Commodities
Farmers’ financial pain spills from Kansas wheat fields to Main Streets
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.
MOSCOW (Reuters) – Nearly 500,000 metric tons of Russian oil products are trapped on tankers hit by U.S. sanctions, LSEG data showed on Wednesday.
On Jan. 10, new Russia-related sanctions targeted more than 180 vessels and insurance companies, adding to the impact of similar restrictions imposed by United Kingdom (TADAWUL:) and Europe Union.
The vessels under the latest U.S. sanctions include nine tankers that loaded oil products at Russian Baltic and Black Sea ports in December and January.
Four of them – Cup, Aquatica, Turaco and Onyx – are carrying in total around 280,000 tons of fuel oil, destined for India, Turkey and Singapore, LSEG data shows.
Another of the tankers – Ariadne – was loaded in December with about 35,000 tons of naphtha in the Russian Baltic port of Ust-Luga. It is drifting near Egyptian port of Port Said, according to shipping data.
Four other vessels from the sanctions list are carrying in total around 160,000 tons of ultra-low sulphur diesel and gasoil of Russian origin.
One of those cargoes – Pravasi – is discharging at the Brazilian port of Santos. Three other vessels – Symphony, Jupiter and Talisman – are on their way to Turkey, according to LSEG data.
Although there is a transition period, allowing the discharge of cargoes that has already been agreed, traders said concern about penalties has slowed activity.
Since the sanctions were announced, at least 65 oil tankers have dropped anchor at multiple locations, including off the coasts of China and Russia, ship tracking data showed.
By Arunima Kumar
(Reuters) -Oil prices paused their rally on Tuesday, but remained near four-month highs, with the market’s attention focused on the impact of new U.S. sanctions on Russian oil exports to key buyers India and China.
futures slipped 54 cents, or 0.67%, to $80.47 a barrel by 1033 GMT, while U.S. West Texas Intermediate (WTI) crude fell 53 cents, or 0.67% to $78.29 a barrel.
Prices jumped 2% on Monday after the U.S. Treasury Department on Friday imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called “shadow fleet” of tankers.
“With several nations seeking alternative fuel supplies in order to adapt to the sanctions, there may be more advances in store, even if prices correct a bit lower should tomorrow’s U.S. CPI data come in somewhat hotter-than-expected”, said Charalampos Pissouros, senior investment analyst at brokerage XM.
The U.S. producer price index (PPI) will be released today, followed by the consumer price index (CPI) on Wednesday.
A core inflation rise above the 0.2% forecast could lower the likelihood of further Federal Reserve rate cuts, which typically support economic growth and could boost oil demand. [MKTS/GLOB]
While analysts were still expecting a significant price impact on Russian oil supplies from the fresh sanctions, their effect on the physical market could be less pronounced than what the affected volumes might suggest.
ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrel-per-day surplus they had forecast for this year, but said the real impact could be lower.
“The actual reduction in flows will likely be less, as Russia and buyers find ways around these sanctions,” they said in a note.
Nevertheless, analysts expect less of an supply overhang in the market as a result.
“We anticipate that the latest round of sanctions are more likely to move the market closer to balance this year, with less pressure on demand growth to achieve this,” said Panmure Liberum analyst Ashley Kelty.
Uncertainty about demand from major buyer China could blunt the impact of the tighter supply. China’s imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.
By Arathy Somasekhar
HOUSTON (Reuters) – Peru’s niche Bretaña is gaining popularity in the United States, with the first cargo discharging in the U.S. Gulf Coast this month as U.S. refiners seek alternatives for declining Mexican heavy crude.
Bretaña, a rare heavy sweet crude with minimal metals, is produced in the Peruvian side of the Amazon (NASDAQ:) rainforest. It is then barged along the Amazon river and loaded onto larger ships that depart from Brazil.
The vessel Radiant Pride transported about 300,000 barrels of Bretaña from Manaus, on the banks of the Negro river in Brazil, and discharged on Jan. 2 in Houston, ship tracking data from Kpler and LSEG showed.
The cargo was bought by oil major Shell (LON:), a source said. Shell declined to comment.
“Given the drop in heavy sour crude from Mexico to the U.S. Gulf Coast over the last year, we are starting to see new heavy grades being pulled in to backfill this loss – this is a trend we only expect to continue,” said Matt Smith, an analyst at Kpler.
U.S. imports from Mexico fell to their lowest on record in 2024 as the Latin American country’s oil production fell and a larger portion of output remained at home to be refined.
Two cargoes of Peru’s Bretaña, a relatively new entrant into the market since production began in 2018, discharged at the U.S. West Coast last year – one at Marathon Petroleum (NYSE:) and another at PBF Energy (NYSE:) terminals, the Kpler data showed.
Marathon Petroleum declined to comment. PBF Energy did not immediately reply to a request for comment.
PetroTal Corp, the producer of Block 95 where the Bretaña oilfield is located, bought the assets from Canadian producer Gran Tierra Energy (NYSE:) in 2017, and currently produces about 20,000 barrels of oil per day, according to Chief Executive Officer Manuel Zúñiga.
Challenges with transporting the crude via a pipeline operated by Peru’s state oil firm Petroperu led to a brief halt in exports between 2022 and 2024, Zúñiga said.
Petroperu has struggled in recent years to keep the line operational amid spills and social conflict interrupting its flow.
Three cargoes of Bretaña headed to the U.S. West Coast and one to the U.S. East Coast between 2020 and 2022, Kpler data showed.
About 90% of the Bretaña crude produced by PetroTal is exported, and the remaining is transported by barges to Petroperu’s refinery in Iquitos, Zúñiga said.
PetroTal has a contract with Houston-based Novum Energy under which Novum buys the crude for export and arranges its transportation, Zúñiga added.
Novum did not immediately respond to a request for comment.
While PetroTal hopes to increase production, permitting delays as well as reliance on barges are a current limitation, Zúñiga said.
“You need access to the pipeline,” Zúñiga said, adding that the company is working to secure use of the infrastructure.
Petroperu said last year that it would hold negotiations with producers in the Peruvian jungle so that they can use the pipeline with a fair rate to help cover operational costs.
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