Farmers’ prospects for ’99 not too rosy

Trying to forecast Northern Colorado’s agricultural scene for the next 12 months is as iffy as trying to forecast the weather.As at least two ag experts said recently, “My crystal ball is foggy.”
Supply and demand and the weather are factors that not only intertwine but always muddle any ag forecast. But for many experts, this year’s image is muddied even more by disturbing global factors, particularly declining beef and grain exports, and by the passage last November of Amendment 14.
In other words, 1999 could be a tough one for ag producers and ag businesses alike. And growth, if there is any, is just a fuzzy image somewhere over a misty horizon that no one is willing to call.
The corn picture, in which yields and production were up and prices were down, reflects the gamut of what happened in many of Colorado’s crops in 1998. As of late last year, harvest figures projected the second-highest corn production in history in both the United States and Colorado, said Jim Geist, field services director for the Colorado Corn Growers Association. Yet, corn exports shriveled.
Even though Colorado doesn’t export much corn because it consumes virtually all it grows, when U.S. corn exports drop, “our neighbors that export corn come closer to our markets in Colorado, and that creates a surplus here, causing prices here to drop,” Geist said.
Another factor that must figure in next year’s corn projection is the effect of Amendment 14, because 11 percent of the state’s corn production each year is consumed by hog growers. That figure could change dramatically or not at all, depending on how many of Colorado’s hog growers opt to quit the business rather than comply with new environmental-protection regulations, which the amendment puts into effect this year.
Of course, no one knows what hog producers will do, but Geist said that the state Department of Agriculture has stated that “we could lose from 30 (percent) to 50 percent of the hog industry.”
“A lot (of the corn forecast) is going to depend on the perspective of corn farmers on future markets that may or may not exist, and that’s going to be directly related to the price they received for their 1998 crop, and that will translate into their planning intentions for (this) year,” Geist said.
Last year’s wheat numbers are similar to corn’s: unusually high yields and very low prices. But Bill Warren, a longtime dryland wheat farmer south of Keenesburg, puts a different spin on those numbers and speculates that the high yields and low prices could help stressed wheat farmers in 1999.
Relief could come if the United States makes large sales of wheat to countries whose production is down, such as Australia and Argentina, he said. Other relief could come from “donations” of wheat to Russia.
Furthermore, Warren said, “the odds are against a second consecutive year of such high yields in the U.S.”
Warren further speculated that the upside of 1998’s low prices could be a reduction, or at least a stabilization, in worldwide acreage which, in turn, would ease chances of another year of surplus.
“What I’m looking for (in 1999) is a 20 (percent) to 50 percent recovery from the lows we had,” he said.
Ag businesses had a strained year in 1998, and it’s going to be a real question in 1999, said Al Shivley, president and CEO of American Pride Cooperative in Brighton.
“Changes in the value of the dollar on the world market changes the costs of all the inputs ag producers depend on,” Shivley said. “While that’s good for the producer buying it, it’s tough for the ag business selling it.”
Ron Treiber, owner of Cache La Poudre Feeds in Fort Collins, agreed, saying that 1998 was a no-growth year, and in any business, if you’re not going forward, you’re going backward.
Feed prices in 1998 followed grain prices: down. Yet livestock feeders didn’t flock to the feed stores because prices for cattle and hogs fell too, forcing some feeders to cut herd size and a few to exit the business altogether.
“The overall picture for 1999 is not rosy,” Treiber said. “At best, it may be a little bit better. Gross sales in terms of dollars could be the same or lower. Tonnage, or volume, could increase, but only if livestock prices rise,” he said.
This year doesn’t look too good for farm-implement dealers either, said Duane Wallen, president and part owner of Bi-State Machinery Co., a John Deere dealership in Greeley.
“Everybody is scrambling, trying to reduce inventory because it looks like sales will be down in 1999,” Wallen said. “They were down 30 percent last year until about August, and then (last fall) we jumped to being down only about 14 percent,” he said.
Wallen expects surplus commodities to continue to build, driving process down further, but, “in the fourth quarter of ’99, we might start to see some recovery,” he said.
The 1995 farm bill also contributed to 1998 surpluses, many observers said. Although it was anticipated, the bill, which includes phasing out government subsidies for unplanted crops, is being blamed for production swings, with the greatest swing coming last year, causing over-production and sending commodity prices down across the board, observers said.
But Jim Smith, director of the Weld County Extension Service, said that farmers are accustomed to making adjustments following any year of over-production, whether it results from changes in government farm programs or unusually high yields and near-perfect weather.
And it’s that practice, plus the point Smith and Warren agree upon, that the odds are against another year of record yields, that help brighten the 1999 picture, Smith said.
Still, a big part of the 1999 ag picture remains: What will the ag lending community do this year as farmers come off a year of scarce profits?
Fred Bauer, senior vice president of Eaton Bank and an ag lender for more than 25 years, doesn’t see a big problem in 1999, because today’s farmers are different from those who were forced out in the downturn of the early 1980s. Today’s farmers have a better equity position than their predecessors had, he said.
It’s that equity – equipment, experience and better management – that helps them “hang in there through a bad year,” Bauer said. “Maybe they don’t make any money, but they don’t lose a lot, either.”
Some banks may tighten up ag lending in 1999, but Bauer said that even after a poor year, the name of the game in ag lending is to patch them together the best way we can and give them an opportunity to make it back, because ag lenders understand that a bad year doesn’t make a bad farmer.”