Farmers hope for record profits in 2008
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It's the time of year when hope begins to sprout as farmers plan for spring planting. This year you can feel the anticipation, but there's also a lot of anxiety among farmers.
At a recent farm management convention in Fargo, most of the farmers taking a coffee break did not want to talk about record prices.
Jeff Mortenson says talking about good economic times makes everyone a little nervous. Still, he's not about to apologize for turning a healthy profit last year.
"We shouldn't feel ashamed that we're finally able to buy a different tractor or buy a different truck," says Mortenson. "This is our business, we shouldn't have to hide our head or feel foolish about updating stuff. It's about time."
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Jeff Mortenson farms about 4,000 acres with his brother near Kennedy, Minn. He says the farm profits from last year are giving him a chance to catch up.
"Instead of just trying to refinance other loans, treading water, you're able to make your payments and maybe pay down some debt. That hasn't happened for me and my brother; this is our 11th year farming and it's the first year we've been able to do that," says Mortenson.
Record prices for corn, soybeans and wheat hold the promise of even bigger profits this year. Some analysts predict farmers could clear $100 or more per acre.
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USDA estimates say farm income in 2008 will be 51 percent higher than the 10-year average.
On Jeff Mortenson's farm, that could mean nearly $500,000 in profit. But he'll also spend more than ever before to plant the 2008 crop. Farm production expenses are up sharply and still rising as spring approaches.
"Our fertilizer has just about doubled in two years. Fuel is darn near doubled also," says Mortenson. "Sure, we're getting paid a lot more for our wheat, but inputs have gone up also, so we're just dealing with higher volumes of money."
Cost for seed and crop insurance are also rising 50 to 100 percent, so Jeff Mortenson is spending a lot more money this spring, but there's the potential for record profits this fall.
"We shouldn't feel ashamed that we're finally able to buy a different tractor or buy a different truck."
It's a little like raising the stakes in a poker game -- the tension rises with the size of the bet.
Mortenson says he could earn record profits this year, but if the grain market crashes or bad weather hits, he could sustain big losses.
North Dakota State University Farm Management Specialist Andy Swenson is a little perplexed by the anxiety among farmers.
"If you look at the numbers, the projected profitability has never been better going into a seeding year. You would think farmers would be ecstatic," says Swenson, "but there is a lot of nervousness out there because of these high costs."
Swenson expects high crop prices to last several years. He says demand is growing and supplies are low. Wheat supplies are at the lowest level since 1948. Soybean stocks are lower than they've been in more than a decade.
But Jeff Mortenson has a hard time believing those rosy market predictions. He says the last big price bubble for farmers was in the 1970s, and it was followed by recession, high interest rates and low crop prices.
He says the stakes are high this spring.
"It seems a little more nerve-wracking. The potential is there so you feel like you don't want to screw up," explains Mortenson. "You know that you might miss out on some good years to sock some money away. Because this isn't going to last."
Some farmers might change their plans this spring to take advantage of high prices by planting more wheat or soybeans.
Jeff Mortenson says because most crop prices are high, he'll stay with his usual rotation of sugar beets, wheat and soybeans because they grow best in northwest Minnesota.
Farm management specialist Andy Swenson says the only big change he forecasts this year is fewer acres of corn. Corn acres increased significantly last year to meet the demand for ethanol. But corn is expensive to grow, it takes a lot of fertilizer.
Swenson expects farmers to cut back on corn and plant more soybeans which cost less to grow and are expected to bring a high price this fall.
Like every spring, farmers face uncertainty. Bad weather could wipe out crops. Increased production around the world could drive down prices. But the odds are that for farmers, 2008 will be a year to remember.
