LAKE CRYSTAL, Minn. — Today’s farm businesses are undergoing pressures that are reminiscent of the 1980s but with better financial tools, says Minnesota ag banker Kent Thiesse, who has lived the full range of economic cycles.
Thiesse, 67, is vice president and farm management analyst at MinnStar Bank of Lake Crystal, about 10 miles south of Mankato. Thiesse is known for writing his column, “Focus on Ag.” He’s known for educational speakers for the FarmFest. Since 1980, Thiesse has been the volunteer coordinator for state 4-H beef programs at the Minnesota State Fair — two events making counter-moves because of the COVID-19 crisis.
Kevin Paap, president of the Minnesota Farm Bureau, called Thiesse’s role “amazing” — both in agricultural education and technical service to the industry and the population as a whole. Thiesse’s work with 4-H and FFA livestock programs and youth scholarship development, his technical newsletters and his ability to explain topics — sometimes difficult issues like COVID-19 consequences — make him one of Minnesota's key agricultural explainers, Paap said.
Born near Fairmont, Minn., in Martin County, Thiesse moved with his family to a farm near Starbuck, Minn., where he graduated from high school in 1971. He went on for an animal science degree at the University of Minnesota in 1975. After a brief stint as a hog buyer for Hormel Foods, he joined the University of Minnesota Extension Service. Thiesse was a county Extension educator — first in Swift County at Benson in 1975, then in Luverne in Rock County in 1979, and finally, Mankato in Blue Earth County in 1987. He developed a specialty in farm management and marketing and added a master’s degree in 1991.
In 2003, Thiesse was hired by MinnStar Bank, an independent, community bank with about $130 million in assets. Its borrowers include crop and livestock producers in Blue Earth and Watonwan counties, primarily.
“Agriculture has always been a very cyclical industry: we go through some very good times and some challenging times,” said Thiesse, philosophically, about challenges. “There are better times ahead, but you have to get through the challenging times to get to those.”
Thiesse remembers the early 1980s in Extension for the birth of the Minnesota state mediation program. About the same time, the state initiated the Minnesota FINPACK credit analysis program — a program initially led by the Extension offices.
Then-new programs were not as user-friendly as today, and many stressed farmers hadn’t done that kind of financial analysis before. Some ag lenders in the 1970s had overextended credit based on collateral, which disappeared when land values declined.
Extension workers often took on a “personal counseling” role to farmers who for the first time were learning about their financial realities. Some lenders pulled back on loaning money to farms. “Some (farmers) were being forced to sell assets or exit the business because they couldn’t get loans anywhere,” he said.
Today, Thiesse said farm financial health is being stressed, but individual economic conditions are “all over the board.” About 10% of farmers have come into the 2020 year in difficult financial straits, in some cases because of poor production or because they couldn’t harvest.
That figure has worsened as the COVID-19 pandemic effects took hold, especially with livestock-dependent operations. Some crop farmers were able to use risk management and forward-pricing strategies prior to the COVID-19 setback, but with surpluses of corn and other crops on the horizon into 2021, those profitable marketing opportunities may not materialize.
COVID wild card
The Coronavirus Food Aid Program has helped farmers, but the reality is aid programs aren’t enough to make anyone whole, Thiesse said. For example, corn payments amount to about 17 cents per bushel while corn prices dropped 50 to 60 cents per bushel in March and early April. Some farmers made sales prior to the Jan. 15 start of the program, so they couldn’t access its benefits.
Similarly, some cattle, hog and dairy farmers have suffered “very large” losses on prices, as well as logistical struggles because of the slow-down or closing of packing plants. The plants have recovered to 85% to 90% capacity now, but hogs still were being euthanized and market prices are still below break-even. It’s unclear whether further federal aid programs will materialize, or how effective they’ll be.
Ethanol’s collapse in the wake of the COVID-19 restrictions is another blow, with values below break-even levels. Ethanol plants since have scaled up some, but it’s unclear whether how that market will recover.
If that’s not enough, the pandemic is against the backdrop of trade disruptions with China, the European Union, and others. The Trump administration has announced a phase one trade agreement with China, but it is difficult to say judge its impact.
Meanwhile, farm land values declined 10% to 20% from peak values in 2013 but have been fairly steady since 2018 levels. Outside investors continue to look at farm land as safer than other places they’d invest funds. That, and low interest rates, keep a floor under the land market. Farmland rental values have dropped 15% to 20% from peak values in 2013 and 2014 but also have been fairly steady in the past couple of years.
Thiesse acknowledged that the percentage of farmers facing difficulty is greater today than two or three years ago. But the educator-counselor in him urges farmers to “not get locked into doing things one way." He urges to be open to new management strategies or adjustments. “What’s successful tends to change over time,” Thiesse said. “ The ones that are most successful have the ability to make some adjustments from year, and generation to generation.”