Larry Kreger Jr. Appraiser Farm Credit Services Southwest

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Rodney Brooks
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1 Larry Kreger Jr. Appraiser Farm Credit Services Southwest

2 Cash Receipts by Sector $4,500,000,000 $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $0 '11 '12 '13 '14 '15 '16 Animals & Products Crops Total

3 $1,200,000,000 $1,000,000,000 Cash Receipts $800,000,000 $600,000,000 $400,000,000 Cattle & Calves Dairy Products Lettuce $200,000,000 $0 '11 '12 '13 '14 '15 '16 Cattle & Calves = +124% from and -33% from Dairy Products = +125% from and -34% from Lettuce = -54% from and +244% from

4 2016 Cash Receipts by Commodity All Other 24% Cattle/Calves 16% Lemons 4% Dairy/Milk 17% Spinach 2% Lettuce 22% Hay 5% Wheat 2% Cotton 4% Cauliflower 2% Broccoli 2%

Cattle Inventory 01/01/18 Calves - Under

3% Bulls - 500 Pounds & Over 20,000 Head 2%

5 Cattle Inventory 01/01/18 Calves - Under 500 Pounds 145,000 Head 15% Milk Cow Replacements 105,000 Head 11% Beef Cows 187,000 Head 19% Other Heifers 29,000 Head 3% Bulls Pounds & Over 20,000 Head 2% Steers Pounds & Over 275,000 Head 28% Milk Cows 203,000 Head 20% Beef Cow Replacements 36,000 Head 4% Total Inventory = 1,000,000 Head

Cattle Inventory on 01/01/17 by County Santa Cruz

19,500 Head 2% Apache 34,500 Head 4% Pinal 285,000 Head

Maricopa 185,000 Head 19% Cochise 105,000 Head 11%

6 Cattle Inventory on 01/01/17 by County Santa Cruz 22,500 Head 2% Other Counties 179,000 Head 18% Pima 19,500 Head 2% Apache 34,500 Head 4% Pinal 285,000 Head 29% Coconino 52,000 Head 5% Yavapai 46,000 Head 5% Maricopa 185,000 Head 19% Cochise 105,000 Head 11% Graham 13,500 Head 1% Navajo 28,000 Head 3% Total Inventory = 970,000 Head

7 Top 10 Commodities in 2017 by Acres Harvested (Reported) 1) Hay 315,000 Acres (unchanged from 2016) 2) Cotton 173,500 Acres (+34% from 2016) 3) Wheat 107,000 Acres (+4 from 2016) 4) Corn for Grain 32,000 Acres (-36% from 2016) 5) Corn for Silage 32,000 Acres (-27% from 2016) 6) Head Lettuce 39,200 Acres (+6% from 2016) 7) Romaine Lettuce 28,000 Acres (+7% from 2016) 8) Barley 17,000 Acres (+6% from 2016) 9) Cantaloupe 15,700 Acres (-1% from 2016) 10) Spinach 12,800 Acres (+14% from 2016)

Hay Acres Harvested 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Other

8 Hay Acres Harvested 350, , , , , ,000 50,000 Other Alfalfa 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 6% decline from

9 2016 Alfalfa Hay Acres Harvested by County Yuma 22,500 Acres 8% Apache 1,100 Acres <1% Graham 2,100 Acres <1% Pima 2,600 Acres 1% All Others 1,400 Acres <1% Pinal 63,000 Acres 23% Maricopa 105,000 Acres 38% La Paz 57,900 Acres 21% Yavapai 1,300 Acres <1% Mohave 9,700 Acres 3% Cochise 13,400 Acres 5% 280,000 Total Acres Harvested in 2016

10 Ton per Acre Alfalfa Hay Yield vs Price '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price $250 $200 $150 $100 $50 $0 Price per Ton Trend = Yield is stable and Price is undetermined

11 Source: Brian Gould, Agricultural and Applied Economics, UW Madison

Cotton 300,000 250,000 Acres Harvested 200,000 150,000 100,000 50,000 Pima

12 Cotton 300, ,000 Acres Harvested 200, , ,000 50,000 Pima Upland 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 65% increase from

13 2016 Upland Cotton Acres Harvested by County Yuma 7,300 Acres 6% Pima 7,900 Acres 7% All Others 6,100 Acres 5% Maricopa 13,100 Acres 11% Graham 9,000 Acres 8% La Paz 7,500 Acres 6% Pinal 67,100 Acres 57% 118,000 Total Acres Harvested in 2016

14 Pounds per Acre 1,600 1,550 1,500 1,450 1,400 1,350 Upland Cotton Yield vs Price '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price Price per Pound Trend = Yield is stable and Price is undetermined

Wheat 160,000 140,000 Acres Harvested 120,000 100,000 80,000 60,000 40,000 Other

15 Wheat 160, ,000 Acres Harvested 120, ,000 80,000 60,000 40,000 Other Durum 20,000 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 30% decline from

16 2016 Durum Wheat Acres Harvested by County Mohave 2,000 Acres 2% All Others 13,600 Acres 14% Pinal 20,800 Acres 22% Graham 1,500 Acres >1% Yuma 45,000 Acres 47% Maricopa 13,100 Acres 14% 96,000 Total Acres Harvested in 2016

17 Bushels per Acre Wheat Yield vs Price '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price Trend = Yield is stable and Price is undetermined $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 Price per Bushel

18 Corn Acres Harvested 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Silage Grain Trend = 14% decline from

19 Bushels per Acre Grain Corn Yield vs Price '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Price per Bushel Trend = -7% in Yield and Price is undetermined

20 Barley 80,000 70,000 60,000 Acres 50,000 40,000 30,000 Acres Harvested 20,000 10,000 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 6% increase from

21 Barley Yield vs Price $7.00 $6.00 Bushels per Acre $5.00 $4.00 $3.00 $2.00 $1.00 Price per Bushel 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price $ Trend = +9% in Yield and Price is undetermined

22 2017 Vegetables Annual Summary Arizona harvested 131,600 acres of vegetables in 2017, up 6% from 124,400 acres harvested in The state produced million hundredweight (cwt) of total vegetables in The value of utilized vegetable production increased 28% from $1.30 billion in 2016 to $1.67 billion in 2017.

23 2017 Vegetable Acres Harvested by Commodity Spinach 12,800 Acres 10% Chile Peppers 1,200 Acres <1% Watermelons 3,700 Acres 3% Leaf Lettuce 9,600 Acres 7% Romaine Lettuce 28,000 Acres 21% Head Lettuce 39,200 Acres 30% Broccoli 10,400 Acres 8% Cabbage 5,800 Acres 4% Cantaloupes 15,700 Acres 12% Cauliflower 5,200 Acres 4% 131,600 Total Acres Harvested in 2017

25 Lettuce 80,000 70,000 Acres Harvested 60,000 50,000 40,000 30,000 20,000 Leaf Romaine Head 10,000 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 18% increase from

26 Lettuce Cwt per Acre Head Leaf Romaine 50 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 ' Trends = Head -3%; Leaf +2%; Romaine +5%

27 Lettuce $70.00 $60.00 Price per Cwt $50.00 $40.00 $30.00 $20.00 Head Leaf Romaine $10.00 $0.00 '07 '08 '09 '10 '11 '12 '13 '14 '15 ' Trends = Head +201%; Leaf +107%; Romaine +40%

28 Cantaloupes 25,000 20,000 Acres 15,000 10,000 Acres Harvested 5,000 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 8% increase from

29 Cwt per Acre Cantaloupes Yield vs Price '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Yield Price Trend = -2% in Yield and -30% in Price $30 $25 $20 $15 $10 $5 $0 Price per Cwt

30 Spinach 14,000 12,000 10,000 Acres 8,000 6,000 4,000 2,000 Acres Harvested 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Trend = 24% increase from

31 250 Spinach Yield vs Price $ $50 Cwt per Acre $40 $30 $20 $10 Price per Cwt 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Yield Price $ Trend = +16% in Yield and +16% in Price

32 When Are Prices Coming Back? Excerpt from a November 2017 article in DTN/Progressive Farmer featuring Dave Kohl, Professor Emeritus of Ag Economics at Virginia Tech When are prices coming back? Kohl said he gets asked this question all the time. His short answer: It s unlikely, unless there is a catastrophic event. In his long answer, Kohl walked the bankers through the four waves of economic cycles. 1) The offensive wave from was a super cycle, led by China demand, ethanol and low interest rates, Kohl explained. It was an aberration. 2) The transition wave occurred from Kohl said this was marked by commodity surplus, working capital burn (decreasing available cash) and land value resiliency.

33 When Are Prices Coming Back? Excerpt from a November 2017 article in DTN/Progressive Farmer featuring Dave Kohl, Professor Emeritus of Ag Economics at Virginia Tech 3) The defensive wave is coming next. From , Kohl predicted a widening gap of economic performance by farmers/ranchers, core equity burn (increasing leverage), steep decline of marginal land and increasing vendor/nontraditional operating credit as regulated lenders shut off operating credit for poor-performing borrowers. Yet, even during this time, the top 40% of ag producers will grow their business, Kohl added. Banks need to be ready to launch those opportunities with credit, he advised. 4) The regeneration wave from will be consumer driven, data driven and people driven with more diversity on how farm and ranch businesses are organized. One-size enterprise does not fit all, said Kohl.

Larry Kreger Jr. Credit Analyst Farm Credit West

Larry Kreger Jr. Credit Analyst Farm Credit West Cash Receipts by Sector $5,000,000,000 $4,500,000,000 $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000