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Veteran Advisor
Posts: 2,992
Registered: ‎02-11-2013
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American Heartland feeling a chill with colapsing commodity prices

10/23  New york times

 

schwartz i believe was the author.

 

somewhat of a good read.

 

wish i was smart enough on how to make a "hot link"  (anything like a hot pepper hot dog ?)

 

 

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Advisor
Posts: 1,406
Registered: ‎06-25-2010

Re: American Heartland feeling a chill with colapsing commodity prices

"seven fat years preceding seven lean years"

 

Veteran Advisor
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Re: American Heartland feeling a chill with colapsing commodity prices

Thank you wc
Senior Contributor
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Registered: ‎05-03-2013
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Re: American Heartland feeling a chill with colapsing commodity prices

As a plains wheat and other minor crop producer this seven fat year time frame was condensed into two fat years interningled with 5 breakeven years. Some of this was also due to wet weather conditions in prairie pothole region where drainage is prohibited.  Hardly an equity building time period for some of us.

Honored Advisor
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Registered: ‎07-18-2011
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Re: American Heartland feeling a chill with colapsing commodity prices

anxious to read it....... but anytime you see someone equating high priced commodities with profitable farming, ya know the article is not researched too well... There are usually reasons the prices were high....reasons that mean less  or no production...

But then usda has confirmed that 4-6 years(more in the southern plains) of drought only happened in 2012 all others were near record production...  farmers are carrying over grain from high price years into low price years.................... sure they are.... Smiley Happy  

 

 

 

 

 

 

Honored Advisor
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Re: American Heartland feeling a chill with colapsing commodity prices

Article has very little to do with raw commodities.  Talks more about manufactured goods like steel.

 

 

Good article and does give agriculture a place...

Veteran Contributor
Posts: 97
Registered: ‎05-11-2011

Re: American Heartland feeling a chill with colapsing commodity prices

I agree with you the good times were not as great as people are writing about it on ag sources. The balance sheet of american agriculture is not as rosy as is being reported. My guess is that we have aged population of farmers alot of baby boomers that are about ready to retire and there balance sheets look good and distort what future of ag sector really looks like. If your a farmer that has been trying to grow and  buy capital for the future your balance sheet is not as rosy as above ones were talking about. Also if your looking to help start next generation of farmers it may be even taken top off your earnings etc. I always see  article above where the farmer farming few hundred acres has made money and now things have gotten tight but can just tighten their belt well here in North Dakota average farm here is around 3 to 4000 acres if your going to make living support a family and be able to replace equipment and make improvements to your farm. The problem is our imputs have more than doubled when fuel prices increased in oil boom but now we have seen hardly any reduction in price of these inputs like fertilizer based on what natural gas is selling for now and what they told us in past we should be seeing NH3 prices around the $200 dollar mark not the $6-700 dollar mark. This also should relate to other fertilzers too! If were going to see 60% reduction in our commodities we also should be seeing it in our inputs too. If this would happen we start to balance out financially where we would could start showing a rate of return. I think either we see price improvement or costs of what we deal with need to come down portionally to bring things back withing business models that we can make money. I am afraid pain of rebalancing is going to get pretty bad both for farmers and ag suppliers everybody will be dealing with smaller margins and is going to loose significant money on inventories of their commodities. This is also going effect even John Deere and Case IH they are going to have to drop price of their equipment in future if thsi is going to work or were going to have to see commodities prices returning to levels to support present prices

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The balance sheet of agriculture is like alot of businesses alot of debt or cost to service the debt is off balance sheet and is not shown on the balance sheet. How much equipment is leased for the season doesn't show up as debt or asset but does show up yearly in cost of doing business. Also if your highering custom help to do some of operations of the farm it doesn't show up on balance sheet but your servicing that capital by doing this. Another effect on the earnings statement is so many farm operations have used one or two year roll of their equipment by buying new in these times spands but if dealers cann't sell roll because of already large inventories of equipment they will be force to continue to make payments and use this equipment. They are going to be shocked at cost of maintennace to keep that equipment running and they haven't cared about maintenance or worried about a maintaining it for the long haul because they have had warranty to cover that as insurance and now that cost is going to show up too. I remember the 1980's i thought they were very difficult but looking at what were facing now this is whole different animal. In the 1980's if could expand at reasonable rents you could start bridging earnings deficit on debt to graduallly redude debt and improve your balance sheet. Also the government also played bigger role in supporting agriculture and helping farmers durning the 80's. AS we stand now expanding is not option because our principal crops of Wheat at least here in Northern North Dakota can not repay the input costs to grow the crop. When we are receiving less than $5.00 per bushel and costs to grow it irequires yields exceeding what is possible to grow on large basis. Wheat at these prices is down from $12.00  or peak of 20.00 (not much sold at that price but alot was sold from 12.00 to 8.00 range so were seeing wheat off more than 75%) but expense just continue to rise.  Corn is not option either gentics is at fringe and price we recieve for corn is probalbly 60 to 70 cents under what major growing area/s recieve for a crop. So you see rotation crop like wheat or corn below cost of production and other specialty crops only slightly above break even prices leaves operation in difficult position. I also expect alot of agriculture have given back good percentage of their profits from previous years in last year and this year. I expect banking and financial sectors are going to want to shore up there positions this coming year and i am betting alot of farmers are going to seriously look at shutting down before they risk any more capital unless financials start improving in coming next couple of months.  I expect to see articles in near future how agricultures balance sheet has detriorated but in fact its just more complete balance sheet without baby boomers assets inflating equity side of balance sheet if they had retired normally like in past generations. The commodity sector of the market is in real trouble and rest of country is just getting a taste of what is to come because its going to lead to layoffs and worker cut backs by next year whole country is going to be talking how bad this is. 

Senior Contributor
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Re: American Heartland feeling a chill with colapsing commodity prices

Some of the story is not even thought out, sucg as the part of the airlines.  Is he assuming that all these people who are laid off or about to be laid off are going to start taking airline trips.  Or even cheaper gas, laid off people don't spend as much on anything.

Honored Advisor
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Registered: ‎07-18-2011
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Re: American Heartland feeling a chill with colapsing commodity prices

I think the writer was trying to find something to keep the article from being totally depressing so he named cheap fuel for airlines off the cuff.

It is not a good pictured when $45 crude is not supporting that industry....   Kind of like how $4 corn and $5 wheat won't support agriculture..... The future doesn't look real bright if he doesn't find something to chear about...