The recession appears poised to roll out across farm country, and Minnesota farmers are still scratching their heads over how to use the new federal farm program as income insurance for the coming spring planting season.
For instance, southern Minnesota farmers who lead the nation in growing sweet corn and peas for canning have until March 2 to signup for a new fruit and vegetable program. The purpose of this program is to protect the acreage planted in those crops for future eligibility in farm programs for the larger crops, such as corn, soybeans and wheat should markets change.
At the same time, farmers in west-central and northwest Minnesota complain they are getting conflicting information about how those larger crop programs are supposed to work. Congress passed a new multi-year farm program in 2008, and regulations and instructions are still trickling down from Washington to county offices in rural Minnesota.
No matter how cold it was at the time of this writing on Friday morning, the spring planting season is coming fast. Winter is the season for farmers to study market signals from worldwide demand, available supplies of major commodities, macroeconomic influences on markets, input costs, and farm program “safety net” protections, and then make planting decisions for the new growing season.
Market analysis from major grain and commodity brokerage houses provided on the Minneapolis Grain Exchange Web site shows how difficult assessing market conditions can be this year. Export demand is keeping prices strong, by historical standards, in part because the U.S. dollar is weak. But the global recession threatens purchasing power everywhere, including for energy commodities, and the giant Dutch agribusiness bank, Rabobank, is quoted as saying U.S. corn prices could fall by at least a dollar a bushel, to $2.50 a bushel, if demand for ethanol falls.
One market commentary, from Austin Damiani of Frontier Futures Inc. at the Minneapolis Grain Exchange, sums up the threats to agricultural commodity prices. “Grains are primarily a generic asset that takes money to buy, and it takes a compelling fundamental situation to break movement from larger monetary and investment conditions.
“‘Deflation’ and ‘demand destruction’ are the biggest factors in the present environment – not spring acres, carryout, or global demand,” he added, using market jargon for farm planting intentions, grains moving through markets and demand projections.
Altogether, the market assessment clearly means Minnesota farmers are no longer immune to the whims of the worsening national and global economy. And that should have farmers scrambling to get the coming year’s crops enrolled in federal price and income protection programs.
That isn’t easy, notes bank official and economist Kent Thiesse at MinnStar Bank of Lake Crystal. Farmers are finding that enrolling in 2009 farm programs is far more complicated than in recent years, he wrote in a Feb. 16 advisory to farm customers. And new federal payment limitations mean bringing tax information from recent years to verify average adjusted gross income for the farm and its operators.
The enrollment period for crops and land in the new program’s major “safety net” provisions does extend out to June 1, Thiesse adds. That does reach well past the planting season except for rare instances when some flooded land or damage crops may be replanted. Regardless, it is well after most farmers have weighed market signals, anticipated production costs, studied farm program benefits and then made production decisions.
Meanwhile, corn prices are bouncing around $3.50 a bushel, or about half of what they were a year ago, and soybeans have fallen under $9 a bushel at most country markets. Wheat prices are all over the board depending on protein content for Northern-grown Hard Red Spring Wheat traded on the Minneapolis market. But market signals from Chicago and Kansas City for other types of wheat are not supportive for the coming year in spring wheat country.
The outlook for Minnesota agriculture is confusing and complicated, and should encourage cautious use of the federal farm program. Our agricultural economy may not be all that different from our industrial, finance, retail and services sectors reeling in recession. All areas Minnesota’s economy must be included as policymakers consider economic recovery ideas.