READ the NAFB’s National Ag News for Wednesday, August 17th…

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Rabobank: Land Rent Values Must Decline

A new report from Rabobank says land rent values must decline for U.S. agriculture commodity production activity to remain economically viable. The report explores the impact of low commodity prices on land values and rent prices. Rabobank says from 2006 to 2013, significant increases in commodity prices, due to surging demand, signaled the need for more land to be converted to row crop production. The subsequent steep increases in agricultural land values have pulled enough acres into row crop production to oversupply most commodities, both domestically and globally. Now, Rabobank senior analyst Sterling Liddell says “after two years of economic losses at the farm level – which resulted largely from the significant drop in commodity prices – the cost of renting land remains sticky and unsustainably high.” Moving forward, the report says rent values need to begin dropping to balance with lower commodity prices over the long term.

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Rural Mainstreet Economy Weakens in July

The Creighton University Rural Mainstreet Index for July fell from June’s weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region within the Midwest dependent on agriculture. After improving four of the last five months, the index, which ranges between 0 and 100, sank to 39.8 from 43.9 in June. This is the 11th straight month the overall index has remained below growth neutral. As a result of weaker farm economic conditions, bankers expect almost one in five crop farmers, or 19.5 percent, to suffer negative cash flows where cash expenses exceed cash revenues for 2016. This month, bankers estimated farmland prices have fallen by six percent over the past 12 months. However, there is a great deal of variation across the region in the direction and magnitude of farmland prices.This month, bankers were asked to assess the likelihood of loan defaults in their area. On average, farm loan defaults are expected to rise by 5.4 percent over the next 12 months. 

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Obama Administration Releases Carbon-Emission Standards for Big Trucks

The Obama Administration Tuesday announced new carbon-emission standards for ‘big trucks’ in the administration’s efforts to clamp down on greenhouse gas emissions. The Environmental Protection Agency and the Transportation Department jointly announced the final standards for big vehicles ranging from vans to garbage trucks to 18-wheelers that require up to 25 percent lower carbon emissions and fuel consumption in certain models over the next decade compared to now, according to the Wall Street Journal. The standards are part of the administration’s goal to cut greenhouse gas emissions across the U.S. economy by more than 25 percent by 2025. The EPA and other government agencies have issued rules regulating greenhouse gas emissions from large swaths of the U.S. economy. Congressional Republicans have mostly opposed the rules, and GOP presidential nominee Donald Trump has vowed to repeal many of them. Democratic nominee Hillary Clinton, meanwhile, has pledged to continue and expand Obama’s climate agenda through more regulations.

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Bayer May Consider Hostile Monsanto Takeover

Bayer AG could turn “directly to shareholders” in its quest to acquire Monsanto. The news from a German publication comes after St. Louis, Missouri-based Monsanto rejected two proposals from Bayer. Monsanto called the proposals “financially inadequate,” but Bayer believes its latest offer “fully captures the intrinsic value of Monsanto,” according to the St. Louis Business Journal. Bayer’s most recent offer valued Monsanto at about $64 billion. Analysts expect Monsanto CEO Hugh Grant to reject any offer less than $67-$69 billion, which a spokesman for Bayer’s shareholders considered too much of a financial risk. In the coming weeks, Bayer will reportedly decide on whether a friendly merger is still possible, or whether Bayer must choose an alternative path. However, analysts say a hostile bid may cost Bayer five to ten percent more, if pursued.

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Humane Society to Target Broiler Welfare

The Humane Society of the United States sent a letter last week to CEOs of major broiler processing companies, saying the organization’s focus is “likely to shift toward broiler welfare issues.” Meatingplace reports a letter from HSUS senior director of food policy Josh Balk said many issues HSUS focused on recently have been “largely put to rest,” including confinement issues related to pigs and laying hens. In the letter, HSUS says “it’s always been our preference to work collaboratively with industry,” in hopes of engaging talks with broiler processing companies. HSUS claims the biggest welfare issues with poultry production include moving toward healthier strains of chickens, providing more space per bird, offering enrichments and shifting to controlled-atmosphere slaughter methods. Several poultry processors contacted by Meatingplace said they were unaware of the letter.

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Confidence Gaining in Brazil’s Agriculture

Amid a deep recession and political uncertainty, confidence in Brazil’s agribusiness sector is bouncing back thanks to stronger local commodity prices and healthy margins. DTN reports the IC Agro agribusiness confidence index surged 19.5 points to 102.1 in the second quarter of 2016. The surge follows an 18-month slump. The Index measures confidence among input suppliers, industry and farmers. Scaling confidence between 0 and 200, a score of 100 represents neutral. This is the first time the index has topped 100 since the first quarter of 2014. Brazil’s business confidence, in general, has taken a massive hit over the last two years due to what DTN calls a “toxic cocktail of negative growth.” However, the county’s economy appears to have bottomed out. Meanwhile, agriculture is one of the few sectors to have grown through the recession, expanding 1.8 percent last year.

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SOURCE: NAFB News Service

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