Iowa farmer Dave Savage thought he was done with operating loans.
Savage, who considers himself a “generation-and-a-half farmer,” had gotten his farm to the point where he didn’t need a loan for day-to-day expenses.
“I thought, ‘Well, this is great. I’ll never need to do operating loans again. That’s nice. I don’t have to pay all that interest,'” Savage, who grows corn, soybeans, wheat, and hay, said.
But Savage has again found himself in the position of having to borrow money to cover operating expenses, a shift he said spans two presidential administrations and can be attributed to a system of overproduction that has led to low commodity prices and a reliance on export markets.
“The reality is most of us had to go back, get into operating loans again, and get deeper into them than we ever thought we were going to,” he said. “That’s just real uncomfortable for any of us to deal with.”
And Savage is not alone: Farmers warn that President Trump’s ongoing trade war with China, coupled with devastating weather and waivers the Trump administration granted to the oil industry exempting them from blending ethanol into gas, has created a perfect storm for them. They say the current landscape mirrors that of the 1980s farm crisis, when farmland values sank and farm debt skyrocketed.
Trump has painted a picture of a rosy future for American farmers, saying late last month the escalating dispute will yield results that “will be big for farmers and ALL!”
But Savage is worried there is no end in sight.
“We’ve seen five years of just making ends meet on the farm,” he said. “I know every business goes through these cycles, but I feel like with this cycle, there’s no end.”
A July report from the Federal Reserve Bank of Kansas City found the volume of operating loans rose 16% compared with last year, and farm bankruptcy filings from June 2018 to June 2019 rose 13%, according to the American Farm Bureau.
Exports of soybeans, pork, and wheat to China, meanwhile, have plunged because of the escalating trade tensions between Washington and Beijing. China — as retaliation for the president’s decision last month to slap tariffs on $300 billion worth of Chinese goods — stopped purchases of U.S. agricultural products.
With China’s export markets effectively closed to American farmers, Beijing has instead looked to Argentina, Brazil, and Canada for commodities.
“This has been one of the most challenging years that my clients have seen as long as I’ve been practicing,” Joe Peiffer, a lawyer with Ag & Business Legal Strategies who has been practicing since 1982, said. “There’s a significant amount of people who are very concerned about what’s going on.”
Peiffer, who helps with debt restructuring negotiations, warned that many farmers have used up the equity they had in real estate and machinery and pledged it to creditors to cover prior years’ losses.
“Land prices are dropping and farmers are losing money,” he said, “and the equity that once might have allowed a creditor to give them a loan and keep them farming, it’s contracting. As that contracts, we get to a position where it’s more and more difficult to keep operating. That’s what is happening to us right now.”
While more farmers are seeking out operating loans, others are struggling to secure financing.
Farm Aid, founded by Willie Nelson in 1985, saw a 109% increase in calls to its crisis hotline from 2017 to 2018, and many farmers calling at the start of the year said they were unable to get operating loans and needed assistance with figuring out how to survive another year.
Now, farmers calling the hotline are trying to determine which bills to pay first and which to put off, said Jennifer Fahy, communications director of Farm Aid.
“The severity of the crisis that farmers are calling with has increased,” she said. “We’re receiving those calls of folks really being at the end of the rope and reaching out for help beyond just financial advice or legal advice.”
With low commodity prices and dairy prices, as well as the trade war with China, Fahy said Farm Aid is “seeing crop farmers and livestock farmers on a larger scale suffer.”
“Access to credit becomes a major concern,” she said, “and that’s essential no matter what scale of farmer you are.”
Some farmers, however, have been willing to take the hit from Trump’s efforts to combat China’s trade practices and believe the president’s approach was needed, even if it caused pain.
“All of us farmers, we saw the problems with China,” Savage said. “They stole some of our technology right out of the fields of Iowa. We knew they stole our digital technology, too. We had to nip that in the bud, and more of us are supportive of Trump.”
But a growing frustration among farmers with the Trump administration stems from its decision to grant waivers to 31 oil refineries that allow them to skirt requirements to blend ethanol into their gasoline.
“Come on, Trump. Get a clue,” Savage said. “He comes out here to farm country and brags, comes to ethanol plants in Iowa and talks about the importance of them and home-grown energy, and then he grants these waivers.”
Ron Heck, a fourth-generation farmer who grows soybeans and corn, said the Environmental Protection Agency’s move to grant the waivers to refineries “seems like the last straw.”
“Everyone has only one nerve left, and they got that one stepped on,” he said.
Trump has attempted to stanch the damage to farmers, including with $28 billion in aid. At the Group of Seven summit in France last month, he also announced the United States and Japan reached a trade deal “in principle” that would be “tremendous for the farmers” and suggested in a tweet late last month that his administration would take steps to increase ethanol demand.
Farmers like Heck, whose family farm in Perry, Iowa, has existed for more than a century, knows the “good times and bad times come and go.” But while he has been able to continue operating successfully, Heck is worried about young farmers who have seen farm incomes fall because of the devastating weather, low prices, and trade war.
“Some farms because of their stage in life or because they made an expansion decision are in very serious financial trouble,” Heck, who has been farming for 46 years, said. “That’s really sad. It’s a timing issue. It’s not an issue of character or hard work.”
To make up for the loss of China as an export market and a decline in revenue, Heck said farmers are now forced to cut expenses, including by purchasing lower quality seed or fertilizer and putting off purchases of new farm equipment. If that’s not enough, he said, farmers are forced to go out of business or file for bankruptcy.
“The rest of us,” he said, “are trying to hang on.”
