Nebraska, Iowa Corn and Soybean Growers Explore Survival Strategies12/21/2017
Farmers clean up their equipment after harvest each year. This year, some are also polishing their résumés.
The situation facing corn and soybean growers has southeast Nebraska farmer Steve Sugden looking for an off-farm job to help support his family. That includes his wife, a schoolteacher; his daughter, a University of Nebraska junior; and twin sons, freshmen in high school.
The low prices farmers are fetching for their crops don’t cover business costs at many operations. Average monthly prices for corn have been below $3.50 a bushel for over a year now; farmers received over $7 and in some cases over $8 in 2012 and 2013.
“The numbers don’t lie,” Sugden said.
Sugden said he has farming in his blood, and he’s not planning a farm sale, choosing to keep the land his family owns free and clear instead of using it as collateral on a loan to pay for next year’s farm operations.
Sugden said he’s at a crossroads.
He has company. Eastern Nebraska farm auctioneers said they aren’t seeing an uptick in farm sales driven by financial stress, but farm finance experts said Corn Belt farmers and their bankers do face another winter of tough decisions if they want to renew operating loans and keep farming next year.
Farm income plunged for three straight years from 2014, and only a slight uptick is expected this year, the U.S. Department of Agriculture said in November. Crop revenue continues to fall, however. Livestock sales are growing.
The picture can be dramatically different from one farm to the next, depending on the size of the farm, the type of crops or livestock raised, the climate and soil, marketing decisions and financial fundamentals.
As many as half of farmers and ranchers are profitable this year, Nebraska Farm Bureau economist Jay Rempe said. About a third are breaking even, he said, and the rest are “really struggling.”
Across the nation, the median farm income will drop to a loss of nearly $1,100 in 2017. In other words, most farms will lose money.
And next year, belt-tightening is likely to continue, as economists’ forecasts call for no meaningful increases in crop prices.
One of the reasons for stagnant low prices: There is a glut of grain on the market. And U.S. farmers this coming spring are expected to plant still more acres than they did this year of corn and soybeans. Competition also is growing globally. So there’s no reason to expect prices to rise, economists say.
Tina Barrett, executive director of Nebraska Farm Business, which consults with farmers on accounting, agreed with the Farm Bureau that there’s a lot of variance from farm to farm. Some producers are doing well and merely have to focus on careful cost control, while neighbors are struggling, with loans maxed out. Those people might not be able to secure operating money for 2018, she said.
Adding to the trouble were high winds that hit Nebraska cornfields in October, knocking ears of corn to the ground before they could be harvested, and putting a big dent in the amount of corn many had to show for their season’s labor, Barrett said.
One northeast Nebraska banker said the wind claimed as much as 50 percent of yields in some fields.
Many farmers will have to make changes to their businesses and get creative to survive, Barrett said. That might include selling equipment needed for certain farm work, and paying a contractor to do that work instead of continuing to make payments on the equipment. Or it might mean not renewing leases on some rented acres, as Sugden has chosen to do.
Agribusiness analysts at lender Rabobank offered other strategies in a report this month. Those include farming on contract for a specific buyer, such as a food processor; converting to more profitable organic crops; adding acres to spread out costs; or adopting new cost-saving technologies and business management tools. Now is the time for farmers to evolve their businesses, Rabobank said, with growers expected to face low returns for the next five years.
“A last option is to sell, close down the farm or temporarily exit farming,” the report said. That could drive further farm consolidation.
Thinking through those decisions is uncomfortable but necessary, Barrett said.
Sugden’s situation has gotten tighter because his available land shrank. He chose not to keep leasing most of the 1,200 acres he’d been farming after the owners asked more for it, citing high property taxes.
But it won’t pay the bills to farm just the remaining 450 acres, he said. With less land, he loses economies of scale, so costs are more per acre, and even if each acre is profitable, the total income is less. Sugden said he isn’t willing to bet the farm on the chance of higher prices to cover his costs.
So now he’s looking for work in Lincoln or Omaha, pitching his military experience and agribusiness education.
If he ends up with a short commute, he might keep farming his remaining land himself on the side. If not, he could rent it out. In any case, he listed his combine for sale, no longer able to justify the expense, which he said rose from $19 an acre to $50 an acre, given his smaller acreage.
Other Iowa and Nebraska farmers are taking similarly hard looks at their businesses and at the larger economic issues that are pressuring profits. High property taxes are a target for the Nebraska Farm Bureau.
“That’s always in the back of your mind: How do we get through the troubled times like they did?” he said.
Cooksley, who also works as an agronomist for a seed company, said his family planted soybeans for the first time in decades this year, looking for a more profitable crop, part of a larger trend of U.S. farmers planting more soybean acres. (Soybeans fetch less than $9.50 a bushel today, down from more than $15 in mid-2013.)
For next year, they’re considering raising beef without added hormones, so it will qualify for new markets. Others in his area are planting field peas, a newer crop for Nebraska that’s been gaining in acres.
And the Cooksleys are holding the line on equipment purchases, deciding this year not to buy a newer planter after all.
It’s not just weak prices that farmers are wrestling with. There’s plenty of uncertainty to keep them up at night, said Brad Lubben, an agriculture policy and economics professor at the University of Nebraska-Lincoln.
There’s President Donald Trump’s threat to withdraw the U.S. from the North American Free Trade Agreement. Farm groups say that would squelch demand and drive prices lower yet.
Congress is due to debate the next installment of the every-five-years farm bill, which funds commodity payments and crop insurance programs. Some regulatory issues regarding farm pollution are still up in the air, as are questions about how the tax bills in Congress will be resolved.
Farmers can feel they’re fighting an uphill battle, with little they can control, said Kelly Nieuwenhuis, who farms near Primghar in northwest Iowa and is active in Iowa corn and ethanol promotion groups.
He tries to control what he can on the farm. He and his brothers have bought no new equipment in the past three years. They continue to invest in quality seeds and fertilizer, trying to produce the best possible crop. Owning their own farmland provides equity they can leverage for an operating loan.
Two MidAmerican Energy wind turbines installed on their land in 2016 brought $22,500 this year, a help but not much compared with his total operating budget. Farmers have to be looking for new sources of income, he said. Without an improvement in markets, he sees “thinning the herd” ahead, with more farmers looking for new jobs and younger farmers challenged to gain a foothold.
“There’s a point in time where something’s going to have to give,” he said.
Source: Barbara Soderlin, Kearney Hub