Reversal of fortune: Yields up, profit down

It doesn’t seem right that farmers you should get “kicked in the teeth” for doing a good job.

But, in the midst of recent abundant harvests, it appears the farmers who both feed us and support the local economy are hurting.

The Marion County bankers who finance these farmers, and carry their accounts, say the degree to which the farmers are hurting varies.

But bankers do have different sets of clients with some variability in how well established they are, how well grounded in the business they are, the type of land they farm, what crops they grow, and the bank’s own policies.

Todd Heitschmidt, president of Central National Bank in Marion, said crop and cattle prices are both down, so farmers who produce both, especially in the heavily grassland parts of the county, may be getting hit with a “double whammy.”

Brad Bartel, president at Emprise Bank in Hillsboro, said the biggest impact he sees in his customers is that they may be financing bigger lines of credit.

Despite recent wheat yields that may have been one and a half to double the normal average, Heit­schmidt said, farmers are unlikely to recover from low prices until possibly 2020.

This is also in consideration, he said, that all “normal yields” have increased for all crops.

Heitschmidt said abundance has resulted in low-demand prices that sound more like those quoted from the 1980s: corn, old crop $2.72 a bushel to $2.99 new crop; milo, old crop $2.56 to $2.88 new crop; soybeans, $10.02 old crop to $9.97 new crop; wheat, $3.09 current crop to $3.95 for 2017.

Bartel said the lower prices have been at least partly offset by lower fuel and fertilizer prices, and some stabilization in equipment prices.

“We have seen customers having to address expenses differently over the past few years,” he said. “Customers have leveraged positions to a low percent debt. They were able to carry over money when things were good.”

Bartel said it has helped to be able to work “in a long-term relationship.”

Heitschmidt said long term relationships held together well for the most part for farm customers and banks until prices dropped in 2015.

He said he has farmers looking now for at least part-time or seasonal work off the farm, and some for full-time employment.

Even more often, Heit­schmidt said, it is the farm wife who is looking for an off-farm job to maintain the family income.

Employment opportunities are low for many of these people, he said. Some may be forced to sell land.

Heitschmidt said the tight farm income could lead to lower land prices over the next two to three years.

“Bottom ground prices and producers will hold better,” he said. “Marginal cropland and pastures will have higher price decline.”

The statistics Heit­schmidt receives for declines in land prices aren’t well defined for Kansas yet, but perhaps settle in at 2 percent decline. Better defined declines show a 5.6 percent drop in Iowa with as much as 4 percent declines in other states.

For farmers who may need a government-backed loan to maintain business, Heitschmidt said the Federal Service Agency has announced it is out of funding until October, about when fall harvest is finishing.

He agreed this is all happening when crop yields of improved varieties and all-around productivity have never been better.

A battered profit-margin is a tough reward for a job well done, the bankers agreed.