The fall U.S. crop harvest has finished, and it’s a record. That’s the problem.
Oversupply has pushed wheat prices to decade lows, while corn is at less than half the price it fetched in 2012. Cattle and hog prices have also plunged, pushing up farm debt and making some farmers wonder if they'll be able to stay afloat.
Much of their fate rests with President-elect Trump and a new Congress, which will be tasked with crafting the next farm bill, the trillion-dollar, twice-a-decade behemoth that sets farm subsidies and broadly shapes the day-to-day lives of farmers. For them, even the margins can make a big difference to their financial reality. Here’s how two father-and-son farm operations in the heart of the U.S. farm belt see their economy, and how they see the kind-of-hard-times they’re living through. Meet the farmers:
Donn, 61, is president of the Kansas Farmers Union and a fifth-generation farmer whose land was originally homesteaded by his great-great-great grandparents after the Civil War. Zachary is 32 and went to Emporia State University in Emporia, Kan. They farm 1,200 acres near Wheaton, Kan., in the north-central part of the state, 10 miles south of the Nebraska border. Their operation includes 100 cows and calves and 300 acres of cropland where they grow corn, soybeans and sorghum, most of which is sold for feed. Three sons and a neighbor help out on the farm. All are working full-time jobs elsewhere.
Bill, 62, and his wife Nancy own Couser Cattle Company, a 5,200-cow feedlot. Tim, 29, has a degree in Agricultural Studies from Iowa State University and runs the crop side as Greenfield Farm. The Cousers are third-generation farmers in Nevada, Iowa, about 30 miles north of Des Moines. They own or rent about 3,000 acres of their own land and handle an additional 1,800 acres for a farm management company. Tim employs two full-time and three to five part-time workers. Bill has two to three employees.
Even with rising costs and declining crop and livestock sales, it wasn't long ago that farmers’ wallets were fat. Farmers saw record profits in 2012 and 2013, and while the plunge since then has been steep, it’s more a reversion to a mean than a return to tough times on the scale of the 1980s, the last major wave of farm foreclosures.
Surpluses are up thanks to record harvests
That’s why commodities such as corn, soy, and wheat have plunged since highs in 2012
Farm profits have fallen steeply since 2013, but adjusted for inflation, they have simply returned to levels seen in the 1960s and 1990s, relatively quiet times in American agriculture
“Prices on my calves were 37 percent lower last month than the previous year. If you had a drop in the stock market of 37 percent, you’d consider it pretty seriously.” —DONN TESKE
“Oh heck, yeah it is. [On if the farm economy is bad] There have been some weather blips in the commodities market that have helped prices at times, but most of the time the market hasn’t been that good.” —TIM COUSER
“Fertilizer has dropped, fuel has dropped. Seed and machinery are the two that resist coming down because of all the infrastructure involved.”
“You need to know what technology makes you money. When you have computer screens in your machinery and autoguidance for your machines, that captures information to make better decisions, but if you’re just doing it so you don’t have to steer, it doesn’t make money.”—TIM COUSER
Seed costs eat more revenue in the GMO era
Equipment spending crucial to decades of farm mechanization collapsed in the 1980s farm crisis. High-tech tractors are pushing a rebound
“Soil testing is my most important technology. The soil map is your most important map. You also have your yield map because your soil fertility, the chemical structure, is what we have the most control over. Soil testing—knowing your PH, your micro and macro-nutrients. That tells you what fertilizers to put on.”—TIM COUSER
“I can point to neighbors who have old equipment and no technology, but they soil-test, they use the right hybrids. The technology is cool to play with, but it has to help yield. That whole field needs to make money.” —TIM COUSER
“If you’re doing value-added stuff, grass-fed beef, that kind of thing, the technology you have for networking is very useful.” —ZACH TESKE
While the Great Recession slowed (but didn’t stop) the growth of organic food spending, days of double-digit growth quickly returned
“Some of the small farms you see are intriguing to me. I see some people make more money off five acres than 500 acres.” —ZACH TESKE
While farmers are putting faith in new markets—from increased exports to China to higher domestic consumption of organic foods—boom times may be tougher to achieve than they were a decade ago. Consumption of ethanol, which pushed up grain prices in the past, has plateaued. So has the price of land, which is used as collateral for loans. Meanwhile, debt levels are rising.
Renewable-fuel legislation passed in 2005 and 2007 dramatically increased the government’s mandate for U.S. ethanol use, but legislation flat-lined growth starting in 2015
“Anyone who is against ethanol is just silly. It is one of the greatest things that has ever happened to the American corn farmer.” —TIM COUSER
Rising commodity prices and inflation pushed up U.S. farmland prices in the 1970s. That was nothing compared to the ethanol-fuled farmland boom of the 2000s
“We hear a lot of talk of Wall Street investors looking at our precious farmland as an investment in a volatile world.” —TIM COUSER
Debt levels are rising as costs rise and land prices level off
“We won’t make enough this year to pay off our operating loan, so we’ll have to dip into equity. We’d prefer not to do that.” —DONN TESKE
“It all pressures you to get bigger and bigger so you can cover your fixed costs.” —ZACH TESKE
Exports and farm aid have helped farmer balance sheets—but both have their limits. Free trade is a double-edged sword, giving farmers new markets while exposing them to foreign competition. Meanwhile, farm payments are rising—but too much of an increase will make them vulnerable to federal-budget demands.
Exports are the perennial hope for the farm economy, fueling booms in the 1970s and the 21st century. With prices down again, can exports again boost profits?
“You’ve got to have a trade policy that protects your producers.” —DONN TESKE
Pressure on Congress to pass emergency aid to farmers in bad years persisted from the 1980s until the mid-2000s. New programs have made subsidy payments more automatic—and similar.
“It doesn’t prevent you from losing money. It helps, but at the end of the day you have to worry about what you can control, and you can’t control what a government is going to pay.” —TIM COUSER
“We’re breaking even on some land and not in others, but a lot of our crop hasn’t been sold yet, and we don’t know what the price will be. We’ll sit down this winter and see how it evens out.”—BILL COUSER
Both families see big changes ahead for U.S. agriculture, as well as near-term discomfort as farmers deal with oversupply. The younger generation remains hopeful.
“In the next two to three years, it will be a challenge to break even. It’s not going to be a repeat of the ’80s, but it’s going to be challenging. Next year will be my 40th year of farming. That’s 40 chances to get it right. Have I got it right yet? I have no freakin’ clue. But I’m still farming.”—BILL COUSER
“We have too much grain on the Plains, and it’s going to be sitting around a while. We need a farm program that responsibly addresses overproduction.” —DONN TESKE
“You don’t want a farm program that tries to limit supply—that never works. You need demand. I’m optimistic. China’s on schedule to buy more beans than ever, we’re going to feed more livestock. We’ve had three years of record crops, and the likelihood is that somewhere next year there will be a major weather disruption, and that will help the supplies. Now, that will take a year. But you have to be patient.”—TIM COUSER
“We have a lot of changes, but we have a lot of opportunities too. Ten years ago I would have told you it would have been unrealistic to continue the farm, but I think we can make it work. I’m not going to let it die out.“—ZACH TESKE
