Commodities

Farmers’ financial pain spills from Kansas wheat fields to Main Streets

Published

4 months ago

June 18, 2024

By Heather Schlitz

SMITH CENTER, Kansas (Reuters) – In a tiny town surrounded by miles of rippling wheat fields, Brady Peterson’s restaurant sits nearly empty during what should be a Saturday lunch rush. Normally, Pete’s would be filled with farmers ordering fried chicken and cheeseburgers, but as farm income thins, so does Peterson’s business.

Sluggish sales have slashed his income so much that he can’t afford to run his home air conditioner during the baking Kansas summers or pay for a suit to wear to a close friend’s funeral.

“I ended up wearing a T-shirt I wear to work and a nice pair of jeans,” Peterson said.

As U.S. farm incomes are forecast to plunge in 2024 due to a sharp reversal in commodity crop prices, less government support and high borrowing and labor costs, farmers’ economic pain is spreading from the fields to Main Street.

The situation in U.S. prairie states is particularly severe. Farmers here are facing the worst economic situation in over a decade, and small cities are at risk of becoming ghost towns, sources told Reuters.

Two years of severe drought followed by national farm economic problems including inflated seed and chemical costs, higher interest rates and lower crop prices have sapped money from the surrounding communities, ten business owners, two chambers of commerce directors, two economists and three farmers in Kansas told Reuters.

Business owners noted anywhere from a 20% to 30% decline in revenue compared to the previous year. Nationally, farm income is forecast to fall 25% from last year according to the U.S. Agriculture Department. That would be the largest annual decrease in dollar terms.

“We’re a farming community, and the farmers just don’t have the money to spend,” Megan Jensen, owner of Meg’s Grooming and Pet Salon in Concordia, Kansas, said through tears. “Every penny I own is invested in this. If I fail, I’m homeless.”

U.S. farm income hit a record high in 2022, before a steep drop in commodity crop prices due to large harvests in South America and waning demand from importers and meatpackers upended U.S. farmers’ fortunes. Corn, soy and wheat futures are trading around three-year lows.

Farm income in Kansas and other prairie states has fallen even more and is forecast to be the lowest since at least 2010 this year, according to U.S. Department of Agriculture data.

Kansas is the biggest U.S. wheat-producing state, and economists say the nationwide downturn has particularly hurt regions that produce the grain as demand for U.S. wheat shrinks.

FEAST OR FAMINE

The mayor of Smith Center, Bryce Wiehl, is a tanned farmer with a scraggly white beard and gruff voice. Over fried chicken at Pete’s, he described the foreclosures, the town of 1,500’s dwindling population and downward economic spiral.

“It’s hard to find an industry that doesn’t rely on farm product prices. It has a dramatic impact on the community,” he said.

Rural downtowns in Kansas are dotted with shuttered businesses, and residents noted the streets are emptier than ever.

“Things are incredibly volatile here. It’s either feast or famine,” said Shane Wyatt, owner of a gun shop in rural Norton, Kansas. “I wouldn’t quite call it a ghost town, but you can really see the impact of the low prices.”

While the broader U.S. economy is growing strong, researchers at Creighton University reported in May that the nation’s rural Main Street economy in the Midwest and Great Plains had fallen as farm equipment sales slumped and agricultural land prices dropped for the first time in five years.

Russ Erbert, a jeweler in Norton, Kansas, delights in showing young couples how a good diamond will sparkle even under dim light and seeing a newly engaged woman smile when she sees her ring. During an economic downturn in a small farm town, these scenes happen less often.

“Some of the young farm kids are waiting until the following year to get married,” he said. “They’re budget conscious.”

When customers do trickle into businesses, they often buy less expensive items: pocketknives instead of firearms at a gun shop and modest gems over two-carat diamonds at a jewelry store. At pawn shops, residents are pawning more possessions for quick cash, and fewer return to buy them back.

High inflation and interest rates hit farmers particularly hard as they depend on short-term, variable-rate loans to pay for everything from seeds and fertilizer to livestock and machinery with the goal of paying them back after the harvest.

Lingering inflation is also pressuring business owners, though they’re reluctant to raise prices in a community where even a minute price hike elicits complaints and may steer customers away.

“I feel like I have to work three times harder to get the same amount of money,” said Tammy Britt, the owner of a soda fountain and gift shop in Concordia.

Some said they were suffering health problems from the constant pressure and unrelenting workload.

“There’s days (sic) where the stress mounts and you want to pull your hair out. Sometimes you got to run to the back of the building and scream a little bit and come back in,” restaurant owner Peterson said. “But you’ve got to be optimistic.

Commodities

Oil heads for weekly gain as Middle East keeps market on edge

Published

1 hour ago

October 25, 2024

By Robert Harvey

LONDON (Reuters) -Oil prices were heading for a weekly gain of almost 3% as Friday’s prices ticked higher, with traders kept on edge by simmering tensions in the Middle East ahead of a planned resumption in Gaza ceasefire talks in the coming days.

futures rose 76 cents, or 1.02%, to $75.14 a barrel by 1214 GMT. U.S. West Texas Intermediate crude was up 77 cents, or 1.1%, at $70.96.

Both benchmarks have fluctuated this week, rising on Monday and Tuesday before falling on Wednesday and Thursday, largely on expectations of heightened or reduced Middle East risk.

“Uncertainty makes investors understandably and justifiably pragmatic,” said PVM analyst John Evans. “Fears of supply disruptions subsided but, rest assured, they have not gone AWOL.”

Investors continue to await Israel’s response to an Iranian missile attack on Oct. 1. A response could involve strikes on Tehran’s oil infrastructure, though media reports last week said Israel would strike military rather than nuclear or oil targets.

U.S. and Israeli officials are set to restart talks for a ceasefire and the release of hostages in Gaza in the coming days.

U.S. Secretary of State Antony Blinken said on Thursday that the United States does not want a protracted Israeli campaign in Lebanon, while France has called for a ceasefire and focus on diplomacy.

Investors are also seeking more clarity on China’s stimulus policies, though analysts do not expect such measures to provide a major boost to oil demand.

Goldman Sachs on Thursday left its oil price forecasts unchanged at between $70 and $85 a barrel for Brent in 2025, expecting the impact from any Chinese stimulus to be modest relative to bigger drivers such as Middle East oil supply.

Bank of America is forecasting Brent crude to average $75 a barrel in 2025 without any rolling back of OPEC+ production cuts into next year, it said in a note on Friday.

“Market participants remain fundamentally torn between supply risks due to the tense situation in the Middle East and demand concerns,” Commerzbank (ETR:) analysts said.

Commodities

New Permian oil pipelines unlikely to be built, say top operators

Published

1 hour ago

October 25, 2024

By Arathy Somasekhar

HOUSTON (Reuters) -Top executives of two U.S. energy pipeline operators on Thursday ruled out building new lines to move volumes out of the Permian shale field in West Texas because of tepid volume growth and difficulties constructing new lines.

A wave of consolidation in the top U.S. shale field has concentrated output in the hands of companies that are promising to restrain output so as not to crash prices by over-producing. Pipeline firms also have embraced acquisitions over new construction.

Enterprise Products Partners (NYSE:) co-CEO Jim Teague said at a Houston energy conference his firm is not considering a new oil pipeline out of West Texas. The CEO of rival operator Plains All American Pipeline said at the same event companies are more likely to optimize existing rather than build new lines.

Enbridge (NYSE:) will add up to 120,000 barrels per day (bpd) to its Gray Oak oil pipeline by 2026, an example of expanding capacity on an existing pipeline. Enterprise has said it could convert a liquids pipeline to carry crude.

Shale pipeline operator EPIC Consolidated Operations is weighing expanding a Permian to south Texas line by about 300,000 bpd.

The expansion is a “when, not an if,” said EPIC CEO Brian Freed.

PRICE NO LONGER INCENTIVIZES DRILLERS

The executives said Permian shale producers are not likely to return to their era of fast-growth that prompted the construction of new oil lines last decade.

Drillers remain disciplined in their spending for new volumes and do not look to drill and grow production even if prices jump from current levels, Chiang added.

“A range of roughly of $60 to $90 (per barrel) doesn’t change their plans too much,” he said.

Output from the Permian basin in the next few years could rise about 300,000 bpd, he said, largely in line with the latest government estimate.

“Most of the producers out of the Permian, because of the consolidation, are taking a more measured pace,” EPIC’s Freed said.

DEEPWATER EXPORT PROJECTS LAG

Enterprise’ Teague also said that his company continues to advance its proposed deepwater oil export project, Sea Port Oil Terminal (SPOT), but “nobody wants to be (the) first” customer to sign up.

Multi-year regulatory delays, a loss of commercial backers and slowing U.S. shale oil production growth has SPOT and three rival offshore oil-export projects struggling.

A change in crude flows as many Western nations banned imports of Russian crude after the country’s invasion of Ukraine, pushing Russian oil to flow to Asia, also has undercut the outlook for U.S. deepwater export projects that can load supertanker directly.

“Things have changed, but my gut feeling is that we’ll be able to get SPOT across the finish line,” Teague said while speaking at an RBN Energy conference in Houston.

However, Plain’s Chiang said “the jury is out on SPOT,” saying it while it makes a lot of sense on paper, existing export contracts and systems could limit availability of customers.

Commodities

Gold prices fall but record highs remain in sight

Published

1 hour ago

October 25, 2024

Investing.com– Gold prices fell slightly in Asian trade on Friday, remaining in sight of record highs hit earlier this week as anticipation of a tight U.S. presidential election kept traders biased towards safe havens.

While the yellow metal did notch new highs, it struggled to hold its peaks amid pressure from a stronger dollar and higher Treasury yields. Still, gold was set for mild weekly gains in its third consecutive week of gains.

Safe haven demand was also boosted by persistent concerns over worsening geopolitical conditions in the Middle East.

fell 0.4% to $2,724.55 an ounce, while expiring in December fell 0.4% to $2,737.05 an ounce by 00:30 ET (04:30 GMT). Spot gold was set to rise about 0.2% this week after hitting a record high of $2,758.53 an ounce.

Election, M.East jitters keep gold underpinned.

Safe haven demand for gold was buoyed by uncertainty over the U.S. election, with less than two weeks left to the ballot.

Republican nominee Donald Trump was seen gaining an edge over Vice President Kamala Harris, according to recent polls and prediction markets.

But with the race still too tight to call, markets remained largely risk-averse, fueling demand for gold.

Increased tensions in the Middle East also dented risk appetite, after Israel presented a harsh rhetoric against Iran this week. Markets are awaiting a retaliatory strike by Israel against Tehran over an early-October attack.

A particular point of concern is that Israel will attack Iran’s oil and nuclear facilities, which could mark a dire escalation in the conflict.

The conflict between Israel and Hamas and Hezbollah also showed little signs of de escalation, despite persistent U.S. attempts to broker peace.

Other precious metals fell on Friday. sank 1.5% to $1,022.95 an ounce and were trading flat for the week, while fell 0.5% to $33.635 an ounce, but were up 1.2% this week.

Copper falls, set for fourth week of losses

Among industrial metals, copper prices fell on Friday and were headed for a fourth week in red as pressure from the dollar and doubts over Chinese stimulus measures pressured the red metal.

Benchmark on the London Metal Exchange fell 0.3% to $9,535.50 a ton, while December fell 0.5% to $4.3457 a pound. Both contracts were down about 1% this week.

A meeting of China’s National People’s Congress, which was supposed to provide more cues on fiscal stimulus, appeared to be delayed to November from late-October.

China- the world’s biggest copper importer- had announced a slew of major stimulus measures over the past month. But the measures did little to improve sentiment, as traders sought more details on the timing and scale of the planned measures.