Farmers on the Brink

doomberg.substack.com

23 points·baq··3 comments

I am a small farmer, and I have seen huge increases in the costs of my inputs over the last 12 months. Enough to make me question the ongoing viability of my operation. If things get as bad as projected in the article, I expect many small farms will be forced to close their doors. When the crisis passes, big ag will control even more of the food supply.

I more wonder how the bigger operators are going to survive with all the debt they've taken on. A neighbour bought three parcels of farmland this year alone. With land selling for $30,000+ per acre, it's certainly not cash flowing itself. He can only be betting that the price of land will continue to rise, using the farm income to service the interest payments in the meantime.

As a small farmer myself I'm a little more optimistic. We're poised to be more diversified to weather any storms and haven't taken on the massive debt to become the big farms. When the big farms start to feel the crunch we'll be in the best position to buy up their assets.

If farmers are able to pass on most of their cost increases to the market and some farmers close shop during the season, prices for output will likely rise.

Also, having secured fixed-interest debt during low interest times is advantageous to pay back during higher inflation times. I wouldn’t be so sure that big operators will automatically struggle. Maybe more than another operator with zero debt, but my understanding is that farmers very commonly use loans for normal operations.

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