08/24/2009 Growing Magazine - Weathering the Economic Crisis
What does that mean for you?
It’s not news that the country is facing tough times economically. Commercial growers feel the pinch as well, but for the agricultural industry, the news isn’t all bad. Farmers, overall, may fare better than other occupational groups.
Buddy, can you spare a dime?
As of late March, business loans and credit were considered rare commodities by many, but growers reported that securing funds for their spring needs hasn’t been that difficult.
Tanya Miller, owner of Millican Produce in Millican, Texas, with her husband Steve King, says growers such as her who have established solid credit ratings shouldn’t have obstacles with loan approval.
“We are expecting to apply for a loan [for expanding our greenhouse tomato operation] in the near future and have been told that we should not have any trouble because of our past history,” she says.
Nick Augostini, marketing specialist with the North Carolina Department of Agriculture and Consumer Services, agrees, adding that growers in his area continue to receive funding through both Farm Credit and the local banks. However, those institutions are reviewing applications more carefully and borrowers should anticipate closer monitoring during the loan’s term.
“Lenders are a little more skittish,” says Dr. Anthony Yeboah, professor and chair of North Carolina A&T State University’s department of agribusiness, applied economics and agriscience education. “There is a general sense of uncertainty, a psychological cloud hanging over the future.”
That may mean that existing credit lines or terms may be altered, but it also signals opportunity. Historically low interest rates may benefit growers and enable some operations to expand.
Prices remain uncertain
With oil prices continuing to fluctuate, budgeting for fuel, transportation, fertilizer and plastic seems to be a guessing game. In recent months, the market has had relief from last summer’s highly elevated costs. Recent cost declines don’t put producers at ease. However, continued moderation in fertilizer costs is anticipated and oil prices are rising with air temperatures at this writing. In mid-March, The Financial Times reported that Opec favored prices around $75 a barrel, but the group was hesitant at that time to cut production. In late March, prices ran approximately $20 below that goal.
Growers are uncertain as to what rewards their crops will bring this season. Coming off a year of high prices, the U.S. Department of Agriculture projects a 20 percent drop in 2009 farm income. Yeboah points out that produce consumption trends are likely to experience change, which isn’t a necessarily gloomy prediction for agriculture. If consumers abandon dining out, restaurant food requirements will drop, but those consumers may choose to purchase fresh produce to prepare at home. The demand for basic foodstuffs may see an upswing, to the detriment of prices for specialty items, and a movement toward more home gardening will figure into commercial growers’ profits as well. But, some growers believe sales and prices will remain steady.
“If times were to get increasingly more difficult nationwide, I believe that people would cut back on spending money on so much food,” Miller says. “Consumers would look for bargains or seconds. If this does happen, farmers would feel the impact on their pocketbooks.”
Labor woes continue
Augostini says that growers in the eastern North Carolina counties he serves have expressed ongoing concern about labor availability and costs. As of this writing, hourly wages for H2A workers have not been finalized, and it remains to be seen if the proposed decrease from $8.85 to $7.25 will be approved. (An increase to $9.35 also is possible.) Yeboah suggests that Americans faced with escalating unemployment rates may be more willing to take farm jobs, an outcome that Augostini views as unlikely.
Strategies to survive recessionary times
Farmer, ecologist and energy expert David Blume rightly points out that food is an essential item, but high input expenses and low market prices can make producing it financially risky for growers. How can farmers stay afloat during difficult times?
Yeboah says growers shouldn’t hesitate to tap reputable agricultural credit sources, but doesn’t advise seeking other types of loans, and he urges producers to continue promoting the health benefits of fruits, nuts and vegetables. Miller encourages the consumer trend of seeking locally produced food.
New efficiencies may assist in producers remaining profitable. Augostini says a balanced and analytical approach will benefit farmers. Reviewing management and production procedures may yield ways to reduce costs without sacrificing quality. Look for crops that aren’t demanding of pricey inputs, yet offer high yields. Substituting lucrative crops for less profitable ones may be one way to stay in the black. In some cases, growers may reduce both acreage in production and employees, while others may increase their crops without taking on additional labor. Diversity and cooperating with neighboring farmers may be beneficial. For example, Augostini says several growers could coordinate their crops, allowing each participant to reduce their individual costs by growing a higher acreage of fewer distinct varieties.
Hope on the horizon
Even in tough times, there are bright spots and new possibilities for innovative growers. Blume, a Californian who farms in Georgia, says the biofuels industry can be a significant boon for agriculture.
“There is opportunity in blending fuel and food production,” he adds. “If food prices drop, energy prices may not.”
California citrus grower Lance Walheim says water availability is a major obstacle for his area.
Blume, author of “Alcohol Can Be a Gas” (www.alcoholcanbeagas.com), isn’t just talking about corn. Waste crops, such as frost-damaged fruit, can be converted into alcohol for fuel. Almonds are also valuable for energy in addition to nutritional purposes, as are many vegetable varieties. Even such “garbage” as grass and weed clippings can be converted into local, clean, inexpensive fuel. Substantial tax credits are being offered for building and operating alcohol plants.
“The next frontier for farmers is taking over the energy supply,” Blume adds. “That can save farm income.”
Renewable energy is also addressed in the American Recovery and Reinvestment Act of 2009. Tax incentives for new renewable fuels offer diversified income opportunities for rural Americans. The stimulus legislation also provides expanded broadband Internet access, enabling more growers to tap the technology’s tools for education, research and Web-based management applications. Extension of small business expensing levels and the bonus depreciation tax provisions will aid producers’ cash flow and benefit those who need to purchase equipment.
Producers are in store for a season of change and uncertainty, but also have the opportunity to explore new crops, methods and value-added products. The upcoming years may not be the best of times for growers, but most remain optimistic about agriculture’s future.
Based in Greensboro, N.C., the author writes articles about horticulture, landscaping, agriculture and travel. She has been a contributor to Moose River Media publications for three years.