FarmPolicy

December 15, 2019

Farmers Hurting From Lower Profit Margins

Donnelle Eller reported on the front page of today’s Des Moines Register that, “Faced with declining profits, some Iowa farmers are defaulting on cropland rents — a largely unheard of move given the intense competition for the state’s fertile farmland and a sign that financial pressure and debt are mounting.

“With farm real estate debt across the United States at its highest levels since the farm crisis years of the early ’80s, farmers are increasingly nervous about trying to turn a profit while paying sky-high rents.

“As a result, more growers are severing ties on rented land that some have farmed for decades — and they’re doing it with the spring planting season nearly upon them.”

The Register article explained that, “”We had someone call today and say ”Don’t cash that check right away,” said Mark Gannon, owner of Gannon Real Estate & Consulting in Des Moines, on March 1. ‘Another farmer called, wanting to renegotiate their lease. … There’s some stress out there.’

“Farmers tell managers and landowners that bankers are tightening credit, with growing losses and dwindling reserves built up during farming’s boom driving lending decisions, experts say.”

Ms. Eller added that, “U.S. farm income in 2016 is projected to fall for the third year in a row, with farmers squeezed between tumbling corn and soybean prices and stubbornly high costs for land, seed, fertilizer and other inputs needed to grow a crop, experts say.

Grain prices have sunk 50 percent or more since 2012, when drought drove prices to record highs.”

Today’s Register article also noted that, “Dermot Hayes, an ISU agricultural economist, said land rents and other costs need to drop more, given where commodity prices have landed.

“‘Cash rents haven’t declined in proportion with revenue,’ he said. ‘That adjustment needs to occur.'”

Also, today’s article stated that: “[Dale Kooima, president of Peoples Bank in Rock Valley in northwest Iowa] said losses for corn and soybean growers are being exacerbated by a downturn for livestock producers. Cattle producers have struggled to post a profit, while pork producers have seen mixed results, he said.”

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