The Planted Row: Stand up and be counted
If my email inbox is any indication, the mood in the ag world about the farm economy is rather grim. I often receive articles written by ag economists trying to quantify the situation.
A report from the Federal Reserve Bank of Kansas City noted, “As of the second quarter of this year, Tenth District bankers indicated that more than 7 percent of their agricultural loans were experiencing either ‘major’ or ‘severe’ repayment problems, an increase from just 4 percent in 2015” (http://bit.ly/2du4v5Q).
Brent Gloy at Agricultural Economic Insights said in a recent analysis, “Bankers see increased loan demand, see loan repayment rates falling, and are adjusting collateral requirements accordingly. Given the income situation in agriculture this is not surprising” (http://bit.ly/2gTnPuk).
Given low corn prices and low cattle prices, I can’t really blame those who are worried about the future. We all know that the nature of the farm economy is cyclical, but the concerned producers who call me to chat say this downturn feels different. While Gloy said in his analysis that loan repayment problems would have to increase substantially before a widespread farm credit crisis develops, it’s hard not feel discouraged, especially when you hear stories of young producers scrambling to get financing.
Some cattle producers I speak with seem particularly worried, especially about the prospect of cheaper Brazilian beef entering the U.S. market. Country-of-origin labeling appears to be dead, denying producers a chance to build value into U.S. beef. Another concern I hear often is the futures market. Producers feel that high frequency trading and a lack of a delivery requirement creates a valuation for beef that in no way reflects the actual value of the product.
All of us are subject to forces outside our control, and that can be frightening. U.S. beef producers are facing a global market, and the deck seems to be stacked against them. The good news is that some of your neighbors are trying to do something about it. Meetings led by R-CALF USA and hosted by sale barns are being held around the region, and attendees are learning that some people in the industry are trying to address the forces driving down prices.
One of those people, Kim Ulmer, stopped by my office to visit this week. He is a part owner of Huron Continental Marketing, and he’s been presenting at these meetings. His family used to market over a hundred thousand hogs per year from 1974 to 1990, and he learned first-hand what a market cycle like the one we’re currently facing can do to an industry. He’s taken it upon himself to fight back this time, but he’s going to need your help to do it.
Ulmer has been circulating a survey to people in the livestock industry, gauging their knowledge of and thoughts on the Chicago Mercantile Exchange and the effects of its rules on cattle prices. Ulmer pointed out to me that the CME is a self-regulatory organization, and he’d like to revoke that status and bring the CME under more direct regulation by the U.S. Commodity Futures Trading Commission. He also wants to reinstate a delivery requirement for cattle trading.
In order to get the people in power to listen to him, he needs more survey responses from livestock industry professionals. You can complete the survey at http://bit.ly/2gGJH97. Here’s the thing. You need to fill out the survey, sign it and send it in according to the instructions on the form. You have to put your name and contact information on it for the response to count.
If you want to help the people trying to address the problems in the industry, you have to stand up, be counted, and make your opinions known. Take a few minutes today to fill out the survey and send it in.