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Farm News & Views - May 30, 2023

Last week, the drought monitor map indicated that there is significant improvement with drought conditions in the western U.S. compared to the beginning of 2023. Arizona is free of drought conditions, while Utah and Colorado have some areas of moderate drought. A small area of Northeast New Mexico and a sliver of southeast Colorado is affected by the severe drought that is impacting the High Plains region of Kansas, Nebraska, Texas and Oklahoma. In states east of the Mississippi river, drought conditions aren’t affecting agricultural producers.

Over the past couple of years, farmland prices rocketed to historically high levels, but there are indications that land prices are beginning to moderate. The latest Creighton University Rural Mainstreet Index reports that while bankers estimate that farmland values in their area rose 4.3% over the past year, they believe that the momentum stops there. Bankers expect farmland prices in their area to remain stagnant, forecasting 0% growth, over the next 12 months. Apparently, a number of factors are driving this slowdown, including higher interest rates, fewer non-farm investors and lower commodity prices. Another indicator of this slowdown is that at a number of land auctions in the Midwest, bids didn’t meet the reserve set by the seller.Probably as a result of increased land sale prices, the USDA reported that farm sector debt tied to real estate is expected to come in at a record high of $375.9 billion in 2023. That would be a significant increase over the 10-year average. The ERS' Farm Income and Wealth Statistics report shows the 10-year average for farm real estate debt (2012-2021) at $282.6 billion. It has been climbing steadily over the last two years. However, non-real estate debt, has been declining. The 10-year average, from 2012 to 2021 is $177.2 billion, and the average debt in 2023 is forecast to be below that average.

Cattle producers are optimistic that they’ll have greater opportunities for profitability this year then they have had over the past three years. After facing slaughter facilities that were closed down by a pandemic and drought that dried up pastures, ranges and forage production, many calves that would have been retained in breeding herds were sent to feeding operations. The increased number of calves in feedlots drove feeder cattle prices lower, which didn’t offer producers much opportunity for making a profit. Now, with drought conditions receding and projected lower cost of feed as hay stocks are built up, cattle producers are optimistic that they can find some profitability in their operations, because as the breeding herd number are are built up, more heifers will be retained, which will decrease the supply of five to 600 pound calves going into feedlots, leading to higher prices for feeder cattle, the main product of commercial cow-calf operations.

Author Henri Alain-Fournier wrote: "Life on a farm is a school of patience: you can’t hurry your crops or make an ox in two days."

Bob has been an agricultural educator and farm and ranch management consultant for over 40 years in southwest Colorado. He writes about agricultural issues from his farm near Cortez, and has helped to produce farm reports on KSJD for more than a dozen years.