Nebraska Gov. Ricketts Touts ‘Major’ Property Tax Bill in Nebraska

“Property tax reforms in Nebraska could help farmers, but not as much as some groups want.”

Source: Nebraska Gov. Ricketts Touts ‘Major’ Property Tax Bill | Agweb.com

Please have patience with me while I talk about agriculture and property taxes for a moment so I can explain why this is important for farmers and environmentalists. Talking about things like taxes and government policies tends to make my eyes glaze over and I find myself with a sudden desire to take a long nap. But if you aren’t a farmer you may not know why this move by Nebraska is important for farmers. Wisconsin already did something like this years ago, and I think it’s the right thing to do.

Property taxes are based on the value of your property, of course. If your house, for example, is valued at, oh, $100,000, you pay property taxes based on that value. If it’s valued at $200,000, your property taxes are going to be significantly higher.

It’s the same with farmland. Under law here in Wisconsin the property is supposed to be assessed for purposes of property taxes at fair market value. (That law had to be instituted because some local jurisdictions were playing fast and loose with property evaluations in order to jack up the tax money they were getting. Before that law was put in place, I knew one poor bugger who had a mobile home that was worth about $10,000 get a tax assessment for $64,000. Seriously. I saw the documents myself.)

The question now is what exactly is “fair market value”? Is it the value of the property as it currently exists, what it is being used for at the moment, or the potential value of the property if it were sold for some other purpose.

That distinction is important, because what was happening in Wisconsin and a lot of other states is that local jurisdictions were assessing property not at it the value of the property as it currently existed, but what the property could be worth if it were sold for some other purpose.

The result was that if you had a farm on the outskirts of a town or city, you were pretty much screwed. Local governments were assessing the farms not on their value as farms, but their value as if they were commercial or residential property.

To illustrate what I mean, let’s look at an example. Farmland in this area is currently going for around – well, let’s round it off to $7,000 an acre to keep the math simple. So if you have a small, 100 acre farm, it’s worth about $700,000.

Meanwhile, land being used for, oh, let’s say a fairly upscale housing development in a nearby town, is going for about $20,000 per 1/4 acre lot, or about $80,000 an acre. Over time the town grows, and now you find that your farm is on the outskirts of the town. And as a result of that, the local government is now assessing your farm not for what it is worth as a farm, but for what it would be worth if it were sold for a housing development. You are now being forced to pay property taxes not on a farm worth $700,000, but property worth $8 million. Your property taxes just went up more than ten times what they’d been before.

While that’s a bit extreme, it isn’t exaggerated by much. I knew farmers who were seeing their property tax bills shooting up into the astronomical range because the jurisdiction they were in decided to evaluate their property not for what it was, but for what it could be. Their taxes were going up five, eight times what they’d been before when their property was evaluated at commercial or residential rates rather than agricultural.

There was some very heated debates over this, of course. The towns (and the developers) claiming that the new value was fair because that was what the property was actually worth if it were sold off to some developer, and the farmers on the other side saying no it isn’t because that’s not what it’s being used for… It was nasty.

I don’t think anyone ever actually proved that the governmental jurisdictions, seeking ever more tax money, along with developers smelling profits, abused the system by ratcheting up the taxes on farms specifically to force farmers to sell at bargain basement prices to a developer, but it was pretty much an open secret that this was exactly what was going on. At the time the laws curbing this were under consideration dozens of farmers appeared before the legislature claiming that this was exactly what was going on. Developers would find a nice farm in a good location near a town, smell the heady scent of money, convince the local government that it would be to it’s advantage to annex the farm into the town, evaluate the farm as commercial or residential property rather than farmland, and the farmer would be forced to sell at cut throat prices to the developer or go bankrupt from the taxes… It was nasty.

And for those concerned with urban sprawl it was nasty as well. This kind of thing was driving the construction of huge housing developments on the outskirts of cities and towns with McMansions sitting on quarter acre “estates”, endless cookie cutter boxes, hastily constructed, looking exactly alike…

Wisconsin did finally change the property assessment laws, but local jurisdictions and developers are still griping about it and occasionally manage to bribe convince some legislator to try to introduce a measure to “reform” the system, turn back the clock and let local jurisdictions snap up all that yummy, yummy tax money by assessing farmland at utterly absurd valuations.

The change didn’t halt urban sprawl, but it did help to slow it down a tiny bit. Maybe. Depends on who you talk to, really. Certainly it helped a lot of farmers whose property is adjacent to towns and cities.

Changes…

Despite the name of this blog, it isn’t really about farming. I guess it’s more like a journal where I write about things I find interesting, curious, infuriating, irritating, fun. But I often return to talking about farming because it was such a big part of my life for so long. But this one is about farming for a change.

What does that have to do with changes? A lot. I was reading an article about new ag technologies, automated and robotic systems to replace human labor. This has been going on for some time, of course. Robotics and automation have taken over product assembly, car manufacturing and a whole host of other industries. Ag has been slower to adopt robotics because it requires above average intelligence, dexterity, strength and gentleness and a lot of other qualities that are difficult to do with robotics. Until now. New advances in software, AI systems, new engineering, new materials and a lot of other technologies have sprung up that are making fundamental changes in how we grow food over the next couple of decades.

Neat, I thought. But then I thought further and realized that this has been going on my entire life. The pace of change has accelerated, true, but when I look at what farming was like when I was a kid and what it’s like today, it’s actually a bit mind boggling.

When I was a kid we still had a crank style phone. We didn’t get a dial phone until I was in second grade. Electricity service went out so often we still had old kerosene lanterns laying around ready to use just in case. A lot of the equipment we used looked like some kind of steampunk nightmare, to be honest.

We still had a few farmers in the area who were harvesting grain with grain binders,dscn1419 shocking it, and running it through threshing machines, for heaven’s sake. In case you’ve never seen one, here’s a photo of a grain binder from an antique farm equipment show I took some years ago. And yes, that thing over there that looks like it was cobbled together out of bits of old string, wire and old barn boards, is an actual commercially made machine. It was pulled by horses (that’s why there’s a seat on it). It cut the grain off with a sickle bar, put it in a bunch, tied the bunch with twine, then dumped it on the field. Workers would come along, stand the bundles on end with the grain heads up so it would dry. Then it would be loaded onto wagons and taken to a threshing machine.

And in case you’ve never seen a threshing machine, here’s one. Well, it’s sort of a dscn1422threshing machine. This is actually a special machine designed specifically for threshing or hulling clover seed, not wheat or oats, but the principle is the same. Workers would throw the bundles onto the elevator over on the left where it would run through threshing bars, fans, screens, etc. to be separated from the stalks and hulls. The hopefully clean seed would come out one pipe to be bagged, the straw would blow out onto a pile. The whole thing was originally powered by a massive steam traction engine via that long belt you see extending out the left side of the photo. Steam engines were replaced in the 1920s or so by gasoline powered tractors, but the threshing machines themselves remained in use well into the 1950s in some parts of the state. There were still a couple of farmers in the area who were using this setup when I was a kid. These things hung on because as long as you could get inexpensive labor it was cheaper to keep using it than buying a combine.

Then there were tractors. Take a look at this beast, for example. Believe it or not, when I img_0279was a kid we actually had one of these beasts, this exact same model. And we didn’t have it for some collection, this monstrosity was an actual working tractor at the time. The only thing we used it for was running the blowers to blow grain or forage into the barns or silos, but it was still a working tractor on the farm. And dear lord we hated that thing. Trying to start that beast… Oh, my. It started by manually cranking it with that big lever  you see just below the radiator. That connected to the crankshaft to turn the engine over. And if you didn’t know what you were doing when you tried cranking it, it would gleefully break your arm. Seriously. It would if you didn’t know what you were doing.

Lest you think we were weird or something, the rest of our tractors looked like this.

A modern (at the time) Oliver 1655 and a 1950s era Oliver 77. (That 77 actually belongs to my eldest son.) So why did we hang onto that old monstrosity? It was cheap power. You could buy them for little more than scrap metal price.

Almost all of the changes that have gone on in agriculture have occurred for one reason: money. They did something that improved the profits of the farm in one way or another. The old threshing machines hung on as long as they did because for some of the tiny farms around at the time it made more sense to keep running them long after they should have gone to the scrapyard than to drop thousands of dollars on a modern combine. Same with the old McCormick tractor. It was cheap power, good enough to run a forage blower, but for nothing else. As soon as it was no longer economical to hang onto the thing, it got dumped. We ended up buying another 1650 to replace it.

Just in my lifetime we’ve gone from grain binders and threshing machines, to GPS guided computerized combines. Harvesting crops by hand to a facility in New Hampshire that raises lettuce that is never touched by a human during its entire life. From planting to harvesting and packaging, everything is done by automated systems or robots.

Changes… Sometimes I look at the world around me and think I’m living in a science fiction novel.

Give Me Land Lots of Land

screen-shot-2017-01-04-at-4-37-48-pmOne trend in agriculture has been making me nervous for some time now, and that is how large quantities of farmland are being concentrated in the hands of fewer and fewer people.

This has been going on for some time, of course. When I was a kid the road we lived on was dotted with small farms of various sizes ranging about 80 acres to 150 acres or so. Ours was actually one of the larger ones when I was a kid, with 140 acres and about 120 under cultivation. If memory serves me correctly, there were ten or twelve farms just on that one stretch of road when I was a kid. Today the houses and even many of the barns are still standing, but they aren’t farms any more, they’re residences. The actual farmland is now owned by one of three huge farming operations.

Whether or not this is a “good thing” is open to debate. But there is one trend that I think is definitely not a good thing, and that is that large amounts of farmland is being snapped up by investment companies.

Corporations like Farmland Partners (which doesn’t actually do any farming) and a lot of others, located both in the US and in other countries, are buying up farmland wherever they can find it and then renting it back to real farmers. For, of course, a profit

One can understand their point of view. People have to eat, after all. Therefore there is always going to be demand for land on which to grow crops. If a farmer can’t afford to buy land, he or she has to get it from somewhere, so they’re forced to rent it from a land owner. To an investor this seems like a fairly safe type of investment, especially with the stock markets being as volatile as they are.

But for farmers, for agriculture in general, this practice is disturbing in more than one way and is potentially damaging for consumers, farmers and agribusiness in general.

These companies do no farming, grow no crops, harvest no grain, raise no cattle. They do nothing to improve the quality of the land they own. They exist for only one reason, to rent land back to real farmers for the maximum amount of money they can squeeze out of them. They contribute nothing to agriculture. I dislike the term ‘parasite’, but, well… Isn’t that what you call an entity which does nothing but syphon off the resources of others and provides no benefit to those it feeds off of?

So far these companies have had little adverse effect on agriculture. Up until now they have been picking off the ‘low hanging fruit’, so to speak, snapping up deals here and there, in widely scattered areas. But as they acquire more, as more farmland is taken out of the control of farmers and placed in the hands of a few companies that care only for making profit… Well, the potential for abuse is obvious.

This kind of thing is legal. I certainly can understand the attraction people may have for this kind of an investment. With the stock market going through endless series of boom/bust cycles over the last few decades, a fairly stable investment like farmland is certainly attractive.

But what kind of effect is this going to have on agriculture as ever increasing amounts of land are being held in perpetuity by companies whose only goal is to squeeze as much profit out of farmers as possible?

John Deere’s Electric Tractor

Source: John Deere’s Electric Concept Tractor Sparks Interest – News | Agweb.com

Deere has been recently showing off it’s concept electric tractor, with the rather awkward and unfortunate name “Sustainable Energy Supply for Agricultural Machinery”, or SESAM. Deere is supposedly going to show it off at the Paris Agribusiness Show in Feb.

While it sounds interesting, whether or not it will actually work in practice is something else again. I haven’t been able to find out much about it. Deer claims that it will work for about 4 hours in “normal use”, whatever that is, or can drive about 55 kilometers on the road.

Both of those claims are essentially meaningless, though. What kind of work? What kind of load was it under, if any? Under what kind of conditions? What kind of weather, temperature, etc? Can I use it to plow snow when it’s -10 or do the batteries turn into mush at low temperatures? Or high temps? How well does it work at 100 or 110 degrees?

The statistics given out that I’ve found don’t sound utterly horrible. It recharges in about 3 hours, which is pretty good. I imagine that would require a specialized charging station, however. Almost no normal domestic power source could charge a big battery pack, that fast.

The battery’s life is estimated at 2,100 charge cycles, which also sounds pretty good until you remember that the average tractor isn’t kept for just a couple of years, but often for decades. That battery isn’t going to last for the life of the tractor, not even close. It would probably have to be replaced many times. So what is that going to cost?

The 3 hour run time may seem pretty good as well, but something like that would be almost useless for the average farm where a tractor may be expected to operate 10, 16 hours straight during  busy times.

And once you’re out in the field and the battery gets low, how do you recharge it? You’d have to take it back to the shop, which could be miles away, wait 3 hours to charge it…

Basically it means you would have to have multiple tractors to fill the same role that was performed by a single machine if you’re going to keep going during busy times.

It might be useful for utility tractors used around the farm itself and that never wander far from a charger, but for harvesting, plowing, tilling… At this stage of the game they’d be useless.

I’m not saying electric tractors are useless. But they are going to need to be better than this. The technology will almost certainly improve with time, but it’s going to take better battery technologies and charging systems that we have today.

Drought, Climate and Agriculture. Like it or not, Change is coming.

Water is an increasingly precious commodity across the country, and lack of water has become an extremely serious issue in Southern California where a years long drought continues. I ran across this item over at Ag Professional’s website and while brief and far from in depth, it does talk a bit about the problems that are going on and the changes that are starting to take place.  California Drought is a U.S. Problem | Ag Professional

The ongoing drought in California is driving a lot of farmers over there into bankruptcy and causing others serious problems as they scramble to fight with cities and other users over an increasingly scarce resource. During his campaign Donald Trump claimed that there is no real drought in California and the other south western states, and he could bring the water shortage to an end if he was elected. But no, Trump is not going to end the drought by simply claiming it doesn’t exist. Even if the new administration changes or repeals existing water regulations, it doesn’t do you much good when there isn’t any water to begin with, which is the situation southern California and Nevada are facing.

With ground water being pumped out of aquifers at rates so high it’s causing the ground to sink, that wells are drying up wells all over that part of the state, and with surface water already being rationed, simply declaring there is no drought and blaming it on regulations is ridiculous. Sooner or later those aquifers are going to be completely depleted or drawn down so far that it is no longer possible to drill deep enough and build pumping systems powerful enough to deal with it.

Are there things that could be done to improve access to water? Sure. But it would take tens, even hundreds of billions of dollars in new infrastructure, new dams, new aqueducts, new pumping systems, etc. And even then they’d have to steal water from other parts of the country, suck rivers dry and pretty much ruin every river system they tap into in order to do it. From an engineering standpoint it could be done, but economically and politically? No state is going to stand by idly and allow it’s water be siphoned off to irrigate crops, water lawns and golf courses and fill swimming pools in states like California and Nevada.

Could the situation out there be solved some other way? Sure. But it would require change. And people don’t like change. The agricultural industry would have to fundamentally change how it works. Not just changing how they farm, but what they farm. Water intensive crops that require irrigation would have to go. Some types of agriculture, like dairy, would probably have to move elsewhere entirely. Consumers would have to get used to the idea of not having “fresh” produce of certain types available every month of the year. It would require a lot of changes that a lot of people don’t want.

And it isn’t just in California and the other states in the south west. How we use water, how we manage our water resources, is going to have to change. The changes are coming whether people like it or not.

Glad I’m Not Farming Anymore

I really liked farming, but I’m rather glad I’m out of the business these days, especially when I see headlines like this one over at agweb.com:

Betting the Farm and Losing: Banks Seek Collateral as Debts Rise

The financial situation for a lot of farmers is pretty stressful right now. Farm income is down 42% from what it was in 2013, farm land prices are dropping and they’re predicting land prices could drop 20% or more over the next couple of years. Corn prices are less than half what they were in 2012, cattle and hog prices are down 38%. Corn and soybean inventories are going to be at the highest level in something like 30 years. The University of Illinois says many farmers in the state are going to be losing about $28 an acre on their corn, and while soybeans are still profitable, they’ll be lucky if they make $67 an acre this year compared to $229 back in 2010.

The situation isn’t good when you look at the financial data. The Federal Reserve Bank of Kansas City is reporting a decline in the financial health of farmers. They have less working capital, are having to resort to taking out loans just to meet operating expenses. In the Midwest banks are reporting that about 22% of farmers will have a negative cash flow for 2016.

As usual the farmers who are getting hit the worst are the young ones who are just starting out or have only been in business a few years. They don’t have the land base or the credit history to get enough capital to buy equipment or to even continue operating.

Farming is a difficult business at the best of times. And it operates under financial conditions that pretty much no other business faces. How many companies would invest huge amounts of money in infrastructure, equipment, land, buildings, labor, etc. when they have absolutely no idea what their product will sell for when it finally gets to market?

That’s the situation farmers face. Farming is a long term proposition. You invest hundreds of thousands of dollars in tractors, combines, planters. You spend tens of thousands of dollars on seed. You invest huge amounts of money buying or renting land. Invest tens of thousands of dollars in labor to plant and tend to a crop.

And you have absolutely no idea what that crop is going to sell for because you have no control over the markets. You could have a boom year like we had a few years ago when the drought drove commodity prices up through the roof, or you could lose your shirt because prices on the commodities markets fell. You can make predictions, run models, listen to the experts, make educated guesses. But in the long run you’re depending on a market that has so many variables; weather, political climate, disease…

I miss farming, but I am glad I’m not doing it any more.

Agrimoney.com | Revival in US milk prices to continue, says Dean Foods

 

Source: Agrimoney.com | Revival in US milk prices to continue, says Dean Foods

This is one of those situations where I don’t know where they’re getting their information because what they’re saying here isn’t what I’ve been reading in the ag news.

Dean Foods seems to be trying to claim farmgate prices are going to go up significantly, that US dairy exports are robust and growing, and that the markets are giving off “buoyant signals”.

But well, no, the market is doing no such thing, and there seems to be no indication that we’re going to be seeing any kind of significant increase in farmgate prices in the US any time soon.

While milk production in NZ and the EU is trending down a bit, here in North America it has continued to rise significantly, with significant numbers of new cattle being added to milking herds and continued increases in milk production. Texas was up about 11%, Minnesota and Wisconsin were up about 2% or a little less. Overall US production is around +1.2% to +2.3%, depending on the numbers you believe, and there doesn’t seem to be any sign that’s going to stop.

As for cheese, yes, there was a blip in the cheese price last week, but that happens all the time, especially as we get closer to major holidays, and we haven’t even begun to make a dent in the truly massive amounts of cheese and butter already in storage. The USDA’s recent purchase of about $20 million in surplus cheese (if I remember the number right) didn’t even make a dent in the amount of cheese in storage. And as of this morning, cheese prices have already started to fall again, down 6 cents over the weekend.

And the statement that “foreign buyers are lapping up” US dairy products is, aside from being a horrible pun, simply not true. Exports of dairy products actually dropped 2% in September.

There is always an uptick in prices this time of year as we approach the holiday baking season. Cream, cheese and butter prices almost always begin to rise around this time of year as retailers and suppliers try to cash in on increased demand. It’s a seasonal blip that doesn’t really indicate any kind of significant improvement in the market.

Maybe Dean foods is just trying to make investors feel a bit better about the fact that Dean’s profits fell by 28% last quarter?