Farm crisis around the corner?

[Crestliner]

Anybody doing math down on the farm these days?

So far since April 2022, the market for new crop has wiped out value in Canada about:

$4 Billion in Canola (18 MMT X -$220/MT)
$3 Billion in Wheat (38 MMT X -$90/MT)

Same time period Fertilizer cost savings at $2 Billion (4 MMT X -$500/MT)...bonus!

Same time period interest costs increased by $6 Billion in last 12 months (140 Billion Debt X 4.5%)

So given average crop, $11 Billion missing from Western Canada economy next 12-18 months based on todays market prices.

Didn't include inflation on parts, fuel, runaway equipment costs and a whole bunch of others....just a rough calculation using some metrics. I'm sure I missed a lot, but the income trend doesn't look that great.

Reminds me of 1982. Bubble burst after that and we wandered in the Ag desert for 20 years until it got profitable again.

[jamesb]

I would agree that ag can and will probably see a reset at some point. I remember those days in the early 80's and for me I see a lot of differences . Food security is vastly different than the 80's. I don't think we will see the US and European subsidy programs that the 80's had that encouraged overproduction. I do think there will be lots of farmers find themselves on the wrong side of the balance sheet very soon with low price grain. In the past things seemed to happen in the US a year or two before it happened in Canada and so far there is no panic. China is a big unknown. We rely a lot on them buying our produce. If they stop it could get ugly. India has had get strides in being more self sufficient but they are due for a set back with changes in weather patterns.

[redleaf]

Anybody doing math down on the farm these days?



Reminds me of 1982. Bubble burst after that and we wandered in the Ag desert for 20 years until it got profitable again.

I hit like on your post, but I don’t “like” it. Scares the hell out of me because that was the exact time frame of my venture into the ag world. Those were some tough years and lessons learned then are hard to forget. The truth is those lessons have been a hindrance in the last while as I feel they have held me back from being wildly profitable. I’m not looking for sympathy, not one bit we are doing just fine here. I just hope we don’t see the likes of those years again for I see a lot of heartache for some if we return to poor commodity prices and a cycle of adverse weather (frost). I want everyone to do well that way I know I will be ok.

[jazz]

These farms with 8 and 9 figure debt loads, I hope they grabbed a nice locked in rate 2 yrs ago, otherwise that could be shocking.

BTW there are no 4.5% mortgages anymore. Its 6% even with a quarter as security. Some article I read said the majority of locked in mortgages and loans will reset in the next 12-24 months.

Just hoping if there is a rug pull, its after this coming harvest.

[sumdumguy]

We were pretty frisky up until 1981, paying top dollar for land, operating on lines of credit, until the dirty eighties with 20-25% interest rates calculated daily on operating lines. Then came droughts every second year. Those lessons need not be repeated. As I have mentioned before, Lentils, Canaryseed and Glenlea Feed Wheat saved us. If we would have depended on CWB, we would have starved with initial payments of $1.25 a bushel and wait 18 months for a few more crumbs, maybe. It made us tough, we built our own house, we hauled seed across the border, we custom anhydroused, we built our own seed plant and taught our children that all things are possible. Don’t wait - do it yourself.

Old Cowzilla, I remember FCC had a profit calculator and not one crop was profitable. DE - Pressing! Renters didn’t even want to pay the taxes.

[Old Cowzilla]

Believe it or not but the cattle where penciling out better than grain for a few years, that and a day job

[goalieguy847]

These farms with 8 and 9 figure debt loads, I hope they grabbed a nice locked in rate 2 yrs ago, otherwise that could be shocking.

BTW there are no 4.5% mortgages anymore. Its 6% even with a quarter as security. Some article I read said the majority of locked in mortgages and loans will reset in the next 12-24 months.

Just hoping if there is a rug pull, its after this coming harvest.

Just bought 80 acres
5.2% on a 5 yr fixed before my young farmer discount....

[Marusko]

everyone's costs are different, gotta do the math on your own operation

for me the prices obviously suck but will be 'ok' if we get average yields at current prices - 50bu canola x 16/bu, 70bu wheat x 10.50/bu. If we get a further drop of 15% or worse in revenue, will be negative cashflow after rent and land payments. Not a comfortable margin at today's prices and going into a dry spring.

heard what the new going rate for cash rent is, with avg yield and today's price, the landlord gets 4x what I'm cashflowing. with no risk to the downside. But a return to Dec 2022 prices ($20 canola and $12.50 wheat) would split the net revenue half-half.

goalieguy what were the 10 and 20 year term rates? a few years ago I locked in 20 years at 4.3%, it didn't seem like a good idea in the following couple of years but am happy with the choice now.

[furrowtickler]

Will hate to see canola at $12 and yeilds just below crop insurance, or god forbid a fall frost to hammer quality with even lower prices .
It happened in 2004 , it can and will happen again at some point . We all better pray it’s not this year.
It would make the farm revenue crisis of ‘04 look like a picnic , and that was far worse for the majority of us than 2001-2002 .

Here is hoping things hold together, or it will be a wipeout like never before seen . Crop insurance does SFA in a scenario like 2004 , you ain’t guaranteed zero in that situation

[furrowtickler]

This will not help, hopefully it has little impact this summer ....

https://youtu.be/sg61NOv6xso

Hoar frost and Drew Learners wet summer through fall added to this could be worrisome , will know by end of July Early August how heat units and moisture go.

[furrowtickler]

https://youtu.be/0oPQeOv0pxQ

[newguy]

These farms with 8 and 9 figure debt loads, I hope they grabbed a nice locked in rate 2 yrs ago, otherwise that could be shocking.

BTW there are no 4.5% mortgages anymore. Its 6% even with a quarter as security. Some article I read said the majority of locked in mortgages and loans will reset in the next 12-24 months.

Just hoping if there is a rug pull, its after this coming harvest.

In the 80s when interest rates went from 20 to 10 I thought it was a bargin.Now it goes from 4.5 to 6 and you think it is hard times.

[SASKFARMER]

I started farming in the first one. Not a fun time and our Gov would not compete with the USA and we were told to change or get out.

Direct seeding started and we all trimmed back.

One thing different this time big investors will gobble up a lot.

[Taiga]

Hutts are waiting to pick up the scraps.

[makar]

Hutts are waiting to pick up the scraps.

I am not sure, here what the hutts buy they are a 3rd party.