The 2015 crop year offers fewer certainties for farming outcomes than most–but not all–years in recent history. Is past history a reliable predictor of this year?
Drought in much of the Western US, an overabundance of corn and soybeans, and lower than usual production of beef for consumption are among the many factors affecting commodity prices and farmers’ choices about how to proceed. Do we know what lies ahead?
Managing the stress that accompanies uncertainty is key. Inability to control the factors that impact farming outcome is the major cause of stress to agricultural producers.
Uncertainty instigates searches for greater income security by farmers. While past history is often a good predictor, 2015 is much different than the Farm Crisis of the 1980s and the occasional but less drastic farm economic downturns since then.
The Agricultural Act of 2014 offers more guarantees of economic security to most US crop and livestock producers than any previous Farm Bill.
Most producers of crops and/or livestock have already undertaken careful planning–or should have–to figure out the level of crop insurance, federal Farm Program method of guaranteeing income and livestock indemnity options best suited for them. There is still time to make some of these choices but deadlines are creeping up.
Perhaps the biggest danger is a false sense of security. We should make decisions carefully. Financially secure producers and lenders will have to resist temptations to capitalize on marginalized producers.
Resisting temptations for “even more” is especially difficult for agricultural producers. Almost every farmer has a strong drive to acquire more land and agricultural resources, sometimes accompanied by weaker controls over “risk-taking” behaviors.
Last week a seasoned cattleman told me an aspiring cow/calf producer with mostly rented pastures purchased 100 bred heifers at $3,200 per animal to start a cow herd. The cattleman and I wondered who loaned the money and who cosigned the note for this ambitious beginner.
Recognizing and sometimes curtailing risk-taking tendencies can make life less stressful and more appreciated. There is something to be said about the maxim: Take it slow and steady.
About a year ago a semi-retired farmer/friend whom I greatly respect said to me, “After chasing the dollar for 50 years, I asked what is more important—building an empire or service to my fellow man? I have concluded the latter will be ultimately judged.”
He added that the things that really matter in life can’t be bought, like one’s reputation and integrity.
Who is at most risk? Producers who specialize only in one or two crops and who have high debt loads and barely enough liquid assets to remain solvent could experience significant stress in the near term.
Some of these operators may have to sell off a portion of their assets or augment their income from alternative sources. They should be considering their options.
For the few who have to sell possessions, the good news is that markets for farm assets like agricultural equipment and land remain substantial. It’s not like the 1980s when almost all farmers were stretched thin, interest rates on borrowed money were very high and a general recession was occurring worldwide.
The beginning cow/calf operator mentioned above might have a tough time shortly. As the nation’s cattle herd increases as expected over the next several years, and as alternative choices for dinner like pork, lamb and seafood continue to expand, beef prices will drop just when he has to “sell off.”
Alternative income sources, such as off-farm jobs or conversion of portions of the farm into other income-generating sources like leased hunting rights or growing alternative crops can stave off having to sell assets. One California farmer I know is raising prickly pear cactus on ground where water is restricted because of drought. He has already sold all the prickly pear syrup he can produce for margarita mix.
Another option is reducing the cost of cropping inputs, such as planting non-GMO soybeans. Two farmers I know plant non-GMO soybeans and earn a bonus of up to two dollars per bushel from European purchasers, but the beans must be completely free of stray GMO beans that find ways of “hiding” in combines, trucks and storage bins.
They use some of the older non-GMO herbicides and/or mechanically cultivate their fields and hire local “bean-walkers” to control weeds. Their input costs were lower, and their non-GMO bean yields and market prices were higher the past two years than their neighbors’ GMO soybean yields and prices.
What is the risk of “everything going south?” Could the Mid-East internecine conflicts turn into a major war that dramatically raises the cost of oil and involves the commitment of far more US resources than currently?
What would be the implications of such warfare on the export of US farm products? Could global warming significantly change agricultural production and trade?
Any of these, and other unexpected other events could happen. Generally though, farming appears in a holding pattern.
Michael Rosmann is a Harlan, Iowa clinical psychologist who lives on the farm he shares with his wife. Share your thoughts with Dr. Rosmann at: www.agbehavioralhealth.com.