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Farmers cash in despite bad economy

Monday, December 12, 2011 | 9:47 a.m. CST

ST. LOUIS — An Illinois farmer made so much money this year he made loan payments on one tractor a year in advance and exchanged some older ones for newer models. An Iowa farmer upgraded his combine and also paid off debt, while an elderly Oregon farmer poured into retirement funds a bundle of his $2 million take from a well-timed sale of much of his turf and equipment.

While much of America worries about the possibility of a double-dip recession, such stories of prosperity are cropping up as U.S. farmers enjoy their best run in decades, thanks to high prices for many crops, livestock and farmland and strong global demand for corn used in making ethanol.

Farm profits are expected to spike by 28 percent this year to $100.9 billion, and the amount of cash farms have available to pay bills also is expected to top $100 billion — the first time both measures have done so, according to the U.S. Department of Agriculture. All the while, crop sales are expected to pass the $200 billion mark for the first time in U.S. history, and double-digit increases are expected in livestock sales.

"We're just experiencing the best of times," said Bruce Johnson, an agricultural economist at the University of Nebraska in Lincoln. "It's a story to tell."

That's not to say that everyone is sharing in the good fortune. Near Gardner, Kan., a short drive south of Kansas City, a lack of rain and nagging winds conspired to leave Bill Voigts, 66, with about half of the soybeans he expected. His harvest of corn was worse, coming in at about one-third of his normal production. Even with insurance, he didn't quite break even on the 2,400 acres he farms — most of them rented.

"Had it not been for insurance in his area, it'd be a disaster. That's the only thing that saves us," Voigts said.

But he noted that the drought plaguing farmers like him helped drive up prices for commodities such as corn, soybeans and wheat, benefitting those fortunate enough to get a good crop.

"At the expense of some farmers, other farmers become wealthy," he said. "That's really the whole story. That's not the government's fault, it's nobody's fault. That's just the way things happen.

"Some people got left behind."

Yet most of the talk about U.S. farming remains bullish, with analysts widely trumpeting "the new normal" in U.S. agriculture: Demand in China, India and other developing countries for U.S. agricultural exports — and hunger for corn for ethanol — has been keeping prices high and farming profitable.

In central Illinois' Morgan County near Jacksonville, Dale Hadden said he was "pleasantly surprised" by the corn and soybeans he got from the some 4,000 acres he works with his brother and their parents, considering they lost about 400 acres of corn to 21 inches of rain in June.

All told, Hadden estimated his crops were worth 10 percent to 15 percent more than in previous years, amounting to tens of thousands of dollars. He spent a chunk of that on an advance full-year payment on a seven-year loan on one of his tractors and to pay down debt on land.

Much of the rest he cautiously set aside.

"It was a successful year," said Hadden, a 38-year-old with two children, ages 11 and 9. "But most farmers would tell you that just because you're flush with cash, you don't spend it all."

In Oregon, 79-year-old Warren Haught sure didn't. With four decades of farming under his belt, Haught — socked by the high cost of electricity to irrigate crops in high desert country — unloaded his 1,500-acre operation a couple of years ago. He pocketed $1.7 million on the land sale and $300,000 from liquidating everything from haying equipment to plows and tractors, using some of the proceeds on two new homes — one for him, the other for his son's family — while saving much of the rest.

"It was a pretty good deal at the time," said Haught, who now has just 72 acres near mountainous Klamath Falls, on which he grows alfalfa and grass crops. He'd like to get at least 100 more acres, saying demand for hay in China and other Pacific Rim countries is boosting prices.

"It was kind of the perfect storm — what you had this year brought a good price," he said. "Everything seemed to be a good price."

In western Iowa near Kingsley, Jeff Reinking and his brother — partners in a 2,500-acre operation evenly split between corn and beans — recently traded in a 2006 combine for one three years newer — spoils from what Reinking called "the best year for me." He also paid off some debt and put some money aside in case things aren't always so rosy.

"I guess we're getting the better end of things right now," Reinking said. "That has not always been the case."


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Comments

Michael Williams December 12, 2011 | 10:21 a.m.

I'm happy at this. After decades of $2.50 corn and 6-buck soy, it's about time. Many of my friends are farmers, and it's nice to see them improve their lot at a faster clip.

I'd say farmers are looking at some rather hefty input cost increases, tho...from fertilizer, diesel, machinery, storage, to chemicals. Input suppliers generally look dimly at an end producer who starts making more than they do. And, activist-types will surely chime in at those greedy farmers who increase our food costs.

So, it isn't all gonna be rosy...farmers will have to start dealing more frequently with those who want what they made. Envy isn't pretty.

(Report Comment)
John Schmidt December 12, 2011 | 10:29 a.m.

Oh, please. The only reason the farmers are experiencing a good year is because your tax dollars are going to subsidize the expense involved in converting record amounts of corn production into ethanol so that it can foul your gas tank while everyone is forced to pay a little more for their food.

(Report Comment)
Michael Williams December 12, 2011 | 12:32 p.m.

JohnS: The only reason the farmers are experiencing a good year.....
____________

The ONLY reason?

Careful. Your farm economics "slip" is showing.

PS: Who's idea was ethanol from corn, anyway?

And you didn't mention soybeans.

(Report Comment)
John Schmidt December 12, 2011 | 7:21 p.m.

Mike, as the number of acres planted in Corn increased the number that was in other crops, such as oats, soy, and wheat, decreased. The price of all grains is up considerably. Yes there is the usual fluctuation in weather, yields, and local demand, but without ethanol the prices would be lower across the board. I will attack ethanol without regard to who from what political party advocates it or did advocate it.

(Report Comment)
Michael Williams December 12, 2011 | 8:26 p.m.

JohnS: But I didn't ask if you will attack ethanol regardless of who started it.

I asked if you knew who started it.

World market supply and demand, and weather in China, SAmerica, and Ukraine have much more to do with grain prices than you give credit. Sure, ethanol is a contributor, but you would be wrong to believe we'd return to 2-buck fifty corn and 6 buck soy if ethanol went away.

I was around when Pb was removed from gasoline, and I did some of the work on the new MTBE oxygenate that was forced on the oil industry before all the environmental research was done. And after it was in the gasoline and leaching through the soil profile from leaky tanks, our gov't (guess who?) thought it would be a great idea to use SUSTAINABLE ethanol oxygenate made from our food.

Unintended consequences-R-Us. Gotta luv it.

(Report Comment)
Michael Williams December 12, 2011 | 8:30 p.m.

You're about to see another Unintended Consequences-R-Us with the so-called "sustainable" use of biofuels for energy...you know, stuff like growing grass on marginal lands, harvesting it, and making burnable pellets.

Check back with me in 10 years-or-so once this really bad idea blows up.

(Report Comment)
John Schmidt December 12, 2011 | 8:38 p.m.

There is a difference between using a tiny bit vs mtbe and mandating that all gas contain ten percent and subsidizing the sale of nearly pure grain alcohol at the pump.

And no, not $2.50. The dollar is worth less these days.

(Report Comment)
Michael Williams December 12, 2011 | 8:52 p.m.

OK, John....I just guess you don't know who started it.

I don't like the ethanol thingie either, but you are being disingenuous and simplistic when you say ethanol is the ONLY reason grain prices are up.

Nonetheless, I'm happy for farmers. Good on them. They've had 4 good years, if memory serves. Perhaps a few of the small-acreage farmers can stay in business with these prices.

(Report Comment)
Michael Williams December 12, 2011 | 8:55 p.m.

Oh, I forgot, John.

MTBE in gasoline was generally more than 10%....a bit more than your "bit".

Otherwise it would not serve as an oxygenate.

(Report Comment)
Corey Parks December 12, 2011 | 9:52 p.m.

How much did the Gentleman farmers of the country make this year? Does their no farming subsidized land check go up also?

(Report Comment)
Michael Williams December 12, 2011 | 11:05 p.m.

Corey: Well, since my CRP contract is a 10 year one...no, the payments did not go up.

But deer, turkey, and other wildlife are through the roof.

And the savannas placed by my WHIP program are nicely returning ca. 20 acres to the habitat they were pre-Columbian.

Plus, the forest stand improvement from my WHIP program has vastly improved the forest, crop trees, and mast for critters.

So, no increase...I'm pretty much at the mercy of input-cost inflation for a 10 year period and what I do out there since all the received funds go back into the farm. I don't live off the funds. Critters, savannas, and forests do, tho.

(Report Comment)
Corey Parks December 13, 2011 | 12:12 a.m.

I commend you on placing the money you get back into your land as that is what CRP in your case is supposed to be for. I am aware though that there are many actual farms that show up every year asking where they check is even if it is a day late. Many of them have a new truck to be purchased or a vacation to go on. Word on the street is that the older the farmer the louder they demand their money.

What I was actually referring to are the people that do not do anything on their land for money. Not the Missouri CRP program for hunting and such. But the owners who own acres of actual farm land that just sit there. They are paid not to plant corn or soy or anything else so as to not water down the market. Had a friend of the family growing up in KS that owned about a 1000 acres and "raised" hay on it that he would allow someone else to plant and bale. He got the bulk of his money from the Fed Gov't.

And doing just a quick search here is a sit I found that kind of shows the dirty side of "govt farming"
http://www.ewg.org/agmag/2011/06/city-sl...

(Report Comment)
frank christian December 13, 2011 | 9:10 a.m.

Another few notes in the area of farm subsidy. The well publicized farmer that drove to D.C. in his "welfare cadillac" purchased with money he had been paid "not to grow".

Documentary about fs, interviewed rancher that raised race horses was paying our gov't 2% on 9M$ in loans. Asked for statement, rancher said, "I just thank God for a benevolent gov't."

Reagan changed this practice with a limit of $50,000. per farmer. Another documentary detailed a Ag. Dept. letter showing how to bring relatives and others into the picture to produce multiple $50,000. loans. Interviewed four "hands" on one farm, none of which knew that when their boss said "sign this", were becoming part owners of the farm.

Tom Brokaw, NBC anchor, took $92,000 from gov't to assist raising an exotic animal. Impala?

Show me that this waste and theft has truly been stopped in our government and - No, I still wouldn't vote for Obama's crowd because they believe this must be done to create jobs?

(Report Comment)
Michael Williams December 13, 2011 | 9:36 p.m.

Corey: Just a quick note to say that CRP and WHIP are national programs administered by the USDA. CRP originally started as an effort to control grain production, but it has morphed into an erosion control/wildlife support program.

WHIP is Wildlife Habitat Improvement Program. It provides cost sharing for certain practices the participant does on his/her land to support wildlife.

(Report Comment)
Corey Parks December 13, 2011 | 10:09 p.m.

Thanks. I knew CRP was national but did not realize how far. I know different states have it. I guess out of all the conversations with my friends in the department that administer them I took it as it was state funded out of the same money that funds the Missouri Department of Conservation. I do know that most of the money my buddy gives out is for smaller chunks of land that really can not be farmed easily in the first place. But I am sure in other parts of the state it might include farm land that is useable.

(Report Comment)
John Schmidt December 13, 2011 | 10:12 p.m.

OK Mike, take a look at this page. I think it clears up many misconceptions that we had.

http://www.seco.cpa.state.tx.us/re_ethan...

I suppose that I'm tentatively alright with a small bit of ethanol even though it takes on moisture and causes gasoline to degrade, but I'm still against the e85. For the record, I had no idea that they were using that much ether. For the record, the ether was not made from food crops.

(Report Comment)
Gregg Bush December 13, 2011 | 10:30 p.m.

Clearly welfare is
Money that goes to someone
Else, 'cuz you earned your's.

(Report Comment)

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