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View From the Cab             09/26 13:03

   Farmers Prepare for Harvest, Wheat Planting as Fed Raises Rates

   Both of DTN's View From the Cab farmers attended loved ones' weddings this 
week, a welcome break as they prepare for harvest and wheat seeding. They also 
talk about the Federal Reserve's latest move to raise interest rates and how 
they're trying to manage the impact.

Katie Micik Dehlinger
Farm Business Editor

   MT. JULIET, Tenn. (DTN) -- Life doesn't plan itself around the seasons or 
the chores that need to be done. Sometimes, that means farmers set their toils 
aside to honor life's big moments.

   Both of DTN's View from the Cab farmers stepped away from their businesses 
in the past week to celebrate family expansions. Colorado farmer Marc Arnusch's 
son, Brett, and Ohio farmer Luke Garrabrant's sister got married within the 
past week.

   "It was pretty magical," Arnusch said. "They had an absolute perfect day for 
it. The weather was fantastic. The view was great, and it went off without a 
hitch."

   The Arnusches had another blessing after they returned back to the farm: a 
gentle, day-long rain. "We actually had an inch of rainfall on our farm, which 
was a surprise, and an answer to a prayer for sure."

   For Garrabrant, he ended a busy week of harvest preparation by picking up a 
tuxedo.

   "They were smart enough to get a venue and not get married on the farm, so 
that took away some of the work, but not all of it," he said, adding there were 
lots of last-minute details that needed attention.

   Garrabrant, who just celebrated his 1-year anniversary, got married on the 
farm. "It's kind of special in the end, but it's a lot of extra work, to get 
that special ending."

   He couldn't help but chuckle at the observation of the rising popularity of 
barns as wedding venues.

   "Our ancestors that built them are probably shaking their heads thinking 
this is kind of crazy," he said.

   Garrabrant and Arnusch have been participating this season in DTN's View 
From the Cab series. The weekly feature follows the farmers and their crops 
throughout the growing season. The two volunteer their time and thoughts on a 
variety of agronomic and agricultural topics. This is the 22nd installment of 
the series.

   This week, they share updates on harvest and wheat planting preparation as 
well as thoughts on farming in a rising interest rate environment. Last 
Wednesday, the Federal Reserve announced another .75% benchmark interest rate 
increase, bringing the federal funds rate to a range of 3% to 3.25%, the 
highest since 2008.

   You can find last week's installment on managing weather extremes here: 
https://www.dtnpf.com/agriculture/web/ag/news/farm-life/article/2022/09/18/farme
rs-gear-harvest-beyond

   MARC ARNUSCH: KEENESBURG, COLORADO

   An inch of rain is about all they ever get at one time at Arnusch's farm 
east of Denver.

   "We get much more than that and it starts to flood in certain places. Our 
ground doesn't really absorb water very well, and typically, when we do get a 
rain, it comes super-fast. But this was basically a day-long drizzle, and you 
couldn't have had it any better."

   Last week, his team planted their first wheat field after a freak shower. 
Now, they're preparing seed wheat so that when it dries out enough, they can 
get planting.

   "To plant a crop that's worth $9.50 a bushel as it goes into the ground is 
something I've only experienced maybe once in my career," he said. While it's 
encouraging, the downside is that input prices are significantly higher too. 
"So, our margins tend to be pretty skinny, but it's nice to see a nine in front 
of the wheat market, not a four."

   He's started to make a few sales for the 2023 season. Even though it's a bit 
earlier than usual, it's important to take risk off the table. While he's sold 
some futures, he's also purchased out-of-the-money calls for about a dime a 
bushel to keep the top side of the market open "in case something crazy in the 
world happens and the market runs away."

   He's also just a few days away from starting to chop silage. The corn was 
still a touch immature when he spoke to DTN on Friday, but Arnusch said recent 
moisture should help expedite it. And without a frost on the horizon, he thinks 
there will be a good window to get the crop out.

   "In Keenesburg, we're looking at pretty stable conditions for the next 
week," DTN ag meteorologist John Baranick said. "There should be plenty of sun 
and temperatures generally in the upper 70s. There is potential for some 
showers later next week with a small disturbance moving through, but otherwise 
it looks like the harvesters should have no weather issues."

   With a forecast like that, it's full speed ahead. Arnusch and his team will 
be harvesting corn silage, drilling wheat and cleaning and conditioning malt 
barley seed to get ahead of upcoming delivery dates.

   "We're going to juggle quite a few chainsaws all at the same time," he 
joked. "They're not too bad to juggle as long as you catch them by the handle."

   One thing he hasn't had to juggle in a long time is interest rates. Arnusch 
said when he graduated college in the 90s, it wasn't unusual to pay 9% interest 
on an operating note. "We've almost become low-interest rate drunk here in the 
last decade" from borrowing operating money at 3.5% to 4%, he said.

   Rates are likely to creep up to 4.5% next year and when coupled with 
inflation in input prices, "it's just a double whammy."

   Arnusch is mentoring a few young farmers this year, including his son and 
niece. One of the things they've talked about is managing cash. He's 
encouraging them to be creative, to demand more from their input suppliers and 
take advantage of some programs that offer zero interest and no payments until 
fall.

   He understands there's a hidden cost to many of these programs, but they 
allow producers that don't have as robust of a balance sheet to manage cash. 
"And that's incredibly key right now. Cash is going to be king in this next 
year, especially if we're in a very volatile marketplace," he said, adding that 
alternative financing, like that offered by input suppliers, wasn't available 
when he got his start farming, but it would have made things a lot easier.

   Another piece of advice he'd offer young producers is to cultivate 
relationships with a variety of lenders. Even if you are very loyal to your 
primary lender, having potential partners waiting in the wings has served him 
well, like when he had the opportunity to buy a farm that hadn't been for sale 
in 100 years. His bank was unsure if they could finance it. Fortunately, he had 
a relationship with another lender, and he was able to move ahead quickly.

   "Those are the kinds of opportunities that I think will exist here in the 
next three to five years as our economy begins to reset," he said.

   It's also critical to make grain sales and take profit off the table. 
"You're never going to go broke making a profit," he said, adding that you 
don't always need to hit the top 10% of the market, but instead focus on 
selling in the top third. "That, in an indirect way, will help us hedge against 
interest rate and inflationary risks. Greed can be the enemy of a lot of 
farmers. I've been guilty of it myself before, but I've learned over time that 
there's a lot of value in certainty."

   LUKE GARRABRANT: JOHNSTOWN, OHIO

   Fall is knocking in central Ohio. The leaves have an off-green tint. When 
DTN spoke with Garrabrant last Thursday, the high temperature was around 65 
degrees, down from 80 the day before. The nighttime low was forecast in the 40s.

   "It's kind of chilly compared to what it has been," he said. They've had a 
number of steady little rain showers, and Garrabrant said he's not 
complaining... yet. "Now if this keeps up for another three weeks, I'll be 
getting nervous, but so far it's actually helping matters."

   Baranick said there's plenty of chaotic weather in the near-term forecast. 
In addition to a wet pattern for the weekend, "another shot of colder air will 
be moving through Monday night. That could cause some more showers into Tuesday 
and bring high temperatures down into the upper 50s or lower 60s for a couple 
of days. Lows should stay in the 40s so no risk of frost just yet. Temperatures 
will rise then through the rest of the week and should stay drier after that. 
Early October is looking good for harvest conditions with limited chances for 
rain that following week as well."

   Garrabrant got a late start to soybean planting this year, so these late 
rains could benefit plants that are still filling pods. His father has a few 
fields that are ready to pick, and if it wasn't for this weekend's wedding, 
they'd probably have spent some time in the combine. He knows some farmers in 
his areas likely got a start over the weekend.

   "It kind of makes me antsy to see what's out there," he said.

   The corn crop still has a way to go, and temperatures in the 60s won't help 
it dry down. Garrabrant estimates he's at least three weeks away from corn 
harvest.

   "I don't get too big of a jump at it because I don't have a dryer or any bin 
space. The more natural drying I can get, the more it helps my checkbook," he 
said.

   As a younger farmer that relies on an operating line of credit, Garrabrant 
is working to get a better understanding of how interest rates will affect his 
checkbook. He's been reaching out to farmers he knows who either experienced 
the 1980s or who learned a lot about those times from their parents.

   He's debating a few different ways to minimize the impact of interest rates 
on next year's operating line. One of them is tapping into the equity he's 
built in his equipment. Garrabrant started acquiring equipment early in life, 
back when he had a manure spreading business.

   "Long story short, I got forced out of the business and sold off a good 
chunk of my equipment and had a good bit of equity in that equipment that I 
pumped right back into the farm. So fortunately, a lot of my equipment is paid 
for," he said. While he feels like he might be a little late to the game, he's 
considering pulling some of that equity out with a fixed-interest loan and 
converting it into operating money.

   "I don't know if it's a good idea or a bad idea, but it's one thing that's 
on the table for how I might combat this," he said. "The end goal is to get 
that operating line of credit as low as I possibly can."

   If his plan was just to maintain his acreage next year, he could have cut 
his operating line in half, but plans to double his acreage also means doubling 
his expenses.

   "It's one more thing to navigate and manage. In a perfect world I would 
operate on cash and what I would have been paying in interest would be what I 
paid myself at the end of the year. I envy the day when I, hopefully, can 
accomplish that because it feels like you're working for the bank. It's kind of 
an overwhelming feeling at times."

   While some people may argue his recent equipment trades weren't the best 
moves, he sees the value in newer equipment that needs fewer repairs. Last 
spring's planting reinforced the importance of being ready to plant when you 
get an opportunity.

   "The goal isn't to try to get equipment to take care of where you're at, 
it's also to anticipate where you hope to be and to be able to grow without 
major changes," he said.

   Garrabrant says it's so crucial to know your numbers. Inflation and supply 
chain problems aren't helping anything. He's already booked his nitrogen 
fertilizer needs for 2023. He's had some conversations about spring chemistries 
but hasn't finalized any deals yet. Next thing on the table is seed.

   "Right now, it seems like we're starting to need to plan for the following 
year's crop a lot earlier than we used to. It's just one more thing to add to 
the plate," he said.

   Katie Dehlinger can be reached at katie.dehlinger@dtn.com  

   Follow her on Twitter at @KatieD_DTN




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