Farmers Experience Tough Times

    A mix of good and bad news has farmers in Iowa and across the country hunkering down amidst uncertainty.
    “Farmers are really having a tough time. The agricultural economy is almost universally poor in every category…” feed mill owner Trent Schmadeke of Clarksville said in an interview this spring. “We have cycles, bad and good, though I’ve not seen it quite as bad all the way through.  Usually if the hog guys aren’t making a profit, the cattle were making a profit. And if the cattle aren’t, the dairy is. But it’s pretty much straight through right now.”
    Wet weather this spring isn’t helping either. According to the Iowa Department of Agriculture’s crop progress and conditions report, as of May 28, Iowa corn growers now have 76 percent of the expected crop planted, 10 days behind last year and two weeks behind the 5-year average. This is the smallest amount of corn planted by May 26 since 1995 when 75 percent of the expected crop had been planted. Forty-two percent of the crop has emerged, nine days behind last year and 10 days behind average.
    Less than one-third of the expected soybean crop has been planted, two weeks behind last year and average. This is the smallest percent of soybeans planted by May 26 since 1993 when just 23 percent of the expected crop had been planted. Eight percent of the crop has emerged, 12 days behind last year and eight days behind average.
    “Today’s markets are somewhat depressing, putting pressure on farmers, and we have a weather situation that’s making things pretty tough for farmers to be competitive and continue to grow and expand like they have in the past,” said Aplington farmer Jim Luebbers.
    When farmers suffer, the rest of the economy does as well.
    “Many of our employers in the region are either OEM [original equipment manufacturers] or supply chain to manufacturers of ag-related equipment, so when the ag economy has a downturn, the ripple effect is felt by many [of these businesses], not to mention the local retailers, ag suppliers, and even the impact on local giving,” said Butler-Grundy Development Director Jeff Kolb.
    Two of the commodities suffering most at present are soybeans and dairy.

Soybeans

    “I would say the depressed prices for corn and soybeans have been the biggest battle we face. We’re fortunate in this area to get decent yields, but with the prices not very strong, it’s hard to make a profit,” Luebbers said.
    World Agricultural Supply and Demand Estimates released by the U.S. Department of Agriculture predict a major surplus of soybeans with 995 million bushels, according to information released by the Iowa Soybean Association’s (ISA’s) Katie Johnson by email May 10.
    That is up 100 million bushels from the previous month’s forecast.
    The news sent July prices down by 14 cents ($7.97), Johnson’s email noted, with a predicted $8.10 per bushel on average, down 45 cents.
    “This is one of the most challenging periods of time we’ve faced in agriculture since the ‘80s,” said Grant Kimberley, ISA’s director of market development. “Stocks are so large; competition is so strong from other parts of the world, and we don’t have access to the largest market in the world which accounts for 60 percent of global soybean sales.”
    With the trade war with China ongoing, farmers are seeking alternative markets. Plainfield farmer Rick Juchems, Region III Director for the ISA, travelled to Mexico earlier this year with other members of the ISA to talk with feed producers.
    “I wish I had more of the new crop sold. A lot of people are in the same boat. There’s just not an opportunity to make a profit…” Juchems said in an interview this March. “[Farmers] now are sitting on a large stockpile of grain, corn and soybeans without demand. There’s no market for beans.”
   U.S. exports of soybeans to China dropped 98 percent in 2018, due to 25-percent tariffs.
    “Other markets such as Egypt and South Korea are importing more, and India is one of the new places. Europe is importing more. The price of soybeans is cheap enough now for people to buy the product, but it doesn’t help the farmers that the price is so cheap,” Juchems said.
    This May, Juchems described many farmers’ position as precarious with late planting and poor markets.
    “Corn is coming back now, but the bean market is really poor. There are a lot of stresses out there that wouldn’t be there in a normal year,” Juchems said.
    A glut of product–and African Swine Fever also working to cut demand for soybeans–is creating trouble, according to Lindsay Greiner, president of ISA.
    “It’s a multilayer problem,” said Greiner, of Keota. “Large supplies weigh on the market and bring prices down, but then we also have an ongoing trade dispute with China and a decrease in soybean demand due to ASF. These low prices are a product of those negative factors.”
    The effects are seen throughout the Midwest–and locally as well.
    “There is a lot of concern among producers; there are some that have not secured adequate financing for spring and many that are trying to refinance are having difficulty doing so,” said David Hemesath, general manager at Farmer’s Union Co-op in Calmar. 

Dairy

    “[We have] major concern for our dairy producers,” Hemesath added. “We are at risk of many of them going out of the business.”
    For the past several years, dairy farmers have suffered from low milk prices. The USDA reported in March that licensed dairy farm numbers declined by 2,731 farms, a drop of 6.8 percent from last year. Iowa lost 80 dairy farms, with numbers dropping from 1,200 in 2017 to 1,120 in 2018.
    Local farmers are subsidizing their dairies with income from a second job–or even from their Social Security checks.
    “Milk prices are murder. They’re killing us. We’re getting to the point where we have to supplement the income to keep the dairy going. We’re cutting back on cows here because it’s not paying…” said Parkersburg dairy farmer Duane Johnson, a member of the Butler County Dairy Promoters. “We’re using our Social Security checks to help keep the dairy running, and that’s not what we should be doing with our Social Security checks. The milk price needs to go up $2.50 or $3 in order for the dairy to be profitable.”
    According to Johnson, it has been over two years since dairy was profitable.
    “The futures don’t look real good. It looks like it will be $16.50 by fall, but that won’t do a whole lot of good. We’ve got to get the profit line back in there,” Johnson said.
    He points to overproduction and under-consumption as two contributing factors to dairy farmers’ woes.
    “People need to drink more milk and eat more ice cream and butter,” Johnson said.
    While many dairy farmers are retiring, Johnson keeps his farm running. His family purchased the farm in 1924, and dairy farming is a family tradition his granddaughter plans to continue when she returns from college.
    “I’m old enough I could retire, but it’s in your blood. It’s part of what you do…” Johnson said. “If you’re in it, you have to stay in it for the long haul.”
    In rural Clarksville, Daniel and Lynn Bolin are also continuing a family tradition–founded in 1890. To survive, they’ve embraced change at New Day Dairy.
    “The faces and forms for farming are changing as we move into the 21st century. For dairy, there has been an increase in the volatility of the farmer milk price in the past two decades. Currently, the dairy industry is moving into the fourth year of pay prices below many farms' cost of production,” Dan Bolin said. “This pressure has pushed many dairy farmers to exit the industry, some to get bigger to embrace economies of scale, and the remainder to hang on and try to get better.”
    While the couple started New Day Dairy with plans to join the latter category, implementing best practices and a modern robotic milker–with prices at adjusted record lows, they’ve also expanded into agritourism with a bed and breakfast slated to open this summer to provide unique opportunities for travelers looking for memorable and meaningful experiences.
    “New Day Dairy is dealing with the new frontiers of a global economy, national economic and ag policies that are inept at best and often more harmful than helpful, and processors that are slow to adapt well in how to provide milk and its products like cheese in the right forms, at the right time, at the right price to the changing modern American family that is still needing food,” Dan Bolin said.
  According to the USDA, while milk consumption has dropped from 247 lbs. per person in 1975 to 149 lbs. per person in 2017 and ice cream consumption has declined, butter, yogurt and cheese consumption has increased.
    In fact, consumption of all products on a milk-equivalent milk-fat basis has increased from 539 lbs. per person in 1975 to the highest it has ever been, 645 in 2016 and 643 in 2017.
    In spite of challenges, entrepreneurial dairy farmers continue to be an active, contributing force in the local economy. They’re looking for new opportunities for growth, and are thankful for the support of their communities.
    “We are thankful for our local economy which benefits from the nearly $25,000/cow economic activity,” Bolin said. “Most of all we are thankful for our neighbors and family that are supportive of us and New Day Dairy as we work every day to develop, milk, and bless.”

Cattle and Swine

  Positive news on the beef front came May 17 with the announcement by the USDA that Japan was ending restrictions for U.S. exports.
    “This is great news for American ranchers and exporters who now have full access to the Japanese market for their high-quality, safe, wholesome, and delicious U.S. beef,” said Sonny Perdue, U.S. Secretary of Agriculture. “We are hopeful that Japan’s decision will help lead other markets around the world toward science-based policies.”
    According to Iowa Secretary of Agriculture Mike Naig, “Japan is … a valuable trading partner for Iowa livestock producers, and now they will have the opportunity to sell beef products without restrictions.”
    The deal permits U.S. products, irrespective to cattle age, in the Japanese market, not seen since 2003. Prior to 2003, Japan was the largest importer of U.S. beef, consuming an estimated $1.2 billion worth of U.S. beef yearly. In 2003, mad cow disease was found in a 16-year-old U.S. cow, and Japan stopped all U.S. beef imports. In 2005, imports from cattle no more than 20 months of age resumed, and in 2013, cattle up to 30 months of age were permitted. The complete lifting of this restriction could have an annual $200 million impact.
    That’s welcome news, as feeder cattle futures have declined by $20 since Easter, and according to Mike Codner, president of the Butler County Cattlemen’s Association, the cattle business has not been very good.
    With the price of corn down, Codner said, more farmers have been feeding cattle instead of selling corn, which has led to a drop in cattle prices.
    “Right now, breaking even is about what we’re doing,” Codner said.
    Butler County Farm Bureau President C. Dale Bohlman believes prices across the board are related.
    “I don’t understand why the beef market is so suppressed. … Part of it is there’s so much meat in the coolers. It has to keep moving. A lot of times, if the pork industry isn’t moving their meat, it all ties together. Each one has to keep moving their product. … If one market is suppressed, it seems to drag the other down, like with corn and soybeans. The soybean market keeps dragging the corn market with it…” Bohlman said. “The pork industry relies heavily on exports. With exports down because of the tariffs, the cash price is just barely covering the cost.”
    Juchems, who custom feeds swine, suspects African Swine Fever in China, which is contributing to low soybean prices, will ultimately spur a rebound and help raise pork prices.
    “It looks like it’s a good hog market going into the summer. With China’s problems with the African Swine Fever and their numbers way down, they’ll probably be importing more pork,” Juchems said.
    Though with tariffs, he added, it’s hard to know.
    Luebbers anticipates that even if the Chinese don’t purchase pork directly, their increased demand on other countries’ markets will lead to those countries purchasing more pork from the U.S.
    “It’s kind of a two-way street,” Luebbers said.
 

Trade and Financial Aid

    Federal assistance was announced last Thursday for farmers. Sonny Perdue, U.S. Secretary of Agriculture, said by email that United States Department of Agriculture action will involve the Market Facilitation Program with direct payment of $14.5 billion for producers. The USDA will also purchase surplus commodities for $1.4 billion under the Food Purchase and Distribution Program and spend $100 million to develop new markets.
     “We appreciate President Trump and the USDA offering an interim solution to assist farmers affected by trade disruption,” said Iowa Secretary of Agriculture Naig by email Thursday. “However, farmers want trade not aid. Farmers need markets to sell their products. This current situation is not sustainable. We need long-term trade agreements, and I believe we can get there, but we need China to come to the table to negotiate. It’s also imperative that Congress takes action to pass USMCA as quickly as possible to provide certainty for our farmers and businesses.”
    Recently, an agreement was reached to end U.S. steel and aluminum tariffs on Canada and Mexico as well as retaliatory tariffs from those countries on U.S. products, bringing the three countries a step nearer to the ratification of the USMCA trade deal.
    “I’m encouraged by the trade news coming out of Washington,” said Naig by email May 17. “With the steel tariffs lifted, this is the time for Congress to approve the USMCA. The passage will protect our relationships with two of our biggest ag trading partners, Canada and Mexico.”
    Senator Charles Grassley also praised the announcement.
    “The biggest hurdle to ratifying USMCA has been lifted,” said Grassley May 17 by email. “This is great news for farmers across the country. Iowa pork, soybean and corn farmers can breathe a sigh of relief that they will once again be able to sell their products in Canada and Mexico on a level playing field. The resilience of American farmers has [triumphed].”
    Senator Joni Ernst joined Grassley in calling for congressional approval of USMCA.
    “This is huge news for Iowa—especially our state’s farmers and manufacturers who have been caught in the crosshairs of this tariff war with our neighbors,” said Ernst by email May 17. “Months ago, the president indicated that when a new trade deal was reached with Mexico and Canada, the tariffs would no longer be needed. Today’s he’s followed through on that.”
    The move also drew approval from Sonny Perdue, U.S. Secretary of Agriculture–and from local farmers.
    “What I know of the USMCA Trade deal is that it would be beneficial to grain and livestock farmers,” said Clarksville farmer Paul Leerhoff. “I think Congress should approve it, and I do believe they will. Our current farm economy is not very good as our ability to produce has exceeded demand, resulting in low prices. This imbalance needs to be corrected to improve prices.” 
    Juchems was also hopeful for the deal’s chances for approval.
    “It bodes well for the signing of the agreements with Canada and Mexico that the trade embargoes on metals, aluminum and steel, have been released. I hope it will speed up adoption and ratification of the trade agreement with those two countries,” said Juchems. “It would help agriculture as a whole.”
    Tom Hansen, a farmer in Winneshiek County involved with the Winneshiek County Cattleman’s Association, is among those following developments.
    Hansen noted he does not take part in any government assistance programs but was happy to hear about a trade deal.
    “It is only the government's job to provide an atmosphere in which business may thrive, and President Trump is doing an excellent job of this by lowering taxes, easing government regulations…and opening up new markets like he did with rice in China and most recently, beef in Japan,” said Hansen by email May 19.

Young Farmers

Clarksville farmers Dale and Pat Mennenga stand with Iowa Governor Kim Reynolds, Krista Mennenga and her fiancé, Tama County farmer Cordt Holub, following the signing of HF768, the Beginning Farmers Tax Credit law. (Submitted photo)
    Sometimes it seems the deck is stacked against young farmers. Established farmers have their land paid for and can buy inputs cheaper, since they can buy in bulk–and yet they too struggle in an uncertain economy.  For young farmers, life is far from easy.
    “It’s a very hard path…” Schmadeke said.            “The only way to make it to the other side is being very resilient, and the only way I can see doing it is if you’re young, trying to get in, get yourself a good day job with adequate time off, farm on the side, and be willing not to take money off the farm for 20-30 years.”
   Hansen offered his thoughts about possible solutions.
    “How about recognizing that the land in these older farmers’ hands is all the retirement assets they have and figure out a way for them to sell it for less and retain more of the funds from its sale to young farmers who can be encouraged to run more diversified operations in order to survive the ups and downs of the free market as there is never a time when all commodities are down,” said Hansen.
    That idea dovetails with legislation (HF768) signed last week by Governor Kim Reynolds, as noted by Naig.
    “I want to thank Gov. Reynolds for signing and the legislature for passing this important legislation that supports farmers who are just starting out,” said Naig, by email May 21. “The new law expands the Beginning Farmer Tax Credit to allow more individuals to participate. This is a great opportunity for existing landowners to earn tax credit and help new farmers establish their own operations.”
    The bill restructures/reinstates the Beginning Farmer Tax Credit Program originally created in 2007 but automatically repealed on Jan. 1, 2018.
    Under this law, cash rent, commodity share and flex leases to beginning farmers qualify for the credit, which is equal to five percent and 15 percent, respectively, of the lease payment. Up to $12 million in tax credits will be available each year to landowners who lease to beginning farmers.
    Reynolds travelled to Tama County to sign the bill at 26-year-old Cordt Holub’s farm.
    “The beginning farmer tax credit has been in use over the past couple years. The program became so popular that funding ran out, which is a good sign showing enthusiasm in agriculture is still thriving in rural Iowa despite suppressed commodity prices,” said Holub. “I have many neighbors already currently enrolled in this program with their landlords or who have gone through this program.
    “I would say it gives a leg up for the beginning farmers when margins can be so tight. Instead of an owner renting a piece out to the top bidder, they will be confident a young farmer full of determination will take care of their ground to the best of their ability.”
    While at the Holub farm, Reynolds also signed a second bill dealing with capital gains tax (HF778).
    “As citizens we are taxed, taxed, and taxed again... and then when we think we've made a good name and standing for ourselves, we're taxed again after a lifetime of hard work, hardships, and commitments. Through this new legislation, a farmer’s hard work over their lifetime won't be punished by taxing the increased value of their property over the years as they try to sell their piece to a relative,” Holub said. “This is a prime way of keeping a farm in the family name and continuing a legacy.”
    The bills were a result of bipartisan efforts in the Iowa legislature.
    “I am glad that Governor Reynolds has signed this bipartisan legislation to support the next generation of farmers. I am glad we can work together to support those interested in farming,” said state Senator Amanda Ragan.“This is a great incentive for landowners to work with young farmers who may not have access to farm ground. It also will insure participation can be maximized.  It is a great way to help retain young farmers interested in staying in Iowa.”
    And those young farmers are needed.
    “Getting and retaining young people in our small rural communities is critical for the economy and survival of these areas. From schools, churches, fire departments and EMS departments, we need young members in our small towns,” said Clarksville farmer Dale Mennenga. “Tight margins make it very hard for beginning farmers to compete with the established producers. These newly signed bills should and will help those wanting to get started in grain or forage production [by providing] easier access to more affordable land.”
    Linda Upmeyer, Speaker of the Iowa House, agreed.
    “We want to remove barriers so that more young Iowans can get involved with agriculture and make it a career,” Upmeyer said. “The changes made this session will help young Iowans get started in agriculture, encourage succession planning, and make it easier for family farms to be passed down to future generations.”

Is Diversity the Key?
 
   Determination to work hard and survive came in handy during the farm crisis of the 1980s.
    “They didn’t break me, but they sure bent … me,” said Allison farmer Bruce Bixby in an interview last year. “It was tough. If you were buying land and machinery, you were probably in trouble. If you weren’t expanding at the time, you were probably okay. But it was a tough time.”
    During the ‘80s, Bixby purchased his first semi to haul feed by night while still working on the farm during the day.
    “He was working while everyone else was home in bed,” said his wife Becky Bixby.
    She got a job in town. Son Eric, his brother and some neighbor kids purchased an auger and worked cleaning up the surplus corn piles that were everywhere at the time.
    “They diversified and brought money in; they didn’t rely on the farm,” Eric’s wife, Vicki Bixby, said.
    Times were hard then.
    “People were not feeding their kids to have the money to make interest payments,” Bruce Bixby said.
    But the Bixbys and their support group of Butler County farmers pressed on day after day. And not one family in their group lost a farm. Now, many have sons and grandsons farming the soil they fought to save.
    Working a little longer and a little harder than the next person is the key to survival in a struggling agricultural economy, according to Trent Schmadeke.
    Butler County Farm Bureau President C. Dale Bohlman advises farmers to stay in touch with their lenders.
    “It’s very tight out here in the country between the grain prices, the livestock prices and the weather. Everybody is struggling. Your current balance sheet is tough…” Bohlman said. “With current prices and this kind of weather, there are a lot of question marks this summer and fall with how people will continue to pay their bills. … The main thing you have to do is to keep talking to your lender. You have to continually keep them updated with where you’re at. Stay in touch with your lender so there are no surprises.”
    Although times may not be as bad as in the 1980s, today, farmers are still finding hope in diversifying, whether that means starting a bed and breakfast, trucking, or taking on a second job.
    There have always been cycles—good times and bad, and regardless of how bad times are, there is always hope for a brighter tomorrow.
    “The future has always been bright and continues to be bright. Any farmer who has been in business long will tell you they’ve seen some highs and lows, good times and bad times,” Luebbers said. “You just work hard and hope good times far out-weigh the poor times.”
    He added that in today’s environment it’s important to keep pace with technological advances to take advantage of all opportunities.
    “It will be interesting to see what happens on the other side. Something will break…” Schmadeke said. “I don’t know what, but there will be some opportunity somewhere.”