NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

February 4, 1999

The Market Advisor: All is Not Well
in the Northern Plains

Harlan Hughes, Extension Livestock Economist
NDSU Extension Service

Financial management and total farm business planning are my recommended management tools in today's troubled times. Yet, many farmers and ranchers do not feel comfortable with financial management and long-term business planning. the NDSU Extension Service is taking a leadership role in enhancing farmers' and ranchers' business planning and financial management skills.

As I conducted September and early October outlook meetings with beef cow producers, I sensed that North Dakota's producers were emotionally down as much as I have ever seen themeven more than in the 1980s. But the general consensus is that things are not as bleak today as they were in late August and early September. Since then, record or near-record row crop yields were harvested, commodity prices bottomed out, beef prices turned upward, loan deficiency payments materialized, government assistance payments increased, and the U.S. dollar weakened, making U.S. commodities lower priced in the world market. All of these events helped cash flows in the last quarter of 1998.

Current low price projections, however, suggest that cash flow problems will return in 1999.

As far as the marketplace is concerned, today's low commodity prices could last through 1999 and beyond. It could take a drought or crop failure somewhere in the world to turn the commodity grain prices substantially upward. Asian demand is not expected to return for two or three years. And Brazil's economic problems may spread to the rest of South America.

All of this led me to ask NDSU to reassign me to work full time on the NDSU Extension Service's Farm Financial Crisis Educational Plan. On Nov. 1, 1998, Bruce Bainbridge was hired to temporarily take over my livestock marketing responsibilities. He is working out of the Bottineau County Extension Office and can be reached at (701) 228-2253. His e-mail address is ausranch@ndak.net.

While the farm financial crisis is perceived to be a farm or ranch business problem, it also impacts the farm and ranch families involved. Sean Brotherson, extension family science specialist; and Julie Hudson-Schenfisch, extension family finance specialists; and I are serving as the NDSU Extension Service's Farm Financial Crisis Executive Team. A 15-member advisory committee will guide this executive team.

North Dakota's current farm financial crisis surfaced publically during the spring of 1998 when grain farmers in the northeastern part of the state could not make their 1998 business plans cash flow on paper. Under current loan rules, a business plan needs to cash flow on paper before an actual operating loan will be made. As a result, northeastern North Dakota was one of the first regions in the United States to feel the direct impact of the financial pressures of the 1990s.

North Dakota farm business management summaries indicate that the financial crisis had been building for several years. Average farm expenses, including family living, have exceeded gross income since 1995. We fully expect the current challenging time to last through 1999 and beyond.

Two economic forces have contributed to North Dakota's current farm financial crisis: five years of low beef prices and five years of crop diseases in certain parts of the state triggered by a substantial change in weather patterns. The tough times in the 1990s have depleted the financial reserves of many North Dakota farm and ranch families. Another cash flow crisis is projected for 1999.

The Farm Financial Crisis Executive Team is developing a prioritized nine-step educational program targeted toward relieving the financial business stress on North Dakota's farms and ranches and the associated family stresses. For example, a Profit Finder program is being piloted in southwestern North Dakota to reduce the current business financial stress and its associated family stress in that area.

This pilot program is being jointly funded by the NDSU Extension Service and the North Dakota Agricultural Experiment Station. We are applying for outside grants to establish the Profit Finder program in other regions of the state.

When it comes to the impact of a farming or ranching economic crisis on families, it is about more than making money. A key component in the NDSU Extension Service's Farm Financial Crisis Educational Plan must address family decision making and the family's ultimate values, goals and resource use. Increased stress, decreased economic well-being, and higher levels of conflict, and depression are some examples of how families are affected by the economic difficulties of farms and ranches. It boils down to a continuance of a generational way of life that is rooted in history.

North Dakota farm and ranch families are struggling under today's economic climate. Many are feeling alone and are unsure what they should do next. Our North Dakota farm and ranch families have a history of great pride, and many are unwilling to admit that they could use some temporary assistance in various areas of their lives.

Some farm and ranch families are dropping their health insurance programs and are reluctant to get medical care for themselves and their children unless it is an absolute emergency. Others have expressed a concern that our farm families who produce the world's food supply will themselves become undernourished. In addition, small town community businesses are going to have financial difficulties if farm families are unable to shop there or pay their bills. Small town businesses may soon be facing some of the same financial crises as farm and ranch families. The NDSU Extension Service will try to help these farm and ranch families keep their pride and their dignity during these very uncertain times.

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Source: Harlan Hughes (701) 231-7380 hhughes@ndsuext.nodak.edu

Editor: Tom Jirik (701) 231-9629