A North Dakota farmer wrote me two weeks ago and described thoughtfully how costs for farmland and crop yields are impacting his financial outcome. His points should be considered by others in similar situations, as well as by lenders, insurers, counselors, and anyone involved in the management of risks associated with agriculture.

The North Dakota farmer lives in an area where corn and soybeans were introduced about 20 years ago as plant genetics advanced and as climate shifts northward facilitated production of these crops in his area. Prior to then, land suitable for farming was purchased for $100-300 per acre and planted mostly to small grains and hay. Most terrain was rangeland.

When this farmer and others with little or no debts converted from ranching and and/or raising small grains and hay to planting corn and soybeans, they earned significant profits, even though their per-acre yields were well below the U.S. averages for corn and soybeans. Competition for farmland increased and purchase prices skyrocketed to $3,000 per acre.

When high prices for crops and livestock dissipated after 2014, those who had made significant purchases, such as land and equipment, were squeezed financially.

The North Dakota farmer pointed out that farmers with low average crop yields, and low established USDA historical yields of corn and soybeans, have mostly the same costs for their inputs as producers who reap higher yields per acre for the same crops. Costs for seed, fertilizer, herbicide, machinery, storage, transportation, crop insurance, and labor are pretty much the same everywhere.

Farmers who obtain low yields for their crops and have substantial farmland mortgage or rent obligations will likely end the 2019 crop year with a deficit, even if crop insurance payments are factored in.

What would change the outcomes for farmers in this circumstance? Significantly higher market prices would certainly make a positive difference, and so would lower costs for farming inputs. The prospects for either or both circumstance are slim currently.

Tariffs are reducing prices for many U.S. commodities, as well as Trump era supplements when grain purchasers take the supplements into account by lowering their bids for federally subsidized grains. Global supplies of grains, meat and dairy products are just too large and poor countries that need nutritious food can’t afford imported foods.

Meanwhile, the costs for seed, fertilizer, herbicide, and most inputs have slid downward only a little. Costs for fuel, rent of farmland, and machinery have declined a bit more. A few costs, such as interest on farm operating loans, have risen.

Great uncertainty exists not only in the region where the North Dakota farmer who brought this to my attention resides, but in many parts of the US where agricultural production is marginal.

Although not nearly as harsh as the Great Depression of the 1930s when there were few forms of assistance for distressed farmers and their families who were dealing with drought, rampant foreclosures, and life-threatening destitution, the current situation is similar in that farmers of land that was better left untilled then now face possible elimination as agricultural producers. However, they also have unique opportunities.

How do existing operators of marginal farmland survive? Today’s farmers of low production farmland survive by their ingenuity, much like our predecessor farmers survived.

Several years ago a Colorado farmer told me in a La Junta coffee shop that he waits for other farmers to go broke and then purchases their land and sometimes their equipment at discounted prices. He has never purchased farmland during a rising market, he said. “You just have to be patient and ready by not purchasing land, machinery, and facilities when agriculture is booming.”

A seasoned rancher in northern Wyoming told me that he has never built a new barn for his several hundred cows and calves. Instead he purchases used greenhouse hoops and recovers them with new plastic tarp for use as calving sheds during inclement weather and for little calves to find protection. One end is kept open except for a barrier that is too low for cows to crawl under. The mama cows loaf nearby to keep coyotes away.

Purchasers who don’t intend to farm can add to the complexities for agricultural producers in marginalized areas by competing for low cost land. Land with timber and ponds is especially desirable for second homes and recreational uses such as hunting.

Farmers with marginal cropland can convert their land from agriculture to other uses themselves, such as lumber production, hunting leases, and cabin sites. They can sometimes apply for Conservation Reserve Program payments, depending on the cropping history of the land, and receive payments to take the land out of production.

Marginalized producers will have to be especially frugal, practical, and creative in their income-generating endeavors to wrest profits in 2019. The North Dakota farmer has already survived tests of endurance. I thank him for raising important issues.