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TOUGH FARM ECONOMY: Iowa Ag Secretary Bill Northey notes that the economic challenges of low crop and livestock prices in 2016 will continue in 2017. On a brighter note, he says progress is being made on water quality issues and renewable fuel options are being expanded for the motoring public.

Looking back on key issues Iowa agriculture faced in 2016

Another year of low crop and livestock prices in 2016 continued to pressure farmers’ balance sheets.

As we close out 2016 and look ahead to the new year, let’s take a minute to review some of this year’s major issues in Iowa agriculture. Iowa Secretary of Agriculture Bill Northey last week shared some of his observations. He notes the economic challenge of low crop and livestock prices is continuing, but says Iowa farmers are making progress on improving and protecting water quality. Another bright spot is renewable fuels. The use of higher ethanol blends is increasing, thanks to the availability of more blender pumps at retail fuel stations.

“Iowa farmers saw record production for both corn and soybeans again in 2016. However, low prices are making profitability a real challenge on both the crop and the livestock side. Despite the economic challenges, farmers are by nature optimistic, and we continue to see investments in the future. And we will continue to see new and innovative technologies being introduced that will allow farmers to be even more productive, while also reducing the environmental impact of farming,” says Northey.

Record crop production in 2016
Much of Iowa had a nearly ideal growing season that saw Iowa farmers produce record corn and soybean crops again in 2016.

Iowa corn production for 2016 is estimated at 2.69 billion bushels, according to the latest USDA National Agricultural Statistics Service Crop Production report. This surpasses 2015’s record of 2.51 billion bushels. The statewide average yield is expected to be a record 199 bushels per acre, 7 bushels-per-acre higher than the previous record set in 2015.

Cost-of-production blues
Soybean production is forecast at 561 million bushels for Iowa in 2016. If realized, this will be the largest crop on record, 6.80 million bushels above 2015’s record high. The statewide yield forecast is 59 bushels per acre, 2.5 bushels more than the previous record set in 2016.

However, the significant drop in crop prices over the past few years has made it a very challenging time on the farm economically, as in many cases current prices are below the cost of production for farmers. Average statewide corn prices fell from $3.37 to $3 from November 2015 to November 2016. Statewide average soybean prices have recovered somewhat from $8.14 to $9.25 from November 2015 to November 2016, but are still below the cost of production in many cases.

Livestock challenges
2016 has also been a challenging year economically for Iowa livestock farmers. Cattle prices have continued to fall and were at $101 per cwt in October, down from $128 per cwt in 2015 and $161 in 2014. Hog prices are also down from $55.50 in October 2015 to $41.70 in October 2016.

Iowa egg production has recovered from the devastating highly pathogenic avian influenza outbreak that resulted in the depopulation of more than 30 million Iowa laying hens in 2015. Iowa egg production in October 2016 was 1.30 billion eggs, up 3% from last month, and up 71% from 2015, according to the latest Chickens & Eggs report from USDA’s National Ag Statistics Service. The average number of all layers on hand during October 2016 was 53.7 million, up 1% from last month, and up 55% from last year. However, egg prices have fallen dramatically, from $1.26 per dozen in October of 2015 to just 21 cents per dozen in October 2016.

Tight profit margins
The tighter margins seen on the farm are starting to ripple through the economy. Iowa farmland prices are down 5.9% over the past year. There have been several announcements of layoffs and mergers by manufactures, machinery providers, seed companies and other business that serve the agriculture industry.

Despite the challenges, opportunities remain. In general, exports remain strong. Agricultural exports account for 10% of the U.S. exports, and ag exports support nearly 1 million jobs across the country. To help continue to grow exports, Northey in 2016 participated in trade missions with the Iowa Economic Development Authority and USDA to the Dominican Republic, Costa Rica, Ukraine and Romania.

Water quality improvements
The Iowa Department of Agriculture and Land Stewardship are continuing to expand efforts to work with all Iowans to make water quality improvements.

In 2016, Northey announced that 1,900 farmers committed $3.8 million in cost-share funds to install nutrient reduction practices in 97 counties in Iowa. Eligible practices include cover crops, no-till or strip till, or using a nitrification inhibitor when applying fall fertilizer. Participants include 900 first-time users and more than 1,000 past users who are trying cover crops again and receive a reduced cost-share rate.

There are 45 existing demonstration projects located across Iowa to help implement and demonstrate water quality practices through the initiative. This includes 16 targeted watershed projects, seven projects focused on expanding the use and innovative delivery of water quality practices, and 22 urban water quality demonstration projects. More than 100 organizations are participating in these projects. These partners will provide $19.31 million to go with over $12 million in state funding going to these projects.

Nearly $350 million in state and federal funds have been directed to programs with water quality benefits in Iowa in 2016. This total doesn’t include the cost-share amount farmers pay to match state and federal programs, and funds spent on practices built without government assistance.

More information about the initiative is at cleanwateriowa.org.

‘Fueling Our Future’
Through the “Fueling Our Future 100” initiative, Iowa Gov. Terry Branstad, Lt. Gov. Kim Reynolds and Northey announced that 217 ethanol blender pumps and 18 underground storage tanks will be installed at 70 sites by 17 companies to provide consumers with access to higher blends of ethanol.

The funding for the projects is from a $5 million competitive grant from the USDA Biofuel Infrastructure Partnership program Iowa received to support the initiative. All funds must be matched by nonfederal funds, including up to $2.5 million from the Iowa Renewable Fuels Infrastructure program. The fueling sites applying for assistance will also be required to provide a minimum of $2.5 million.

“Thanks to the investments made by the state, the federal government and by these companies, customers will have greater access to higher blends of renewable fuels. This will increase consumer choice at the pump and allow them to increase the amount of clean-burning, homegrown renewable fuels they use,” Northey says. “The ‘Fueling Our Future 100’ initiative, along with the EPA’s recent announcement of the RFS levels for next year, is good news for customers, the renewable fuels industry and our energy independence.”

Northey hits 10th annual county tour
In November, Northey completed his 10th annual 99-county tour of Iowa. Northey has visited each of Iowa’s 99 counties every year since taking office in 2007.

He says, “Visiting each county every year has been enjoyable and invaluable for me to better understand the diversity and scale of Iowa agriculture and also the passion and commitment of our state’s farmers. Getting out to our rural communities; visiting farms, businesses, schools and community meetings; and listening to a wide variety of Iowans is important for all elected officials as we seek to serve the people of our great state.”

 

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