For Farmers, Great Harvests Can Bring on Hard Times

December 12, 2015 05:00 AM

By Mark Steil, Minnesota Public Radio News

Minnesota farmers can give thanks this holiday season for one of their most productive harvests in history. But the bounty has a big downside.

The record corn and soybean crops are causing prices to drop. And the financial pain has spread beyond the major grains to most sectors of the farm economy.

Earlier this decade, just about every part of farming saw record prices and profits. But then the markets turned, and now most sectors are struggling to make money.

Grant Breitkreutz has seen the impact of the economic downturn on his cattle farm in southwest Minnesota. He said he'll really feel the pinch when he sells a group of calves in January.

"We're anticipating fully $500 a head less than one year ago," said Breitkreutz. That's because the price of those calves has dropped by more than a quarter, from around $1,400 a head last year.

But Breitkreutz is doing better than most. He still expects to make a small profit on the calves, while many in the cattle business are losing money — oftentimes hundreds of dollars a head on cattle sold for slaughter.

The misery is enjoying plenty of company. Breitkreutz said it doesn't matter which sector you look at — crop, livestock or dairy. Farmers in general are in a down cycle.

"We're taking a severe dip here," he told Minnesota Public Radio News ( ). "Everything has dropped substantially."

Crop farmers probably are the hardest hit. Corn prices have dropped by half from the record levels of three years ago. Dairy farmers, though, are also struggling. Milk prices have been at or below break-even for most farms for the past year. Hog farmers are still making money, but just barely.

Wells Fargo agricultural economist Michael Swanson said the common factor in the low commodity prices is worldwide oversupply.

"The Minnesota ag economy is a vital player in the global market," said Swanson. "And it can't escape that cycle. Right now, supply is robust, and demand is a little bit questionable."

Good harvests and livestock herd expansions are the main drivers on the supply side. China is a big reason demand is questionable. The world's most populous nation is cutting back food purchases because of a slowing economy.

Swanson said the strong dollar is also hurting U.S. farmers. It makes American food exports more expensive, driving overseas customers to countries with cheaper prices.

"A stronger U.S. dollar certainly hurts all our export markets at the same time," said Swanson.

The agricultural stress is showing up in the banking sector.

Minnesota requires lenders to file notice when a farmer falls behind on payments. Once the notice is filed, the farmer has the right to request mediation. For the year ending last Sept. 30, the number of mediation notices soared by half, to nearly 2,500.

The University of Minnesota's Kent Olson, who oversees the monitoring program, said that's a signal of growing economic stress. "It is hard times out there," said Olson.

In past years, Olson said, the filing of mediation notices led to mixed results. About 40 percent of the farmers actually go into mediation hoping to restructure the bad loan with payments they can afford.

"The rest of them, the debtor either pays up, gets current, or they just surrender the collateral," said Olson.

Some farmers still have a financial cushion from earlier this decade. Those savings will help many farmers make it through the down time. And most will benefit from a federal safety net program that handed out $4 billion to the nation's farmers in 2014.

Despite the federal safety net, Wells Fargo agricultural economist Michael Swanson said some farmers are going to have to assess their viability in the coming months.

"The sooner you make a tough decision, the better off you are," said Swanson. "And so I think there's going to be an awful lot of homework being done at the farm table this winter."

Homework that could mean some painful financial decisions.

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Spell Check

Sean P
Petaluma, CA
12/12/2015 08:20 AM

  Are you talking about selling off land in the last part of the article?


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