Farmers, ranchers play guessing game

 
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May 31, 2008 - 04:05:53 CDT
When Kidder County farmer Steve Koester looks out on his livestock and crops, he sees acres and acres of worry.

Koester, 41, said a drought has him concerned about his crops and about grazing lands for his cattle. And even if the drought lets up, Koester said he worries that this year's wildly fluctuating crop and cattle markets could move away from him so fast that he won't be able to recoup the record amounts he spent on fuel and fertilizer.

"It's unprecedented," said Koester, who's been farming for 20 years. "This is something the agriculture industry has never seen before."

On the opposite side of the Missouri River, Grant County farmer Chad Sketteberg is facing the same concerns.

He's kicking himself for not signing forward contracts to mitigate a sharp rise in his fuel and fertilizer costs. At the same time, Sketteberg, 39, is keeping one eye on the drought and another on the same wild swings in the wheat and cattle markets that also hold his financial fate.

"It's making all your decisions a big gamble," he said.

Across Western North Dakota, this triple whammy of high costs, commodity markets and a drought are turning 2008 into a balancing act.

On the one hand, the wildly fluctuating crop markets are still quite high by historical standards, and a new farm bill offers greater immediate protection if disaster strikes. On the other hand, fuel and fertilizer costs have risen even faster, and high crop prices of are little use to farmers who have their crops wiped out by a drought.

Already this year, Gov. John Hoeven declared an early stage agricultural emergency, opening up $1 million in state grants for farmers who need help buying equipment to get water to their livestock.

According to the U.S. drought monitor, a swath of North Dakota from the Canadian border to western Morton County is classified as in "extreme" drought - a condition that only exists in two other parts of the country. Except for the far southeastern corner, all of North Dakota is classified as at least "abnormally dry."

Byron Richard, president of the North Dakota Grain Growers Association, said he's seen many operations already affected by this year's drought.

If the drought persists, and results in federal disaster declarations, farmers should get payments quicker than those received from 2005 and 2006 disasters. That's because the new farm bill, which became law this month, includes permanent disaster aid.

Agriculture Commissioner Roger Johnson said that means the money is "on tap" and waiting for an emergency.

"As it turns out, that's likely the most important part of this farm bill for North Dakota farmers," he said.

But even with this and other price support protections afforded by the bill, farmers still face market risk. And naturally, the more the market moves, the more risk they face.

The markets are now moving faster than ever as farmers and grain buyers are joined by hedge funds and other speculators who have no interest in ever seeing a rail car of grain show up at their front door.

According to the Commodity Futures Trading Commission, which regulates these markets, monthly trading volume has increased 125 percent since 2005 for wheat, 85 percent for corn and 56 percent for soybeans.

Koester sold some of his crop via futures contracts last winter, but said the market's unpredictability makes it harder than ever before to wring this price risk out of his operation.

"There really isn't enough risk management in this environment," said Koester. "It's just like gambling."

Sketteberg said he would like to see regulators calm down the commodity markets by barring all the recent speculators who have nothing to do with the agriculture industry.

But while the final prices of crops fluctuate, there's been a steady uptrend in both fertilizer and fuel costs. According to the U.S. Department of Agriculture, farmers nationwide are paying 65 percent more for fertilizer, 43 percent more for fuel and 30 percent more for seeds than they did a year ago.

Dan Beyer, head of financial services for Farm Credit Services in Mandan, said farmers' higher costs have increased his agency's lending by 20 percent over 2007.

"They're not really planting more," he said. "It's entirely due to the higher costs."

The higher costs mean less margin for error come harvest time.

Richard, of the grain grower's association, estimates that area farmers will have to get at least $7 a bushel for their wheat to break even. Wheat closed the Friday trading day at $7.61 a bushel, but has come down from more than $12 in March.

Between working on his farm and running a custom harvesting business, Sketteberg sometimes pauses to wonder whether all these undercurrents will make this year more like last year or more like 2006. Last year, as crop prices raced up and inputs hadn't risen as much, he had his best year ever. But in 2006, he had his worst year ever when a drought destroyed his crop.

"If I can actually produce a crop, this could still be a good year for me. I'm not totally pessimistic," he said. "But, then again, if these wheat prices continue to drop, it could be really devastating to rural America."

(Reach reporter Jonathan Rivoli at 223-8482 or jonathan.rivoli@bismarcktribune.com.)
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Farmers, ranchers play guessing game
Comments

Cliffard wrote on Jun 14, 2008 4:26 AM:

" Freemarketradical, from reading your postings, it seems to me that you are upset that you didn't get a piece of the pie the government was subsidizing to farmers and ranchers,but rather you had to bail your parents farm out. A noble thing to do, but don't take it out on people. They had nothing to do with your family's affiars. If you think stress equates to working at a Chevron Corp. office, son, you haven't lived. "

freemarketradical wrote on Jun 11, 2008 6:50 PM:

" ND rancher, thanks for the advice, but as a manufactures representative I sell rather pricey equipment used in the energy exploration and development activities. I am not interested in selling anything else, and I do work hard. Do not understand how you can say I make nothing but enemies, as I do quite well. I have never posted "negative extream comments", although I understand how you as a rancher could see it that way. When I challange farm subsidy payments or over grazing on puic land your reaction is like a welfare mom being told her benefits were being cut and she has to find a job. I also think if you read what was posted I am not the one doing the whining, it is the farmer and ranchers. Can you quote one statement where I have whinned. "

ND rancher wrote on Jun 11, 2008 1:57 AM:

" Freemarketradical, It is apparent that you have alot of time to post your negative extreme commits. If you spent your time investing in hard work like the rest of the world, you may acheive something other than enemies. It's also apparent that no one here holds out any sympathy for your whinning and complaining. So try your luck over at NBC,where anything but the truth sells. "

freemarketradical wrote on Jun 8, 2008 1:05 PM:

" Mary, haven't bought a 2000 acre farm but have bought a 1497 acre one. After reading your descriptions of farming difficulties, along with those of others and the whining farmer complaints I hear I will most definately stick with statement that farming "seems like a selfish persuit of a nonsence dream" for most anyway. Why farm when others are willing to do it for free, or even work in town to keep their farm going? Who sounds foolish. I don't care if any farmer, or a large % of them don't work. In fact I wish they would go on strike to teach ungreatfull people like me a lesson. Come the next spring I will be at the many farm sales buying equipment cheap and picking up all that rented land others let go so they could teach me a lesson ! "

GARRY wrote on Jun 7, 2008 10:57 PM:

" Kidder,& Grant county's have always been drought countys! As well as Morton
,& most all county's west of the Missouri river! These guy's should have known
that ! But, they thought they could buy this cheap land,& grow gold out of it! That's
why it was cheap! Because, you can't grow much there! Now they want government handouts,because of drought ??? Sorry, i can't feel sorry for them !
But, i do feel sorry for farmer's who bought good land that got hailed,droughted,or flooded out. But , if you buy land for cheap in a bad area what else can you expect ??? But, i do wish all farmer's ,& ranchers GOOD LUCK !! "

SE Forty wrote on Jun 7, 2008 10:30 PM:

" To mary- Keep my mouth shut!??? If you can't make it at farming then GET A JOB!! I believe no one is telling you that farming is the only thing to do. I know more than the average person about farming. I did grow up around a farm/ranch. Also I live in the country now, and not in a subdivision. I choose not to farm because I live in the USA. I have a choice, just like farmers who have a choice to farm or not to farm. What I don't like is the tax money that is wasted on certain farmers who should never receive a dime simply because they are good at the paperwork. Shoot away , I'm done with this subject. "

mary wrote on Jun 7, 2008 6:15 PM:

" To SE Forty, just like wal said, if you don't know what you are talking about, keep your mouth shut! You are fortunate NEVER to have had to draw a welfare check! We never did either until the last years of farming! We just got tired of the BIG farmers collecting everything! So, for twp years we did get some government money! But, of course we had to comply with this and comply with that! If you didn't you did not get paid and believe me, the government is a hard one to argue with if one of them guys think you did it wrong! If you think your prices have one up too much for food and gas and lumber, etc, you should try farming! If any of you think you can make it on farming.... just go out and try it! Buy yourself a 2,000 acre farm and try to farm... buy the equipment to do it..... Do any of you have any idea how expensive tractors and combines are? My sister-in-law, who grew up on a farm told me once, well, if you didn't have to have AC in your tractor it would not be so expensive! I just asked her why she had AC in her house.... when she worked away from home all day long!

JustMe, we farmers are entitled to have a decent truck to get to town with, we have to drive 30-40 miles to do our business in town! We do not run to town for a bar of soap or a loaf of bread like you guys do!

Freemarketradical, we all know how foolish your statement is.... someone else will grow the crops..... Who will that someone be, when the guys that are farming right now can not do it anymore? You don't care? I really do think you better begin to 'care'! Food costs are only goingto go up! "

SE Forty wrote on Jun 7, 2008 12:03 PM:

" It would appear GOD is blessing them at this point in time, So why do they need my tax dollars??? "

Quill wrote on Jun 7, 2008 11:31 AM:

" Sounds like the business of farming is experiencing some of the same challenges as other businesses. "

City girl--past farmers daughter wrote on Jun 7, 2008 9:34 AM:

" GOD BLESS OUR WORKING FAMILY FARMS!!!! I have been on both ends of the stick, and let me tell you .... its much e-z'er going to work in the city.. punching in and out on the time clock, then working on the farm!!! There is no time clock there.. you are always punched in when working the farm life... 24/7/365 LIKE IT OR NOT!!! I like working the farm life, so I still go home and help out my elderly parents that still farm.... but there is no way I could handle the stress they all go thru each year... ITS A GAMBLE....anyway you look at it.... !!!!
GOD BLESS ALL OUR FARMERS THRU-OUT THE BEAUTIFUL U.S.A.!!!! "

freemarketradical wrote on Jun 5, 2008 1:53 PM:

" Al, Whinning me ? This story, and most like it, are about farmers and ranchers endless whinning about high costs of nitrogen, fuel, seeds, equipment, land rents, health care insurance, low cattle prices, long hours, low pay , unreasonable bankers, hunters, the weather, Korean reaction to their inability get a handel on mad cow disease, that they can't break CRP contracts without penalities, that no one appreciates their efforts to grow food and feed the world, land taxes, grazing restrictions on public lands, a"wanna be armchair democrat promoting negative pessimestic views", ect ect... all during the time of record crop prices and farm profits. "

Al wrote on Jun 4, 2008 10:48 PM:

" To freemarketradical, Your flattery will get you no where,just like your previous postings, there's no sympathy here for you, so run along now, and try some cheese with that whine. bye "

freemarketradical wrote on Jun 3, 2008 10:38 PM:

" Al, thanks, at least now I know what "a armchair wanna be democrate" is, and why I am one. I also want to thank you for your thoughtful and well written response. Thanks again for setting me straight. I also believe your well reasoned arguments will sway many to your point of view. I can't thank you enough. "

Al wrote on Jun 2, 2008 4:29 AM:

" To Free market ridiculous, just as I thought, change what you mean to say. Arm chiar wanna be Democrate = Promoting you negative, pestamistic viewes, just because you think you were so wronged in life. Take somewhere else. "

freemarketradical wrote on Jun 1, 2008 12:55 PM:

" Farmer Al, I never said that farmers were foolish and prone to violence. I said that you made them sound that way. ie " Mouth off to those farmers ....". I grew up on a farm and bought mom and dad out a few years ago after his heart attack and I was downsized out of a 20 year job at a major oil company in San Francisco. Al, if you want stress, go work for Chevron Corporate Office ! To me, it was always more important to take care of the people I loved instead of being selfish and doing what I loved. I saw several of my high school clasemates doing the farming they loved only to lose the farms they loved and had in their families for 80 or 100 years. Seems to me a selfish pursuit of a nonsence dream, something my dad tried. Being one of the last real conservatives, wanting to eliminate commidity subsidies, social security , medicare and public funding for education I don't understant the "wanna be democrate" slam. Perhaps you can explain what you ment. "

Al Falfa wrote on Jun 1, 2008 10:55 AM:

" To Free market radical, foolish? prone to violence?, appearently, you never had to work or shoulder the stress that comes with doing something you love. If you had, you'd be out there doing it. You sound like some arm chiar, wanna be democrate. "

freemarketradical wrote on May 31, 2008 10:51 PM:

" After reading the story I wonder if Koestar and Skatteberg might not be in the wrong line of work. I could care less if any farmer works hard, or takes a risk, or not, It dosen't matter to me. No different than it wouldn't matter to some farmer if I didn't go to work work. I am not sure what he means , but Farmer Al makes farmers seem kinda foolish and a bit prone to violence. Why work so hard if your still not sure you can provide for your family, espically considering many are setting on a million dollars or so in land assets they just don't have the ability to make productive ? Drough, hail and high prices have been driving farmers off the land since the end of WW1.Fewer farms keep keep food prices down . No new story here, the consumer wins. If we could only get rid of commidity subsidies the taxpayers would win also. "

Farmers Daughter wrote on May 31, 2008 9:06 PM:

" Thank you, Farmer Al Falfa for your support of farmers. SE Forty, you clearly have not lived and worked on a farm for your livelyhood. 2007 may have been a good year for some farmers. Prior to 2007, when was the last time the farmers had a good year? In 2006, a record number of ranchers sold out due to yet another year of drought. Consumers were paying high prices for meat at the store yet some ranchers were unable to break even at the livestock barn. Until you have managed and operated a farm, you have no idea the stress, l-o-n-g hours, and back breaking work a farmer goes through year after year, hoping they have not waited too long to lock into a contract or to sell their livestock and/or grain. THANK YOU to the farmers, their wives, and children. Your hardwork does not go unnoticed. "

lutefisk wrote on May 31, 2008 8:52 PM:

" Someone else will grow the crops. What an ignorant comment. Much of the world is going thru food shortages and much of the worlds corn and oils, such as palm oil, is being used in the worlds gas/fuel tanks. The subsidy system isn't perfect, but neither are the markets and economies that drive the agricultural business. I don't know what you do for a job SE Forty, but judging from your comments you don't carry much risk with you to work everyday. Farmers, like any self owned business, do live with risk everyday - more than the average small business owner. There is competition over rental land, rising input costs, commodity markets that they have no control of and mother nature.
Yes - take the good year and hold on to your ankles because you don't know what the next ten will be like. If prices return to the past state and input cost continue to rise, there will be far fewer farmers, but no worries SE Forty, there will always be food on your table. "

SE Forty wrote on May 31, 2008 1:32 PM:

" To hubert and wal- Try reading the other article about 2007 and the record earnings for the POOR farmers. You people think your the only one's who do back breaking work. Yea right! Beleive me if you were to get a REAL job instead of the WELFARE you would find out it isn't so easy anywhere else. But I am not subsidized by the government. As far as the grocery isle, Someone will grow the crops, If not you then someone else. "

JustMe wrote on May 31, 2008 1:01 PM:

" So, what is left from the record year last year? All I see in the yard is a new mailbox for the relief checks and a new pickup... "

Farmer Al Falfa wrote on May 31, 2008 12:39 PM:

" SE Forty, pretty easy for you to sit there and talk uneducated, but go out and see what these farmers have to put up with. I know, I grew up on a farm in North Dakota. See the stress they're under while they work in 90 degree plus or -40 below wheather, hoping what they are doing is enough to feed their family, while you stuff your mouth. You want to play critic? Mouth off to the face of these Farmers after they put in a 16 hour day, when all they want to do is go home and get ready to do it agian tomorrow. Or when a drought or hail or high operating costs drive them off the land they love. I gaurantee you'll wish you hadn't. No SE Faty, it's people like you that need to have their computer taken away until you get the real picture, come walk in our shoes, if you're man enough. I doubt it. "

wal wrote on May 31, 2008 9:31 AM:

" SE Forty - The best course of action, or inaction, for people who don't have a clue what they're talking about is to be quiet. "

hubert wrote on May 31, 2008 8:24 AM:

" There are so many loud mouths in the Bisman area. If you want to whine about "welfare" why not whine about the military-industrial complex? They are intentionally creating markets for their ridiculous weapons and you are paying for their folly from design to implementation, and not one ounce of it is about national defense.

How about all the corporate welfare? It far exceeds what the farmers are getting. Who needs the support more? The Fatso burger franchise or the farmers?

No matter what subsidies a farm gets, farmers still EARN their money with back breaking work. Keep that in mind next time you wheel down the grocery isle. "

SE Forty wrote on May 31, 2008 5:54 AM:

" Why not take some of your record earnings from last year and use that for the hard times like the rest of the country? I'm still waiting for my first welfare check. "

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