by WALLY FALCON*
This posting, my eighth annual edition, comes again from our mid-sized corn, soybean, and cattle farm in Linn County, Iowa. My wife and I may not be typical owners, but our farming operation is a fair representation of what is happening in rural America. The overwhelming reaction for 2019 is, “Wow, what a difference a year makes.” In 2018, growing conditions were practically perfect; in 2019, almost nothing has gone right.
Not since the early 1980s can I recall seeing so many glum faces around the farmer coffee table at the local diner. And it is more than just the lousy coffee that prompts the scowls. Our spring was the wettest in recorded history. There was severe flooding from both the Mississippi and Missouri Rivers, and from most of the streams in between. Plantings of corn and soybeans were delayed, and substantial acres did not get planted at all—more than 400,000 acres in Iowa alone. About 75% of the corn is typically planted by May 15th in our region. This year, less than 25% was in the ground, and the wet, cold soil left crops that were planted looking yellow and puny.
“Prevented acres” (those fields that farmers were prevented from planting) became a hot topic of conversation, as everyone re-read their crop-insurance contracts to see what was needed to qualify, and who actually determined what was prevented. Discussions on whether it was wiser financially to plant late, with expectations of a small crop that could well suffer frost damage, or whether to claim prevention, led to some very interesting new principles of cost accounting! Calculations and comparisons were complex, but farmers who chose the prevent option received about $400 per acre. Those who planted very late, and rolled the dice with respect to their regular crop-insurance, still eagerly await harvest outcomes.
If April 15-June 15 was unbelievably wet, June 15-August 15 was unbelievably dry during the critical period for corn pollination and grain filling. Rainfall was 4 inches less than normal, and inch-wide cracks opened in the soil. Corn on sandy knolls began to burn and many stalks failed to “shoot” ears. Many of the ears that were produced were small and poorly filled with kernels. Pastures also dried up, and we began feeding supplemental hay to our cow herd in July. During the week of August 18th, we finally received two inches of rain—too late to make much difference to the corn crop, but offering some hope for reasonable soybean yields. One of my more sacrilegious friends suggested that the mid-August rain was god’s way of suckering famers into farming for another year.
To make matters worse, eastern Iowa now has a new invasive pathogen—tar spot in corn. Tar spot is a fungus that literally blew in from Mexico. Spores rode winds from a hurricane into Indiana and Illinois in 2016, and now they have migrated to Iowa. Our corn varieties have little resistance to it, and while breeders will probably breed in resistance within a couple of years, farmers are now short-run losers. Yesterday’s debate over coffee was whether, with both low crop prices and low expected yields, it paid to spray aerially for tar spot and other fungi. (The application costs about $25 per acre for both the fungicide and for flying it on.) For our farm, we decided to take our chances on damages and not to spray. Who knows if that was the right decision.
Perhaps the only thing that farmers agree on is that NO ONE has a good grasp on the size of the U.S. corn crop—not farmers or traders, and certainly not the Department of Agriculture (USDA). For whatever reasons, local producers believe that the USDA is fudging the expected numbers upward on both expected yields and planted acre, with consequent negative effects on corn markets. A sad sign of the times occurred during a recent mid-western tour of crop conditions. The tour included members of USDA’s statistical team. But after threats to their personal safety were deemed credible, the USDA recalled its members from the tour. No one whom I know ever thought that the comment “farmers were up in arms” would need to be taken literally.
More generally, the growing frustration and anger with Washington has replaced talk about the best new tractors and pickups—no one is buying. Farmers were furious over the Environmental Protection Agency’s (EPA) decision to provide waivers on ethanol requirements for 31 refineries, and a failure to move more generally to an E15 standard. And after a decades-long attempt to build an Asian soybean market, farmers feel seriously victimized by the President’s trade policy (though interestingly, it is often the USDA and the EPA rather than the President who are blamed). Farmers will certainly cash the checks from the new $14 billion Market Facilitation Plan, but they are extremely worried about the loss of long-term market shares. Farmers who grow either soybeans or corn in our county this year will receive (potentially) $66 per acre. Only the first half ($33) of the payment is now guaranteed; the remaining half of the payment is conditional on what the USDA says are “market conditions and trade opportunities.” Farmers are still scratching their heads about the operational meaning of those concepts.
In some years, strong livestock profits help offset poor crop yields and prices. But 2019 has not been one of those years. Whereas 2018 saw quite high profits from pigs, 2019 saw a decline in lean pork prices from $.92 per pound in May to $.62 in August. Pork exports were disrupted by trade arrangements with Mexico. And in China, despite needs arising from African swine fever, the 66% tariff caused a 4% decline in pork shipment from the U.S. during the first half of 2019. Cattle fared little better. Prices for slaughter steers started at about $1.40 per pound in March. But by August, prices had slipped to about $1.05 per pound. To add insult to injury, a fire caused temporary closure of a very large packing plant in Kansas, which slaughters about 6,000 head per day (5% of total U.S. capacity). This accident, in turn, caused an overnight drop of $0.10 per pound. The $0.45 per pound drop in price between March and August of “what might have been” tallies up to the equivalent of about $500 per animal—the difference between very handsome profits and devastating losses.
Taken together, readers now understand why my report this year has taken the form of a lament. In a recent Farm Futures survey of 1,150 farmers, 53% said that 2019 was the worst year they had ever experienced. And readers will also understand why the Secretary of Agriculture, Sonny Perdue, was roundly booed for his attempt at humor during a recent farm tour: “What do you call two Iowa farmers locked in a basement—a ‘whine’ cellar.”
The State Fair is a big deal for Iowans. (So big, in fact, that by law public schools cannot start until the Fair is over.) In 2019, more than 1 million visitors participated in state-fair activities, which is remarkable in a state with a total population of only 3.2 million, and with only three cities of greater than 100,000 in population. Of course, this year’s attendance, in preparation for the Iowa political caucuses, was inflated by an invasion of politicians and media personnel! During fair week, 24 Democratic presidential candidates showed up—22 on a single weekend. They not only cluttered the fair concourses, but they also tied up the airway, internet, and transport systems.
It was quite a spectacle. There were the obligatory candidate pictures—viewing the sculpted butter cow, eating corn dogs, turning steaks on a grill, and for the geographically venturesome, a shot in front of a corn ethanol plant. Some even tried the dill-pickle ice cream. And poor “Captain”, Iowa’s largest boar (1,254 pounds), was exhausted by week’s end by all of the celebrity photo ops!
With all of the visiting candidates, Soap Box Corner was unusually crowded. Joe Biden and Elizabeth Warren essentially tied in the informal straw poll at the fair, with Pete Buttigieg and Bernie Sanders finishing third and fourth. For the most part, candidates said what farmers wanted to hear. Speakers generally spoke in favor of ethanol (some even liked E15); were against the current trade policy; and were mostly silent on climate change. Wearing my professorial hat, I am not sure that many of them would pass Ag101—even using Stanford’s liberal grading standards.
Few candidates spoke with much nuance about agriculture. Many seemed to be thinking about an agriculture that perhaps existed in Iowa during the 1960s—one in which younger farmers had farming systems producing a broad array of crop and livestock products. But that is hardly the current reality. What I found most surprising was the implicit view that Iowa’s 87,000 famers were a set of small homogeneous farm units. In fact, there are huge economic and political differences among three groups.
One set contains a sizable number of retired farms which typically own moderate amounts of land that they now rent to others. For this group, health insurance, declining land rents and social security are uppermost in their minds. A second group is a younger, more venturesome group of farmers, who may own 160 acres, but who are aggressively trying to buy or rent an additional 1,000-2,000 acres. They also carry large loans for land and for huge machinery inventories. For them, trade policy, interest rates, crop insurance, and health insurance are central matters of concern. There is also a third set, comprised of multiple family generations, often organized as family corporations, who are intermediate in their ownership patterns, debt obligations, and political concerns. None of the three groups is very happy, but it is the second set that has local bankers worried, since delinquent farm loans have now risen to a 20-year high.
But farmers often sound like baseball players. “Just wait until next year.”
Perhaps next year—god willing and the creek don’t rise—my report will be more upbeat. At least we will know the outcome of the Iowa Caucuses. Maybe we will also know if the August 29 Bloomberg Report, “U.S. Farmers May be Angrier, but Their Trump Love is Growing”, continues into 2020. But as 2016 showed, what farmers tell pollsters about their political preferences always deserves a fair amount of skepticism. On our farm, we will at least know the actual size of the 2019 corn crop, and whether our switch from Angus to Simmental bulls increased the rates-of-gain of our steers.
In the meantime, it is back to Stanford—without a pitchfork—to duel with some of the brightest of the “Z” generation, and to work on a global food-security assessment for 2050.
1* During the academic year, Walter Falcon is a Senior Fellow and Farnsworth Professor (Emeritus) of international agricultural policy and economics at Stanford University. He spends summer with his wife, Laura, on their farm near Marion, Iowa. (wpfalcon@stanford.edu)
To read his previous reports see: 2018 / 2017 / 2016 / 2015 /