Articles

    Land Values Have Positive Outlook

    “Despite the tumultuous year that 2020 was due to the Covid-19 epidemic, farmland values in our Benchmark program have been resilient and overall highly stable,” said Andrew Weidner, certified real estate appraiser with Compeer Financial and guest speaker during The Chicago Farmers’ April 12 webinar. Compeer is a sponsor of The Chicago Farmers

    He said that Compeer has approximately 4.6 million acres of farmland linked to its benchmark program. The properties include 19 farms in Illinois, 10 in Minnesota, and nine in Wisconsin, all of which are appraised on an annual basis.

    Weidner, who is based in Compeer’s Sycamore office and covers northeastern Illinois, said that the last three year value trend for the farmland in the benchmark program shows less than a five percent value change during that period. In noting the trend, Weidner shared the following:

    • A quality cropland, +1.2 percent
    • B quality cropland, -2.3 percent
    • C quality cropland, +4.1 percent
    • Recreational land, +11.8 percent


    Weidner said that recreational land typically tracks more in-line with the general economy as opposed to agricultural tracts, and the upward trend seems to be associated with buyers applying discretionary dollars to other areas in place of trips or other family-oriented things they would have done, had pandemic restrictions not been in place.

    In discussing cropland quality, Weidner noted the importance of the soil’s productivity index (PI). For example, Class A land has excellent productivity and ranges between 133 and 147 PI. “In Northern Illinois, it is typical for A quality cropland to produce 185 bushels of corn per acre or more,” said Weidner. “The land has tremendous yield potential. We are very fortunate to live where we live because Illinois has a lot of highly productive soils. There is a high correlation between the price paid for land and its soil class and productivity.”

    Class B, with a PI range of 117-132, has the potential to produce 150-185 bushels per acre, and Class C, with a PI range of 100-116, typically produces 120-150 bushels per acre, Weidner said.

    The rates of return, measured as a capitalization rate, on the benchmark farms show:

    • Class A averaged 2.07 percent with a range of 1.92 to 2.23 percent
    • Class B averaged 2.25 percent with a range of 2.16 to 2.73 percent
    • Class C averaged 2.50 percent with a range of 2.13 to 3.30 percent


    In calculating this return, Weidner said that Compeer assumes that the property is professionally managed and that expense, along with insurance and general maintenance expenses, is included in the figuring.

    Weidner also discussed the cash rent market. He noted that soil productivity, drainage, land access (e.g., good road frontage), topography, and field size are taken into consideration when setting prices. For the 2020 year, cash rent in Illinois for cropland A averaged $309 per acre, with a range of $255 per acre to $345 per acre; cropland B averaged $283 per acre, with a range of $230 per acre to $328 per acre; and cropland C averaged $248 per acre, with a range of $215 to $282 per acre.

    In Wisconsin, the average cash rent was $211 per acre, with a wide range of $100 to $300 per acre.  Similarly, in Central Minnesota the average cash rent was $213 per acre, with a range of $195 to $230; Southern Minnesota reflected those rates, averaging $235 per acre with a range of $215 to $250 per acre.

    Generally speaking, Covid-19 had no effect on land values.  This can be partially attributed to the fact that the Midwest was already late into the heaviest sale season when restrictions began to be put into place in March, observed Weidner.

    He did note that the auction format shifted dramatically to online auctions during Covid. Weidner referenced a comparison for the number of online auctions relative to “in-person” auctions throughout the year.  Generally speaking, it appeared that there was a slight premium paid for those auctions in an in-person format as opposed to the online format.  “I think that much of the differences in prices have to do with people’s familiarity and agility with technology,” remarked Weidner.

    Regarding the future, Weidner said that many individual investors and investment groups have been reinvesting their stock market gains in farms and he believes that trend will continue. Operators also are in a better position now regarding liquidity and cash flow as a result of the continuation of emergency government funds due to Covid-19. Additionally, the Federal Reserve remains committed to keeping interest rates low. “We are beginning to see a surge in land values across Illinois,” Weidner said.

    Weidner drew comparisons of recent farm sales in the DeKalb County market that indicated similar and significant changes in value from late 2020 to early 2021.  “Land values have responded in dramatic fashion given the increase in corn and soybean prices over the past six months.” Weidner said.  In some locations, recent land sales are being recorded at levels not exhibited since 2014.  The optimism surrounding agriculture right now is widespread with 2021 poised to be one of the most profitable in years for both operators and landowners.

    Weidner spoke on green energy and related that Facebook intends to build an $810 million data center in DeKalb and recently purchased 502.14 acres.  The company touted the site for its accessibility to green energy due to its proximity to a wide swath of wind turbine farms operating in the area, its location to the interstate, and the potential workforce from Northern Illinois University.

    In discussing wind turbines, Weidner said that initial leases for the wind turbines are typically 25 years in length, with the intention to extend the lease beyond the 25 years. He said there is often an increase in the operational fee that either tracks inflation or has a set percentage increase over the term of the lease.  Lease payments are often paid annually. He added that the newer turbines have higher contract leases because they are more productive and up to date.

    In discussing green energy, Weidner spoke of a proposed 5,000 acre solar farm in Lee County, Illinois that will provide electricity for 116,000 farms and produce 600 megawatts. In contrast, a single wind turbine produces approximately 1.5 megawatts, Weidner said. “Interest in solar energy is steadily increasing, but currently there is limited information on it,” he added.

    Weidner encouraged webinar attendees who are looking at farmland to contact Compeer’s financial offices to take advantage of its Farmland Finder program, which is free. He said it offers helpful information about farms such as the overall quality of the parcel including the soil’s productivity rating, topography maps, regional cash rent information, and even groups the 10 farmland sales closest to the property in question.

    In response to a question from a webinar audience member, Weidner said the benchmark data were completed as of July 1, 2020, and new data will be completed this July. He said it is widely expected that there will be an increase in land values across Illinois for the benchmark farms.

    For appraisal requests, Weidner may be reached at [email protected], (815) 751-0427 (cell) or (815) 756-3440 (office).

    Written by The Chicago Farmers Editor, Denise Faris

    Chicago Farmers get a view of ADM’s future

    Ian Pinner, senior vice president and chief strategy and innovation officer at ADM and president of the company’s Health and Wellness division, talked about ADM’s future and its many expanding roles during Chicago Farmers’ March 8th  ZOOM meeting.

    “Unlocking the power of nature to enrich the quality of life” is ADM’s new purpose and focus for the future. Known as a global leader in human and animal nutrition and a premier agricultural organization and processing company, ADM continues to evolve so that it aligns with the latest trends, according to Pinner. “This description of ADM reflects the transformation of ADM and directly impacts how we interact with farmers every day,” he said.

    “ADM thinks about trends in such areas as sustainability, alternative proteins, and consumers’ needs,” said Pinner. “We are updating our brand as part of our evolution to stay fresh and refreshed. We continue to build on our legacy of processing wheat and beans, but we also are evolving the value that ADM can create and keeping it current in the marketplace.”

    Pinner noted that ADM does more now than ever before. While it is known as a buyer and seller of farm products, it has expanded its capabilities up and down the value chain, he said. A leading nutrition company, ADM is aware of the fact that across the food value chain there is a tremendous shift in consumers’ tastes that offers opportunities to companies that are agile and resourceful.

    “There is an evolving demand that is happening at a time of innovative technology to support new approaches to nutrition,” Pinner noted. “In response to this, ADM purchased Wild Flavors six years ago. We built and expanded 16 production facilities for feed protein complexes in the United States to meet the needs of animal nutrition.”

    He noted that ADM also has implemented high tech ways of interacting with its customers and engages in daily virtual tastings of its products. It has more than 50 innovation centers.

    Enhanced science and technology capabilities and investment in market research allows
    ADM’s Nutrition business to support its customers from the development of their ideas to a product and to market in record time, related Pinner.

    Regarding animal nutrition, he went on to say that consumers want their pets and livestock to be raised humanely and sustainably. ADM has dramatically expanded in this area through acquisitions and organic investments and finding solutions in nature so that it has a range of ingredients that meet animals’ nutritional needs.

     ADM’s Health and Wellness business is expanding the universe of pre-, pro-, and post-biotics. And the company is pioneering sustainable and renewable solutions such as plant-based replacements for materials that were traditionally made from petroleum and other non-renewable resources. And it is still one of the world’s largest buyers, transporters and processors of agricultural products.  “We remain a premiere global supply chain manager matching local needs with global capabilities,” said Pinner.

    He shared that ADM also is developing partnerships that match the bounties of the American farmers. It has collaborated with Innova Feed, a leader in producing insect ingredients for animal nutrition, and Spiber, a Japanese biotechnology start-up that takes corn by-products and turns them into polymers for such things as light weight auto products, apparel, and high performance foam. Pinner said the polymers will play a role in expanding the range of plant based, sustainable alternative materials.

    “Everything ADM does starts with the farmers; your goals are our goals,” said Pinner. “We connect what you grow with the world; we connect farmers with customers looking for a certain product; and we are expanding how we move products around the world and enhancing your global reach. We are partners with farmers as we expand the scope of what we do to meet today’s most pressing challenges.”

    Regarding the impact of Covid-19 on ADM’s thinking, Pinner said that Covid has acted as an accelerator around trends such as sustainability, more natural products, traceability, addition of  pets to households, and more demand for functional products that are healthy. He said these are ideal situations for ADM’s Nutrition business, which recorded $6 billion in human and animal nutrition sales this year.

    Regarding the future for ethanol in ADM’s plans, Pinner said that the company continues to look at its portfolio to determine the status of products. It is continuing a strategic review of its corn dry mill assets, which were temporarily furloughed due to the drop in demand in fuel due to Covid restrictions, and which the company expects to restart in the first half of this year. Pinner said ADM was excited about the advent of the vaccines and seeing more cars on the road because these factors would have a positive effect on ethanol demand.

    In discussing regenerative agriculture, Pinner said that ADM’s role is to identify how the products can be sourced. He noted, “We need standards so there is a level playing field.”

    In response to a question from the webinar audience, Pinner said that infrastructure in the United States is a key business advantage; the cost to move soybeans down the inland waterway system to the Center Gulf, for example, is very competitive and it is important to hold that advantage. “We would like to see more investment in the river, roads, and rail infrastructures to maintain competitiveness,” he added.

    Written by Chicago Farmers Editor Denise Faris

    How to be a good marketer in today’s environment

    Angie Setzer, vice president of Grain for Citizens, has marketed grain for 16 years. She shared her insights with The Chicago Farmers during TCF’s February 8, 2021, webinar meeting and recommended the marketing behaviors that breed success as we head into 2021.

    Angie reflected on last year and its turbulence due to the Covid-19 pandemic. She said the year began with hope, turned into fear and ended with contract highs.

    Angie added that China was practically non-existent as a grain buyer and it appeared that it was not coming back to the United States as an importer; but, “it returned in a big way,” she said. Angie added that China has a desire to stock up because crops in 2019 weren’t as large as expected and they were smaller in 2020 also.

    She went on to say that importers of grain went from “just in time” supplies to “just in case” because they did not want to take a chance. Angie noted, “Covid-19 shined a light on how precarious the supply chain actually is and it showed the importance of logistics.”

    Angie related that China’s buying frenzy created a frenzy elsewhere causing people to wonder what did they know that everyone else did not know.

    In addition to a big demand, the concerns over lack of supply were exacerbated by Russia, Argentina, and Ukraine discussing export restrictions. She said the Russian export ban and tax will become effective after February 15th, and in the meantime they have exported 20 percent more than they had a year ago, with continued massive shipments expected.

    The Argentinian government stopped the ability of farmers to ship corn out during January. The Argentine president said the IMF had to give the country more flexible terms on their debt or there would be more restrictions. Farmers fought back on this.

    Domestic users were asking for restrictions in the Ukraine, but exporters and farmers say they are unnecessary, creating a multi-party agreement.

    Finally, many headlines about food shortages stoked fear.

    The falling dollar is adding fuel to the export fire and cementing the idea that U.S. exports have the potential to remain large. Inflation also is on people’s minds. Angie noted that modern monetary policy questions if stimulus really leads to inflation.

    As we move forward, there are several things that bear watching, she said:

    • China’s ability to avoid a second Covid wave
    • Reports of a new strain of African swine flu in the barns of the fourth largest hog producer that reduces the breeding potential of the animals and results in the euthanizing of the hogs
    • The spread of the bird flu across Asia into Europe resulting in millions of birds being euthanized
    • The new administration’s approaches to stimulus and monetary moves


    What is ahead for corn? There continues to be reduced gasoline demand and ethanol production; feeders are struggling. While export sales are large, shipments continue to lag pace needed. Angie said that there is excitement over export sales, but until the bushels are shipped, there is fear of cancellations. She noted that corn acreage is expected to be large.

    Regarding beans, there is a massive export demand and sales continue to be larger than expected. She said that the demise of South American production has been exaggerated. Angie said that in December the discussion about drought had many expecting the Brazilian crop to fall, but it did not.

    It appears now that the long-term cycle of low prices is behind us and volatility will be the word for 2021. Angie said it is too early in the year to forecast what will or will not happen, but it is a good time for farmers to focus on improving their approach to marketing instead.

    In order to become a good marketer, Angie recommends that one should not:

    • Always look for a scapegoat
    • Fly by the seat of your pants
    • Allow emotion to drive decisions
    • Fall victim to analysis paralysis
    • Believe that one is not smart enough to make changes


    Her components for success include:

    • Have a plan
    • Book profits when possible; don’t always chase profitability
    • Have an idea of costs
    • Look for outside sources to help
    • Limit social media because sometimes one hears so many things an inability to make decisions can develop
    • Recognize when you are overwhelmed
    • Review your plan


    Angie noted that knowing one’s cost structure allows for a level of comfort when booking inputs and marketing production. It also provides an ability to make deferred sales at profitable levels providing long-term peace of mind. She said that less emotion is involved when one knows the point of profitability and what needs to be accomplished pricewise to be successful.

    Angie stressed the importance of having a solid plan and understanding it. She also recommended building a team of trusted advisors and friends. “It is important to have people you can talk to and bounce ideas off of,” she said. “You can meet in person or have virtual meetings. It also is helpful to build relationships with local buyers and suppliers,” Angie said.

    She pointed out that no one will ever nail the high of the market with anything but luck. Angie said the best strategy is to start with a small percentage of the crop at a point of profitability and continue to sell as the market moves higher. She recommended adjusting targets if information or the outlook begins to change and “always come back to having a plan.”

    Angie said that being a good marketer does not happen overnight; it requires constant effort and awareness. She said it was good to realize that old habits aren’t necessarily bad habits; also, little changes can have a big effect such as checking soil health or writing out goals.

    In response to a question, Angie answered that she was holding off booking for 2022 because it was impossible to book fertilizer, fuel and other input prices at this point.

    “The level of uncertainty in the year ahead is unprecedented, remember you are in business to be profitable when the opportunity arises, not to nail the high,” she said.

    Written by The Chicago Farmers Editor, Denise Faris

    Healthy soil means a healthier you

    Jeff Martin, who is a past president of the Chicago Farmers and the owner of Martin Farms with his wife Jean and sons Doug and Derek, discussed the importance of healthy soil and the strides he is making on his farms during his January 11, 2021, Chicago Farmers’ webinar presentation.

    “The nutrient density of our food is 15 to 70 percent less than it was 50 years ago,” said Martin. “This is causing health problems that are tied to the health of our soil. The nutrient density of  our food is not what it should be.”

    Martin said that farmers need to study and compare the conventional practices to the opportunities that are available today. “If you want different results, you have to manage and think differently; you have to have an open mind, whether you are a landlord or a tenant,” he said.

    He noted that many producers are losing money with today’s conventional practices. Martin added that the key to profitable farming is the soil health, which also is referred to as soil quality. That soil quality is an eco-system that supports animals and humans and has the continued capacity to function as a vital living eco-system that sustains plants, animals and humans.

    If the soil is healthy, the essential minerals in the soil will be available to the growing crop due to nutrient cycling. Those minerals come to humans through the plants and through the animals that eat the plants and grain.

    “I believe I have a responsibility to improve our grain and food production not only for our health, but for the health of our grandchildren,” said Martin.

    According to Martin, the single largest issue that impacts farm profits is that many farmers have the wrong expectations for the soil and continue to pour on inputs.

    He said that soil is composed of the vital living creatures that inhabit it, and a healthy, functional soil system will suppress diseases and retain the essential nutrients that plants need. A healthy soil also:

    • Decomposes toxins
    • Reduces water needs
    • Increases water infiltration and the soil’s holding capacity
    • Increases root depth and oxygen in the soil


    “These things reduce, and possibly eliminate, the need for pesticides and fertilizers,” Martin said. “We have seen this in our operations, not 100 percent, but we are getting there.”

    He shared that the goal is to develop soil that is functional and healthy and fosters an environment that favors beneficial microbes and the plant, soil, soil microbe system (PSSMS). Martin said that he and his family have found that gypsum, lime, kelp, and photosynthesis act as synergists with the soil, while aggressive tillage, myco fungi , nh3, KCI,  DAP, and poor Ca:Mg ratios act as antagonists. He related that high NO3 plant levels attract insects. If the nitrate levels are in balance, insects will fly over the field in search of another field that will provide the nitrate they seek.

    Martin noted that the goal is to cut back on the nutrients, which is possible through nutrient cycling, creating plant available nutrition from insoluble sources and from free nitrogen that is in the air and in the organic matter in the soil.

    Martin said that for the past five to six years, his family has employed the Agribio Systems/Regenerative Program versus a conventional farming program. The Agribio system costs totaled $158.02 per acre and included the use of lime, gypsum, urea, boron and humic acid.  When cover crops were added, the cost was $180.82 per acre. Round-Up is not used because it is an antibiotic and harmful to certain microbes in the soil and ties up specific minerals in the plant. For the conventional method, using DAP, potash, and lime with anhydrous ammonia added, the cost was $221.60 per acre.

    Martin encouraged people to view a video at agribiosystems.com to learn more about the system.

    In response to a question, Martin said that cover crops are just part of the system. If they were incorporated into the system completely, he believes that drainage would be helped, but he is not certain that they would prevent the need for tiling. He added that he believed with the proper balance of microbes, soil aggregation, and cover crops, the need for tiling could possibly be eliminated. Martin said that 50 percent of the fields they work on have cover crops and they would like to do more, but timing is important and when harvesting is not completed until mid-November, it is too late for most cover crops to grow enough to become effective, with the exception of cereal rye.

    Regarding landlords’ response to the Martins’ approach, Martin said they spend a lot of time educating the landlords and farm managers on the system, ensuring that they understand it and that they are aware of the success it achieves. He added that the landlords and farm managers are mainly concerned with cutting back on inputs. Martin said the system has been implemented on 90 percent of the farms in which the Martin family is involved. He said that most of their leases are one to three years and it takes at least four to five years with proper management to get the soil to the balance that the Martin family wants. He said that due to the education they provide for the landlords and farm managers, the Martin family is not worried about losing a lease.

    Written by The Chicago Farmers Editor, Denise Faris

    September webinar on leasing trends kicks off TCF’s 2020-21 season

    Dr. Gary Schnitkey, agricultural and consumer’s economics professor at the University of Illinois, Urbana-Champaign, had good news at the Chicago Farmers’ September 2020 webinar meeting when he shared, “The income outlook for 2020 in Illinois is better than we thought.” However, he did add the caveat that a lot still depends on whether there will be more ad hoc disaster assistance in the near future.

    In response to a question from the webinar audience about the upcoming election’s impact on agriculture, Dr. Schnitkey said that it is believed that if President Trump is re-elected, he will not bring forward any proposals for ad hoc disaster payments because there is no need since he has been returned to office. On the other hand, if the Democrats win the White House and are the majority in the Senate, they won’t issue the payments either because farmers did not support them.

    “But both parties historically have supported farm programs and I don’t see any reason for that to change,” said Dr. Schnitkey. “However, the nature of the support will change if the Democrats are in control because I believe that more of the payments will be tied to conservation.”

    In reporting that the income outlook was better in 2020 than analysts originally had forecast, Dr. Schnitkey said the higher income is based on the fact that in Illinois, corn yield was 223 bushels per acre and the soybean yield was 62 bushels per acre, both were above the trend line.

    The original dire outlook was due to the hot, dry weather in Illinois, Indiana and Iowa during the summer months. Additionally, a severe wind storm in August in Iowa added to the negative impact on yields.

    Dr. Schnitkey went on to say that the USDA changed its Iowa yield forecast for soybeans to 54 bushels per acre in September, down from the forecast of 58 bushels in August; the US yield was downgraded to 51.9 bushels in September from 53.3 bushels in August. Good income increases came about as a result of the lower yields and concern about the yields in China.

    “At this point in September, we are looking at higher yields than we were in August,” said Dr. Schnitkey. He noted that the national yield for corn was 178.5 bushels per acre, with a market year price of $3.50 per bushel for 2020, down slightly from the 2019 price of $3.60.

    Regarding soybeans, the national yield in August was forecast to be 53.3 bushels per acre and in September the forecast was changed to 51.9 bushels. The market value price was forecast in August by the USDA to be $8.35, but upgraded in September to $9.25. The USDA put the corn market value price at $3.10 in August but revised it to $3.50 in September.

    Dr. Schnitkey said that the Coronavirus Food Assistance program has a September 11 deadline. Thus far, payments have been made for livestock and many grain farms. Corn payments were set at $0.335 per bushel and soybean payments were $0.475 per bushel. Currently, there is no indication of ad hoc disaster assistance for 2021.

    Regarding cash rents, Dr. Schnitkey said they were holding steady in 2020. He said the average cash rent for Iowa is $230; Illinois, $222; and Indiana, $194. He noted that the ad hoc federal payments have been important in adding to the stability of the cash rent levels.

    Based on a survey in August, projections for the average cash rent per acre for professionally managed farmland in 2021 include:                                                                                                                        

    Excellent, $297 ($305 in 2020)

    Good, $253 ($270 in 2020)

    Average, $212 ($224 in 2020)  

    Fair, $160 ($173 in 2020)

    Dr. Schnitkey said that 50 percent of Illinois farmland is rented; in Indiana it’s 45 percent; in Iowa it’s 41 percent; and in Ohio it’s 37 percent.  He added that larger grain farms tend to be more involved in rent situations.

    What are the farming arrangements throughout Illinois?

                            Northern                      Central                         Southern

    Owned             19 percent                    14 percent                    22 percent

    Share-Rent       21 percent                    42 percent                    36 percent

    Cash-Rent        60 percent                    44 percent                    42 percent

    Custom farming, in which the landowner pays for the field operations, bears all of the costs, and receives all of the revenue, involves six percent of the state’s farmland.

    He noted that over time, it is becoming apparent that people switch from share-rent to cash-rent due to the ease of making arrangements.

    Dr. Schnitkey advised that a written lease is the best way to go, although there are many instances where this is not the case. If there is not a written lease and the landowner wants to terminate a relationship, he must provide notice by October 31, according to law; however, specifications in a written lease will supersede the October 31 deadline. Dr. Schnitkey said it is rare to see a lease arrangement for more than two or three years. “I would discourage the longer leases because you have no idea what the future holds,” remarked Dr. Schnitkey.

    Dr. Schnitkey added, “The outlook now is bright, not great, but still greater than we thought just one month ago.”

    Written by The Chicago Farmers Editor, Denise Faris

    State Ag director visits TCF

    The Illinois Department of Agriculture Director Jerry Costello II was the guest speaker during the Chicago Farmers December 7, 2020, webinar and outlined the agency’s responsibilities and how it protects the consumer.

    Costello noted that the Department of Agriculture is mainly a regulatory agency. It is responsible for inspecting the state’s 1,727 food manufacturers, which make Illinois the leading food manufacturer in the United States. The agency also inspects all agriculture products such as seed programs and it oversees weights and measures, which encompass scales in grocery stores.

    The environment also comes under the agency’s umbrella and inspections ensure that water quality is protected by monitoring the use of pesticides so that they are not polluting bodies of water. County fairs, fairgrounds, medicinal plants, cannabis and hemp also are regulated by the state agency. “Hemp is a sector that could be one of the top cash crops in Illinois,” Costello commented.

    In response to a question, Costello said that ethanol production in the state is very important and it will expand. He said it has an important role environmentally as a renewable fuel.

    Appointed to the position of director of the department on March 2, Costello has spent his tenure working under the restrictions put in place in an effort to stem the spread of the virus. “We are working with 40-50 percent staff levels in person in our building with most of our people working remotely,” said Costello, who pointed out that a number of staff members usually work remotely because that is the nature of their work.

    Costello said that at the outset of the pandemic Governor J.B. Pritzker deemed agriculture as essential in Illinois. There were concerns at many processing plants due to Covid and for a short time production levels fell to 50 percent; however, plants in the state are at 95 percent production capacity now, he said. The agency worked with its Ag partners such as the beef and dairy associations and corn growers to ensure that there were no shortages, Costello added.

    The CARES (Coronavirus Aid Relief and Economic Security) Act allocated $5 million in business recovery grants for livestock producers and small meat and poultry plants that the state ag department administered. Costello said the department received 749 applications and it is in the process of reviewing the applications and the funds should be disbursed soon.

    Costello went on to say that his department serves as an educational resource and will be the host of a December 9th webinar for new and beginning farmers. The department also “relaunched” the Homegrown by Heroes Program in November, which recognizes veterans who are farmers. The program provides veterans with information that will help them move forward in farming.

    Bobby Dowson, the department’s marketing representative, discussed his work with food and agribusinesses in Illinois. Dowson related that Illinois is one of the leading agricultural states and ranks third in the United States with annual exports of about $8 billion in agricultural products in 2019. The top three products based on 2019 figures include:

    • Corn, $947 million
    • Soy, $798 million
    • Distilled grains $664 million


    He noted that the top trading partners were Canada ($1.4 billion) and Mexico ($1.35 billion). Others include Indonesia, Korea, Japan, China, Vietnam, Hong Kong, and the Philippines. These countries import quite a bit of distillers grain, beef, pork, and soybeans.

    Dowson said the agency markets the agricultural products and organizes tours in the United States for foreign importers interested in pork, dairy and grain tours. It also organizes tours overseas for Illinois agricultural importers. Due to Covid-19, there were a number of virtual tours during 2020. He noted that there were 150 participants this year who were part of the grain tour. The agency seeks federal funds to pay for transportation to the United States, but participants cover their expenses while they are here. In response to a question from a webinar audience member, Dowson said that money spent on the trade missions is well-spent. “Customers like to see the quality of the product in person that they are going to import,” said Dowson. “The people who go overseas find it valuable to meet potential buyers that they might not otherwise know about. We have found that a lot of sales are generated from inbound and outbound travel.”

    David Lakeman, manager of the Division of Cannabis Regulation, spoke about the administering of the industrial hemp, medical cannabis, and adult use cannabis programs. Lakeman said that a great amount of growth has been seen in this sector and there has been a lot of innovation. In 2019, 7,141.03 acres of hemp were planted and 5,233.20 acres were harvested. He noted there were 800 licensed hemp growers and 364 licensed hemp processors. Regarding medical cannabis, there has been $331,223 in sales this year and $581,958 in sales of adult use cannabis this year.

    TCF learns about U.S. trade policy and what to expect with a Biden administration

    Dr. Russell Hillbery
    Professor, Agricultural Economics
    Purdue University

    Dr. Russell Hillberry, a professor in Purdue University’s Department of Agricultural Economics, discussed the history of United States trade, where we are now, and where we could be headed with the country’s trade policies under President-elect Joe Biden during the November 9th Chicago Farmers webinar meeting.

    Reflecting on the current administration, Dr. Hillberry said that President Donald Trump was a historical anomaly in terms of presidents’ trade policy orientation. He said that generally this president employed an aggressive use of U.S. trade policy and used what some would say are the “loopholes” in trade policy to pursue his agenda. As a result, there was predictable retaliation from other countries.

    By contrast, President-elect Biden has a long record of support for U.S. trade agreements, although he also has sought and won support from labor unions, which often oppose such agreements. But there was little talk about trade policy in the campaign, said Dr. Hillberry, so it is not completely certain how the Biden administration will approach trade.

    Sharing a historical overview, Dr. Hillberry related that Article I, Section 8, of the Constitution gives Congress the authority to set tariffs. The president has the responsibility for most foreign policy issues. Dr. Hillberry pointed out that it is difficult for Congress to negotiate with countries because it is not well-organized for negotiating trade agreements. The two chambers can differ on trade policy ideas and its members cannot respond rapidly to developments that would affect trade.

    Congress has granted limited authority to presidents to negotiate agreements for a given period of time, which is known as Trade Promotion Authority. With this authority, the president negotiates agreements and then consults with Congress, which votes on an agreement without amendment. With congressional approval, the agreement goes into effect.

    In terms of responding to events, many years ago Congress granted the president the authority to raise tariffs in certain situations. As a result, the president has the power to respond to events or raise tariffs due to national security concerns. The president also can use trade agreements as “a stick with countries that have not lived up to stipulated obligations.” There is no need for Congressional approval, but the president has to ensure that certain legal conditions are met.

    Domestic politics do play a role in trade agreements. Dr. Hillberry said that the Senate is more favorable than the House to granting presidents the authority to negotiate. This is due to the fact that the costs of trade agreements are concentrated by industry and are localized. However, the benefits of trade agreements are diffuse. American voters generally do not take trade policy into account as they cast their ballots. “The higher levels of representation generally are more in favor of trade agreements,” noted Dr. Hillberry.

    He went on to say that presidents usually tend to favor more trade agreements and take national interests into account when considering the agreements. They see trade agreements as a tool for accomplishing foreign policy objectives. But, a president also naturally favors more negotiating authority because such authority is a grant of power from the Congress to the president, said Dr. Hillberry.

    “Presidents, in general, are more favorable to trade agreements due to these factors than their political parties as a whole are,” according to Dr. Hillberry.

    Trade agreements are usually about economic benefits, but presidents’ foreign policy objectives are ultimately more important in the minds of policymakers than are the economic implications of agreements, Dr. Hillberry noted.

    For example, presidents use the granting of access to U. S. markets in return for some foreign policy goals they want to achieve. In order to have domestic politics work out, a president would leverage the support of domestic export interests, such as agriculture or medical equipment or Hollywood, to overcome opposition from import competing interests.

    Following World War II, from the 1940s to the early 1980s, the United States advocated multilateralism regarding trade. It had the view that the nation should form agreements with many countries, but only within the context of the General Agreement on Tariffs and Trade (GATT). “GATT was an open club,” said Dr. Hillberry. “Member countries treated each other in the same manner.”

    The primary reasons for pursuing the GATT agreements were related to foreign policy. The goal was to create prosperous blocs of market-oriented economies as a Cold War strategy. “The United States wanted its allies to be prosperous to diffuse the adoption of communism and to unify Western Europe. The agreements were efforts to support the NATO allies. Additionally, they made former combatants in Europe interdependent. This would build a big, open club that would liberalize trade,” according to Dr. Hillberry.

    He went on to say that there were economic reasons, too, for pursuing the GATT agreements. They created a broad international prosperity with few trade barriers. Additionally, policies that are consistent across trading partners are economically most rational; it is the preferred way of doing trade agreements. At the time of these agreements, the United States was dominant in manufacturing and the agreements opened up trade for U.S. exports.

    In the 1980s and 1990s, the United States began to sign preferential agreements. Israel, Canada, and Mexico were given greater access to U.S. markets in return for the United States gaining access to their countries’ markets. The main reason for a 1985 agreement with Israel was political: to support an ally in the Middle East. There were no meaningful economic benefits.  A foreign policy rationale for Nafta was that it helped to stabilize Mexico and support its reforming government. Economically, agreements with Canada and Mexico created a trading bloc to compete with blocs in Europe and Asia.

    President George W. Bush signed a number of agreements with small countries that supported the United States in the Iraq War. Another reason to pursue so many bilateral agreements was that the European Union was signing agreements throughout the world at that time. The many U.S. agreements that came with a lot of commitments also were seen as a way for the United States to force the agenda at the World Trade Organization. Among the agreements negotiated by President Bush, the U.S.-South Korea agreement was a notable exception. An agreement with that country was negotiated under pressure from Congressional leadership from agricultural exporting states.

    President Obama shifted from negotiating with one country at a time to negotiating mega-regionals such as TTIP (left unfinished) with the European Union to harmonize technical standards, and the Trans-Pacific Partnership (TPP) with 11 Pacific countries to compete for influence in the region with China. TPP also was held out as a carrot for China to behave itself and have a future membership with the group, said Dr. Hillberry.  The TPP was negotiated and signed by President Obama, but President Trump withdrew before the agreement could be sent to Congress. Neither agreement has been implemented by the U.S., though the other members of the TPP went ahead without the U.S.

    President Trump invoked discretionary powers to raise tariffs. He initiated steel and aluminum tariffs against most of the world and put higher tariffs in place against China, who then retaliated with tariffs on agricultural products, among others. As a response, the U.S. government sent large payments to farmers to make up for the loss of exports.

    President Trump also was skeptical of international institutions and undermined the WTO; he negotiated either reductions in the tariffs he had imposed or the halting of tariff increases; and negotiated mini-deals that did not require the consent of Congress. He also renegotiated NAFTA with Mexico and Canada, although he made limited changes in that case due to pressure from Congress.

    What to expect from President-elect Biden? During the campaign, candidate Biden proposed changes to government procurement laws that favored buying American made products. Dr. Hillberry thought President-elect Biden might try to rebuild U.S. influence at the WTO and he will probably move quickly to remove tariffs with allies, especially in Europe. He will expect reciprocity with lower tariffs on U.S. goods. A President Biden can do this without Congress because these tariffs were raised without Congressional approval. President-elect Biden might consider re-entering TPP because he was an advocate of it. However, he would need Congressional approval, and the votes might not be there, Dr. Hillberry suggested.

    Dr. Hillberry expects President-elect Biden to use trade policy, such as carbon tariffs, to compliment policy related to climate change. It is possible that tariffs would be in place for countries that don’t have policies to mitigate emission of carbon dioxide and other climate change pollutants.

    Regarding China, there are relatively high tariffs in place in both directions due to the trade war. President Trump negotiated a “phase one” mini-deal at the end of 2019 that could be thought of as mostly a cease fire, we won’t continue to raise tariffs on China, and vice versa is expected.

    The United States did get commitments from China to purchase U.S. agricultural products, these commitments were not met due to Covid and interruptions in the world economy, the commitments probably were not feasible anyway, Dr. Hillberry said.

    In getting the agreements, President Trump set up farm payments without Congressional approval through the Market Facilitation Program for farmers affected by tariffs. This program could be reversed.

    “My expectation is that President-elect Biden initially will keep the tariffs that PresidentTrump had as leverage with China,” said Dr. Hillberry. “He can negotiate away Trump’s tariffs without Congressional approval as President Trump did.”

    Dr. Hillberry said that President-elect Biden will likely have different goals than President Trump. He will seek policy commitments, not purchase agreements, in his negotiations, and he would look for movement on certain issues. For example, it is possible that President-elect Biden would focus on intellectual property and state owned enterprises and down play agricultural export interests.

    He noted that the China policy is likely to be re-oriented away from U.S. agricultural exports and there could be a reduction or end of the Market Facilitation Program payments.

    Dr. Hillberry pointed out that most of President Trump’s actions were done without Congress with no change in the law so they may have limited durability with a new president. Trade policy probably will not be a high priority in the Biden administration, which will be focused on other things. “I expect mostly a return to normal U.S. trade policy settings and restoring relationships with traditional allies, such as Europe and Japan, will be a main objective,” said Dr. Hillberry. “There will be new efforts related to labor interests in the United States and environmental issues such as climate change will be key parts of trade policy going forward.”

    Written by Denise Faris, The Chicago Farmers Newsletter Editor

    Automation and autonomy in agriculture

    Driverless combines and cultivators autonomously supervised hundreds of miles away from the fields are not dreams of the future. They are here now and Mark Moran, lead of Advanced Sensing Emerging Technology and head of John Deere’s Intelligent Solutions Group in Champaign, and Craig Rupp, CEO of Sabanto, shared how and why this technology is happening in agriculture during their presentations during The Chicago Farmers’ October 5, 2020, webinar.

    “United States agriculture has tripled output in the last 70 years,” said Mark. With worldwide populations growing, we can’t let up on the creation of food.”

    Agriculture is moving to a smart industrial operating model, according to Mark. He noted that agriculture today is unbelievably high tech. “There is a lot of advanced technology on a combine. There are more lines of code on a combine than on a fighter jet,” said Mark.

    Over the years, John Deere has developed machinery that supports precision agriculture and autonomy and brings decision making to the plant level, Mark said. The enormity of planting (the United States plants two trillion corn seeds per year) and the increasing unpredictability of weather are fueling the need to get into the field right away. Information and communication technology are key elements of precision ag, along with autonomy or automatic navigation.

    Every autonomous system is based on sense-decide-act. For example, the weed control product See and Spray senses what is happening on the ground, decides what the weed is and sprays that weed, not the plant, Mark said.

     “Autonomy is not science fiction and it is not technology change, it’s people change. People’s jobs in agriculture are changing,” Mark related. “An autonomous system requires set-up (navigation), path planning (obstacle avoidance), job planning, and remote supervision. Sending a tractor down a field is not the same as a driverless automobile on the road.”

    An electrical engineer by education, Craig grew up on a farm in Iowa and worked for a time at John Deere.  Co-founder of 640 Labs, an agricultural technology startup, Craig wanted to solve a problem in 2018 that every farmer has: labor shortage. He noted that the American farmer is aging, rural communities are dwindling, there are fewer opportunities for the young, families are smaller, farms are getting larger, and farmers are increasingly relying on outside labor.

    “Labor already is a problem for farmers. I believed that autonomous machines would fill the labor gap that agriculture is experiencing,” said Craig.

    In 2018, Craig founded Sabanto, which provides total turn-key ag operations using autonomously supervised equipment. In the spring of 2019, Sabanto began autonomous planting. After purchasing equipment, Craig’s company began planting in Iowa, Nebraska, Minnesota, and Illinois. He also built a team (the most competent people I know, said Craig) and built a fleet of planters. Craig leased a 60 horsepower Kubota tractor, which was powerful enough to pull a five-row planter, and a three-quarter ton truck, which could transport the tractor.

    “We are able to cover 130 acres per day with one system with less compaction.” said Craig. “We have deployed three units in a field, planting simultaneously.”

    He noted that while his autonomous planters were planting in a field in Sac City, Iowa, he was a mile way. Sabanto recently completed rotary hoeing for a 20,000 acre organic grower in Nebraska. After buying a cultivator, Craig cultivated an organic bean field in Burlington, Iowa. “After we dropped off the equipment in Iowa, one of our engineers in Chicago monitored it for an 18 hour run,” Craig shared.

    After a number of farmers asked if Sabanto could take over their fall tillage on their farms, Craig purchased a tillage machine. “While our autonomous tiller did the tilling on an Illinois field, the farmer’s employee was hauling grain,” Craig recounted. He noted that while he was giving his presentation for Chicago Farmers, his equipment was tilling land in Harvard, Illinois.

    Craig said he was asked to provide cover crop seeding and started doing that in November 2018 with a cover crop of winter wheat in Champaign.

    In response to questions about dealing with obstacles, such as mud holes, Mark answered, “We figure out mathematically what the ground is and have the equipment identify if the obstacles are doable and solvable problems. If the technology gets into trouble, it asks for help, or it can take care of it. If necessary, a person is sent out to resolve the issue.”

    Craig responded, “We monitor the health of the system. We know what speed we should be running at. We have not had any of our equipment stuck yet.”

    Craig and Mark agreed that autonomy would be more available in agriculture long before it is on the highways.

    “We can lay out a business case with autonomous ag; we can point to how much it is saving the farmer. It is hard to build a business case with the autonomous car,” Mark said. “Car technology is not rugged enough for farming. We are competing for talent, although our location in the University of Illinois Research Park allows us to be close to the talent. Ag has some really cool problems, we are hiring programmers to help feed the world. We are competing with industry such as Tesla, Facebook and Google, not just other ag companies. Once people understand how noble the work is (feeding the world) and how advanced our problems are, we can get students excited about ag. We have to tell our story.”

    Written by Denise Faris, The Chicago Farmers Editor

    How we must get farming right to avert future crises

    John Piotti
    President
    American Farmland Trust

    Agriculture is like a double edged sword: on the one side it has been a lifeline for millions because of the ability of farmers to produce an abundance of food for the world; on the other side, the unsustainable practices that are often employed to grow our food harm the environment. But, The Chicago Farmers learned during the May 11, 2020, virtual meeting through a presentation by John Piotti, president and CEO of American Farmland Trust (AFT), that all is not lost, that enough farmland farmed with the right practices can lead to true sustainability and a healthy planet. AFT is a Gold Level Sponsor of The Chicago Farmers

    “There are things that we need to change in farming. The world needs farms: ‘no farms, no food,’” said Piotti to Chicago Farmers members attending the May Zoom meeting. “AFT has worked for 40 years to bring agriculture and the environment together and it has been involved in some of the most critical issues affecting the planet, including climate change.”

    Piotti gave a brief history of U.S. farming since 1837, when John Deere invented the modern moldboard plow. “It changed everything,” said Piotti. “The prairie land was too tough and too thick to properly farm, but that changed with the Deere plow. But once we had this amazing technology, we plowed and plowed--and that over-plowing contributed to the 1930s dust bowl.”

    He went on to say that during the 1930s, Secretary of Agriculture Henry Wallace advanced soil conservation as government policy; but then during the war years, the country’s focus was elsewhere. During the 1950s and 1960s, American farmers applied industrial models to agriculture and the “Global Green Revolution” was underway.

    “That Green Revolution kept millions from starving, but that accomplishment came with severe environmental consequences,” said Piotti. He then added that environmentalists became more active during the 1960s and 1970s in an effort to turn things around but they were often at odds with farmers.

    According to Piotti, AFT was founded in 1980 to bridge the divide between farmers and environmentalists. Piotti then pointed out how different things were in 1980 than today--how less than 10,000 acres of farmland has been protected, there was no recognition of agricultural easements in federal law, no federal funds for farmland protection, and minimal support for better farming practices.

    But AFT changed all that, Piotti pointed out, when it launched the “Conservation Agriculture Movement” by advancing the Farmland Protection Policy in 1981 and incorporating the Conservation Title into the 1985 Farm Bill. In years since, over 6.5 million acres of farmland have been permanently protected and better farming practices have been adopted on millions of additional acres.

    Yet sadly, agriculture is a major cause of the climate crisis now confronting the world, Piotti said, adding that 10 percent of our nation’s overall carbon emissions are from agriculture. But agriculture has the chance to reduce atmospheric carbon and put it back into the soil, Piotti noted.

    AFT is the only national agriculture group that takes a truly holistic approach, focusing on the land itself, the farming practices employed on the land, and the farmers and ranchers who steward that land. Piotti said that AFT encourages regenerative agriculture, which uses better farming practices that restore soil health. These practices:

    • reduce harmful run-off into streams
    • hold water during droughts
    • don’t require farmers to use as many inputs
    • capture atmospheric carbon in the soil (countering greenhouse gas emissions)


    And the best practices for increasing carbon in the soil?

    • cover crops
    • crop rotation
    • no till or low till
    • intensive rotational grazing
    • silvo-pasture (which allow livestock to graze in wooded settings)


    Piotti commented that farming is essential to both growing our food and providing essential environment services, including carbon capture. He shared that AFT’s research has shown that just by applying cover crops and reducing tillage, U.S. agriculture could sequester carbon equivalent to over 80 percent of its emissions--and that Ag could go further with more aggressive steps. “We could become a carbon sink, that is what agriculture needs to do to counter industry that will always emit carbon,” said Piotti.

    A major concern is that we are losing 2,000 acres of farmland every day--and we lose opportunity to combat climate change with every acre we lose. He said that one key question is whether we have enough farmland. “It is necessary to determine how much land we need not only to feed ourselves, but to provide essential environmental services including sequestering carbon,” Piotti said. “We don’t yet have that answer, but when the research is complete, I am convinced that it will show that long before we run out of the land that we need to feed us, we will run out of the land that we need to help heal the planet.”

    The aging farmer population is another concern, said Piotti; however, AFT is actively involved in helping people who want to farm. The organization helps would-be farmers find farmland and advises them on how to farm successfully.

    Piotti said that AFT recently created a Farmer Relief Fund to aid farmers impacted by the coronavirus pandemic. AFT has now raised $1 million, which allowed it to allocate $1,000 checks to 1,000 farmers. “We had 5,200 applicants and with current funds can only support one out of five applicants. So we hope you will consider a gift to the Farmer Relief Fund,” said Piotti.

    Piotti said that in order to combat change, widespread adoption of regenerative practices is necessary as well as sufficient farmland and enough of the right farmers and ranchers. That’s a tall order.

    But there is reason for hope, he said. “We have the tools needed to protect the land and manage that land well, and we know how to support the next generation,” Piotti said. “We simply need to do this work at greater scale.”

    He also pointed out:

    • we are poised for changes in both policy and markets to compensate farmers for both growing food and providing environmental services
    • we are positioned to take on new research that will help assess exactly how much farmland we need—and in so doing, avoid a tipping point


    Piotti went on to say, “Perhaps the biggest reason for hope is that more and more people appreciate farming, farmers and the food they grow. This increased awareness of farming and environmental challenges is making a difference. Driven by public demand, federal policy is poised for major change with regenerative practices as the focus.”

    Piotti urged people to connect with AFT, visit its website (www.americanfarmlandtrust.org) and become a member. Piotti said, “We need more people engaged.”

    He added, “AFT is in the crises prevention business. As horrible as this pandemic is, it is a small problem compared to what will happen if we have a serious shortage of food or a planet that is environmentally unsound. Yet we can remove these threats if we act now to rebuild agriculture.  And we can do that with your help.”

    Written by Denise Faris, Chicago Farmers Editor

    CME’s chief economist discusses the current economic environment at TCF meeting

    Dr. Blu Putnam, chief economist and managing director of the CME Group, the world’s largest operator of futures and options exchanges, was the guest speaker at The Chicago Farmers’ March 9, 2020, meeting. He provided his perspectives on the “Current Economic Environment with Insights from the CME Market Sentiment Meter.”

    The presentation opened with a discussion around the timing of when different markets reacted to the spread of the COVID-19 virus.  Dr. Putnam noted that oil markets were quick to react with price declines, since the virus was first discovered in China, because China is a huge importer of oil.  By contrast, downward pressure on U.S. and European equity indices were several weeks behind.  This appeared to reflect that global equities waited until the narrative changed from a China-only story to a global narrative with news about tracking the spread of the virus around the world.

    The reaction of equities to policy responses also was intriguing.  Dr. Putnam noted that when the U.S. Federal Reserve (Fed) announced an emergency cut in rates on March 3, 2020, equities reacted with further declines.  While the Fed was acting in an accommodative manner, which under other circumstances might have been reflected in an equity rally, market participants chose to focus on the forward-guidance, namely that the Fed was extremely worried about how the economy would handle the spread of COVID-19.

    Dr. Putnam shared some new research from CME Group on ways to quantitatively track changes in market sentiment.  In an example from the past year, Dr. Putnam shared that the Market Sentiment Meter showed that back in May 2019, equities were in a highly conflicted sentiment state.  At the time, market participants were weighing the pros and cons of the U.S. tariff tensions with China, with some market participants seeing optimism while others were very worried about a global slowdown in trade and growth.  By December 2019, equity markets had become comfortable that a reasonable resolution of the tariff tensions was at hand with a Phase One U.S.-China trade deal, and the sentiment risk distribution returned to a typical balanced-risk shape.

    In closing, Dr. Putnam focused on agriculture and talked about how market sentiment had evolved during the planting season in 2019.  Early in the season, sentiment and risks seemed relatively balanced.  By May 2019, however, sentiment and risks had shifted into a much more anxious state, due to a cold spring and the considerable flooding that was delaying plantings.  Dr. Putnam noted that as of March 2020, the corn market had returned to an anxious sentiment state.  Corn market participants had a lot about which to be concerned with oil prices dropping and impacting ethanol, with the virus lockdowns closing restaurants and impacting beef (steak) sales, and with jobs being lost in many sectors of the economy shrinking incomes and demand.

    Delaware Statutory Trusts and 1031 Exchanges; an introduction for owners of farmland

    Daniel Wagner
    SVP Government Relations
    The Inland Real Estate Group, LLC
    Nate Kuhn
    President
    Chicagoland 1031 Exchange


    Dan Wagner, senior vice president, government relations, of the Inland Real Estate Group, LLC, was among the speakers at The Chicago Farmers inaugural webinar that was held on April 20th in lieu of a regular meeting due to the restrictions on large gatherings. He was joined by Nate Kuhn, financial adviser with Chicagoland 1031 Exchange. Inland is a Platinum Sponsor of The Chicago Farmers.

    Dan gave an overview of Inland, which was founded 52 years ago by four Chicago public school teachers who became involved in real estate ventures and formed Inland. Over the years, Inland has purchased $47 billion in commercial real estate. With its experience in real estate, Inland developed the Delaware Statutory Trust (DST) structure that is used in Section 1031 exchanges. Inland Private Capital Corporation’s counsel worked with the Internal Revenue Service to educate them on the DST structure and Revenue Ruling 2004-86 was issued as a result of the collaboration. Section 1031 of the Internal Revenue Code can provide a strategy for deferring capital gains tax that may arise from the sale of a business or investment real property.

    Nate said that Inland is one of the sponsors of DSTs that his firm works with. Chicagoland 1031 Exchange is independent from Inland. He said that DSTs could be a consideration at retirement or at other points in people’s lives when they may be thinking about changing their investments into something that is passive.

    A Section 1031 exchange allows people to sell property and defer the ensuing taxes by purchasing another property with the proceeds of the sale, said Nate. Additionally, the DST structure allows the investor to continue to exchange real properties until the investor’s death. Upon the death of the investor, the heirs may receive a step-up in basis to avoid completely the deferred capital gains tax.

    “With the DST, an investor has the ability to be a fractional owner of property that he would not be able to afford on his own, for instance a $100 million apartment complex,” said Nate. “The DST allows the investor to get the advantage of a potential cash flow-generally around 4.5 percent to 6.5 percent without the responsibilities that come with the ownership of property,” said Nate. Because this is a real estate investment, the investor could also realize appreciation when the DST is sold. At the same time, the DST owner also participates in the downside if a property sells for less than its original purchase price; additionally, cash flows can fluctuate and are not guaranteed.

    The fractional ownership also allows for diversification across different asset styles and geographically, added Nate. A person could go into three or four DSTs that are involved in asset classes other than multi-family dwellings, such as self-storage facilities or medical care. Dan added that the DST owner also is not responsible for loans on the properties.

    Nate also pointed out that the like-kind involved in the exchanges does not mean that an investor has to buy the same kind of property he or she sold; it just has to be an investment property.

    The men noted the minimum investment in a DST is $100,000, but if an investor has less than that to invest, there is some leniency. But the exchanges do tend to be large, in excess of $1 million, Nate said.

    Nate pointed out that with a DST, the investor gives up control to the sponsor of the DST. Additionally, DSTs are not liquid investments, but the investor should receive cash flow and potentially appreciation throughout its duration. The DST could sell within three to five years, but it is usually seven years. To invest in a DST a person must qualify as an accredited investor. An accredited investor must have a net worth over $1 million, alone or together with spouse (excluding the value of primary residences, or $200,000 of income individually ($300,000 with a spouse) in each of the prior two years with reasonable expectation to continue for the current year.  .

    Nate said that DSTs can be purchased in living trusts or irrevocable trusts. He has also worked with LLCs and corporations (irrevocable trusts and other entities have different accreditation standards that he is happy to discuss). Nate suggested that DSTs are good measuring sticks for people who are considering buying property directly. “Compare the property to a DST and determine if it is better than a DST,” he said. Nate went on to say that he has worked with quite a few farmers who decided to exchange into a DST.

    Dan commented, “Inland is the number one sponsor of DSTs. It’s a dynamic concept. People should consider working with a knowledgeable financial adviser such as Nate to learn if it works for them.”

    You can read more information about 1031 exchanges and DSTs at Chicagoland1031exchange.com. Nathan Kuhn can be reached at 847-607-4976, ext. 1, [email protected]

    (The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last two years, and reasonably expects the same for the current year) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investor’s situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.

    This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Nathan Kuhn at 224-427-3421.

    Chicagoland 1031 Exchange does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances.

    Securities offered through DAI Securities, LLC, member FINRA / SIPC. Advisory services offered through Kuhn Wealth Management, Inc. (KWM), a state registered investment advisor. Insurance offered through DAI Securities, LLC. KWM dba Chicagoland 1031 Exchange is independent of DAI Securities, LLC.)

    Hemp in today’s marketplace

    There currently is a keen interest in the growing of hemp, even though growing the plant just became legal one year ago. Dr. Winthrop B. Phippen, professor of Plant Breeding and Genetics, School of Agriculture, Western Illinois University, discussed this new crop during the Chicago Farmers February 10 luncheon meeting.

    “The current hemp industry is new and there is a lot of uncertainty that surrounds hemp production,” said Dr. Phippen “Because it was just legalized a year ago, there is little research and information on it. It is apparent from the 2019 growing season that producers are determined to grow hemp, but they need to create networks.” 

    Dr. Phippen pointed out that hemp was grown in Illinois during World War II for its fiber, the plant’s most valuable product. Hemp is useful for its fiber, grain, and CBD (cannabidiol) oil. Hemp’s oil and seeds are the major interests today. In 2019, there were 970 applications in Illinois; 294 processor applications and 644 grower licenses, according to Dr. Phippen.

    Hemp, like marijuana, is a cannabid plant, but the flower from the marijuana plant is significantly higher in THC, the chemical responsible for most of marijuana's psychological effects, than it is in the hemp flower, Dr. Phippen noted. Hemp is used for the extraction of its CBD (cannabidiol) oils.

    “We do not have data from hemp’s 2019 growing season,” said Dr. Phippen. “There were no research trials and growers are trying to develop a supply chain. What is being grown now is not the same as the hemp that was grown more than 70 years ago for its fiber.”

    He said that growing hemp is more labor intensive than producers originally had expected. Industrial hemp that is grown for its CBD is harvested by hand. The plants are hung to dry in drying sheds or warehouses. The grain of industrial hemp is harvested with a combine. Following the harvest, the hemp must be stored immediately in aeration bins. Industrial hemp fiber is harvested by mower and baler and the bales are stored at 15 percent moisture. Proper storage both seeds and oil are critical to prevent spoilage.

    The professor noted that growers do face challenges:

    • markets or end users are not identified prior to planting
    • protocols are needed for the final products
    • limited availability of seasonal labor
    • experienced workers are not available at planting or harvesting
    • no registered chemicals
    • there is no infrastructure in the state for processing.

     

    Dr. Phippen said there are a lot of uncertainties in the production and processing of the plant, and it is an expensive endeavor. “People have to do their due diligence regarding their budgets,” he said. “We have to wait and see what happens when regulations are in place.”

    What is happening in the land market?

    ”In the midst of the coronavirus, no one knows where the overall world economics are going, let alone where agriculture’s economics are headed during this uncertain time, but we do know there will be a lot of change,” Randy Dickhut, Farmers National Company senior vice president of real estate and guest speaker, said during an April 20 webinar that took the place of Chicago Farmers usual meeting setting due to the coronavirus and the large group restrictions that are in place. Farmers National, a gold Sponsor of the Chicago Farmers, manages $9.2 million worth of land and is one of the country’s largest independent oil and gas leasing firms.

    Randy explored what owning land was like before the coronavirus, what it is like in early 2020, and what will be the new normal.

    Land is important to agriculture and it is growing in importance, said Randy. It comprises 83 percent of the total assets in agriculture, making it almost 100 percent of the equity in agriculture. He noted that the stability of agriculture rests in its land values.

    Referring to land values in Nebraska, Iowa, and North and South Dakota, Randy said that land values have had “quite a ride” since the early 2000s. He said that land values are increasing due, in part, to the fact that the Corn Belt is expanding north and that has added value. The peak of the land values hit in 2013, but the values have not fallen much for average land.

    Giving examples of land values, Randy related that values in Illinois had increased to more than $7,000 per acre for average land in 2019. In Kansas, the valuation was $2,000 an acre, but the numbers were inching up. Land values in Arkansas were at $3,500 an acre and they had not plateaued. “Values in Arkansas were moving upward because the Arkansas delta region has a number of crop options that include corn, soybeans, rice, and cotton,” he said. “The area also attracts a lot of institutional investors because of the size of the tracts and land prices are low.”

    Randy went on to say that farmland is a good long-term investment and compares favorably with other real estate investments: it offers consistency, the land is always rented; there is no vacancy.

    He noted that farmland correlates to 10 year Treasuries. It is also a hedge against inflation. While farmland ownership compares somewhat to the movement of gold, it is more or less counter cyclical to the stock market, so it is a good investment for spreading out assets.

    Land values were in positive territory in the early 2000s, but they are not as good today, observed Randy. At the opening of 2020, farmers had a little bit of optimism: grain prices were getting slightly better as well as livestock and dairy prices. Additionally, the United States was in Phase I of the China trade deal and the third payment of MFP had been made.

    Randy added, “But, the best laid plans go astray.” He did note, however, that land values are holding due to low interest rates. Randy said there also is not much debt in agriculture now. The issue is the lack of availability of working capital. If grain values would increase, the future would look brighter.

    In the long-term, there are a number of converging trends that will have effects on agriculture and land values, Randy said. He noted the internet and artificial intelligence, ongoing generational land transfers, food preferences and changing eating habits, and changes in food production. “Things change quickly and land values change quickly too,” said Randy.

    He said the “new normal” will be affected by three trends:

    • Sustainability in resources and food and secure sources
    • Traceability, where our food is coming from
    • Changes in land ownership through technology and purchases by institutions

    Randy observed that climate change and land usage also will impact land values; however, the Midwest continues to be a prime spot for investment. Experts are studying how much useable land the country has. He said that one-half of the land goes to agriculture for pasture and feed grain. “Will that remain to be the case as we move forward?” Randy asked.

    Among the challenges that agriculture will face:

    • population loss in rural areas
    • migration from urban areas to rural areas, which could cause changes in ownership of land
    • technology is increasing yield and less land is being used with better crop production
    • the effect of growth in electric cars on fuel and corn
    • lab grown food
    • population growth or leveling off of population
    • Covid 19’s drastic effects on grain and livestock prices

    In response to a question about lenders from a webinar listener, Randy said that March and April brought crashes in ethanol and livestock prices, which will pose real challenges to lenders for equipment purchases and other purchases. “I am sure lenders are making plans now on how they will mitigate those losses,” responded Randy.

    Responding to another question, Randy said that the best times to sell farmland are late summer and early fall. “We usually see a lot of activity post-harvest,” he said. The next best time is mid-January to February; however, “farmland will sell at auction year-round.”

    Landlord Boot Camp

    How well a non-operating landowner communicates with the renting farmer will go a long way in ensuring a well-informed landowner and a successful farming operation. This was the underlying theme of the “landowner boot camp” conducted by Jennifer Filipiak and Jami Cox at the January 13th Chicago Farmers meeting.

    Ms. Filipiak, executive director of Driftless Area Land Conservancy, and Jami Cox, of AgAware, are members of TCF’s board of directors. Ms. Filipiak and Ms. Cox explained that they drew information from the USDA Agricultural Census and a survey of non-operating (non-farming) landowners conducted by American Farmland Trust (AFT). (The link to the AFT survey is www.farmland.org/noissurvey. The link to the USDA ag census is https://www.nass.usda.gov/AgCensus/)

    The USDA Agricultural Census indicates that 39 percent of U.S. farmland is rented, and in the Midwest, rental rates are higher. In Illinois, 60 percent of farmland is rented. Nationally, 61 percent of land is owned by the person who is farming it; 31 percent of American farmland is owned by non-operators who rent the land to farmers, and eight percent of farmland is owned by farmers who rent the land to other farmers. Ms. Filipiak noted that an operator refers to either a farmer or rancher, while a non-operator owns the farmland, but doesn’t farm it. Through a survey of non-operating landowners in 11 states, AFT found that most of these landowners live near their land. They may own the land for a number of different reasons, including investment, recreational, or family (inheritance) purposes. The AFT survey also showed that most landowners trust the farmers who rent their land to make good decisions about its management and are committed to their renters continuation as a renter of their land.

    Ms. Filipiak pointed out that farmers who rent land to farm often rent from multiple landowners. “The surveys also indicate that 57 percent of the rented acres are rented annually,” said Ms. Filipiak.

    A survey of Illinois, Iowa, and Indiana for agricultural landowners, found that 63 percent of these landowners have experience in farming, but they might not have the confidence in making decisions because farming has changed in recent years.

    Ms. Cox pointed out that verbal leases are common in many parts of the country. Ms. Filipiak noted, “In many areas we found that a written lease sends the message ‘you don’t trust me.’”

    Regarding leases, while they usually renew annually, many are long-term, and can be three to five years in length, with some as long as 15 years, said Ms. Filipiak.

    Ms. Filipiak and Ms. Cox stressed that the landowner’s trust in the farmer is an important factor in the non-operator landowner-renter relationship. In a survey, landowners indicated that other factors that rate high in determining a renter are:

    • The renter is trustworthy
    • The renter cares about the landowner’s land
    • The renter is financially responsible

    Non-operating landowners indicated that they wanted more information on their land’s soil and water quality. They want to be well-informed. The AFT survey indicated that 92 percent of Illinois landowners also said they trusted their operator to initiate good conservation practices. Noted Ms. Cox, “The landowner will likely support the renter in conservation practices they wish to implement.”

    “The survey found that the non-operating landowner loves the land and wants the renter to love it as well,” said Ms. Cox. “The landowner is willing to structure a lease to accommodate a renter’s input. It is important that the landowner and the renter have a conversation that will inform the lease.”

    Ms. Cox and Ms. Filipiak pointed out that landowners can self-educate and learn about their land and farming operations by doing such things as riding in the combine with the farmer to personally see the land and, at the same time, talk with the farmer.

    The women said that landowners should create goals for their land, ask the renter what their goals are, and determine how the two parties can work together to achieve all of the goals.

    Issues that the renter and landowner must agree on include:

    • The length of the lease
    • Is the landowner crop sharing or will it be cash rent
    • What is permitted and what is prohibited on the land, e.g., could hemp be grown on the farm; can the renter tile the land; etc.

    Communication is very important in the relationship. “The landowner and renter have to start the conversation and determine what each one needs,” said Ms. Filipiak. Ms. Cox noted, “The Midwest has productive land and the farmer does not want to ruin the land. Each of the parties has something the other needs – landowners need a farmer, and farmers need land to farm.”

    Ms. Filipiak pointed out, “A lot of the non-operators are not getting the information that the famer is getting. We need to get that information out in more general ways and not just place it in resources that only a farmer would access. We need to market to a broader audience.”

    Written by Denise Faris, Chicago Farmers Editor

    Illinois Department of Natural Resources is more than deer, duck, and fish

    Colleen Callahan has a mission. As director of the Illinois Department of Natural Resources (IDNR), she is striving to make Illinois residents more aware of what the IDNR does for them and making IDNR more aware of what the state’s residents want from it.

    Ms. Callahan, a past president of The Chicago Farmers, was the guest speaker at TCF’s holiday meeting on December 9th at the Union League Club. During her presentation she outlined IDNR’s responsibilities and sought input from the audience members regarding how they would like to see the IDNR involved in their lives.

    “Many people think the IDNR deals with deer, duck, and fish, but the department is so much more than that,” said Ms. Callahan. “For example, here we are in Chicago with Lake Michigan at its doorstep. Were you aware that the IDNR is responsible for the coastline along the shores of Lake Michigan? It comes under the auspices of the department’s Coastline Management office, which also is responsible for the release of Lake Michigan’s water to 7 million people. As a department, we do ourselves a disservice by not being more engaged in the Chicago area.”

    Ms. Callahan noted that the management of the state’s recreational sites are IDNR responsibilities. This includes the 329 state owned parks, which attract 39 million visitors a year, community parks, and the 1,600-acre world class shooting complex in Sparta, Illinois.  “International visitors participate in shooting competitions at the complex and they are thrilled to be there,” said Ms. Callahan.

    She said that the IDNR has more than $1 million in grants to share with communities to improve their park sites. She introduced Ted Penesis, director of community outreach, who is working to further community relations and advise the communities how the grants would be best used. Recognizing that students from the Chicago High School for Agricultural Studies were in attendance, Ms. Callahan said that speaking at TCF’s meeting was an ideal occasion to share with them IDNR job possibilities such as water engineer or wildlife biologist. “When it is time to consider a career path, I hope you consider IDNR,” she added.

    Ms. Callahan observed that cultural resources could also be a part of IDNR’s title because it is responsible for the state’s historic sites and museums. In response to a question from the audience, Ms. Callahan related that the new state museum director is a champion for presenting our state historic sites, some of which were closed during the state’s lengthy budget impasse.

    “There are areas in some of our parks that have been closed and sections of the Illinois and Michigan Canal that are in need of repair,” she said in a response to an audience member’s concerns. “These are state treasures, with $1 billion of deferred maintenance statewide. However, now we have a budget, a capital bill, and we are hiring people so that we can address this list. There are things that you will notice that are being done, but it will take a while. For some of the projects we have to work with the Capital Development Board, and that in itself is a lengthy process.”

    IDNR also lists farming among its activities, said Ms. Callahan. The department has 35,000 acres of tillable land that is leased to more than 200 tenants. Working to be a good steward of the land and an agricultural model, the department has submitted an action plan to the governor that focuses on conservation of the environment.  The IDNR’s leases have become more environmentally friendly and are focusing on regenerative agriculture and soil health. “We now recommend that our tenants plant cover crops because they benefit the soil and wildlife,” she said.

    The IDNR’s office of Public Lands is charged with enhancing the state population’s access to land for recreational pursuits. With 97 percent of the land in Illinois privately held and 80 percent of the land owned by farmers, there is little land left for the public. “We have to establish relationships with private owners who might be willing to allow the IDNR to lease their land for hiking or hunting. In some instances, people approach us about taking over their land when they die because they don’t want it commercially developed,” Ms. Callahan said. She added that when the IDNR leases the private land for such things as hunting, it covers the liability insurance. The funding is provided through the federal Farm Bill and IDNR’s Illinois Recreational Access Program (IRAP). There also are tax benefits in the leasing arrangements.

    Farmers who own timber land could find the forestry office to be beneficial, she pointed out. The office’s foresters will evaluate the stand of timber for sale purposes and help in eradicating invasive plant species with controlled burns; wildlife biologists also are available to help with the preservation and conservation of the landowner’s natural resources. The state also has its own nursery in Mason City that provides seed stock for native trees and native grasses.

    “We continue to review IDNR’s role in the state,” said Ms. Callahan. “We plan to work with universities regarding how we are managing our land that historically has been in row crops. We are looking at the use of solar energy. We are committed to being an example and a leader in conservation.”

    Written by Denise Faris, Chicago Farmers Newsletter Editor

    November meeting offers a primer on the state of the Illinois International Port District

    Clayton Harris III is an enthusiastic cheerleader for the Illinois International Port District (IIPD). As its executive director for the past three years he has made it a priority to make potential customers aware of what the District’s Iroquois Landing and Lake Calumet port facilities, both of which are on Chicago’s Southeast Side and near the Indiana border, have to offer. There are 19 public port districts in the state. Harris was Chicago Farmers’ November 18, 2019, meeting guest speaker.

    “We are the greatest multi-modal facility in North America,” said Harris. “These ports are the logistics hearts and brains of transportation.”

    Harris related that the Iroquois Landing Facility has 190 acres and approximately1,600 acres comprise the Lake Calumet facility. In addition to these sites, the District also includes the Harborside International Golf Center, which was constructed over the old city of Chicago’s dump and filled with refuse.

    “We have connections to road, rail, and water,” said Harris as he displayed a picture of the ports with nearby interstates and rail yards crisscrossing the properties. “The Chicago facilities are within 10 miles of five United States highways, have access to six of the seven North American Class I railroads, and the sites are the only Great Lakes and inland rivers port. We rank number two behind the Duluth/Superior port. The port processes an average of 17.5 million tons of cargo annually.”

    The state’s port system includes 350 private terminals along the Illinois, Kaskaskia, Calumet, Ohio, and Mississippi Rivers, as well as Lake Michigan. Three Illinois ports are among the leading ports in the country.

    Harris noted that international ships come through the Chicago sites via the St. Lawrence Seaway; barge traffic comes via the Mississippi River and the Gulf of Mexico.

    While the Chicago sites see $37 million in agricultural products at their docks, Harris would like to increase that figure for the facilities and be an economic stimulus for the Chicago area. In 2017, the facilities had total revenue of $1,186,968 and his goal is to increase that by six percent while reducing debt, which he has done during his three years of stewardship.

    Harris said that making the facilities more attractive is a key factor in drawing more traffic. He said the state’s capital budget allocated $150 million for the state’s 19 ports and the Illinois International Port District hopes to receive $50 million from that.

    The Calumet site has the largest grain elevators east of the Mississippi River, but none of them store any grain. “A decision has to be made to either raze the structures at a cost of $14 million or revamp them for $25 million, although we do have two grain bins to store soy,” said Harris. Additionally, a “ghost ship” that has been moored alongside the grain elevators for 20 years will soon be moved showing ongoing progress and change.

    Harris said the IIPD is now involved in a $1 million master planning process that will give it action plans to make the sites more attractive and more cost effective. He added that the District just received $17.5 million that will fund its first capital improvement project since 1981 and include the repaving of Butler Drive, the main roadway through the port district at Lake Calumet, and the raising of rail lines.

    “Our master plan will outline what we should, could, and will be doing,” said Harris. “For example, we plan to add a refrigerated shed to the Lake Calumet site so that we can store fresh food products. I want to engage people in agriculture and learn what we can do for you. I want you to incorporate the state’s 19 ports in your thought process.”

    Sustainable farm shares space with a golf course

    The ping of a golf club head striking against a golf ball and the yell “fore” are not sounds usually associated with a farm, but if you are involved in Fairway Farms in Lemont, Illinois, they are common noises that Angelica Carmen, the farm’s manager and Sustainability Specialist, says come with her work location. Angelica was the guest speaker at Chicago Farmers’ October 21, 2019 meeting.

    Angelica manages and developed the farm that is located on the site of a former gravel parking lot at Cog Hill Golf and Country Club in Lemont and backs up to one of the four golf courses that have made Cog Hill famous among avid and pro golfers. The two-year-old sustainable farm boasts 4,500 square feet of planting space, 25 raised beds growing 100 different varieties of heirloom plants and edible flowers that are used in Cog Hill’s banquet facilities, 12 beehives (apiary) whose honey is sold to the community, a pumpkin patch, and a closed-loop composting program that uses kitchen waste mixed with garden refuse to create fertile compost that is used on the farm and, at the same time, mitigates methane-producing landfill waste.  “In the 2.5 years it has been in operation, the farm has diverted over 7,500 pounds of kitchen waste from landfills,” said a proud Angelica.

    A graduate of Loyola University Chicago, Angelica holds a degree in communication and environmental advocacy and leadership. She has had agriculture internships with Uncommon Ground, which has the first certified organic rooftop farm in the United States, and Loyola’s Urban Agriculture program. Aspiring to be a chef one day, Angelica said her internship with Uncommon Ground taught her how to grow sustainably and to grow for restaurant chefs. Loyola taught her how to manage a sustainable operation.

    Fairway Farms does not have electricity or mechanized equipment, does not use herbicides, irrigates from trenches dug under the fairways and a nearby pond, uses mulch that is composed of downed trees from the golf course, and creates its growing materials by recycling things no longer used by the golf course and adapting the items for growing use; for example, old golf cart beds have become planters and wooden turf pallets are turned on their sides to display hanging planters.

    “Golf courses can be positive stewards of the environment,” said Angelica. “The golf course has cut its use of fungicide and insecticide by 60 percent as a result of its connection with the farm and our sustainable processes. Additionally, the farm has saved the kitchen roughly $9,000 in produce costs annually.”

    Today, a wildflower berm that backs up to the golf course supports the apiary, which produced 140 pounds of honey this season. While most of the honey is sold to the community, some honey goes to Cog Hill’s kitchens when needed for recipes.  The farm has a partnership with Pollyanna Brewing Company and grew basil varieties to brew Dubs Delight Blonde Basil Ale. The farm also has planted a lavender bed dedicated to the brewery for Cog Hill’s 2019 ‘Par for the Course American Pale Ale,’ which is available in the golf course’s dining areas.

    Pollinator gardens, “Monarchs in the Rough,” dot the golf courses and bluebird houses and bat boxes, constructed by area students, are erected throughout Cog Hill.

    Prior to developing the farm, Angelica worked with Cog Hill’s Director of Grounds Operations, Chris Flick, who wanted to delve into sustainability and spearhead a sustainability program for on and off the golf course. Angelica’s job was to grow the culinary farm on a golf course and that she has done.

    “We have partnerships with a number of area restaurants and Pollyanna Brewery and we are reaching out to schools,” said Angelica. “Our mission is to educate. Sustainability is giving back more than you take. We are enhancing the ecosystem and reusing as much as we possibly can to to reduce harmful emissions. Fairway Farms grows without any chemicals or synthetics and I see biodiversity strengthening from year to year.”

    To increase people’s awareness of Fairway Farms and its sustainability, Cog Hill and its farm were the hosts of two Farm to Table dinners that were held on grounds overlooking one of the golf courses.  The produce used on the menu came from the farm and was served.

    “Our first dinner served 50 people in August 2018 and the second dinner this September had 70 people,” said Angelica. “Ninety percent of the menu was sourced from the farm. We plan to increase the number of dinners to three or four each year because they are great showcases of our programs and inspiring to people.”

    There will be several Farm Dinner events open to the public held throughout the 2020 season, with official dates coming soon. Event information is available on Cog Hill’s website, www.coghillgolf.com/growing-green.

    Written by Denise Faris, The Chicago Farmers Newsletter Editor

    It’s been an unusual year

    Dr. Gary Schnitkey, agricultural and consumer’s economics professor at the University of Illinois Urbana-Champaign, opened the Chicago Farmers’ 2019 season to a large audience at the September 9th meeting with a discussion on 2019 farm income and cash rents and what the future holds.

    “It’s been one of the most unusual years that the Illinois Corn Belt has experienced,” said Dr. Schnitkey, referring to 2019. “The ‘prevent plant’ program and the trade situation dominated the year’s discussion. Northern Illinois, South Dakota and Ohio were the hardest hit by prevent plant.”

    He went on to say, “It is surprising how much corn actually did get planted and, in most cases, the corn looks good. However, it is late in development. In a normal season, we would be harvesting corn now, but it is more likely that the harvest will be in October and November. With the late development of the corn crop and the possibility of frost prior to harvest, we could be on a collision course.”

    Dr. Schnitkey pointed out that the trade situation with China worsened in May, but President Trump tweeted that MFP (Market Facilitation Program), which was offered in 2018, would continue in 2019. In Illinois, the MFP rates per acre for planted corn ranged from $53 to $87. He said that half of that payment has been received or will be soon by farmers. The remainder is not guaranteed. If the remaining funds do come, they could appear as late as January. “I think the payments will happen,” he said.

    Dr. Schnitkey noted the average MFP payment this year is $20 to $30 higher than last year. People involved in the prevent plant program, received $15 an acre. “The ad hoc Disaster Assistance Program has allocated $3 billion for MFP and targets prevent plant acres,” he added.

    The MFP was critical this year for farmers’ revenue, as were the ARC (Agricultural Risk Coverage) payments. Dr. Schnitkey advised farmers and landowners to postpone signing up for these programs now and consider doing so in November or December when it is clear which program will have the highest payout.

    Crop yields will be lower in 2019 for Illinois, he said. The USDA projected 180 bushels of corn per acre and 55 bushels of soybeans per acre.

    “We have had phenomenal yields since 2013,” said Dr. Schnitkey. “No one is predicting the same yields as last year.”

    He noted that the trade dispute with China hit the U.S. soybean market hard in May. Since then soybeans have been below $9 per bushel and could go as low as $7. The futures prices are at $8.80. Corn is continuing below $4 per bushel.

    “Corn prices could go higher through lower yields,” he said. “I don’t see how soybean prices could go above $9, even if the trade issue is resolved.”

     He related that the swine flu in Asia and Africa is reducing herds by 20 to 40 percent, which affects the need for soybean meal to feed the stock, and there is a large carry-over of soybeans. Dr. Schnitkey said that 2019 probably is not going to be a good year and 2020 looks like another scraping by year.

    Cash rents

    Dr. Schnitkey said that cash rents in Central Illinois ticked up slightly in 2019, but that is not projected for 2020.

    Land Productivity         2019 cash rent              2020 cash rent (expected)

    Excellent                      $302                            $298

    Good                           $261                            $254

    Average                       $212                            $205

    Fair                              $170                            $167

    He noted that the USDA would release the cash rent numbers for the state’s counties during the third week of September and the information would be posted on Farm Doc.

    In response to a question, Dr. Schnitkey said there is a growing percentage of variable cash rent arrangements. These are primarily used by professional farm managers. He said that variable cash rents are involved in about seven percent of land in Illinois. He said the trend is to move from share rent to cash rent. “The trend is a move to cash rent because farmers and landowners want simpler leasing arrangements,” he said.

    Dr. Schnitkey noted that most farms are still in strong financial positions.  He said, “I believe farmers are thinking there will be better prices in the future and they are going to hang on to their land. They believe that once they let go of their land, they will not get it back.”

    He said that it is projected that farmers’ debt to asset ratio will increase; working capital will decline. Additionally, the fall fertilizer prices are holding steading and not decreasing. This also is true for seed and pesticide costs.

    “Farmers will have to cut costs in the machinery area or in cash rents. However, if new machinery is not brought on, it could mean more money toward repairs,” Dr. Schnitkey remarked.

    In response to a question from the audience, Dr. Schnitkey said he did not see yields slowing too much because technology was in place to increase yields. “We know how to farm more acres,” he said.

    Regarding digital technology, he noted that it is being used by farmers in one form or another, but it’s what they do with it that makes the difference.  Dr. Schnitkey said, “I think there is a lot of data that are collected and people wonder how to use it.”

    He added that consumers have changing views on food. They are not only concerned about lower prices, but they want more amenities in their food. They care how food is produced. For example, they are focused on the production of more non-GMOs.

    “This will change Ag production, we will see more non-GMOs. But the consumers’ demands are fickle. Today it is non-GMOs, but what will it be in 10 years? It is a moving target,” said Dr. Schnitkey.

    Denise Faris, Chicago Farmers Editor

    A little bit of planning will help in a long way in succession strategies

    Vasili Russis, of Kelleher and Buckley, LLC, was the guest speaker at The Chicago Farmers’ May 13th annual meeting at the Federal Reserve Bank of Chicago. A lawyer and a CPA, Russis related that he has found himself dealing with many litigation cases in recent years when “estate plans go south.” His goal was to help the May audience members avoid these kinds of situations when they are involved in estate planning.

    “In many of the instances, parents gave farmland property outright to their children,” said Russis. “When several surviving children are involved, it only takes one to have a problem.” He noted that the only one who benefits from these disagreements that end up in litigation is the attorney.

    Russis said, “A little bit of planning will help in a long way in passing on property.”

    He noted that there was no established centralization in these inheritance situations. “We look at setting up an LLC (Limited Liability Company) so that there is centralization,” Russis said. “Normally, one person manages the LLC. It could be a family member who best understands farming or someone outside the family who is trustworthy. The family comprises the membership of the LLC. These family members are the investors.”

    Russis said that an agreement as to who should be the manager is needed and it is best to cover this when the parents are alive.

    The benefits of an LLC, which is more effective than a corporation, include:

    • Eliminates partition threat (a sale of the property can’t be forced)
    • Provides litigation protection
    • Allows a key person from the next generation to serve as manager. The patriarch or matriarch could serve in this position until he or she is unable and then a person from the next generation could step in
    • Provides a shield for individuals against creditors; contracts are with the LLC, not with the members of the LLC


    Russis pointed out that the fiduciary duties of the LLC fall upon the manager. It is the manager’s responsibility to ensure that the property is being properly administered, that fair rents are collected, and that the owners are aware that there is a potential buyer for their property. The manager also would ensure that the LLC would file the 1065 tax form in a timely manner.

    “The manager has to be someone you can count on, who is trustworthy and transparent,” said Russis.

    Russis said that setting up an LLC in Illinois has been more attractive in recent years since the state has changed its laws that pertain to this structure. Filing in Illinois is a cost savings rather than having to file in either Nevada or Delaware.

    Regarding asset protection strategies, he noted that a multi-member structure gives protection against outside creditors. “An outside creditor who deals with the farm operation does not have any rights regarding the members of the LLC,” Russis said. “There also are ‘poison pill’ provisions that can be part of the LLC that make the property unattractive to outside creditors.

    He said that trusts can be a good asset protection vehicle. A self-settled trust (which is created by the parents) will not protect parents, but protects future beneficiaries because it becomes an irrevocable trust upon the death of the parents. The trust owns the property.

    A spousal limited access trust also can be established as an asset protection vehicle. The trust involves each parent and it allows them to deed property to an irrevocable trust. The parents are protected from creditors in this trust.

    Russis said another vehicle is the power of appointment support trust (POAST). It is useful when aging family members and younger generations own real estate and there is a low basis property with a high fair trade, which results in capital gains. The property is transferred to an irrevocable trust and the older generation is a beneficiary and given a power of appointment. The transfer of the property to the trust allows for a future step up basis so that the unrealized gain is eliminated on the death of the older generation family member holding the power of appointment and in turn reduces gain in the future due to the step up in basis.

    Russis said that caution has to be taken with the POAST because the current landowner can’t be a beneficiary if it is a newly established trust; however, an added power of appointment in the trust may allow the property to be given back to the landowner.

    Regarding tax deferrals, Russis noted the like kind exchanges, known as 1031s. The 1031 can only be used for real estate, farm equipment is no longer eligible. He said that the property one wishes to buy in this exchange must be identified within 45 days and it must be purchased within 180 days. The basis of the new property carries over to the basis of the relinquished property.

    “It is important to find the replacement property ASAP,” said Russis. “It is possible to do a partial exchange, but there will be a slight tax liability on the gain. Additionally, when the LLC is selling the property, it has to reinvest in the new property. If not all members of the LLC want to reinvest, the LLC must be liquidated and a new one would be formed with the members wishing to buy the property.” For a liquidation, Russis mentioned the liquidation should be planned well in advance of a sale.

    Russis noted that if an LLC does not have the funds to buy out a member, financing could be arranged or the party could be given a promissory note from the LLC.