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Published December 18, 2009, 08:23 AM

Farmers try to weather financial drought

Wisconsin farmers had great expectations when commodity prices spiked in 2007.

By: Jeff Holmquist, New Richmond News

Wisconsin farmers had great expectations when commodity prices spiked in 2007.

At that point, things looked bright for those who produced the nation’s food supply. Farmers expanded their operations, made a tidy profit and planned for the future.

Those brief moments of prosperity were, by all accounts, the best of times.

Now, just a few months later, producers are faced with the worst of times.

The sudden downturn in the nation’s economy has hit rural residents hard.

Hog and beef farmers have been forced to sell their animals at a substantial loss during much of 2009.

Crop farmers found commodity prices painfully low as this fall’s harvest came in.

And dairy farmers were crushed by milk prices that sunk to some of the lowest levels in decades.

On the farm

“This is the worst year ever,” local dairy farmer Chip Traiser proclaimed. “The price of milk is the same as it was 30 years ago.”

Almost all producers echo his frustration.

Since joining his dad Charles in farming in 1973, Traiser has experienced the ups and downs of the agriculture industry like everyone else. The current crisis is like none other.

Traiser, of rural Somerset, recalls the farming slump of the 1980s, when farmers protested across the nation and many decided to close up shop.

“This just seems worse,” he said. “Our cash flow is much worse.”

He worries about his farm’s future, which has been operated by one family since 1855. Traiser is the fourth generation on the family farm and he hopes to pass the operation on to his daughter eventually. The ag economy has to improve dramatically for that to become a reality.

Traiser currently milks 80 cows and farms about 300 acres.

When July’s dry weather, coupled with low milk prices, hit at the same time, Traiser said it pushed him to the breaking point.

“The stress level was high,” he said.

Traiser also had hernia surgery and his two knees replaced in 2009, adding to the stress of the times.

“It’s been a tough year,” he said.

Thankfully, Traiser said, late summer rains helped crops recover. It turned out to be a pretty good year in terms of yield.

“Otherwise it would have been our seventh dry year in a row,” he said. “That wouldn’t have been good.”

As he gets set to leave 2009 behind, Traiser said he’s cautiously optimistic that the agricultural economy will turn around soon. Dairy prices are inching higher and the nation’s economy seems to be on the rebound.

Traiser admits he doesn’t have any suggestions for federal and state officials concerning possible solutions to the crisis. He’ll leave that to others.

“I have no idea,” he said. “It’s just all political.”

Some help

A little help is on the way for Traiser and other dairy producers.

Thanks to a $350 million supplemental appropriations bill that Congress approved in October, dairy farmers will receive a one-time payment sometime between now and January.

About $290 million of the package is designated for direct payments to producers.

About $60 million will be used to purchase excess dairy products for use in the commodity program for low-income Americans. The hope is that by removing excess dairy products from the supply chain, prices for milk will rise again.

“I called Baldwin (the Farm Service Agency) and asked if we were getting our checks by Christmas,” Traiser said. “It’s looking kind of doubtful now.”

According to Bob Forrest, FSA executive director for St. Croix County, the county’s 187 milk producers are looking forward to the eventual payments.

“It all helps, but it certainly isn’t a cure all,” he said. “It probably won’t be enough to pull them out of the slump, but anything that helps to lift farmers’ spirits will be good.”

Bad timing

Marv Warner, farm loan manager at the Baldwin FSA office, has been helping producers with their credit and planning needs for 34 years. He’s set to retire next year but is disappointed that he may leave when many of his clients are struggling.

“I really sympathize with these farmers,” he said. “I’ve been working with some of them for many years, and there’s emotions involved for me with a lot of these people.”

Over the past year, Warner said, he’s seen families break up from the stress of the financial crunch. Some have even stopped farming.

Choosing to leave farming can be a challenge in a down economy, Warner said.

“Even if they were to get out of farming, there are no jobs for them to get,” he said.

Another disturbing trend he’s noticed is that many producers are turning to credit cards to help them through the tough times.

“We’ve seen credit card debt increase significantly,” Warner said.

That’s a problem as credit cards always carry high interest rates, making it even more difficult for farmers to keep their operations afloat.

Other farmers are borrowing against the equity they’ve built up on their property over the years to make ends meet, he said.

That could mean trouble come spring, if farmers find it difficult to secure loans to pay for seed, fertilizer and fuel, he said.

One bit of good news is that FSA received a 20 percent increase in its federal funding for next year.

Warner said the increase in funding will help, but he doesn’t know if it will be enough to make a big difference. He said he expects to see a significant increase in demand for FSA programs in the coming months.

“Hopefully we’ll be able to deal with all the issues, but I think there are going to be some challenges,” he predicted.

FSA provides help to farmers in a number of ways. They offer a low-interest loan program to financially strapped producers and they have a loan guarantee program that helps banks share the risk for some ag loans with the government.

The future

Lee Milligan, University of Wisconsin Extension ag agent, said it will take several years for area producers to recover from the 2009 disaster.

And that recovery can’t begin until the world economy stabilizes and starts to grow again.

“We are very affected by the world economy,” he said.

In the short term, Milligan said lenders have been very helpful in working cooperatively with producers through the tough times.

“The lenders have stayed with the producers,” he said. “They’ve developed interest-only plans where feasible and increased operating loan caps when feasible.”

Suppliers, who have been hit hard by the downturn, have also been helpful by not cutting off producers too quickly, Milligan said.

For the most part, Milligan said, area farmers believe things will begin to turn around in 2010.

“Everyone is hopeful that there is light at the end of the tunnel,” he said.

Government help

U.S. Rep. Ron Kind (D-Third District) said he recognizes the struggles his rural constituents are having these days.

He conducted a live “Telephone Town Hall” on Dec. 2 to talk with about 1,500 farmers in the district about the crisis and what the federal government is doing to address the situation.

He said there is an “extreme sense of urgency” to turn things around in the agricultural sector.

Going forward, Kind said, it will be important for Congress to develop ways to eliminate the instability of commodity prices so that farmers can avoid unexpected losses. That is especially true for dairy farmers.

“This roller coaster ride is really hard on producers,” he said.

One proposal Kind is working on is a supply management component to federal farm programs.

“We should reward those who stay within a certain level of production,” he said.

By managing supply, prices will fluctuate less as available commodities won’t jump up or down when prices shift. If such a system works, Kind said, prices will bounce back quicker because demand for the available supply will impact the market quickly.

Kind said he also backs efforts to develop new markets for U.S. farm products and meat around the globe.

Opportunities exist in China and other growing economies for improved exports, he said.

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