Farmers holding back on grain

Many hope prices will be higher by waiting until spring

January 05, 1999|By Anne Haddad | Anne Haddad,SUN STAFF

It's time for farmers to buy seed and supplies, fix or replace equipment that got a workout during the fall harvest, and take stock. But many grain farmers are holding onto the crop they grew hoping for a better price in the spring.

"Right now, it costs you more to grow it than what you're getting back," said Kelly Hereth, executive director of the Farm Service Agency office in Carroll County. The agency is the local arm of the U.S. Department of Agriculture.

Grain prices have fallen lower than they were 30 years ago -- at one point as low as $1.68 a bushel for corn that costs the farmer about $2.50 to grow. The price of corn is holding flat at $2.10, and market analysts are predicting weak prices in the spring, when they traditionally go up, Hereth said.

Federal programs help with cash flow.

About 300 farmers in Carroll County have received $435,584 from the federal government as part of an emergency farm assistance package passed by Congress at the end of summer.

More than 400 farmers received another $1 million in commodity loan programs, and more applications are pending from growers who find they cannot get a price on the open market that will cover the cost of planting and harvesting.

A year ago, farmers were left with little yield by a drought that shriveled corn plants before they produced ears. The federal help is necessary, farmers say, but they would rather see national policies that can help them sell on the international market.

"Am I grateful for government payments? Yes," said Melvin Baile Jr., a New Windsor grain farmer. "That's the only safety net we have in place when it comes to supply and demand. Right now, we have horrible demand and oversupply."

For Baile, government payments added about 6 percent to his gross farm income.

"That goes right into taking care of current expenses," he said, with nothing left to build on.

Instead of a new pickup, he and his younger brother put a new drive line in the old one.

The problem of low grain prices stems from the financial crisis in Asia, which in past years purchased about a third of the grain grown in the United States. But those countries cannot afford it this year with their weak currency.

"Other countries are subsidizing exports to get them out of the country," Baile said. "Canada and the European Union."

While all farmers care about the weather outside their doors, Baile has found that weather halfway around the world makes a difference, too. To survive, farmers must keep a close eye on the world market.

Baile subscribes to a satellite data service hooked up to a computer monitor in his office. It provides him with market news and weather around the world.

Every day, he checks the weather in South America, where it's the growing season for corn. Countries such as Argentina are major competitors in the corn market.

If weather and rainfall are good there, Baile would expect a bounteous South American harvest, which could further drive down corn prices. In that case, he would be more likely to sell his stored grain earlier, before the market is glutted.

If Argentina gets little rain, and Baile sees a drought shriveling its crop, he might hold out for higher corn prices.

With farmers at the mercy of so many variables, government payments might be the only thing they can count on.

"It's a lot of bureaucracy, and there's a certain stigma that's attached to receiving government payments," Baile said.

Hereth said, "The best way to look at it is, it's a way of them recouping their tax dollars."

Without the help, more farms could disappear.

Maryland is losing farmland at an average of 60 acres a day, according to state and federal statistics.

In North Dakota, where drought, snowstorms and floods have besieged farmers the past 10 years, officials are estimating the state could lose a third of its farms in the next year.

"If farmers are insolvent, that affects the banking industry, too," Baile said.

Hereth expects corn and soybean prices to go up in April or May, as they usually do, though not as much as in the past.

"We will not have a fast recovery," she said.

Farmers cannot wait until then to get cash for their 1998 harvest, because they need money now to order seed, fertilizer and repair or replace equipment.

The low-interest federal loan program allows farmers to use their crop as collateral for a loan. Carroll farmers can borrow $2.10 for every bushel of corn they have harvested and stored, at 5 3/8 percent interest. Other eligible crops include wheat, barley, soybeans and sorghum.

When the loan matures in late summer, they have two choices: pay back in cash or in grain.

The good news, Hereth said, is that dairy farmers are able to catch up from last year's disaster. The drought had made corn and hay scarce and expensive last year.

This year, milk prices are up, and grain prices are low.

Pub Date: 1/05/99

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