Ag crisis ripples through economy

by

Cindy Stewart, Kittson County Enterprise

April 8, 1998

 

Editor's Note: This is the second in a series on the farmcrisis in Kittson County. The family farm is in jeopardy. How is it affectingfarmers and the community?

There's a strong connection in Kittson County, betweenagriculture and the economy.

The small communities which make up Kittson County aredependent on agriculture.

That's the message Ron Anderson, a farmer near Hallock,and Rob Rynning, a farmer from Kennedy, wanted to get across to legislatorslast week.

"This crisis is not just affecting the farmers butthe whole economy of these communities in northwest Minnesota," Andersonsaid.

From the farmers perspective, the crisis means cash flowproblems and the impending doom of not being able to continue in agriculture.

Kelly Turgeon, director of the Farm Service Agency office,said in varying degrees, the crisis is affecting farmers from the Red RiverValley to Caribou.

"Financially, they are not able to maintain a stableincome to continue operating the farm. The result is some farmers will notcontinue,' can not continue" Turgeon said.

He said others may have to scale back their operations,some may have to experiment with new crops and some may re-enroll land inCRP.

Kittson County Agriculture Extension Educator Curtis Nyegaardsaid he agreed it is affecting all farmers.

"It is affecting everyone of the farmers in the county.They won't all go out of business, but they are being affected," hesaid.

Earlier this year, Nyegaard esti-mated about 35-40 farmersmight not be planting a crop this spring.

He said those numbers are estimates and could be high butthere still could be farmers who, within the next couple of weeks, decidethey can not continue farming.

And what does Nyegaard tell a farmer who is wondering ifthey should continue on the farm?

"I tell them if they have found something else tomake money at, they should consider it. Look at the investment they makein farming they work hard all year long and then lose $40-$50 an acre,"he said.

The North Dakota State University Extension Servicerecently did a survey, showing the losses growers have experienced on wheatand barley acres last year.

Average net farm income of Red River Valley farms enrolledin the North Dakota and Minnesota farm business education program plummeted62 percent last year.

Average income for these farms dropped from $97,000 in1996 to $37,000 in 1997.

"Last year more than a quarter of the farms in theprogram had a negative net farm income," Andrew Swenson, farm managementspecialist for the North Dakota State University Extension Service, said.

In large part, the low incomes resulted from staggeringlosses on wheat and barley acres.

Farmers in the study lost, on average, $45 on every wheatacre they planted and this figure takes into account only actual costs incurred,with nothing subtracted for operator labor, management or equity investment.

Average loss on every acre of barley was $46.

Nyegaard said some farmers can not withstand the loss andtherefore have to call it quits.

Anderson, who farms west of Hallock, told the legislatorsthat they feel disaster program payments, which are not part of the 95 FarmBill, may have helped some of these farmers get back on track.

He said in 1993, growers in Kittson County burned theirwheat crop. During that year, farmers had good crop insurance and disasterprogram payments and it helped to offset the poor crop.

He said in 1993 and 1994, Kittson County growers received$14 million in disaster program payments.

"We don't have that now and it's really starting toshow up, Anderson said.

He said with the 95 farm program, disaster program paymentswere taken away and now the failing farm economy is trickling into otherparts of the economy.

"We had to help the legislators understand the strong,connection between agriculture and the businesses in Kittson County,"he said.

And, many businesses in the communities are feeling theaffects.

Todd Johnson, Johnson Oil Co. in Hallock, said they areseeing the affects in a lot of ways.

He said people are behind on paying last year's bills,let alone this year's payments.

They are seeing' less customers in general and some ofthe customers they do have are in uncertain situations.

"It's a trickle down affect and it's not just us,but all businesses are seeing the affects," Johnson said.

Steve Holmgren, manager of. the Harvest States Elevatorin Kennedy, said one of the concerns affecting his business, and in general,all elevators, is less volume of grain.

"In the grain portion of the business, we handle thecommodities the farmers raise. When there is reduced volumes, it tightensup our ability to make money or meet commitments," Holmgren said.

The elevators handle a certain amount of grain per yearand even though there are lower volumes, there are the same amount of bills,he said.

On the farm supply side, Holmgren said credit is a "realnightmare." The crisis creates problems with managing accounts receivablesand securing accounts.

Farm Credit Services of Grand Forks estimates that of its1,770 farm customers in the northern valley (including Minnesota) with short-termoperating loans, about 20 percent have less than acceptable credit, meaningthey are experiencing cash flow difficulties.

Of this 20 percent, about 60 percent derive a majorityof their income from small grains. The size and number of farmers whichfit this category has more than doubled in the last three years.

An additional 25 percent to 30 percent is on the brink,one crop year away, from joining the aforementioned group. That's almosthalf of the Grand Forks FSC customer base, or close to 900 growers, whoare at or near the brink of unacceptable farm credit because of poor cashflow.

And not only is. the failing farm economy affecting farmrelated businesses, it is having an indirect impact on mainstreet.

Kittson Memorial Hospital Administrator and member ofthe Hallock Chamber of Commerce, Rick Failing, told a group of legislatorsat the March 7 farm meeting in Hallock that the situation is and will continueto have an impact on the communities in this area.

He equated the communities' economy to a three legged stool:one leg retail and service, the second leg industry and the third agriculture.

"Unfortunately our economy is precariously standingon a two legged stool, one leg being retail and service and the other legagriculture. There is no third leg," Failing told the group.

Even before the farm crisis, it's been difficult to balanceon the two legged stool and now faced with five years of poor crops andlow prices that wobbly two legged stool is about to collapse, he said.

"This situation will no doubt create pressure on thesecond leg of this stool, retail and service," Failing said.

The retailers up and down main street in these communitieswill feel this crisis as much as the farmers will, he said.

So, the question is what can be done to help growers andcommunity members survive this crisis. Next week, this series will addressthe question of what can be done, and what has been done to help turn theeconomy around.
rs andcommunity members survive this crisis. Next week, this series will addressthe question of what can be done, and what has been done to help turn theeconomy around.