Farm-profit volatility boosting risk for lenders, economist says

Back to TopCommentsE-mailPrintBookmark and Share

U.S. farmers face increased financial risk because of higher operating costs and volatile commodity prices, even as income this year reaches a record, said Michael Boehlje, an economist at Purdue University.

“We’ve seen a combination of more price volatility, but we’ve also seen cost volatility that we didn’t see in that prior 15 years,” Boehlje said Tuesday at an agricultural banking conference in Indianapolis. The volatility of profit margins over the last five years is three times what it was during the prior 15 years, he said.

Farm lenders may have to increase requirements for working capital because there are more “fluctuations in potential income,” he said. Land prices and cash rents are up, the operation cost per acre has tripled, and fertilizer and seed chemicals have doubled for grain operations, he said.

With the operating risk for farmers increasing “dramatically,” lenders “have to be much more cautious than you might have been in the past on financing,” Boehlje said. “You have to be much more conservative on the financing side, which implies that you need to be conservative in how willing you are to finance.”

While profit margins for farmers will be a little lower in 2012 than current levels, they will remain above those of the last 20 years, he said. The U.S. Department of Agriculture anticipated record farm income this year of $103.6 billion.

“What I worry about is that when we fast forward to 2012 and actually have a crop harvested, I am not convinced that those margins will be there,” Boehlje said.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.