Investors Still Fans of Farmland

Fri. Feb 05, 2016 12:05 PM


By Elizabeth Williams
DTN Special Correspondent

WEST DES MOINES, Iowa (DTN) -- Wall Street's romance with farmland hasn't waned despite commodity price setbacks. In fact, professional investors attending the recent Iowa Land Expo see the steep drop in crop prices since 2013 as a buying opportunity for farm real estate.

Three publicly traded agricultural real estate investment trusts (REITs) now join other institutional investors combing the country for farmland deals. Although total investor ownership of farmland is just a small slice of farm sales, interest is increasing as farmland values slide lower.

"We're finding good return deals in this market. You just have to be selective," said Paul Pittman, CEO of Farmland Partners, Inc., the Denver-based ag REIT that made headlines in 2015 with the record purchase of 22,300 acres in Illinois.

Farmland Partners Inc., listed on the New York Stock Exchange ((NYSE: FPI) is the largest publicly traded agricultural REIT. It now owns 258 farms for a total of 107,900 acres in 13 states. Another REIT, Gladstone Land Corp. (Nasdaq: LAND) based in McLean, Virginia, owns 43 farms totaling 16,810 acres in six states. The newest publicly traded company devoted to farmland ownership is American Farmland Company (AMEX: AFCO), whose agricultural headquarters is in Salt Lake City. It went public in October 2015 and owns 18 farms in six states (California, Illinois, Arkansas, Alabama, Georgia and Florida) with about 16,000 acres.

While farm operators are somewhat wary about investors competing to buy farmland, "we don't set high prices," said Pittman. "A well-financed farmer will out-bid an investor looking for a higher return. In fact, we support the market at the lower end [when few want to bid on a farm]."

LOOKING FOR HIGHER RETURNS

Wealthy individuals also remain on the hunt for farmland, said Steve Bruere, CEO of People's Company, a real estate/farm management company based in West Des Moines. "We get calls all the time: 'I've got $10 million and want a 5% annual return, do you have any farmland property I could buy'."

Bruere tempers their expectations, given lower commodity prices and rents. "You're not going to find that kind of return in row-crop farmland," he said. "Today, we're looking at a 3% to 3 1/2% cap rate (cash rent divided by land value)."

For example, $250 per acre cash rent divided by $8,000 per acre land yields a 3.125% return (cap rate). "In this land market, you might be able to get a 4% gross return, before property taxes. For good quality land a year or two ago, you might have been able to get $350 per acre, but now you're looking at cash rent levels more around $250 per acre," Bruere added.

Pittman believes deals can still be had. "It depends on the area, as to what return we're looking for," he said "In the Southeast U.S., we want a 5%-5.5% return rate. In the Delta: 4.5%-5%. In the High Plains: 4.5%-5%. In eastern Nebraska: 4%-4.5%. In Illinois or Iowa 3.5%-4%." The higher the risk, the higher return.

For specialty crops, such as vegetables or permanent crops (orchards or vines), Pittman looks for a 7%-8% return on investment, but he is not a big fan of permanent crops.

"I don't want more than 15% of my portfolio in specialty crops because two-thirds of the value of the purchase is wrapped up in a tree or vine that won't last forever. For example, a disease or storm could wipe-out an orchard, or consumer demand could shift (such as in oranges), or over-supply could collapse prices (as with almonds) and you're stuck with a permanent crop," he said.

JOIN THE CLUB

Investor buyers are not new to ag land. Pension companies such as Prudential and Metropolitan Life have had farmland in their investment portfolios since the Depression. TIAA-CREF (Teachers Insurance and Annuity Association of America), a relatively newcomer to farmland ownership, owned 227,380 agricultural acres in 12 states at the end of 2014. That didn't count an even larger overseas portfolio.

Still the negative impression of outside investors in agriculture persists. "Nobody likes an investor, unless it's their own investor," noted Bruere. "To run a commercial farming operation of 5,000 acres, the capital investment just to operate is huge. It's hard to own all the ground you operate. Renting is a necessary part of doing business."

"Investor funds don't prevent farmers from owning farmland," Pittman noted. "The farm operator should own what he can afford and rent the rest. Our company is the simplest way to bring equity to American agriculture.

The advantage of an ag REIT is that it allows small investors to participate in the market and diversify their geographic risk. That's important when prime Midwest farmland still commands $10,000 an acre in some locales. "A teacher or firefighter or business person can buy our stock and own agricultural land," said Pittman. "And we only charge around a 1% management fee that includes the farm management."

Another advantage of owning farmland through a REIT, said Pittman, is if you want to sell, you simply sell your stock without having to sell the farmland.

NO BIG DEAL, YET

"Although we're seeing more interest from investment funds in farmland, they are still a small part of the market," said R.D. Schrader, owner of Schrader Real Estate and Auction Company, based in Columbia City, Indiana, which conducts more than 200 agricultural auctions per year in more than 40 states. "As land values were climbing, 70% to 80% of the buyers were farm operators. As the farmland market has softened in the past two years, investor buying has picked up maybe another 10%.

"There is still a lot of cash out there looking to invest in farmland from both farm operators and outside investors, Schrader reported. "Since farm profits aren't there right now, there is still pressure on land prices, but they haven't fallen as far as some expect."

Elizabeth Williams can be reached at elizabeth.williams@dtn.com

(SK)

Biotech Regs Proposed

Fri. Feb 05, 2016 11:01 AM

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- USDA is asking for the public's input on whether the agency should draw up new rules to regulate biotechnology products, according to a notice filed in the Federal Register this week.

The Animal Plant Health Inspection Service has faced heavy criticism from environmental and food groups for not conducting a complete environmental assessment on the potential effects of biotechnology crops. The APHIS announcement is part of an overall reexamination of the "coordinated framework" of regulations on biotechnology by USDA, the Environmental Protection Agency and the Food and Drug Administration. The White House ordered a review of the rules last summer.

APHIS is asking for public comment on a number of fronts, including proposed definitions of biotechnology and regulated organisms. APHIS proposes a number of regulatory and non-regulatory options on biotechnology, including genetically engineered organisms, and to safeguard agricultural plants and natural resources from plant pests or noxious weed damage caused by biotechnology.

Nathan Fields, director of biotechnology and crop inputs for the National Corn Growers Association, told DTN there are concerns APHIS will broaden the definition of biotechnology.

He said NCGA would rather limit the definition to transgenic crops. Transgenic crops include plant genes that have been artificially inserted instead of plants acquiring them through pollination, such as Bt corn.

Fields said NCGA may ask for an extension of the 30-day public comment period.

"There are some concerns we have," he said. "First and foremost, it's kind of odd we only have a 30-day comment on this. I'm not sure that's adequate time to address. USDA seems to be broadening the definition."

Jacque Matsen, public affairs manager for DuPont Pioneer, told DTN the company is watching the process closely.

"I can tell you we are closely following and engaging in USDA's efforts to update its biotech regulations," she said. "We will review and provide feedback on this latest development as well, but don't have anything specific yet."

Karen Batra, director of food and agriculture communications for the Biotechnology Innovation Organization, or BIO, said the group will be providing public comment to APHIS at some point.

"We are currently reviewing the proposal, but we are not able to comment yet," Batra told DTN. "We need to have a number of discussions first to outline the key issues we need to address."

Patty Lovera, assistant director of Food and Water Watch, said APHIS is taking a good first step. Food and Water Watch will be urging APHIS to include in their environmental impact statements the full list of impacts from adoption of biotech crops, including associated herbicide use, potential for contamination of organic and identity-preserved crops, development of resistance and any other potential impacts. "It is long overdue for APHIS to consider all of the ways that biotechnology impacts the environment," Lovera said. "The extremely limited scope of what is evaluated in APHIS' current process needs to be addressed in any update to their regulations."

PROPOSED OPTIONS

The APHIS notice said there are a number of options including taking no action to change existing regulations for certain organisms developed through biotechnology that could pose a plant-pest risk, but would continue to regulate those potential biotech organisms as the agency does now.

A second alternative is to revise current APHIS regulations on biotechnology. That would include creating a review process to regulate certain biotech products to protect plant health, analyze potential plant pest and/or noxious weed risks first, and "thereafter regulate only when appropriate and necessary."

The second option calls for setting a procedure to first analyze which biotech products would require an agency review. In addition, APHIS is asking for input on possible "justifiable exceptions or exemptions" that would exclude certain biotech products from regulatory review.

APHIS would propose to eliminate the notification procedure, as "APHIS anticipates that many GE organisms currently regulated under the notification procedures would not be regulated nor subject to further review under this alternative," the agency said in the notice.

The second option would eliminate the current petition process for non-regulated status and conduct new risk analyses when new information is made available.

A third alternative would be for APHIS to regulate biotech products as either plant pests or noxious weeds using an existing plant pest or noxious weed "analysis trigger."

"Under this third alternative, APHIS' proposed regulations would substantially increase oversight and resources over those currently used to regulate GE organisms," the notice said. In addition, the third alternative would not exempt certain biotech products and would eliminate notification and petition procedures.

The fourth option put forward in the notice would be to withdraw the current regulations completely and implement a voluntary, non-regulatory "consultative" process for certain biotech products.

With the fourth alternative, biotech developers would be responsible for ensuring their products "do not pose risks" as a plant pest or noxious weeds.

Despite the complexity of the proposed changes for the biotechnology industry, companies or others wanting to weigh in need to have their comments sent in before March 7. Full details can be found in the Federal Register notice: http://dld.bz/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @ToddNeeleyDTN

(CC/AG)

Woodbury: Family Business Matters

Thu. Feb 04, 2016 5:04 PM

By Lance Woodbury
DTN Farm Family Business Adviser

Estate planning, on the surface, has two primary goals -- transferring wealth and minimizing taxes. Both are important to agricultural families, as the high cost of land and equipment can be a barrier to entering a farming or ranching business. Additionally, a large estate tax liability can erode the equity built over generations, if assets must be sold to pay tax.

At a deeper level, however, estate planning serves another meaningful purpose. It can enhance the ties that bind heirs together. In my conversations with business owners, I often hear them express a desire to create something beyond financial significance with their planning efforts. They recognize that passing assets such as land, equipment and cash to the next generation is important, yet insufficient, to create or nurture strong bonds between family members.

We've all heard of siblings who inherited land, but then fought incessantly and eventually sold it. Or we know of family members who, in only a couple of years, exhaust the wealth accumulated over decades. Or we see heirs who can't make the adjustment from being siblings to being partners in business with one another, and their once-positive relationship deteriorates. How can you avoid these scenarios? By cultivating the following two non-financial principles that will enhance the ties between generations, siblings and cousins for the future.

SHARED VALUES

A successful estate plan fosters shared values, and those values form the foundation of a successful business partnership. Such values reflect our most deeply held beliefs about the world and our interaction in it, serving as guideposts along the path of family business growth. When values don't match, conflict more easily emerges.

Values show up in all kinds of day-to-day business decisions. For example, the value of stewardship is demonstrated in decisions about land and facility improvements. Financial values emerge in discussions about crop or livestock marketing, or equipment purchases. How you value the people who work for you is evident in your supervisory relationship, your human resource policies, compensation and benefits.

Values are also demonstrated in the events and stories that have shaped the family and business. Homesteading, survival in the 1930s or 1980s, off-farm jobs, weather or market events, family tragedy or success -- your family's values are apparent in all of these events, which is why it's important to tell, and retell, those stories.

SHARED VISION

A successful estate plan embodies a shared vision among family members or business partners. For example, many family business partners believe that keeping their capital together provides a better life for all of them. Other families I know share a vision of making a contribution to society by producing food. Another family believes that working together encourages strong family relationships, while another believes their family business is the best place to foster an entrepreneurial spirit.

In all of these examples, the family shares a common view of where they are headed. They are in agreement, at a high level, of what they want to accomplish. Sure, at times there are disagreements on the details and tactics of getting there. But the shared vision keeps them motivated to work through disagreements and train the next generation.

As a family in business, take time to articulate the values that have shaped your organization. Discuss your vision for the future with your heirs or business partners, and encourage them to participate by sharing theirs. It costs very little to have these discussions -- mostly time. But the ties between family members can be immensely strengthened with the investment, and your estate planning process will likewise be enhanced.

**

Editor's Note: Lance Woodbury writes family business columns for both DTN and our sister magazine, "The Progressive Farmer." He is a Garden City, Kansas, author, consultant and professional mediator with more than 20 years of experience specializing in agriculture and closely-held businesses. Email questions for this column to Lance@agprogress.com.

(MZT/CZ)

Obama Calls for $10 Oil Tax

Thu. Feb 04, 2016 4:59 PM

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- President Barack Obama's advisers on Thursday pitched a $10-per-barrel tax on oil to pay for new transit programs and research on higher-mileage vehicles.

The president will propose the plan when he releases his proposed 2017 budget next week to Congress. Such proposals frequently come with a truckload of "dead on arrival" comments from congressional leaders. Republicans, who control the House and Senate, are highly unlikely to approve a tax on oil to fund cleaner energy. The president's plan does provide stump-speech fodder for presidential and congressional campaigns.

The plan to tax oil comes as per-gallon national gas prices are the lowest since early 2009, Obama's first days in office. AAA reports gas prices are averaging $1.77 a gallon nationally and dip as low as $1.45 a gallon on average across Missouri.

Such a proposal is unlikely to be embraced by farm groups, which are going to highlight the high costs farmers pay for inputs, including fuel costs for machinery and vehicles.

The White House briefed reporters Thursday and laid out details for the president's "21st Century Clean Transportation System" that would spend about $32 billion a year on different infrastructure investments.

The president pointed to the need to address climate change by reducing carbon emissions while creating jobs in cleaner transportation. The transportation sector accounts for about 30% of greenhouse-gas emissions, the White House stated.

Thus, a new tax on oil would pay for high-speed rail and modernization to freight rail, as well as increased federal funds to mass transit in cities. It would also pay for more research into cleaner cars and planes. Increased funding would also make the Highway Trust Fund solvent again.

House Speaker Paul Ryan, R-Wis., sent out a "dead-on-arrival" statement shortly after the White House issued the proposal.

"Once again, the president expects hardworking consumers to pay for his out-of-touch climate agenda," Ryan said in a statement. "A $10 tax for every barrel of oil produced would raise energy prices -- hurting poor Americans the most."

The White House stated the $10-a-barrel oil tax would be paid by oil companies and phased in over five years. "By placing a fee on oil, the president's plan created a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future," the White House stated.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG)

Rethink Corn Economics

Thu. Feb 04, 2016 6:58 AM


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- Corn farmers looking to curb their losses this year should scrutinize two sizeable inputs: seeds and fertility.

Together, those two inputs cost Indiana farmers nearly as much as land does, according to numbers from Purdue's Center for Commercial Agriculture.

Farmers may mistake them for costs beyond their control, university agronomists Bob Nielsen and Jim Camberato and agricultural economists Michael Langemeier and Jim Mintert noted in a webinar sponsored by the center on Monday. Yet growers may find savings by revisiting common practices such as routine fertility applications, some nitrogen applications and packing corn fields with high populations of racehorse varieties stacked full of biotech traits, they concluded.

SEED SAVINGS

Nielsen has received many calls from farmers wondering if they can get away without biotech traits like Roundup Ready or Bt this year, he noted. His answer is yes, with several caveats.

"This is an opportunity to save a lot of money," he said. "But it needs to be done smartly. Traited hybrids are mostly either protecting against insect pests or allowing us to use herbicides like glufosinate or glyphosate."

Consider your pest problems carefully, he said. If you have light rootworm pressure that is controlled by crop rotation, maybe you can go without belowground Bt traits. If you are willing to scout more often and use insecticides and rigorous pre-emergence weed control, perhaps you can forgo aboveground Bt traits and Roundup Ready technology.

"If you back away from trait technology, you have to have a back-up strategy and be willing implement it," concluded Mintert.

Nielsen also pinpointed growers' tendency to plant a denser planting population than the ag economy can justify right now.

For example, for Indiana growers, the optimum planting rate is generally pegged at 32,000 plants per acre. Yet final stands anywhere between 29,000 and 35,000 will still produce "basically optimal yield," Nielsen pointed out. "Most farmers aim for the mid-30s or even low-30s, and we're saying if you aim for the high-20s, that is probably is the economic sweet spot at least for corn in Indiana."

While those numbers are specific to Indiana growers, it is a general truth of corn production that "optimal economic planting rates are several thousand less than optimum agronomic planting rates," he added.

Finally, pick your hybrids with a new mindset, Nielsen suggested. "It's not just about yield potential," he said of the hybrid selection process. "It's also about the ability of hybrids to consistently yield well no matter the growing conditions. We are in a time period of extreme climatic variability. So try to find hybrids with a wide array of tolerance to stress -- hot, cold, wet and dry."

Because corn hybrids turn over fairly quickly, growers can't always access more than a few years of data on any given hybrid. So widen your variety trial search beyond your region and state to see how a hybrid performs in a range of growing conditions, Nielsen said. "Look for hybrids that always end up in the upper 10% of a wide variety of trials -- company and university trials, across geographies -- even if they don't win trials outright. That tells me they are pretty stress tolerant."

After you've identified these hardy hybrids, narrow your search by looking for the ones that have the disease and insect package that best fits your growing conditions to save on insecticide and fungicide treatments, he added.

FERTILITY RECALCULATIONS

Try to shift to a risk-management mindset when planning nitrogen applications, Camberato said. His research has shown that farmers are most likely to lose nitrogen from fall applications, early spring anhydrous or liquid applications and surface-applied urea applications.

"We estimate on average, fall applications will lose 15%, and early spring maybe 10%," he said. "One practice to take better advantage of this is to put nitrogen on closer to planting time or even in-season."

Warm falls followed by wet springs, which we may experience this year, make fall-applied fields especially prone to nitrogen loss. "Looking ahead, it may be too late for fall applications this year of course, but for the 2017 crop, stay away from fall nitrogen applications," Mintert suggested.

Don't be too quick to dismiss in-season application as a hopeless rescue option either, Camberato said. "We've been surprised at how much potential the corn crop has to take up nitrogen late in the year and respond by increasing yield if the crop is healthy and you have a favorable grainfill period," he said of his research. "We've gotten 110-bushel yield increases with as late as V15 applications on corn that eventually makes 225 bushels."

Remember that corn's yield response to nitrogen is highest when nitrogen is severely limited and slows as you approach the optimal nitrogen rate, Camberato added. "If you're shooting for maximum yield [with nitrogen applications], you may be losing money on the nitrogen and then have to handle and dry more grain, which actually costs you more to produce than it's worth," he said.

Finally, 2016 might be a good year for Indiana farmers to drop a phosphorus application, he added. If a recent soil test shows levels within the maintenance range (30 to 50 parts per million), don't add any this year, he said.

"Typically, in the maintenance range, the recommendation is to replace crop removal, but there is very little probability of a yield response to the fertilizer applied that year," he said. "That recommendation was built for years of profit."

Don't worry that your levels will plummet from one year of restraint, he added. "To change soil levels just 15 ppm, you have to remove 300 pounds of P2O5 [phosphate]," he explained. "A 200-bushel corn crop removes about 75 pounds per acre of P2O5, so that's several years of crop removal for you to move out of the maintenance range."

For more information on these recommendations, see the slideshow from the webinar, Reducing Corn Production Costs, here: http://bit.ly/….

Emily Unglesbee can be reached at emily.unglesbee@dtn.com

Follow Emily Unglesbee on Twitter @Emily_Unglesbee

(PS/AG/SK)

Banking on Ag Research

Wed. Feb 03, 2016 2:20 PM


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- As sequestration has pressed USDA to make budget cuts in recent years, USDA Secretary Tom Vilsack told reporters Wednesday he hopes Congress will support the president's budget proposal, which will include a doubling of federal dollars spent on agriculture research and development.

President Barack Obama's proposed 2017 budget will be announced next week and would bump federal spending on ag research from about $350 million to $700 million -- the amount called for in the 2008 farm bill. The funding was re-authorized in the 2014 farm bill.

Vilsack said he believes Congress will get behind the need to fully fund research through the USDA's Agriculture and Food Research Initiative, or AFRI.

"I think people understand and appreciate the need for additional innovation," he said. "I'm hopeful that people will see the benefits of innovation in agriculture. That would be my hope. The budget gives us the opportunity this year to finally meet the amount ($700 million)."

On Wednesday USDA announced $30.1 million in competitive grants to fund 80 research projects centered on improving food safety, reduce antibiotic resistance in food, and to increase plant resilience.

Since 2008 AFRI has been funded at below half the levels established in the farm bill. Vilsack said Wednesday this means USDA has turned away about 90% of the research proposals presented for funding.

Grants typically are awarded to universities, non-profits, community groups, businesses, foundations, associations and federal agency and international partnerships.

John P. Holdren, science and technology adviser to the president and director of the White House Office of Science and Technology Policy, told reporters the president understands the importance of agriculture research and development.

"Further strengthening our investments in agricultural research will be essential for U.S. farmers to be able to keep the nation's food supply abundant, healthy, reliable and sustainable through the 21st century," he said. "That's why the president's forthcoming 2017 budget request doubles funding for the Agriculture and Food Research Initiative to the full authorized level of $700 million."

AFRI grants are administered by USDA's National Institute of Food and Agriculture.

The latest $31.1 million in grants includes $15.1 million to fund 35 projects in AFRI's food safety area. Those projects will focus on enhancing food safety through improved processing technologies, mitigation strategies for antimicrobial resistance, improving food safety and improving food quality.

The funding includes $3.4 million to address antimicrobial resistance throughout the food chain. NIFA also is awarding $15 million to universities, laboratories, and research organizations to fund 45 projects on plant breeding for agricultural production, plant growth and development, composition, stress tolerance, photosynthesis and nutrient use in agricultural plants.

The grants awarded cover a wide variety of research areas, from improving alfalfa yields, to plant resistance to drought, to plant use of nitrogen, http://tinyurl.com/….

Since AFRI was established in 2008, the program has led to innovations and discoveries in agriculture to combat childhood obesity, improve and sustain rural economic growth, address water availability issues, increase food production, find new sources of energy, mitigate the impacts of climate variability and enhance resiliency of our food systems, and ensure food safety.

"In the face of diminishing land and water resources and increasingly variable climatic conditions, food production must increase to meet the demands of world population projected to pass 9 billion by 2050," Vilsack said. "Funding in research to respond to these challenges should be considered as an investment in our nation's future, an investment which will pay big dividends in the years to come."

The National Institute of Food and Agriculture awards AFRI grants in six farm bill priority areas including plant health and production and plant products; animal health and production and animal products; food safety, nutrition, and health; bioenergy, natural resources, and environment; agriculture systems and technology; and agriculture economics and rural communities.

Read details about filing for the grants here, http://tinyurl.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @ToddNeeleyDTN

(CC\CZ\SK)

Syngenta Sanctions Sale

Wed. Feb 03, 2016 12:19 PM

By Pamela Smith
DTN Progressive Farmer Crops Technology Editor

DECATUR, Ill. (DTN) -- After months of speculation, Syngenta announced Wednesday that its board will recommend shareholders accept a $43 billion cash offer from China National Chemical Corp., also known as ChemChina. However, the deal must still undergo scrutiny of shareholders and regulatory agencies.

Davor Pisk, Syngenta's chief operating officer, told DTN in a phone interview that the offer represents an acquisition and ChemChina will be acquiring 100% of Syngenta's shares. The buyout was unanimously supported by Syngenta's board of directors. "It is going to be done through a tender offer to our shareholders, and it is conditional upon two-thirds of shareholder acceptance and regulatory clearances as well," said Pisk.

Once the tender offer closes, Pisk said in a news conference, the arrangement could take the companies the rest of the year to finalize the deal, largely because of regulatory approvals will be needed in Europe, the U.S. and China. Pisk said ChemChina's intent in the future is to offer a new public offering for at least a share of Syngenta stock.

Switzerland-based Syngenta said in a statement that ChemChina's cash offer is worth the equivalent of $482 a share and includes a special dividend to shareholders if the deal goes through. Last year Syngenta rejected multiple bids from St. Louis-based Monsanto that amounted to $46.5 billion in cash and stock. A sweetened deal of a $3 billion reverse breakup fee wasn't enough to seal that deal.

Pisk indicated the proposals were less attractive because a high proportion of the value was in Monsanto shares rather than cash. Other challenging aspects of that potential merger included company relocation, tax inversion concerns and execution risks.

"The differences were pretty clear," Pisk told DTN. "We have a concrete proposal from ChemChina, which we never actually received from Monsanto. The Monsanto deal was predicated on us divesting our seed assets. It also required negotiating a lot of cross synergies between the companies," he said.

"With this offer we have much greater clarity about continuing with our crop strategy. We continue to be based in Basel, Switzerland. Syngenta continues to be Syngenta -- with the same management and same commitment to our integrated portfolio and commitment to research and development that aimed at developing choice for growers."

He indicated a Monsanto merger would have likely resulted in less research dollars being spent, less innovation and ultimately less choice for U.S. growers in a consolidating industry -- his comments acknowledged the announcement in December that Dow AgroSciences and DuPont Pioneer plan to merge. He also mentioned that this sale will be less disruptive to company employees.

Beyond shareholder acceptance, national security concerns may influence the merger's chances of success, as well. A little-known federal agency, the Committee on Foreign Investment in the U.S. (CFIUS), has long scrutinized mergers between foreign and American companies. Syngenta is not an American company, but it has extensive business ties to the U.S., which could draw the attention of the CFIUS, especially given recent concerns over Chinese access to U.S. agricultural trade secrets. The merger announcement comes just days after a Chinese citizen pleaded guilty to stealing genetically engineered corn seed from DuPont Pioneer and Monsanto for China in 2013.

The China National Chemical Corp. is a state-owned enterprise that used to be called the Ministry of the Chemical Industry, according to the ChemChina website. ChemChina overall is ranked as the 265th largest company in the world, according to the Fortune Global 500 with $45 billion in revenues in 2015. The company has 145,000 employees, of which about 48,000 are outside of China.

ChemChina dominates the Chinese chemical industry and has a hand in several different industries with at least nine companies traded on the Chinese stock exchange. ChemChina's agrochemical corporation already operates at least eight different member companies.

ChemChina has a declared strategy of expanding into different downstream and upstream businesses and developing a more cutting-edge research and development program. Last month, ChemChina bought German machinery maker KraussMaffei for about $1 billion and took a 12 percent stake in Swiss energy trader Mercuria. In March it bought Italian tire manufacturer Pirelli.

China President Xi Jinping's has openly discussed plans to modernize the country's farms to keep up with food demand from a rising consumer class. However, the country has wavered on acceptance of GE traits, has turned back shipments of U.S. corn containing Syngenta traits that did not have Chinese import approvals and has been slow to sanction new GE traits. Today, Monsanto announced China had given the nod to its dicamba-tolerant soybean traits, but Pisk said Syngenta's own rootworm trait, Duracade, was not among the traits in this wave of approvals.

Pisk also said he did not think the change in ownership would affect the litigation over the MIR162 trait and exports to China that were blocked in 2014.

"We don't see this potential change in ownership having an impact upon the lawsuits," Pisk said. "Obviously, these cases are coming to trial, going through the normal process and they will be based on the facts as they existed at the time."

Pisk told DTN he hoped the purchase of Syngenta would lead to China being more accepting of current and future GE technologies. "I hope through this move we can begin to see much more common understanding of benefits of these technologies for agriculture -- a more level playing field which would lead to reduced trade tensions," Pisk said. "I think this could be the start of something very positive between China's agricultural trade relations and the U.S."

Monsanto, which had courted Syngenta last year, said in a statement that the Syngenta-ChemChina deal does not change Monsanto's corporate view. Monsanto stated the company has a plan to grow as a standalone company.

Pamela Smith can be reached at Pamela.smith@dtn.com

Chris Clayton and Emily Unglesbee contributed to this report.

(CC/AG)

USDA Can't Help Cotton

Wed. Feb 03, 2016 10:09 AM

By Jerry Hagstrom
DTN Political Correspondent

WASHINGTON (DTN) -- Agriculture Secretary Tom Vilsack said early Wednesday that USDA lawyers have determined the department does not have the authority to declare cottonseed an oilseed, as the cotton industry has asked.

The declaration would make cottonseed eligible for farm subsidies, but after a speech to the National Association of State Departments of Agriculture Wednesday morning, Vilsack said Congress did not grant the authority in the 2014 farm bill and through appropriations has forbidden it to use the Commodity Credit Corporation to provide the assistance to farmers or cotton gins.

The announcement would be a blow to the cotton industry that has been anticipating a decision from USDA. It would effectively mean Vilsack is kicking the issue back to Congress to reopen the farm bill and create such a program.

Vilsack said that Congress would need to find $1 billion over 10 years for the subsidies related to declaring cottonseed an oilseed.

USDA wants to help, Vilsack said, but "right now we are a bit stymied by the barriers."

Vilsack confirmed to reporters that he has informed congressional agricultural leaders of the decision.

Vilsack confirmed the situation to reporters after House Agriculture Committee ranking member Collin Peterson, D-Minn., said earlier Wednesday that Vilsack told him he does not have the authority for the oilseed declaration.

But speaking to reporters after his speech to NASDA, Peterson also said that lawyers for House Agriculture Committee Chairman Michael Conaway, R-Texas, believe that USDA does have the authority.

Peterson said he recognizes that cotton farmers are in financial trouble, but that the cotton industry got what it asked for in the farm bill -- the STAX crop insurance program. The House version of that bill included a reference price of 65 cents, Peterson said, but it was taken out in the final bill because the Senate objected to it.

One of the problems that has occurred, Peterson added, is that some cotton growers have shifted to peanuts and there is now a glut of peanuts, but that cotton growers do not have a peanut base.

Peterson also said that USDA had made an alternative proposal, but that neither the cotton industry nor the Republicans like it.

(CC/AG)

Todd's Take

Tue. Feb 02, 2016 9:19 AM


By Todd Hultman
DTN Analyst

As I write this in Omaha, we are bracing for a February blizzard, but having experienced a sunny 40 degrees at last week's Sioux Falls Farm Show, there is a feeling that spring is not far away. With that come thoughts of a new growing season.

Back in December, USDA gave us their first glimpse of 2016 when they released their long-term projections and the outlook was largely neutral for corn. However, like all estimates this early in the year, these are just starting points, and we will need plenty of erasers before the year is done. Before we talk about acres, yields, and all the other variables that are headed our way, I like to begin with an estimate of grain prices in relation to their production costs.

If you read this column a year ago, you might recall me saying that December corn futures have a tendency to trade between USDA's estimated cost of production* and a 50% premium to cost in years that lacked unusual events, like drought. For 2015, the anticipated range was $2.98 to $4.47 a bushel before we knew anything about plantings or weather.

As it turned out, December corn reached the high end of the range on July 10 amid concerns of too much rain falling from Missouri to Ohio, but did not stay there long. The eventual low of $3.56 on Nov. 10 came with many in the Western Corn Belt reaching their best yields ever.

As disappointing as post-harvest prices were to many producers, I find it interesting that December corn did not trade closer to the anticipated low of $2.98. Brazil had a successful 3.35 billion bushel crop earlier in 2015 and their shrinking currency gave Brazil's corn exports a 55% boost to 1.28 billion bushels. Much of the credit for corn's stubborn support should go to the stabilizing influence of U.S. ethanol production, which was up 4% in 2015 -- a temporary beneficiary of cheap gasoline prices.

The anticipated range for Dec 2016 corn is roughly the same as a year ago, at $2.96 to $4.44. With the Dec 2016 contract showing $3.92 as of Monday's close, prices are in the upper half of the expected range, but are not high enough yet to offer a profitable return for many who are renting ground. Outside markets have not been friendly to corn prices early in 2016, but it is encouraging for demand that commercials are still net-long. For that reason, I still think December corn has a good chance to trade above $4.00 by the end of March.

The rest of the story, as Paul Harvey would say, is up to weather. So far, DTN Ag Meteorologist Bryce Anderson leans toward normal precipitation for the Midwest this summer, but also expects above normal temperatures, giving us an early corn yield estimate of 165 bushels an acre.** If it proves out, Bryce's early scenario would point to a modest reduction of U.S. ending corn stocks in 2016-17 and help offset some of the concern from corn's bearish outside market influences.

Is $5 corn possible in 2016? Yes, but history also cautions us that a scenario above $4.44 is not likely without extra help to get there -- drought being the obvious suspect. In the meantime, the year is still young and there is much that we do not know. Stay tuned to DTN as we bring you the surprises of 2016.

* For valuation purposes, the production cost used here ignores land expense. Land expense is an important factor but is set aside because it varies widely for each particular farm.

** "Midsummer Crop Weather Projection" by DTN Ag Meteorologist Bryce Anderson, Jan. 22, 2016 at: https://www.mydtn.com/…

Todd Hultman can be reached at todd.hultman@dtn.com

Follow him on Twitter @ToddHultman1

(CZ/BAS)

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