In my job I get to meet a lot of interesting people, mostly farm people, many come from a farming legacy. Being a fourth or fifth generation farmer is common and farming land that has been in their family over a hundred years is not too uncommon.
Modern day farmers are constantly bombarded with new information, new technology — a virtual myriad of complex production and marketing systems. In one way or another most farmers find a way to draw on the experience of their father or their grandfather, or friends and neighbors who have been farming for a long, long time.
In the spring of 2009 much of that infrastructure no longer applies. We simply haven’t been in times like these — ever. The Great Depression had similar financial basis, but those were different times — more than half the people in the United States lived and/or worked on the farm back then.
At the time of the Great Depression a majority of the U.S. House and U.S. Senate came from the farm and virtually every politician in Washington, D.C., was only a generation away from farming. As all of us involved in agriculture know all too well, that’s not the case anymore.
Now, the world of farming is far more restricted, with only a small fraction of the population even living on a farm, much less making a living off the land. As one prominent North Carolina farmer recently told me, “We are trying to navigate through unchartered waters and the risk of running aground is higher than ever.”
It is hard to find an area of agriculture that is not negatively touched by our country’s current financial crisis. Really, it’s not our ‘country’s’ financial condition, it is our ‘world’s’ financial condition.
Growing crops has always been the easy part — farmers know how to grow crops. Technology and hard work has kept American agriculture well ahead of production problems when it comes to growing a crop.
I don’t think many, either farmers or those in the farm industry that provides new and exciting technology every day, would argue that the basis for growing crops is the fertility of the soil. Making fertilizer more efficient and more reliable is one of the bases upon which the Land-Grant concept of agricultural research, teaching and outreach is based.
To say the supply of fertilizer worldwide is fragile is about as euphemistically as I can put it. Farmers got a glimpse of that fragile nature last summer when they saw fertilizer prices double, triple, quadruple; then fall about as fast as they had climbed.
That instability is relatively unimportant compared to the impact the ongoing global financial crisis is having on fertilizer. A cargo ship loaded with fertilizer and/or raw product from which fertilizer is made from North Africa or one of a number of countries in the former Soviet Republic bound for America requires roughly $20 million to get from point A to point B. Bankers who used to stand in line to finance such a profitable cargo don’t call anymore — the risk is too high.
Even if the supply of fertilizer on a global basis was stable, the challenge of getting a ship-load of raw material to North America for processing is another case of sailing through unchartered waters.
The use of global positioning satellites for laying out and plowing fields, wonderful new plant varieties that contain genetically altered, multi-stacked genes and variable rates for everything from irrigation to seed has made farmers more efficient at growing crops.
Selling that crop has had its ups and downs, but the bottom line is people have to eat and they want and need fiber for clothing. That demand hasn’t changed, but its size, shape and total face surely have changed.
It is a staggering thought that there are more middle class Chinese than there are U.S. citizens. India is not far behind. The demand for better food and better fiber is surely going to go up on a global basis, but who will be able to afford the finished products is another matter.
As I sit here in early March, grain prices look good compared to past years. On the other hand, if I planted 1,000 acres of corn and wanted to sell 75 percent of my expected yield on the futures market for $4.10 bushel, could I do it?
Will the current financial crisis prevent buyers from getting the credit they need to buy crops that are not yet planted? Can farmers afford the risk of growing crops on the hope that someone will have the money to buy them? A few months ago, most learned people would have said, yes. Now, most say, I hope so.
I prefer to be the optimist, but my optimism was shaken by a recent conversation with a farmer in South Carolina — by any measure a highly successful farmer. In 2008, he sold 400 acres of two-ton per acre peanuts for $580 per ton. He sold his best ever yielding corn crop for $4 and up per bushel and a two-bale per acre cotton crop for about 90 cents a pound.
Despite impeccable credit, he can’t get long-term financing to buy the irrigation equipment he needs to irrigate the rest of his 2,000 acre farming operation. It’s the same story for the new tractor and GPS system that would allow him to develop variable rate seeding and pesticide application strategies.
I remember sitting in a farm banking meeting early last spring and hearing one of the country’s top economist say very clearly, “We are not in a recession and we are not going into a recession.” Just this week, I saw another equally prestigious economist, responding to a question about a worldwide depression say, “We are not in a depression and we are not going into a depression.”
In the Southeast for sure the 2009 crop will be one of the latest planted — ever. What is planted will be affected by the financial crisis. And, how these crops are grown will be affected by financial decisions.
Waiting to pull the trigger is surely going to make hitting something easier — the question is what.