USA: American farmers should diversify, says analyst

US grain farmers are facing a financial crunch and are looking for ways to overcome it. They have been cutting costs since the downturn began 2.5 years ago by reducing equipment purchases, fertilizers, and crop protection products, and negotiating lower land rents. Now, they are increasing operating lines of credit for the first time in years, indicating a potential surge in agricultural debt similar to the 2013-2014 downturn. RaboResearch predicts a $20 to $25 billion increase in lines of credit debt over the next few years. The analyst suggests that US farmers may need to diversify their crops, particularly towards those suited for low carbon intensity fuel feedstock, food grade soybeans, ESG cotton, and "orphaned" crops like oats, to remain competitive, especially with Brazil's lower production costs. The article also highlights the potential of Canada as a model for diversification, as Canadian farmers have shifted towards growing less heavily traded crops, leading to higher net farm income than in the US.

Grain farmers in the United States are in a financial pinch and may want to look north of the border for a way out, says an analyst. Growers have been cutting costs during the last 2.5 years of the current downcycle. They have reduced equipment purchases, cut back on fertilizers and crop protection products and are negotiating lower land rents. Now they are increasing operating lines of credit for the first time in years, said Owen Wagner, grains and oilseeds analyst with RaboResearch Food & Agribusiness. It is reminiscent of what happened during the last downturn in 2013 and 2014. Agricultural lines of credit in the U.S. surged to US$100 billion by 2016, from about $80 billion before the downturn. Agricultural borrowing then went on a long downward slide due to an influx of government support in response to the trade war with China and the post-COVID surge in commodity prices. It then fell to the low $70 billion range but is now starting to creep higher. RaboResearch believes ...