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AgroNomics vision 2014 - On Farm Energy Independence
- 1. Engineering Energy Solutions since 2001 HelioPower On Farm Energy Independence AgroNomics, Vision 2014 U.S. Ag Investment Conference Nov 11-15, 2013 - Reno, Nevada Tom Millhoff Agribusiness Practice Leader HelioPower, Inc.
- 2. Engineering Energy Solutions since 2001 • Energy Matters • Energy Economics: Three levers for savings • Supply: Cheap power alternatives – tips & traps • Demand: Unconventional ideas, sustainable savings • Price/Policy: Paying less and creating wealth • Energy Planning Guide • Approaching Energy Projects • Valuing Energy Projects • Financing Energy Projects • Conclusions, Questions & Answers HelioPower Overview
- 3. Energy Matters Engineering Energy Solutions since 2001 HelioPower • Utilities face rising & deferred costs • Farmers face rising & volatile retail prices • New Era of Choice & Independence
- 4. Energy Matters - Traps Engineering Energy Solutions since 2001 Coal – regulatory costs, emissions abatement Natural Gas – unsustainably low prices Nuclear – Mothballed reactors Hydro – aging dams, permitting, climate change Failing Infrastructure - future costs HelioPower Utilities face rising & deferred costs
- 5. Energy Matters - Traps Farmers face rising, volatile retail prices PG&E Large Ag Pricing % change vs YAGO $0.70 14% PG&E $/kWh - $0.60 12% optimistic $0.50 PG&E $/kWh - 8% pessimistic $0.40 $/kWh 6% 4% Engineering Energy Solutions since 2001 10% HelioPower 16% Forecast PG&E Large Ag Pricing $0.30 2% $0.20 0% -2% 2006 2007 2008 2009 2010 2011 2012 2013 CAGR $0.10 -4% -6% $0.00 2005 2010 2015 2020 2025 2030 2035
- 6. Energy Matters - Tips Future: Distributed Generation Modest Capital Costs + Economies of proximity + Competing approaches + Low/zero cost fuel + Falling legal barriers = Growing competition + Emissions reductions = Competitive Marketplace Engineering Energy Solutions since 2001 Past: Centralized Power Generation Massive Capital Costs + Economies of scale + Lack of substitutes + Fuel control + Legal barriers to entry = No Competition + Price inelasticity = Monopoly Power HelioPower New Era of Choice & Independence
- 7. Engineering Energy Solutions since 2001 HelioPower Energy Economics • Supply • Demand • Price/Policy
- 8. Energy Economics Manage Supply, Demand & Price INTEGRATED Energy SOLUTIONS Analytics SUPPLY: Conservation, Distributed Efficiency & Generation Demand Mgt (Renewable?) $ Return Engineering Energy Solutions since 2001 DEMAND: HelioPower % Return PRICE
- 9. Energy Economics Manage Supply, Demand & Price Returns by Investment 50% Conservation 45% Rate / Demand Management 35% Efficiency 30% Integrated Energy Solution 20% Engineering Energy Solutions since 2001 25% HelioPower % Return (IRR) 40% Distributed Generation 15% 10% 5% 0% $- $1,000,000 $2,000,000 $ Return (ROI) $3,000,000
- 10. Engineering Energy Solutions since 2001 HelioPower Energy Economics - Supply
- 11. Energy Economics - Supply Renewables • Solar Photovoltaic (PV) • Solar Thermal • Biomass & Biofuel • Wind & Geothermal • Hydroelectric • Hydrogen Fuel Cells • Storage Engineering Energy Solutions since 2001 Carbon Fuel Sources • Electric Grid • Natural Gas • Diesel • Combined Heat & Power (CHP) / Co-Generation • Nat Gas Fuel Cells HelioPower On-Farm Power Alternatives
- 12. Engineering Energy Solutions since 2001 HelioPower Energy Economics – Carbon Fuels
- 13. Energy Economics - Supply Engineering Energy Solutions since 2001 Characteristics Established, reliable, cheap Monopolistic marketplace Rising, volatile prices Rural power quality issues Rural accessibility issues Expensive in some states Expensive summer rates HelioPower Electric Grid: The “Avoided Cost” Hurdle
- 14. Energy Economics - Supply Engineering Energy Solutions since 2001 Characteristics Established, reliable, cheap Domestic supply Climate friendly vs coal Monopolistic distribution Rising, volatile prices Rural accessibility issues Environmental risks HelioPower Natural Gas: The “Avoided Cost” Hurdle
- 15. Energy Economics - Supply Diesel: An unnecessary evil? Tips & Traps Ongoing fuel costs Limit usage to on-peak Plan on changing! Engineering Energy Solutions since 2001 HelioPower Characteristics Reliable, on-demand High fuel costs High NOx Emissions
- 16. Energy Economics - Supply Natural Gas Engines Tips & Traps Co-Gen/CHP heat need? Emissions regs Rising fuel costs Diesel Natural Gas Electricity Relative Irrigation Fuel Costs Engineering Energy Solutions since 2001 Propane HelioPower Characteristics Reliable, on-demand Cheap fuel cost Accessibility
- 17. Engineering Energy Solutions since 2001 HelioPower Energy Economics – Renewables
- 18. Energy Economics - Supply Biomass (Crop Residue) Tips & Traps Got heat baseload? Fuel oppty costs? Engineering Energy Solutions since 2001 HelioPower Characteristics Carbon negative! On-site fuel Heat + power (CHP) Large investment Hard to finance Complex interconnection 12mo fuel inventory High O&M costs
- 19. Energy Economics - Supply Tips & Traps Got Sun? Got Taxes? Policy and finance are as important as engineering Buy low, sell high Engineering Energy Solutions since 2001 Characteristics Sustainable, no fuel Low ownership costs Incentives, financing Large capital investment Not “power-dense” HelioPower Solar - Photovoltaic
- 20. Energy Economics - Supply Solar - Thermal Tips & Traps • Shares Solar PV Traps/Tips Qualify your roof Improved closed-loop technology vs 1980’s Engineering Energy Solutions since 2001 HelioPower Characteristics • Shares Solar PV attributes For water heating Efficient & economic Not power dense Heavy on roofs
- 21. Economics - Supply Wind Inexpensive energy Intermittent power High up front costs Expensive feasibility Engineering Energy Solutions since 2001 Geothermal Facility heat & steam Reliable baseload High up front costs HelioPower Other Renewable Sources
- 22. Economics - Supply Tips & Traps Peak demand avoidance Prices falling: like Solar 10 years ago Voltage frequency business models No rate arbitrage Engineering Energy Solutions since 2001 Characteristics Enable Micro Grid Grid balance services Fix rural power quality Island mode option Emergency power Off-grid power Still expensive HelioPower Energy Storage
- 23. Engineering Energy Solutions since 2001 HelioPower Energy Economics – Demand
- 24. Energy Economics - Demand Management Manage When you Consume Engineering Energy Solutions since 2001 HelioPower • Charges vary by time of day and season • Main charges are for Energy (kWh) and Demand (kW)
- 25. Energy Economics - Demand Management Manage When you Consume Trap: Summer Load Tip: Peak Shave Engineering Energy Solutions since 2001 HelioPower Trap: On-Peak Load Tip: Work Rules
- 26. Energy Economics - Demand Management Manage When you Consume Solar + Net Metering Tip: Buy Low, Sell High Engineering Energy Solutions since 2001 HelioPower On-Peak Load Trap: Buy High
- 27. Engineering Energy Solutions since 2001 HelioPower Energy Economics – Price/Policy
- 28. Energy Economics - Price/Policy Engineering Energy Solutions since 2001 HelioPower Manage What you Pay
- 29. Energy Economics - Price/Policy Manage Where you Consume Net Meter Aggregation Tip: Offset loads without sacrificing cropland Engineering Energy Solutions since 2001 HelioPower Net Metering
- 30. Energy Economics – Price/Policy Engineering Energy Solutions since 2001 HelioPower Avoided Costs Drive Energy Investment
- 31. Energy Economics - Price/Policy Engineering Energy Solutions since 2001 HelioPower Renewable Portfolio Standards
- 32. Energy Economics - Price/Policy Corporate tax credit(s) only Personal + corporate tax credit(s) Notes: This map does not include corporate or personal tax deductions or exemptions; or tax incentives for geothermal heat pumps. Engineering Energy Solutions since 2001 Personal tax credit(s) only HelioPower Renewables Tax Credits Puerto Rico
- 33. Engineering Energy Solutions since 2001 HelioPower Energy Planning Guide
- 34. Energy Planning Guide How to Approach an Energy Project Trap: Dive right in to a specific solution Tip: Define your Needs, Goals & Resources Resources? • • • • • Feedstocks/Fuels Site resources Time Team Financial • Capital • Tax appetite • Credit Engineering Energy Solutions since 2001 Goals? • Return hurdle • Time horizon • Stability • Sustainability • Leadership • Competition HelioPower Needs? • Cheaper power • Reliable power • NOx Avoidance • Buyer compliance
- 35. Energy Planning Guide How to Select Energy Partners Engineering Energy Solutions since 2001 Selecting an Integrated Energy Services Partner Seek referrals NABCEP, General & Electrical contractor certifications Good standing with permitting authorities and utilities In-house financing, install, operations & maintenance Long-standing, healthy business Do they ask insightful questions? HelioPower Do it yourself RFP or competitive bid on vague scope Engage Energy Services partner for feasibility, scope, financing, then take to bid (costs money up front) Select partner for turnkey solution (no up-front cost)
- 36. Energy Planning Guide How to Value an Energy Project Traps: Comparables – not viable for design/build custom projects Capitalization of income/rents - varied income stream Requires assumed discount rate IRR – Simple means of comparing differing projects Does not reflect changing discount rates over time Engineering Energy Solutions since 2001 Additive to property valuation HelioPower Tips: NPV – Intrinsic present value of income producing asset
- 37. Energy Planning Guide Engineering Energy Solutions since 2001 HelioPower How Energy Projects impact Farm Values
- 38. Energy Planning Guide Financing Energy Projects Power Purchase Agreement 3rd party monetizes tax benefits & incentives Lowest operational risk / exp High financing & transactions costs Engineering Energy Solutions since 2001 PACE (Property Assessed Clean Energy Finance) Secured by Property Tax Very low capital costs Mortgagers hate it Requires tax appetite True Lease / Tax Lease 3rd party monetizes tax benefits & incentives Moderate financing & transactions costs Delayed ownership HelioPower Cash Purchase / Loan Best total returns, simple Requires capital, tax appetite
- 39. Energy Planning Guide Conclusion - If it makes sense today, DO IT. Engineering Energy Solutions since 2001 Traps Technology Risk – Expect incrementalism Price Risk - Commodity characteristics Policy Risk - Consider pending policy & sunset dates (ITC 2016) Tips Time risk - Lost savings Competitive risk – Will they have lower costs? HelioPower Making a Decision
- 40. Conclusions ENERGY PLANNING • Start by defining your needs, goals and resources • Invest your time in selecting good energy partners • Value and compare projects on long term savings (NPV, IRR) • There is always uncertainty. If it makes sense today, do it. Engineering Energy Solutions since 2001 ECONOMICS • SUPPLY: Avoided cost, resources & policies drive choice • DEMAND: Manage your energy demand • PRICE/POLICY: Leverage local policies HelioPower • We all buy, sell, value and finance energy • We are entering a new era of energy choice
- 41. Thanks to… Engineering Energy Solutions since 2001 Carol Fornhoff – Westchester Group Mark Peterson - Kefa Capital, Howard Haldermann - Halderman Farm Management Corey Prins - Northwestern Farm Management Co. George Baird - LandManagement Group, LLC Ricardo Amon – the California Institute of Food & Agriculture Research at UC Davis • Jim, Mary & James Rickert – Prather Ranch • Cheryl Cooley, Meg Butcher, and the ASFMRA team HelioPower • • • • • •
- 42. Engineering Energy Solutions since 2001 HelioPower Questions & Answers Tom Millhoff - HelioPower, Inc. Agribusiness Practice Leader C:775.830.0448 O:760.563.5528 E: TMillhoff@HelioPower.com
Editor's Notes
- (bond, slow)Thanks for that great introduction. And thanks to you for coming… I appreciate the help that folks like Carol Fornhoff, Mark Peterson, Howard Haldermann and Corey Prins provided in guiding my remarks this afternoon.My goal this hour isTo provide you with an overview of our dramatically changing farm energy landscape, To equip you with some tips, warn you of traps, & provide you with practical tools that will Help you and your clients create wealth by valuing and managing down your long term energy expenses.=========================SOURCES ============– Daisy the Cow @ Prather Ranch Solar photo courtesy of Mary Rickert
- Our goal this hour is to provide you with an overview of this changing farm energy landscape, and equip you with some tips, warn you of traps, & provide you with tools to help you and your clients create wealth by valuing and managing down your long term energy expenses.Energy is a rich topic and your needs will be unique, so I’m structuring the presentation into three sections.Start by defining why energy matters to youThen take an economic approach to identifying energy opportunities using the levers of energy supply, demand and price.Finally we’ll provide a brief Energy Planning Guide to help you make sound decisions in the face of imperfect information.And of course we’ll have some time for Q&A. My colleague Amanda Holland and I will also be hosting a breakfast networking table tomorrow AM; if you have a specific project you’d like to explore I invite you to reach out to us after the presentation.========== SOURCES ==========Chart - U.S. farm energy use fell after 1979 as farmers switched from gasoline to diesel and reduced tillage and agrochemical use. 1 Exajoule (EJ) = 0.95 Quadrillion BTU. Figure adapted from Miranowski (2005) by Michael Bomford.
- OK we’ve established that we’re all in the Energy business. So let’s drill deeper to find out why energy matters to Farm owners, managers, appraisers and financiers. Bad news first:Utilities face fuel price/supply unpredictability and rising costs=========== SOURCES ===============Graphic – US Dept of Interior – Bureau of Reclamation - http://www.usbr.gov/power/edu/hydrole.htmlNatGas - The Economist 3/2/13 - http://www.economist.com/news/finance-and-economics/21572815-natural-gas-prices-are-sure-riseeventually-bonanza-or-bane “Most gas wells require $4 or more to cover costs”Hydro - U.S. Army Corps of Engineers Water Resources California DWR - http://www.water.ca.gov/climatechange/docs/ClimateChangeWhitePaper.pdfNuclear – “Aging and expensive, reactors face mothballs” NYTimes 10/12/12(SCE announced on June 7, 2013 that it would "permanently retire" SONGS Unit 2 and Unit 3);Fukushima Daiichi Nuclear Power Plant 2011Infrastructure – “CPUC recommends $2.25 billion fine for San Bruno” LA Times May 6 - http://www.latimes.com/local/lanow/la-me-ln-san-bruno-explosion-20130506,0,1062469.story
- (More bad news)… so retail energy prices are volatile & rising- Since 2006 PG&E pricing for large agricultural electrical services has been rising erratically at a 5% CAGR. - If the trend continues retail electricity prices will exceed $.50/kWh in 20 years… for those who have not developed alternatives sources.=========== SOURCES ===============PG&E - http://www.pge.com/tariffs/electric.shtml#LARGEAG
- TRANSITION Now for the Good news: world’s a changin’… PAST – MONOPOLY POWERFUTURE – DISTRIBUTED GENERATION – “DISTRIBUTED SUPPLIER POWER”No longer “Energy Takers”… you have choices.Alternative sources of energy may cost less, or even be more reliable, than utility power.
- Three levers: Supply, Demand & Price/Policy. Each lever has advantages. Price-driven energy projects tend to deliver high % returns and low $ returns on small $ investmentSupply-driven projects should deliver high $ returns and lower % returns on larger $ investment… but they create wealthDemand-driven projecst lie somewhere in-betweenCombine them for best outcomes
- Real data from a multi-project feasibility study at grain mill$ Rtn (ROI) %Rtnn (IRR) $ Inv$2,500 50% $500 Conserv (Behavioral)$130,000 38% $50,000 Effic (Wastewater recycling)$500,000 45% $50,000 Rate / GM (rates swap, predictive analytics)$2,750,000 18% $600,000 Renewable DG (Solar)#3,200,000 20% $650,000 IES(mix of above)SOURCE: HelioPower client===========
- TRANSITION – Since it gives us the biggest bang, let’s start by pulling the Energy Supply lever.
- Today we face a broadening portfolio of energy supply choicesBroadly speaking two categories of DG: With Fuel/Feedstocks, WithoutEach solution merits a dedicated presentation, so I’ll focus on an overview of characteristics, traps & tips for those most viable in a farm environment.FUEL CELLS - A fuel cell is a device that converts the chemical energy from a fuel into electricity through a chemical reaction with oxygen or another oxidizing agent.[1] Hydrogen is the most common fuel, but hydrocarbons such as natural gas and alcohols like methanolare sometimes used. Fuel cells are different from batteries in that they require a constant source of fuel and oxygen/air to sustain the chemical reaction; however, fuel cells can produce electricity continually for as long as these inputs are supplied.
- For any energy project to be economically sustainable it has to reliably deliver a levelized cost of energy below that of the electric grid… or gas distribution system. We refer to this as the “Avoided Cost of Energy”. More energy projects get done where existing “avoidable” energy costs are high – more on this laterEnergy projects also get done where energy supply is limited or unreliable========== sources ===============http://www.geni.org/globalenergy/library/national_energy_grid/united-states-of-america/americannationalelectricitygrid.shtml
- The same holds for Natural Gas. Advances in extraction technologies and techniques are driving conversion from centralized coal and distributed diesel… and that’s good… if you have NatGas access.========= SOURCES ==========http://www.c2es.org/docUploads/leveraging-natural-gas-reduce-ghg-emissions.pdfhttp://geology.com/articles/natural-gas-prices/
- Many of you probably converted irrigation pumps to diesel back in the 90’s when it was $1/gal… now that it’s $4/gal NatGas is looking attractive. But both solutions make you dependent on expensive feedstocks and are subject to emissions regulations. - You should consider moving off DieselNatGas may not be your best alternative… high ongoing fuel costsGrid or Solar+Grid… or soon even Solar + Battery can deliver much lower lifetime costsNOx is a generic term for mono-nitrogen oxides NO and NO2 (nitric oxide and nitrogen dioxide)Sources: http://heliopower.com/food-agriculture/diesel-solar-conversion-irrigation/
- Let’s take a closer look at NatGas in the context of irrigationtui========= SOURCES ===========http://heliopower.com/food-agriculture/diesel-solar-conversion-irrigation/KSU Irrigation Energy Costs.xls -----A spreadsheet program to compare the costs of irrigation energy options.Version -- 11.08.05Key assumptions:-INPUT------ Acres1 Electric:0.080$/kWh90% NPPPCInches Applied1 Nat. Gas:6.00$/mcf90% NPPPCFeet Lift300 Diesel:1.10$/gal90% NPPPCPSI Pressure20 Propane:0.90$/gal90% NPPPC-OUTPUT-----EnergyEnergy Energy ----- Cost as percent of: ----- Source Cost ($)Use Elec.Nat. GasDieselPropaneElectricity3.9850kWh100%93%103%69%Natural Gas4.281mcf108%100%111%74%Diesel3.874gal97%90%100%67% Propane 5.756gal145%134%148%100%
- http://www.nrel.gov/gis/images/map_biomass_crop_residues.jpgSee also http://maps.nrel.gov/prospector
- TRANSITION – RENEWABLES. Main advantage is zero feedstock costs… sustainability. Source: http://www.nrel.gov/gis/images/eere_pv/national_photovoltaic_2012-01.jpg See also http://maps.nrel.gov/prospector
- Source: http://www.nrel.gov/gis/images/eere_pv/national_photovoltaic_2012-01.jpg See also http://maps.nrel.gov/prospectorProbably won’t work on your pole barn…
- Source: NREL
- ========== SOURCES ====================http://www.greentechmedia.com/articles/read/three-factors-driving-the-marriage-of-solar-and-energy-storage?utm_source=Daily&utm_medium=Headline&utm_campaign=GTMDaily1. The technology is there2. The economics can make sense3. Solar installers want storage -- if it pencils outWhat Energy Storage CEOs Are Thinking - http://www.greentechmedia.com/articles/read/what-energy-storage-ceos-are-thinking?utm_source=Daily&utm_medium=Headline&utm_campaign=GTMDaily1.) There is an increased focus on cost reduction. 2.) The future of Li-ion batteries is still bright. Power versus energy applications still dominate.4.) Direct regulatory and policy intervention is workable at the state level. 5.) Transitional business strategies are critical. Europe tops China as the most attractive international market. Multiple value streams are real. 10.) The probability of disruptive technologies is high. 11.) Project financing is starting to appear.
- Charges vary by time and seasonKey rates to focus on are demand charges and kWhBest rate depends on your LOAD PROFILEWhat’s a load profile?
- I’m glad you asked. A load profile is your energy intensity over time.
- TRANSITION – Price/Policy: Paying less and creating wealthNet Energy Metering – permits you to shift distributed energy generation across timeVirtual Net Energy Metering / Meter Aggregation – allows you to shift distributed energy generation across geography
- Source: Greentech Media “Net Metering Grows Some Muscles in California” 9/16/13
- Single biggest driver for on-farm energy initiatives is the price you pay for utility energy.Energy economists refer to this as the “avoided cost” – represents important and sustainable savings stream… decrease in your NOE, increase in your NOI, and a proportional increase in your farm’s value.
- Another big driver for energy projects is your state’s RPS. Others includeRebates & Grants (incl USDA)Public benefits funds for RenewablesSource - www.dsireusa.org
- Tax Incentives can cover over 50% of a project’s cost over time… if you can monetize them.- ITC is most materialFederal & State depreciationState Tax CreditsSales & Property Tax Incentives (SBOE Ag Equipment)Financing availability also drives project investmentSource - www.dsireusa.org
- With uncertainty comes risk, and with risk comes reward… for those who manage risk.There are a lot of angles to play so be deliberate
- IRR = discount rate at which NPV = 0Source: Agriculture’s Value Equation: Farmland ValuesBy Sano Shimoda,Terry Jones | November 14, 2011http://www.croplife.com/management/state-of-the-industry/agricultures-value-equation-farmland-values/Tom Millhoff – sample project proforma
- I’m not an appraiser but I know a little about project finance… and for the appraisers in the audience I have some opinions re: how you might value an existing or potential energy project.Source: Agriculture’s Value Equation: Farmland ValuesBy Sano Shimoda,Terry Jones | November 14, 2011http://www.croplife.com/management/state-of-the-industry/agricultures-value-equation-farmland-values/Tom Millhoff – sample project proformaPotential strategic shift in how farmland is valued. We believe there could be a fundamental shift in how mainstream agriculture values farmland, from a capitalization model to more sophisticated net present value methodology. Net present value models are mainstream financial valuation tools that discount an asset’s expected stream of future earnings. Simply, in the case of farmland, a net present value model for farmland, or for simplicity, a single farmland acre, would discount forecasted after-tax earnings generated over a 5- to 10-year time frame, based on estimated crop prices, production costs, as well as a range of discount rates, or cost of capital, expected in the future. Over the next two to three years, discount rates can be expected to rise, reflecting an increase in the interest rate for the 10-year U.S. treasury note from current 2.1% to at least 3.5% to 4.5% over the intermediate term.For example, a detailed corn profit model for the next five years for high productivity (180 to 200 bushels per acre) Iowa/Illinois farmland, excluding land costs, suggests that before-tax per acre profits could decline from an estimated $660 per acre in 2011 to $300 per acre in 2013 and then modestly increase to $325 to $425 per acre over the remaining years in this decade. Based on our forecasts and current interest rates, an acre of high productivity farmland is valued at $8,145 per acre. When interest rates rise to a more normal level of 3.5% to 4.5% over the intermediate term, the current farmland value of $8,145 per acre would be expected to decline to $4,255 to $5,235 per acre, which reflects a 35% to 45% decline.If farm profits deteriorate in line with our forecasts over the next one to two years, we would expect farmland values to initially be sticky on the downside. Many cash-rich farmers will likely continue to bid aggressively for farmland, under the expectation that any price declines are only temporary and do not reflect a secular deterioration. However, at some point over the next two to three years, when price declines start to accelerate, even cash rich farmers will capitulate. (We believe some farmers, who realize that current farmland values reflect “irrational exuberance”, are optimizing their farmland portfolio, and starting to build financial resources, to buy farmland when falling values become undervalued.)In our view cascading farmland price declines will be triggered by sales from two classes of “weak” holders. First, will be farmers that are forced to sell farmland due to overstretched finances as a result of significant profit declines. Second, will be investors, who are likely not prepared for capital losses in farmland values, especially if we are correct that there is a risk that farmland values could decline over an extended period from current peak levels.Also In This Series• Is Agriculture Facing A Bubble?• State Of Agriculture: Irrational Exuberance Or The New Normal?• Agriculture Faces The ‘Perfect Storm’• Market Myopia — The Power Of The Dark Side• Too Much Of A Good Thing Can Spoil Ag’s Party• About The AgInnovation AdvisorsFalling profits and farmland values create risks for ag dealers and the supply chain. Currently, ag dealers and the basic suppliers of inputs (ag chemicals, seed and fertilizers), machinery and services are benefitting from the mega profit levels generated in many sectors of agriculture, especially Midwest agriculture. However, based on our forecast for a dramatic decline in Midwest farm profits over the intermediate term, farm suppliers will be subject to significant downward price and competitive pressures, as well as volume declines. Downstream suppliers will also be subject to an expected growing risk of potential farm customer defaults.Additionally, while farmers’ general debt/equity positions are favorable and debt leverage positions are not considered excessive today, a substantial decline in profits and farmland values could expose some farmers and their creditors to significant working capital and farmland loan risks.
- Price risk: 500kW PV project loses >$100,000 in positive NOI impact and $52,000 of NPV every year it is delayedThe best time to plant a tree is ten years ago.The second best time is now.
- My colleague Amanda Holland and I will also be hosting a breakfast networking table tomorrow AM; if you have a specific project you’d like to explore I invite you to reach out to us after the presentation.