Digest highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Ag loan interest rates move higher

The Federal Reserve raised its benchmark short-term interest rates in late July. Prior to the announcement, second-quarter 2022 average interest rates charged on variable and fixed-rate loans were already trending higher in several major district banks serving agricultural markets.

Based on quarterly reports and newsletters, average interest charges on variable-rate operating loans across Chicago, Dallas, Kansas City and Minneapolis Federal Reserve districts averaged 5.52% as of July 1, up from 4.88% during the previous quarter.

Here’s a summary of individual districts:

  • In the Chicago district, nominal interest on variable loans surged to their highest level since the second half of 2019. The district’s average nominal interest rates on new operating, intermediate and farm real estate loans stood at 5.42%, 5.53% and 5.17%, respectively.
  • In the Dallas district, interest rates on variable and fixed loans were the highest since the second quarter of 2020. Interest rates on variable operating, intermediate and real estate loans averaged 5.67%, 5.53% and 5.3%, respectively; rates on fixed loans averaged 6%, 5.81% and 5.45%, respectively.
  • In the Kansas City district, average rates increased by about 60-70 basis points from the previous quarter. In most cases, interest rates were the highest since fourth quarter of 2019 and the first quarter of 2020. Interest rates on variable operating, intermediate and real estate loans averaged 5.55%, 5.47% and 5.18%, respectively; rates on fixed loans averaged 5.75%, 5.75% and 5.5%, respectively.
  • In the Minneapolis district, interest rates were another spiking input cost for farmers, increasing substantially in the second quarter after a moderate increase in the previous quarter. Interest rates on variable loans operating, machinery and real estate loans averaged 5.45%, 5.3% and 5.1%, respectively; rates on fixed loans averaged 5.5%, 5.5% and 5.4%, respectively.

GDT product prices mixed

The latest Global Dairy Trade (GDT) auction saw the overall price index decline 2.9%, marking the 10th decline in the last 11 auctions. Average prices in individual product categories were mixed in the Aug. 16 auction, including:

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  • Skim milk powder was up 0.1% to $3,524 per metric ton (MT, or about 2,205 pounds).
  • Whole milk powder was down 3.5% to $3,417 per MT.
  • Butter was up 0.2% to $5,204 per MT.
  • Cheddar cheese was up 4.2% to $5,005 per MT.
  • Anhydrous milkfat was down 9.8% to $4,990 per MT.

The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is Sept. 6.

FSA increases LIP payments for young dairy, beef cattle

The USDA’s Farm Service Agency (FSA) increased Livestock Indemnity Program (LIP) indemnity payments for young dairy and beef cattle, retroactive to the beginning of the year.

The higher payments are for non-adult animals in the beef, beefalo, buffalo/bison and dairy categories. Payments for dairy cattle under 250 pounds increased from $45.32 to $255.47 per head; payments for beef cattle under 250 pounds increased from $175.27 to $474.38 per head.

Authorized in the 2018 Farm Bill, the LIP provides benefits to eligible livestock owners or contract growers for livestock deaths in excess of normal mortality caused by eligible loss conditions, including eligible adverse weather, eligible disease and attacks by animals reintroduced into the wild by the federal government or protected by federal law, including wolves and avian predators. In addition, LIP provides assistance to eligible livestock owners that must sell livestock at a reduced price because of an injury from an eligible loss condition. LIP payments are equivalent to 75% of the market value of the applicable livestock.

The updated LIP payment rates are effective immediately and will be applied retroactively starting Jan. 1, 2022, for all eligible causes of loss including excessive heat, tornado, winter storms and other qualifying natural disasters. Producers who have already received LIP payments for 2022 will receive an additional payment, if applicable, commensurate with these updated rates.

Owners or contract growers may apply to receive LIP benefits through local FSA offices. For more information, review the LIP fact sheet.

DFA, Pizza Hut partnering on sustainability project

Dairy Farmers of America (DFA) and Pizza Hut are partnering on a project to provide participating farmers with the technology and data needed to help reduce greenhouse gas (GHG) emissions.

The partnership seeks to enroll DFA members in the FARM environmental stewardship program. Once enrolled, farms will receive a SCiO cup, a lab-grade dry matter analyzer, to analyze and adjust dairy rations to produce milk more efficiently, create less waste and reduce on-farm GHG. The farms will also be eligible to apply for funds to implement sustainability projects and adopt other practices.

The goal of Pizza Hut, a subsidiary of Yum! Brands, is to source 50% of all dairy used to make the pizza cheese served through the chain’s restaurants from dairy farms participating in the FARM environmental stewardship program.

The project is also part of a broader strategy to reach additional long-term sustainability goals:

  • Yum! and Pizza Hut seek to decrease GHG emissions 46% by 2030 with a focus on restaurants and supply chain and achieve net zero emissions by 2050.
  • DFA is seeking to cut GHG emissions by 30% across its supply chain by 2030 and also part of an industry-wide collaboration through the Innovation Center for U.S. Dairy to be greenhouse neutral or better by 2050.

Northeast DBIC offers dairy funding

The Northeast Dairy Business Innovation Center (DBIC) announced three funding opportunities for dairy farmers and service providers.

  • On-farm milk storage and handling grant: Dairy farmers may apply for funds to support the purchase of equipment and supplies to improve milk storage, handling and energy efficiencies. Applicants can select from a list of eligible equipment. This grant has an application period of Aug. 25-Oct. 6. Grants will range from $15,000-$50,000, with a 25% match commitment. Match waivers may be available.
  • Dairy farm cohort technical assistance: Service providers will be able to submit proposals to develop cohorts of dairy farmers to address relevant areas of technical assistance to their region. Service providers can submit proposals for projects up to $150,000. Topics can focus on grazing, forage enhancement, innovative farm practices, marketing and/or other areas of support for farmers. The request for proposals (RFP) is open until Sept. 16.
  • Dairy farm production education funding: Funds are available for service providers and dairy producer associations to develop events, webinars, educational series or conferences to increase farmer-focused production and business viability education. Proposals will be accepted for projects up to $35,000. Deadline to apply is Sept. 16.

The Northeast DBIC serves an 11-state region, including Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.