May 6, 2016
As planting season continues, alarming anecdotes about the Mid-South ag sector’s financial health are being told in every corner. You’ve heard them: businesses reliant on farmers are laying off employees, banks have refused long-time farmers loans after working with them for years, veteran farmers are retiring rather than risk losing even more money.
How tough are things in the Delta? In January, Greg Cole, CEO of AgHeritage Farm Credit Services, spoke at the Arkansas Soybean Association Annual Meeting. Some three months later, he spoke at the Mid-South Agricultural and Environmental Law Conference. Sadly, Cole’s views haven’t changed much since January.
“The start of the current environment really began in 2014,” said Cole at the soybean meeting. “When prices fall as hard as they have and expenses don’t fall at the same rate, it sends you from an extremely good profit scenario to a very bad scenario.”
Agriculture is a cyclical business and the current down cycle may be in place for a while, warned Cole. At the ag law conference, Cole cited a Purdue University 100-year study “that shows good times last five to seven years. Not so good times last 10 to 12 years. I’m not suggesting we’re in a 10-year downturn -- I certainly hope not. But when you look at the fundamentals we could very well be in for a five to seven year roll that started back in 2014.”
For those with long memories, Cole doesn’t believe the Delta will see a return to the nightmare of the 1980s. “We don’t have the leverage today that we had in the 1980s. However, the concentration of debt is a lot more today with fewer producers than it was back then.”
While the federal safety net will help, “it may not sustain all producers through a long period of low prices and profits. We could lose the bottom 25 percent of all producers in the Delta during this cycle if it extends for as long as some economists suggest. The positive news is the top 25 percent will have the opportunity to expand.”
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