The seeds of renewal grow 7 feet high in the fields surrounding this historic community between Peoria and the Quad Cities, a prominent example of industrial decay in the heartland now getting a boost from record prosperity on the farm.
A bumper crop, strong food demand, booming bio-fuel production and generous government support have brought about a banner year in the Corn Belt, and this rural city is enjoying some of the best conditions anywhere. Even the weather has cooperated lately, putting the harvest into high gear.
Veteran Galesburg farmer Jim Purlee has had all four of his combines traversing the 9,000 acres he oversees with several partners, while the ethanol plant he helped launch three years ago moved ahead with an expansion project and paid out dividends.
As local manufacturing has declined, “Agriculture has become more of the star,” Purlee said. “I just deposited a couple of checks, actually. It’s pretty good times.”
Average farm income nationwide has soared past $80,000 per household, a record level that enables farmers to pay down debt, invest in equipment and bid up the price of crop land, which is on a tear unaffected by the credit crunch and slowdown in residential housing markets.
“It has not gone backward for 20 years,” said Don McCabe, president of the Soy Capital Ag Services farm brokerage, who expects additional appreciation ahead.
Of course, farmers know from painful experience that good times can be fleeting. In recent months, ethanol prices have plunged amid a supply glut, and corn prices have retreated slightly from their peak early in the year. The last time Midwest farm conditions were this strong, back in 1996, lean years quickly followed.
On top of those concerns, the big money pouring into farm country has encouraged critics of federal subsidy programs, setting the stage for a potential showdown in Congress this fall.
Would-be reformers such as U.S. Rep. Ron Kind (D-Wis.), say change is required. Farmers should get aid “when they need it, not when they don’t,” he said. As it stands, taxpayer money goes to wealthy operators in the midst of plenty, through so-called direct-payment bonus checks that arrive no matter how favorable the conditions.
“You’d think they would start to blush,” Kind said.
A House Farm Bill approved this summer over a White House veto threat faces a rough road in the Senate. It would extend those billions of dollars in direct payments to crop growers over the next five years, while imposing restrictions on a tiny fraction of operators whose annual incomes top $1 million. Combined with multibillion-dollar subsidies for corn-based ethanol and international pressure to curb trade-distorting support programs, the federal aid for farmers has led a host of lawmakers to join Kind in pressing for cutbacks.
All the attention being paid to the farm-income boom will undermine “the effort to get a good farm bill,” lamented Tom Buis, president of the National Farmers Union. “Profit should not be a dirty word for farmers.”
In Galesburg, battered by the shutdown of its giant Maytag refrigerator plant and other top local employers in recent years, profits on the farm come as welcome news. Chamber of Commerce President Bob Maus reckons that fully one-third of the community’s commercial revenue stems from agriculture, and just about any uptick in the rural economy can only help.
Expansion of a Burlington Northern Santa Fe Railway yard and nearby Deere and Caterpillar plants have helped, but most of the area’s nascent recovery depends on smaller additions, such as the farmer-funded ethanol plant going up in neighboring Galva.
“There’s no more Maytags out there,” Maus said. “Agriculture is the cornerstone of the economy.”
In surrounding Knox County, unemployment is down and the labor force is growing for the first time in years, noted Chris Merrett, a Western Illinois University professor who heads the Illinois Institute of Rural Affairs. Even so, farming typically provides less of a boost to spending and commerce than high-paying factory jobs, he said.
George Inness is not so sure. A farmer and proprietor of Inness Farm Supply on the outskirts of Galesburg, he has witnessed first-hand his neighbors investing heavily in their operations.
“Farmers have a habit of spending more than we’re making,” the 70-year-old Inness said with a wry smile. “If we make a lot, we spend a lot.”
Demand is brisk for the herbicides, fertilizer and seed Inness sells from a 1940s-era Quonset hut at his sprawling retail operation, and it could get better.
“We might be experiencing the best crop ever in west central Illinois,” he said. “The yields are good, the quality is good, and the prices are good.”
High prices, in particular, encourage farmers to invest in options such as a mid-summer fungicide application, which pays for itself only when per-bushel profit remains high. Nearly every farm investment, from land to equipment, depends on the same cost-benefit analysis. And, so far, the spending has been justified, Inness said as he inspected a new grain hopper and handling system he is installing at his store, one of many new storage facilities dotting the landscape here this fall.
Farm investments can be substantial. Purlee got a heartening response from the local farmers he tapped for mid-six-figure stakes in the new Galva ethanol plant set to open late next year, his second big ethanol project, he said. The recent supply glut and sharp decline in ethanol profit margins presents no deterrent for long-term-minded investors: “They see it like buying another farm,” Purlee said.
The big numbers bring additional risk, said Mike Boehlje, a Purdue University agricultural economist. Since operators this year won’t be getting extra government subsidies that kick in when commodity prices are low, they bear a greater share of the potential downside, he pointed out. Rising costs for rent, fertilizer, seed, equipment and fuel raise the ante, too, and the weak dollar makes imports costlier.
Low debt levels and the rise in farmland values help offset the risk, boosting the net worth of those who own property. Net farm equity, for instance, is shooting up $200 billion per year, while the average income for farm households of $81,500 surpasses the same figure for U.S. households overall by tens of thousands of dollars.
Those numbers can be misleading. The farm-household figure includes off-farm income, too, for instance. And livestock farmers beset with higher feed costs have operated in much tougher conditions than their row-crop brethren.
As every farmer knows, success on the land tends to come and go. Farm income will be strong again next year, predicts Terry Francl, senior economist at the American Farm Bureau. But after that, who knows?
Indeed, grain prices shot up only a year ago after a long period of relative sluggishness. In 2009 and 2010, higher expenses on the farm “will be felt,” Francl warned.
“People might get the impression this is going to go on year after year,” he said. “Two years down the road, it could be entirely different.”
Amen, said Sue Purlee, wife of the Galesburg farmer.
“People forget so quickly that farmers have been dealing with corn at $2,” she said. “Now they’re finally getting a break, and people are jumping all over them.”
Whatever happens in the marketplace or Capitol Hill, the farmers of Galesburg will persevere, Inness vowed.
“We’re eternal optimists out here.”
———-
gburns@tribune.com
