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Honored Advisor

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.

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12 Replies
Veteran Advisor

Re: So where`s this farming thing headed?

BA   -  Is  this  liken  to ,   On  Golden  Pond  ,  Strawberry  Fields  Forever,   Where  The  Green  Grass  Grows  ( GREW ) ,   or  George  Strait  singing , Troubadour  -   Or  This  Cowboy  Rides  Away Smiley Frustrated     

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Veteran Advisor

Re: So where`s this farming thing headed?

So where is this farm thing going....nowhere
Other than down
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Veteran Advisor

Re: So where`s this farming thing headed?

BA, what a difference a decade (+1) makes. I started farming in 2007, and quit in 2018. The funny thing is that commodity prices are nearly the same, its just the inputs that have changed. When I started, I bought Pioneer soybean seed for $30 a bag, now those beans are $60-$70 a bag. In 2007 you could still rent land around here for $75 an acre. Now average land rent is somewhere around $100-$150 an acre for non irrigated ground. Yields have gone up since 2007 and prices are nearly the same, so why are farmers hurting so bad? Well, the "good times" inflated everything, you know this. I'm not sure we see crop farming go the way hogs did in the 90's just yet. There are too many out there willing to run a tractor and combine for darn near nothing, but very few people will smell like hog ***** unless they are making money. When Stamp and Boersen went broke it seemed like somebody else just took on the unprofitable land rent and the process continues. So as long as somebody is willing to raise crops cheap, it makes no sense for the big ag companies like Cargill, ADM, or the Andersons to jump in. The inflated prices over the past decade made for some very greedy operators, so until enough pain is felt to "correct" inflated land rent, equipment purchases, or over the top living expenses, well.... Where's farming headed? IMO its just going to be a stalemate for a while, even if trade with China improves, the fund money is heavily invested elsewhere. Just my $0.02

 

Just a side note. This is the first year in over a decade that I won't plant a crop. To be honest I thought I would miss it more. I don't miss the stress of working a full-time off farm job, farming a couple hundred acres, and trying to run a small seed dealership. I enjoy the livestock trucking that I do now. I haul hogs full-time for an Iowa based hog farm that supply's hogs and feed to farmers here in Michigan. We have a new 10,000 hd a day Clemens plant nearby and I've got a regular run. Life is good!

 

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Honored Advisor

Re: So where`s this farming thing headed?

Hey Blacksandfarmer, there`s no doubt there`s a huge supply of willing farmers, but are they going to get the capital?  I think that`ll be the big thing and now that we`ve seen how risky farming can be, if someone gets a $1 million windfall how many after a year or 2 more of this would want to "farm until it`s all gone"? 

 

A couple years ago Bill Graff did a podcast on "will today`s grain prices afford new machinery?".   If losing money becomes the norm in farming, you just won`t be able to run a new combine over enough acres to pay for it and if you buy a used machine the repairs will eat you alive.  Right now new machinery is bought by independently wealthy farmers as a tax break...basically if it wasn`t for taxes, new machinery wouldn`t be bought, the actual need for new is secondary.  

 

In the late 80`s early 90`s it was determined that farming is a business, not a way of life, however what kind of business model is farming?  Would the sharks on the Shark Tank tv show give us $1 million for a 30% share of our business?   I don`t think they would be interested in a business with such low annual returns.  

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Veteran Advisor

Re: So where`s this farming thing headed?

k-289 = I prefer "the old man is down the road"

https://www.youtube.com/watch?v=JbSGMRZsN4Q

 

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Veteran Advisor

Re: So where`s this farming thing headed?

76cat   -  Agreed  -  Bravo  -   along  with   73,280  being  enough  weight ,  pulled  along  with  a  Cat  1693   Smiley Wink 

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Veteran Advisor

Re: So where`s this farming thing headed?

BA, no I doubt a shark would want any part of farming. Farming is a long game with risk's most people couldn't stomach. Those that can make it work are blessed with a heck of a good life though. Sometimes I wonder if the abundance of those willing to farm is an ingrained thing that goes back to the beginning when God told man he was to be the caretaker of the land. Nobody is closer to the land than a farmer.

 

I'm working close with the hog industry now that is very integrated, the risk is shared by many. I'm not sure we see that yet in crop farming. I think crop farming and cow calf operations are very similar, too much risk and not enough guaranteed money for large corporations. I wish you the best of luck getting the crop in. This downturn is just a bump in the road.

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Advisor

Re: So where`s this farming thing headed?

Glad that you found a paying job, BlackSand, and that you have an upbeat attitude. Life is always what you make it, your attitude determines how happy you are going to be, and I wish you the best in your new endeavor.

 

I do wish that the federal government would target supports such as crop insurance and subsidies to beginning and small farmers but that is not the goal...the goal is always cheap stable food supplies and it seems to be working as there are no shortages that I know of.

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Highlighted
Advisor

Re: So where`s this farming thing headed?

Livestock production and process is Mexico bound.

 

USA will unit train grain to Mexico just like now.

 

Big grain is a loser but the govt will keep bailing extra Cash to crop folks....i.e. Corps.

 

its becoming all quasi govt....just like USSR communal farms.

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