Managing the 2020 farm crisis, farmers will need high efficiency. Learn how focusing on small fixes and expanding their market will help.
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Managing the 2020 farm crisis, farmers will need high efficiency. Learn how focusing on small fixes and expanding their market will help.
Going into 2020, farmers faced an uphill battle due to a number of circumstances. International trade wars, low commodity prices, and erratic weather patterns caused farmers across the globe to struggle just to get by. And some weren’t able to. Last year, nearly 600 family farms went bankrupt in the US, almost 100 more than in 2018. Then the COVID-19 pandemic arrived, dramatically shrinking GDP in virtually every part of the world by at least double digits, and sending farmers into an agriculture crisis. “2018 and ’19 were bad, but then we got hit by the virus, and finances got even worse,” says Robb Ewoldt, who farms 1,000 acres in Davenport, Iowa.
Ewoldt ruefully recalls that less than ten years ago, he was sitting pretty, selling soybeans for more than $14 per bushel. But, he says, “we can’t expect to make that kind of income now.” He adds that even if corn were selling for about $4.25 a bushel and soybeans for upwards of $10 a bushel, “we could make it work. We could survive on that.”
But since the virus hit last February, Ewoldt is facing low crop prices. He is losing about $1 a bushel for soybeans and 65 cents per bushel for corn. With more than 100 bushels of corn produced per acre and about 60 bushels of soybeans, “that’s a serious loss,” he says.
Low crop prices come from a range of virus-related conditions—everything from transportation disruptions (which reduce ethanol usage and, hence, corn prices) to shuttered restaurants, limiting demand. Moreover, farmworker availability has been affected by restrictions on international travel, placing further downward pressure on farm output and income.
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Still, there are a few positive signs for farmers in the midst of the recession. Agriculture has not experienced massive reductions in consumer demand and forced shutdowns as have other sectors such as air travel, hospitality, restaurants, and brick-and-mortar retailers. And in many countries across Europe and in the US, farmers are getting government subsidies to cover some of their losses.
During uncertain economic periods, farmers have few large pressure valves to open to reduce the financial impact. Part of the reason is that most successful farms practice highly efficient agriculture, and even under the best of circumstances, profit margins can be tight and volatile. Nonetheless, there are a series of potentially beneficial steps that farmers should consider to navigate difficult terrain.
- Focus on small fixes. “We continue to talk to farmers about getting back to basics,” says Nate Franzen, president of the agricultural banking division of First Dakota National Bank in Yankton, South Dakota. He advises farmers to evaluate their budgets more frequently than before, comparing projected expenses and income to actual, and making improvements as needed. Some farmers may be tempted to seek lower-cost seed, fertilizer, and pesticides. That may be possible in a few limited situations, but experts warn against the dangers of being penny-wise and pound-foolish. A lower-priced fertilizer may seem like a good deal until farmers find it reduces their productivity. Mindful of that, Ewoldt continues to buy high-quality inputs but has become stingier about their use. He used to broadcast fertilizer all over his fields, but, he says, “we only feed the soil where we will grow this year.”
- Expand your market. Ewoldt says that farmers have to “think out of the box” to find new revenue streams. For example, he has garnered a few contracts by finding buyers willing to pay a little more than current pricing for some produce, especially if it is a niche product. Depending on your farm, that may be a gourmet crop or even specialty flowers like lavender, can fit this category.
- Invest in the farm. This may be difficult to do when spare cash is limited, but bankers say that under some circumstances, they will offer farmers good, low-priced loans if they are thinking creatively and show a great deal of promise. For a farmer, borrowing money to prepare for a post-recession future can put you in a position to take advantage of better circumstances as soon as they arise. For instance, Ewoldt has been purchasing equipment for no-till farming, believing that it will improve his soil and allow for more abundant crops when demand returns.
Profit volatility is an inevitable facet of farming. It can’t be entirely eliminated. But by following some practical policies, farmers can reduce its impact and survive even during downturns.