Southern Ag Today

Author: Charley Martinez

  • Current Non-Real Estate Farm Debt

    Current Non-Real Estate Farm Debt

    As mentioned in previous Southern Ag Today (SAT) articles (Martinez and Ferguson 2022, Martienz 2023), monitoring Non-Real Estate Farm Debt provides insight into debt health. Last year, there were periods of drought and increased input prices for producers. At the time of this article, planting is on everyone’s mind (completed or about to start), producers are bailing hay, and all prices in every supply chain are working their way through tariffs. The most recent reports offer insights through the end of 2024. As a refresher, every commercial bank in the U.S. submits their quarterly Reports of Condition and Income, which are known as call reports. Within these call reports are totals of agricultural loans and the status (on time or late) of the loans. Figure 1 displays the total loan volume (yellow line) and loan volume for three late categories (30-89 days late, 90+ days late, non-accrual) for the last 16 quarters (4 years). The totals are for all the Southern Ag Today States. 

    Through the end of 2024, non-accrual (blue line) loans continued to decrease, which is positive, and loans that are 90+ days late (grey line) remained relatively the same. Total loans (yellow line) are down from the previous quarter, which is expected due to seasonal trends. But, total loan debt is up 4.8% compared to 2023. The most concerning statistic is the loans that are 30-89 days late (orange line). At the end of 2024, debt that was 30-89 days late, was up 5.2% compared to the end of 2023 and the highest since Q1 of 2021. Q1 is seasonally the highest quarter for 30-89 days late loans, but given that it’s up from a year ago, the Q1 2025 reports will provide an indication of debt health in 2025 and moving forward.

    From a sky high view, the call reports indicate that there are some possible caution signals for debt in the SAT states. Total non-current debt is approximately 1%, which is still relatively low. The next two quarters will provide answers if the signals are false alarms or true signals of concern. In the coming months, it is crucial that producers are mindful of their working capital and continue the positive production and risk management strategies they have implemented thus far. 

    Figure 1. Non-Real Estate Farm Debt from 2021 Q1- 2024 Q4 

    Source: Federal Financial Institutions Examination Council

    References

    Martinez, Charley, and Haylee Ferguson . “Current Non-Real Estate Farm Debt“. Southern Ag Today 2(30.3). July 20, 2022. Permalink

    Martinez, Charley, and Parker Wyatt. “Current Non-Real Estate Farm Debt.” Southern Ag Today 5(20.1). May 12, 2025. Permalink

  • Upcoming Deadline: Beneficial Ownership Information 

    Upcoming Deadline: Beneficial Ownership Information 

    As we wind down the year, an approaching deadline will impact many producers and operations throughout the country. The deadline for filing Beneficial Ownership Information (BOI) is set for January 1, 2025. The Corporate Transparency Act (CTA) is the federal act that requires filing the BOI with the Financial Crimes Enforcement Network (FinCEN). The BOI is sometimes collected by financial institutions, but providing that information does not satisfy filing with FinCEN. FinCEN reporting collects information that is not collected by a financial institution.  FinCEN requirements include: 

    1) a unique identifying number and issuing jurisdiction from, and image of, one of the following non-expired documents: 

    a) U.S. passport, b) state driver’s license, c) identification document issued by a state, local government, or Indian Tribe, or d) Foreign passport. 

    2) Any trade name or doing business as (DBA name

    3) Jurisdiction of formation and registration (if a foreign entity)

    4) Information about company applicant(s)

    5) Certification by the individual filing the report with FinCEN:

    a) The report is true, correct, and complete.

    FinCEN defines a “Beneficial Owner” as an individual who directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. 

    There are two types of reporting company definitions:

    • Domestic reporting companies: corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
    • Foreign reporting companies: entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

    There is no maximum number of beneficial owners who must be reported to FinCEN. If you fall under the above definition, you should consider filing the BOI application with FinCEN. 

    Failing to file can result in monetary penalties and possible felony charges. More information on filing BOI, and updates, can be found here. 

    Martinez, Charley. “Upcoming Deadline: Beneficial Ownership Information.” Southern Ag Today 4(49.1). December 2, 2024. Permalink

  • The Relationship Between Formula and Negotiated Cash Fed Cattle Prices

    The Relationship Between Formula and Negotiated Cash Fed Cattle Prices

    In August 2021, the USDA announced a new market news report that would contain the distribution of weekly US fed cattle prices using price “bins” (LM_CT215). What makes this report unique is the way that price data are reported. Prices are reported in $2 increments, or bins, for negotiated cash, net formula, net forward contract, and negotiated grid nets. Figure 1 shows an example of how these weekly data are reported. The weekly weighted average live fed cattle price is highlighted in Figure 1.  The number of fed cattle selling at each $2 per cwt premium or discount to the average is reported in the grid.  

    Figure 1. Snapshot of Data Reported in USDA National Weekly Direct Beef Type Price Distribution (LM_CT215)

    Source: USDA AMS

    The new distributional data allow market participants to understand fed cattle prices in more detail and go beyond minimum, maximum, and average prices for each marketing type. With this new distributional dataset for formula and negotiated fed cattle prices, we[1] analyzed how weekly prices between these two markets interact with each other. One objective of our study centered around the impacts of negotiated prices on cattle markets. Specifically, as concerns have risen in relation to a possible thin cash market, we wanted to understand whether or not negotiated prices impact formula prices, or if it’s the other way around, as some market participants have suggested. Figure 2 displays a visual representation of the results from our study and shows how prices interact with each other (from August 10, 2021, to May 14, 2024). Current negotiated (orange) and formula (blue) prices for a given week are in the middle. We found that, depending on the market, current prices are impacted by the preceding three weeks of prices (the two columns on the right and left).

    Figure 2. Negotiated Cash and Formula Fed Cattle Price Relationship Flow Chart. Data is weekly for the time range, August 10, 2021, to May 14, 2024 (n = 145).

    Our study found that the current negotiated cash price for a given week (top middle orange box) is positively impacted by the week prior negotiated cash price (green dotted line), and negatively impacted by the negotiated price 3-weeks prior (solid red line). Current formula prices were found to be positively impacted (green dotted line) by the formula price from the prior week and the prior two weeks of negotiated fed cattle prices. However, formula prices were negatively impacted (solid red line) by formula price from two weeks prior. 

    Despite concerns that the negotiated cash market is too thin and does not provide marketing information to the formula market, we find that the negotiated price does influence the formula fed cattle price. We find evidence supporting the conclusion that negotiated cash price information is being transmitted to formula price variability, which is expected because formula prices are designed to be based on the negotiated trade. Our results also indicate that formula prices do not impact on the negotiated price. 

    [1] Boyer, C.N., E. Park, A. F. Ramsey, and C. Martinez. 2024. “Formula and Cash Negotiated Fed Cattle Price Relationships”. Journal of Agricultural and Resource Economics, forthcoming.

    Martinez, Charley, Christopher Boyer, Eunchun Park, and A. Ford Ramsey. “The Relationship Between Formula and Negotiated Cash Fed Cattle Prices.” Southern Ag Today 4(34.2). August 20, 2024. Permalink

  • Estate Transition Planning

    Estate Transition Planning

    The University of Tennessee Institute of Agriculture hosted the 2024 Beef Improvement Federation Conference two weeks ago. One session that spurred on great conversations was estate transition planning and what that entails. Table 1 displays the Southern Ag Today states and the age break downs of total producers. Kentucky has the highest percentage of producers that are under the age of 35 (10%). For the age range of 35 years to 64 years, all states have over 50% of their producers in this category. But, six states (TX, VA, MS, GA, SC, and FL) have 40% of their producers in the 65 years of age and older category, with Mississippi having the highest percentage at 42%. Farm management is often thought about only from a financial performance (income statement, balance sheet, cash flow statement) standpoint, but sound farm management also includes planning for the future, including estate and management transitions. 

    A large number of producers in the Southern region are potentially nearing retirement or are over the age of 65 years. This would suggest that estate transition planning should start becoming a priority. If the goal of the farm is to stay a farm, then at some point in the future, the farm will change hands. Transition planning can become a huge task if no plan has ever been thought about or developed. Often, producers indicate that they don’t know where to start. That is understandable. Thus, a good starting point could be, “What is adequate retirement income?” Building upon this question could solve questions like: “What are my lifestyle costs? Will costs change in retirement (life care)? How much income will come from social security, pensions, savings, investments, and the farm?” Each farm is different and has diverse challenges like trusts, multiple families/individuals in the operation, debt amounts, urban encroachment, and many more. 

    However, starting the conversation is the most important step for everyone involved in the process. The key to this falls on the shoulders of the parent(s). Not only is it awkward for the child, or children, to start this conversation, but if there are multiple children and one takes the lead, it can have unintended consequences. But just initiating the conversation is the start. Throughout the process, there are many tools that can be utilized: a will, power of attorney, advanced healthcare plan, healthcare agent, trusts, insurance, letter of last instruction, and easements. While the previous sentence has a lot of moving parts, having a team of professionals could aid in the process and make it easier. The team could include an attorney, accountant, financial planner, lender, extension educator, business consultant, and communication specialist.

    The topic of estate transition is diverse, and it looks different for every operation, but starting the process is never the wrong step. This article only scratches the surface, but below are resources available to you to start. 

    University of Tennessee: Farmland Legacy- https://farmlandlegacy.tennessee.edu

    University of Minnesota- https://agtransitions.umn.edu

    Iowa State University- https://www.extension.iastate.edu/bfc

    Table 1. Age Group Break Down of Total Producers for Southern Ag Today States

    Percent of Producers in Age Group
    StateTotal Producers<3535-6465 and Older
    TX402,8766%52%41%
    OK124,7439%53%37%
    AR67,4259%54%36%
    LA42,5518%54%38%
    KY119,13210%55%35%
    VA67,7988%52%41%
    TN107,8177%53%39%
    NC72,4799%54%38%
    MS52,0257%51%42%
    AL62,7778%53%39%
    GA67,0827%53%40%
    SC38,0978%51%41%
    FL79,2537%53%40%
    (Source: 2022 Ag Census)

    Martinez, Charley, and Kevin Ferguson. “Estate Transition Planning.” Southern Ag Today 4(27.3). July 3, 2024. Permalink

  • Heifers on Feed and Feedlot Demographics

    Heifers on Feed and Feedlot Demographics

    Last Friday, the USDA released its monthly cattle on feed (COF) report. While some COF categories/numbers are reported consistently each month, the USDA also sprinkles in unique quarterly and annual numbers in these monthly reports. Last week’s report included two items that were unique, “Cattle on Feed by Class on 1,000+ Capacity Feedlots and Quarter – States and United States: 2023”, and “Feedlots, Inventory, and Marketings by Size of Feedlot – United States: 2022 and 2023”. 

    The Cattle on Feed by Class on 1,000+ Capacity Feedlots and Quarter data offers insights that are more in-depth than January 1 estimates. It shows the quarterly estimations of heifers and heifer calves, by major fed cattle state, by quarter. On October 1, 2023, there was a total of 4.64 million females on feed. Two weeks ago, Southern Ag Today highlighted the reduced number of heifers being retained as replacements (Griffith, 2024). Figure 1 contains the number of heifers on feed for each quarter of 2023, by state. In Oklahoma, the reports indicate that females on feed were decreasing until the last quarter (October 1). In Texas, quarter 2 (April 1), peaked in terms of number of females in all fed states but also with most females on feed in 2023, then maintained throughout the last two quarters of the year. The number of heifers on feed are historically large.  While the January 1, 2024, number of heifers on feed are not reported by state, more heifers were reported on feed on January 1, 2024 (4.735 million head) compared to January 1, 2023 (4.66 million head). 

    Figure 1. Heifer and Heifer Calves on Feed by Class on 1,000+ Capacity Feedlots and Quarter (Source: USDA)

    Figure 2 contains the number of feedlots by head capacity (over 1,000 head) in 2022 and 2023.  The cattle on feed report only includes feedlots with 1,000 or more head on feed.  The February cattle on feed report and the annual cattle inventory report provide some insight into the number of head on feed in smaller feedyards.  Feedlots with fewer that 1,000 head decreased in number from 24,000 in 2022 to 23,000 in 2023.  While those smaller yards had a few more head on feed than the year before, their total marketings in 2023 declined 4.5 percent in 2023 compared to 2022.  

    Figure 2. Feedlots by Size of Feedlot – United States: 2022 and 2023 (Source: USDA)

    The total number of feedlots decreased from 26,093 in 2022, to 25,103 in 2023.  Tighter feeder cattle supplies might be expected to reduce the number of feedyards.  The feedlots with capacities of 1,000-1,999, 8,000-15,999, 16,000-23,999, and 32,000-49,999 increased in total numbers compared to the previous year. Whereas feedlots with capacities of 2,000-3,999, 24,000-31,999, and 50,000 and over decreased in total numbers compared to the prior year. 

    Tighter feeder cattle supplies, made even tighter by herd expansion, over the next few years will likely stress feedlots numbers. Although the long-term trend of feeding a larger percentage of total cattle for longer periods of time will help.

    Martinez, Charley. “Heifers on Feed and Feedlot Demographics.” Southern Ag Today 4(9.2). February 27, 2024. Permalink