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Agriculture flourishing as harvest under waySTERLING, Kan. (AP)--Around this small Kansas town, evidence of prosperity rumbles across rural roadways on 18 wheels. Trucks filled with corn head to the area ethanol plant, feedlots and the elevator--a commodity that might well be called yellow gold at prices of more than $5 a bushel. For once, the farm sector is the bright spot amid hard times. While much of the U.S. economy totters, agriculture is flourishing. On the farm, higher commodity prices and bountiful crops should mean a boost to most pocketbooks. According to the U.S. Department of Agriculture, the ag economy has the potential to add a record $95.7 billion in net income to producers. Meanwhile, the value of crop production, at $188.8 billion, is forecast to exceed the 2007 record by $38 billion, a 25 percent increase. The economic surge has spilled over to farm manufacturers, who can't keep up with demand for new products. Salina-based Great Plains Manufacturing has added a plant in Ellsworth to help boost production. After diversifying into other products several years ago, Krause Corp. in Hutchinson has centered its focus back to its original roots--agriculture. Yet at a time of record agriculture profits, concerns are mounting about a possible disaster not seen since the 1980s farm-economy collapse. Increasing debt, soaring land values and the skyrocketing prices for inputs like fuel and fertilizer have brought farmers' worries to the forefront. The commodity market is volatile, and fearing drops in prices, some wonder when this golden age of agriculture will end. "It is a scary time," said Inman resident Ron Stucky, who farms near Conway. He already knows that half the input prices for a wheat crop he'll drill in next week will double. "Everyone is kind of shaking in their boots about the price of fertilizer," he said. "And there's no way to know what kind of crop you'll have next year." As long as the demand for commodities remains strong, good times for farmers should continue. But if it falters, farmers fear a crisis. The volatile market has made some grain elevator officials reluctant to forward-contract, and a few small-town banks already are hitting limits with producers, said Kansas State University agricultural economist Kevin Dhuyvetter. Input costs have risen so much that farmers want high lines of credit. "They are literally pushing up what the bank can lend them," he said. "I don't see it being as big an issue with the larger, consolidated banks, but the local banks that rely heavily on agriculture, they might have more demands for credit than they can supply." There is a lot of uncertainty, he said, with higher input costs taking from farmers' bottom line. According to the University of Nebraska-Lincoln Extension, dryland wheat farmers averaged $69.38 an acre in net income in 2008. In 2009, if prices stay the same, but input costs increase as projected, net returns will decline to $25.21 an acre. Commodity prices also have taken a small dip in recent weeks. Wheat prices dropped more than a dollar from a month ago, corn and milo have dropped slightly, and soybeans have dipped nearly $2. "The risk is high, stress levels are high," Dhuyvetter said. "Things look to be very profitable, although it is hard to sleep at night when the market moves 40 cents a day." Despite fears of the future, no one can deny there is a gold rush on the Plains. It seemed that for years Kansas farmers would watch as their livelihoods withered under drought and crop prices dwindled because of a glut of grain. These days, most are cashing in on a rural economic boom driven by a short supply of commodities globally. "Our farmers are going to make money in '08, unless they really messed up in marketing and sold early," Dhuyvetter said. Richard Roth, with Roth Equipment in Larned, said while a few farmers have said they would put off purchase because of input costs, this year has been lucrative for many dealers. "Ag has been in a nice little boom here," Roth said. "If farmers do well, their suppliers do well, and it sure is a reverse from the national economy. You hear the housing industry and the financial industry is declined, and the East and West Coast is in a slump. But ag is doing well." Orders for planting, seeding, spraying and tilling equipment are intense and widespread these days. Several agriculture manufacturers are trying to keep up with the demand that includes a backlog of orders well into 2009. That includes 36-year-old McPherson County farmer Monte Dossett, who wanted a new combine for the fall harvest. With the strong demand, however, he'll have to use his old one. "It'll show up next year," he said. In Sterling, where a new plant churns out ethanol made from corn and milo not far north of town, Mike Bender's company, KMW, is seeing the effects of demand. Bender and his crew manufacture loaders and backhoes for compact and agriculture equipment. An old plant on the outskirts of Ellsworth that has been mostly empty for a few decades is seeing activity once more. In the 1970s, Ford Motor Co. employed hundreds here to make wiring harnesses for vehicles like the Ford Pinto, a car not manufactured since 1980. For a while, it also was a warehouse. Now prosperity in the farm economy has brought life back to the old building. Recently, Great Plains Manufacturing completed its first unit from the site in the form of a disc harrow. "Our sales have doubled six of the past seven years," said Great Plains Division President Rick Hanson. "Not only is the domestic market doing well, but so is the export market." The company started moving into the 130,000-square-foot building in January. The plant employs 40, with plans to increase to 60 in the near future. In Salina, the company is adding another 150,000 square feet and 50 jobs. Hanson said workers are putting in long hours to get out products, with some even working weekends. He, too, wonders how long the drive will last, noting past dips in the farm economy. "You need a crystal ball," Hanson said of what next year will bring, "but I hope it sustains." Some farmers just don't have the money to shell out on expensive equipment. Bender, at KMW, said as commodity prices drop, he expects farmers to take a frugal approach to spending. The agricultural equipment sales index has declined every month in 2008, he noted, with the August reading of 56.8, down from July's 62.3. And despite profiting this year, Inman farmer Stucky said he's still paying for the Easter weekend 2007 freeze that killed his wheat crop. Because he didn't have federal crop insurance, Stucky wasn't eligible for disaster payments, saying he lost $40,000 because of the poor crop. Stucky said he's using equipment from the 1960s and 1970s, which still gets the job done. Meanwhile, he said that applying starter fertilizer to his wheat crop this fall has doubled to more than $1,000 a ton. Good prices and a good crop next year will help, he said, adding that even with that in mind, "I don't like to stick my neck out, especially in the price swings." Richard Brown, president of Krause Corp., however, said the global food shortage wouldn't end any time soon. "We expect the demand to remain fairly strong as we go forward in the next three to five years," he said, adding that he thinks commodity prices are leveling off and shouldn't drop much lower. "I think soybean prices will go up, and all three of the primary grains are at historically favorable levels where farmers can make a good return," he said. "We really think price adjustments are behind us." 10/6/08 Date: 10/1/08 Advertisement
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