Heightened Focus on the Farm Economy- Senate Ag Committee Hearing on Credit Conditions

Recall that the House Agriculture Committee is conducting a Focus on the Farm Economy series where each of the Committee’s six subcommittees are examining the growing pressure in rural America; a link to brief summaries of the first five of these hearings is available here.

Meanwhile, a news release from the Senate Agriculture Committee yesterday indicated that, “U.S. Senator Pat Roberts, R-Kan., Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, today held a hearing on the Farm Credit System.

“The hearing, titled ‘The Farm Credit System: Oversight and Outlook of the Current Economic Climate,’ had two panels. For witness info, testimony, and to watch the hearing, click here.

“‘Farmers and ranchers all across the country are experiencing difficult economic conditions as farm sector profitability is forecast to decline for the third straight year,’ said Chairman Roberts. ‘Over the past three years alone, net farm income is expected to decline by 56 percent.'”

At yesterday’s hearing, Chairman Roberts pointed out that, “As our nation’s farmers and rural communities continue to deal with low commodity prices and elevated input costs, access to affordable credit in rural America is as important today as ever.

“The spring 2016 Agricultural Lender Survey released by Kansas State University’s Department of Agricultural Economics expects the credit environment for farmers to remain difficult for at least a few more years.”

Kenneth A. Spearman, the Chairman and Chief Executive Officer at the Farm Credit Administration, stated at yesterday’s hearing that, “U.S. farmers and ranchers are in the midst of serious belt tightening. Commodity prices have declined sharply while input costs have been slow to adjust downward. Many crop and livestock producers are operating with narrow, or even negative, profit margins.

“An extended downturn in the farm sector would be a major challenge for U.S. agriculture. Over the past two years, many farmers have been coping with a declining market by using working capital generated during the previous period of strong earnings. As a result, the System has recorded relatively low loan losses and maintains a strong financial position to date. However, if commodity prices continue to be weak for another year or two, we expect significant financial stress on borrowers as working capital erodes further and as farmers make additional cuts to capital expenditures, household spending, and operating costs.”

And Donnelle Eller and Christopher Doering reported on the front page of today’s Des Moines Register that, “Depressed commodity prices and plunging farm income across the Corn Belt are reshaping the Iowa and the U.S. agricultural landscape.

“It is forcing mergers of ag giants such as Dow, DuPont, Monsanto and Syngenta; squeezing local and regional elevators, implement dealerships and manufacturers into consolidating; and winnowing the number of farmers dotting rural America.”

The Register writers explained that, “The farm downturn is being driven by three years of lower commodity prices, combined with stubbornly high costs for seed, chemicals and other inputs needed to grow corn and soybeans.”

Today’s article stated that, “Moline, Ill.-based Deere & Co. is buying majority interest in Hagie Manufacturing, a Clarion-based maker of high-clearance sprayers, and purchased Bauer Built, the Paton, Ia., maker of ultra-wide planters. Land O’Lakes purchased Ames-based United Suppliers, a customer-owned crop seed, fertilizer and herbicide retailer, to fold into its Winfield U.S. division.

And several local farm equipment dealers and cooperatives are making deals.”

More specifically, Forbes writer Antoine Gara reported yesterday that, “German healthcare and agricultural giant Bayer confirmed on Thursday morning it is in preliminary discussions on a takeover of Monsanto one of the biggest seed and agricultural firms in the United States.”

And Bloomberg writer Mario Parker reported today that, “Deere & Co., the world’s biggest agricultural equipment manufacturer, cut its fiscal full-year earnings outlook as lower commodity prices hurt farmers’ income and a glut of unsold machinery continues to pile up at dealerships.”

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