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Henderson: Ag Economy Will Rebound

by Courtney Schafer

Published: Friday, September 2, 2016

Grain farmers and agriculture businessmen and women gathered last Wednesday for the annual Pinney Purdue Field Day at the Pinney Purdue Agricultural Center in Wanatah. More than 150 individuals attended the event to listen to educators and specialists about corn, soybeans and other topics that farmers are dealing with.

Jason Henderson, associate dean and director of Purdue Extension, gave his answer to the question, "Will the cash crunch in agriculture turn into a farm bust?" In discussing this, he referred to the tough times that agriculture and farmers dealt with during the 1970s and 1980s, and that many farmers today are feeling some of the same rhythms from that time.

"We are on the downturn now, we're filling the cash crunch, but will this turn into a bust? In my opinion, I think the answer is no. I don't think the farm economy is going to go bust if agriculture remembers the biggest lesson of the 1980s: Don't leverage the farm," said Henderson.

He then discussed the classic booms, and busts that have been seen over the past several years. In a classic boom, there are surging demands. Right now, that demand for the United States is ethanol. Farm booms were noted during World War I and World War II and the 1970s.

Exports and the Russian grain deal sparked the farm boom in the '70s. Today, China is the country that has spurred this recent farm boom,Henderson said. Also seen during a classic boom cycle are low interest rates that spark investments and boost farmland values. Today, farmers are seeing record-low interest rates that have helped the general economy and land values.

During a farm bust, there is flat demand and global supplies are booming because farmers respond to profitability. When there are profits to be made, farmers tend to produce more and are very efficient at doing it.

When producers go through a cash crunch, they tend to start rolling loans and then there ends up being a liquidity crisis. Henderson expressed that during these times, producers don't have to witness a solvency crisis or bankruptcy. Those two negative effects are more commonly caused by high interest rates which isn't something he predicts will happen.

"Producers need to figure out how to manage through the cash crunch to position themselves in agriculture for long-term prosperity," he said.

Henderson also added that he has been talking with bankers across the United States who are assisting farmers and producers. Those bankers have informed him that they will be using Farm Service Agency loans and guarantees more this year and next year than they have in the past due to the cash crunch.

Analyzing agriculture today and despite the cash squeeze producers are feeling, he thinks that the industry is in a great position and is going to continue to have profitability in the long run if farmers are able to get through this short-term downturn. Getting through today will create another decade or two of prosperity.

"As long as producers remember what the industry has been through in the past and can get through today, agriculture has a great future ahead of itself," said Henderson.

Bob Nielsen, Purdue agronomy corn specialist, shared a summary about a study which he and Jim Camberato, Purdue agronomy soil fertility specialist, have been conducting on plant population. Between fertilizer inputs and seeding inputs, those two together represent about half of a producer's costs and inputs.

"It's important to keep these studies up-to-date and current because they impact your farms so greatly," said Nielsen.

Making decisions on seeding rates involves a balancing act because it isn't just increasing populations and expecting things to happen the way you want them to because plants per acre is just one of four or five components that come together to give you the most accurate bushels per acre report.

"The balancing act involves population in terms of plants per acre, how many ears per plant which usually stays fairly constant, how many kernels per ear and the final component is weight per kernel. Weight per kernel is quite often what puts us over the top and creates record yields," said Nielsen.

He also mentioned corn prices for this year's harvest aren't going to be very promising and right now he can't really predict what they are going to be.

Nielsen and Camberato are continuing several different trials to help producers maximize yields and profits and help prevent disease.

A new corn disease, Xanthomonas, was also brought to the attention of the grain farmers in attendance at the field day by Kiersten Wise, Purdue Extension plant pathologist. Xanthomonas is a bacterial leaf streak that looks similar to the symptoms of gray leaf spot.

She mentioned that it is very important to correctly identify this disease in fields to make effective treatment decisions. Foliar fungicides won't treat this new bacterial disease. If producers think they have Xanthomonas in their field(s), they are encouraged to send samples of the plant to a diagnostic center to identify the disease and get proper treatment.

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