Picking Up the Tab

In good years and in bad, there’s a lot of money in American food. Regardless of the year, however, less of it flows back to the folks who actually grow the food, American farmers and ranchers.

For example, the U.S. Department of Agriculture (USDA) estimates that cash paid to American farmers and ranchers this year—for everything from cattle to cauliflower to catfish—will equal $366.6 billion. The all-time record is 2014’s plump $424.2 billion.

Either number, however, pales in comparison to total U.S. grocery sales, pegged by the Food Marketing Institute at $668.7 billion last year, the latest available data.

While two-thirds of a trillion bucks is nothing to sneeze at, it’s chicken feed compared to what Americans spend on food at home and what USDA labels “away” from home. That amount will again top $1.5 trillion this year, according to the USDA.

Farmers, ranchers, and Big Agbiz are happy, even proud, to point to impressive numbers like these because all reinforce agriculture’s role in the U.S. and global economy. But the numbers, big and small, don’t tell the entire story.

For instance, on Aug. 30 USDA trumpeted that 2017 net cash income and net farm income would rise for the first time after “three consecutive years of decline.” USDA sees net cash income at $100.4 billion, up nearly 13 percent, but net farm income—explained as “a broader measure of profits”—will increase only $1.9 billion, just 3.1 percent, to $63.4 billion.

Any upward kick is nice, of course, but $1.9 billion spread nationwide requires a microscope to see, not trumpets to announce.

Microscopes also might be in order at the nation’s largest ag cooperative, CHS Inc., better known as Cenex Harvest States, to examine its similarly lean year.

In late April, Reuters reported that Seara Ind e Com de Produtos Agropecuarios Ltda, a Brazilian grain trading and farm management company with business ties to CHS, had filed for bankruptcy. Its tanking, sources told the news service, would clip the Minnesota-based farm coop for “around $200 million.”

Even worse, reported Reuters, CHS appeared to be one of the last to know that Seara was sinking; it “was surprised” by Seara’s “decision to seek court protection…”

Wow, anyone watching the store at CHS?

Maybe not. In late August, the $30-billion coop again made headlines when it filed suit in federal court against Boersen Farms, Inc., a massive Michigan farming operation that had borrowed “more than $145.3 million” from CHS Capital LLC, a CHS subsidiary.

Boersen Farms, explained DTN, an electronic news service, grew out of the crack-up of another giant Michigan farm, Stamp Farms LLC when it “bought the bulk” of Stamp Farms’ “land-lease agreements and other assets in what was considered one the largest farm bankruptcies ever in 2013…”

Four years later, however, Boersen appears well on its way to where Stamp once was. On Aug. 23, CHS began collection proceedings on its multi-million dollar loan, noting that Boersen Farms consisted of “approximately 25,000 acres of corn and 58,000 acres of soybeans” in about 800 parcels scattered throughout 26 Michigan counties.

Outside those mind-boggling numbers—a $145 million loan to an 83,000-acre farm—an even more mind-boggling question looms: Who at CHS thought loaning $145 million to an 83,000-acre, corn and soybean farm was a wise investment?

If it was long-time CEO Carl Casale, he’s not around to answer any questions. Casale, who spent 26 years at Monsanto before arriving at CHS six years ago, was quietly replaced in May, a month after CHS’s Brazilian losses became public. If it was CHS Board Chairman David Bielenberg, he’s gone, too, having resigned two weeks after Casale left.

That leaves two, new and hopefully chastened, bosses to find out what happened. It also leaves the coop’s farmers and ranchers to pick up the tab.

Little wonder there’s more and more money in food and less and less cash in growing it: profits run uphill to those getting paid, losses run downhill to those getting nicked.

© 2017 ag comm