“Historically high grain prices have allowed farmers to pay down By Mike Myers

Staff Writer

Right now, one doesn’t have to look very far to find bad news about the U.S. economy.

Seemingly every day, media outlets are full of stories about the declining economy — about job losses, plant closing, foreclosures and an inability for individuals and businesses to obtain credit.

But one area of the economy that has fared better overall and may be better positioned to withstand a prolonged economic downturn is agriculture.

While grain prices have declined significantly since the historic highs of last summer, the unprecedented prices and good yields farmers have enjoyed allowed many farmers to get their financial house in order by paying down debt and replacing aging equipment, according to Kerry Newsome, market president and senior commercial debt debt service and upgrade equipment.”

The overall economic instability has led some to fear farmers might see a return to the tough times of the 1980s. But Purdue University economists Mike Boehlje and Chris Hurt argue in their report “The Financial Crisis: Is This a Repeat of the ‘80s for Agriculture?” which can be found at http://www.age con.purdue.edu/news/financial _crisis.asp that farmers are likely to withstand these tough times in better shape than in the 1980s, a decade which put many farmers out of business.

That’s in part because farmers are carrying less debt now than they were two decades ago. In addition, attempts to jump start the economy are helping farmers as interest rates are at all-time lows, meaning it’s costing farmers less to borrow money for operating capital. Or, as Mike Cecil, loan manager with Midwest Ag Finance in Washington said, “The interest on short-term money is as low as I’ve ever seen it.”

While the credit market is still tight overall, lending in the agriculture sector is in much better shape.

“All indications are from what I’ve seen that there is plenty of credit out there for agriculture,” said Cecil.

While the housing market has plummeted nationally, the market for farmland has remained strong, particularly locally.

“In auctions in a three- to four-county area in the last six months, farmland has been selling very strong,” said Newsome.

“Going forward, we may see that plateau some due to a drop in grain prices compared to higher input costs.”

Though farmers may enter the new year in better shape overall than the national economy, there are some warning signs on the horizon. Like most everything throughout the economy, the price of the inputs farmers use to produce a crop, like fertilizer and seed, has skyrocketed and hasn’t yet fallen as far as grain prices have withdrawn.

“Going forward, I think the picture is a little more cloudy,” said Cecil. “Prices have gone down dramatically since last year, and while the price of inputs has gone down, they haven’t gone down as dramatically as grain prices have.”