Farmers adjust to downturn

Published 10:35 am Thursday, September 15, 2016

MAXWELL, Iowa — Pale green and 8 feet tall, tightly packed corn stalks reach to the horizon throughout the Midwest in what is likely to be the biggest harvest the U.S. has ever seen.

Aside from a sense of pride in breaking the previous record by nearly a billion bushels, farmers won’t benefit. They’ll lose money on virtually every cob.

It’ll be the third consecutive year in which most corn farmers will spend more than they’ll earn. The growing has been too good and the resulting glut of corn depressed prices to a decade-low. It’s a similar story for soybeans, the second most common Midwest crop.

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As a result, farmers are cutting costs, dipping into savings or going further into debt. Federal crop insurance and payments that help protect farmers when prices fall too low offer some protection, yet many farmers and their spouses supplement income with off-the-farm jobs. The drop in farm profits raises questions about agriculture’s boom-and-bust cycles and why people adhere to what at times is seemingly not a sustainable business model.

“I am 67 years old and when we examined my Social Security records recently, I had a 12-year stretch when I didn’t pay myself one single dime,” said Wayne Humphreys, who grows corn and soybeans and raises hogs in southwest Iowa. “We lived on my wife’s salary. Everything else went to the farm.”

Corn and soybean prices reached their height in 2012 but have since plunged, resulting in a 42 percent drop in farm income. For the nation’s roughly 2 million family farms, the average household income will be $118,890, but only about a fifth will come from the farm itself, the U.S. Department of Agriculture said recently.

“Typically this time of year the dealership would be talking to me about getting a new planter, and they have talked to us and we told them we’re going to pass,” said Joe Steinkamp who farms corn, soybean and occasionally wheat near Evansville, Indiana. “Obviously we’re concerned and we’re watching our pennies as we go.”

To get by, nearly a third of U.S. farms have to borrow money, and borrowing has increased because farmers need to finance operating costs and near-historic low interest rates make borrowing inexpensive. But banks are reporting an increase of past-due loans, an indication that borrowers are struggling to repay in a time of tight profit margins.

The current situation isn’t like the 1980s, when foreclosures contributed to the loss of 292,000 farms over a 10-year period. Some of that was caused by farmers who borrowed heavily during the 1970s’ low-interest rates then defaulted due to the combination of higher interest rates and collapsed crop prices.

The less-established farmers who rent expensive farmland or went into debt to purchase land or new equipment are “the ones I worry about,” said Harold Wolle, a fifth-generation family farmer from south-central Minnesota.