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Farmers say they can ride out low crop prices with Congress' help
Paul and Loren Koeman, of Hamilton, say then can ride out low crop prices if given the right tools.
American farmers will likely suffer a $7.4 billion drop in net farm income this year, but at least a few Michigan farmers say they can ride it out -- if given the right tools.
Loren Koeman is optimistic that he and his father, Paul, will be able to weather the current low prices. They've also done their share to stay ahead of the game by spreading their risk and using risk-management tools.
The Koemans grow 3,000 acres of corn, soybeans and wheat near Hamilton, in Allegan County. "We sell direct to end users as much as we can," Loren Koeman said. "It's more a business of serving customers rather than just delivering to an elevator."
"It does provide some challenges though. Our customers will say, 'I want a load of corn Monday at 10 a.m.,' and we have to get it there Monday at 10 a.m."
Soybeans are processed at Zeeland Farm Services and the family ships wheat to Michigan millers. Other crops are sold to other area farmers for feed.
Although the Koemans are able to do better by skipping the middleman, they're still affected by the extremely low prices that have dominated the market this year. "It certainly hurts " Koeman said. "Our advantage is probably a set margin of so many cents across the board."
Because the Koemans sell much of their crop direct to livestock and poultry farmers, recent peril in those industries in the state have meant a direct hit. The closing of the BilMar turkey processing facility in Zeeland took some of their customers out of the poultry business for now.
"It points out the need for a good risk-management program," he explained. "We've done some things with crop insurance, markets -- hedging and futures."
Koeman said the current crop-insurance program doesn't go far enough to protect farmers. He also advocates spending some money to bail out foreign economies and stimulating trade. "I think where we really need more help is the export field," he said. "We're in an international marketplace right now. What I would like to see that I can't do myself -- that we can't do as farmers -- is some help with the exports. That's half of what's going on right now is the exports, the other is oversupply."
"I think we're seeing the handwriting on the wall that says we can't just raise whatever crop we want when we want and expect to get paid for it," Koeman said.
Koeman says he wouldn't want to scrap the 1996 farm bill and go back to government-controlled supply. His father, Paul, agrees. He, too, remains hopeful that the farm economy will straighten itself out with some help.
"It's going to be tough for a little while. We;ll have to tighten our belts," the elder Koeman said. "If nothing else, it forces you to be a better manager."
Low farmgate prices are also affecting commodity promotion and research efforts, according to Keith Reinholdt, Michigan Soybean Association executive director.
"Our income will be down 25 percent this year," he said. "Continuing research projects will be our priority. Any type of promotion activities will be statewide efforts."
Because farmgate prices aren't likely to improve in the next year, Farm Bureau is asking Congress to take steps that will help the farm economy in the long run, according to Al Almy, Michigan Farm Bureau public policy division director. He said the plan also calls on Congress to aid farmers in this disaster year.
Almy said Congress needs to move quickly to provide emergency supplemental funding for farm families, and take immediate steps to expand exports of U.S. agricultural products. Michigan Farm Bureau President Jack Laurie serves on the 10-member American Farm Bureau Federation committee that developed the recommendations for Congress. The "Committee on the Farm Economy" distributed their report to all members of Congress, and also established a toll-free hotline, (888) 333-5757, that farmers can use to generate letters to their U.S. representatives.
Laurie said Congress has little time to get the job done, as it is scheduled to adjourn Oct. 9. However, Laurie said it's not likely to happen.
"The leadership in Congress had indicated there was a window to pass fast-track," Laurie said. "That window is now. But what we picked up visiting with Congress this week was some reluctance to give additional authority to the administration based on perceptions right now. We can't cripple our ability to negotiate trade agreements because of the situation in Washington with the current administration. My impression, however, is we're going to be lucky if there's even a vote at this point."
All in all, Laurie said Congress must not abandon the 1996 farm bill and should maintain the FAIR Act's market-based strategy. He said doing anything else, such as extending commodity loan terms or raising caps, would signal a return to the government-controlled supply seen before the farm bill.
"We are opposed to extending commodity loans," Laurie explained. "If you extend that loan term, it simply moves that crop into next year, and we'll end up with two crops in one year. Loan programs were intended to lessen pressure to sell at harvest time and spread sales throughout the marketing year. It is a marketing tool for producers, not an income-support program."
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