U profs lend

Amy Olson

While farmers in the Midwest lament the farm crisis that has rendered their crops less profitable than expected, University researchers are doing their part to alleviate the farmers’ woes.
Low market prices for crops and poor growing conditions are hurting Minnesota’s agricultural industries and threaten the livelihood of some farmers throughout the state.
With the collapse of overseas markets in Asia and Russia — who are the major importers of U.S. grain — the demand for commodities like wheat, corn and soybeans has dropped, lowering prices below production costs.
Mike Martin, the University’s vice president for agricultural policy, said the University is working to develop new crop varieties to give farmers more alternatives. These crops, including canola grown for oil, might be introduced in the state’s northwestern region, where soybeans and sunflowers have not grown well.
Martin said agricultural researchers are developing disease-resistant varieties of wheat, corn and soybeans. Last year, Minnesota legislators appropriated $3 million to research crop diseases.
The cost of harvesting poor crops will outweigh the economic market value for some farmers, leading some to not bother harvesting at all, Martin said.
Kent Olson, an applied economics professor, said good world-wide weather conditions over the last three years have yielded a surplus of most commodities. Although good weather has produced profitable harvests throughout much of the country, low market prices for crops mean farmers could lose money on the fall harvest.
Mike Schommer, communications director at the Minnesota Department of Agriculture, said Minnesota and other Midwestern states are particularly dependent on exporting agricultural products to overseas markets in Russia and Asia.
Market prices for hogs, cattle and turkeys are also low.
While many of Minnesota’s 87,000 farmers have had good harvests because of good weather, others have not faired as well. For the sixth consecutive year, poor growing conditions and disease have plagued farmers in the Red River Valley in northwestern Minnesota, yielding unprofitable harvests.
While this crisis might seem bad, it’s not the worst in recent years.
Olson said agriculture’s worst crisis in recent history occurred in the mid-1980s. High interest and inflation rates forced many farmers out of business. With an otherwise sound economy, Olson said he doesn’t expect the current crisis to become as severe.
“Even though it’s not as bad as the mid-’80s doesn’t mean it won’t be bad for those who are hit,” Olson added.
With approximately 25 percent of Minnesota’s economy dependent on agriculture and agriculture businesses, losses in the agriculture industries could affect the state’s economy as a whole, Schommer said. About 25 percent of Minnesota’s jobs are in agriculture or related businesses.
Olson said if bad weather ruins crop production in countries in the Southern Hemisphere, like Brazil, where farmers are just beginning to plant their crops, crop prices could rise. Since the harvests won’t occur until January, any price increases would be too late to help American farmers this year.
An upswing in the Asian economy could also raise commodity prices.
Schommer said the impact on Minnesota farmers will depend on the length of Asia’s economic depression. For farmers in northwestern Minnesota, the length of the unprofitable harvests might determine whether they can remain solvent.
Schommer said the state Legislature will likely assist farmers with an aid package after Congress has passed its aid measure. On Monday, Republicans in the U.S. Senate defeated a bill that would have provided $7.3 billion in aid.
While the measure would have provided short-term relief, Schommer said politicians recognize that long-term solutions include incentives to increase overseas commodity exports through economic support of the International Monetary Fund and “fast track” legislation to speed up the trade agreement process with other countries.
Farmers who are in debt and cannot take this year’s losses might be forced to sell their land.
Most farmers use operating loans to cover up-front costs for seed and fertilizer each year, Olson said. With reduced incomes or losses this year, Olson said bankers might be hesitant to issue operating loans next spring. Those who have collateral might be able to get other loans.