Minnesota farmers, “Main Street” debts

Back before the winter holidays, we came across some data that really threw us — a huge jump in shaky debt that Minnesota farmers owed to their local businesses.

The numbers came from University of Minnesota Extension’s farmer-lender mediation program. Its fiscal 2010 report showed rising numbers of requests to negotiate debts that farmers couldn’t pay on time.


Given the recession and how hard it’s hit livestock producers especially, a nine percent jump wasn’t a shock.

Digging into the data, though, a whole different story emerged.

The value of debt addressed in mediation nearly doubled year over year from $322 million to $624 million.

Most surprising: The biggest percentage jump came in the “Main Street Suppliers and Small Businesses” category. That has implications for small town Minnesota businesses as well as farmers.

It’s shocking, too, because fiscal 2008 showed only $9.5 million mediated in that category and $16 million in 2009. By fiscal 2010, the past due farmer IOUs to Main Street and small town businesses in Minnesota ballooned to $173 million.

These debts are for things like repairs, feed, fuel, veterinary services, seed and supplies, the U Extension says. Check out the extension group chart (click on the chart for a larger view).


There are real implications here for small town Minnesota businesses as well as farmers. Mediation means the debt is in some jeopardy of not being paid. You can find good definitions and specific explanations here.

We’ve talked a lot about the struggles of those in the Twin Cities economy. Maybe we need to have a deeper discussion about how long it will take rural Minnesota to see a real recovery out of the Great Recession.

“It’s sort of a split ag economy out there,” Extension economist Brian Buhr told us when we asked about the data in late November.

“Most of the crop side of the world — corn, soybeans, wheat — has been doing pretty well. The side with really difficult times the last three or four years has been dairy and swine.”

The financial woes of those livestock producers are turning up in in problem debt owed to Main Street vendors.

Demand for grain and ethanol are driving the woes for livestock producers. Grain prices have surged the past few years and that’s bad news for livestock producers seeing the costs of feeding their herds rise faster than the animals’ value.

Overall, the ag picture doesn’t look all that bad but livestock’s really been hit, Buhr added. The economy has “sort of decoupled the fortunes of grains and livestock.”

It’s also apparently put a big hurt on the lenders and small businesses who’ve extended credit and are owed money.

We’re hoping to dig deeper into this issue in future posts. It’s not clear from the data we’ve seen if the problem “Main Street” debt is concentrated in any particular county or region of Minnesota.

Help us build on this initial bit of reporting. Tell us what you’re seeing in your part of Minnesota, especially if you’re a farmer or a small business person who’s been part of the Extension mediation program.

Post something below or contact us directly at MinnEcon.

1/20 UPDATE: Dick Senese, associate dean with University of Minnesota Extension, sent us some additional thoughts on the jump in troubled debt owed by farmers to Main Street businesses.

In times of tight credit, Main Street Businesses do often decide to increase the amount of debt that they carry. This is unexpected overhead for Main Street, and it demonstrates the commitment that rural businesses often have to their community and its economy.

As in all business risks, this can result in both profit or loss. In mediation, the goal is to get everyone paid if at all possible when that debt goes bad.

The degree to which the debt is past due is very specific to the lender.

The law says that creditors with a secured debt of more than $5,000 against an agricultural property must offer Farmer-Lender Mediation before proceeding with foreclosure, repossession, cancellation of contract, or collection of judgment. The point at which lenders pursue that would depend upon their agreements and debt tolerance.


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  • James Anderson

    Finally someone hits the mark (or at least gets much closer to the mark). You are connecting FLM to Community Vitality. The Corn/Soybean Farmer helps but does not effect the local economy as much as the Livestock sector. Can we raise the Livestock, Sustainable Ag, Organic, etc sectors as well to help save the small town Grocer, Veterinarian, Gas station, Elementary School.