Posted February 9, 2017 by Administrator
Agribusinesses face a variety of risks that other businesses do not. Some risks, such as events that affect pricing, are the same for all institutions. Other risks are unique to agriculture-based businesses, such as farming. If you own an agribusiness, you need to familiarize yourself with all of the risks that can affect your company. Below are some of the common risk factors farmers face.
Problems with pricing often occur after a farmer has already committed to production. Production is a lengthy process for agribusinesses. For example, farmers must invest in feed and equipment to produce the best possible livestock. It can take months or even years to see a return on their investment. During this period in time, global and local market pricing can shift and have a dramatic effect on farmers’ bottom line.
Agribusinesses face distinctive production risks compared to other industries. Some examples include harsh weather, droughts, insects, and a variety of other environmental factors. These elements are uncontrollable and sometimes unpredictable, which can hinder production output.
Changes to government policies can affect multiple industries. For farmers, the biggest risks come with changes to regulations regarding how they grow their crops and raise their livestock as this can have a significant effect on production costs. Other changes that can affect farmers are rules regarding manure disposal, conservation and land use mandates, or tax law updates.
Agribusinesses cannot afford to ignore these risks. The best way to reduce risk is to invest in the proper types and amount of insurance. To learn more about how insurance can reduce your agribusiness’ risk, contact the experts at Cline Wood.
Posted September 20, 2016 by Administrator
A new program has been created to expand livestock pricing information accessibility through the USDA Agricultural Marketing Service (through its USDA Market News Division.) The USDA Market News Division provides market information to producers of cattle, swine, lamb and livestock in the U.S. The new program, the Livestock Mandatory Price Reporting program, will encourage competition in the marketplace by improving price and supply data. The USDA Market News Division will improve its service by increasing transparency, breadth and depth of market reporting.
Livestock producers are not the only beneficiaries of the new program. Livestock processors, retail food outlets, restaurants, exporters and many other stakeholders will benefit from the daily market intelligence accessibility. Literally thousands of agricultural business transactions depend on having access to the LMR data.
Funding, and authority, for the program was awarded through the Livestock Mandatory Reporting Act of 1999. Reauthorization will be required by March 1, 2018. Parties involved in the reauthorization efforts include cattle, swine and lamb producers, packers and other market participants.
The first step in the reauthorization process is to conduct a baseline analysis of the livestock and meat industry during the past year. The baseline study will provide an overview of the evolving livestock and meat markets, which need to be taken into consideration in the comprehensive final study.
Changes are happening rapidly in the livestock and meat industry. Here are a couple of the changing trends in the industry.
- Packers have become larger, more concentrated, and more vertically integrated.
- The industry has made major investments to improve supply chain management.
- The use of LMR has expanded beyond price discovery
- Consumer preferences have changed, and packers are marketing a wider variety of value-added and specialty products to meet consumer demand.
With greater vertical integration and concentration in the industry, the LMR information has expanded beyond price discovery. AMS will be inviting industry representatives from National livestock and meat trade associations and organizations to participate in a series of stakeholder meetings to discuss the marketing methods, the current challenges with reporting livestock and meat markets, and the needs of the industry regarding future revisions to LMR. The goal of these meetings is to reach consensus on what each commodity area needs changed in the next reauthorization. AMS has tentatively scheduled the first meeting for mid-November. More information will be shown when the schedule is finalized.
We are looking forward to the completed comprehensive LMR study and the report for Congress, which will serve as the basis to inform the next reauthorization.
Posted May 25, 2016 by Administrator
Some farmers and entrepreneurs have turned to a new form of agribusiness in order to become successful. Combining tourism and agribusiness helps to create a sustainable business model while also building stronger communities. This win-win merger, known as agri-tourism, brings healthier products to families, creates thousands of jobs, and injects millions of tourism dollars into farming communities.
In the state of Virginia, local tourism supported by agribusinesses help to create over 1,300 jobs and $25-million-dollar annual payroll in 2014. Tourists also spent over $100 million dollars in Virginia that year, bolstering local communities even further and brought local food, beauty supplies and other products to families in the area.
There are many different types of agri-tourism businesses that have proven to be sustainable for the farmer and the community. These business types include:
- Farms that offer educational tours
- Bed and Breakfasts with farm tours or wineries
- Restaurants with a farm to table experience
- Eco-farming tours and educational programs
- Charitable events and other community event programs
- Traditional farmer’s markets with produce and other local products
Many farmers and entrepreneurs combine several of these businesses to create unique programs and are dedicated to helping the community to thrive.
At a time when many farming communities are struggling, local businesses are looking for a way to help improve the standard of living in their area. Agri-tourism and community support programs have proven to be one way that agribusinesses can help their community while also supplementing their income.
Many local tourism boards have begun to create programs that advertise and support agri-tourism. If you are interested in learning more about combining agribusiness and tourism, contact your local tourism board for more information. And if you are looking how to reduce risk for that new business, contact the experts at Cline Wood.
Posted April 11, 2016 by Administrator
As farm income is expected to hit a 14-year low, more agribusiness profits are being bolstered by US subsidies. Unless the price of important crops such as corn performs better than expected, the US farming community will continue to struggle to be profitable.
Over $50 Billion in Aid
According to USDA estimates, federal aid will comprise 25% for total profit for farmers this year. Total aid will reach over $50 billion, which is higher than was predicted two years ago. The last time farmers received this high of a payout was ten years ago in 2006. And agriculture states are looking for ways to help their farmers with even more government aid as the prices for certain crops continue to falter.
Corn and Soybeans a Losing Proposition
Agribusiness income is less than half what it was even three years ago. The main culprits of the lackluster profits are the price of corn and soybeans. Despite the fact that corn and soybeans are the biggest US crops, farmers will lose money for every acre they plant this growing season due to a significant drop in prices. And the price of corn over the next few years will be a major factor in the fate of the farming industry.
Experts estimate that corn prices will hover around $3.70 a bushel for the next nine years. If corn manages to rise above this estimated average, then the government won’t have to provide as much aid to farmers between now and 2025. If corn prices drop, to say $3.00 a bushel, then government subsidies will need to increase over the next nine years.
In the meantime, states that depend on farming are looking at alternatives, such as adding cottonseed to the list of crops that qualify for subsidies, and emergency aid to help farmers make it through the lean years.
Contact the experts at Cline Wood to learn more about the current state of agribusiness and how it affects your business.
Posted March 1, 2016 by Administrator
All businesses look for ways to save money, including agribusinesses. If you are looking to cut costs in 2016 you may be looking at reducing your crop insurance coverage. However, the money you save on insurance premiums may not make up for the money you lose later if you have a tough year.
Agriculture Act Not A Safety Net
One reason you may be looking at cutting your crop insurance is because of the Agriculture Risk Coverage-county average (ARC-County). ARC-County was created as part of the 2014 Agriculture Act to help protect agribusinesses who had below average crop yields. Many farmers and others in the agriculture industry believe that with this safety net in place, crop insurance isn’t necessary.
That isn’t the case. ARC-County offers limited protection and figures are based on lower levels as part of the county average. Because farm yields are variable, the coverage received from ARC-County wouldn’t be enough to offset losses for most agribusinesses.
In a recent study comparing ARC-County with different types of policies and coverage levels, agribusinesses would need ARC-County and crop insurance to help offset loses. And since 2016 is expected to be a tough year for crop yields, you may want to consider keeping the crop insurance coverage you have.
There are other ways for agribusiness to reduce costs and maintain adequate coverage. Contact us today and our experts can help protect your business and your bottom line.
Posted February 4, 2016 by Administrator
ARC-County was created as part of the 2014 Agriculture Act to help protect agribusinesses who had below average crop yields. Many farmers and others in the agriculture industry believe that with this safety net in place, crop insurance isn’t necessary. That isn’t the case. ARC-County offers limited protection and figures are based on lower levels as part of the county average. Because farm yields are variable, the coverage received from ARC-County wouldn’t be enough to offset losses for most agribusinesses.
In a recent study comparing ARC-County with different types of policies and coverage levels, agribusinesses would need ARC-County and crop insurance to help offset loses. And since 2016 is expected to be a tough year for crop yields, you may want to consider keeping your existing crop insurance coverage. A quick refresher from the USDA/FSA is below:
County ARC: Payments are issued when the actual county crop revenue of a covered commodity is less than the ARC county guarantee for the covered commodity and are based on county data, not farm data. The ARC county guarantee equals 86 percent of the previous 5-year average national farm price, excluding the years with the highest and lowest price (the ARC guarantee price), times the 5-year average county yield, excluding the years with the highest and lowest yield (the ARC county guarantee yield). Both the guarantee and actual revenue are computed using base acres, not planted acres. The payment is equal to 85 percent of the base acres of the covered commodity times the difference between the county guarantee and the actual county crop revenue for the covered commodity. Payments may not exceed 10 percent of the benchmark county revenue (the ARC guarantee price times the ARC county guarantee yield).
Individual ARC: Payments are issued when the actual individual crop revenues, summed across all covered commodities on the farm, are less than ARC individual guarantees summed across those covered commodities on the farm. The farm for individual ARC purposes is the sum of the producer’s interest in all ARC farms in the State. The farm’s ARC individual guarantee equals 86 percent of the farm’s individual benchmark guarantee, which is defined as the ARC guarantee price times the 5-year average individual yield, excluding the years with the highest and lowest yields, and summing across all crops on the farm. The actual revenue is computed in a similar fashion, with both the guarantee and actual revenue computed using planted acreage on the farm. The individual ARC payment equals: (a) 65 percent of the sum of the base acres of all covered commodities on the farm, times (b) the difference between the individual guarantee revenue and the actual individual crop revenue across all covered commodities planted on the farm. Payments may not exceed 10 percent of the individual benchmark revenue.
Posted January 19, 2016 by Administrator
You may think that an industry like agribusiness wouldn’t have many apps available. On the contrary, there are hundreds of apps that are for agribusiness or can be used for your agribusiness. Here are five of the most useful mobile apps you can use today to make 2016 more productive.
- Evernote: A paperless work environment is beneficial for a business that isn’t confined to an office. Evernote is an app that can keep you organized and can be used on your desktop, tablet and smartphone.
- AgWeb News: You can view the latest agribusiness news wherever and whenever you need it with the AgWeb News app.
- Pocket: And when you are without an Internet connection, you can still access AgWeb news articles and other digital content with Pocket.
- Virtual Farm Manager: Manage all of your agricultural tacks and keep your business organized with the Virtual Farm Manager.
- MFA Agronomy Guide: The MFA Agronomy Guide app is a great resource for corn, small grain and other crops.
- Ag Direct Mobile Calculator: This mobile app is a great way to compare, calculate quotes and make an informed decision on financing and leases.
These five mobile apps are a great way to get your agribusiness off on the right foot in the new year. AgWeb App Finder has over a hundred mobile apps you can use for your agribusiness. Take a look to find all of the apps you need to manage and grow your business in 2016.
Posted December 28, 2015 by Administrator
The House Agriculture Committee’s General Farm Commodity and Risk Management Sub Committee has been discussing agribusiness’ issues with the cotton industry. Many feel that if something isn’t done soon many farmers will face serious losses.
Cotton growers face many different problems, including:
- Water scarcity
- Increase in international cotton production
- Synthetic fibers competing in same market
- Lower cotton prices
- Drop in cotton exports
These problems force many farmers to have to rely on crop insurance benefits. Some agribusinesses who specialize in cotton may not qualify for financing next year. When so many farms have to produce higher than average yields to cover expenses, the different market, environment and regulatory issues become too much to handle.
Members in the General Farm Commodity and Risk Management Sub Committee feel that a stabilizing policy should be created so that cotton growers would qualify for emergency funding. Otherwise acreage will continue to decrease and cotton production in the US will suffer.
Since there are so many difficulties farmers need to overcome, reversing the problem may take time and several government policies. In the meantime, cotton growers are facing a difficult present and an uncertain future if they want to plant cotton during next year’s growing season. To learn more, contact us.
Posted November 23, 2015 by Administrator
For the past 20 years, Congress has managed the standards for SBA small agriculture producer qualifications. These qualifications determine whether small agriculture businesses meet the requirements for a Small Business Administration loan. In October, a bill was proposed in congress that would return the ability to set standards to the SBA, which could relieve some of the undue hardship in the small agriculture industry.
SBA Agribusiness Standards
The Small Business Administration institutes standards for financial eligibility for most industries. The SBA uses factors that include net worth, net income, or number of employees. Each industry has a different standard based on the unique qualifiers of small businesses in that industry.
In the mid-80’s, the SBA was looking to alter the definition of small business in the agriculture industry by looking at cash receipts. Congress took it upon itself to create a statute that defined small farms as those with cash receipts less than $500,000 and took away the ability of the SBA to create standards for small agriculture businesses.
Since the mid-80’s, Congress has increased the value of cash receipts, however current standards of cash receipts less than $750,000 doesn’t meet the needs of many family-owned farms or ranches.
If the Small Agriculture Producer Size and Standards Improvement Act were passed, the SBA would once again be able to determine the definition of small agriculture businesses. They could also monitor the industry using information from the Census of Agriculture and Department of Congress to make adjustments as the industry changes.
This would help improve the financial state of the small agriculture industry and the economy as a whole.
Posted October 13, 2015 by Administrator
There is a demand in the US for more than just organic food. As more consumers are embracing eating healthy, there has become a growing trend for specialty food items. As restaurants, grocery chains and companies struggle to meet this demand, the weak link in the supply chain is the growers.
As the understanding of organic food becomes mainstream, many consumers have begun to prefer specific types of organic foods, including:
- Gluten Free
- Hormone Free
Two-thirds of consumers admit that they frequently purchase these items at grocery stores and request them when dining out. Once they have decided on a preference they are consistent in their buying habits.
Businesses Struggling to Meet Demand
The demand is large enough that restaurants and grocery companies have struggled to meet the demand and a supply chain has formed. However, despite the fact that organic food sales are up over 80%, growers are the weakest link in this chain.
Not Enough Organic Farms
As of right now, over 14,000 farms are certified organic, with the majority of them residing in California. Many farms are reluctant to begin the three-year process of converting to an organic farm without a guarantee the move will be profitable.
Many Companies Dealing Direct
In order to encourage more farmers and guarantee a steady supply of produce, some companies, such as Walmart, are dealing directly with famers and agreeing to contracts that assure the farms a specific price if they guarantee delivery. This benefits both the farmers and the grocery chains as they struggle to find a way to make healthy food beneficial to their bottom line.
Specialty foods aren’t a fad; they are a trend that is only going to grow. US food producers can’t meet current levels and as demand increases, the US is going to have to struggle to catch up.