WASHINGTON — America’s depressed agricultural economy is not yet at “a tipping point where vast numbers of farms will be lost,” the CEO of one of the country’s biggest agricultural lenders says. But “there’s bleeding going on” thanks to a confluence of low commodity prices, bad weather and tariffs.
It’s forcing some farmers to refinance loans and convincing others to retire.
“It’s a slow erosion,” said Rod Hebrink, chief executive of Compeer Financial, a 43,000-member cooperative operating in the Midwest.
Hebrink, a native Minnesotan who still lives in the state, testified to a congressional subcommittee Tuesday about current challenges facing U.S. growers and livestock producers.
He did not predict an agricultural meltdown on the scale of the 1980s. He said Compeer, one of the nation’s biggest rural lenders, has not been forced to deny new loans to many customers. But the cooperative is now counseling some to rethink the way they do business.
A prolonged downturn “has impacted farmers of all ages, experience levels and sizes,” Hebrink said in his testimony.
The University of Minnesota recently reported that farm income in Minnesota is at its lowest level since the state began keeping that statistic.
Many grain farmers have not generated income for four or five years owing to bad market and weather conditions, Hebrink said. They have been living off working capital.
“You can’t draw on equity forever,” he said.
Now, bad weather has added another burden. Farmers in the Upper Midwest face possible catastrophic floods as the winter’s heavy snowfalls melt. Even where floods have not ruined property, Compeer’s Fund for Rural America has given out a total of $117,000 in $1,000 quick relief payments to people who have had barn roofs collapse from snow accumulation, Hebrink said.
That seems benign when compared to the damage sustained in Nebraska during last month's bomb cyclone, which when all of the destruction is compiled, will cost the state upwards of $1 billion in destroyed crops and livestock.
As Hebrink spoke in one congressional hearing, the National Pork Producers Council, whose membership includes many Minnesota hog farmers, submitted written testimony in a neighboring hearing. It offered an ugly assessment of what retaliation to President Donald Trump’s protective tariffs on steel, aluminum and Chinese imports has done to places like Minnesota that lead the country in hog production.
China, which bought $851 million worth of pork in 2018, now has retaliatory tariffs totaling 50 percent on American pork products, the council reported.
Mexico, which could not charge tariffs under the North American Free Trade Agreement that Trump scrapped, has placed a 20 percent tariff on U.S. pork in retaliation to the protective levies the U.S. placed on Mexican steel and aluminum for reasons of national security.
Congress has yet to approve Trump’s renegotiated trade deal with Mexico and Canada — the United States, Mexico, Canada Agreement (USMCA). Without it, some economists say U.S. pork producers risk losing a Mexican market that was worth $1.3 billion in 2018.
Losing the Mexican market “would be cataclysmic for the U.S. pork industry and for all of American agriculture,” the pork producers council said.
Meanwhile, anticipated increases in pork sales to Japan and other Pacific Rim countries under the Trans-Pacific Partnership fell off the table when the White House withdrew the U.S. from that free trade agreement.
Hebrink said the tariff battle “exacerbated” an already grim situation.
“There’s more nervousness now,” he said. “Farmers are optimistic by nature. But there is a reality setting in.”