LDN - Business

Trade war and sagging prices push U.S. family farmers to leave the field

[April 30, 2019] By P.J. Huffstutter

BEATTIE, KANSAS(Reuters) - Shuffling across his frozen fields, farmer Jim Taphorn hunched his shoulders against the wind and squinted at the auctioneer standing next to his tractors.After a fifth harvest with low grain prices, made worse last fall by the U.S.-China trade war, the 68-year-old and his family were calling it quits. Farming also was taking a physical toll on him, he said; he'd suffered a heart attack 15 months before.

It took less than four hours to sell off all the tractors, combines and other farm equipment at the Taphorn retirement sale, ending a family tradition that had survived nearly a century.

"We went through the bad times in the '70s and '80s," said Jim, 68, broad-shouldered and stocky. "In some ways, this is worse."

Across the Midwest, growing numbers of grain farmers are choosing to shed their machinery and find renters for their land, all to stem the financial strain on their families, a dozen leading farm-equipment auction houses told Reuters. As these older grain farmers are retiring, fewer younger people are lining up to replace them.

The trend has created boom times for the auction houses, which report that their retirement business has grown 30 percent or more over the past six months, compared to the same period a year earlier.

But it is expected to put a strain on the agricultural supply chain: It means fewer customers for seed and chemical companies, fewer machine buyers, and fewer suppliers for grain merchants.

The revival of the family farming tradition proved short-lived.

In the wake of the U.S. recession of 2007-2008, the lure of high grain prices drew young people from their city jobs to their family's fields.

By 2012, farm profits were flourishing as corn and soybean prices soared amid global demand and tight supplies. For the first time in decades, the number of producers aged 44 or younger in the Midwest grew.

From the financial crisis in 2008 through 2012, their ranks increased more than 40 percent in Iowa and Illinois, nearly 57 percent in Indiana and 60 percent in Kansas, according to data from the U.S. Department of Agriculture.

Taphorn's son Tom, who works as a district manager at a cattle feed company near Manhattan, Kansas, was among those who wanted to return home to farm with his parents.

But the father of three couldn't make it work. During the boom, Tom sought to expand by renting more land - but as grain prices fell, most landlords refused to lower their rates. It was beyond Tom's reach, leaving him and his parents with too little land to till to cover two families’ expenses.

Tom kept his job. His siblings, one also in Kansas and the other in Indiana, didn't want to farm full-time.

Jim and Karen knew no one else within their family would take over their business. So they decided to sell their equipment and rent out their land.

COMES DOWN TO MATH

At the Taphorns' auction, Karen, 68, reached for her husband's hand, squeezing it hard.

"Karen, it's ok to shed a tear," auctioneer Dan Sullivan said, as she pressed her face into her husband’s shoulder. "It's the end of an era."

Farmer retirement rates are not tracked by either state or U.S. government agencies, but federal data shows the ranks of farmers are gradually aging. The average age of U.S. farm operators was 57.5 years in 2017, up from 54.3 years in 1997.

The number of farms is shrinking, too, as the industry increasingly is consolidated either into the hands of large-scale operators or tiny niche crop growers. Mid-sized farms – those with annual sales of more than $50,000 but less than $5 million - are dwindling.

(See graphic on aging of U.S. farmers and decreasing number of farms https://tmsnrt.rs/2GR1Wr8)

For many families, leaving farming is a painful but simple calculation: The trade war with China, set off by tariffs imposed by the Trump Administration, has lasted nearly 10 months.

China, the top buyer of U.S. soybeans, the nation's most valuable agricultural export, has dramatically reduced its purchases. Grain prices have remained stubbornly low and operating costs are rising fast.

(See graphic on the impact of the U.S.-China trade war on farming https://tmsnrt.rs/2BYCdun)

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Kyle Ferguson and Cody Holst of Sullivan Auctioneers, LLC spot bids while a retiring farmer's equipment is auctioned at Jim & Karen Taphorn's farm near Beattie, Kansas, U.S., February 27, 2019. REUTERS/Lane Hickenbottom

Such factors now are "speeding things up" among farmers deciding to retire, says H. Andrew Pyron, chief executive of Big Iron Auctions in St. Edward, Nebraska.

ILL-TIMED BET

In the spring of 2018, Mike and Linda Manson of De Soto, Kansas, decided to plant soy on all their fields.

It was an ill-timed bet, coming just before China applied retaliatory tariffs on U.S. soybeans

By summer, U.S. soybean exports had plummeted. Heavy rains hammered the plants, reducing their crop. Finding help at harvest was tough, too, because healthy young people are hard to come by in the industry these days.

"I had one guy, a retiree, helping me. But he's fat and his knees gave out on him, so he couldn't get into the combine," Mike Manson, 69, said wryly.

The erosion of multi-generational family farms is painful for sons and daughters as well.

"I'm the only son of an only son, and I was still trying to figure out my path back to the farm," said Sam Hudson, 34, who co-owns an agricultural marketing firm in central Illinois.

His father has a small farm. Even if the men borrowed $1 million to get enough land, equipment and other supplies to scale up the operation, the business might only break even, given current grain prices and land rent costs.

"It doesn't make any sense right now," he said.

A BOON TO AUCTIONEERS

The budget-conscious farmers who remain seek deals on quality used equipment rather than splurging at dealerships, auctioneers say.

Steffes Group, a top auction firm in the upper Midwest, recently had to juggle staff to cover three large retirement auctions in three states on the same day, auctioneer Scott Steffes said. Big Iron Auction's retirement farm business has surged 40 percent this year.

"Up until now, there wasn't a lot of motivation to exit farming," Steffes said. "Now, what I'm hearing from folks is, 'It's no longer fun to farm.'"

Many farmers don't have 401Ks or other traditional retirement safety nets. Now they're worried that if they keep going, they'll have to take on debt against land they own, which will threaten their income stream long-term.

"We're getting calls every day from farmers looking to sell off their equipment, but keep the land," said Luke Sullivan of Sullivan Auctioneers, headquartered in Hamilton, Illinois. "They want to rent out their ground, because that land is their retirement."

Some renters propose to split farm expenses and pay landlords in corn or soybeans, not cash, the modern equivalent of sharecropping. But typically retirees seek renters who pay top-dollar, tenants who are big and can farm thousands of acres.

The Taphorns were different: They turned down several huge operations as renters, instead choosing to be paid less by a young family trying to expand their business.

BIDDERS SWARM IN

For weeks, out-of-town farmers and machinery buyers had called the Taphorns to ask questions about their equipment.

On auction day, buyers from four different states joined the crowd of locals. Bidders also flocked to the Sullivan Auctioneers website.

Jim's tractor went to a middle-aged farmer in Illinois. Another farmer from Iowa grabbed his planter. The soil ripper went to a guy in Kansas, about 100 miles away.

A couple weeks ago, old friends started calling, asking for help in their fields.

One was in his early 60s and had injured his leg over the winter. Jim assured his friend he'd be there - forever a farmer, even in retirement.

(Reporting By P.J. Huffstutter; Editing by Caroline Stauffer and Julie Marquis)

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