Risk and Profit Conference

Click HERE for BREAKOUT SCHEDULE

1. Update on the Tax Cuts and Jobs Act–Parts 1 and 2 (2 hours) - Roger McEowen and Mark Dikeman

This session will detail the TCJA changes as they impact farmers, ranchers and agricultural cooperatives and their patrons.  In particular, the session will address the application of the new qualified business income deduction; changes with respect to like-kind exchanges; new depreciation rules and related planning implications; rate bracket planning; commodity gifting; family and individual tax credits; remaining Schedule A deductions; flushing out the myths vs. truths (property tax; interest expense; cooperative sales, etc.); charitable gift planning; changes with respect to personal casualty and theft losses; new tax rules associated with alimony; alternative minimum tax; handling moving expenses; loss limitation rules for non-corporate taxpayers; handling business interest; cash accounting rule changes; new rules surrounding business-provided meals; handling partnership losses; immediate expensing of assets; modified education-related provisions; and changes concerning retirement-related provisions.  Numerous examples will be presented and discussed.

2. Kansas Farm Finance Issues - Allen Featherstone and Robin Reid

I.

3. Introduction to Farm Payroll - Anthony Ruiz and Mark Dikeman

Advances in machinery, technology, and methodology have allowed agricultural producers to gain tremendous efficiency advantages and allowed farm labor requirements to significantly decrease in recent decades. Yet many farms require one or more employees to perform tasks and make decisions imperative to successful operation. This talk focuses on basic Kansas and Federal payroll and tax regulations as well as things to consider before work begins, handling withholding, calculating paychecks, benefits, and tools to make the process smoother.

4. Family Living Expenses, Current Net Farm Income, and Effects on Farm Equity - Gregg Ibendahl

Current net farm income is low from a historical perspective but especially compared to four or five years ago. At the same time, family living increased during the period of record farm income and has been slow to adjust. The result of lower than normal farm income and higher than normal family living is that farms may be using up some of their equity. This session examines those KFMA farms with family living expenses to see how the combination of net farm income, family living expenses, and off-farm income has affected overall farm equity of specific farm groups in the state. The various farm expense categories will be examined to see where farmers might be able to make adjustments if needed.

5. Factors Affecting Net Farm Income - Emily Carls, Terry Griffin, Gregg Ibendahl

Recent trends in net farm income have increased the caution that producers exhibit when trying to make management decisions. Low commodity prices necessitate efficiency in other areas of production such as machinery, inputs costs, etc. Extension personnel have been working to assist in improving profitability by providing producers with the latest research, guidance for farm decisions, and the software/tools to aid in decision making. However, without fully understanding which variables affect net farm income, whole-farm management decision making can be challenging. With better knowledge of these factors, extension personnel could make better recommendations for farmers to improve overall profitability. The purpose of this analysis is to determine the factors that predict net farm income in order to help producers find areas where they can make feasible adjustments to their operations and increase their profitability.

6. Preparing Your Finances For Disaster - Sandra Myers

Everyone knows how to prepare your house, farm, or family for when disaster strikes. But what about your finances? Is your financial emergency kit prepared for a tornado, flood, fire or death? This session will help you decide how much you need to survive emergencies, avoid insurance snags, and figure out what you need to have at a moment’s notice when those disasters hit.

7. The Value of Social Capital in Farmland Leasing Relationships - Allison Pitts and Mykel Taylor

We will discuss the latest research on how landowners and tenants approach land leasing in Kansas. Results of a recent survey asking both sides of the lease agreement will be presented and discussion will follow on how the survey results can be implemented to achieve a more effective leasing relationship.

8. How Much Do Landlords Benefit From Agricultural Subsidies Versus Tenants? - Nathan Hendricks

Government subsidies are paid to tenants when land is rented under a cash rental agreement. However, landowners may still capture the benefits of subsidies if they adjust the rental rate. This session discusses new research that estimates how much direct payment subsidies were reflected in cash rental rates. We exploit the fact that direct payments were much higher in the Southern U.S. due to historical political favoritism of southern commodities. We compare cash rental rates from counties in the South with much larger direct payments to those in other regions that have similar expected market returns. The implications for who benefits from current Farm Bill programs will be discussed. .

9. Update on the Farm Bill - Mykel Taylor and Art Barnaby

We will be discussing the current status of the farm bill and what its contents may mean for Kansas farmers. We will also review the programs outcomes from the last farm bill as a way of projecting forward the sign-up decisions producers are likely to make.

10. Finding Successful 2018-2019 Grain Marketing Strategies - Dan O'Brien

Developing and carrying out a successful grain marketing program during Fall 2018 through Summer 2019 will depend on how a farmer chooses to manage the opportunities and risks that will present themselves in the grain markets.  This session will focus on the possibilities and pitfalls that are likely to happen in grain markets on a "seasonal" basis in the coming year, and how best anticipate managing them in terms of marketing strategies.  These discussions of anticipated seasonal "opportunities and risks" for the Fall 2018 – Summer 2019 period will be supported with analysis of the range or "probability distribution" of grain futures and cash price trends and tendencies that have occurred since 2005 for Kansas corn, wheat, grain sorghum and soybeans.

The profitability of historic seasonal grain pricing opportunities relative to annual cost of production for major crops in Kansas will be examined. Cost of production estimates are based on Kansas Farm Management Association cost of production figures.  The effectiveness of using of grain futures will be examined from the perspective of the profitability of pricing opportunities they presented through time within a marketing year. Pre-harvest futures options-based strategies will be examined from the perspective of what could have implicitly been paid for puts and calls relative to final closing levels of their respective harvest futures contracts.

11. Principles of Hedging Livestock Sales Using Futures Markets - Brian Coffey

This session will include a review of how to use futures and options positions to manage price risk in the cash market for livestock. Emphasis will be given to how a futures or options position changes a producer’s risk exposure and livestock basis. Several practical examples of basic futures/options strategies will be presented with time given at the end for questions and discussion.

12.  High Frequency Trading in Agricultural Futures Markets: What Low Frequency Traders Need to Know - Joe Janzen

High frequency traders (HFTs) are new participants in the futures markets we rely upon to discover the prices of major agricultural commodities. This presentation describes what they are and why they trade corn, wheat, and cattle. Along the way, we will answer some common questions about HFTs, such as: If a farmer hedges with a futures contract, how likely is it that an HFT takes the other side of the trade? Do HFTs manipulate prices or make prices more volatile, and if so, how do they do it? What are the rules governing high frequency trading? Ultimately, how much confidence should producers, merchants, and end-users have in the futures markets?

13. Risk Management in Evolving Live Cattle Markets - Ted Schroeder, Glynn Tonsor, and Brian Coffey

The US live cattle cash market has experienced a substantial structural shift toward non-negotiated trade in recent years leading to sporadic trade across market regions. At times, US regions appear to be segmented markets. Meanwhile, the cattle market has realized immense price volatility making judicious price risk management by producers essential. However, hedging risk has also increased. This session will outline the nature of changes in live cattle cash markets over the past two decades and discuss how these changes have influenced ability to use futures markets to manage price risk.

14.  Cow-Calf Profitability-Where to Focus Management For Success - Whitney Bowman, Dustin Pendell and Kevin Herbel

Cow-calf production profitability varies greatly from year to year, such as the record high returns to cow-calf producers in 2014 followed by record low returns the following year. While some variability of returns is inherent to the industry, many cow-calf producers are able to turn a profit even in “hard” years. In this case, good management could be defined as persistently being more profitable than one’s neighbors over time. Certain factors that affect profitability may be more easily managed by cow-calf producers than others. By understanding the factors that both improve profitability and can be persistently managed by Kansas cow-calf producers, producers may be able to better allocate resources to improve returns.

15. Impact of Climate Change and Geographic Movement of Cattle Production - Buddhika Patalee and Glynn Tonsor

Cattle production is one of the biggest industries in the US and ranks 1st in cash receipts. Weather plays a key role in feedlot performance in terms of daily weight gain and profits, hence deviations from normal weather conditions make cattle production better or worse. Over the past few years, cattle inventory numbers have been shifting regionally. According to USDA-NASS statistics, 26% in 2007 and 73% in 2013 of the total cattle inventory is from areas experiencing drought. During the southern plains’ drought in 2011, livestock producers moved north, resulting in a 5-8% increase in livestock inventory in Colorado, Iowa, Nebraska, and Wyoming, with a 13-15% decrease in inventory in New Mexico, Oklahoma, and Texas. The objective of this study is to investigate the impact of climate change on cattle production and how it affects cattle share in top cattle-producing states; Texas, Kansas, Nebraska, Colorado, and Iowa.

16. Attitudes Toward Groundwater Use in the Ogallala Aquifer - Bill Golden, Matt Sanderson, and Bridget Guerrero

The Ogallala Aquifer has declined in some areas more than 60% since predevelopment. Past efforts to slow the decline and ensure the future economic viability of the region have been largely unsuccessful. More recently, interest in groundwater conservation has accelerated in some areas, with a variety of management strategies to sustain the aquifer. The purpose of this presentation is to review some early results from an aquifer-wide survey of attitudes in the region.

17. Can Adjustment of Planting Dates Offset Warming Impacts for Kansas Sorghum Producers? – Noah Miller and Jesse Tack

Changes in future weather have been predicted to significantly reduce future U.S. corn yields. A potential way to address yield losses in corn is to switch from corn to sorghum production, as sorghum is known for its capacity to withstand higher temperatures than corn. However, the effects of extreme heat on sorghum yields are still relatively under-researched. In this session we examine the effects of warming temperatures on sorghum yield losses, and the ability to offset these losses by adjusting the planting date.

18. Does Crop Insurance Enrollment Exacerbate the Negative Effects of Extreme Heat? A Farm-level Analysis - Madhav Regmi, Jesse Tack

19.  Impact of VSR on HRW Wheat Futures in Year 1: What Do You Mean I Can’t Deliver Wheat Against My Futures?
Dan O’Brien, Darrell Holaday, Art Barnaby, Beth Yeager

A Variable Storage Rate (VSR) mechanism was adopted for the CME Kansas Hard Red Winter Wheat futures in 2018, beginning with the MAY 2018 contract.  This session will begin with a look at the track record of the VSR on MAY 2018, JULY 2018, and SEPT 2018 HRW Wheat futures to date. The patterns and behavior of HRW Wheat futures price levels and deferred contract spreads will be examined, along with changes in volume and open interest for lead versus deferred contracts. The identified purpose of the VSR was/is to bring about convergence between HRW Wheat futures and cash prices at designated CME Wheat delivery locations during futures contract delivery periods.  To this end, HRW wheat basis levels at key HRW wheat futures designated deliver locations will be examined as well.  However, the short crop - high protein situation for HRW Wheat in 2018 has complicated the determination of the impact of VSR in year 1 of its adoption. During the later part of this session there will be a discussion about the function, effectiveness, and impact of the VSR on HRW Wheat futures and cash prices.  The discussant is an established professional market analyst-advisor who has worked with farmer clientele and has been periodically involved in a grain futures industry advisory capacity on grain futures contract performance issues. These "in the market" observations will lead into a concluding "open floor" discussion about the VSR and its impact on CME HRW Wheat futures and HRW cash markets.

20. Eliminating HPO Will Leave a Donut Hole in Farmers’ Coverage - Art Barnaby

21. Sustainable Growth Rates of Farmer Cooperatives: Who is Growing Broke?  - Brian Briggeman and Nathan Smart

Many cooperatives are growing at an exceptional rate.  Cooperative growth has been fueled by producer consolidation, a highly competitive marketplace and new opportunities through rising global demand.  However, growth at an exceptional rate may be unsustainable and could potentially cause significant financial stress.  Cooperatives could get so caught up in growing that they could create problems, or “grow broke.”  The sustainable growth rate (SGR) is a financial metric used by many businesses to address this potential growth problem and can be used by cooperatives to ensure their long-run success.  Thus, the objective of this research is to better understand the SGRs of cooperatives, provide baseline SGRs, determine key attributes of higher growth rate cooperatives and key indicators of SGR changes.