> By Norm Heikens Indianapolis Star/News INDIANAPOLIS (Sept. 18, 1999)
-- > Meet Jerry Rulon, consolidator. At a time low prices are driving other > farmers to their knees, Rulon is adding to his operation. He snapped up a > bankrupt pig factory in December. And through much of the farm crisis, the > grain farmer has negotiated with prospective landlords to add to the 5,000 > acres he owns and rents in Hamilton and Tipton counties. "I'm a contrary > son of a buck," Rulon says with a hearty laugh. "You always want to expand > at the bottom of the cycle. Farmers like Rulon aren't making the news very > often these days. Hogging the attention are farmers struggling to preserve > their livelihoods in the face of drought, weakened markets and a rapidly > changing industry. But financially secure farmers are just as much a > reality. Purdue University agricultural economist Howard Doster says he > wouldn't be surprised if at least two farmers are positioned to expand for > every one who will go out of business this year. While hurting farmers plan > liquidations or survey their odds of staying in business, their prosperous > neighbors are quietly scouting for bargains on land and equipment. "The > ones who are going to be left standing are those who are pretty good, pretty > big and pretty well-financed," Doster says. "They see opportunity rather > than being frozen by their problems." Opportunities could be plentiful, > depending on how the crisis plays out. Experts describe farmers' plight as > the worst since the mid-1980s, when one in 10 farmers were forced out of > business after land values plummeted. At least 10 percent of Indiana's > 65,000 farmers will quit from 1998 to 2000, Purdue economists say, and some > bankers predict even greater losses. In an average year, 1 percent to 2 > percent leave the farm. Two years of low prices and bleak prospects for a > quick turnaround are leading bankers to break the news to borrowers that > they are cutting off their credit. Other farmers are leaving voluntarily to > protect their assets and avoid being forced into bankruptcy. The crisis was > caused by a glut of products and too few buyers. The world produced three > consecutive years of record-breaking crops. Meanwhile, Asia's economy > collapsed. European countries kept their trade barriers and the strong > American dollar made agricultural exports expensive. Many grain farmers are > breaking even or experiencing small losses. But historically low hog prices, > triggered by factory farm expansions and slaughterhouse closings in Indiana, > have eroded about half of hog farmers' net worth. Industry watchers say hog > farmers won't buy much for a long time despite somewhat improved prices. > They're too poor. Grain farmers will do the lion's share of the > consolidating. Because data isn't available, economists and other experts > are reluctant to estimate just how many farmers they think are prepared to > take on more land or other assets such as buildings and equipment. But it > isn't a tiny minority. "There are numerous farmers who, if they wanted to > buy a farm today, could write a check," says Daryl Fry, vice president of > The Farmers Bank in Frankfort. Expansion-minded farmers fall into two > groups: those who can afford to buy land and those who can only afford to > rent. Interest costs, alone, on a land mortgage can equal the cost to buy > seed, fertilizer and chemicals. Many farmers prefer to rent and control > greater acreage than to tie up their assets in land. Nearly every > financially viable farmer who isn't near retirement is on the prowl to rent > more land, observers say. Howard Halderman of Halderman Farm Management > Services in Wabash says 90 percent of the firm's 550 tenants in Indiana, > Ohio and Michigan are capable of farming more ground. When the firm needs a > new tenant for a particular tract, it often takes bids from as many as 10 > strong, capable operators in the area. "Most guys want to expand," > Halderman says. Halderman tenant Dean Lamb is one. Lamb, who raises 6,000 > acres of corn and soybeans north of Lebanon with his father, brother and > sister, says the family could absorb 500 more acres without having to buy > additional equipment. Excess capacity like that makes it easy for many > farmers to add acreage. "When someone goes out (of business), it doesn't > take much for someone else to step in," Lamb says. Comparatively few > farmers have the means to buy land. But parcels with rich soil command > prices of more than $2,500 an acre -- beyond the ability of the land to > generate a profit from crops. Nonetheless, farms "for the most part are > selling to another farmer," says Greg Maxwell, who oversees ag lending in > Indiana for National City Bank. "There's still a lot of money out there." > Hamilton County farmer Rulon bought 35 acres with the hog buildings. Rulon > says he got it for less than $400,000, a third of its worth just two years > ago. Rulon wants to buy more land, but he's waiting until the price drops. > Given the gravity of the farm crisis, it's overpriced, he says. Few > prosperous farmers discuss their plans publicly for fear of irritating > financially strapped neighbors. Operators interested in absorbing a > distressed neighbor walk on eggshells. "You need to keep your head down if > you want to get along in your neighborhood," Danville farmer John Hardin Jr. > says of expansion-minded farmers Adds Halderman, "If they back-stab > somebody, it's just not as much fun to walk down the street." > >
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