Growing Pains

Growing Pains

By Patrick Brendel Friday, 12 September 2008

Local farmers adapt to unstable prices, unfavorable weather and urban development

From beneath the brim of a well-worn baseball cap, John Noren’s eyes track the methodical progress of his son Christopher’s cotton stripper. Six rows at a time, the yellow-and-green machine combs the 330-acre patch of white fluff and Blackland soil, leaving behind a trail of bare, brown twigs, sun-scorched leaves and stray bolls. To the south — suburbia — a rising tide of red brick, dark-roofed Hutto homes swells against the boundary of the unfenced field.

Noren predicts that the person from whom he leases this plot will sell to developers soon. Recently, a 100-acre field he used to lease was sold in order to build a new high school. Profits have been almost nonexistent for area farmers over the past few decades, despite the recent high price of grains. And a devastating summer drought has cut crop yields by as much as half their normal size.

Growing competition from builders for the area’s prime cropland and escalating oil prices are exacerbating volatilities inherent in agribusiness. That has Noren in a somber disposition toward the future.

“This might be the last of the Norens ever to farm,” he said, watching his son.

But harvest leaves little time for philosophic reflection, and Noren climbs back into his boll buggy to transfer a load of cotton from his son to his wife, Christy, who uses a module builder to compact the fluff into rectangular prisms weighing about 7,000 pounds apiece.

Prime land

Farms and ranches sprawl across more than 500,000 acres of Williamson County, according to the 2002 U.S. Census of Agriculture, a record produced every five years. That was more than two-thirds of the county’s 730,000 acres. Crops are planted on about 170,000 acres total each year. The 2007 agriculture census will be released in February.

Running roughly along IH 35 in the county, the Balcones Escarpment marks the boundary between rocky Hill Country to the west and flat, fertile soil to the east. The far southeastern portion of the county contains rockier, sandier ground.

At first, farmers were largely unaffected by development in the western part of the county and around Georgetown. But the building of roads like Toll 130 began enticing developers to the eastern part of the county, where the most fertile farmland is. Suddenly, there was a lucrative market in which to sell property traditionally leased out to family friends and longtime business associates for around $40 or $50 per acre, per year.

“Any farmer that plans to continue farming for a long time, and maybe has a generation coming up behind them who wants to farm, and is in a high-growth area, there’s always going to be the concern of the availability of good farmland,” said Seth Terry, county agriculture program coordinator with the Texas Farm Bureau.

But county extension agent Bob Whitney said the crowding out of farmers by new developments may be more of a perception problem than reality.

“A development of 500 acres out of 7[00,000]-800,000 acres is not a whole lot,” he said.

Rolling the dice each year

Last year, 2007, was a boon for Williamson County farmers, with tremendous yields and record high prices for corn, the area’s leading crop. Driven mainly by an increased demand for the grain to brew ethanol, the price of corn has risen even higher in 2008. However, the cost of oil has skyrocketed as well, causing farmers to pay more for oil-derived products like diesel fuel and fertilizer in order to run their machinery and nurture their plants.

The price of fertilizer has tripled in the past three years, estimated Wayne Decker, who farms between Hutto and Taylor.

Typically, farmers invest far in advance — much of the time using credit — for materials needed to produce the year’s harvest. With high prices in place for both crops and oil, there exists a potential for greater profit if the harvest is good. There also exists a greater risk of losing everything if the harvest is poor, Decker said.

“The possibility is there next year to have the best year you ever had. The possibility is there to lose more money than you’ve ever lost, too,” said Mark Welch, assistant professor and extension economist in grain marketing for Texas AgriLife Extension Service, which is part of the Texas A&M System.

For example: Farmer A, with low market prices for corn and oil, invests $100 to plant a field, expecting to sell the corn for $150, making a profit of $50.

On the other hand, Farmer B, with high market prices for corn and oil, has to invest $200 to plant a field, expecting to sell the corn for $300, making a profit of $100.

Farmer B stands to make more money ($100) than Farmer A ($50), especially if the crop is extraordinary. But if a blight wipes out both farmers’ fields, then Farmer A loses only $100, while Farmer B loses $200.

“If everything clicks, and everything goes well, that’s fine. But if it doesn’t, you’re in trouble,” Decker said.

Bigger problems would emerge if the cost of oil outpaces the price of crops.

“Input costs catching up with the price of commodities is the problem,” Welch said. “You may see that the profit margin in farming is going to get tighter and tighter.”

That could result in a big squeeze for farmers, who expect about a 3 percent return on their investment in a normal year, county extension agent Whitney said.

“That’s not a great deal of money to be socking away in the bank,” he said.

Also, as farmers are borrowing more and the risk of farming increases, other businesses are becoming more reluctant to offer farmers alternatives, like entering into agreements early in the season to buy future harvests at locked-in, prearranged prices, Welch said.

“[The high price of commodities] just compounds the risk associated with farming generally. It can get too wet. It can get too dry. Now add in record high input costs and limited marketing alternatives, and it just creates an extremely stressful situation,” he said. “Even though there are record high prices, it’s not a lot of fun for farmers.”

Still a bright future?

Whitney, though, is comparatively optimistic about the future of agriculture in the county. If grain prices stay high and the cost of oil stabilizes, profit incentives could attract young people back into agribusiness, he said.

“There’s always an opportunity for a good farmer to make a living in farming,” he said.

County agribusiness produced more than $45 million in sales in 2002. That includes about $30 million in farm sales and $15 million in livestock, but does not account for businesses dependent on area farmers and ranchers, such as insurance and real estate agencies.

“For the county, agriculture’s still an important component of commerce, despite the transformation of the area. Certainly on the eastern side of Williamson County, agriculture is rich,” Taylor Chamber of Commerce President Jim Aanstoos said.

Decker, whose four grown children are not farmers, hopes that agriculture survives. Economically, agriculture creates wealth for everyone, in addition to making products available for purchase, he said.

He also stressed “the importance of agriculture to our country so that we can keep feeding and clothing ourselves, so we don’t have to rely on some other source, some other country.”

Closer to home, agriculture is also important to the county’s development because many people move out to the suburbs precisely to be around tractors, fields and farmers, Whitney said.

“What the urbanites are coming to the area for is exactly why the farmers are here: for the country life,” he said.

The bottom line, he said, is that the advantages of being a farmer are in some ways ineffable, or at least are not measured solely in terms of dollars and cents.

“They’re in it because it’s a good business for them and their families, and they see some intrinsic benefit to being a farmer,” Whitney said.

Prices on the rise		Generally, the price of crops has risen since 2000, but so has the cost of oil-derived products like diesel and fertilizer.
Crop prices: Dollars per acre      Oil prices: Dollars per barrel
	Corn	Cotton	Wheat	Oats	Oil
2000	$197.66	$220.10	$92.77	$77.61	$56.18
2001	$197.06	$231.51	$135.84	$93.08	$48.42
2002	$135.07	$235.68	$111.09	$83.44	$49.65
2003	$168.64	$316.04	$121.12	$77.05	$57.49
2004	$262.18	$453.63	$120.63	$67.09	$75.13
2005	$156.81	$245.20	$108.77	$62.82	$106.17
2006	$140.75	$310.92	$132.74	$67.70	$127.89
2007	$342.39	$360.87	$241.89	$63.12	$141.53
The figures are derived from U.S. Department of Agriculture statistics for Williamson County, the Chicago Board of Trade and the International Monetary Fund. The numbers have been adjusted for inflation and are in 2007 U.S. dollars.