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Honored Advisor
Posts: 18,055
Registered: ‎05-13-2010
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So where`s this farming thing headed?

I hear the biggest farmer I know is in money trouble, some have thrown in the towel but were quietly absorbed last winter. Farmers that are hanging on want to keep up appearances and don`t want anyone to see them sweat, because a sign of weakness may give their landlords to get all the rent up front.  And those that are exiting have access to landlords which is as treasured as The Fonz`s little black book.

 

Going on 3 years now of hoping to spot land, the crew is near mutiny, rations and drinking water are running low...sharks are circling the ship...tried to catch a seagull but too weak to hang on. 

 

But seriously, there are great migrations off of farms every decade or 2.   I think there was a migration in the 50`s and 60`s as some left the farm for seemingly better employment opportunities in town.   Then of course in the 1980`s farm crisis, we lost farmers, but the 400 acre farmer that hung on now has 2,000 acres, that was just a normal expansion of technology and economics.  About 10 years ago the runway lights were turned on for young family members to come back to the farm, grain was getting profitable and there was opportunity, it lasted 5 years and now we`re going on the 5th year of treading water.

 

But the 2,000 acre farmer probably can`t take one more bad year, the last $5 chip was placed on the roulette table, one last try to win back loses incurred earlier in the evening.  Equity was burned keeping up with the Jones` thinking the downturn was a 2 year maximum aberration, instead burning equity has become the new normal.

 

But we saw this with hogs, in `94 they went to 8 cents and the smart farmers quit, some hung on and in `98 hogs hit 20 cents and that was it, if you wanted to be in the hog business you custom fed for Murphy.  During the decade of the 1990`s the industry completely changed drastically.  In 1990 you had 200 sows farrow to finish and sold to one of a few local buying stations, by 2000 if you were still in the hog business you were custom feeding at different barn sites.  There are exceptions of course, but that is how that industry evolved.  

 

It sure looks like we`re at a "8 cent hog" moment in grain farming...but I don`t care how bad $3 corn is, it ain`t no 8 cent hog bloodbath. 

 

We`re kind of at the point where weather yield reductions is the only plausible price salvation in the grain market.   But we have to stipulate that the weather problems don`t occur in the US to bail us out Smiley Happy   but the whole world is in the same boat.  I just don`t see Pakistan for instance buying surplus market moving pork and soybeans from us.  

 

Unless there`s a real favorable Black Swan, I can`t see why grain farming won`t go through a similar sea change as the hog industry did in the 1990`s.  

 

As always just my 2 cents.