It's going to be a rough year in farming if commodity prices, including beef and grain, don’t rebound soon.
Nearly 90% of agricultural lenders have seen an overall decline in farm profitability in the last 12 months, according to a survey by the American Bankers Association and the Federal Agricultural Mortgage Corp.
Markets for grain, beef, poultry, pork and dairy are notoriously cyclical, but industry observers say they’ve seen more permanent changes that will further fuel consolidation of producers and processors.
The survey of more than 350 lenders showed they were most concerned about commodity prices, liquidity and farm income.
“It’s a pretty stressful time in the dairy business,” said Edward Coates, vice chairman of the agricultural and rural bankers committee of the American Bankers Association.
There’s more milk than processors can handle, with much of it flowing into Wisconsin from Michigan and other states, and the recent crisis with farms dropped by Grassland Dairy Products could easily resurface as many of those operations found only temporary homes for their milk.
It wouldn’t be surprising if more farms lost their milk buyers – leaving them with nowhere for their milk to go and cows that have to be milked 365 days a year.
“It’s a very delicate situation right now,” Coates said.