financial expert. Mr. Scott, thank you for that, insight, Ryan talk about, what about the financial conditions, how leveraged are producers, and is there any sign of help from the fed?

00;12;35;27 – 00;12;36;15
Dr. Ryan Loy
Right.

00;12;36;18 – 00;12;55;24
Dr. Ryan Loy
To kind of piggyback off of this bleak picture, you all have been kind of painting up to this point. It’s financial conditions, obviously are not very good. That’s something that Scott had touched on. You know, folks who didn’t cash flow in 23 and didn’t cash flow this year are going to really have a tough time, trying to, acquire a loan this year.

00;12;55;24 – 00;13;14;21
Dr. Ryan Loy
That’s going to be a big deal. You know, there’s a lot of risk in agriculture. It’s a risky business. And banks are going to start kind of, you know, kind of taking taking that to heart a little bit more, especially with how low commodity prices are and how thin margins are, if, if at all, in some cases, there’s no margin at all to actually make money.

00;13;14;23 – 00;13;38;13
Dr. Ryan Loy
And so from that perspective, you know, producers are pretty overleveraged right now, I would imagine. And Scott, please correct me if I’m wrong. I would imagine that, any working capital that was generated over the last two years is probably at least starting to get, you know, they’re starting to use it to try to bail themselves out, or they just don’t have those working capital reserves to the degree that is sustainable, to make yourself not overleveraged.

00;13;38;15 – 00;14;00;14
Dr. Ryan Loy
And by working capital, I mean just cash on hand. Right. So from the perspective of leverage, asking themselves, okay, what portion of their assets really are funded by their equity, their cash on hand versus how much is funded by debt? And I would imagine that that that balance sheet is looking more on the debt side. It’s looking heavier on the debt side than it is on the equity side.

00;14;00;17 – 00;14;21;17
Dr. Ryan Loy
And so those are the kind of things that I would suspect are going on right now, at least what I’ve heard anecdotally. But from the Fed’s perspective, again, we Riley you know we’ve talked about this on several episodes, and so I won’t get into the crazy detail, but the last, Federal Open Market Committee meeting, was November 6th through seventh, and that was the most recent one.

00;14;21;19 – 00;14;41;06
Dr. Ryan Loy
And again, you know, just to kind of reiterate the FOMC that the Federal Open Market Committee, they’re the ones who are kind of that arm who deal with monetary policy for the fed. And so they’re going to control the interest rates, which in turn controls the supply of money out there. And, you know, a lot of these things get complicated, but it really boils down to simple supply and demand.

00;14;41;06 – 00;15;03;19
Dr. Ryan Loy
If there’s not a lot of U.S. dollars out there on the market, the cost for those of US dollars is going to increase. And so we’ve seen that over the last few years, the they’ve kept interest rates extremely high. To try to kind of, you know, damper the, growth and damper a lot of this investment to try to get us to a soft landing and not put us into a recession like 2008.

00;15;03;19 – 00;15;34;10
Dr. Ryan Loy
But at that last meeting, they actually decided to lower the federal funds rate again. Which is good news. They lowered it about 0.25 percentage points, and that brings the target rate to about four and a half to 4.75%. And the effective rate is basically just somewhere right in the middle of that of those two rates of what the actual federal funds rate is going to be, they’re quoted saying that, you know, inflation, which is their personal consumption expenditure index that they use for inflation, they being the fed remains elevated.

00;15;34;10 – 00;16;00;29
Dr. Ryan Loy
It was at 2.3% in October, which is the last time, a report was released for that. But it’s actually made more progress towards that 2% objective. So that’s what the fed is trying to shoot for. They’re shooting for 2% inflation year over year and maximum employment. And so their goal for maximum employment, which basically means close to close to 5% or lower unemployment, is what they’re shooting for.

00;16;00;29 – 00;16;31;19
Dr. Ryan Loy
And we’re at 4.1% unemployment as of October 2024. So numbers that are coming in from the economy are, are good. And it’s looking like, the fed will have an opportunity to kind of continue to lower rates. So for the year, this brings the total reduction of federal funds rate, which is the kind of prevailing interest rate in the market, down 0.75 percentage points, and it’s down 0.75 percentage points from that 5.5%.

00;16;31;21 – 00;16;58;12
Dr. Ryan Loy
That 5.5% target that was there since 2022. What does all that mean for farmers? Well, that means that the prevailing interest rate, which directly influences operating long term intermediate, loans, that rate’s coming down. That means that, when banks have to borrow money that you in turn borrow that cost is less the banks, that means that they will that cost will be less to you in the future.

00;16;58;12 – 00;17;24;25
Dr. Ryan Loy
And so that’s kind of the idea here. And so this could really start to relieve some financial stress into the next year. And that’s a very general statement. That’s all depending on the person depending on their credit history, depending on a lot of things. But in general it can start helping folks who maybe want to do some debt refinancing, which, you know, they can kind of bundle their existing debt into one, one debt structure and at a lower interest rate.

00;17;24;27 – 00;17;26;26
Dr. Ryan Loy
So those are the kind of things to be looking for.

00;17;26;28 – 00;17;47;28
Riley Smith
Thank you. Ryan So, we’re going to flip it over to, our farm bill expert. Now, Hunter so can you explain to us, what is the state of the farm bill right now? That’s the big question for a lot of producers. And the thing that, do we have one? Are we going to get anything new here in the, you know, the near future?

00;17;48;05 – 00;18;20;02
Dr. Hunter Biram
Yeah. Well, long short of it is, is that we do not have farm bill. The 2018 for bill extension expired on September 30th of this year. So, what that means is programs have been authorized for funding through 2024. We’ll not have funding in 2025. And so in the immediate term, where where I’m on goes is, the dairy margin coverage program, I know that we’ve been talking a lot about road crops, but that’s going to be the first program that I’d even say, like, is effectively on the chopping block because, because milk is harvested daily.

00;18;20;04 – 00;18;44;26
Dr. Hunter Biram
And so the protection for that program is going to get, what the risk manager for that program is more is really the first, first, first management tool that comes, comes into play. And so if we don’t have an extension going into 2025, what effectively happens is, the prices that are used in the Dairy Margin coverage program are actually going to revert back to permanent law that was authorized in 1948.

00;18;44;26 – 00;19;08;04
Dr. Hunter Biram
Farm bill. And so what that means is, yeah, the price supports are going to be fantastic. I mean, you’re looking at some really good price supports from the farm side, but the issue becomes, what about the consumers? What about us? What if we go to buy milk? If farmers are getting these, these, higher prices, what effectively happens is the consumer price of the, the the price that we would see, on the shelf was actually going to go up because of that.

00;19;08;04 – 00;19;29;12
Dr. Hunter Biram
And so that getting into two technical detail there actually, I have a southern ag today article that I wrote with, graduate student in Arkansas, Jack Myers, and I’ll include a link, in the, newsletter to that. But that’s the first and foremost implication that comes to mind, is, you know, we could see really expensive milk and like, immediately.

00;19;29;14 – 00;19;50;07
Dr. Hunter Biram
And so that’s first thing that comes to mind. Obviously commodity programs like price less coverage, agricultural risk coverage, will cease to be funded. And so effectively, we don’t have that farm safety net that we talk about a lot. So no ARC no PLC. Normally that, deadline is, what, March the 15th, I believe to make that enrollment decision.

00;19;50;09 – 00;20;12;21
Dr. Hunter Biram
So, you know, we’re, we don’t have any PLC or ARC you know, legally, Scott probably would say we don’t have it, even economically. And I would agree with him that we don’t even have it economically. Given that it has it, provide any real protection of any significance, in, in the last year or so, another program will be the CRP program.

00;20;12;21 – 00;20;33;15
Dr. Hunter Biram
So switching over to conservation, that’s a conservation reserve program will also cease to be funded. You know, what that means is that there can be no new acreage enrolled in CRP, but, you know, the Equip program and the, CSP or the Conservation Stewardship program, those are authorized under the IRA, the Inflation Reduction Act. And so, as far as I know, enrollment can continue for those programs.

00;20;33;15 – 00;20;52;28
Dr. Hunter Biram
So we’ve got those three conservation programs. CRP really on the chopping block. I couldn’t CSP not so much. Now, will we get a new farm bill in 2025 or will we get an extension? It’s far more likely to get an extension. I hope we get an extension. That’s worst case scenario is, is an extension, I guess.

00;20;52;28 – 00;21;09;15
Dr. Hunter Biram
Really? The worst case is we don’t get anything. But really, I’m trying to be optimistic. As you all probably know by now, we’re optimistic person. So I’m hoping that, you know, we’re going to get an extension which would make the second extension of the 18 farm bill. The first one was made last year on November 19th. So when I.

00;21;09;17 – 00;21;30;16
Dr. Hunter Biram
Think about the new farm bill. Know how to, you know how to answer that question? My mind immediately goes to, you know, I’m an economist. I think about objective functions and constraints. And the first constraint that comes to mind is time. You know, we got to have floor time to be able to pass legislation. We got to be able to have time to take legislation to the committees for it to be deliberated.

00;21;30;19 – 00;21;45;18
Dr. Hunter Biram
You know, these, you know, there are a lot of listening sessions that that happen and have happened. I think most of that work has been done. But still, it it takes time to pass legislation. As we know we said the there’s the old saying that it takes an act of Congress to get things done, sometimes.

00;21;45;18 – 00;22;07;20
Dr. Hunter Biram
And the implication is it takes a long time. And so I think about, you know, we had the, the administration coming in and with that will be, over 1300 political appointments that require Senate approval and Senate confirmation, over 1300, political points. That’s crazy. The average time it takes to get all these confirmations finished is 192 days.

00;22;07;23 – 00;22;21;26
Dr. Hunter Biram
Takes a long time to get this done. You know, to put that into perspective, confirmations, during the Reagan administration were only 69 days. So what we’ve always gotten to be, to a place where the confirmations take three times as long as they used to last.

00;22;21;26 – 00;22;25;05
Riley Smith
Before they pick up a pen and get anything done.

00;22;25;08 – 00;22;45;28
Dr. Hunter Biram
Yeah. I mean, you get I have these these folks in place in the administration. I mean, you got to get all your secretaries, and, you know, there are other lower level cabinet positions. But, you know, you got to have all these folks in place to be able to implement legislation that has been passed. So I think about Senate confirmations and, and that’s going to take so that’s all sets are on the House side.

00;22;45;28 – 00;23;05;04
Dr. Hunter Biram
I think about the Tax Cuts and Jobs Act 2017, you know, that’s set to expire December 31st of this year. And when we think about that versus the farm bill, the Tax Cuts and Jobs Act is going to directly impact these household bottom lines. I’m not saying that the farm bill won’t. It certainly will. But I’ll think about, individual tax rates.

00;23;05;04 – 00;23;25;22
Dr. Hunter Biram
I think about standard deduction when. So with tax cuts and Jobs Act with nothing is done, the individual tax rates will increase and the standard deduction, will decrease. And so when I think about the spotlight, I think in terms of new legislation, I mean tax cuts and Jobs Act. So getting something new in the place of that’s probably going to be on the forefront.

00;23;25;24 – 00;23;46;17
Dr. Hunter Biram
So you got tax Cuts and Jobs Act or some tax legislation and then you’ve got Senate confirmations happening in the upcoming year. So you know, will we get anything new in 25. Give it all that. I’m just not too optimistic about 25. More optimistic about 26. And, I’ve got a nice little figure. I may include this in our, in our newsletter.

00;23;46;19 – 00;24;07;02
Dr. Hunter Biram
When you think about, you think about when presidents have been elected and when they’ve, been sworn in and, they begin the administration. You know, how many presidents in recent history have they have actually passed a bill in their first year? That would be none. None of them have passed in their first year. But in their second year, we have seen that.

00;24;07;04 – 00;24;30;18
Dr. Hunter Biram
So, Trump passed in 2018. That was the second year of his administration. And, with Barack Obama, what happened with him was George Bush actually passed the oh eight farm bill in the last year of his presidency. And, with Obama, you know, he started in 9 in 2009. Well, then he passed in the, what he passed in 2014 on the next farm bill.

00;24;30;18 – 00;24;48;05
Dr. Hunter Biram
So there’s actually six years difference between those two farm bills, but only because, because of the passage in the timing of the passage with George W Bush. And so I’ll let’s say I don’t think it’s likely that we’re going to see the first year of the Trump presidency that there’s going to be a farm bill, a new one.

00;24;48;07 – 00;24;51;23
Dr. Hunter Biram
I think at best we’re going to be getting, getting an extension, so.

00;24;51;26 – 00;24;54;22
Riley Smith
Well, that’d be completely a lot better than nothing.

00;24;54;22 – 00;24;55;12
Riley Smith
at all.

00;24;55;15 – 00;24;57;14
Dr. Hunter Biram
Oh, I completely agree.

00;24;57;17 – 00;25;04;12
Riley Smith
That would not be good. Well, thank you for that optimism. And insight.

00;25;04;12 – 00;25;06;28
Dr. Hunter Biram
Not. You’re we’re just, we’re just a ball of fun today.

00;25;06;29 – 00;25;14;07
Riley Smith
Tell you what, that was, when we got to talking about permanent law, that made me think I’m going to go home and I’m going to go buy a jersey cow and start.

00;25;14;07 – 00;25;17;10
Dr. Hunter Biram
Milking this, let’s say get your milk storage and.

00;25;17;11 – 00;25;39;03
Riley Smith
Guess to get some chickens. We’re fixing to go back to old times or completely foraging for ourselves. So last but not least, Ryan, I know you touched on FSA a little bit, but is there anything out on FSA worth noting? You know, going into 2025, are you seeing any new programs?

00;25;39;06 – 00;26;03;06
Dr. Ryan Loy
Yeah. So, interestingly enough, there is a new program for the FSA that came out in September of this year. It was released in September 25th, 2024. And it’s what’s called is the it’s called the distressed borrower set aside. And it’s actually pretty self-explanatory as to what it is. It’s it’s very straightforward. And so basically it provides USDA direct loan borrowers.

00;26;03;06 – 00;26;25;13
Dr. Ryan Loy
So this is this is adhering to direct loan borrowers. So we don’t want to get into too much of that. But if you deal with the FSA and you are a direct loan borrower, not a guaranteed borrower, you have an opportunity to set aside one loan payment, to the end of the loan term. And so some of the stuff that, you know, essentially what it does is become a balloon payment.

00;26;25;16 – 00;26;52;03
Dr. Ryan Loy
But you take, for example, your distress. You can’t make your annual payment. They’re going to take that amount and they’re going to push it to the back, and it’s going to accrue at a different, interest rate. And it’s actually going to accrue at 0.12 5% interest over that time. So not only do you get to push it aside to the end, but you’re it’s not going to accumulate the same interest that you’re, having to pay on the other payments.

00;26;52;05 – 00;27;15;24
Dr. Ryan Loy
And so some of the big things from that, like I said, came up on the September 25th. And so some eligibility, is going to be if you’re financially distressed or you’re 90 days past due on an FSA direct loan. FSA will actually notify you of the availability of this set aside program. And, or you can actually go into your FSA office and see, what they’re doing about it.

00;27;15;24 – 00;27;36;10
Dr. Ryan Loy
So this is a new program. I know for a fact that just I went down to the training in Houston for the entire USDA, farm loan program, implementation. And I know that it’s it’s a difficult process right now in its infancy. So if you go and do that, I would just suggest, you know, kind of be patient as people are figuring this out.

00;27;36;12 – 00;27;56;03
Dr. Ryan Loy
That’s one of the big things for this, but it’s, what the Farm Service agency’s coming out kind of. Their big rule change is adding this distressed borrower set aside, and they have security changes as well. And so, you know, FSA will no longer take a lean on personal property for a farm ownership loan. If real estate is already the primary security.

00;27;56;06 – 00;28;14;00
Dr. Ryan Loy
And so they’re still looking to get that 125% secure. That’s usually what they’re what it used to be. And they would take personal property on top of real estate to do that. But they won’t won’t do that anymore. And so that’s a big change. And that’s that’s really nice for people who are distressed and are worried about putting up personal property.

00;28;14;02 – 00;28;25;17
Dr. Ryan Loy
As security for their loan. So those are kind of the big changes from the FSA. There’s a lot you know, there’s there’s a lot of detail when it comes into this, but I would suggest just kind of reaching out, if you’re a listener and I’d be happy to talk about it.

00;28;25;20 – 00;28;33;12
Dr. Hunter Biram
Ryan, you went a bit on this and I just tuned out maybe, but has has FSA defined where the stress borrower is?

00;28;33;15 – 00;28;54;25
Dr. Ryan Loy
Yeah. So how they’re, how they’re framing it for this, in particular is if you indicate you’re financially distressed, you basically have to show that you don’t have any equity or any cash or any sort of, accounts receivable, meaning that you have some money coming in soon to actually pay this loan off. Another way that they’re doing it.

00;28;54;25 – 00;29;10;10
Dr. Ryan Loy
Whereas if you just kind of let it go delinquent for 90 days, which is not something I’m advising, but just just as just a statement of fact, if you’re 90 days past due, then you qualify for it. Now, it’s not to say that you can just say, well, I have the money, but I’m 90 days past due.

00;29;10;12 – 00;29;22;18
Dr. Ryan Loy
There are some checks and balances in there. And I tend to be in full transparency. I’m not sure what those checks and balances are, but there are some in there to make sure that, folks aren’t just, taking advantage of this situation.

00;29;22;20 – 00;29;33;11
Riley Smith
Ryan, I got another question. I just, skipped over it. I didn’t say it. But this is for, actually. Sorry. This is for Hunter and Scott. That’s right.

00;29;33;13 – 00;29;47;25
Dr. Hunter Biram
I mean, is there any other thoughts on that, Ryan? I mean, I know that you’ve been working a lot on this, and you heard a lot in Houston. Anything that that if I were money to know about. I mean, how does implementation look for something like this? How is the rollout going to be pretty smooth or the main form of the government?

00;29;47;28 – 00;29;48;18
Dr. Hunter Biram
I mean, it’s probably going.

00;29;48;18 – 00;30;08;03
Dr. Ryan Loy
To be a little. But yeah, it’s funny you say that. And so that’s what I, I was trying to kind of say earlier would just be patient because the implementation of this is going to be a difficult process. It just kind of from a 30,000ft view, to actually implement this, they need it. They need some, you know, they need technology to do it.

00;30;08;03 – 00;30;28;07
Dr. Ryan Loy
But as of right now and the last I heard, it’s actually being done by paper. And so, for example, you know, the FSA portal, you know, if you’re a farmer or FSA portal, it might not update to your distress borrower set aside even if the office that you’ve already done that with. And so, you know, don’t be concerned about those things.

00;30;28;09 – 00;30;51;09
Dr. Ryan Loy
And so those are kind of the big implementation issues. I see and again, I think a lot of this and the, the, the success of this program will be shown with how good the checks and balances are. Because if you have a lot of people coming in to take basically a free lunch, you know, and say, well, I’m distressed, I’m just going to let my 90 days go and then we can talk about it.

00;30;51;09 – 00;31;21;00
Dr. Ryan Loy
Then, depending on those checks and balances, that’s kind of ripe for somebody to take advantage of it, and it could end up hurting the program. But that is that is an opinion. And that has yet to be shown yet. But with the things that are going on, that could happen. And one other thing I meant to talk about as well, one of the main criteria, eligibility, for this distressed borrower set aside is that your loan had to at least been, outstanding, received or closed.

00;31;21;03 – 00;31;39;26
Dr. Ryan Loy
You either had to have it. It’s either closed by this time, but September 25th of this year. So if it wasn’t, if it wasn’t a loan, if it wasn’t closed, if it didn’t originate before September 25th of this year, you’re not eligible for it. So again, I think that’s one of their checks and balances to make sure people aren’t taking advantage of this going.

00;31;39;26 – 00;31;48;24
Dr. Ryan Loy
And after this rule is implemented, then they go and get a huge loan and then let it go. So those are kind of just some of my thoughts on it. And so.

00;31;48;24 – 00;31;51;10
Dr. Hunter Biram
Any loan Ryan or just an FSA loan.

00;31;51;13 – 00;32;08;11
Dr. Ryan Loy
It’s FSA direct loans only. Yes. So that’s very important. Again, if we want to get into that, I’m happy to. So direct loan is going to be one where you get it directly from the FSA. And if you part if you have a loan from FSA, you probably already understand this. But this is for direct loans only.

00;32;08;11 – 00;32;27;20
Dr. Ryan Loy
This is not for guaranteed loans where the guaranteed loans would be, you going to a commercial bank or another lender, and the FSA is backing your loan? And basically just helping shore up that collateral for you. You are not eligible for that in that case. And so there’s a there’s a couple of other things here.

00;32;27;23 – 00;32;50;09
Dr. Ryan Loy
You know, you have to act in good faith with the FSA if you haven’t been a good borrower. It’s their discretion to not to not offer this to you. And the borrower must be at least current or not, more than 150 days past due on any other FSA loan. When this application is completed. And so, you know, borrowers can request this assistance really at any time.

00;32;50;09 – 00;33;17;14
Dr. Ryan Loy
So again, they have eligibility, right? Like I mentioned earlier, you know, their financial distress, they’re proving, based on their income statements, their balance sheet that they can’t actually pay this, they’re 90 days over or they can actually request it really any time before then. Then it’s the FSA is discretion. So there’s a written request where you’ll have to give production income and expense records and other things may be, actually required, depending on the person.

00;33;17;14 – 00;33;21;10
Dr. Ryan Loy
And again, that’s, that’s on a person by person basis. So it’s hard to generalize that

00;33;21;12 – 00;33;22;00
Dr. Hunter Biram
Appreciate that.

00;33;22;00 – 00;33;45;15
Dr. Hunter Biram
Ryan I mean, you’ve got some great, great insight, great comments there. And I obviously encourage everyone to check out that the status bar set aside. I mean, I feel like there were a lot of people who would qualify to be a distressed borrower. So they it’s something that they should check out. Switching gears just a little bit, Ron, you know, you know, I’ve been talking about this and, we’ve been seeing it in the paper, and people are talking about it now.

00;33;45;18 – 00;33;56;03
Dr. Hunter Biram
But can you briefly touch on some geopolitical stuff? I mean, can you kind of walk us through, you know, maybe even, talk about BRICs and what that is and how. And now we’re not talking about building a house.

00;33;56;05 – 00;34;17;22
Dr. Ryan Loy
Yes, absolutely. So the BRICs, it’s actually been very fascinating to me. I really enjoy learning about these geopolitical issues and what they kind of mean. And if they actually hold water, as far as being a real problem in the BRICs is kind of an interesting, interesting topic because, you know, ones on one end, it does hold water for it to be a major threat.

00;34;17;22 – 00;34;43;21
Dr. Ryan Loy
But on the other end, maybe not so much as a, short term threat as some as, some may think. And so if you don’t know, BRICs is essentially an agreement between Brazil, Russia, India, China and South Africa. Those are the BRICs. Now it’s they’re calling themselves BRICs plus. And so recently they’ve added Egypt, Ethiopia, Iran and the UAE to this as well.

00;34;43;23 – 00;35;10;18
Dr. Ryan Loy
And the whole goal of this is to basically, you know, from a 30,000ft view, these countries say we want to and we don’t want to rely on the US dollar anymore. And so one of you know, for that for the United States, one of our unspoken superpowers is the dollar, right? It’s it’s that global currency. We have the mechanisms in place to basically get the currency worldwide.

00;35;10;21 – 00;35;31;01
Dr. Ryan Loy
We’re one of the few countries that’s okay with running a trade, deficit with every country that we trade with. And it’s from the perspective of they get our money, we get their goods, even if we run the deficit. Well, our money’s out there and it’s we that’s our mechanism for getting it out there. Right? So it becomes that base, that base currency that people trade in.

00;35;31;03 – 00;35;54;21
Dr. Ryan Loy
Well, these, BRICs countries saying we don’t want we don’t want to be basically adhere to the US dollar anymore, especially after the 2008 financial crisis where, you know, our dollar tanks and so the rest of the world tanks along with it. So they’re trying to basically, you know, be individual away from that. And, you know, just from a 30,000 this is this is a whole podcast episode in itself.

00;35;54;21 – 00;36;16;24
Dr. Ryan Loy
And I would love to talk about it more. But without getting into crazy amount of details, what these countries are trying to do is basically implement a way and implement a currency that is off the US dollar. So they’ve been de-dollarizing their balance sheets. These these countries have. And how they’re doing it is essentially in a very interesting way.

00;36;16;26 – 00;36;35;23
Dr. Ryan Loy
You know, China is really the main actor here. You know, you look at a lot of these graphs and China is the one who holds a lot of these reserves. And so there’s two ways that they’re basically doing it to try to detail rise or at least take the US out of the global trade, being one of the main players in global trade.

00;36;35;25 – 00;36;55;13
Dr. Ryan Loy
And so China essentially buys us dollars and holds them in their central bank. And so they do that for a number of reasons. One, because they have to pay debts back in the US dollar, but they also buy it as well because the more that they buy, the less that there is on the marketplace and makes our dollar extremely expensive.

00;36;55;19 – 00;37;15;29
Dr. Ryan Loy
So when we go to trade, then countries are like, well, why would I go to the US to buy expensive soybeans when I can go to Brazil? And it’s so much cheaper for my currency, right. So that’s one of the main things they’re doing. They’re basically trying to control that supply to some degree and, and make our value of dollars so high that nobody would want to trade.

00;37;16;01 – 00;37;41;10
Dr. Ryan Loy
Another way they’re doing it is they’re trying to, kind of run off a lot of their, or fuel derivatives and their other, foreign currency derivatives and turning them into gold. And this whatever currency they’re going to come up with for these BRICs countries is going to be some backed by gold to some degree. And so they’re going to try to go to the gold standard on these things.

00;37;41;13 – 00;38;00;28
Dr. Ryan Loy
And that’s that’s the big thing. But, you know, the big thing is, is that these countries want to trade on their own. They want to become the world leaders. They all want to be exporters, which probably won’t work in the long run. And, they just don’t want to rely on the dollar anymore. So they’re trying to figure out ways to get rid of the dollar.

00;38;01;01 – 00;38;19;03
Dr. Ryan Loy
Some metrics to track. And I think are important to bring up is going to be, you know, the dollar share in global reserves. Kind of like what I just talked about with China, looking at these countries and looking at what share of the actual dollar they have in their central bank reserves and how much they’re holding, U.S. Treasury holdings by foreign governments as well.

00;38;19;03 – 00;38;41;13
Dr. Ryan Loy
That has to be paid back in dollars. And looking at how much treasuries, they actually buy that instruments. Right. It’s all in dollars. That’s that’s another good thing to track. And then also tracking is how much gold is purchased by these central banks. That’s that’s a big thing. But again, in the short term, I don’t know this is a problem, but it’s at least warranted to be looking at in the longer term.

00;38;41;16 – 00;39;02;00
Dr. Ryan Loy
Because as it stands right now, these countries don’t have the financial position or the financial pull in the world that the United States does to really make a huge impact in the short term. But more countries join and more countries adopt this, this kind of focus. That’s a different story.

00;39;02;03 – 00;39;18;20
Dr. Hunter Biram
There’ll be something to keep our eye on. I mean, we don’t want this. We don’t we we don’t want to outright dismiss it and be like, oh, you know, is just these that countries is like, no, I mean, these are pretty some pretty significant countries in that agreement. I mean, you know, we talk about the B, the Brazil, I mean, we talk about soybeans are extremely competitive.

00;39;18;20 – 00;39;42;19
Dr. Hunter Biram
They are and how they continue to clear out land and can increase their, acreage harvested and now China has invested in their infrastructure and, you know, their ability to or, Brazil’s ability to get grain to the poor. And, you know, we talk about the, the C in the BRICs and, I’ll just mention China. I mean, and, just how powerful of a player they are and how much demand they account for.

00;39;42;19 – 00;39;52;05
Dr. Hunter Biram
And when we talk about them at the front of this, episode takes, but, we’ll go into our last topic, here and, Riley Well, letcha.

00;39;52;08 – 00;39;53;13
Riley Smith
Well, the country at the.

00;39;53;15 – 00;40;18;25
Riley Smith
That that one last comment on that, last bit of information seems like everybody is certainly trying to reach more sustainability for their selves, trying to, as Ryan talked about, getting rid of the dollar because it feels like a global economy and how the world turns is on the almighty dollar. But, going into our last topic, I skipped over accidentally, but,

00;40;18;27 – 00;40;24;15
Riley Smith
Hunter and Scott, what what about the Farm Act ? Is the same? Is it the same as the farm bill?

00;40;24;18 – 00;40;27;22
Dr. Hunter Biram
Scott, you want to take a hack at the farm act?

00;40;27;25 – 00;40;55;09
Scott Stiles
Well, I don’t know if there’s been any traction on on that. And, I think there’s, you know, certainly an effort underway to try to, you know, you talked about the farmer bill extension while it’s being termed the Extension plus and the plus component of the farm bill extension is to address some it’s some type of temporary assistance to address the market losses.

00;40;55;11 – 00;41;18;00
Scott Stiles
But as far as actual traction on the Farm Act itself, I don’t I don’t think there’s been any movement on it, but there is certainly, an effort underway to try to attach something to the farm bill extension that provided some immediate assistance. I mean, that really helps people cover their their operating losses for, for 2024.

00;41;18;02 – 00;41;41;14
Scott Stiles
And, so that I mean, there’s, I mean, at add to that what you like Hunter I don’t, it seems like the farm act on its own merits is too expensive to be considered. And, but there is, the prospect of doing something very similar that will roll out some, some aid here in the very near term.

00;41;41;17 – 00;41;45;29
Riley Smith
Hunter do you see any, expectations with it?

00;41;46;02 – 00;42;08;10
Dr. Hunter Biram
You know, I would I would like to be optimistic here and think them is going to get through at. So Congress just reconvened today I believe they’re going will be in session through December the 19th. So we’ve got, what, 16 days? And, so we’re in this what they will call the lame duck session. And, and, will we see it then?

00;42;08;13 – 00;42;22;17
Dr. Hunter Biram
You know what? It’s just going to be tough, I think, to get it out 16 days. I mean, I’m not saying without the know, I don’t support in that. I don’t think it’s useful for farmers, but, it would be nice to, to, see that, to see that big push here. I know that our, our farmers need it.

00;42;22;17 – 00;42;41;14
Dr. Hunter Biram
You know, Scott, you know, we talked about this a lot, held the current. I mean, even if we do get this extension, it’s almost worthless just because of the of where all the prices are set at. You know, the reference prices, more specifically, it’s not looking like they’re really going to provide any, any protection, even in the art program.

00;42;41;16 – 00;42;49;25
Dr. Hunter Biram
I’m not even sure we’re going to see much protection out of that in either. Going into next year. And on top of that, they won’t even get the cash.

00;42;49;27 – 00;42;50;27
Scott Stiles
For.

00;42;50;29 – 00;43;11;17
Dr. Hunter Biram
For this until I guess if we’re looking at 2025, let’s assume there’s an extension. We said by March 15th, if there are any payments that are right, they won’t be made until 26. So from a cash flow perspective, the farmers need that money to, you know, to make payments on these loans. And, you know, that’s something that we’ve talked at great length about.

00;43;11;19 – 00;43;43;04
Scott Stiles
You know, part of the, the, the list of things that have to be done in Congress, relatively soon, is passed a disaster aid package. And I think in total, that’s $100 billion. And, and, so maybe there’s some portion of that that can be allocated to, something similar to the Farm Act and hopefully, you know, there’s a hard deadline of December 20th to pass the continuing resolution to keep to avoid the government shutdown.

00;43;43;04 – 00;44;06;24
Scott Stiles
So there is some discussion about attaching, you know, the farm bill extension plus, something to this, you know, the federal funding stopgap that has to be passed by December 20th, which would be ideal. Oh, because it’s, you know, I after the 20th, I mean, it’ll be a Christmas recess, and it just won’t be much work.

00;44;06;24 – 00;44;13;22
Scott Stiles
Not after that. So I think that, you know, the pressures on to really get something done, by the 20th of December.

00;44;13;25 – 00;44;39;15
Dr. Hunter Biram
Yeah. A lot of things on the docket. Yeah. Through I mean, thinking about this. Well, and to be clear, you know, the farm Act is different than the farm bill. You know, we’re talking about the farmer, Assistance and Revenue Mitigation Act, which is going to be different than, the the farm bill. This is going to be funding that, you know, currently the farm act, they’re trying to get the funding through what the the CCC, the Commodity Credit Corporation, and getting authorized through there.

00;44;39;17 – 00;44;57;12
Dr. Hunter Biram
So that’s, you know, as I say, a little piece of legislation, it’s going to be tough to get that through, given what you just said, Scott, with, you know, which I got from the government to, oh, you know, as a whole, so maybe there will be some funding attached to that. But we’ll, you know, we’re going to wrap up this podcast.

00;44;57;15 – 00;45;13;01
Dr. Hunter Biram
I’ll, I’ll be sure to include some details on the Farm Act and how it would work. But I’m not sure how serious we should take it, at the moment, but let’s just, let let’s just see what kind of assistance, or how the assistance comes through if it does.

00;45;13;07 – 00;45;35;11
Riley Smith
Well, this has definitely been a, very informative podcast episode. I feel like I’ve gained a lot of knowledge, though it was not happy knowledge. It was, certainly things that, Yeah, it was dense. I think it’s, something that a lot of consumers and producers need to know about, going forward for the next couple months.

00;45;35;13 – 00;45;52;00
Riley Smith
But other other than that, I want to take the time. I appreciate you guys for coming on here. And, Doctor Loy and Mr. Scott, I appreciate you all getting on a zoom with us and having this podcast episode today. Hunter, thank you for coming down. Joining me in the studio. It’s been a really good conversation.

00;45;52;00 – 00;46;14;28
Riley Smith
And, if that’s, everybody else getting everything out and, I think we’re going to wrap this up. Y’all stay time for my market report. Thanks. All right, guys, back with your market report. March 25th. Corn. We got new, contract months, March 25th. Corn. Current prices at $4.30 per bushel. A month ago, prices at $4.30 per bushel.

00;46;14;28 – 00;46;46;26
Riley Smith
There’s no difference. Year agos prices at $4.86 for bushel. That’s down $0.56 January 25th rise. Current price is at $15.14 per cwt month ago prices at $14.73 per cwt. That’s up $0.41 a year agos prices at $16.90 per cwt. That’s down dollars $0.76. January 25th beans current price is at $9.84 per bushel month agoes.

00;46;46;26 – 00;47;19;05
Riley Smith
Price is at $9.99. Excuse me, a month agos prices at $9.97 per bushel. That’s down $0.13. Year agos prices at $13.06 per bushel. That’s down $3.22. July 25th. Wheat prices at $5.63 per bushel month. Give us prices at $6.05 per bushel. That’s down $0.42 here. Year agos prices at $6.44 per bushel. That’s down $0.81. March 25th. Cotton. Current prices $0.71 per pound.

00;47;19;05 – 00;47;43;27
Riley Smith
Month agos price $0.72 per pound. That’s down $0.01 a year. agos price $0.79 per pound. That’s down $0.07 and your weekly U.S average for peanuts current prices at $486 per ton a month agos prices at $496 per ton. There’s no difference. Year agos prices at $598 per ton. That’s down $112. And that’s your weekly commodity futures this week.

00;47;43;28 – 00;48;08;13
Riley Smith
Your input prices this week, Urea is still at $480 per ton, Ammonium Nitrate is $465 per ton, ammonium sulfates at $520 per ton. DAP is at $740 per ton Triplesuperphosphate, $687 per ton potash, $412 per ton, and your pellet lime is $225 per ton. This week. Your diesel prices off road diesel this week is at $2.47 per gallon.

00;48;08;13 – 00;48;32;26
Riley Smith
Highway diesel’s at $3.17 per gallon. And your Mississippi River level. at Memphis, Tennessee. This week. Current levels are -0.38ft and a year ago was a -7.9ft. I want to thank you all again for tuning in to another episode of Morning Coffee and AG Markets. We hope you enjoyed it. We hope you have a great rest of your workweek and enjoyed your morning coffee.

00;48;32;28 – 00;48;49;19
Riley Smith
So until next time, we’ll catch you on the flip flop. Bye bye now.