Ag producers navigating labor shortage, financial stress

Editor’s Note: BankBeat spoke with five Midwest ag bankers in March, including Darla Sikora, Dave Yahnke, Nate Franzén, Heather Malcolm and Gary Mueller. This portion of the interviews is the third and final part of the feature in this month’s BankBeat magazine. The first and second parts were posted to BankBeat.biz on May 1 and May 8, respectively.  

CONTRIBUTORS

Darla Sikora

SVP – Agricultural Banking

Citizens State Bank of Loyal

Loyal, Wisconsin

Dave Yahnke

Senior Vice President/Chief Credit Officer

Iowa Trust and Savings Bank

Centerville, Iowa

Nate Franzén

President – Ag Banking Division

First Dakota National Bank

Yankton, South Dakota

Heather Malcolm

Vice President of Ag Banking

Bank of the Rockies

Livingston, Montana

Gary Mueller

Vice President/Farm Manager & Trust Officer

Havana National Bank

Havana, Illinois

Have your local producers experienced any negative impacts from a shortage of workers?

A stable, dependable, and affordable workforce has always been a major focus of attention for my dairy farm customers here in Wisconsin. The more recent shortage of workers increases the urgency for producers to competitively retain and attract staff. To another degree, the shortage of workers in allied businesses has contributed to increasing expenses at the farm level. For example, because other businesses the farms depend on have seen a rise in their cost of labor, the price of the products or services the farm purchases from those businesses correspondingly increases as well.

— Darla Sikora

Ag labor can be challenging in any environment, but certainly as tight as the labor force is today, it is a challenge. Immigration plays into that, too, depending on what segment of agriculture we’re talking about. Dairy is a great example. It has significant labor needs, depending on the size and scale of the operation, and a lot of that labor can be immigrant labor. Most of our producers seem to be managing it OK and finding the labor they need. Generally, the labor economy has probably gotten a little worse since the pandemic and is more of a challenge than ever. It’s improved a little bit now that we’re putting a little more distance between us and the pandemic. But it’s still really tight, especially in rural areas.

— Nate Franzén

There’s a shortage of available labor at times, especially during planting and harvest seasons, but in our region in general, it’s just difficult to find quality labor at a reasonable price. The manufacturers in the region continue to struggle to find help. Labor’s a little bit of a problem for everybody, but it’s been that way for a while now.

— Dave Yahnke

Operations are perpetually looking for a quality ranch hand with a good work ethic, integrity and a knowledge of production agriculture. The shortage of workers is seen more in the agribusinesses. There is a shortage of staffing at the parts store, feed store, mechanics, etc. Operations are put in a time crunch when it takes longer to be helped or to have a piece of machinery repaired.

— Heather Malcolm

Yes, in rural areas it’s difficult trying to find somebody who is available or willing to put in the hours it takes in the farm economy. It’s very rewarding but you have to find people with the right mindset. Usually someone who was born and raised in the rural community, they’re used to it, but they don’t always want to stick around and it can be hard to convince people who didn’t grow up with it to try it. We’re seeing some retired parents who are coming back to drive tractors in the spring planting and fall harvesting.

The big thing I’m hearing about from my farmers is there’s a shortage of truck drivers. Because of licensing requirements here in Illinois, it’s hard to find drivers who can haul fuel or grain. Sometimes we lose hired workers to the fertilizer dealers because they’re more seasonal and more of a 9 to 5 job, and because they’re busy at the same times as the farm, that’s where a squeeze really comes in.

— Gary Mueller

Are there other sources of concern you’re hearing about from your ag customers? What bright spots are you seeing?

Financial stress is currently a key factor on many farms. To better manage through the present circumstances, I am seeing a more intense focus on both productivity and cost control. Farms are continually seeking ways to enhance production through improvements in herd health, nutrition programs, cow comfort and raising of replacement cattle. There is more focus on soils, agronomy, and tillage and cropping methods. At the same time, all expenses are scrutinized in efforts to help maximize returns. More producers are becoming involved in milk marketing programs such as DRP or LGM-Dairy.

Additional bright spots are the current higher beef prices, decent cull prices and higher prices for calves, which help offset the tight milk margins. Agriculture has always been a cyclical business and the resourcefulness of our ag producers has them further sharpening their skills, focusing on efficiencies, and managing risk accordingly to help them through this down cycle.

— Darla Sikora

Farms and ranches in general are in pretty good shape today financially across the board. We’re positioned well to handle some turbulence, to handle the higher interest rates for a period of time. Producers in general have done well the last few years, and most are in pretty good shape. That doesn’t apply to all segments, of course. The dairy market was tight last year, and the swine industry had a really difficult last 12 to 18 months. They’re feeling stressed. On the other side, beef cattle have been very strong, grain farming has been really strong the last few years. Like always in ag, it’s rare that everybody’s doing well at the same time, but most producers are positioned pretty well to handle a little bit of turbulence.

— Nate Franzén

For bright spots, USDA has been very helpful with trying to improve broadband coverage in a lot of the rural areas in the state. That’s really been a positive.

Even with the challenges that we’re facing right now, we’ve had a pretty good stint in agriculture recently. So most balance sheets are stronger than they were going into that period. We’re in a position to be more resilient and work through a period with somewhat low commodity prices. We certainly don’t look forward to that, but I think we’re in a position to weather that storm as long as it doesn’t last too long. Cash flows are going to be challenged; liquidity burn is going to be a likelihood this year, but most guys are in a position where they can survive that without too much trouble, I think, at least for one year. 

I have a lot of customers who are anticipating it’s going to be longer than that. A lot of my farm customers are pretty cautious right now and not doing anything too aggressive until they can see what the future looks like. And obviously in an election year, that’s probably not uncommon. We certainly need a political environment that is less partisan and more willing to reach across the aisle and find solutions that are good for everybody.

— Dave Yahnke

Along with the drought concerns, there are concerns about grasshoppers. The grasshoppers, combined with a drought, are large concerns for our producers. Another concern in the countryside is the political uncertainty given the election year. Montana has a lot of state and federal land which is leased to the local producers. Depending upon who is elected, will those political views align with keeping these leases available to the local producers? The delay in a Farm Bill is also a concern.

— Heather Malcolm

Concerns are the input costs. Government trade agreements are also concerning because it’s going to cost the farmers income. It’s the nonfarm news that sometimes drives the markets instead of supply and demand. You can try to anticipate what your supply/demand is, but sometimes it’s China that’s not importing grain or they change an import/export requirement or what’s going on in Russia and Ukraine.

Bright spots: It’s springtime, which always brings with it sunshine and smiles. Planters are sitting at the edge of the field like jets on the runway. April 5 is early planting here, and everybody feels good here when they can get in the field and the weather cooperates.

We’re trying to be efficient, we’re trying to maximize the markets, we’re trying to work smarter — not harder — and utilize chemicals and fertilizers in the best ways. We try to find ways to reduce risk and maximize income.

— Gary Mueller