Monday, March 14, 2016

Farmers Are Cash-Poor, Again

The once-in-a-generation boom is over, and hard times are here:
Faced with declining profits, some Iowa farmers are defaulting on cropland rents — a largely unheard of move given the intense competition for the state's fertile farmland and a sign that financial pressure and debt are mounting.
With farm real estate debt across the United States at its highest levels since the farm crisis years of the early '80s, farmers are increasingly nervous about trying to turn a profit while paying sky-high rents.
As a result, more growers are severing ties on rented land that some have farmed for decades — and they're doing it with the spring planting season nearly upon them.
Most farmland rent payments were due March 1, with spring planting typically starting in mid-April.
"We had someone call today and say 'Don't cash that check right away,'" said Mark Gannon, owner of Gannon Real Estate & Consulting in Des Moines, on March 1. "Another farmer called, wanting to renegotiate their lease. … There's some stress out there."
Farmers tell managers and landowners that bankers are tightening credit, with growing losses and dwindling reserves built up during farming's boom driving lending decisions, experts say.
"Some farmers went in to renew their line of credit and found out that the bank wouldn't extend credit to them," said Steve Bruere, president of Peoples Co., a Clive land broker and farm management company. "Producers are coming back and saying the cash flows just don't work."
U.S. farm income in 2016 is projected to fall for the third year in a row, with farmers squeezed between tumbling corn and soybean prices and stubbornly high costs for land, seed, fertilizer and other inputs needed to grow a crop, experts say.
Grain prices have sunk 50 percent or more since 2012, when drought drove prices to record highs.
Dad just told me that the seed companies are cutting deals with farmers who have cash on hand to pay for seed for spring planting.  After seven boom years, when everybody talked about how farmers were paying everything in cash, we suddenly find out that the cash is no longer there.  Things are going to get very,very ugly in the next few years.

No comments:

Post a Comment