Fed Leaders Hear From Nebraska Farmers

OMAHA (DTN) -- Farmers and agribusinesses across states such as Nebraska and in the greater Plains region are facing one of the most complex and uncertain economic environments in recent memory.

That was the resounding theme from a listening session hosted Tuesday in Omaha by leaders from the Federal Reserve Bank of Kansas City, where farmers, ag lenders and industry leaders painted a sobering picture of farm finances, but also pointed to a few emerging opportunities that could help producers weather the storm.

MARGINS SHRINK AS COSTS CLIMB

Brandon Hunnicutt, who farms near Giltner, Nebraska, captured the mood of many when he described today's financial squeeze. The planting decision this spring came down to "Which crop are we going to lose the least amount of money on," he said.

"The challenge for us here looking forward is what do we do with a big pile of corn? But at the same time, we're losing farmers. Farmers are in a very bad head space right now."

Hunnicutt said he and his family have had to rethink whether it's worth storing corn, hoping for a price rally, while paying higher interest on an operating loan.

"The price of the crop has to go significantly higher just to cover the interest costs," he explained. "It makes more sense to get rid of it, pay down the line, and invest the money somewhere else -- which is completely against every reasoning for having a storage facility. These are the decisions we are thinking about."

Hunnicutt noted he has heard more stories about farmers being told by banks they no longer qualify for credit. The challenge isn't as much finding an immediate remedy, he said, but getting people to talk so there's a better understanding of what's going on in rural communities. That's difficult, he added, "especially in the farming community because farmers aren't going to go down to the local bar and tell you, 'Hey, the bank just cut me off.' They're not going to do that."

FED VIEW ON ECONOMY: SOUND FOOTING FOR NOW

Michael Barr, a Federal Reserve board member, acknowledged that tariffs could fuel inflation, slow down the economy, and increase unemployment. Offering a few comments at the start of the event, Barr said the U.S. economy overall was on "sound footing," but he added, "Looking forward, I expect inflation to rise due to tariffs.

"Higher short-term inflation expectations, supply chain adjustments and second round effects may cause some inflation persistence. At the same time, tariffs may cause the economy to slow and unemployment to rise," Barr added.

"There is still considerable uncertainty around tariff policies and their effects."

Barr's comments were similar to those of Federal Reserve Chairman Jerome Powell who earlier Tuesday said in a congressional hearing the Fed would wait and see about the impact of tariffs and overall Trump administration policies before looking at cutting interest rates.

AG COMPANIES SEE 'TARIFF CHAOS'

Farmers and ag leaders alike voiced frustration with the unpredictability of trade policy, tariffs and farm-related regulations.

Paul Maass, CEO of Omaha-based grain-handling business Scoular Co., said erratic trade policy "just creates chaos" for agricultural companies. "It affects hiring, investment and every part of your business," Maass said. "Everything in your business just kind of gets slowed down."

Sherrie Fogge-Fidler, president of the Farm Foundation and also a Nebraska farmer, reflected on how uncertainty is affecting even the most enterprising farmers.

"I was really taken aback by the impact that uncertainty is having on these leaders and entrepreneurs that I admire," she said.

Farmers who used to be first to invest in new technology have paused everything. "And this is across the country, which is disturbing to me," she said.

Fogge-Fidler later added farmers are telling her the combination of high input costs, low prices and high interest rates also takes decisions out of farmers' hands.

"They said, 'We're not going to be able to make our decisions now. The bankers are going to be making our decisions now' and nobody likes that feeling," she said.

OPPORTUNITIES IN HEADWINDS

Despite the challenges, the session highlighted reasons for cautious optimism. Krista Prinz, president of Citizens State Bank in Wisner, Nebraska, pointed to agricultural real estate as a continuing strength for producers and lenders. "Real estate has been a shining spot for us in agriculture for quite some time now," she said.

She cited niche markets as areas of promise, such as marketing beef direct to consumers. "We've seen very positive prices for cattle producers, and direct-to-consumer beef has been strong," Prinz said.

Still, Prinz also highlighted that interest rates have a big impact on cattle feeders even as they continue to see strong prices.

"There's a larger impact, even in cattle feeding, with $100 a head going to interest," she said. "You have to look at what other investment options are available for them."

Hunnicutt, too, is exploring new strategies, such as looking at planting non-GMO corn next year to export to Mexico as a way to capture more value.

Hunnicutt also noted a few opportunities in recent years that have helped. The Costco poultry processing facility in eastern Nebraska has brought younger families back to the area. Hunnicutt sees potential for the state to attract dairy operations from places like California and Idaho. "We've got the water, we've got the corn, we can grow the alfalfa. The question is, how do we get them here?"

Nebraska officials just held a ground-breaking ceremony for a $186 million dairy processing plant in the state.

On the energy front, Maass pointed to renewable diesel and sustainable aviation fuel as growth areas that could bolster demand for grain. "What could ultimately raise that price of grain above production costs? More demand," he said. "And that might not be corn directly, but there will be indirect effects."

Producers are also turning to technology and data to gain an edge, but there is still a lot of untapped potential. Prinz noted while farmers have vast amounts of data at their fingertips, "We haven't fully uncovered what they can do with it yet." She added she sees ag producers becoming increasingly savvy at using this information to improve profitability and efficiency.

As Fogge-Fidler also added, "For me, the anecdote for many risks is innovation."

The roundtable was part of an agricultural innovation event held by the KC Fed in Omaha. DTN requested an opportunity to attend but Fed officials declined.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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