Wow there is not really very much I can add to Mike's great post here ...
Except YES the Farmers and or Farm Land has been in trouble for years and I view dried up fields in the Central Valley of California when I drive back and forth from the Bay Area to Las Vegas.
Major problem in California is the water rights being sold to corporations from other countries and other reasons of money and greed ;o(
The Farming Industry is in trouble. I keep hearing that and if it is true...That means America is in trouble.
I hate being a Chicken Little and saying the sky is falling...and I really, really, really hope I am wrong...but there are many cracks in the fabric of many farms...and we do not want to lose them.
I do not think many people outside of farming are really aware that we need higher crop prices to stay afloat.
Crop prices are still way too low for the farmer to make a decent living. Cattle prices have had the bottom fall out of their industry as well.
If you think Farmers going broke does not affect you because you live in a metro community or do not work in the farming industry...you need to rethink your thoughts...because if the farming industry fails...we all fail.
Farmers are perhaps the best number crunchers in the world, most of them are easily the hardest working, and all are a resilient bunch of people. However...
Farmers are at a critical crossroads in 2018 where many farmers will not weather another bad year for crop prices. So what does that mean?
The Banks are getting very, very nervous as the Federal Reserve Board continues to raise the Prime Interest rates and the crop prices are flat at best.
The loss Banks may have when a Farmer is forced to sell out is way higher than any extra interest they may earn with higher rates, in my opinion.
Banks will be forced to make clients liquidate equipment and/or farm land to meet financial obligations. They can only help a client hang on for so long. But they might not get dollar for dollar return on any liquidation.
The ripple effect will mean more land on the market in the fall than is normal...less qualified buyers...so the rich get richer and the poor become tenants or hired hands or go to work somewhere else.
Generational farms could be lost through no fault of the farmer or operator but simply because global and national prices, interest rates, weather, conflicts, and politics are adversely affecting the prices all at the same time.
We DO NOT want to see that happen. And here is why.
When farmers do not make money...they do not buy new equipment...or new vehicles...or new pivots...or take trips...or donate near as much to charity or local causes. They have to tighten the purse strings and that ripples down to many other industries.
For Nebraska...it also can greatly impact taxes. Fewer land buyers will mean lower land sale prices...which will mean lower land values and lower tax revenues. This area of taxes needs to be lower...but not because of a depression. That is a discussion for another time however.
So what is the solution? We need corn prices at least in the low to mid $4.00 range...if it was at $4.50, the farmer could pay the higher interest on any loans and put a few dollars in the pocket. If it is below $4.00, the only way the Farmer can make any profit is if the yields are sky high.
And with fickle Mother Nature...that is always a risk.
So...How Do We Get There?
Many things can impact the pricing quickly...but that usually means a problem somewhere such as drought, too much rain, crops being planted too late...or needing to be replanted to a shorter season crop...hail and wind, trade wars, and war, etc. It could also mean an early freeze cutting yields short in the southern hemisphere, but all of these are only short term solutions at best.
We need to communicate with our local, state, and federal governments and really articulate what is going on in the real world...and what we need to do for the farm to survive...which is every farm on every mile in the Midwest. Not some fancy operation somewhere that is all glitter and gold that you see on the news...but a real farm that is a working farm and those are everywhere but on the news.
Long term, we need to continue to develop...although at a faster rate...more uses for the renewable crops. I feel this has stagnated or slowed immensely.
IE: Find more ways to use the product that benefits society and/or find a wider range of products for the farmers to produce. Hemp is a great example.
One thing that is absolutely needed:
WE NEED TO CUT OUT THE MIDDLE MAN! Right now there simply are too many fingers in the 'till. If you are a middle man...you know I am right.
There are multiple layers of Institutional Buyers who are buying and selling commodities, in this case, crops, and turning around and selling them...or holding them... for a higher amount and thus a profit...for doing basically nothing but buying and reselling. They have way too much control on the markets and any future trends.
Imagine it this way: You are having a garage sale...but the only people you can sell to are the guys that own thrift stores and they determine what they will pay you.
You have no say so in the price and cannot sell it to the small neighbor because the small neighbor has to buy it from the thrift store.
Except....if you have a big, rich neighbor who needs your items...(like an ethanol plant for corn growers)...then you can sell to that big, rich neighbor for a higher price than if you were selling to the thrift store.
But even that big, rich neighbor sets the price.
Why? Because your friend is also having a garage sale and selling the same stuff as you and thus is your competition and is willing to take the price the big, rich neighbor is offering...thus forcing you to take that price as well. Or keep it and make no money.
So you rent a storage unit and then pay to store your items and try to sell them at the next garage sale for the same amount...thus losing money.
The farmer stores the corn at the elevator and pays a monthly storage charge to do that...and most of the time loses money doing that while the elevators reap any profits.
The elevators also have multiple ways of dinging the crop prices...ask your favorite friendly farmer to explain this to you if you do not know what I mean.
We need to get rid of some of the layers...in this current electronic age...they are simply profit takers and unnecessary in my opinion.
I am an eternal optimist...and I know that the industry as a whole will survive long after I am gone...but I do not want to see any clients, friends, or farm families lose their livelihood through no fault of their own. I also hope that they are being careful with their farming operation and looking at all angles for bringing in revenue into their operation.
Until next time...keep planting the seed of life!!
This has been Mike McCann...Nebraska Land Broker...Coming to you from the Farm Land of Nebraska and America!! Visit me at www.mikemccann.com to learn more about the agricultural and farm land for sale market.
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