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Growers likely to be caught by credit crunch

Already hammered by drought and storm damage, growers are being caught in a "price squeeze" as production costs rise and agricultural lenders become more cautious, said a Texas AgriLife Extension Service economist.

In an economic climate where agricultural lenders were already cautious, the current credit crisis is just more bad news for producers, said Dr. Carl Anderson, professor emeritus and AgriLife Extension agricultural economist.

"I hate to be the bearer of bad tidings," Anderson said. "But the economy has been weakening for some time. Producers are going to be caught in an even greater squeeze between low prices (for grains) and high productions costs, particularly nitrogen fertilizer."

The last year has been a textbook example of how world markets have become interdependent, said Anderson, who served as a senior economist for the Federal Reserve Bank in Dallas from 1969 until 1978 before returning to work for AgriLife Extension.

Cotton prices are particularly revealing of this interdependence, he said. Though drought and hurricanes greatly reduced U.S. cotton production, there are still approximately 10 million bales in U.S. reserves, which has greatly driven down prices farmers hope to receive this year. "It's a classic case of supply and demand," he said.

Anderson said a weak consumer economy in the U.S. has lowered the demand for cotton and other textiles. "We hoped to export much of these stocks, but overseas demand, even in China, has also been weakened," he said.

Meanwhile, production prices – especially the cost of diesel and nitrogen fertilizer – continue to climb, and producers need to reconsider doing business as usual, he said. "Producers need to take a close look at their production costs," Anderson said. "But that does not mean completely reducing necessary expenses like good quality seed and adequate fertilizer. They should develop a 'realistic' estimated cash flow plan as soon as possible and discuss it with their lender as to any adjustment needed to obtain a line of credit. The credit crisis is affecting funds available to lend as well as length of loans."

The following summaries were compiled by AgriLife Extension district reporters this week:

CENTRAL: Milder temperatures were the norm across the area. Topsoils were drying up again. Many producers were making their last cutting of hay for the year. Winter food plots were being planted for livestock and wildlife. Producers were working cattle and weaning calves.

COASTAL BEND: Post-harvest field work continued. Most of the area needed rain. Livestock were in good condition. The second crop rice harvest began, and the sesame harvest was under way with yields ranging from 600 to 1,000 pounds per acre.

EAST: Cooler night temperatures slowed forage growth. Most producers continued to cut and bale hay. Armyworms were increasingly becoming a problem in many areas. Livestock were in good condition. Post-Ike cleanup continued in some counties.

FAR WEST: Onion fields were prepared for fall seeding. Sorghum was past blooming stage and filling grain. Corn was in the dent stage and in good condition. The fifth cutting of alfalfa was in progress. Cotton needed more heat units to mature and produce maximum lint and seed. Wheat and oats were planted as producers took advantage of the late-summer moisture. Range and pasture conditions were good due to recent rains.

NORTH: In some counties, soil moisture was adequate with cooler temperatures prevailing. In other areas, conditions were fairly dry despite the rain brought by Hurricane Ike. Small grains that were planted early for grazing began to suffer from lack of moisture. A large number of counties harvested small grains for grain instead of grazing. Open weather allowed the corn harvest to be wrapped up. Soybean and sorghum harvests neared completion. Cotton was in fair to good condition with bolls opening and harvest between 10 percent to 40 percent complete. Oat planting was under way, with planting from 10 percent to 75 percent complete. Bermuda grass was doing well. Silage sorghum was growing well under irrigation. Growing conditions for forage have been excellent, and some forage producers were making their last cutting in order to clean up their fields for the year. Livestock were in good condition, but the herds have been reduced, which cut the demand for hay. Feral hogs were wreaking havoc on pastures and hay meadows. Armyworms were on the march, and mosquitoes were plentiful. Pastures were in good shape for the end of September.

PANHANDLE: Temperatures were above average all week. Soil moisture varied from surplus to very short with most areas indicating adequate to short. Corn was mostly fair to good with the harvest under way in some counties. The cotton crop was opening bolls, the condition varied from very poor to excellent, but the crop needed more heat units. Some sorghum was harvested, but most of the crop needed more warm days to mature. Wheat planting continued. Range conditions continued to improve with most areas reporting fair to good. Cattle were in good condition.

ROLLING PLAINS: Fields and pastures in parts of the district began drying out after a wet late summer. Producers were just recently able to get back into fields and continue planting wheat. The sorghum crop was in excellent condition because of warmer weather. Some of the dryland cotton crop turned around and looked like it might now be worth harvesting. Irrigated cotton looked good. Pastures were in good shape and were expected to maintain livestock through the winter. Stock tanks and rivers were full. But while some parts of the Rolling Plains benefitted from recent moisture, other parts needed rain. Producers in the dryer counties were waiting to decide whether to harvest crops. Some early planted wheat began to turn yellow. Grass was getting short, and water was becoming limited. Later-planted cotton looked good. Pasture conditions improved, but hay supplies were tight. Cattle producers could be in for an expensive year if there is a hard winter.

SOUTH: Saturated soils and cooler temperatures continued throughout the region. Irrigation applications to winter wheat and oats rescued crops, but caused producers added expense. Producers in other parts of the region began to plant cabbage. Spinach planting should begin soon, weather permitting. Condition of livestock improved considerably due to good-quality forage produced on native range and pastures after recent rains.

SOUTH PLAINS: Weather was mild, with highs in the 80s and lows in the mid-50s. Soil moisture was short to adequate. Cotton responded well to the warm, dry days and was in fair to good condition. Some producers were getting ready to apply cotton harvest aids. Sorghum made good progress, but many of the later-planted fields needed more time to mature. In other areas, the sorghum harvest was under way with about average yields. Wheat planting was in full swing. The corn harvest continued with average yields. The pumpkin harvest continued with demand at an all-time high. Peanuts were in fair to good condition and continued to mature. Pastures and ranges were in fair to good condition. Cattle were in good condition.

SOUTHEAST: Condition of livestock and forages continued to improve. Madison County lost some pasture from flooding related to Hurricane Ike, but the loses were limited. However, a lot of fences were damaged in the region. Timber damage was moderate, according to the Texas Forest Service. The hurricane destroyed the follow-up/secondary ratoon rice. The soybean crop was damaged too. The rain improved pasture conditions, but only temporarily. Windy conditions without further rainfall dried pastures out again. Some hay baling resumed.

SOUTHWEST: The region received less than 0.5 inch of rain during September. The year-to-date cumulative rainfall total is about 56 percent of the long-term average. Forages, which were improved with August rains, were showing moisture stress. Even if rain is received in early October, it is doubtful that there will be sufficient growth before the first hard frost to allow for over-wintering livestock. Fall crops made good progress under heavy irrigation. The peanut harvest gained momentum. The cotton harvest continued. The fall cabbage harvest began with excellent quality and high yields reported.

WEST CENTRAL: Warm days and unusually cool nights continued. Most counties remained extremely dry and in need of rain. Field preparation efforts increased. Some producers reported heavy infestations of armyworms. Small grain planting was under way. Cotton producers were applying harvest aids where bolls were beginning to open. The dryland cotton outlook does not look good this year, but irrigated cotton was doing much better. The milo harvest was completed with good yields reported. Livestock were in fair to good condition with supplemental feeding continuing in many areas. Feeding costs continued to rise. Producers were cutting herds because of feed costs. Irrigation of pecan orchards was in full swing.

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