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US Farmers In "Dire Straits": JPM Warns Of Imminent Liquidity Crunch
Despite the government's 'advice' to young debt-laden students, the tragedy of the American farmer continues with worryingly pessimistic views on the future of the industry. With farmland prices falling for the first time in almost 30 years, credit conditions are weakening dramatically and the Kansas City Fed warns that persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity, and JPMorgan concludes, the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016.
Not so long ago, US farmland - whose prices were until recently rising exponentially - was considered by many to be the next asset bubble. Then, almost overnight, the fairytale ended, and as reported in February, US farmland saw its first price drop since 1986.
Looking ahead, very few bankers expect price appreciation and more than a quarter of survey respondents expect cropland values to decline further in the next three months.
And now, The Kansas City Fed warns that Agricultural credit conditions are worsening rapidly...
Credit conditions in the Federal Reserve’s Tenth District weakened as farm income declined further in the first quarter of 2015. Persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity. Funds were available to meet historically high loan demand, but loan repayment rates dropped considerably. Although profit margins in the livestock industry have remained stable, most bankers do not expect farm income or credit conditions to improve in the next three months.
On a more regional level, farm income declined in all District states except Oklahoma. In Oklahoma, farm income has steadily improved over the last three years due to revenue from mineral rights and cattle production but remained unchanged in the first quarter of 2015
Strains on the farm economy have begun to affect the overall economic outlook in some states. Through 2014, growth in per capita personal income was notably smaller in states most heavily concentrated in crop production.
Ninety-four percent of survey respondents expect farm income to remain the same or decline further in the next three months. Additional declines in farm income could continue to create economic challenges in states heavily dependent on crops.
Loan Demand is surging... (to replace income's collapse or roll old debt)
The continued decline in farm income boosted demand for new loans as well as renewals and extensions on existing loans. During years of historically high farm income, some farmers were able to self-finance. However, as working capital has declined due to high production costs and lower crop revenues, more producers have needed external financing to pay for operating expenses and capital purchases. Loan demand was also supported by livestock loans on feeder cattle, which still command historically high prices. In fact, demand for non-real estate farm loans increased across all District states in the first quarter and is expected to remain elevated over the next three months.
If expectations are met, the survey measure of loan demand would be the highest since the survey began in 1980.
And paying back loans is slumping...
Alongside reduced farm income and higher loan demand, loan repayment rates have declined significantly.
Bankers also expressed concerns over increased debt-to-asset ratios, especially for younger farmers with high borrowing needs.
As The Kansas City Fed concludes...
Low crop prices placed added stress on net farm incomes and contributed to weaker credit conditions in the first quarter. As farm incomes fell, cropland values moderated and more producers depended on financing to cover operating expenses.
Sufficient funds were available to meet increases in loan demand, but declines in repayment rates as well as slight increases in carry-over debt, collateral requirements and loan renewals and extensions suggest that credit quality may become more of a concern moving forward.
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All of which is summed up ominously by JPMorgan, writing in a downgrade not for Deere, that...
We recently spent some time in the Midwest meeting various agriculture industry participants including dealers, farmers and industry experts. We believe it was clear from what we heard that the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016.
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Source: JPMorgan, Kansas City Fed, Bloomberg
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Some farmers are. But again, some people will eat, most will not.
Same as it ever was...
Ill be a buyer when the silver farmland ratio gets closer to historical norms.....now what are the historical norms?
RIPS
Renting out farmland shouldnt pay much more than the taxes.
A neighbor died, and his 220 acres with 2 houses and a shack went for 2.4 million. Dead farmer's entie farm was valued at $249,000
New "Corporate Farmer" severed houses, and sold one for $279,000. He is listing 20 acres for 215,000. A decade ago, land sold for $500/acre, It peaked at $12,000/acre
I am keeping my eye on a 200 acre farm (half bush / half good land) It is now reduced to $1,280,000 I don't believe it will sell for more than $800,000
All the Mennonites/Amish have been going crazy buying land at peak - with the philiosophy of "only paying the interest" inflation will take care of the rest.
Crops are in this year, we'll see what happens next year. I predict a lot of barn/house fires, and insurance claims, along with bakruptcies in the next 2 years, followed by my purchase of some nice farmland at a deep discount from today's prices.
There are some great farm buying opportunities in California right now. That is if you like growing dust devils.
Farmers about to have a fire sale in 3... 2.... 1....
Blank Check Bankers will be buying shortly thereafter...
And if a farmland bubble is anything like the housing bubble, they'll let it sit fallow, else they'll have to mark even bigger losses on their balance sheets. Not good news. They'll get to reap what they sow, which is nothing but discord and chaos.
With gasoline demand down 20%, guess what, ETHANOL demand is down 20% also. That's a lot of corn, being farmed year after year on the same depleted soils that need $4/bu in fertilizer just to grow.
The topsoil needs to be conserved and recharged. Letting land lie fallow or lightly grazing it will get it back. Otherwise the hydroponics-with-soil that is today's farming is not a sustainable business model.
We're just now figuring out that when we very intensely, but briefly graze grasslands, it's a good thing. It's kind of like when you have herds of animals that bunch up and constantly move to stay away from predators, it's good for the land. Mimicing nature works. Who woulda thunk it?
Fallow land sitting atop a depleted aquifer that is polluted with fracking chems.
Guess they can always sell to the chinese if they dont mind accepting CASH.
We got our 20 acre spread that included a house, good well, septic, perimeter fencing, and two barns, at the end of the last bust at a foreclosure sale for $290k. It was purchased by the previous owner at the peak of stupidity for over $700k.
It can be done, and I think you are correct to think that the opportunity will present itself again, shortly.
I'm looking at 20 acres (wooded) $20 K. Power available, no structure, seller will put in and maintain road.
Comes with good, solid, gun-totin' neighbors too!
Sounds sweet, Citxmech. If you tend the soil and put back what you take from it, you can do a lot with 20 acres.
I've been thinking that it would be nice to start a private seed bank and seed savers exchange organization here locally. I'm not sure where to start, but it seems like a good thing to have going. It should probably include an open knowledge base about what crops grow best in the local area and how they do. I just picked up some white spring wheat seed that originated in Arizona that I'm going to plant here soon to build up some wheat supplies. Supposedly, people with wheat sensitivities don't have issues with the old heirlooms, and this is at least 150 years old as an heirloom. We've definitely changed our food supply, that's for sure.
Sounds excellent Vaq. I think localization is the wave of the future - and setting ourselves up in this model will never hurt.
Prices are much cheper than that in Northeast Arizona. 40 acres of land you can farm is less than $1000 and acre. You need to drill a well, but the land cost is a fraction of what it is in the Midwest.
The real estate market where I am, which has been booming in the first part of the year, has very suddenly gone silent.
Cocksuckers abound. Money is so fucking important we think our physical bodies can get all kinda frankinpharma and demineralize crops and thrive to better level.
The elites say too many god damn people so make shortcuts on humanity and see how it goes.
I see so many not super old shits hobbling into the grocery store. Fucking crazy. WTF.
The historical norm for true ownership is that next to none of us can pay for it ... can't sink the land in a boating accident.
But we can hang the oligarchs when they come to take it if we stick together.
I thought that CA farmers already have a Liquidity Crunch.
It will be the weed farmers who take the hardest hit.
So what now JPM wants to get the National Insurance for Farmers and wants a Federal Government Guarantee... just like for Sub-prime Housing??
Farmers have their own Crop Insurance. I haven't heard anything about the Insurance going bankrupt.
Not that I know Farmers or Farming, but is this just a Psyop against the people of the USA for a new JPM Project or Privatization Program??
Yes, it's a bad business model that should have been allowed to fail in 2008/2009.
Looking more and more like we never should have bailed those fuckers out...
< shocker >
It always looked that way.
Funny how the folks at the Fed always eat.
GRD, on second thought, I won't say what those folks at the Fed can eat...
Better start planting your own. This is just the start, of driving the independent farmers out, buying their farms, then really ass-reaming us.
I watched the same thing happen with hogs. (Cargill/Big Ag)
Come on! Cargill does not own the whole CONgress.
cossack, you are so right, they don't own the whole congress,
they just rent 'em when they want to fuck us.
Edit;
It was a simple, yet effective process, just get the regulators to look away, while they "finger-bang" the corn markets.
I watched several go under, that had been raising them successfully for decades.
Every bite of feed they ate caused the farmers to go deeper in the hole. It got so bad, that they were taking loads of hogs to sale barns, and if they didn't sell, they were given away to anyone that would take them.
Yep, Cossack your right......Monsanto owns a large part...........
Maybe it was all just a single play ... first legislatively pump the biofuel market to drive up corn prices and run most of the smaller pig farmers out of business, now let corn prices collapse and drive smaller corn farmers out of business.
If you rely on credit and/or are reliant on year by year income big players can always put you out of business.
Absolutely! The Biofuckle played right in with it. I've always said, "drink your corn squeezins, and burn your oil squeezins"!
Double post, that's a first.
A first? Not a second?
Dire Straits indeed. Money for nothing and your chicks for free.
https://www.youtube.com/watch?v=iwDDswGsJ60
Sharks signaling to each other that the feeding frenzy is about to commence. Funny how the farmers won't have access to liquidity but bankers get an endless flow to consume whenever they want.
Time to dump the GMO opponents! We must reach our goal of 2.5 billion people on planet earth!
Someone forgot to tell the farmer that all they need is a printer/computer and they too can create all the money they want!! Ironically, they are the ones sitting on all the real collateral.
tick tock motherfuckers!!!!
^ This. The ultimate end game is for the banksters to own all of the collateral. Boom/bust ==> land goes to the banks out of the farmers hands. The ultimate beauty of all debt-money systems.
Unfortunately for us, bankers don't know how to farm. They only know how to shuffle paper and how to manipulate assets. They will fuck up food production and we will all be reminded of what real value is because of it. The bankers included. Fuck'em.
Possession is always 100% of the law.
Time to ask the expert, Robert Mugabe, how to deal with this farm issue.
Give the Amtrak money to the farmers.
Farmers generally observe speed limits as well...
Count the negatives. Now you know how many here work for the man.
People who work, eat and drink.
People who don't work, drink.
Come to think of it, JPM just wants to tie up real property. Same as it ever was.
So some farmers paid too much for their land, reset time. The banks will take them over and get contracts to feed the inmates at FEMA camps.
U know when the gov isn't killing everyone and they turn around and act like they have a great idea that EVERYONE should do... It is usually to stalk someone before that person can be themselves to kill the ambitions with passion assassins. Even if it was a good idea the gov mandating everyone to do anything is always a sector destruction of what ever it is they are mandating with their kiss of death.
They don't even do research other than to stalk people out of their dreams and out kisses of death on all others incomes but theirselves!
Then get pissed if u short their bullshit!
Like they could fix anything in the first place with their giant spider web of deciet!
So much for Jim f***ing "buy commodities" Rogers and his Maserati- driving farmers.
I am hearing for the first time in a decade, sob stories from some guys I know in the implement dealer business. It seems that business has dropped off a cliff compared to what it has been for many years.
It pretty much goes in one ear of mine and out the other. It's not that I am glad to hear it or sad to hear it, I am pretty much indifferent about it, but I do feel it is a bit telling of the way things might start to go a wee bit south around here, whereas up to this point many farmers, be it grain or livestock, have been sticking a fat hog in the ass for the most part. This is not to say they won't still make money, but I have a sneaking suspicion a lot of the ancillary, picks and shovels folks are feeling the pinch and will only get worse.
Just a few years ago tillable ground was setting new records near here, but things have really tapered off from those lofty levels. I told these same guys things are going to slow down three years ago and they just ho hummed as if I was nuts.
Farming has the most obvious and regular economic cycles of any market ... and people still fall for it every time.
Dealers will be fine. JD dealers get a 10% markup on selling new equipment...but get a 70% markup on parts to fix old equipment.
It's impossible to invest in anything in a CB-manipulated world. You turn around and everything has changed in six months based on an arbitrary decision. You are better off saving and doing nothing.
Buy Silver.............. you know it makes sense.
just another opportunity to manipulate statistics.
Breakfast today, scrambled eggs with herbs, steamed chard and watermelon for after.
Didn't grow the watermelon but all else was ours. Suburban lot.
Grow your own. Banksters hate that.
Biggest difference between now and the early/mid '80s (when conditions were arguably worse than present) is that most farmers/ranchers are not leveraged based on collateral, rather on cash flow, and in many cases very little debt. Most of the real estate purchased with cash; the problem will be money for inputs. Problems will be in implement business, where lots of equipment has been returned after fulfilling leases, and many farmers can get by with existing equipement for 4-6 years.
Correct, producing real food has real inputs. The supply lines (and the political "middle") will not hold much longer.
so nice of the maggots at jpm to worry about those poor farmers /sarcasm
Wouldn't it be a hoot if JPM did a manipulation of the CME grain prices ( like the precious metals on the COMEX) to drive down prices, and bankrupt producers so that their friends could repossess farmland instead of buying it? They did it with gold and silver with the Fed's blessing.
The libs will organize concerts. Michelle will #savethefarms. All will be well.
Don't forget the creative artists paintings and drawings. Something has to end up on an ice cream carton or it just won't be right.
Obama care will have SOLIENT GREEN for youall. I'm going to be 'pushing' Organic tubers to the rich.
Just one more manipulation to drive out productive workers so that the pigmen can buy up everything of value for pennies on the dollar.
...."liquidate the farmers".....
After all, Stalin did it to the farmers in the Ukraine. Liquidate, rinse, repeat.
Dought did the liquidation.. they ate their power source, the oxen and horses due to a multi-year drought and then there was no production that made the famine spread to the towns and cities
I guess the only group not in "dire straits" is the bankers and their buddies...
The banksters, on the behalf of their Zionist masters, print their grift and loan it to the farmers. When the farmers cannot come up with the vig for the banksters, the banksters take the farms, on the behalf of their Zionist masters.
Share-cropping for Zion.
Liberty is a demand. Tyranny is submission.
THATS why the banks are talking about Land Prices. What does a farmer care about land prices for his 1000 acres that's been in his family for 3 generations if he isn't going to sell it?
Land prices for the BANK to liquidate.
You are wise.
Liberty is a demand. Tyranny is submission.
alright clueless.. I give you the drill.. When the family farm gets a bit to small and the farmer loves everyone, he sells his equipment and rents out the land, putting it into trust (bank held as trustees). Now the old man is in ill health, but having had livestock, doesn't give a damn abouit doctors, he'd rather trust a vet, but having got out of business, her live hios life as long as he can, with the cancer and then goes out with a bang (trusty shotgun). The bank then divies up the money, usually 50% to mamma and he 'kids' get around 10% (farmers still are having sizable families. Now mamma having baked all her life find out she is hiding cancer (farm chemical induced) and loves the doctor as much as her crazy beautician... and half the farm goes to saving her life, for a little while. Noqw with the reduction of income, the benificiariers vote to liquidate and take that onetime big payoff, at mamma funeral.. and so goes the farm, like 1000 acres.
Even today cancer treatment can easily cost millions and that $12 million easily get turned into $6 after the two primaries hit the dirt (a little pay off when ther old man dies to bribe them into staying in the trust) and mamma's need for the lastest and greatest, not covered by Obama care...... and 'kids' all become millionares for a year.
They are talking again about Huge commercial factory farms.
The future is Very bright for Small, Family owned, Local food producers. NO huge debt problems, No needs for $100,000 each pieces of equipment.
5-15 acre free range chicken/eggs, Pigs and Beef. Future is very bright.
Join a CSA in your area.
Not to mention that the average farmer is getting up there in age. Demographics also say that going into farming will have a bright future, if you can survive the interrim period of strife that we will inevetably go through. Rip up your lawn and start learning how to grow things now. It isn't a skill that you pick up overnight, and you don't want to all of a sudden need that skill when you all of a sudden realize that it's a bit more than just putting some seeds into the ground.
There are still privately owned farms in Amerika?
Says bloated JPM that refuses to do any banking and lend any of its free money from the Fed to the farmers.
Shove it.. You know little to nothing.. JPM got out due to the fact that the local courts will side with the farmers and give them as much time as they can... five years. To get that machinery and land you must go to the state courts.. if ain't federal.
Ending subsidies for marginal foodstuffs and unhealthy foodstuffs and for foodstuffs diverted to ethanol would help the market clear.
Sugar is heavily subsidized.
Corn is heavily subsidized.
'Foodstaffs' such as iceberg lettuce have zero nutritional value but require excessive amounts of water to grow...
The focus of domestic argricultural production should be on nutritional foodstuffs and sustainable practices.
POTATOES!!!
Liquidity crunch? Good. Farm land price charts looked worse than the fucking equity market charts.
"After peaking two years ago, Iowa farmland values have tumbled about 15 percent, a new report shows, and are likely to continue dropping, given weakness in corn and soybean prices. The hit, while mostly on paper, is expected to further dent farmer confidence in spending on tractors, combines and other big-ticket equipment, say experts."
Source: http://www.desmoinesregister.com/story/money/agriculture/2015/03/31/iowa...
Just got 240 acres of corn planted two weeks ago, it is up and about 6 inches tall. Has been raining all week on it. I have all 800 acres of bean ground tilled and fertilized ready for planting. All rented ground that was leased cheap 7 years ago and hit those high prices and high yeild insurance year 3 years ago. Did it all with older equipment that needed a little work done to it. That older equipment has appreciated better than gold the last 5 years and don;t really owe anything on it.
Kept my grassland in grass, expanded the cow heard to 350 cows, and have bankers calling me up to coax me into debt. I remind them of what they did to me back in the 80's when I really needed them and how they treated me.
In the last year, I have inherited the family ranch in the Panhandle of Oklahoma, wth 20 oil and gas wells on it, so I am not too worried about a little correction in land prices, I am ready to jump out of grain production when it turns south and just suprised it it paid so well this long.
Hey, Stud Duck,
I didn't draw for any hunts this year, and was thinking about heading to OK for deer this fall, on account of the limit being 6. I figure that, including the out of state license fees, the total hunt would cost me somewhere in the neighborhood of $700-$800, and don't want to do it if I don't have a really good chance of whacking at least 3 deer. Do you have any info on hunting deer in OK? Areas to go, private vs public land, etc...?
Is a liquidity crunch the same as not having enough money? I have to admit a liquidity crunch sounds a lot cooler, kind of like QE confuses a dumb goy better than 'printing more money from nothing'.
Start planting a garden folks. I have been perfecting my gardening skills for the past 10 years.
+1000
You don't even need to be self sufficient with it, so long as you have the know how to become self sufficient. I would add to planting a garden that you should also know how to save seeds. If SHTF, seed catalogs will be useless, and saving seed really gives you an opportunity to see what does well in your area and what doesn't. Besides, epigenetics starts playing a role and subsequent generations should do better than the initial generation, provided that you allow for sufficient genetic diversity.
Diatomaceous earth for seed saving. Amazon. Now. Wish list or purchase.
It is the big farmers, those over 3000 acres (up to 50-60k acres that bank on their production every year) Most of these type of farmers (corperations) hold their equipment for less than 2000 hours or 5 years a nd so far the secondry market has bought up their equipment at high prices, but with low margins of 2% the squeeze is on and if rates increase, those in the margins of the squeeze will go belly up and land prices will be in for regional corrections. I base this on the CME futures, BUT the wild card is out there (UKraine). Last year UKraine left thousands of acres destroyed or un-harvested of sunflower. [http://www.barchart.com/charts/futures/OGH15] and we can see the impact... this is a highly unliquid market with great moves with small impact , over and under production, but more so in under production. The sunflower seed oil reduction also has had a stabilizing effect on soybeans, mainly due to the oil as soymeal has gone down (good feedstock for cattle, pigs and chickens, but with bird flu in the midwest...)
So what am I hinting at, well ..... eat porky, as it should be cheap for a while and feeder cattle is coming down (grazers to feeders is still a bit off as feeders has done a 20% reduction from the high that was drought induced)
Late August will be the kicker although.