As Farmers Cut Back- the Doldrums Caused by Lackluster Prices for Crops Start to Ripple onto Rural Main Street

Tom Meersman reported today at the Minneapolis Star Tribune Online that, “Ed McNamara sat in the driver’s seat of his John Deere combine recently, musing about crop prices as he mowed through six rows of corn at a time.

Thousands of Minnesota farmers have withstood stubbornly low crop prices during the past 27 months, and farmers’ average net income has been dropping steadily for the past three years. McNamara, who has been farming just south of the Twin Cities near Goodhue since 1978, has seen the farm economy cycle up and down several times and knows the drill when profit margins are slim to none.

“‘Tighten your belt, cut back on inputs but don’t hurt your yield, run machinery a little bit longer, and try to get the best deal for supplies,’ he said, including seed, fertilizer and other chemicals.”

Today’s article indicated that, “As farmers cut back, the doldrums caused by lackluster prices for crops and livestock have started to ripple onto the main streets of rural Minnesota. When farmers have less money to spend, it affects anyone who is selling farm equipment, marketing fertilizer, or building new barns, bins and sheds.

Low commodity prices also put a squeeze on cash rents for land that many retired farmers or their families depend on for income.”

Mr. Meersman explained that, “But David Preisler, executive director of the Minnesota Pork Producers Association, said the direct effects of weak crop and livestock prices show up quickly in many small towns.

“‘The first ripple effect you see is going to be any sort of capital purchases that are more discretionary in nature,’ he said.”

The Star Tribune article added that, “The average spending for machinery and equipment in 2012 and 2013, when crop prices peaked, was about $117,000 per farm. That plummeted to about $67,500 in 2014 and $48,000 in 2015. Farm building purchases such as grain bins and hog barns had a similar drop-off, from about $36,000 per farm in 2013 to $21,000 in 2014 and $16,000 in 2015.”

Today’s article noted that, “If low prices persist well into 2017, [Harold Wolle, president of the Minnesota Corn Growers Association] said farmers with equity and experience will tough it out, while beginning farmers or those who have aggressively expanded and paid high rents will be more vulnerable.

Ag lenders have been working with producers already, he said, sometimes charging interest only on farmland loans or devising other ways to stretch out payments. Helping cash flows temporarily are the federal farm program payments that many producers received last month because of market downturns in 2015, Wolle said.”

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