Sad day for this farmer

[LouNY]

Being multi millions of dollars in debt is daily business for any large operation regardless of product. Good friend of mine signed a $7M loan in February to plant his 2018 crops. Loan matures 31 December. That's just the borrowed money to put in the crop. Now add the machinery debt and land debt. Very common for him to carry $15M of debt. And don't kid yourself, the banks will sell him out in a heartbeat if he gets behind.

That's a viscous circle having to borrow to put a crop in, paying the interest on borrowed money out of a thin margin. Borrowing for operating expenses is completely different then borrowing for growth.

 

[ovrszd]

That's a viscous circle having to borrow to put a crop in, paying the interest on borrowed money out of a thin margin. Borrowing for operating expenses is completely different then borrowing for growth.

Yep.

Someone mentioned milk prices compared to years ago. The corn producers in this country are selling at 1980 prices. Pencil that.

 

[LouNY]

It's hard to say whats going to happen to the US farm economy, prices going down, cost going up.
I know that dairy in the North East is a losing business, Beef can't pay the bills going thru the auction houses, you need to direct market to come out ahead.
And that's a major headache in so many ways.
Grain prices are marginal to break even. I don't know how hog farmers can do it. **** I bought a supermarket ham for Easter, a butt ham for $.77 a pound,
when we send a cow or pig to slaughter cutting and wrapping will run $.89 to $2.90 a pound depending on if it's USDA inspected or state inspected, sausage and cured meats
cost more for processing then they sell for in the stores. Same with chickens if you pay to have them processed it will cost more then store prices.
$14 dollar milk is 1960 prices. In the end I'm afraid it will be the consumers that finally lose, when all the independent farms are gone and 2-3 major corporations
completely control everything with no family operations left to provide an alterative bend over it's coming.

 

[ovrszd]

I think government involvement is what's holding prices at a stable level. I also think large operations must expand their production to keep a profit margin. Murphy Farms is a large hog operation near me. They have their own cutting and packing operation. Their hand is in it all the way to the consumer's store of choice. My friend is strictly a grain operation, corn/soy beans. He wants the government out of it. His operation is closely monitored and controlled by USDA. He has very little wiggle room of his crop ratios.

I don't know what the answers are either. I'm afraid we are spoiled by cheap food prices. Sure doesn't feel like it when you have $150 of groceries in one cart. But upon closer inspection, a lot of waste is discovered. Very large percentage of purchases are pre processed and packaged for quick use. That's expensive.

In regards to family operations, getting harder to define that.

 

[Larry Caldwell]

Yep.

Someone mentioned milk prices compared to years ago. The corn producers in this country are selling at 1980 prices. Pencil that.

Low inflation in America has been balanced on the backs of farmers. The days when you could farm 40 acres are long gone, there are only a few 400 acre farms left, and you pretty much need 4,000 acres to make a good living. Dairy is labor intensive. We had a neighbor once who was milking 1,000 cows, and it took a staff of 40 employees to keep up. He wanted to expand, so bought several thousand acres and started to develop it, but the NIMBYs wouldn't let him keep cows, because they claimed it would cause smog. No joke. He eventually went bankrupt, and this was a family farm that he had inherited from his father.

 

[dickfoster]

I think government involvement is what's holding prices at a stable level. I also think large operations must expand their production to keep a profit margin. Murphy Farms is a large hog operation near me. They have their own cutting and packing operation. Their hand is in it all the way to the consumer's store of choice. My friend is strictly a grain operation, corn/soy beans. He wants the government out of it. His operation is closely monitored and controlled by USDA. He has very little wiggle room of his crop ratios.

I don't know what the answers are either. I'm afraid we are spoiled by cheap food prices. Sure doesn't feel like it when you have $150 of groceries in one cart. But upon closer inspection, a lot of waste is discovered. Very large percentage of purchases are pre processed and packaged for quick use. That's expensive.

In regards to family operations, getting harder to define that.

I think you've got the nail on the head, it's largely government involvement. Government subsidies help the big corporate operations much more than the small and family run operations. End unneeded substies and the playing field will level. It's those deep pockets buying influence in Washington that you can't compete with. Subsidies are a bad thing even though the excuse for starting them was to help the family substinance farmers back in the 30s.

 

[ovrszd]

I'm all about free enterprise with minimal regulation.

If government involvement and subsidies were ended suddenly the first farmers to fail would be the small ones. This would cause the large ones to get larger because they'd buy the little ones for pennies on the dollar. Then product prices would adjust to truly fit supply and demand. Demand for all AG products would go thru the roof because of reduced supply. Cost of living in this country would skyrocket. Wages would have to respond. Inflation would go rampant. Possible economic collapse would follow.

After the dust settled the surviving farmer would be solvent again. If he desired he would liquidate some assets to a strong demand. In the end that large farmer (corporation) would be fatter. We as consumers would be much leaner. Sugar on your Corn Flakes would be unattainable.

 

[smstonypoint]

This thread prodded me to check the latest cost of milk production as reported by the USDA -- USDA ERS - Milk Cost of Production Estimates. Here are data by herd size for 2016 (the latest year currently available).

Average total costs ($/cwt.) decrease with herd size, but the largest herd size category (1,000 or more head) is not covering those costs.

Steve

PS --- There appears to be an error in the spreadsheet as the data are identical for the 50-99 and 100-199 cow sizes.

 

[Larry Caldwell]

I think you've got the nail on the head, it's largely government involvement. Government subsidies help the big corporate operations much more than the small and family run operations. End unneeded substies and the playing field will level. It's those deep pockets buying influence in Washington that you can't compete with. Subsidies are a bad thing even though the excuse for starting them was to help the family substinance farmers back in the 30s.

Subsidies were established because milk production is seasonal. You have to overproduce during parts of the year to avoid shortages at other times. Milk in the store would fluctuate from $1/gallon to $20/gallon through the year without subsidies. Children need a lot of milk.

 

[smstonypoint]

Subsidies were established because milk production is seasonal. You have to overproduce during parts of the year to avoid shortages at other times. Milk in the store would fluctuate from $1/gallon to $20/gallon through the year without subsidies. Children need a lot of milk.

Actually, most milk is now processed (e.g., cheese, butter, ice cream, nonfat dry milk, etc.) rather than consumed as fluid milk -- Trends in Beverage Milk Consumption | Dairy Herd Management.

"Prior to the 1980s, more than 50 percent of the milk regulated by USDA's Federal Milk Marketing Order program was in beverage milk production. By 2015, only 33 percent of milk in the Federal Order program was in fluid milk. During this time, per-capita consumption of beverage milk declined by 25 percent to approximately 18 gallons per person. Milk price volatility, the proliferation of imitation milk and bottled water products, reduced consumption of ready-to-eat cereals, and legislation limiting school milk options all contributed to the decline in milk sales."

I will have to check, but I think the data are similar for California.

Steve