Is that pop champagne?FARGO, N.D. — If farmers are the eternal optimists, then they may have more to be optimistic in 2012 than ever before. And more to be careful about, I would think.
By: Mikkel Pates, Agweek
FARGO, N.D. — If farmers are the eternal optimists, then they may have more to be optimistic in 2012 than ever before. And more to be careful about, I would think.
At least that’s the surface sentiment I’ve gathered from the long string of agricultural meetings, conferences and ag shows. They started with Big Iron in West Fargo, N.D., in September and will start to trail off in March as farmers turn their attention to the task of readying the machines, land and people that will bring forth the new crop.
My latest of this was at the Aberdeen (S.D.) Ag Expo, one of the last of its kind, in February. Like all ag shows, there is a seemingly endless variety of companies, big and small, working and adapting to help farmers and ranchers do their work, with high-tech and low-tech goods and services.
At one booth was Mike Johnson of Country Repair and Manufacturing at Mellette, S.D. The business does repair work on machines and equipment in a 75-mile radius. Johnson says his company does complete repairs on combines and things such as tractor overhauls — transmissions, rear ends, whatever.
With the revival in value for the livestock industry, Country Repair has moved more into repair of livestock handling equipment. They custom-make chutes and build calf shelters, whatever. “We custom make it to what the cattleman wants,” Johnson says. “We make the gates to fit their operation, so they don’t have to make their operation fit our gates.”
In another aisle was Alan Hawkinson, a friendly Aberdeen-based ag loan officer for Home Federal Bank of Sioux Falls, S.D. Home Federal is based primarily in the eastern part of the state, and is making inroads into Minnesota. There’s a “lot of opportunity out there,” for farmer-customers who have a solid history of repayment, Hawkinson effused.
Today’s operating interest rates are as low as 4.5 percent, Hawkinson said. “It is variable, but it will reflect the market,” Hawkinson said. Mortgage rates at his bank have been hovering in the upper 3 percent ranges, which he says is some of the lowest rates in the past 20 years. Some farmers with mortgages are looking at refinancing, he says. “If they haven’t, they should look into it because it’s a very good chance to save money,” Hawkinson says, “get money to roll back into their operation and make it stronger for the next generation.”
To get a loan, of course, there has to be an appraisal. With ag land prices up 25 to 30 percent in the past five years, fresh appraisals are needed. The appraisal cost alone can be $1,200 to $3,000, for a whole farm, depending on the number of acres.
As someone who makes his living in agriculture, and worked through the farm credit crisis of the 1980s, I’m optimistic, yes, but also wary of these high-flying times, and financial health of farmers both today and in future generations.
In recent weeks, I’ve heard economists suggest we may be in a “bubble” for land prices, and that some people who have paid the higher prices will be caught short on collateral if the bubble pops.
On the other hand, I’ve heard Bill Wilson from North Dakota State University in Fargo talk about the persistent export opportunities in China, India and surrounding regions. U.S. farmers and their transportation system have advantages, but there are tough competitors in Brazil and elsewhere who strive to displace us. Yes, the U.S. will be a key to feeding the world population that grows from 7 billion today to 9 billion by 2050.
Me? I’m inclined to believe Wilson, but risk-averse. I won’t be among those buying land at $5,000 to $6,000 an acre, no matter the interest rate.
Editor’s Note: Mikkel Pates welcomes comments about his column. Mail comments to him at 714 Park Drive S., Fargo, N.D. 58103.
Email him at email@example.com or phone him at 701-297-6869. Pates is a staff writer for Agweek.