Winter is the time for farmers to line up credit for the next crop season. This year could be especially brutal for many Minnesota farmers, who’ve been struggling with depressed prices for corn and wheat since the 2014 harvest.
“It is really an issue between lenders and the farmers,” says Ed Usset, a grain market economist at the University of Minnesota. “[Farmers] are not cash-flowing. Do they extend them credit again?”
Lenders offered a “downbeat” assessment of the agricultural economy in a credit conditions survey released in November by the Federal Reserve Bank of Minneapolis. Almost all—91 percent—of Minnesota lenders surveyed reported that farm income fell in the third quarter.
Farmers were making money several years ago, but “it ended with a thud in the first half of 2014,” Usset says. Excess supply in the world market caused wheat and corn prices to fall.
Soybeans kept farmers afloat financially. “That ended with the trade war,” Usset explains, when China placed tariffs on American soybeans in response to tariffs from the Trump administration.
The average age of a Minnesota farmer is over 55. Baby boomers and older farmers are retiring at a rate that outpaces young farmers entering the business, says David Nicolai, a University of Minnesota Extension crops educator based in Farmington. “We’ve also seen ag lenders tighten their loan requirements,” he says, which could force some farmers who are renting land to leave farming before the 2019 crop year.
“You would expect to see continued consolidation,” Nicolai says. State and federal statistics show the number of farms in Minnesota has declined from 74,400 in 2013 to 73,200 in 2017. But nearly two-thirds of them are generating less than $100,000 a year (in revenue and government payments).
Commercial farms—those that bring in between $500,000 and $1 million in sales and government payments—are hardly unaffected. In the five-year period, the number of these farms declined from 5,300 to 5,000, while average farm size jumped from 900 to 980 acres.
Unless the trade battle is resolved and crop prices rise, Usset predicts more farmers will leave. “You can imagine that the small players will decide, ‘This isn’t for me.’ ”