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Overcoming low prices, high inputs and natural disasters a tall order

Ronnie Petree admits he’s uneasy about meeting with many of his farming customers. The senior vice president at First Guarantee Bank in Jennings, La., knows the numbers aren’t pretty and too often, lately, the faces across his desk are marked with defeat.

Tormented with drought and slammed by hurricanes, in the space of only months much of Louisiana has become a traumatized landscape. Now, resilient Louisianans are getting on with a massive cleanup.

However, the residual economic effects of so much bad news — especially for rural, agriculture-based areas in the south — are only now emerging. When the final numbers are tallied, the long-time banker worries agriculture in his state will be irrevocably changed.

Petree, who works primarily with rice and cattle producers in southwest Louisiana’s Jefferson Davis Parish, recently spoke to Delta Farm Press. Among his comments:

On current agriculture policy…

“(The federal) government isn’t aware of what’s going on in agriculture. We’re backing ourselves into a corner on ag policy the same way we have on energy. If we continue on this track, we’re going to be beholden to foreign nations for our food. They’ll dictate what we eat and how much it costs just like they do at the oil and gas pumps.

“Unless someone wakes up, we’re going to be in some major trouble. The noise from empty bellies will be a lot worse than any squawking over empty gas tanks. Imagine how angry people will be when that happens. When you can’t feed your child properly, the retaliation will come. You can bundle a kid up in cold weather or strip them down in the heat. But when you can’t put proper food in their bodies, that’s when our government will pay the price…

“And what’s on the horizon? A new farm bill and there is no sympathy for agriculture. There won’t be a whole bunch of people fighting for farmers.”

On opening markets…

“Our government’s approach to markets continues to be ridiculous. Cuba is a prime example. How can we have a nation wanting major rice imports and we’re not providing? If we’re trying to hurt Castro, it isn’t working. That idea has failed.

“One farmer told me so well, ‘Every time I see Castro, he doesn’t look malnourished.’

“None of us want to do business with communists. But there isn’t a blanket ban on them. We do big business with communists and dictators and bad leaders all the time.

“Yet, President Bush continues to say he’ll veto legislation to open up trade with Cuba. That makes no sense. But what makes less sense is southern congressional delegations not banding together to override a veto. Farmers are going out of business and almost no one is fighting for them.

“We’re losing infrastructure. Jeff Davis Parish is a perfect example of an ag-based area. When the farmers go out, what will happen? Churches will lose tithes, schools will suffer, civic organizations will be hurt, and small town businesses will go out. It’s a chain effect.”

What is happening in Jeff Davis?

“I believe 25 to 30 percent of the farmers here will soon be gone. They’ll either be forced out or they’ll just get tired of fighting.

“Those that don’t go out will cut back on the number of acres they plant. When that happens, fuel dealers won’t sell as much, the implement dealers won’t sell as many parts. Forget the big items like tractors or combines — it’s a given those won’t sell. Ag aviators won’t fly on as many acres.

“Now, I expect some farmers here to try crawfish. But even that is full of risk. Much of the market for crawfish is in New Orleans. Everyone knows how New Orleans looks right now — they aren’t begging for crawfish…

“We’re getting ready to start the Christmas season. The impacts of all these farmers having trouble are being seen now, but it’ll be much more obvious in a couple of weeks…Christmas is going be really tight in this area.

“A few farmers had a second rice crop to cut. They may have had a 14-barrel potential. After the hurricanes, they may be at 5 barrels. That may not sound like much, but it is.

“In this area, people are beat up. We had the hurricanes come through and now we’re about to lose a bunch of farmers. Any money they got from FEMA or Red Cross won’t last long.

“The only thing saving a lot of people is cleanup work. Some of these farmers have taken their trucks and tractors and done hurricane cleanup to make extra money. Without that, there wouldn’t be any money to live on between now and the time for the next crop loan…

“My family evacuated when the hurricane came through. On our way home, I stopped at a store in Shreveport and there were a couple of farmers in the parking lot. They were from Grand Lake and we just started swapping stories.

“They had evacuated 15 trailer loads of cattle and still had to leave 1,000 head behind. They lost $800,000 worth of cattle. To replace them, it was going to cost $1.2 million. On top of that, their pasture was under saltwater.

“How are they going to recover from that?”

On obtaining 2006 crop loans…

“The process of obtaining crop loans is going to be uncomfortable this year. Bankers will be sitting across from producers who have made the best crop in years and they still can’t pay off the loans. That’s not something anyone is looking forward to.

“I’ve met with a handful of farmers already. It’s very, very hard to work out their numbers and get a positive result. Those in better shape are barely getting crop loans paid. Some are just trying to get the interest payments made.

“On three applications I’m working on, the farmers will have to restructure their term debts. And all this time, you have to remember, their equity is eroding.

“I wonder how the fuel and fertilizer dealers are going to handle this. Guess what happens when a farmer owes the dealers $35,000 and he has nothing after paying the bank? Some of these are major dealers, but they’re still owed. Everyone is going to get hit…

“Comparing a budget from last year to this, inputs are up at least 20 to 30 percent. Using FSA pricing, producers were getting $12.15 per barrel last year.

“The counter-cyclical payment projection was $1.46. This year, they’re allowing 89 cents. Last year, an 81 cent LDP (loan deficiency payment) was allowed.

“What has happened is a decrease in projected crop prices and increased costs. And in the same environment, you’re looking at rising interest rates.”

When did Petree know area farmers were in trouble?

“I started telling businessmen in this area about the possibility of losing farmers early in the summer. There was an obvious problem brewing. After the hurricanes, it was even more evident.

On a government bail-out of farmers…

“I don’t want to see the government involved. But if the farmers are going to be saved, the government will have to come in and help the farmers out. They need another direct payment. That’s the least that needs to happen.

“Listen, I’m all for fighting for freedom all over the world. We have no qualms about spending billions of dollars around this globe. But down here everyone is asking how can we do that and talk about cutting farmers out. The ag portion of the budget is tiny compared to what’s being spent on the wars (in Afghanistan and Iraq).”

On landlords…

“If landlords have a good producer who keeps the farm up and clean, they may have to give a little bit to keep him.

“I met with two guys who are cutting back from 1,400 acres to 200. The landlords are gracious enough to give them the payments this year. Those two guys are going to try more crawfish. That’s the one-year plan.

“But some landlords are paying pumping costs and they’re getting beat up every day too. There are no easy answers.”

On the prevailing mood…

“Over the years, I’ve watched the Louisiana farm community go through some hard times. These people couldn’t wait to get after it. They’d say, ‘Give me another crop loan and we’ll make it. It’ll get better.’

“That’s not the case now. Instead, everyone is saying, ‘I don’t know if it’s worth going on. It isn’t going to get better. We’re a dying breed.’

“When you get that attitude circulating, it makes it hard for anyone wanting to fight for farming.”

On responding to those saying ‘This isn’t a big deal. Farmers are always complaining about something.’…

“Listen, a lot of the farmers around here either went through the Great Depression or have parents who did. They know the score.

“This isn’t about putting money in a farmer’s pocket. It’s about keeping them in business to make sure there’s enough food.

“I keep coming back to this country’s energy policy and how it’s fallen apart. The same is happening to agriculture.

“Before the oil industry crash back in the 1970s and 1980s, we had umpteen oil platforms off the coast of Mississippi, Louisiana, Texas and Alabama. There were an incredible number of great welders and certified workers. During that crash, we lost all those people to other work. Those oil employees didn’t want to go through another crash.

“Well, if we lose 25 percent or more of our farmers, they aren’t coming back. If they can find a stable income elsewhere, they’ll take it. No one wants to put their family in financial jeopardy. They’ll be lost for good.”


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