How agriculture works thread

[ovrszd]

Farm incomes are not that bad, in fact they're far above average.

Farm Income Is Forecast Far Above Average for Second Year

If the forecast holds true, 2021 and 2022 would be the highest years for farm income since the record $123.7 billion in 2013.

www.agriculture.com

2021 was a good year. 2022 will be a really bad year for row crop farmers. Input costs are up horribly. If they have less than a bumper crop the smaller, younger guys will be in trouble after harvest.

 

[5030]

Farm incomes are not that bad, in fact they're far above average.

Farm Income Is Forecast Far Above Average for Second Year

If the forecast holds true, 2021 and 2022 would be the highest years for farm income since the record $123.7 billion in 2013.

www.agriculture.com

When you factor in the liabilities versus the income, a lot of producers are walking a very thin line today. Most producers I know aren't the sharpest businessmen either and most are dependent on crop insurance provided by the government, IOW agricultural welfare. As the central government heads toward insolvency that will dry up. Then what? 30 trillion or whatever it is, isn't sustainable and one of the prime drivers in the record inflation we are seeing today. There are other factors at play but agricultural welfare is a big part.

Myself, I take anything from the mainstream news with a grain of salt, including that article.

I prefer hands on in the trenches predictors.

Just an example for you... Last spring, 46 urea was 18 bucks a unit. This year it's 38 and climbing every week. Last spring ORD was averaging $2.20 a gallon, presently, it's bumping 3 bucks a gallon, however the price per bushel of grain is stagnant.

No way can a producer absorb those differences and survive, government welfare or not.

if you are even slightly over extended this year on new equipment or whatever, you won't be making your notes on time and finance companies frown on that, JD and CNH finance arms are still finance companies.

I predict there will be some really good auctions coming up this fall as marginal producers shed their liabilities. Bet Tractor house will be getting a lot thicker with their weekly flyer and it will also impact selling prices on late model used equipment adversely. You cannot sell it if no one has the money to buy it. Simple economics.

I may be FOS, but I don't think I am. I watch the markets closely.

 

[ovrszd]

Yep. And the clincher is the number of things that are stacked against the farmer today. Diversity can't even escape this mess. Normally diversity gives a farmer one product that will create enough profit to pull thru a hard year. In my area none of it is going to be highly profitable. It's a hard row to hoe.

 

[5030]

What I'm curious about is my friend down the road that owns and operates a very large certified seed business in hybrid corn and soybeans and how his pre growing season sales are progressing (I need to swing by and ask).

I have a feeling that the smart producers are cutting way back on orders for this upcoming growing season, just based on the rapidly increasing cost of inputs, least the smart ones should be. The others will plod blindly along and their end game will be insolvency or worse because remember farmers have families and mouths to feed and mortgages to pay just like normal every day folks do.

Other guy across the road from him specializes in round bales of wheat straw for tub grinders to grind for cattle feed and he sure has a pile of rounds outside and inside his open front barn that haven't decreased in quite sometime from what I observe. Beef producers around here sold off large amounts of cattle last year (I eliminated all my cattle last fall). Was getting to costly to feed them versus what beef was getting on the market. I suspect he's in a world of hurt already. Winter time is his busy time.

 

[ovrszd]

What I'm curious about is my friend down the road that owns and operates a very large certified seed business in hybrid corn and soybeans and how his pre growing season sales are progressing (I need to swing by and ask).

I have a feeling that the smart producers are cutting way back on orders for this upcoming growing season, just based on the rapidly increasing cost of inputs, least the smart ones should be. The others will plod blindly along and their end game will be insolvency or worse because remember farmers have families and mouths to feed and mortgages to pay just like normal every day folks do.

Other guy across the road from him specializes in round bales of wheat straw for tub grinders to grind for cattle feed and he sure has a pile of rounds outside and inside his open front barn that haven't decreased in quite sometime from what I observe. Beef producers around here sold off large amounts of cattle last year (I eliminated all my cattle last fall). Was getting to costly to feed them versus what beef was getting on the market. I suspect he's in a world of hurt already. Winter time is his busy time.

A "smart" row crop farmer cannot cut back. Hafta think about that awhile for it to soak in. Row crop farmers are very vulnerable.

 

[ArlyA]

My family members do contact growing for some grains, doesn't pay very well but it is a guaranteed income. Just some of that they grow is contracted. The farm multiple crops and some take more moisture than others, so they have some weather protection in doing that. They also have fields over a large area, so again, some weather protection. Hail is a big crop destroyer there. Years ago I asked one member about crop insurance and seems he said it cost so much, it wasn't worth it. I'll ask that again when I get the chance. Then they save up for bad years. Oh and I asked about the effect of the price of fuel and he said using minimal tillage, it wasn't that big a deal.

 

[5030]

The old moldboard plow went to the scrap yard a decade ago least around here. Everything here is no till but along with that comes the bug problem.

Richard is correct, row crop farmers cannot really cut back unless the go to fallow fields and there isn't any income in that.

Will be interesting to see what they do this upcoming year. I still maintain that the ones that are over extended will probably bite the bullet. They cannot weather more than one bad year and around here, last year wasn't good. Too much rain. So bad around here that they are taking corn off now or what they can get that hasn't fallen over. Beans weather cold and snow much better than field corn. The stalks get brittle and the roots rot and over they go. Combines cannot pick up corn on the ground. Me, I keep thinking about buying a new tractor or 2 but I'm waiting to see how farm auctions go around here. There are quite a few late model tractors than may wind up on the block and I have the money squirreled away to buy one or more if the price is right.

Brings me to another point and that is, I'm wondering if the current uptick in tractor prices (used, not new) is going to come to an end, at least for the post 4 units. I can see the value increasing on the pre 4 units as there are fewer and fewer available (not made anymore) and well cared for ones are commanding a steep price today.

 

[K5lwq]

No doubt this will be a tough year for row crop and really all farming and industries. But I see it as a cycle that has happened as long as I can remember.

I remember 1973 and 1974 being horrible years for cotton. I remember stories of farmers committing suicide and losing everything they had. Even long time family farms struggled. But 1975 was one of the best cotton years ever for those that could plant.

In the late 80’s in Noxubee County Mississippi 68 farmers folded. The next year even more quit. It changed the landscape there for ever. Now all that land is in timber and catfish ponds.

There will always be ups and downs in farming. I just hope this cycle will not be as bad as it appears.

 

[ovrszd]

Oh and I asked about the effect of the price of fuel and he said using minimal tillage, it wasn't that big a deal.

I was in my friend's office two months ago when they contracted their diesel fuel for this coming year. They contracted 250,000 gallons. It was $1.10 per gallon higher than the previous year. That's $275,000 increase.

In the total dollars of their operation that isn't very much. But consider this. That comes out of the profit margin. It's not recoverable. At the end of the year they'll have $275,000 less in their hands. That leaves a mark.

 

[5030]

I roll my fuel costs into operating expenses with the lubricants, filters, tires and visits to the dealer for items I cannot address myself and let the accountant do his thing with it.

Fuel and maintenance costs are always a large part of the bottom line.

I know nothing about cotton farming but I do know that any farmer holding outstanding notes and having a bad year or multiple bad years is gonna be very tense. Maybe to the point of Chapter 13 tense.