ADVERTISEMENT

ADVERTISEMENT

Low yields, depressed markets take toll on southwest Minnesota farmers

WORTHINGTON -- A challenging growing season, depressed markets, increased input costs and China's imposed tariffs on agricultural products have meant a tough year for many of the region's farmers.

112818.N.DG_.FARMECONOMY 2 Print.jpg
A farmer harvests his corn crop in this image captured earlier this fall northeast of Edgerton. Corn yields are about 60 bushels per acre below what they were a year ago. (Tim Middagh / The Globe)

WORTHINGTON - A challenging growing season, depressed markets, increased input costs and China’s imposed tariffs on agricultural products have meant a tough year for many of the region’s farmers.

Often humble people who work quietly to feed the world, these men and women are up before dawn to milk cows, feed cattle or do the hog chores. They lose crops from too much rain - or not enough - and work well into the dark of night to plant and harvest their crops.

The sentiment among farmers after this year’s harvest could be wrapped up in two words: it’s over.

In rural America, local economies are driven by the success of its farmers. Those who work closely with producers find it difficult these days to paint a rosy picture for agriculture in southwest Minnesota.

Jim Bloch is a mostly-retired farmer who has spent the past 30 years as a mediator with the University of Minnesota’s Farmer-Lender Mediation program. Based in Westbrook, he works between struggling southwest Minnesota farmers and their creditors (bank lenders, feed companies, seed dealerships etc.). In Minnesota, mediation became mandatory in the mid-1980s to encourage compromise before a farmer can be foreclosed upon.

ADVERTISEMENT

Bloch said he’s busier now than he was during the 1980s farm crisis.

“It’s kind of got the same twist, but the debt is so much bigger,” he said. “I think I got more agreements that were reached in the ’80s - then, the debt wasn’t as big.”

Farmer-lender mediation provides a 60-day window of protection from foreclosure for farmers. During this time, a farmer must decide whether to sell whatever he has of value to pay off creditors or find new financing.

“My job is to point them to a different bank, find them a farm advocate or provide any information we can get for them,” Bloch said. “I ask a lot of questions.”

In three decades as a mediator, not a month has gone by in which Bloch hasn’t assisted in at least one mediation. He’s had as many as 17 meetings a month.

“Since the first of January, I’ve averaged at least 10 meetings a month,” he said of 2018.

It isn’t just the high number of mediations that has him concerned. He’s seen more divorces among farmers this year than he ever has before.

“Usually the wife says she can’t handle this much debt anymore,” Bloch said.

ADVERTISEMENT

Yield drop in 2018 Mother Nature was not kind to southwest Minnesota crop producers in 2018. Heavier and more frequent rains during the growing season led to significant crop loss for some, but across the board, farmers reported yield loss.

Keith Newman, grain division manager at New Vision Cooperative’s Brewster headquarters, said corn yields were very disappointing, and soybean yields were sub-par.

Corn yields were 30 to 60 bushels per acre less than the 2017 crop, Newman said, with yield averages of 165 to 170 bushels per acre across New Vision’s service territory. Soybean yield losses were up to 20 bushels less than a year ago, he added, with yields ranging from 48 to 50 bushels on average.

Those yields are in line with what crop adjuster Mike Crowley has heard in his Worthington office of Compeer Financial.

“There’s been some yields on corn close to 100 bushels (per acre),” Newman said. “Beans, I’ve heard some yields as low as 19 bushels. There was too much rain, too much water, too much ponding, and the nitrogen and nutrients leached away with the water.”

With low markets, Newman said farmers put a fair amount of grain into storage.

“(Farmers are) hanging on, waiting for better prices,” Newman said. “They’re hoping for a resolution with the trade issue with China, and with disappointing yields, they’re hoping they can get more value out of what they’ve harvested.

“Overall, it was just a challenging year,” he added.

ADVERTISEMENT

Low yields equal lost income According to David Bau, Extension Educator in Farm Business Management with the University of Minnesota’s regional office in Worthington, 1,200 farmers enrolled in the Southern Minnesota Farm Business Management Program have lost money for the past four years.

“2018 will be the fifth year in a row,” Bau said. “We’ll have losses on both corn and beans for most farmers, even with crop insurance.”

Bau said that while land prices and rental rates are still quite good, difficult times are ahead.

“Farmers still have good balance sheets, but the problem is they have poor cash flow,” he said. “Cash flow shows the income coming in and going out. They can’t sell their crop and pay off all of the bills.”

Mike Dierks, Farm Business Management faculty member at Minnesota West Community and Technical College, said farmers who paid cash rent for land in 2017 lost an average of $66 per acre. This year, the losses will be far greater.

Based on Monday’s cash price for corn at New Vision ($3.24 per bushel) multiplied by 60 bushels per acre of lost crop due to poor yields, the resulting shortfall is $194 per acre. A farmer with 500 acres of corn, therefore, is seeing a $97,000 loss on their crop - if they sold at today’s market prices.

For soybeans, Monday’s cash price was $7.77 per bushel. Figuring a 10 bushel-per-acre decline, the average loss would be just under $78 an acre. However, if one figures in the market difference between today and Jan. 1, 2018 ($9.25), the losses are significantly higher for soybeans.

“I’m trying to stay positive because farmers need the support of their community, but you also have to be realistic,” said Dierks. “There’s a high probability that most farmers are going to have less cash to work with this year because of lower yields and lower prices.”

Less cash may mean not being able to pay the bank loan or the feed man, and that will force some farmers to make decisions they’d rather not.

“That could be a hundred different things,” Dierks said. “They’re going to have to look at restructuring loans, selling something to generate some cash that they normally wouldn’t sell, or finding another source of funds.”

Crowley said more farmers are talking retirement.

“Some will give up rent that is too high - they have to give that up,” Crowley said. “Once you have the land, it’s really hard to give it up again. Someone else usually will (step in), but if the rent is at a level that proves not profitable, you just can’t farm it.

“When you can’t cash flow it, when you’re in the red, that’s just not a good thing,” he added.

“Some farmers are going to get out of the business,” added Bau. “Some farmers are going to get turned down by the bank this year because they haven’t paid off their operating loans.

“The farmers are seeing it’s not working,” he said.

Dierks said part of the reason farmers are so short on cash is the increased cost for health insurance.

“It’s not uncommon to have a $15,000 cost for health insurance and a $10,000 deductible,” he said. “They have reduced income, increased family living without choice and there’s a new tax code. Nobody knows if that’s going to be good or bad.”

Dierks said people want every farmer to succeed because they spend a lot of money in their community.

“Last year, each farmer spent $785,000 in their community. Each farm you lose, that’s a lot of dollars that goes away,” Dierks said. “As farms get bigger, a lot of them don’t spend anything within their community; they negotiate outside of their community.”

Hurts across the spectrum Whether raising crops, livestock or both - whether it’s a young farmer or one passed the age of retirement - the depressed farm economy is affecting all producers in one way or another.

Bloch said his clients range from a farmer in his early 30s to a 92-year-old who mortgaged some land he’d bought at $200 per acre.

“He’s going to have to sell it,” Bloch said. “The capital gains tax is going to kill him.”

In his southwest district, Bloch has a farmer custom-feeding hogs who said if it wasn’t for the value of the manure he is able to sell, he’d be losing money.

“His light bill has doubled, fuel bill has doubled, insurance bill has gone up,” Bloch said.

The dairy industry is facing some of the greatest struggles. Bloch has seen three or four mid-sized dairies (150-cow average) go out of business this year.

According to the National Agricultural Statistics Service, the average price for a cow was $1,230 during the quarter ending Sept. 30 - the lowest average price since October 1998. The price represents a $380 drop per cow from one year ago.

Bloch was told dairy farmers now get brochures about suicide prevention with their milk checks.

‘It’s not all gloom and doom’ Despite the rising number of mediations, Bloch said it’s not all gloom and doom for farmers.

“You’ve got some farmers with money in the bank and are low-risk people,” he said. “And, if you’re a farmer, you’re always optimistic. We’ve just got to have a better price for our commodities.”

Back when he started farming, a farmer needed a $50,000 or $100,000 line of credit to operate in a year.

“Now we’re talking millions,” Bloch said. “A brand new combine is half a million dollars - for a piece of machinery you use half a month out of the year.”

Bloch said there’s some well-established farmers - big farmers - who will weather this storm and keep on going.

As for the rest, time will tell.

“No farmer wants to quit or sell his land. That’s the big thing right now. We’re trying to keep them going,” said Bloch, one of eight part-time mediators in the state. “Some of these farmers gotta help themselves, too. (Perhaps) it’s selling some of their assets.

“It’s tough on the bankers, too,” he shared. “They need to know when to hold ’em and when to fold ’em, too.”

Unlike the high interest rates that fueled the 1980s farm crisis, this crisis in agriculture is fueled by low markets and high input costs.

“I would not qualify (this) as the ’80s crisis, but we’re going to have cases of tough situations. Some are going to be fine,” said Crowley, noting that good yields the past few years have kept farmers afloat. “It’s getting to be a tough business to be in farming right now.”

Resources available Programs and resources are available to farmers struggling in the current farm economy. The USDA Farm Service Agency’s Market Facilitation Program (farmers.gov/MFP) provides direct payments to producers impacted by imposed tariffs on U.S. crops and livestock (1 cent per bushel on corn; $1.65 per bushel on soybeans; 12 cents per hundredweight on dairy; and $8 per head on hogs). Contact an FSA office for details.

For mediation information, visit https://extension.umn.edu/get-help/farmer-lender-mediation .

The toll-free Minnesota Farm and Rural Helpline provides support for emotionally-stressed farmers at 1-833-600-2670; the Farm Aid hotline is 1-800-FARM-AID (1-800-327-6243) and the National Suicide Hotline is 1-800-273-TALK (1-800-273-8255).

112818.N.DG_.FARMECONOMY 1 Web.jpg
oybean yields were about 10 bushels per acre lower this year as compared to 2017. Wet weather caused numerous drown-outs during the growing season. (Tim Middagh / The Globe)

Related Topics: CORNSOYBEANS
What To Read Next
Louis and Cyril Keller are the inventors of the Bobcat skid-steer loader and were selected as 2023 inductees into the National Inventors Hall of Fame.
Awards were announced during Friday’s annual FORWARD Worthington Extravaganza at Lerma’s Event Center.
“They’re totally new. They’re sophomores, they’ve never competed in BPA.”
Wednesday’s community input meeting at Worthington High School was the third of four planned by the Minnesota Attorney General’s Office.