Friday, July 1, 2022
CapitalPress.com 13
Loans: ‘Demand for credit is going to climb’
ducers have on-farm storage for
fuel and purchased their needs
earlier this year in the $4.50 a gal-
lon range, he said.
“So they dodged that bullet a
little bit,” he said.
Fuel was definitely higher this
spring than a year ago, and farm-
ers have already absorbed the
increase. But other costs are high
as well, he said.
“Repairs, maintenance, parts
have gone up dramatically, if we
can get them … even belts,” Wil-
lis said.
All have at least doubled,
and the price of used equipment
has gone up. An older Peterbilt
semitruck that would normally
sell for $15,000 to $20,000 has
doubled in price, he said.
Another issue for farm-
ers is interest rates. The Federal
Reserve raised the prime inter-
est rate to 4.75% in mid-June to
tame inflation, and it’ll probably
continue to raise interest rates
through the year, he said.
Continued from Page 1
Higher input prices
“Higher input costs made it
necessary to increase operating
commitments for many borrow-
ers,” he said.
But custom-
ers remain well
positioned despite
the challenging
inflationary envi-
ronment, and he
expects the num-
ber of operating
Doug
loans as well as
Robison
loan amounts to
grow, he said.
The Producer Price Index
for farm products in the U.S.
increased by more than 34% from
April of 2021 through April of
2022, he said.
“The costs for fertilizer and
chemical increased at an even
faster pace, with the Producer
Price Index for nitrogen-based
products increasing more than
49% while spot prices for many
products have increased by more
than 100%,” he said.
Input costs for agricultural pro-
ducers have significantly out-
paced the inflation rate often cited
in relation to the Consumer Price
Index, which has been above 8%,
he said.
Loan officer Bennett has
already updated quite a few oper-
ating loans since the first of
the year, increasing the amount
because producers underestimated
the cost of fuel and fertilizer. By
mid-May they had already deter-
mined it was going to take more
money to grow this year’s crops,
he said.
“The demand for borrowing
has increased because of the antic-
ipated cost of production,” he said.
The increase varies, but it’s up
10% on the low end with some
loans up 40% year over year, he
said.
Carol Ryan Dumas/Capital Press
Justin Willis, vice president commercial and agricultural loan officer at D.L. Evans Bank, at his office in
Twin Falls, Idaho.
Financial health
Producers came into the year in
good shape, and Northwest Farm
Credit has been able to meet their
increased needs, he said.
“I think, in general, credit qual-
ity was up because most people
made money the last couple of
years,” he said.
People added working capital
and paid down debt. There wasn’t
a lot of debt from last year’s oper-
ating cycle, he said.
Crop outlooks
Water was the biggest concern
this year until rains came in April
and May and brightened the out-
look. But the earlier expectations of
cutbacks changed cropping plans.
There’s a lot less corn being grown
and a lot more wheat as prices
neared double-digits a bushel, he
said.
“We’re going to be pretty darn
short on corn silage this year.
Demand will stay high, supply will
stay low and it will drive the price
high,” he said.
Feed costs — 60% to 66% of a
dairy’s cost of production — are
Carol Ryan Dumas/Capital Press
Eric Bennett, relationships manager at Northwest Farm Credit Services, crunches the numbers on op-
erating loans at his office in Twin Falls, Idaho, on June 14.
going to stay high, he said.
“Dairies are making money
now. The concern for dairies is
breakeven is going to stay high, but
will the milk price hold?” he asked.
If the milk price doesn’t stay at
$20 to $21 a hundredweight, dair-
ies are going to lose money, he said.
Row crop farmers are going to
be OK, he said.
Labor a factor
Labor is another component of
the high cost structure, whether it’s
crops or dairy. He knows one dairy-
man who’s already given milkers
three raises this year. On average,
those wages are $14 to $15 an hour,
he said.
Farmers can mitigate some
of the risks with crop insur-
ance and revenue protection pro-
grams, as well as futures and
options to lock in a price floor, he
said.
“It would help if the expense
side would come down,” he said.
But oil and fuel prices aren’t
likely to come down, and labor
costs aren’t coming down, he
said.
“Farmers are seeing inflation
way higher than 8%. Just the cost
of doing business is much more
than a year ago, two years ago or
five years ago,” he said.
“Demand for credit is going to
climb,” he said.
Lawsuit: ‘These rules aren’t all reasonable’
Continued from Page 1
Sara Duncan, spokes-
woman for Oregon For-
est Industries Council, said
OFIC considers OSHA’s
rules unreasonable.
“Given
extraordinary
events like the 2020 Labor
Day wildfires and last sum-
mer’s heat dome, we agree
with all Oregonians that the
health and safety of employ-
ees must be prioritized, and
employers should adapt as
we acclimate to a changing
climate,” said Duncan. “But
these rules aren’t all reason-
able — many go far beyond
extreme events and are dra-
matically more strict than
any other state.”
Duncan pointed out, for
example, that the air quality
index requirements under
Oregon’s new rules are
twice as stringent as Califor-
nia’s rules.
According to Oregon
OSHA, the heat rules apply
to outdoor and indoor work
activities where there is no
climate control when the
heat index equals or exceeds
80 degrees Fahrenheit.
These requirements, Dun-
can of OFIC said, “will sig-
nificantly restrict work in
benign circumstances like a
typical Oregon summer day.”
Industry groups are also
Cost crunch
Across town, D.L. Evans Bank
is also seeing a significant rise in
agricultural loans.
“We increased our operating
lines about 35% on average,”
said Justin Willis, vice president
commercial and agricultural loan
officer.
Typically, operating loans are
fairly close to the previous year,
he said.
“This is the highest year of
cost of production farmers have
seen in my career (21 years),” he
said.
Farm diesel is $5 to $5.24 a
gallon, up $1 to $1.50 since the
beginning of the year. Most pro-
Wolf: ‘It’s not always about
the best available science’
Continued from Page 1
Capital Press File
Business and timber groups have filed a lawsuit to block
Oregon’s heat and smoke workplace rules.
concerned about smoke-re-
lated rules. In court docu-
ments, plaintiffs allege that
the rules “do not distinguish
between contributions to
the Air Quality Index level
from wildfire smoke in com-
parison to other pollutants”
and don’t give employers a
method by which to deter-
mine whether particulates
from wildfire smoke are
present at a work site.
Rex Storm, executive
vice president of Associ-
ated Oregon Loggers Inc.,
another plaintiff, said he
“concurs” with Oregon For-
est Industries Council’s
statements, though he did
not elaborate.
Aaron Corvin, of Oregon
OSHA, said OSHA’s staff
“do no comment on pending
litigation.”
PCUN, an Oregon-based
farmworker
union,
expressed frustration that
business groups filed the
lawsuit.
“We’re frustrated to see
corporate lobbyists and law-
yers attempt to delay the
recently adopted heat and
smoke standards from going
into effect, right as sum-
mer heats up,” said Reyna
Lopez, PCUN’s executive
director and president.
Oregon OSHA’s rules,
she said, provide workers
with “common-sense pro-
tections such as access to
cool water, shaded rest areas
and additional breaks in
high-heat temperatures.”
Countering costs
On the flip side, crop prices
have increased substantially.
The price of hay is up 30%
from the beginning of the year,
and there’s a lot of speculation
it will top $300 a ton across the
board, not just for dairy hay,
he said.
Grain corn prices last year
were pushing $5 to $6 a bushel.
Contracts were $7 to $7.50 this
spring, and the price in June was
$8 to $8.50. Wheat prices went
from $5.50 to $6 a bushel last
year to as high as $9.25 now, he
said.
“On a positive note, budgeted
revenue is up 40% to 45%,” Wil-
lis said.
Because growers don’t con-
tract all of their anticipated pro-
duction, some of that revenue
might be pushing 50% higher
than last year, he said.
“The budgeted expenses are up
35% but could be 40% because of
rising costs,” he said.
The good news is projected net
profit margins have increased 2%
to 5% from last year due to the
high commodity prices, he said.
“So even though production
costs have increased in 2022,
revenue is exceeding those costs
and profitability is projected to
increase by 2% to 5% from the
previous year,” Willis said.
Increased costs will increase
the bank’s lines of credit for
farmers, but they’re all going to
get renewed, he said.
“Banks love ag credit. Food is
not a commodity that goes out of
style. It’s a good risk for the bank.
In agriculture, there’s always
somewhere to take your crop to
sell … people always need food,”
Willis said.
He is worried, however, about
food costs next year and how
that’s going to affect consumer
spending and the economy.
This year’s higher commodity
prices haven’t gone into the food
chain yet, but they will after har-
vest, he said.
Commissioners Mel-
anie Rowland and Lorna
Smith are seeking a stron-
ger rule than proposed by
the staff. Rowland said
she didn’t want to waste
any more
time on a
rule that
won’t be
adopted.
“I think
it’s pretty
clear that
Kelly
we, Lorna
Susewind
and I, do
not have a
majority in terms of peo-
ple who want a rule,” she
said.
Earlier in the meet-
ing, Rowland said killing
wolves was a “big deal.”
“My personal belief
is that we’re doing it
because we were raised
on the big, bad wolf the-
ory, and people don’t like
wolves. They’re scared
of them,” said Row-
land, a recent Inslee
appointee.
“We think it’s a big
deal to kill wolves, too,”
Fish and Wildlife Director
Kelly Susewind answered.
‘WE THINK IT’S A BIG DEAL
TO KILL WOLVES, TOO.
BETTER OR WORSE, THERE’S
ONE PERSON IN THE STATE
WHO CAN AUTHORIZE IT AND
THAT’S ME, AND I TAKE IT AS
A VERY, VERY BIG DEAL.
Kelly Susewind, Fish and Wildlife Director
“Better or worse, there’s
one person in the state who
can authorize it and that’s
me, and I take it as a very,
very big deal. And it both-
ers me when people think I
don’t,” he said.
“I’m sure not doing it
because it’s the ‘big, bad
wolf,’ “ Susewind said.
Whether under a rule
or the current protocol,
Fish and Wildlife requires
ranchers to use non-lethal
means to prevent wolf
attacks before the depart-
ment resorts to shooting
wolves.
Wolf policy coordinator
Julia Smith said the depart-
ment hopes the non-lethal
measures work, but they aren’t
proven.
“There is a body of sci-
ence on lethal removal
showing it is effective, not
long term, not forever, no
tool is effective forever,”
she said.
“We have no science
whatsoever on things
like range-riding, yet
we are huge proponents
of range-riding because
we think it works. We
think it has the the pos-
sibility to work,” she
said.
“It’s not always about
the best available sci-
ence. It’s about, Let’s try
things out and see what
we can do,” Smith said.
“We are promoting meth-
ods for which there is no
science.”