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Local banker looks at bigger picture with U.S. farm bankruptcies

Local banker looks at bigger picture with U.S. farm bankruptcies
Image: Darcy Maulsby/iStock/Thinkstock

A recent story by Bloomberg News noted U.S. farm bankruptcies in September surged 24 percent to the highest since 2011 amid strains from President Donald Trump’s trade war with China and a year of wild weather.

Western Nebraska and eastern Wyoming, have suffered from weather and a natural disaster with the Ft. Laramie Tunnel collapse. So, will the states see more bankruptcies?

“The 24 percent is year over year,” said Galen Larson, president of Platte Valley Ag Credit Co. at Platte Valley Bank in Scottsbluff. “When you use a fairly small number, and that increases just a little bit, it makes the number stand out. When really, it’s not very big.” 

He adds the nation as a whole went up 113 bankruptcies year over year, which includes Puerto Rico.

Larson agreed Nebraska could see some bankruptcies this year, but he doesn’t expect the number to be significant. 

The story only focuses on the year and not the bigger picture. In five years, farmers have seen very low cash flow values. For example, in five years, corn prices have been around $3 to $3.40, which is below the cost of production. 

“So for five years, the farmer has been faced with negative cash flows. To me, the bankruptcies are a result of those five years and not the trade wars. They (trade wars) don’t help, but they are not the result,” Larson said. 

It is crucial farmers begin to lock in at prices when they are high. Early in the spring, corn was around $4 in the market. The farmers who took advantage of those prices are now in a better spot. 

“I think that is the key, we’ve (farmers) been reducing expenses for the last five years, so we’re keeping expenses down. It’s just taking advantage of when the market presents itself to take the price,” he said. 

Trade is still vital, and Larson, like many, is hopeful agreements like the U.S.-Mexico-Canada Agreement will pass soon. 

“The farm is very resilient and very capable of making changes if he knows when and to what he needs to make changes,” Larson said. “Right now, when you don’t have an agreement, you really don’t know what to plant, as you don’t know which way things can go.”

Larson says 2019 was a tough year, but he hopes it will be a break-even year for producers. 

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