A Financial Tsunami has Reached America’s Farmers… But Not All in the Same Way

Harn Soper, founder, Sustainable Farm Partners - A financial crisis has fallen on U.S. conventional and organic farmers alike … but for different reasons with a different impact.

Conventional grain farmers have seen the prices for their corn and soybeans fall to the extent that many struggle to produce at a profit. With grain still in their bins from last year’s harvest and anticipating a fast approaching bumper crop this year, over supply has, as it always does, driven down prices.

Add to this the current administration’s trade war with China, which has led to Chinese buyers canceling grain purchase contracts with U.S. farmers. Conventional grain farmers have seen their export market hit hard, and fear that it will take years to recover. Too much grain and fewer places to sell.

While the administration has promised a $12 billion bailout to farmers as a fig leaf for the damage done by the trade war, many farmers expect it to be too little too late. As reported by the AP, according to Daniel Weinand, a farmer in North Dakota, this could be the death knell for his farm. As a grower of conventional corn, yellow peas and canola on 900 acres of rented land, he qualifies for a penny per bushel for his corn losses. "A penny a bushel on corn, it's not that it's entirely worthless. But it almost is," he said. "I don't know how many more years I can weather."

Chuck Grassley, U.S. Senator and Iowa farmer, will receive a bailout check, but admits that the administration's priority should be on opening "markets and opportunity, not government handouts." This is a sentiment expressed by farmers across the Midwest just wanting a fair price.

Farming 98 percent of U.S. farmland, the financial strain on conventional farmers is causing farmland values to decline, which has hit banks hard as well. When a farmer can’t farm profitably, banks can’t lend. In January 2018 CoBank forecast an increase in Chapter 12 farm bankruptcies. In the months since, the trade war with China has escalated, creating a landscape in which that forecast is becoming a reality. According to Steve Nicholson, senior grain and oilseed analyst for Rabobank, the bank has lost up to 80 percent of the farm market to which they can lend..

Smaller banks are on thinner ice. With looming foreclosures, they are reporting that this year they will have to decline operating loans to many farmers.

Under these conditions, along with a grim forecast for recovery any time soon, absentee landlords are nervous, seeing the value of their land holdings and rents decline, and are beginning to sell. In Iowa, as with much of the U.S. grain belt, over 50 percent of all farmland is rented, creating peril for farmers like Earl Haffner and his son Jeff who operate a multi-faceted, certified organic farm near Panora, Iowa. They learned recently that their landlord wants to sell the 550 acres they rent.

The U.S. Farm Bill adds one last insult to injury for both conventional and organic farmers. Currently held in committee in Washington DC, there is no assurance that a new farm bill will be passed before Congress adjourns. Included in this bill are many critical farm subsidies, support, and research programs, not the least of which is crop insurance. Again, politics has it’s hand in this farm crisis because many non-farm programs are tangled up into this “something for everyone” bill. The politics are high and intense over whose ox gets gored.

For organic grain farmers the challenge is different. It is not organic grain prices that haunt them. They are making money, as their certified organic grains bring prices that are between two and three times higher than their conventional neighbors. Their challenge is hanging on to the ground they rent and working with reluctant financial institutions.

Organic farmers find shelter from this storm supported by the ever-increasing demand for organic food. When the Organic Foods Production Act was passed in 1990, the organic market was valued at just $1 billion. Today, according to the Organic Trade Association, organic sales will top $50 billion, with expectations that sales will experience annual increases in the double digits.

It has been said many times, “when one door closes, another opens”. Who will be the farm, investment and banking entrepreneurs to open new doors to this organic opportunity? A new paradigm is in order as conventional thinking is revisited. The challenge is to create new investment and banking tools that nurture and support consumers’ in growing demand for clean, chemical-free organic food. Conventional farmers need support to make the transition to organic easier, and organic farmers need the opportunity to keep and grow their farms.

It will be up to the private sector, not government, to step up and prosper by partnering with farmers focused on a new day for organic agriculture.

Harn Soper is founder of Sustainable Farm Partners focusing on new investment models that preserve and expand the future of organic farming. Harn@SustainableFarmPartners.com.