2019 marks the sixth consecutive year of U.S. net farm income being down more than 50 percent below the peak resulting from the ethanol boom and Chinese soybean purchases in 2013. So, why aren’t more Mid-South farmers going out of business?
The answer is a testimony to the staying power of growers in the face of adversity and to the foresight of the authors of the 2014 farm bill, according to Greg Cole, president and CEO of the Little Rock, Ark.-based AgHeritage Farm Credit Services.
“When I spoke at this conference in 2014, net farm income had fallen 50 percent in that one year,” Cole told participants in the Mid-South Agricultural and Environmental Law Conference in Memphis, Tenn. “I made a bold prediction that if this environment lasted for an extended period of time we could lose the bottom 25 percent of our farmers. That hasn’t happened.”
Cole, whose organization provides nearly $1.4 billion in operating loans to Arkansas farmers annually, listed several reasons he believes producers have survived the steep decline in prices and other adversity.
“First of all, we started this cycle with a very, very strong balance sheet and a lot of liquidity,” he said. “I’ve been loaning money in the Arkansas Delta for 34 years. In 2012, farmers across this river made more money than in any other time in my career.
“The other thing is we started a new farm bill (the Agricultural Act of 2014), and, guess what, it’s actually working, especially here in the Mid-South. The farm bill safety net has turned out to be a lot surer than originally thought, and that’s been a big factor.”
Land values, meanwhile, have remained relatively high and that’s been helpful for farmers needing to refinance and for lenders to use as collateral. Interest rates have also remained low, especially compared to what farmers faced in the 1980s.
“And the reality is when you have a rapid shift like that, our farmers have made some half-time adjustments and have done some things to increase their efficiency to minimize losses and generate profits,” said Cole, who made several references to playing football in the Southeastern Conference.
“The good news is we still have most of our farmers still on the farm,” he noted. “The other side of it is there still is a lot of time left in this game, and there is some negative current coming down this Mississippi River.”
Cole displayed a slide showing projections of net farm income from the Food and Agricultural Policy Research Institute and USDA. “These are suggesting nothing is really going to change in the near-term unless there is a game-changing event. We all know that forecasts aren’t always accurate, but this suggests we could be in this kind of environment for some time.”
Cole said one of the biggest negatives facing farmers can be summed up in two words – too much. “We have too much commodity in certain crops; we have too much water and way too much moisture; we’re way too late on our planting – the latest since they’ve kept records; we have way too much arguing going on with our trading partners – at first with China and now we have Mexico in the mix; and our farmers are having to rely way too much on politicians to restore our profitability in the form of the Market Facilitation Program payments we got last fall and that are in play now.”
For more information on the conference, sponsored by the National Ag Law Center in Fayetteville, Ark., visit www.NationalAgLawCenter.org.