Commodity prices have tumbled and, based on recent commodity reports, they might fall even more. How much further can they go?
Oh, what a difference a year makes! Back then, we were thinking that a $6 price for wheat was low and $5 wheat was unthinkable. Now, it is threatening to drop below $4.
When I think about the drop in price, a paraphrased scriptural text comes to mind: ?The Lord gives and the Lord takes away….?
We give God all kinds of credit or blame, whenever there is blame or credit to be given. Perhaps we blame God even more than we should, as much of our trouble is man-made and we deserve the credit for it.
Regardless, the drop in income is very real, and so are the consequences. Are we all prepared to experience those consequences?
In that last sentence, the word ?all? is the most important word at the moment.
Agriculture is a major driving economic force in our community. Every business, from the local machinery dealer, the crop services supplier, hardware store and service shop in the area, all rely on agriculture for their livelihood.
Even the retirement community derive benefits as retirees receive passive income from crop sales on owned farmland. Tabor College also benefits from a prosperous farm economy, from annual donations and the occasional donation of land from a generous donor.
When agriculture does well, so goes the rest of the economy in Marion County. The downside of the coin is when it is not doing well, Marion County feels the negative impact, too.
To emphasize these important points, these bits of information should suffice: At K-State?s Risk and Profit Conference last week, along with State Farm Services Director Adrian Polansky and others, I participated in a panel discussion about agricultural policy and the general state of the ag economy.
Director Polansky?s opening remarks highlighted the seriousness of our current economic situation. In operating loan volume, the current year?s volume for American agriculture was at an all-time high.
In Iowa, the average corn and soybean farm was losing in excess of $350,000 in equity in 2015. He did not have current numbers for farms in Kansas, if my memory is correct.
Though they may not reflect the numbers mentioned for Iowa farms, Kansas farmers are likely experiencing similar economic distress. The seriousness of our current state of affairs suggests that unless commodity markets turn around soon, farmers and all businesses must prepare for a time of worsening economic conditions.
This message also applies to local and state governments, as well as publically funded educational institutions.
Though this advice may not be new to them, it bears repeating with an emphasis that now is not the time for raising revenue with more property taxes. Agriculture has already undergone double-digit increases in property taxes as land values have risen. More increases are not sustainable and likely to be counterproductive.
Plus, Gov. Sam Brown?back?s goal of eliminating income taxes on businesses could not have come at a worse time. It was an ill-conceived plan from the beginning, and one that will deepen the effect of a worsening economy as agriculture rides out the storm.
The livestock industry is the only bright spot, enjoying positive returns as producers are still recovering from the devastating effects of the last major drought cycle.
But as they begin expanding their herds while realizing greatly reduced feed costs, they may also be sowing the seeds of their own demise, fulfilling the axiom that high prices is the cure for high prices.
The irony is this: The only way to recover from the current down cycle is for another disaster to appear somewhere else, preferably in another country.
On the horizon, it appears Argentina is experiencing a tremendous surge in rainfall and increased flooding. It is estimated the country may lose as much as 20 percent of its wheat crop. If that happens, U.S. wheat farmers may get some much-needed price relief in the form of more exports to Brazil.
The only concern is, it may not be enough relief, thanks in part that Argen?tina?s production is very small in comparison and markets might hardly take note.
I hate the thought of benefiting from someone else?s suffering. But that?s the economic reality we experience every day. We suffered through several years of intense drought while other farmers benefited from better weather, AND received higher prices as well.
This fall, we may at least get a small boost in prices for next year?s wheat crop, thanks in part to Argentina?s wet weather.
The Lord gives and takes away?.
Paul Penner farms north of Hillsboro; he has been active on state and national wheat organizations. He can be reached at smokeyjay@?embarqmail.com.