Wow! The year 2009 is just flying by with schools, conferences, farm work and events at the dairy creamery. At each of my stops on the road, inquiring minds are interested in the state of the economy from an agricultural and general economy standpoint. Well here is the halftime report for agriculture.
Protein Industries
There is no doubt that U.S. livestock industries are suffering. The hog industry is mired in a long-term economic slump. The media hype related to the swine flu, officially called H1N1, was devastating to many. A producer on my banking school panel indicated his swine buildings are vacant because the current economic environment would further hinder farm performance and deplete working capital.
The dairy industry economics is following the lead of the hog industry. Larger, more financially leveraged businesses are losing up to a million dollars a month. The smaller dairies are facing similar struggles and many are questioning long-term viability.
The poultry and beef industries have issues, as well, because costs are high and demand in certain segments is facing economic turmoil.
Grains
The grains sector across the country is facing weather, input cost and bottom-line margin issues. Land values in many areas of the country are softening with more properties on the market and evidence of “no sales” at public auctions. Lenders are becoming more conservative in underwriting standards related to collateral and cash flow. Some bank failures are starting to occur in farming and rural areas.
Unemployment
As the recession continues, unemployment rates may exceed 10%. However, if you count discouraged and displaced workers, the level is already above 15%. With 75% of North American farms and ranches depending upon non-farm revenue as a cash flow source or supplement, this could be an issue later in the year.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.