American farmers battered by low commodity prices and trade war brace for things to make matters worse
America’s agricultural belt, already battered by low commodity prices, the trade war and growing bankruptcies, is bracing for even worse times.
Record flooding this spring in the Midwest and Great Plains damaged corn and soybean stocks in some areas, while extremely wet weather resulted in widespread planting delays.
Now, the threat of a weak fall harvest and the danger of an early frost could amplify the hardships felt in areas of Wisconsin and Minnesota and tip more family farms into bankruptcy.
“This is going to be a tough year, there are no two solutions,” said Steve Zenk, farmer and agricultural advocate from Danube, Minnesota, a small town of less than 500 people in the southern state. .
“Hold our breath”
It was a soggy spring and a cool, wet summer, which left the region’s crops easily two to three weeks behind in maturity, according to Zenk.
Delays in planting the year’s crops are forcing farmers and bankers to watch the harvest and the approaching fall.
“It’s cold this time of year,” Zenk told MarketWatch in a phone interview. “We are holding our breath a bit because an early frost could really damage the crops. ”
Advances in corn, soybeans and wheat crops in Iowa, Minnesota and Wisconsin have lagged far behind five-year averages, according to the latest crop condition reports from the U.S. Department of L ‘Agriculture.
Concerns about the 2019 harvest come as U.S. farm balance sheets have already been strained by a handful of years of declining commodity prices. But the USDA’s early forecast for higher-than-expected corn production has helped pressure prices while sparking skepticism from growers and many analysts.
Weather concerns had driven C00 corn futures,
to a five-year high above $ 4.50 a bushel in Chicago in June. Corn was trading at $ 3.61 a bushel on Wednesday, after suffering a sharp selloff in August. S00 Soy Futures,
was trading at $ 8.67 a bushel, after hitting a low more than a decade earlier this year below $ 8 a bushel.
Wisconsin is the country’s second-largest dairy producer after California, while Minnesota is also one of the country’s top dairy-producing states. While larger industrial dairy farms may benefit from low crop prices that make feeding livestock less expensive, family farms in states with shorter growing seasons often suffer.
“For the traditional dairy farmer who grows their own crops, having low prices is a bad thing,” said Pat Lunemann, a crop and dairy producer with about 740 dairy cows in Clarissa, Minnesota, in an interview.
Milk prices increased in 2019, with September Class III milk futures contracts US: DAU19
trading at $ 18.20 per hundredweight on Wednesday, marking a 9% gain since the start of the year. Analysts attributed the gains in part to lower inventories of dairy cows, which contributed to slower growth in milk production.
Meanwhile, farm bankruptcies in the Federal Reserve’s Ninth District, which covers Minnesota, Montana, North and South Dakota, and Wisconsin, recently hit their highest level in nearly two decades.
The graph below shows Wisconsin and Minnesota leading the ninth district in Chapter 12 filings, a special section of the bankruptcy code that arose out of the 1980s farm crisis to empower farmers and fishermen to restructure their businesses. debt, while maintaining their businesses.
Joe Mahon, regional director of outreach at the Federal Reserve Bank of Minneapolis, said the current farm landscape looks less grim than during the 1980s farm crisis, mainly due to lower borrowing rates, debt aggregate farm household aggregate and relatively stable land prices.
“Farms have entered this crisis with pretty thick cash cushions,” Mahon told MarketWatch in a recent interview. “The concern is that the cash cushion has been pretty worn out. Few farms are able to withstand another year of low income. “
While bankruptcies are a growing problem, Lunemann also said many family dairies are calling him simply because they are burning their equity and losing money. “At one point you say enough is enough. I need to have something more for retirement.
Meanwhile, farmers have had to exploit the lifeline of federal government aid programs, which the Trump administration recently beefed up in the face of the continuing trade war between the United States and China.
The USDA expects this year for government direct agricultural payments to reach a ten-year high of $ 19.5 billion, double the payments seen in 2014.
“We hardly ship anything. We don’t have markets. We have no crops, ”said Ruth Ann Karty, farmer and agricultural activist, of Clarkfield, Minnesota.
Since the 1980s, agricultural advocates have helped struggling farmers negotiate with lenders and apply for free aid programs, sometimes including giving them a list of lawyers who handle Chapter proceedings. 12. Farm Aid, launched by musicians Willie Nelson, Neil Young and John Mellencamp, partners with national agricultural advocacy programs.
Both Karty and Zenk have said bankers this fall are checking borrowers earlier in the season than usual about expectations for the 2019 harvest.
“It’s not an overwhelming number,” Zenk said of bankers’ inquiries. “But we’re seeing more than usual, pushing up the question of whether you’re going to be short.”
The recent escalation of the trade war between Washington and Beijing led China, the world’s largest soybean buyer, to shut its doors to all U.S. agricultural products last month.
The president of the American Farm Bureau Federation, Zippy Duvall, in August called the decision “a blow to thousands of farmers and ranchers who are already struggling to get by.” Farm Bureau estimates show U.S. agricultural exports to China fell $ 1.3 billion in the first half of the year, after falling to $ 9.1 billion last year from $ 19.5 billion. dollars in 2017.
U.S. stocks rose on Wednesday, a day after the S&P 500 SPX index,
and Dow Jones Industrial Average DJIA,
closed at session highs over reports that China has offered to buy more US farm products in exchange for a delay in upcoming tariffs.
“We would have had problems even without the trade war,” said Paul Mitchell, director of the Renk Agribusiness Institute at the University of Wisconsin-Madison.
“A lot of farmers are baby boomers,” he said, adding that many older farmers choose to retire early or sell before things get worse.
“They’re rational about what they want to do with their lives, and they don’t think the good times are coming soon,” Mitchell said.