Farm Community Eyeing Repercussions Of Dealer Contracts (UPDATED)

A letter sent late last week by Speaker of the House Davy Carter tipped off the general public to notable panic that has enveloped a portion of Arkansas’ agricultural community.

On Friday, Carter asked House Agriculture, Forestry and Economic Development Committee chairman Rep. Matthew Shepherd (R-El Dorado) to convene his committee to explore potential solutions to a brewing financial crisis rippling through the Delta farmland.

“Recently it has come to my attention that some of our Arkansas farmers may have been left holding breached commodity contracts executed by one or more commodity brokers in Arkansas. If this holds true, literally tens of millions of hard earned dollars that our farm families were expecting will have disappeared into the heavens,” Carter wrote.

The controversy centers around Turner Grain Merchandising, a commodities dealer located in Brinkley, Arkansas, but could include others. While representatives of the company have not responded to media requests, farmers and state officials have indicated the firm is at the center of the potential financial debacle.

Turner has reportedly not paid or has delayed payments on crops to farmers potentially totaling millions of dollars.

Currently, the state Agriculture Department, the Attorney General’s office and other state and federal elected and appointed officials are probing the situation. Several sources contacted for comment declined, citing their interest in waiting for legal or government documents to be filed to clarify the depth of the situation and to avoid fueling speculation about the problem.

Carter agreed saying his letter’s intent was to initiate review, not harm any financially sound players.

“I would encourage everyone to stay calm as the facts develop,” Carter tells Talk Business & Politics.

A joint meeting of the House and Senate Agriculture, Forestry and Economic Development Committees has been scheduled for Friday at 10 a.m. in Room A of the Big MAC complex on the campus of the state capitol. A meeting agenda has not been posted yet.

ECONOMIC INDICATORS
At a manufacturing press conference in Jonesboro on Tuesday (Aug. 19), Arkansas Economic Development Commission director Grant Tennille said he was only familiar with details of the episode from press reports.

He cautioned that farmers had to have confidence in the system of agriculture and that the potential ripple effects from defaults could not only impact farmers, but other parts of the economy from equipment dealers to grocery stores to banks.

“One thing the world ignores is that farmers bet their entire nest egg on a yearly basis,” he said. “The whole debate is not unsolvable, but it shakes people to their core.”

Several economic reports this summer have indicated that declining crop prices are a source of concern in Arkansas and other farming communities across the Midwest.

In June, the U.S. Bureau of Economic Analysis (BEA) said that personal income fell 0.2% in the first quarter as earnings for Arkansas workers failed to keep pace with inflation and Arkansas farms lost more than $1 billion.

“First-quarter farm earnings declined more than $1 billion in North Dakota, Minnesota, Iowa, Arkansas, and Nebraska,” the BEA report said. “The declines reflect falling crop prices.”

Last month, Creighton University Economist Ernie Goss noted in his regional Rural Mainstreet Index report that farmers in Arkansas and throughout the Midwest are struggling to make ends meet.

“Agriculture commodity prices have plummeted for farmers in our region. The drop has slowed growth in the region according to our survey with prices below break-even for a significant share of agriculture producers,” Goss said. “I expect readings to move even lower as these lower prices spill over into the broader economy in the weeks and months ahead.”

Goss’ monthly index, which surveys bank CEOs in rural communities across the Midwest, also noted that weaker crop prices are definitely taking some of the air out of agriculture land prices and made farmers more cautious about purchasing new equipment.

According to Goss’ monthly index, nearly 32% of the bankers surveyed said crop prices are close to or below the break-even price for farmers. Also, more than four in 10 bankers, or 40.3%, expect loan defaults to climb in the year ahead if crop prices remain at current levels.

UPDATE: Sen. Pryor was also in attendance at the Jonesboro manufacturing event. He said his office is in contact with federal officials.

“Our agricultural producers have a huge impact on our state’s economy. They not only feed and clothe our families, but they employ local workers and support our small businesses. We’ve been talking with concerned Arkansas farmers and the USDA so we can find a solution as soon as possible,” Pryor said. “I’ve called on the USDA for an extension of any of its commodity loans for affected farmers, and I’ve asked them to investigate enforcement action that can be taken with the Grain Inspection, Packers, and Stockyards Administration.”

Agriculture is Arkansas’ largest industry, with more than $8 billion in farm income generated annually. Through direct and indirect products and industries, agriculture accounts for nearly 25% of the state’s economy.