Millions of farm acres are set to go unplanted with corn this spring as persistent wet weather leaves U.S. farmers facing an agonizing choice: whether or not to risk trying to raise a crop, the Wall Street Journal reported. Heavy, repeated rains over the past two months have left fields saturated throughout the critical planting period for corn, typically the biggest U.S. crop by acreage. Farmers in rain-soaked states now must decide whether to file insurance claims on unplanted fields (potentially making less money off their farms), switch to less-profitable crops or take their chances sowing corn that may not have time to fully mature. The inclement weather adds another challenge to a punishing period for farmers, seed and chemical suppliers, and tractor makers. Trade disputes with major U.S. food importers including Mexico and China have cut into crop prices, adding pressure to farm incomes, after several years of bumper harvests swelled global grain supplies.
For the past five years, the 18 states that produce the majority of the U.S. corn crop had an average of 90 percent of their fields planted by the end of May, according to data released on Tuesday by the Agriculture Department. At the same point this year, 58 percent of the corn crop is in the ground, the Washington Post reported. The outlook for soybeans is just as dismal, with 29 percent in the ground compared with 66 percent in years past. In individual states, the gap is even more severe. Just 22 percent of the corn crop had been planted as of May 26 in Indiana. Soybeans stood at 11 percent. “Week after week, farmers haven’t been able to get out in the fields to plant corn and soybeans,” said John Newton, chief economist at the American Farm Bureau Federation, noting that this was the worst planting day on record since the USDA began tracking such data in the 1980s. “The frequency of these disasters, I can’t say we’ve experienced anything like this since I’ve been working in agriculture.” From the Rocky Mountains to the Ohio River Valley, millions of Midwesterners have endured unremitting rainfall, hundreds of dangerous tornadoes and debilitating flooding brought on by swollen waterways that are spilling into already saturated grounds — much of it farmland. The Senate voted last week to approve a multibillion-dollar aid package for communities nationwide that have been hit by natural disasters, including those affected by hurricanes in Puerto Rico and the South, wildfires on the West Coast and the flooding that continues to inundate those in the Midwest. The House’s version of the bill is being held up by Republicans who want it to include funding for Trump’s proposed wall along the U.S.-Mexico border. The House is expected to vote on the measure next week.
U.S. dairy farmers that have seen an unprecedented number of bankruptcies in some parts of the country are looking closely at what sort of boost they may get from the Trump administration’s trade aid package, Bloomberg News reported. Retaliatory tariffs have robbed dairies of around $2 billion, said Beth Ford, the chief executive officer at Land O’Lakes Inc. Meanwhile, banks are de-risking their dairy portfolios, and operating loans have become harder to get, Ford said. U.S. farmers generally are struggling to remain afloat as the tariffs spat with China plays out. Dairy exports to China, once a fast-growing market, fell by more than 40 percent in the first quarter of 2019, according to the U.S. Dairy Export Council. Meanwhile, dairy farmers only got about $250 million in the first round of government payouts, according to Ford. “What do farmers want? They want trade. Nobody wants a payment,” Ford said. “If they have to have an interim payment, they would like something more reflecting the loss in the market that hit them.”
Stalled trade talks between Beijing and Washington are exacerbating a slump in the U.S. Farm Belt, and few farmers believe an aid package being assembled by the Trump administration will be enough to compensate them for the economic damage, the Wall Street Journal reported. Agriculture has been among the U.S. economic sectors hit hardest by the year-long trade conflict with China. Now that a deal has slipped from the grasp of negotiators, farmers are facing the likelihood that the deepest downturn in the agricultural economy since the 1980s could be prolonged. The U.S. Department of Agriculture, in the absence of a deal, is cobbling together a farm-relief program that will total somewhere between $15 billion and $20 billion, according to Agriculture Secretary Sonny Perdue. This is the second such aid package since the trade fight began. Many farmers doubt that the scale of that aid package is anywhere near sufficient to make up for a trade spat that has shut them out of a lucrative Chinese market of 1.4 billion consumers.
The Trump administration will seek additional financial aid for farmers stung by the U.S.-China trade war, a top White House official said yesterday, adding that President Donald Trump and President Xi Jinping of China are likely to meet in Japan next month to continue negotiations, Politico reported. “I think we had an authorization of $12 billion,” Kudlow said, referring to the dollar amount the Trump administration has already pledged in aid to farmers. “We will do it again if we have to. … We will do that." On Friday, the U.S. and China wrapped up another round of trade talks with no resolution as to when tariffs on hundreds of billions of dollars worth of goods would be removed. “This is a risk we should and can take without damaging our economy in any appreciable way,” Kudlow said. Read more.
In related news, China plans to impose tariffs on $60 billion worth of U.S. goods, the finance ministry said today, after the U.S. escalated a trade war with a tariff hike on $200 billion of Chinese products, Reuters reported. China will impose tariffs on a total of 5,140 U.S. products from June 1, the ministry said in a statement today. Read more.
Lower commodity prices means financial stress is mounting for many in agriculture, and one attorney said it’s showing up with many farmers that don’t qualify for chapter 12 today, AgWeb.com reported. “Many farmers have debt that's greater than you can file using a chapter 12 bankruptcy; the limit is $4,411,400,” said Joe Peiffer, attorney and owner of Ag & Business Legal Strategies in Cedar Rapids, Iowa. Peiffer specializes in bankruptcies. He said that the current cap for bankruptcy is too low. “I have a farmer who filed about a year ago, and he was bucking the limit then, which is a little less, not much less, and he's farming about 1400 acres, all but 80 which is rented,” said Peiffer. Legislation introduced by a bipartisan group of lawmakers was recently introduced in Congress called the Family Farmer Relief Act would raise the debt limit for chapter 12 bankruptcies to $10 million — a move Peiffer says can’t come soon enough. “It's important to give farmers an escape hatch if they have to downsize in order to make it work,” said Peiffer. “Otherwise, the taxes will be an impediment that will stick with them a long time.” Mark Greenwood, chief diversified markets officers for Compeer Financial, sees first-hand the financial stress some producers are facing. He said it’s vital producers take an accurate financial snapshot of their operation by examining their financial position. Read more.
To read the full bill text of the "Family Farmer Relief Act," please click here.
Banks that serve U.S. farmers are increasingly restructuring existing loans and boosting the collateral needed for new ones as the numbers of late and missed payments have risen, Bloomberg News reported. While regional banks are healthy, they’re clearly boosting their defenses against the risks they face. In March, a report by First Midwest Bank in Chicago showed past-due agricultural loans up 287 percent in 2018 over the previous year. Meanwhile, cases handled by the Iowa Mediation Service involving farmers unable to make payments rose 20 percent. While regional banks are healthy, they’re clearly boosting their defenses against the risks they face. In March, a report by First Midwest Bank in Chicago showed past-due agricultural loans up 287 percent in 2018 over the previous year. Meanwhile, cases handled by the Iowa Mediation Service involving farmers unable to make payments rose 20 percent. Farmer bankruptcies in six Midwest states rose 30 percent to 103 in 2018, according to the Federal Reserve Bank of Minneapolis. To hold back the tide, Farmers National Bank in Prophetstown, Illinois is restructuring more and more loans to keep growers solvent while trimming the bank’s own risk. Conditions that prompted lenders to ask for more collateral rose 2.5 percent in the fourth-quarter of 2018 from a year earlier, according to a survey by the Federal Reserve Bank of Kansas City, which covers parts of seven states. Meanwhile, as of January 1, average interest rates on farm operating loans had edged up to 6.07 percent, its highest level since the second quarter of 2010, according to February report by the Federal Reserve Bank of Chicago. Read more.
As bankruptcy rates among American farmers near record highs, U.S. Senators Chuck Grassley (R-Iowa), Amy Klobuchar (D-Minn.) and Tina Smith (D-Minn.) reintroduced the "Family Farmer Relief Act of 2019" on March 27 to raise the chapter 12 operating debt cap to $10 million, allowing more family farmers to seek relief under the program. Click here to read the full text of S. 897.
