Betting The Farms and Loosing

Betting The Farms and Loosing

It’s a telling tale happening through the court systems, from the heavy farming states in the Midwest, like Ohio and Indiana and stretching into the South West, States like Wyoming and Colorado. Almost every sector of the farming community is being affected by a large uptick bankruptcies, with the majority of the blame being placed on an ill advised trade problem within the current White House.

Will it get worse or level off

Some say it’s too early to tell. American farmers are almost to good at what they do. Even before the President slapped tariffs on many crops, they were at or near record surplus. But the tariffs, especially on Soy Beans and Corn, means the farmers are not selling very much, if any of this years crops.

They end up feeding the surplus to their animals, or dumping it on the ground as most storage facilities are still full. With every day that goes by, with these crops on the ground, they become less and less attractive for sale.

The Federal Reserve Bank of Minneapolis covers Wisconsin, Minnesota, the Dakotas and Montana. In that district, mostly ‘family operated’ farms are the ones in the worst of the situation and 84 of them filed for bankruptcy through the end of June in 2018.

“Current price levels and the trajectory of the current trends suggest that this has not yet seen a peak,” Ron Wirtz, an analyst at the Minneapolis Federal Bank, wrote at the time.

Now that we are entering the spring of this new year, 2019, it’s the time that many farmers look to banks to upgrade some equipment and purchase needed seed and fertilizers to get a new crop in. With bill continuing to pile up unpaid with no money coming in, those banks are most likely going to have to refuse the loans.

Rising Interest Rates

Another problem since our new administration, is the raising of the interest rates across the board in the United States. Not just on credit cards, auto or home mortgage loans, but also all new loans that the farmers would have to take on, to try and pull themselves through this tough time.

Banks, with existing loans to farmers, will most likely have to keep raising the rates, some of them on existing loans, not to mention to get new crops in the ground. Another huge expense coming in for crop growers that are seeing some of the lowest price for their crops.

Many talk of a ‘missing generation’ of farmers if the prices continue to stay low and the interest rates continue to increase. The Federal Reserve has indicated it will probably raise rates two or more times thru this year.

Unwarranted Trade Wars

Another promise to the mid western farmer through his campaign for President, Trump said that he would tear up existing trade policies and create new ones. Better, hugely better for the American farmer was some of his rhetoric.

Before the ‘soybean war’ with China for example, 57% of the soybean exports from U.S. farmers, went to China in 2017. Through 2018, that number dropped to around 20%. Where did all the soybeans go? If you have the nerve, ask a soybean farmer.

In a December, 2018 interview on NPR John Boyd, who farms 300 acres of soy on his place in Virginia, stated “Well, basically the market is stale”.

“And, out in the Midwestern states, they’re not even taking any more grain in. They’re actually stockpiling it and covering it with tarps. And this is the worst thing I have seen, you know, since I’ve been a grain farmer. And the actual price of grain has fallen off, dramatically, to about $8 a bushel. And, for a farmer to break even, we need at least $9 or maybe $9.50 to actually break even.”

When asked about the Government bailout, a 12 to 12 billion dollar package to help farmers ‘get over the hump’ Trump says, Boyd is just as displeased. “We’re not because you still have to go through all of the government loopholes. And I did apply. I’m going to let you know I went into the ASCS (ph) office in my local county – Mecklenburg County, Va. I applied. And, immediately, the NRCS, the agency that – which you have to comply with and have a approved plan on file, immediately came out to my farm and demanded a whole lot of changes that I would have to put into place and, actually – to receive the funds.”

So to get any of those funds, farmers like Boyd has to make changes in the way their farms, farms they’be been running for years, are operated.

Placing the Blame

As with past President’s and their administrations policies, the overall economy gets placed on the desk sitting behind it in the Oval Office. As a share of GDP, the Agriculture and Food production sector has fallen during the last couple of years, from record highs in 2013.

Many of those farmers, if they are still farming, will have a tough decision to make in the next presidential election. The same farmers that were promised a better system for trade on their products have seen those promises not being fulfilled, and most likely, made worse.

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