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.
Investing.com– Gold prices rose slightly in Asian trade on Thursday, but were nursing a tumble from record highs as anxiety over the U.S. election and a shifting outlook for interest rates favored the dollar.
But despite Wednesday’s losses, the yellow metal was still trading higher for the week, with heightened safe haven expected to keep gold prices underpinned in the coming days.
rose 0.3% to $2,724.70 an ounce, while expiring in December rose 0.3% to $2,737.15 an ounce by 00:23 ET (04:23 GMT). Spot prices hit a record high of $2,758.53 an ounce earlier this week.
Gold remains underpinned by safe haven demand
The yellow metal still retained most of its gains this week as safe haven demand remained high in the face of a tight U.S. presidential election and heightened tensions in the Middle East.
Israeli officials presented harsh rhetoric against Iran on Wednesday, raising concerns that an Israeli strike against Tehran will cause a dire escalation in the war. Israel also kept up its offensives against Hamas and Hezbollah.
In the U.S., Republican nominee Donald Trump was seen gaining an edge over Vice President Kamala Harris in the upcoming election, which is less than two weeks away.
But markets still expect a hotly contested race, keeping uncertainty high over the future of U.S. politics.
Increased safe haven demand kept traders largely biased towards gold and other precious metals, also helping them weather strength in the dollar, as the greenback benefited from growing expectations that interest rates will fall at a slower pace.
Other precious metals were positive on Thursday and were also sitting on gains this week. rose 0.7% to $1,037.80 an ounce, while rose 0.6% to $34.050 an ounce.
Copper prices rise with PMIs in focus
Among industrial metals, copper prices rose on Thursday with focus turning to upcoming purchasing managers index readings from the and .
Benchmark on the London Metal Exchange rose 0.7% to $9,581.50 a ton, while December rose 0.7% to $4.3637 a pound.
Both contracts were nursing losses this week as traders held out for more cues on stimulus in top importer China. A meeting of the country’s National People’s Congress is set to take place later this month, with the government expected to then decide on plans for more fiscal spending.
LONDON (Reuters) -Oil prices were broadly stable on Thursday as uncertainty around conflict in the Middle East and reports of North Korean troops ready to help Russia in Ukraine kept traders on edge ahead of the U.S. presidential election.
futures were up 29 cents, or 0.4%, at $75.25 a barrel by 1157 GMT. U.S. West Texas Intermediate crude futures rose 33 cents, or 0.5%, to $71.10.
Oil prices have gained about 3% this week after shedding more than 7% last week on a perceived calming of Middle East tensions and concerns of oversupply and weak demand.
“The opposing forces of economic anxiety, loose oil balance and potential war-related supply disruptions will ensure that no clear oil price direction emerges in the immediate future whilst the risk remains skewed to the downside in the medium term,” said Tamas Varga of oil broker PVM.
On Wednesday the U.S. said for the first time that it had seen evidence North Korea has sent 3,000 troops to Russia for possible deployment in Ukraine, a move that could mark significant escalation in Russia’s war against its neighbour.
In the Middle East, an exchange of heavy fire between Israel and Hezbollah heightened supply concerns. Israeli strikes were also reported to have hit the Syrian capital Damascus early on Thursday.
Washington, meanwhile, continues to push for peace between Israel and Iran-backed groups Hezbollah and Hamas before the U.S. presidential election on Nov. 5, which could alter U.S. Middle East and oil policy.
“Trump is leading over (Kamala) Harris based on current data from betting markets and Trump has proposed making the U.S. a major oil supplier,” said OANDA senior market analyst Kelvin Wong, adding that such a move could depress prices.
While betting markets put Trump ahead, other polls show the result is too close to call.
Investing.com– Oil prices rose Thursday after Israel escalated its rhetoric against Iran, raising the possibility of a hit to supply from this oil-rich region.
At 08:25 ET (12:25 GMT), rose 0.6% to $75.44 a barrel, while rose 0.7% to $71.26 a barrel.
Israeli defense minister touts Iran strike
Traders were positioning for an escalation in the Middle East conflict after Israeli Defence Minister Yoav Gallant told air force crews that the world would understand Israel’s strength after striking Iran.
His comments were made amid growing anticipation of a strike against Iran in retaliation for an October 1 attack, which was Tehran’s second major attack on Israel in six months.
Fears of an escalation in the conflict have been a key driver of oil prices in recent months, with traders attaching a risk premium to crude on fears that Israel could attack Iran’s oil and nuclear infrastructure.
Israel also ramped up its offensive against Hamas and Hezbollah this week, prompting retaliation from the two military groups.
The escalation in the conflict comes despite a bigger push from the U.S. to broker peace in the Middle East before the Nov. 5 presidential election.
PMIs in focus
Crude prices were nursing two weeks of steep losses amid heightened concerns over slowing demand.
These concerns were added to after data showed that eurozone business activity remained in contractionary territory, as demand from both home and abroad fell despite firms barely increasing their prices.
The preliminary composite eurozone Purchasing Managers’ Index, compiled by S&P Global, nudged up to 49.7 in October from September’s 49.6 but remained below the 50 mark separating growth from contraction for a second straight month.
Business activity in Germany, Europe’s largest economy, shrank in October but less steeply than in September, while the dominant services sector in France contracted at its sharpest rate in seven months, dragged down by sluggish new orders.
The PMI for Britain, outside the European Union, showed businesses reported their slowest growth in 11 months.
, due later in the session, is expected to be buoyed by strength in the services sector.
Any more signs of resilience in the U.S. economy are likely to further bets on a slower pace of interest rate cuts by the Federal Reserve – a notion that has dented oil markets in recent weeks.
Crude to fall further – Macquarie
prices are on a three-month losing streak and are likely to continue to stumble through year end, analysts at Macquarie said, as weak supply and demand fundamentals will likely continue to take shine of any boost from Middle East geopolitical pressure or stimulus from China.
“[W]e anticipate a decrease in crude price through YE24 as bearish fundamentals outweigh geopolitical factors,” Macquarie analysts said in a recent note.
The supply and demand outlook is at the heart of the weak fundamentals pressuring oil prices. The analysts expect a pick up in growth in the fourth quarter, driven by US production growth and the return of OPEC+ barrels at a time when oil demand growth trends below 1M barrels per day.
U.S. inventory data showed a bigger-than-expected build in , according to official data released on Wednesday.
(Ambar Warrick contributed to this article.)
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