Declining farm income

Average net farm income in Iowa from 2010 to 2018.

About 44% of Iowa farmers are struggling to pay their bills as low commodity prices, unpredictable weather and lingering trade disputes conspire to wreak havoc on the agriculture industry.

The recent study released by Iowa State University included information on the percentage of producers having difficulty covering costs related to fertilizer, seed and other short-term needs.

The percentage of Iowa farms with “vulnerable liquidity ratings” has been in the 44% range since 2016. In 2014, it stood at 31.3% before climbing to 40.2% in 2015.

The recent statewide findings come as little surprise to farmers in the tri-state region.

Dubuque Country Farm Bureau President Craig Recker said local crop and livestock producers have faced steep challenges for years. And he emphasized that conditions are getting worse, rather than better.

“The cost to do business keeps going up and what they are paying us keeps going down,” said Recker. “It keeps crunching the margins. It is becoming a big problem.”

That comes despite the fact that Iowa farmers are poised to receive the most government payments this year in relation to the ongoing trade war with China.

Farmers in the state will receive $767 million in payments from President Donald Trump’s $16 billion trade assistance program this year. The U.S. Department of Agriculture announced a second round of payments under the program earlier this month.

Illinois will receive the second-highest total, at $707 million.

But the Iowa State report illustrates how agricultural challenges have played out over the course of the decade.

Average net farm income in Iowa topped $243,000 in 2012, but sat at less than $59,000 in 2018, according to the report. This figure has rebounded slightly since bottoming out at $27,927 in 2015.

Even so, the eroding profitability has led to “a deterioration of the overall financial health” of the farm sector. The report shows how these shifting economic realities have affected farmers in the short term.

NO RELIEF

Area experts believe the financial challenges only have intensified in 2019.

Jo Daviess County (Ill.) Farm Bureau Manager Annette Eggers said weather conditions have plagued farmers throughout the year.

“Farmers were unable to get crops in in a timely manner, and they haven’t been able to get their crops out in a timely manner,” she said. “That really affects cash flow a lot.”

The ongoing trade disputes with China have largely cut off U.S. farmers from that market, which has dramatically reduced exports, especially for soybeans.

Iowa Soybean Association board President Tim Bardole said the additional payments will help but won’t solve all the problems farmers are having this year.

“I don’t know of any farmers who aren’t short of money right now,” said Bardole, who farms near Rippey. “It’s definitely helpful, but it’s not a cure for the issues at hand.”

Recker said such payments have helped some farmers get by. In the broader picture, however, it doesn’t offer much comfort.

“It’s kind of a Band-Aid approach,” he said. “It isn’t a long-term solution.”

Last year, U.S. farmers received about $8.6 billion in assistance during the first year of the trade war as part of a $12 billion aid package.

Iowa farmers received $987.7 million in last year’s agriculture bailout, second only to Illinois growers, who received $1.1 billion.

Eggers said many farmers still believe the international disputes will serve a long-term purpose. However, she acknowledged that producers already have been impacted by the turmoil much longer than they anticipated.

“There are a lot of different layers right now,” Eggers said. “When you pile those up, it really adds to the tensions.”

MAINTAINING FOCUS

While the struggles of the ag industry often are described in broad strokes, Recker emphasized that different types of farmers are confronting different kinds of challenges.

Recker, who raises cattle, believes the scant number of packers in the industry has created near-monopoly conditions.

Beef farmers are forced to accept whatever they can get for their cattle, often “losing money or breaking even” in the process. But these packing companies continue to turn solid profits when they sell the meat to retailers.

Crop producers, meanwhile, face “a demand problem,” according to Recker. Farmers have produced solid yields in recent years, but trade disputes have left them unable to find an adequate market for their crops.

The juxtaposition of problems has left many farmers concerned about the future. In some cases, Recker suggested, the only solution is to focus on the few things that can be controlled.

“Farmers make up less than 2% of the population, but everything that goes on in the world affects us, from weather to trade disputes,” Recker said. “It is a volatile business. You just try to run your operation the best you can and stay positive.”

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