A new report by the Federal Reserve Bank of Minneapolis paints an alarming picture of financial struggle on Midwestern farms that deserves a deeper look.
The number of farms declaring bankruptcy is rising and, while still small, has doubled in Minnesota over the past four years. But that’s just one indicator of a gathering crisis for farmers here and elsewhere. Agricultural experts say that many more are making the painful decision to exit farming. Kevin Klair, a professor of applied economics at the University of Minnesota, told an editorial writer that between 20 and 40 percent of farmers in Minnesota are struggling financially, beaten down by five years of falling farm incomes.
The midsize family farms that have been the backbone of rural economies are taking the brunt of the impact, according to Klair and others, and Minnesota should take heed. Better technology, increased mechanization and research that has improved crop yields have been boons for agriculture in general but have made it harder for midsize family operations to keep pace and have contributed to production that is so efficient it has resulted in a global oversupply of some crops. “The cost of capital to operate has become so huge,” said Gary Wertish, president of the Minnesota Farmers Union. “There are economies of scale that come with large operations that smaller farmers just don’t have. If we don’t find a way to give smaller operators more of a solid footing, some of these farmers won’t be here in the long run.”
Ron Wirtz, regional outreach director for the Federal Reserve and author of the report, said that while the trend lines toward consolidation have been clear, “there is no question the level of struggle for farmers is increasing. Farm balance sheets are getting tighter, and farms are less profitable than they were five or six years ago by a significant margin.”
Added to all that is President Donald Trump’s heavy-handed and indiscriminate use of tariffs, which have touched off a trade war that may prove a tipping point for some farmers. “We’re getting whacked on both ends,” said Wertish, who raises corn, soybeans and navy beans with his son at their farm in Renville. “The tariffs are driving up our cost of production, and the prices we get are falling.”
Some farmers are trying to ride out the storm, saying the president is doing what is necessary to achieve long-term trading gains, particularly with China. But that is not the only consideration here. The U.S., as Wertish rightly points out, is “losing our reputation as a reliable trading partner around the world.”
Few trading partners would have objected to Trump taking on China, a nation that has scoffed at patent protections and forced companies across-the-board to surrender their technology secrets in order to do business there. Instead, Trump needlessly squandered goodwill among allies by first picking fights with friends and allies. The small gains in the recently signed United States Canada Mexico agreement that is an offshoot of NAFTA “were not worth the disruption,” Wertish said.
Market share once lost is hard to regain. Falling prices may well trigger more consolidation, with larger operations gobbling up smaller ones.
Minnesota, thankfully, has some resources in place to help struggling farmers cope, including financial advice, possible restructuring of loans and even connections to mental health assistance. Those were bolstered in the last legislative session when Gov. Mark Dayton sought and received $35 million for the state’s Rural Finance Authority, which helps provide low-interest loans to farmers and is itself an outgrowth of the mid-1980s farm crisis. In making the request, Agriculture Commissioner Dave Frederickson noted that farmer enrollment in RFA loan programs rose 93 percent in volume compared to the previous year.
Fair warning: More may be needed if the state is to help its farmers ride out the current storm. The federal government, too, would be well-advised to re-examine policies that may have contributed to putting midsize farms at a disadvantage. The family farm is an important tradition in this country — too important to let it become just another gauzy memory of yesteryear.