A growing gamble

Feb 8, 2009      The Progress-Index

Joshua Brown

Feb. 8, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- With the nation in the midst of record economic turmoil, agricultural experts say Virginia's farmers are facing similar financial troubles.

Farmers in the Tri-City area who have a track record of being able to manage risk well will likely "survive" the recession, Virginia Cooperative Extension Agent Mike Roberts said, but farmers who have done worse managing their farms may not make it through.

"I think farmers that prove they manage risk pretty good are going to be able to survive this year -- and that's the key word, 'survive,'" he said.

While it may appear farmers are making large profits, profit margins are cyclical, he said, and farmers face incredibly increased prices on the front-end of business, such as seed and fertilizer costs.

For example, fertilizer costs, i.e. potash and nitrogen, rose as much as 500 percent in the last three years, although those costs have fallen to about 200 percent of their prices from three years ago.

"It's still high, but it's come down," Roberts said.

He said seed and chemical costs are also high, further hurting farmers' bottom lines.

Dinwiddie farmer Alvin Blaha, who tenant farms about 600 acres, said crop prices are making it difficult for farmers to decide what to plant. Wheat prices right now make it impossible for a farmer to come out even and other crop prices haven't been set yet, he said.

Blaha said many farmers are waiting to see what the government-subsidized crop insurance rates would guarantee before planting.

"We really don't know what to do," he said. "I mean, right now, I doubt if anybody's made any real concrete plans on what they can plant, because of the prices of all the inputs [costs to plant crops]," he said. "That's the game now is what will you lose the least money on.

"It sounds a little funny, but until something moves, we don't know what the crop insurance on beans and corn will be until March, because that price is set by the market in February."

Farmers who have paid down their debts, such as equipment, building, or crop loans, should be able to weather the economic storm, Roberts said. Those who haven't paid down their loans as much will have more trouble finding credit lines, he said.

Farmers typically have an operating line of credit each year to cover operations until they receive payment for their crops, he said.

"I would strongly encourage farmers to prepay [chemical and seed costs] in 2008," he said, adding that world demand has increased prices. He cautioned against taking loans for any new equipment during the hard financial times.

"Seven-year capital asset debt [used to purchase machinery] is the last thing they want right now," he said. "I counsel every farmer I can to not buy machinery if they can fix it up or put a bolt in it [to keep it working]."

Roberts explained that while it may appear farmers are "getting rich," they are facing hard economic times too and said he hopes that tenant farmers, who farm the land for absentee landowners, will not have rent raised on the properties.

He hopes landowners would absorb rising property taxes and not reflect those increases in their subsequent rent charges.

"In this time of higher taxes, somebody's going to have to eat the difference, and I would encourage the landowner to do that because it is their property," he said, adding that he understands the plight of rising taxes.

Prince George farmer Charles Skalsky said the farming business is a hit-and-miss business. Farmers don't sell their crops based on cost to plant, but instead must plant crops that will yield them profits based on crop prices, which are set by the market.

"It's a gamble," he said.

Skalsky agreed that input costs are going up. He said he has seen potash priced at $815 per ton, compared to about $200 per ton two years ago.

On top of that, Skalsky said because farmers are self-employed, they have higher expenses for things like health care insurance or retirement plans.

"When you're self-employed you got a lot more costs than people see," he said. "People say, 'You made so much money!' I say 'Yeah, I made this much money, but it went here, here, and here.'"

For Blaha, though, it comes down to a simple question: How do you recoup your operating costs in a harsh economy?

"Any article you read in [an] agriculture publication you'll see the same thing, 'What do we plant?'" he said.

--Joshua Brown can be reached at 722-5160 or jbrown@progress-index.com.Farming is big business in Va.

Agriculture remains the top industry in the Virginia with 47,600 farms that cover approximately 8.6 million acres. The average Virginia farm is 181 acres and generates $49,593 worth of sales, according to the Virginia Farm Bureau.

Dinwiddie County has 361 farms on 92,429 acres with and generates an average of $40,707 in sales per farm, according to the 2002 U.S. Census of Agriculture. The average farm in Dinwiddie is 256 acres. Overall, Dinwiddie has a market value of production at its farms of $14.7 million with another $782,000 in government payments.

Prince George County has 218 farms on 55,111 acres and generates an average of $19,682 per farm, according to the 2002 U.S. Census of Agriculture. The average farm in Prince George is 253 acres. Overall, Prince George has a market value of production at its farms of $4.3 million with another $590,000 in government payments.

Farming has taken a dip in both counties since the 1997 U.S. Census of Agriculture. In Dinwiddie, there were 426 farms in 1997 with 96,336 acres generating a total of $18.2 million with another $522,000 from government support. In Prince George County there were 168 farms on a total of 49,055 acres generating a total of $5.9 million with $225,000 in government support. It is interesting to note that in Prince George, the number of farms increased from 1997 to 2002, even though the amount of total land and sales declined.

Newstex ID: KRTB-0406-31565745

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