Apr 22, 2020

Ag Economy Is, in a Word, ‘Uncertain’

If I had to sum up the current ag economy in one word, it would have to be “uncertain.”

December through March – the time between fall harvest and spring planting – is what we in ag lending like to call “loan renewal season.” It’s when farmers usually handle a majority of their loans and financial planning, because it’s typically a good cutoff between crop years and has the fewest unknowns of any other season.

That hasn’t been the case this year.

A year of challenges

Many ag producers will remember the 2019 crop year as one of the most challenging years even the most seasoned producers have experienced. From a late, wet and cold spring, to a 30-inch October snowfall in some areas, to an exhausting, grueling and unfinished harvest because of unprecedented amounts of fall rains in many areas, Mother Nature threw some of her very best punches at producers.

With a significant amount of 2019 crops still in the field, there was a lot of uncertainty in preparing financial statements and trying to estimate anticipated yields, possible quality discounts and crop insurance implications. Added to that, the final portion of 2019 Market Facilitation Program payments (meant to help farmers who suffered from trade retaliation by foreign nations) did not show up in farmers’ bank accounts until February. And many producers had not yet learned whether they would receive Wildfire and Hurricane Indemnity Program Plus (WHIP+) disaster payments to offset losses from flooding and snowstorms.

The year’s growing season and harvest challenges piled onto a host of other issues already facing many producers: trade concerns, continued low commodity prices, rising expenses, consumer demand shifts and thin or even negative margins all added to the anxiety levels ag producers have in a “normal” year.

Growing mental health concerns

Probably not surprising considering everything facing those in ag, concern over farmers’ mental health is escalating, as farmer suicide rates continue to grow, according to an August Forbes article.

Nearly half of adults in rural areas say they’re going through more mental health challenges than a year ago, an American Farm Bureau Federation report shows. While adults in rural communities see stress and mental health as a growing problem, nearly half of farmers say accessing a therapist or counselor in their community is difficult. And the report shows that most still see embarrassment, stigma and cost as obstacles to seeking help.

Producers by nature are optimistic about the future, believing, “Next year will be better.” However, it’s important not to let unbridled optimism supersede making hard choices in a timely manner. It’s a bit ironic that in most careers, change is often seen as positive. But when someone decides to leave the farm or ranch, it’s sometimes viewed as failure rather than a new opportunity. Similarly, when farmers or ranchers finally make the difficult decision to retire after several decades of hard work, there’s not the traditional “retirement” party honoring and celebrating their achievements.

Despite the obstacles, we’ve also seen some really nice (and surprising) financial results from operators of various ages who raised assorted commodities. What they had in common was they had solid accrual-based financials and sound, well-thought-out 2020 projections, cash flows and downside risk plans.

Widening urban and rural divide

Make no mistake, today’s farmers and ranchers are a tough and hardy lot. The social, agronomic, political and financial environment they operate in demands it. Since the bulk of today’s ag operations need to be run as businesses by operators with high business IQs to manage thin margins and a wide array of controllable and uncontrollable risks, the number of pure “lifestyle” farms and ranches is declining. And the urban and rural divide continues to widen.

Already, well over 82% of Americans live in urban areas – on only 2% of the land. And only about 2% of our population lives on farms or ranches. The average American is now at least three generations removed from the farm. With only about 34 congressional districts considered to be rural and 218 votes needed to pass anything in the House, rural voices are easily drowned out. This disparity will impact legislation on food, environment and other issues critical to the livelihood of American farmers and ranchers – making it even more important that they spend time educating the general public on ag issues.


Lynn Paulson, SVP | Director of Agribusiness Development

DIRECT 701.298.7138

BRANCH 701.298.1500