The American farm belt is headed toward a historic milestone: There will soon be fewer than two million farms in the United States, the first time that has happened since pioneers moved west after the Louisiana Purchase in 1803.
Across the country's producing region, a years-long drop in the prices of corn, wheat and other agricultural commodities driven by a worldwide grain glut is driving many farmers deeper into debt. Some are giving up on the business, raising fears that the coming years could bring the biggest wave of farm bankruptcies since the 1980s.
The US share of the global grain market is now less than half of what it was in the 1970s. US farmers' income will fall by 9% in 2017, the Department of Agriculture (USDA) estimates, prolonging the biggest decline recorded since the Great Depression for the fourth consecutive year.
In the current harvest, U.S. farmers have sown the fewest acres of winter wheat in more than a century.
“Nobody just grows cereals anymore,” says Deb Stout, whose sons, Mason and Spencer, farm the family’s 2,000-plus acres in Sterling, Kansas. Spencer also works as a mechanic and Mason as a mailman. “Having a side job seems like the only way,” she says.
Deb and her husband have gone bankrupt before. Farmers in the Sterling region lost an average of $$6,400 in 2015, the year with the most recent data available, after making an average profit of $$80,800 a year earlier, according to the Kansas Farm Managers Association.
Agriculture has always been an endeavor of ups and downs. Today, the swings are sharper and less predictable, as the agricultural economy has become more international, with more countries growing food for export and for their own populations.
American farmers' share of world grain trade has fallen from 65% in the mid-1970s to 30% today, giving them less influence over prices. Having more producers and more buyers around the world also means more potential disruptions due to weather, famine or political crises.
Corn prices used to vary from year to year by less than US$$1 per bushel. Since 2006, they have soared and fallen more than US$4 per bushel.
A decade ago, a biofuel boom in the U.S. and China's growing middle class drove up prices for crops like corn and soybeans. Many American farmers invested the windfall profits by purchasing more land and equipment.
The boom also encouraged farmers in other countries to speed up production. Producers around the world have added around 73 million hectares of cultivation in the last ten years. Lower production costs, proximity to fast-growing markets and improved infrastructure have given producers in some other countries an advantage.
Corn and wheat production has never been greater, and never has so much grain been stored before.
From the early 19th century until the Great Depression, the number of U.S. farms grew steadily as pioneers conquered the West. Farming families generally raised a few livestock and cultivated a few dozen hectares of land at most. After World War II, high-powered tractors and harvesters allowed farmers to work with more land. 20 years ago, genetically modified seeds started helping farmers produce more.
Farms grew and specialized. Large-scale operations now account for half of U.S. agricultural production. Most farms, even some of the larger ones, are still run by families.
As the size of properties multiplied, their number in units fell from six million in 1945 to just over two million in 2015, approaching a limit last seen in the mid-19th century. Total hectares cultivated in the US fell by 24% to 370 million hectares.
Russia, meanwhile, has gone over the past 25 years from the world's biggest wheat importer to its biggest exporter, says Dan Basse, president of Chicago-based research firm AgResource Co.. Farmers planted even more wheat last year to take advantage of the dollar's recent rise against many currencies. This encourages Russian farmers to export as much wheat as possible in dollars, which today yields about twice as many rubles as it did three years ago.
The strong dollar also allows farmers in some countries to reduce their prices.
“As the dollar remains strong, American farmers have no levers to pull,” says Basse. “It’s a slow bleed, not a cut to the jugular.”
Last year, Barack Obama's administration accused China of unfairly subsidizing wheat production and improperly limiting grain imports to the detriment of U.S. farmers. In October, the USDA said it would pay more than US$7 billion in financial assistance under existing programs to help farmers survive the current crisis.
U.S. wheat exports last harvest were the lowest in nearly 50 years, although government analysts expect them to improve this year. Basse says he believes it will no longer be economically viable for the US to export wheat within five years.
Economists do not expect the current slump to be as severe as the crisis that hit the country's farm belt in the 1980s. At the time, grain prices plummeted after a boom in the previous decade that encouraged farmers to expand production, hoarding debts as the surplus grew. The value of farmland plummeted and interest rates soared, triggering a collapse that forced many farmers and financiers out of business.
The expectation is that, this time, agricultural land values will be maintained. Agricultural yields reached record highs in 2013, leaving many producers with significant cash reserves. Interest rates, although expected to rise, are still near historic lows. While U.S. farmers' debt-to-asset ratio is projected to increase in 2017 for the fifth consecutive year, it also remains historically low.
The cost of inputs such as fertilizers has fallen, and economists predict increasing pressure on seed prices and land rentals. The squeeze could ease if weather restricts harvests, increasing demand for excess U.S. grain. Fewer rural communities rely economically on agriculture today, which could help insulate them from the crisis.
For some, the crisis is an opportunity. Farmers with low debt and enough scale to profit from last year's record harvests could be in a position to lease or buy land from struggling neighbors.
Lee Scheufler, 65, has expanded his Sterling farm nearly 10-fold over the years, starting with 240 acres 40 years ago. He saved money during profitable years and recently bought and leased higher quality land to replace some of his weaker areas.
“We try to position ourselves for when the tide turns,” says Scheufler, adding that in the future he would like to pass his land on to a younger producer who is just starting to farm, as a neighbor did for him.
