High grain, low milk prices leave dairy farmers strugglingby Rupa Shenoy, Minnesota Public Radio
Mantorville, Minn. — In the midst of a plentiful harvest and high grain prices, dairy farmers are struggling.
Burdened with high grain costs and low milk prices, some dairy farmers have racked up enormous debt, unequaled since the farm crisis of the early 1980s.
John Larsen Sr.'s family has owned his 50-acre farm in Mantorville, in southern Minnesota, for seventy years.
On Larsen's farm is a paint-chipped barn that sags with age. In the pasture beyond it, his 35 cows graze in a pasture. He sells all of the farm's milk to a nearby co-op.
"Times got tough in 2009," Larsen said. "I think you could drive down the road and pick a place and find a dairy farm that had tough times. It was kind of a perfect storm of high input costs and low milk prices."
Larsen saw a downturn for the dairy industry coming in the futures markets. First the cost of grain feed for cows skyrocketed. Then the price of milk plummeted.
"It's really tough to prepare for it," he said. "I mean it hits you like a truck when it hits."
When Larsen describes his financial situation, he says he's "hanging on by his nails." His farm needs work, and money to make those improvements. The banks' solution: expand or put the whole farm up as collateral for a loan. But Larsen only sees those choices as more risk.
Most farmers routinely carry high debt. Overall, farm loan delinquencies nationwide have risen to a 17-year high.
Banks in this state have sent about 3,700 default notices to farmers over the last year, according to the University of Minnesota's Farmer Lender Mediation Program. That's more than an 80 percent increase in the last two years. The number of farm foreclosures is slightly up.
Those numbers are for all farms -- and all types and sizes of farms are among those in foreclosure or delinquency.
But the combination of high costs and low milk prices means many dairy farmers were hit especially hard, said Kevin Plante, coordinator of the Minnesota Farmers Assistance Network, a state agency.
"[The] numbers we saw earlier in ... mid year were almost to that point where we saw back in the '80s where we were in the farm crisis," Plante said.
Banks are under pressure to reduce the risk in their loan portfolios, but bankers say they'll continue to make loans to farmers who can make it through this crisis.
"We care about people, we care about our clients, and so to watch families go through challenges with this cycle is not easy to see," said Paul DeBriyn, president and CEO of Mankato-based AgStar Financial Services.
He said farmers are simply going through a tough cycle.
"This pretty well is typical of what we see time to time," DeBriyn said. "It's just now it seems that the volatility that occurs in the pricing of these cycles is more dramatic than ever before."
On the Larsen farm, it's hard to believe the downturn is temporary. At feeding time, when Larsen shoveled grain into wheelbarrows, he gripped the wheelbarrows by their rims because the handles are gone.
Larsen wants to pass his farm on to one of his four children. But as he prepared to bale hay, 19-year-old John Larsen Junior said he doesn't want the family dairy business.
"The economic stability of the dairy industry is horrible," the younger Larsen said. "I think it's pretty much permanent for now. You either got to go big or you got to go home."
John Larsen Jr. said he plans to keep farming, but his plan is different from his father's. No cows. Just grain.
- Morning Edition, 11/02/2010, 6:20 a.m.