Agricultural economy expected to sputter

ST. PAUL — In the past three years, said Marc Knisely, United FCS CEO:

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From left to right, Jessica Fyre, of AgCountry FCS; Marc Knisely, of United FCS; and Paul Kohls, of AgStar Financial Services, testified at the Feb. 17 Agriculture Finance Committee hearing.

ST. PAUL -- In In the past three years, said Marc Knisely, United FCS CEO:

• Corn and soybeans have recorded the highest-ever market year averages.

• Broilers, turkeys, eggs, hogs, beef cattle, feeder cattle and milk have reported the highest-ever calendar year market prices.

• The farm debt-to-asset ratio reached its lowest level since USDA started collecting the data in 1960.

• Farmland values increased by double digits year-over-year.


Expect new realities to set in this year, Knisely said in testimony before the House Agriculture Finance Committee on Feb. 17.

Farmland values have dropped. An AgriBank study found farmland values were down about 9 percent year-over-year in southwest Minnesota, said Paul Kohls, general counsel of AgStar Financial Services.

Corn and soybean prices are below breakeven of $4.30 per bushel for corn and $12 for soybeans.

Large equipment values have dropped 10 percent to 15 percent, and land rents are steady to $25 per acre lower.

An economic slowdown in agriculture is expected because there is a slowdown in global economic growth, the increasing value of the dollar makes U.S. commodities more expensive on the world market, and the Russian embargo is resulting in trade redirecting, Knisely said. In addition, while it appears the U.S. economy finally is improving, wage growth is lagging.

The economic engine that drove the economy the past three to five years is starting to sputter, and every business in rural Minnesota is going to feel it, Kohls said.

The expected decline likely will rifle beyond rural Minnesota and result in lower tax collections.

Agriculture is cyclical, Knisely said, and lenders in the Farm Credit system worked with their customers to have good working capital going into this downturn, yet it will be a struggle for some.


Most will be able to weather the first part of the cycle, he said. Years two and three of the cycle will be more severe, assuming prices follow the projected trendline.

If farmers need financial assistance, they can use Farm Service Agency loan guarantees, restructure their loans or enter farmer-lender mediation.

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