Letter to the Editor

A farm crisis in the making?

Tuesday, August 16, 2016

Only 35 years after the 1980's farm crisis, another storm seems to be brewing. Corn production is forecast by USDA to be up 11% from last year. This crop, possibly over 15 billion bushels will include a market-killing overhang of nearly a billion bushels. Corn exports are not performing well due to the strong US dollar, and all sectors of the livestock market are struggling.

Farm inputs like seed, pesticide, fertilizer and farm equipment are up and sticky on the upside. Rents can be sticky on the upside, and a year of perfect weather is driving a bumper harvest. And - prices for corn and beans are below the cost of production.

It comes on the cusp of a presidential election where, no matter which party wins Congress, there will be significant shifts and much time spent reorganizing. The farm bill is up for a re-write this year, and new techniques and technologies and management practices need to be built into this new bill. For instance, during the most recent US Senate primary election I advocated that better soil and water conservation practices be tied to the ability to sign up for federal crop insurance. But it will be impossible to finish this before March when the 2017 land leases are signed for cultivation. And even if it was, a farm economy in a deficit situation might be unable to take advantage of it in a year of financial hardship.

This means that in the short run, Iowa will need to make do with the laws on the books to fight this new crisis. Here are some ideas:

* Ask President Obama for a temporary emergency order lifting the national Renewable Fuel Standard (RFS) for ethanol by 0.5% in order to soak up the crop surplus while at the same time increasing national air quality. Estimates are for a billion bushel overhang on the market. A one-half percent increase in RSF to E-10.5 would come close to eliminating the overhang. The cost savings to the government in avoided support payments may be significant just in market loan rate reductions as well as loan deficiency payments.

* Initiate a crash program to buy wetland potential properties or acquire permanent easements for the same. The goal of the acquisition program will be to improve surface and ground water quality, as well to improve natural habitat for hunting, fishing, recreation. The actual redevelopment of the wetlands might take some time and is cash-dependent, but nothing can practically be started until the potential wetland property is acquired. Redevelopment as actual wetlands will likely be over a number of years. With the market for farmland going in a downward trajectory, many farmers will view the land or easement sale as an opportunity to gain cash for the hard times, aas well as a worthy cause.

If you are a farmer, or a small businessperson in a rural area - hold onto your hat, for the rollercoaster is about to begin.