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Producers Worried In Wake Of Farmer Mac Rescue
Ames, Iowa — The recent move to shore up Farmer Mac by a group of Farm Credit System banks has focused attention on Americas’ food producers — and their growing concern about future farm loans in wake of the country’s credit crisis.
“The fact that we’ve seen grain prices fall by about 35 percent in the third quarter, combined with expectations that input costs will continue at current levels, means there is a lot of uncertainty in rural America for farmers and ranchers,” said National Farmers President, Paul Olson.
Corn prices are now approaching break-even levels for grain producers, and an exodus from grain markets by index funds due to the world’s financial crisis, further stokes producer worries. The soybean rollercoaster ride peaked this summer at $16, and now hovers around $10 for the CBOT November contract.
Earlier this year, a cattle producer raising hard-fed 500 pound Holstein steers was earning profits of $160 using $7 corn. Earnings have now fallen to just $105, with corn costs of $4.50 per bu. Additionally, livestock producers must now put down almost twice as much equity in order to finance new animals. With credit tightening, some may choose to leave their barns empty.
Two months ago, June ’09 hog futures were priced at $99 cwt., but have since fallen to $82 cwt. Even though corn has now fallen by $34 per animal to finish, producers are concerned about their returns. And, in dairy — USDA’S All Milk Price last November was $21.60 cwt., but has fallen to $16.28, and some economists believe it could go as low as $15.
Meanwhile, USDA’s September Index of Prices Paid for Commodities and Services, Interest, Taxes, and Farm Wage Rates is up 20 percent from one year ago. On the inputs side, costs are not expected to fall, despite weakening economic conditions and falling crude oil prices. Some analysts predict that next spring, producers in the corn belt states of Illinois, Iowa and Indiana will pay nearly $1000 an acre to put in a corn crop.
Potential ag lender concerns about a producer’s ability to use risk management strategies to lock in a portion of profit, could impact their decision to make credit available. And, if farmers don’t have access to credit, it could begin to impact America’s food supply.
“In this strained economic environment, farm price parity is a concept worth examining,” said Olson. Parity is a measuring device that puts the value of raw farm commodities at a level that equals all the costs, including labor costs and capital costs.
“We encourage producers to meet with their lender very soon to arrange credit for their operation next year, and stay in close contact with them during the fall and winter months,” concluded Olson.
“The fact that we’ve seen grain prices fall by about 35 percent in the third quarter, combined with expectations that input costs will continue at current levels, means there is a lot of uncertainty in rural America for farmers and ranchers,” said National Farmers President, Paul Olson.
Corn prices are now approaching break-even levels for grain producers, and an exodus from grain markets by index funds due to the world’s financial crisis, further stokes producer worries. The soybean rollercoaster ride peaked this summer at $16, and now hovers around $10 for the CBOT November contract.
Earlier this year, a cattle producer raising hard-fed 500 pound Holstein steers was earning profits of $160 using $7 corn. Earnings have now fallen to just $105, with corn costs of $4.50 per bu. Additionally, livestock producers must now put down almost twice as much equity in order to finance new animals. With credit tightening, some may choose to leave their barns empty.
Two months ago, June ’09 hog futures were priced at $99 cwt., but have since fallen to $82 cwt. Even though corn has now fallen by $34 per animal to finish, producers are concerned about their returns. And, in dairy — USDA’S All Milk Price last November was $21.60 cwt., but has fallen to $16.28, and some economists believe it could go as low as $15.
Meanwhile, USDA’s September Index of Prices Paid for Commodities and Services, Interest, Taxes, and Farm Wage Rates is up 20 percent from one year ago. On the inputs side, costs are not expected to fall, despite weakening economic conditions and falling crude oil prices. Some analysts predict that next spring, producers in the corn belt states of Illinois, Iowa and Indiana will pay nearly $1000 an acre to put in a corn crop.
Potential ag lender concerns about a producer’s ability to use risk management strategies to lock in a portion of profit, could impact their decision to make credit available. And, if farmers don’t have access to credit, it could begin to impact America’s food supply.
“In this strained economic environment, farm price parity is a concept worth examining,” said Olson. Parity is a measuring device that puts the value of raw farm commodities at a level that equals all the costs, including labor costs and capital costs.
“We encourage producers to meet with their lender very soon to arrange credit for their operation next year, and stay in close contact with them during the fall and winter months,” concluded Olson.
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