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Economic gale blows into Nebraska cornfields

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BY ART HOVEY / Lincoln Journal Star

Tuesday, Oct 14, 2008 - 12:43:55 am CDT

Lincoln commodities analyst Clay Bradley can’t remember anything similar happening since Jimmy Carter blocked grain exports to the Soviet Union in 1980.

The financial crisis gripping Wall Street spilled over into grain markets Friday. It got much of the blame for the corn price falling the daily limit on the Chicago Board of Trade and for many of the state’s grain elevators, in the middle of harvest, not to post cash bids.

“It’s really the outside markets that are contributing to this,” Bradley said as he tried to take stock of the stock market’s impact on Nebraska’s agricultural economy.

Story Photo
(LJS File)

At 76, Rising City farmer Gene Glock has never seen anything like it in 60 years of farming. Always before, when elevators backed away from the market temporarily, it was because of a drought or something unusual inside agriculture.

This time, “part of it is our normal buyers overseas; some of them can’t get money to buy because it’s a worldwide problem,” Glock said.

“In that respect, it’s something totally unique that I hope I never have to face again. But I don’t know if we have a plan to deal with it or not.”

Randy Robison, general manager of Frontier Cooperative in Brainard, was one among many who decided not to buy any corn until he could see if grain volatility would ease Monday.

“There’s too much risk,” Robison said Friday. “We can’t get it covered.”

Things were back to normal, sort of, at the Board of Trade and at Frontier, as a new week began. The cash price of corn ended Monday at $3.70, down 26 cents from the most recent posting of $3.96 last Thursday.

It may be a long time before the word “normal” is used again to describe the stock market. It rose a record 936 points Monday.

But the more immediate concern to corn farmers might be a sustained price slide that had wiped out much of the gain set in motion in 2006 by robust demand from the ethanol and export sectors.

From Oct. 13, 2006, the value of a bushel of corn at Frontier rose from $2.83 to a high of $7.18 on June 27. It dipped below $4 on Oct. 7 and has lost another 30 cents since then.

At other times, Bradley might point to an unexpectedly big harvest or some other agricultural variable as the culprit. But this time he’s talking about consumer spending and unemployment, “as well as just the panic.”

The broader economy has also intruded into the ethanol outlook.

A year ago, Auburn Mayor Bob Engles was promoting a 12-mile-long pipeline to the Missouri River as an important step toward hosting an ethanol plant there.

Now the sense of urgency for that $7 million to $8 million project has diminished and possibilities for a $200 million ethanol outlet have stalled out with the dirt-work stage.

The credit market for ethanol dried up last year, Engles said. “With the recent developments on Wall Street, that certainly hasn’t improved that.”

Water options are still on the table 70 miles southeast of Lincoln, and Auburn’s mayor is still speaking optimistically about ethanol. “We’re ready to go as soon as the industry turns itself around.”

When that might happen varies widely with the faith — or lack of faith — individuals have in ethanol as an energy alternative.

Todd Sneller of the Nebraska Ethanol Board conceded “the most difficult period in recent history to secure new financing for a new ethanol plant.” That’s particularly true if the project team has no other operating ethanol plants.

But Sneller said he can feel good about new plants opening at Wood River and Bridgeport, to a third getting close at Atkinson, and to a federal ethanol mandate that calls for 15 billion grain-based gallons by 2012.

None of that impresses Doug Carper, a veteran of the commodity-trading business in Lincoln and one of the state’s sternest ethanol critics.

Carper sees “the equivalent of the dot.com bust of a decade ago.”

Nebraskans who invested in ethanol plants are either already sorry or they soon will be, he warned.

“The equity is gone. It’s never going to come back.”

Reach Art Hovey at 473-7223 or at ahovey@journalstar.com


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TP wrote on October 14, 2008 1:26 am:
" And McCain wants to get rid of the ethanol industry. The one good thing our government has done for Nebraska and there farmer's in the last 20 years. And now McCain wants to through all that away. Voting for McCain will be very bad for Nebraska and its farmers. "

 Ej wrote on October 14, 2008 3:23 am:
" If your going to gamble you have to ge willing to take the risks. I don't see this ethanol taking off like they hope and it is going to bankrupt a lot of people. "

 whatever wrote on October 14, 2008 5:10 am:
" And this is why we tread lightly when considering the spending of our state budget surplus. Farmers planted when inputs were high this year. Many farmers have also purchased way over priced farmland the past 18 months or so. In addition greater purchases of expensive equipment have been made and need to be paid for. The bottom line? Farm income won't be as high as once thought. If the credit markets have dried up and grain purchasers aren't purchasing where does the grain go? When 76 year old farmers tell you they haven't seen conditions like this my experience tells me you stand up quick and take notice. You don't farm successfully for 60 years because you are an idiot. Everyone is waiting for the "big event" that changes the world. Well over the past 3 weeks we have had a lot of "big events" that seemingly haven't changed anyone's world around here too much. The effects are cumulative and there is a period of time before you go from Point A to Point B to Point C etc. Right now the world governments are trying to just stop that process, then they will try to back it up to the beginning where things are relatively stable and the rules of the economic game are clear to all players. If they fail chaos will ensue and those with money in the bank(or in a mattress) win and those that are dependent on foreign sources for the day to day financing of their lifestyle and dependent on foreign sources for energy are pretty much on a one way trip to the bottom. The good news is once you hit bottom you can climb back out. Certainly not back to a lifestyle a person was accustomed to but a lifestyle worth living. The world is changing profoundly and it will take a little time before people see the changes. "

 Pie in the Sky wrote on October 14, 2008 6:23 am:
" The price of grain is always something of a mystery in this country. Since the price fixing of the early 50s until now and the price guarantees that were placed in the 50s and now we have a situation where nothing is predictable, the ethanol thing has nothing to do with it. Grain traders have everything to do with it. The manipulate the market until no one knows where the market is. Good luck farmers and happy selling. "

 Hjalmer wrote on October 14, 2008 7:00 am:
" And yet, Nebraska farmers will dependably provide their votes to Sen. McCain. He's the candidate when challenged in televised debate to provide programs that he would cut, the only one he could cite was to cut Federal aid to the development of ethanol! If rural voters would wise up, and deliver their votes to the candidates that support them economically rather than first checking to make sure they have an (R) after their name we'd have better policy and better politics too. "

 no problem wrote on October 14, 2008 7:46 am:
" Sounds like all we need is another welfare program for the farmers. That is if we can get these conservative, self-reliant, independent, and God fearing men to take another government handout from the taxpayers. "

 Galen wrote on October 14, 2008 8:07 am:
" Farmers gambled by planting extra corn acres, then gambled further by buying new equipment - and, of course, a new pickup - before the money was "in hand". Ethanol from corn, has never been a really workable idea. It costs more to produce then what it's worth. Despite what the corn board and others try to tell us, ethanol production - or even the MENTION of a new plant - starts farmers drooling because they know the price will go up (artificially inflated). It also affects the prices of other things. High priced grains are NOT a good idea, we're just conditioned to THINK they are.
I suppose there will be another "bailout" for farmers, now.....
If you "count your chickens before they hatch" and gamble with money you don't have, I find it hard to feel sorry for you. "

 ARJ190 wrote on October 14, 2008 8:44 am:
" Yeah, let's all vote for Obama and give "Tax Refunds" to people who don't pay any tax!! HUH?? How can you get a refund on something you never paid. Ethanol is a joke that was railroaded in for the financial gain of a few. "

 Nina wrote on October 14, 2008 8:50 am:
" I hope 'no problem' didn't say that with his mouth full. It doesn't make sense to want food availability and at the same time put down the farmer who struggles to feed this great nation and more. "

 Bad wrote on October 14, 2008 9:40 am:
" I'm with the 76 yr ol farmer. Farmers tend to keep farming because its
what they grew up with and are family farms from way back. Was in my family. My grandpa bot farms back in the depression when he helped build
the railroads. Even though it was dryland, if you owned it,in a drepression you still had your land. What I hear and read, ethonal is
a fluke. Probably something the govt. was willing to experiment with on
the farmers and the speculators had something to gamble with. While in
the beginning Nebraska was using 10% ethonal, a couple states east, you
couldn't even find ethonal in filling stations. Those states finally
started ethonal plants and many are now even closed. The farmer just
got duped again, seen it for 75 years. The sad part is if gung ho farmers
loaded up with loans and bot land and more machinery. I won't forget that
happening in, was it the '70s when one relative and several in my
part of the state lost their family farms!! "

 Ethanol vs feeders wrote on October 14, 2008 9:44 am:
" Carper is just talking his business gravey train of feedlots customer hedgers who now hate the fact they have competetion for corn finally and cant buy 1.80 corn all winter and government issue big ldp payments to offset prices to farmers...now ethanol plants blow the bids up when cattle feeders use to steal most cheap corn..and the best thing no government ldp payment to farmer saving tax payers a chunk of change also mr ccarper forgot to mention that big fact of savings to the taxpayer vs cheap corn for his feedlot buddies..... "

 Farmers daughter wrote on October 14, 2008 10:16 am:
" Obviously there will always be people like no problem and Galen who criticize anything to do with farmers. The farmers in my area haven't changed the amount of acres planted in corn or soybeans this year. We crop rotate. One did buy used equipment last year because the old was breaking down and he had a good year with grain prices, but the rest of us put the money back into this years production. I don't know of any farmers in my area that look for handouts. We look to make a profit on our business just like any other business. Since I don't farm myself, I'm just a landowner, I don't know the actual cost of producing a bu of corn, but I read somewhere that it costs 3.49 (without land costs). I received an increase in land valuation this year also. With corn selling below $4.00, guess there won't be much profit this year. "

 JoBeth wrote on October 14, 2008 10:52 am:
" Galen and ARJ, the new pickups you refer to are porbably at least 10 years old. You can't tell me that for once when life loks good there are some things you have gone without for a long time and you get them. As far as buying expensive farm equipment, it it just palin expensive. We have operated with a combine that is over 40 years old. If you don't know what you are talking about, you should not post. Also for once NE needs to vote for Obama. I make under 250,000.00 a year and could use the break that all the big guys get. Oh, and I've paid a lot of taxes on my meager 24,000. too! "

 Honest question to Nina and farmers daughter wrote on October 14, 2008 11:25 am:
" I read all the time that it costs farmers "$insert_here" to produce a bushel of grain. That cost is always higher than what they receive. How? I don't understand how farmers are always getting less than it costs to produce. If I had a job that paid me less than what it cost to drive to work, park and work I'd look for a new job, lickety-split. How can anyone work for years in a job that pays less than it costs to produce? I'm giving farmers the benefit of the doubt here, but if this is accurate (and they lose money every year) they should in my opinion get out. "

 Galen wrote on October 14, 2008 11:53 am:
" Actually - Most of the farmers around us buy a new pickup every 2-3 years. Most of the equipment being bought is not always used, either. There was also a mad scramble to plow up hay and pasture for more corn ground. I'm not trashing other farmers, I just point out that EVERYONE needs to live within their means. A lot of equipment was bought just because it was "wanted", not needed. If you put youself $300,000 in debt on a gamble, don't cry about it later. "

 Lincoln Taxpayer wrote on October 14, 2008 12:26 pm:
" To Farmers daughter and others- How many people get paid from the government not to do something(ie not planting acres) when that stops I might feel bad for farmers.
Just like any other business if you can't make money farming without government support get out of that business and let someone who can do it. "

 CS wrote on October 14, 2008 1:26 pm:
" Obama's tax cuts are not just income taxes. Everyone, even poor people pay taxes on other things. I pay little to no income tax once deductions kick in, but I still buy gas, groceries, pay for my home, had to purchase a vehicle, etc. I receive no welfare or assistance because I make too much, yet I make so little that they give me a huge return every year? Id rather keep it and invest it myself, thank you. "

 crp wrote on October 14, 2008 2:20 pm:
" It has been estimated that over 12 million acres have been taken out of crp and put into crop production. I'm willing to bet more marginal land is on the list to be broken up and planted to corn. This will have an effect on ag prices and the taxpayer will get hit with more ag handouts to compensate. "

 Now who do we blame wrote on October 14, 2008 6:33 pm:
" With record high corn prices, everyone was so eager to blame the farmers for our high grocery bills. Now that corn prices are back down I'm sure our grocery bills will plummet as well.....yea, RIGHT!!!! "

 Matt P. wrote on October 14, 2008 9:57 pm:
" Nina, quit being so overly dramatic! Farming is no different than any other industry, or at least it shouldn't be. If the government would quit providing subsidies, and that's all ethanol from corn really is, then the farmers wouldn't be in this problem!

Furthermore, Farmers DO NOT farm to put food in your mouth! They farm to make a living and to do something they enjoy. Do you think their objective is to really provide you with that second Big Mac for the day?? No, farmers (and I have many in my family ) are much much more practical.

Bottom line is if the government would allow the "market" to dictate what farmers grew instead of manipulating the market through subsidies or prop up programs like ethanol production then prices wouldn't fall out of the bottom of the barrel when those programs come to end.

For example, 15 years ago before the "ethanol boom" farmers would grow more soy beans or other types of crops because corn was at such a low price. But because of the ethanol boom, subsidized by Joe Taxpayer, the price of corn skyrocketed. Naturally, farmers then planted corn to take advantage of these prices. Well, now, the farmers are the ones who will be left holding the bag.

If you truly believe that farmers have not planted more corn in response to the ethanol demand then you are completely naive and completely unaware of the situation. Corn production is way way up!! That may not include "your friends" but we're talking about the entire market here!! "

 Farmers daughter wrote on October 14, 2008 10:45 pm:
" I get $1082 from the government in the form of CRP money out of the 564 acres I own. I didn't take ground out of production, this was highly erodable ground that I planted in cover crop (grass) to control run off, which the phesants now live in. I see more people get free money from the government in the form of child tax credit and EIC than I get. The big government handouts go to mega farm operations, not the family farmer. They're also the ones that swope in to buy farmland for far above what it's worth. I'm proud to be a member of the farm community, even though I don't actively farm. And one other thing, my dad always told me if I had land that was paid for, when the economy got bad, I'd never starve because I could sustain myself and my family by growing vegetables and raising livestock. That's what he did in the depression, when people didn't have money anymore, they traded chickens for tractor repair, etc. Some of you could learn a lot from a farmer. "

 Hey ej wrote on October 15, 2008 8:23 am:
" You understand that low corn prices are GOOD for the ethanol industry, right? How exactly is the government mandating an industry a "gamble?" "

 Ninajean Rohlfs wrote on October 15, 2008 9:22 am:
" Matt P, how presumptious to think you dictate another person's motives. Farmers were in a predicament way before ethanol was even produced. (Family farmers, that is, read Farmer's Daughter's all too true explanation of the difference). Farmers DO care about feeding people - that's why they donate loads of hay to go into drouth regions of the US, so cattle don't starve (check out this church-based activity on the internet). That's why they take bunches of fresh garden tomatoes to the local nursing homes, etc. as a donation. That's why at our farm auction, our family served lunch, and gave the proceeds to the World Hunger Fund. There is a dramatic need, so if it takes drama to get the point across, so be it. Thou suspecteth too much! "

 Jim wrote on October 15, 2008 11:00 am:
" "The big government handouts go to mega farm operations, not the family farmer. " I've heard this claim before from friends and acquaintances who have family members who farm. Not sure they realize how easy it is to check this out at the Environmental Working Group's website - www.ewg.org. You can find out how many hundreds of thousands of dollars of taxpayer money those 'family' farmers are raking in just by typing in their name. Advise everyone to check it out but prepare to be shocked. Thank goodness for the Freedom of Information Act. "

 Nope wrote on October 15, 2008 11:43 am:
" To Jim, single names on the list are not all small family farmers. We have several families who farm together, mega acres. I'm not saying they do anything wrong by combining their farming operation, they are actually being efficient in using less equipment to farm more land, get the crops out on time by running multiple combines through one field. However, because they farm lots of acres and the USDA requires you to list the farms in each owners name, not a corporation or partnership, you will see single names with lots of dollar signs behind them. It would be beneficial to see the number of acres along with the dollars collected. "

 jim is right wrote on October 15, 2008 11:55 am:
" I always knew the farm kids I went to school with in small town Nebraska had parents that were loaded, but I was even shocked at the payouts to these family farmers over the last decade. I always wondered why those kids got new cars every year, and had the designer clothing and all that other stuff, it was because people like my dad who was not a farmer were paying tax money to subsidise these farmers for their corn production. How about we let the market dictate the price of corn, not government payouts. "

 jim is right extra wrote on October 15, 2008 11:57 am:
" I also forgot to mention that a lot of these so called "corporations" are family operations, not the evil big business. Most farmers create a corporation to run their farm out of. They use initials of family members as the name, or their last names, or whatever to come up with the name of the business. So saying that only mega corporations are pulling down massive checks is not accurate. "

 Nina wrote on October 15, 2008 12:01 pm:
" Jim, in our county, on the info site you provided, there are at least three farmers receiving payments of many thousand dollars. These are corporate farmers who pose as 'family farmers.' If you check the status of their farm holdings, you will see they are really corporations, or else they have divided their large farm holdings into several mini-farms, each held by various family members, to qualify as 'family farms.' This does not make them family farmers, and we who farm know the difference, even though many, because of government loopholes they don't have understanding of, may not. A shrewd lawyer can help big farmers who are really corporations but are instead legally qualifying as family farmers, take advantage of this, and uninformed citizens believe what they read, without knowing the real situation. It's all politics, and real family farmers, of the type that have grown this nation, are not getting rich from the government. "

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