Despite economy, farm show visitors upbeat By Randy Dockendorf
Yankton Media, Inc. While the nation has undergone an economic meltdown, farmers and agribusinesses were showing optimism — albeit of the cautious variety — during Tuesday's opening of the Dakota Farm Show at the DakotaDome. South Dakota FFA officers Bradley Cihak of Tyndall and Wyatt DeJong of Kennebec said the nation's current economic woes haven't deterred their plans for going into ag-related fields. In fact, they see agriculture as a bright spot in the midst of the national recession. Cihak, a Bon Homme High School junior, said he knows a number of young people who want to enter farming. "The start-up is the key," he said. "Not as many young farmers can afford the machinery, seed and other expenses to start an operation. Staying on the family farm is a plus." While farm prices have dipped in recent months, Cihak is confident things will turn around. He pointed to the good growing season enjoyed last year in Bon Homme County, which can provide a springboard for 2009. "Ag has taken a hit," he said. "It has to come back at some point, but 'when' is the question." DeJong, a South Dakota State University freshman, likewise looks for better times in 2009. "One of the big things is input costs. It takes more to make as much as it ever did," he said. "But it has been much better than the last six years of drought. During the last year, you were able to make a high quality crop for cattle. This was the first year that you didn't have to buy supplemental roughage for the winter." DeJong sees a strong long-term future for agriculture. "There are great opportunities to overcome these challenges," he said. "I think it will get worse before it gets better, but there is light at the end of the tunnel. Ag will always be a necessity. We need ag to feed the world." Agribusiness owners are also looking for a stronger farm economy in 2009. Rick Hurd, who lives in the Avon-Wagner area, and Jim Cook of Grand Island, Neb., are contractors who were working the booth for MDS Manufacturing of Parkston. While the ag sector has not experienced the severe meltdown felt elsewhere in the economy, that doesn't mean farmers aren't concerned, Hurd said. "People are cautious with their capital expenditures," he said. Cook said he looks for credit to improve in the coming year. An improved housing market will provide a major boost for the overall economy, he said. "I think more dollars will become available later in the year," he said. "For what we are selling here, farmers don't have to finance anything. These are $1,000 to $5,000 products, so they can pull out their checkbooks." However, Hurd remains concerned about the rising number of foreclosures. "When you can't make your mortgage, it's a train wreck waiting to happen," he said. "Why not stretch out the payments rather than foreclose on homes?" Cook predicts that fuel prices will stabilize for the most part. "Fuel prices were at $4 a gallon, and now it's less than half," he said. "Crude oil was at $147 a barrel, but then it hit $50. I predict that crude oil will edge up slightly, to remain in the range of $50 to $70 a barrel." Cook looks for more emphasis on alternative energy, particularly wind power, which will benefit the Great Plains states. "From North Dakota to Texas, you are seeing more (wind energy)," he said. "We have to get off the Mideast oil as quick as we can. We should be drilling in Alaska." While cheaper fuel has benefited farmers in terms of input costs, ethanol producers are feeling the squeeze, Hurd said. "They are facing $5-6 corn to produce ethanol at $1.50 a gallon," he said. As a former Iowa governor, U.S. Agriculture Secretary-designate Tom Vilsack should bring insight into the ethanol industry and other Midwest needs, Hurd said. "Iowa is full of ethanol plants. (Vilsack) knows the situation and can work around it," Hurd said, adding that sugar cane and switchgrass may emerge as other ethanol ingredients. The growing presence of blender pumps could increase the demand for ethanol, he said. Besides producing more alternative energy, farmers are reducing their own fuel consumption, Hurd said. "People have changed their driving habits. They have consolidated farm trips during the last couple of years more than they ever did in the past," he said. "They are also looking at reduced tillage options, buying more fuel-efficient tractors and getting more done with less per acre." On the other side of the coin, Hurd said he remains concerned about rising unemployment and poverty in the rest of the nation, the soaring federal deficit, and the nationalization of banking and key industries. He called for more tax credits and other incentives for business investments. "Where did we go from independent businesses to government being your partner?" he asked. "How long have they been doing that in Europe? It's happening here now. It's a free country but not a free world." "We are putting Band-Aids on the problem," he added. "You can't keep printing money. It's got to stop somewhere." Despite the economic challenges, Hurd said the Midwest should remain strong. "We live in the best part of the country there is," he said. Cook said he likewise remained upbeat about the coming year. "As far as the general economy, farmers are optimistic. I think the prices will edge up," he said. "The input costs for corn and soybeans, such as fertilizer, will come down and get in line. Everything looks good." That same optimism was expressed by Dave Knudsen, vice president and manager of the ag department at First Dakota National Bank in Mitchell. Last summer's prices of $7 corn and $14 soybeans have now dropped in half, but things still remain solid, Knudsen said. "They are coming off a very good crop yield year. The prices dipped from where they were in July, but when you look at the scheme of things, they are historically at good price levels," he said. "Given this economy, it's anybody's guess where we go. It will level out here somewhat. I am guessing that we will see another price rally. It will be a battle for acres of corn versus soybeans. The profitability leans to corn. With the inputs, corn 'dollars' out better." Ethanol has seen tough times, Knudsen said. "Right now, the profit margin for ethanol is pretty skinny. It's survival of the fittest," he said. "Either corn has to get cheaper, or crude oil has to go up. I look for crude oil prices to rise." The ethanol industry is undergoing a transition period, Knudsen said. "The (ethanol plants) that came in at the end will struggle," he said. "Those that have been operation for 2 or 3 years should see pretty good profits and have staying power." On the positive side, the outlook for alternative energy is bright, Knudsen said. "Renewable energy is the definite wave of the future," he said. "We have wind, ethanol and biodiesel. Down the road, we need to get energy independent. We should have done it 20 years ago." Livestock prices were tough in 2008, with hopes for improvement in the new year, Knudsen said. "During 2008, cattle on feed at best were break-even. Most cases, they lost money. Hogs and poultry had a tough go of it because of the price of corn," he said. "Overall, the livestock industry of the last 10 years has been good, but this past year has been tough." Exports hold the key for livestock markets, Knudsen said. "We produce a lot of meat, and China and a lot of overseas countries are getting more protein in their diet, more than they ever were," he said. When it comes to financing, Knudsen sees interest rates going sideways in the short term. "In the long term, the next 5 to 10 years, the rates will go higher," he said. "We are seeing 50-year lows (for interest rates), so lock in your long-term financing wherever you can." While President-elect Barack Obama has proposed a massive stimulus package, Knudsen said the private sector will hold the ultimate solution. "I think the answer lies outside government," he said. "I'm not saying the stimulus package won't help, but it's not the answer. Consumer confidence is a lot of it, and I think it will come." Despite the national economic meltdown, Knudsen said he sees good times for agriculture. "I am upbeat today. We have the general farm economy as strong as it has been for many years," he said. "People are in a good mood but cautious. I am very optimistic about ag in 2009, but also cautious. In the long run, ag will be good."