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Big Mood Swings Down on the Farm

Optimism Jumps With Big Crop, Higher Prices and Government Checks

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Above image credit: In this Sept. 23, 2015, file photo, a central Illinois farmers deposit harvested corn outside a full grain elevator Virginia, Illinois. (Seth Perlman | AP Photo)

Matt Moreland considers himself an “Old MacDonald” type of farmer. He farms corn and soybeans, raises beef cattle and even runs an agritourism business called Red Barn Ranch

He’s not quite done getting his crop out of the field. Chopping silage for some of his neighbors left him a few weeks behind schedule, and has kept him from finishing off his soybean fields. Even so, the fourth generation Harrisonville, Missouri, farmer is feeling good about where his operation stands.

“It’s easy to be optimistic,” Moreland said. “Watching the yields come in better than expected, and watching the markets climb. We haven’t seen that in a long time.”

Moreland is echoing the sentiment found in Purdue University’s Ag Economy Barometer’s October results. The barometer comes from the results of 400 U.S. agricultural producers who answer a telephone survey from the university. The October results showed widespread optimism among U.S. farmers. 

The barometer reached 183 in October, a 27-point increase from September. The indices that track farmers’ outlook on current and future conditions rose last month as well. Those rose 36 points and 23 points, respectively.

Ag Economy Barometer
Purdue University’s Ag Economy Barometer has recorded exceptionally sharp swings over the past year. The barometer gauges farm optimism. (Source: Purdue University)

According to Purdue University Director of Center for Commercial Agriculture James Mintert, this is because of some of the same things Moreland noted. Rising commodity prices, higher yields and continued government assistance in the form of the second round of Coronavirus Food Assistance Program payments have lifted spirits down on the farm.

Markets Rally

Typically during harvest season, grain commodity prices dip due to an influx of supply and decreased demand. As in so many ways, 2020 is not proving to be a typical year.

A derecho — a wind storm akin to an inland hurricane — blasted Iowa in August and left 850,000 acres of crop unharvestable, according to the Des Moines Register. That has led to an increase in demand for grain from other states in the country, driving up the price of corn and soybeans.

Derecho crop damage in Iowa
Rod Pierce walks through a cornfield damaged in the Aug. 10 derecho near Woodward, Iowa. The exceedingly rare inland hurricane hit several Midwestern states but was especially devastating in Iowa as it cut through the state’s midsection with winds of up to 140 mph. (Charlie Neibergall | AP Photo)

Our biggest soybean exporting competitors in South America are also experiencing droughts, which makes demand for U.S. soybeans even higher.

In late October, the U.S. Department of Agriculture issued a report on the status of the U.S.-China trade deal. In it they gave China a passing grade for its adherence to the new deal. It also stated that China has purchased 71% ($23.6 billion) of its target of agricultural products in 2020 so far. The report drove commodity markets higher.

The USDA’s November World Agriculture Supply and Demand Estimates predicted even higher export numbers than expected in October. About 2.6 billion bushels of corn are estimated to be exported in 2020, compared to 2.3 million that was expected last month. Soybeans did falter slightly, going from an estimated 4.8 billion bushel to 4.7 billion bushel exported.

Commodity prices 2019-2020
A price comparison of five farm commodities during 2019-2020. Commodity prices have increased recently. (Source: macrotrends.net and investing.com)

“Depending on the part of the country you’re in, soybean prices have risen from prices in the low $8 per bushel, to prices roughly about $11,” Mintert said. “Any way you slice it, that’s a big change. It’s had a huge impact on revenue, and then in turn on sentiment.”

Because this market increase has been driven by an increase in demand. Mintert believes the rally in prices may have more staying power. He said supply driven shocks in the market tend to decay faster, but demand driven bull markets are a sign for optimism among producers as they look towards the future of their operations.

The boost in the economic outlook for farmers is welcome. During the first nine months of the year, farm bankruptcies were on track with a 20% increase in 2019. Through September, 433 farms had filed for bankruptcy in 2020.

Passing on the farm to the next generation is always on Moreland’s mind. In his experience, the farm economy moves in roughly three-year waves.

“You know, we’ve been down for three years,” Moreland said. “So this is the turn where it’s coming back up. Hopefully we can rise or at least be at the market we’re at for another three years.”

There is a slight wrinkle in that outlook, however. 

Last Saturday, Joe Biden was named president-elect as winner of the 2020 election. An administration change is on the horizon, and that is causing some consternation among farmers.

“It is something I’m a little worried about,” Moreland said.

A new leader of trade negotiations throws a wrench into the success farmers have seen in 2020. But according to Mintert, a Biden presidency does not necessarily mean a lot will change economically for farmers.

“Assuming Republicans maintain control of the Senate, I don’t think it’ll be too extreme,” Mintert said. “If we wind up with all three branches on the Democratic side, based on the proposals that were discussed during the course of the campaign, there probably would be some changes. If the three branches remain at least somewhat divided, I think that’s a different story, and that probably could have an influence on producers as well.” 

Moreland said that he understood President Trump’s vision on trade negotiations, and was willing to take a hit on short-term commodity prices for a long-term fair deal with China. His hopes the big recent price moves don’t go away with the end of Trump’s presidency.

A bigger concern in agriculture is the same thing that caused it so much financial loss earlier in 2020: COVID-19.

Strong economies foster wealthier consumers who buy pricier foods. That drives more meat consumption, which is good news for U.S. farmers who export grain for livestock feed, and in recent years, large amounts of meat. Farmers will be looking overseas with hopeful eyes, waiting to see how those economies recover.

“That’s really concerning going forward,” Mintert said. “How quickly those economies recover, and maybe get back to the ground on where incomes are growing.”

Eternal Optimists

There are a lot of changes on the horizon in rural America, and still plenty of uncertainty. However, at the moment, there are plenty of reasons for farmers to be optimistic.

The USDA is now predicting yields of 178 bushels per acre for corn, and 50 bushels per acre for soybeans. That’s up from the 168 bushels per acre for corn and 46 bushels per acre for soybeans in 2019. 

“It’s been a substantial recovery,” Mintert said. “Those recoveries are never perfectly uniform, but on a broad brush kind of perspective, it’s a substantial recovery.”

Mintert also said that this is a step in the right direction for a successful 2021. If Moreland’s theory is correct, this is the beginning of a three-year wave that would see farmers starting to recover after a few tough years, not that he wouldn’t have been optimistic either way.

“Farmers are kind of what a lot of people would categorize as eternally optimistic,” Moreland said. “We are very famous for saying, ‘next year will be better.’ My whole life, and you when you get to next year, if it’s not better, you just say next year will be better. And you keep looking forward, being eternally optimistic.”

Jacob Douglas covers rural affairs for Kansas City PBS in cooperation with Report for America.

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