Drought floods farmers with record profits

Net farm income is expected to rise nearly 4% this year. Insurance payments and high grain prices are contributing to the gains.

By Kim Peterson Aug 30, 2012 2:28PM
There is no doubt that the widespread U.S. drought this summer has devastated farmers. Crops are damaged beyond repair, and the impact will be felt for years.

But despite the damage, or maybe because of it, farmers are on track to have their most profitable year on record, according to the U.S. Department of Agriculture. Net farm income is expected to hit $122.2 billion this year -- a nearly 4% increase from last year and the highest on record. If you adjust for inflation, it's the second-highest profit after 1973, the Financial Times reports.

Post continues below.
How can this be? A big reason is that the crop shortage has pushed grain prices to all-time highs. So the farmers that made it through the drought with crops intact stand to win big. Farms in northern states such as North Dakota are expected to see a 39% jump in profits this year, the Times reports.

Many farmers who saw fields destroyed will file insurance claims, and the money from those claims is expected to offset their losses. The government will help with those payouts.

The estimated profit windfall coming to farmers is bringing out critics who say the government is propping up farmers too readily with federal crop insurance. "It's compelling evidence that what started out as a basic safety net has become a program that is essentially guaranteeing business income," said Craig Cox, an official with the Environmental Working Group, told Bloomberg.

The U.S. corn crop this year is about 17% smaller than last year.

Some farmers are unable to get help from insurers. Livestock farmers, for example, usually can't get crop insurance, the Times reports. They have to deal with feed costs that will rise as much as 13%.

Record profits coming to some farmers may be good news for Deere (DE), which said that while it's being cautious with its outlook in the near term, business could be booming next year. "This year's drought could positively influence our outlook as it spotlights the need for John Deere's highly productive agricultural equipment," CEO Samuel Allen said recently, according to Forbes. Kubota (KUB) may also see a boost.

More from Top Stocks

Tags: DE
266Comments
Aug 30, 2012 3:48PM
avatar

I have no problem with the family farmer and small co-ops making a profit from rising prices or getting saved by govt sponsored crop insurance. What I do have a problem is with large corporate farms like ADM getting govt sponsored crop insurance. 

Aug 30, 2012 4:20PM
avatar

 Lord knows we can't have anyone succeed in America! Our new enemy...farmers, and their greed! Odd how most of these farmers have paid for insurance for years without any claims but when they do need them and utilize those funds, they are chastised by the media.......... That's like your house burning down and some "journalist" yell WRONG when you recieve your insurance check to rebuiild.

 

This sounds like an article bashing big oil, only modified with farmers in mind!

Aug 31, 2012 10:59AM
avatar

I would like to clear this up for a LOT of misinformed people.  You need to hear it from a farmer and stop believing everything you hear on the news.  I am a young farmer that farms with my dad.  We run 1500 acres in southwest Wisconsin.  To some, we would be considered a "corporate farm."  In all reality most farms of large size are still family farms.  Farming is like most industries.  You need to be as efficient as possible which requires you to get bigger or get out.  Being a farmer doesn't just require sitting in a tractor all day.  I spend just as much time in meetings and learning about new technology to be more efficient and make more food to feed America.  Farmers are very smart people with more technology at our fingertips than most other industries.  Using fertilizer and chemicals is NOT harmful to the environment or your food when used properly, which good farmers do.  But to the main topic here of crop insurance.  Yes I have crop insurance.  Yes I will get a payment for my crop.  Yes I paid premiums as did my father for the last 35 years without a single claim.  Say what you want, crop insurance is just like any other.  If you don't like that we are getting a payment after paying in premiums, then stop paying your home owner's insurance as well as your auto.  When your house burns down or you have an accident, don't come crying to me. 

     To say that a farmer works only because he or she loves it is a half truth.  The MAIN reason I farm is because it is in my blood.  I live for working the land and seeing what I have done which is doing my part in feeding and fueling America.  However,  I wouldn't be in business anymore if I didn't turn a profit.  What I see more and more in America is hatred towards those who are successful.  This shouldn't be.  It should be celebrated and taught to others.  I don't mind giving a handout to those who need it, but will not stand for a person critcizing me and my profession while they have their mouths open waiting for a "taken for granted cheap meal."  People need to start learning to live a little more like a farmer and care about others.  I could go on and on.  Thanks for your time.

Aug 30, 2012 4:32PM
avatar
Qualify the statement about crop insurance!  Most family farms cannot afford the insurance rates and not only get no crop income, they still have the expenses for seed grain, fertilizer, fuel, and all the time spent preparing the fields and nothing to show for it.  What other industries pay retail for their purchases and receive wholesale prices for their goods?  Exclude the large corporate farms from those statistics and then tell us how much money the farmers are making.
Aug 30, 2012 4:39PM
avatar

I am a small farmer in the mid-west and my crop is borderline at the moment. If I get insurance payout on a portion of the crop it will got to input cost and cutting cost. I still have to cut the crop and spend the time, diesel and breakdown costs just to see if I qualify for my insurance. I don't see where I am making a profit when I have to spend money just to see if I can break even this year.

Aug 30, 2012 7:54PM
avatar

ARGHHHHHHHHHHHHHHH!!!!  I can't believe the stupidity!!!!  Thank you to everyone who supports the farmers.  We work hard for what we have.  We take care of what we have.  We get by when we have to.  We fix it up and get by when we have to. And through it all, we find a way to keep on feeding this nation we love so much (along with many others).  We don't do it to get rich. That would be lunacy.  We do it because we love it.  We do it because it's in our blood.  If you don't like it.  Pick up a shovel and grow your own.  If you think you can!!!!!   Shame on you MSN!!!

Aug 31, 2012 10:08AM
avatar

Profit??? Do you really know anything about farming? Do you have any idea how much seed cost? Fertiilizer? Maintenance on equipment? Diesel to run the equipment?

The higher grain prices and shortage of corn will mean a shortage of seed in the fall and a higher price for it. Farming takes thousands and thousands of dollars. The people who are making big profits are the buyers, not the producers. I get so tired of people just looking at the gross amount of money. They never look at the numerous amounts of expenses it takes for farmers to produce the crops.

True commercial farms may make big profits because they sell direct to companies. But individual farmers have to go through buying/selling points and for some crops they have a set contract. The contract is made prior to the growing season, so any bumps in prices usually don't effect what the farmer gets. Please check facts before making these stupid headlines that mislead the American public into thinking that all farmers are getting rich off of there tax money. The majority of the money in the Farm Bill goes for food stamps--not farming. Only 10-17% of the farm bill actually is paid to the farmers.

Aug 30, 2012 4:58PM
avatar
Don't know about others, but our farm (in Illinois) certainly isn't going to make more money this year.
We still have to pay for seed, harvest, chemicals and machinery repair, etc. despite the fact that
the crop isn't great.  Insurance only covers part of the year's expenses.  Yes, we have had some 
good crops in the past few years, so I can't - and don't complain, but quit saying we are going to 
MAKE more money.  

Looking at an ear of corn and seeing it only partially filled out, hurts.  It costs just as much to harvest
a crop of 30 to 50% as it does to harvest a 100% crop - let alone the soy beans that are flattened - or have just not developed at all. 
Aug 30, 2012 11:52PM
avatar

 As a dairy farmer, it is interesting how the story quickly skips over livestock producers.  No one eats corn or beans... consumers eat products such as meat, eggs, and dairy products, which are fed these crops. The input costs have skyrocketed... but the prices we receive has not kept pace. Volitility in the markets crushes small producers. 

Especially irritateing to hear is this idea that we will be bailed out, or given government money. This is ludicrous. Any government assistance we can apply for is almost always low interest loans, which have to be paid back either way, and have many, many stipulations and tie ons along with. This isn't like a guy from FEMA comes out asking if we need help. We have to prove our losses, show how we plan on makeing a profit, and have collateral .

I hate to point out that most of what used to be called government 'farm bills' are actually entightlement programs such as food stamps and consumer assistance.  The various ways our government is involved in agriculture is to ensure a cheap food supply for consumers, not to help typical farmers.

Aug 30, 2012 6:46PM
avatar

I grew up on a farm in Iowa.  Never, never were we ever 'rich' or 'well off'.' I cannot remember a year growing up without my dad pacing many late nights worried how we would make it. We did okay. My dad finally retired about 4 years ago. Thank God.  Last year we would have had flooded ground with no crop, and the crops that didn't get flooded out got little to no rain.  This drought they are talking about started last year (2011) if you want to be technically correct.  We were a small family farm and we were ones that could not afford the crop insurance.  Too expensive. The insuranceon teh equipment was enough to stagger at, dad couldn't justify the additional expense.  Sure, I grew up not 'wanting' for anything, I had a roof over my head and learned the value of a dollar hoeing beans and detassling in the summers.  Not easy work by any means.  I'd challenge any one of these bleeding heart liberals to one day, just one day dawn to way past dark working along side any of us that know what it is to 'work' - you'd be freaking out about 10 am wanting a latte' break in the middle of freakin' nowhere's ville with a jug of cold water to chug on maybe. 

It makes me so ill to hear about 'welfare' and bull S. from people that have never walked a mile on dirt clods that are harded than the cement they pound on their way to temperature controlled environments and complain the farmers that raised that cow for the steak they ate last night at the newest bistro on the corner are getting some assistance.  A bale of hay here in Iowa is now going for $250.00 a bale. I ask any of you city folk to estimate how many cows will that feed?? And for how long will that last?? Not very many and not very long.  Most of the farmers are harvesting what is left of their crops now due to fear of a bad wind storm knocking what might be on the stalks to the ground.  My dad is 77 years old. Seen many things, never in his life time has this been this widespread and awful as it is now.  They talk about the 1975 drought.  This is worse.  A lot of farmers walked away from farming then and what happened?? Remember the lines at gas stations after that? Remember the inflation that set in?

One more snarlky comment from someone that needs to check their high and mighty attitude at the door. This affects everyone. The mom that just had a baby. Sure, she's going to breast feed you say....the whole process means the mom needs calcium in her system in order to produce good milk for baby...where does that come from?? Certainly not a pill at the drug store. I've seen where people have said, 'hope you like beans' - where do you think they come from?? They come from a farm. Not one person on this planet can survive without a farmer doing their job 24/7/365.  No, farmers don't get breaks over the winters.  They are tending livestock, fixing machinery, getting their plans together for a better 'next year,' they are fixing the door on the shed to keep the snow off the machinery so it lasts another year....you people have no idea. 

The farmers and other farm kids here know what I am talking about.  The rest can go and have a piece of cardboard for dinner...no wait....cardboard comes from trees...whoops, some tree farmer probably had something to do with that...yes, there are such things as tree farmers.

Just everyone step off.  This article was written so poorly with so much misinformation I am surprised that it was even allowed to be posted.  I for one am embarassed for the idiot.

Thanks for letting me vent - farmers ROCK! Sorry for any typos - I am just that pissed!

Aug 30, 2012 7:43PM
avatar
I farm and I am pleased to see the level of support from you for my business.  Some days reading blogs it seems like everyone hates me for what I do and who I am.  Judging by the responses in this column it seems it may just be the vocal minority that feels that way.  Thanks for the support of American agriculture.  We are very good at what we do and proud of it.  It is a pleasure to farm for you.  Longfarms
avatar

To Bxacto:     Exactly.....if you can't make money then why would you farm???   Do you go to work every day to lose money??????   Farmers feed the world and the idiots out there think its such a damn glorious job......   the stress on the farmers through this drought has been a nightmare.   

 

You have no idea!!   Grow up or starve!!

avatar

To cottoncat:

 

What does that mean???   We pay tens of thousands of dollars  in crop insurance premiums yearly  and luckily  havn't needed to use it yet......what is the handout here???  Right now the expense of machinery, labor, repairs,  to rip, disk, plant/seed, fertilize, irrigate, and harvest is way more then the insurance company will pay......this must be beyond your knowledge....do you know a farmer?????  obviously not!!!  Next time you shove food in your mouth.....think about where it came from.

Aug 31, 2012 10:20AM
avatar

I hope you all realize that you're literally biting the hands that feed you.   Not just the corn farmers, but the wheat farmers and those who grow vegetables.  And maybe just once you should look at the ingredient labels on the food you by so that you realize how often SOYbeans are utilized in foods.  

I can't wait to see what you all post when the shelves at the grocery stores are empty and meat is so expensive that only those with 6 figure incomes can afford it.   I live in Iowa... it's bad here.  VERY bad.   And it's going to trickle down to each and every one of you.   Even the price of gas will skyrocket when the corn is mandated to food products and no ethanol is being produced.  The Saudis would just LOVE that!

Finally, for those of you who don't understand it...    A farmer will normally insure for what his farm averages per acre.   And this insurance is more expensive than any of you can realize.   So give them a break... because how many of you can.. or will.. plant a garden and exist only on what you produce?  Without the farmer, you're going to be very very hungry.   

Aug 30, 2012 5:46PM
avatar

If farmers go out of business, what are we going to eat?  It already bothers me that we dont produce enough goods in this country to be self sufficient.  Lets not add food to the list of things China can hold over our heads.  A country that cannot feed itself cannot rule itself.

Aug 30, 2012 8:55PM
avatar
  We have only about 20 cow/calf pairs so we don't fit into the big ranch picture.  We buy hay each year for winter feed.  This year we bought our hay early because we thought feed would climb in price, so far it's gone up $21.00 a ton. For an outfit that buys hundreds of ton each year that increase could put them under.  It's hard to watch everything you worked for be lost.
Aug 30, 2012 11:13PM
avatar
Are you kidding?! This is poor reporting. It's not telling the whole story. Not everyone gets crop insurance. The small time family farms are suffering. We are going to have sell our cows or the farm. We can't afford the feed for them and even if we could it's hard to find this year.
Aug 30, 2012 8:03PM
avatar
Before all of this is over we will learn the very hardest way to respect our land and the people who work it.  I'm afraid we are about to learn what it was like to live during the dust bowl days.  Livestock prices will drop, production has to drop since there is no feed and the federal lands to pasture on in the summer are taking a total beating.  Our food isn't going to be plentiful, no food for livestock equates quickly to limited food on the market for us.  Farmers work their fingers to the bone their entire lives and are always in debt.  Their children sell off the land and move to the city.  We need more farms and less suburbs, more water and fewer golf courses and swimming pools.  Lets get our prioritys right.  I'm glad I can live where I can hunt but I like beef the best with some sweet corn.
Aug 30, 2012 8:01PM
Aug 30, 2012 4:57PM
avatar
What a balanced article!  The Environmental Working Group, an organization that vows to destroy family farms, is quoted, but there's absolutely nothing from any farmers' associations.  Is it any wonder that people trust the media less than they trust a used car salesman?
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
268
268 rated 2
422
422 rated 3
632
632 rated 4
512
512 rated 5
518
518 rated 6
682
682 rated 7
523
523 rated 8
343
343 rated 9
124
124 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.