Larry Kreger Jr. Credit Analyst Farm Credit West

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1 Larry Kreger Jr. Credit Analyst Farm Credit West

2 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 $500,000,000 $0 '12 '13 '14 '15 '16 '17 Animals & Products Crops Total

3 Cash Receipts $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 Cattle & Calves Dairy Products Lettuce $400,000,000 $200,000,000 $0 '12 '13 '14 '15 '16 '17 Cattle & Calves = 21% decrease in receipts from Dairy Products = 23% decrease in receipts from Lettuce = 323% increase in receipts from

4 2017 Cash Receipts by Commodity Lemons 3% All Other 20% Cattle/Calves 17% Cantaloupe 2% Dairy/Milk 17% Spinach 2% Lettuce 25% Hay 5% [CATEGORY NAME] 2% Cauliflower 2% Broccoli 2% Cotton 4%

Cattle Inventory 01/01/18 Calves - Under

Replacements 105,000 Head 11 % Beef Cows

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

01/01/18 Cattle Inventory by County Santa

Other Counties 171,500 Head 17% Coconino

6 01/01/18 Cattle Inventory by County Santa Cruz 22,000 Head 2% Pima 18,500 Head 2% Other Counties 171,500 Head 17% Coconino 54,000 Head 5% Yavapai 47,000 Head 5% Cochise 115,000 Head 12% Apache 34,500 Head 3% Pinal 305,000 Head 31% Maricopa 190,000 Head 19% Graham 14,000 Head 1% Navajo 28,500 Head 3% Total Inventory = 1,000,000 Head

7 2018 Cattle on Feed The number of cattle and calves on feed for the slaughter market in Arizona feedlots with a capacity of 1,000 head or larger was estimated at 289,000 head as of 12/31/18. This total was one percent above the prior month s inventory and 11 percent above the same time period a year ago.

8 Top 10 Commodities in 2017 by Acres Harvested (Reported) 1) Hay 315,000 Acres (unchanged from 2016) 2) Cotton 174,000 Acres (+31% 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 (+7% 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)

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

9 Acres Harvested Hay 350, , , , ,000 Other Alfalfa 100,000 50,000 0 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Trend = 5% decline from

2017 Alfalfa Hay Acres Harvested by County Yuma 20,000

Pima 2,400 Acres 1% Pinal 66,500 Acres 24% La Paz 54,500

<1% Mohave 11,700 Acres 4% Cochise 12,500 Acres 5% All

10 2017 Alfalfa Hay Acres Harvested by County Yuma 20,000 Acres 7% Apache 1,000 Acres <1% Graham 2,400 Acres 1% Pima 2,400 Acres 1% Pinal 66,500 Acres 24% La Paz 54,500 Acres 20% Maricopa 101,000 Acres 37% Yavapai 1,000 Acres <1% Mohave 11,700 Acres 4% Cochise 12,500 Acres 5% All Others 2,000 Acres 1% 275,000 Total Acres Harvested in 2017

11 Ton per Acre Price per Ton Alfalfa Hay Yield vs Price '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Yield Price Trend = Yield is -3% and Price is +34% $250 $200 $150 $100 $50 $0

12 Price per Ton Alfalfa Hay $250 $200 $150 $ $50 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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

13 Acres Harvested Cotton 300, , , ,000 Pima Upland 100,000 50,000 0 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Trend = 31% increase from

5% Maricopa 24,200 Acres 15% Pinal 87,000 Acres 55% La

14 2017 Upland Cotton Acres Harvested by County All Others 18,500 Acres 12% Graham 10,600 Acres 7% Yuma 8,700 Acres 5% Maricopa 24,200 Acres 15% Pinal 87,000 Acres 55% La Paz 10,000 Acres 6% 159,000 Total Acres Harvested in 2017

15 Pounds per Acre Price per Pound 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 Upland Cotton Yield vs Price '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Yield Price Trend = Yield is -13% and Price is unreported

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

16 Acres Harvested Wheat 160, , , ,000 80,000 60,000 Other Durum 40,000 20,000 0 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Trend = 28% decline from

17 2017 Durum Wheat Acres Harvested by County All Others 22,100 Acres 25% Pinal 19,300 Acres 22% La Paz 3,100 Acres 3% Yuma 44,500 Acres 50% 89,000 Total Acres Harvested in 2017

18 Bushels per Acre Price per Bushel Wheat Yield vs Price '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Yield Price Trend = Yield is stable and Price is -23% $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0

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

20 Bushels per Acre Price per Bushel Grain Corn Yield vs Price '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Yield Price Trend = -7% in Yield and -13% in Price $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00

21 Acres Barley 80,000 70,000 60,000 50,000 40,000 30,000 Acres Harvested 20,000 10,000 0 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Trend = 44% decrease from

22 Bushels per Acre Price per Bushel Barley Yield vs Price '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Yield Price Trend = +9% in Yield and -6% in Price $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00

23 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.

24 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

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

27 Cwt per Acre Lettuce Head Leaf Romaine '08 '09 '10 '11 '12 '13 '14 '15 '16 ' Trends: Head = Stable; Leaf -12%; Romaine +6%

28 Price per Cwt Lettuce $70.00 $60.00 $50.00 $40.00 $30.00 Head Leaf Romaine $20.00 $10.00 $0.00 '08 '09 '10 '11 '12 '13 '14 '15 '16 ' Trends: Head +85%; Leaf +4%; Romaine +22%

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

30 Cwt per Acre Price per Cwt Cantaloupe Yield vs Price '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price Trend = -8% in Yield and 4% in Price

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

32 Cwt per Acre Price per Cwt 250 Spinach Yield vs Price $ $50 $40 $30 $20 $10 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Yield Price Trend = +40% in Yield and +24% in Price $0

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 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.

34 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. Appraiser Farm Credit Services Southwest

Larry Kreger Jr. Appraiser Farm Credit Services Southwest 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