Farm country rides economic wave

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By the time you read this, the second presidential candidate debate will be history. Hopefully, Obama and McCain rehearsed the right answers, because they didn’t know what questions the town hall audience might yield. Hopefully, they forgot Keating and ties to terrorists, because it’s obvious in my town that the only issue to debate is the economy.

Remember the 1992 presidential campaign that pitted Bill Clinton against Bush the Elder? It gave us that wonderfully pithy saying, “It’s the economy, stupid!” Too bad that sign isn’t still posted on campaign bulletin boards across the nation.

It will always be the economy.

What a difference a quarter — three months — makes. Here in farm country, record crop price increases at the beginning of 2008 had us flying high. Even though crop inputs had double-digit increases, life was good.

By the end of the second quarter of this year, however, energy prices and steadily climbing input prices — 20 percent above year-ago levels, and fertilizer and fuel costs that nearly doubled — were squeezing us hard. But prices still looked good. Really good.

Fast forward to today. New crop corn futures have lost more than $3.60 in value and new crop bean futures fell almost $7 since the highs this summer. Net corn revenues are now expected to be $375 per acre (excluding land costs that ain’t cheap). Same trend for soybeans and wheat.

Why? It’s the economy, both domestic and abroad. Fewer disposable dollars mean fewer dollars spent on meat. And that, reminds University of Illinois specialist Darrel Good, affects livestock, which affects feed, which affects the grain market. A weakened global economy means we can’t pin our hopes on exports to take up the slack.

The fundamentals in this market? Fear. And that makes it hard to plan your farm’s course.

We’re right out there on the credit precipice with all the home owners. Farmers’ operating loan demand has been on the upswing all year. In fact, according to the Federal Reserve Bank, the total volume of non-real estate loans to farmers the first half of 2008 increased more than 20 percent above a year ago. Machinery loans were up 7.4 percent in the second quarter over 2007. When farm prices were good.

There will be greater need for farm credit this fall and winter. The downside is that as the demand for farm loans increase, the funds available from traditional deposits for farm loans decrease.

Has the farm boom reached its peak? My Magic 8-Ball says “chances are.”

Time to fall back on the best of advice: Manage your debt. Know your cost of production and manage your inputs.

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