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By Mike Scott, NEMOnews Media Group
“Crop yield in 2020 looks to be good, but several factors, particularly weather, can impact the crop before it actually makes it to the bin,” Valerie Tate, MU Extension Agronomist.
Agriculture is the backbone of the economy across northeast Missouri. According to the Missouri Department of Agriculture, the economic impact of agriculture, forestry and related industries in Scotland County was enormous. Sales in Scotland County topped $125 million dollars. Labor income was over $34 million dollars, and the ag industry accounts for 978 local jobs, and contributes $8.7 million dollars in taxes.
To get a better look at the challenges faced by area farmers, we contacted Karisha Devlin, MU Field Specialist in Agriculture Business.
How do the 2020 harvest yields look across northeast Missouri?
Despite a flash drought this summer, the crops look pretty good. Crop genetics have improved the ability for crops to handle stress. The USDA NASS Missouri Crop Progress & Condition Report (Sept. 8, 2020) rated corn condition as 2 percent very poor, 5 percent poor, 19 percent fair, 57 percent good, and 17 percent excellent. Soybeans setting pods progressed to 95 percent compared to the 5-year average of 89 percent. Soybeans turning color was 6 percent compared to the 5-year average of 17 percent. Soybean condition was rated 1 percent very poor, 4 percent poor, 22 percent fair, 57 percent good, and 16 percent excellent.
What are the current commodity prices? How do they compare to last year?
As of today, the CME group (board of trade) prices are higher now than they were at this time last year. The prices change throughout the day and night, so the prices I quote you will not necessarily be the price when this article is published. As of today, corn is $3.69 (December CME price) and soybeans is $9.98 (November CME price).
How has the weather this year impacted prices?
Weather is one of many, many factors that affects commodity prices. We are trading in a global market, so weather factors from around the world affect the prices here. In my opinion, trade/tariffs, global demand, exports, and COVID has had as much impact on price as weather.
What impact did the drought and derecho in Iowa have on prices?
As stated earlier, there are many factors that affect commodity prices. The drought and derecho have more of a local impact than national. Although the dereco impacted 37.7 million acres of farmland across the Mid-west, not all of those acres were lost. While the dereco does lower overall national production it could be positive for prices.
On average, what are a farmer’s total expenses per acre?
A farmer’s total expenses are going to vary by commodity and by farming operation. Below I have shared MU Extension budgets estimated ownership costs per acre and per cow. MU Extension budgets are designed to assist Missouri producers and other agricultural stakeholders in evaluating expected costs and returns for crop and livestock enterprises. They present production economics information, data and analysis estimated in the fall season for the upcoming production year. The budgets can be located at: https://extension2.missouri.edu/programs/agricultural-business-and-policy-extension/missouri-crop-and-livestock-enterprise-budgets. Below are the 2020 total estimated ownership costs for corn, soybeans, and cow/calf.
Corn 2020 Budget – $567.05 per acre
Soybean 2020 Budget – $411.87 per acre
NE MO Cow/Calf 2020 Budget – $1,041.46 per cow (fall calving) $1,020.81 per cow (spring calving)
Many farmers have been holding off on buying new equipment. How long can they continue to delay purchases?
The last few years have been financially tight for many
agricultural producers. Agriculture is cyclical, and we came off of a few fantastic years and have hit some challenging ones – weather wise and financially. COVID has definitely increased the challenges producers already faced. Data from the 2020 Farm Income Update by FAPRI-MU shows farm income was supported in 2020 by record government payments tied to COVID-19 relief efforts. However, with no CFAP, PPP, or MFP benefits assumed in 2021, government payments will fall by more than 50 percent. Although farm cash receipts are down in 2020, FAPRI shows an increase in 2021 and jump in 2022 as an assumed macroeconomic recovery takes hold. The FAPRI baseline shows relatively stable values of farm real estate and other assets. On the other hand, the FAPRI baseline shows farm debt continuing to grow at a modest rate. The farm debt-to-asset ratio has increased every year since 2013, and that trend continues through 2025.
Purdue University/CME Group puts out a monthly Ag Barometer report. In the September report, they asked specifically about plans to purchase farm machinery in the upcoming year, fewer farmers (48 percent) in August reported that they plan to reduce their purchases this year than in prior months.
I think farmers are thinking about financial health overall, as they need to be. Farmers are good about taking care of their equipment, and bargain shopping. If you need to replace a piece of equipment, be sure to pencil it out and look around for options. Equipment doesn’t have to be brand new, you can find equipment that has been used but has low hours on it. Another option is share equipment with another farmer by going in together on a purchase.
How much impact does farming have on local economies?
Agriculture is very important to our state and local economies. In 2016, the state of Missouri conducted a comprehensive study of the economic contributions of Missouri agriculture and forestry. The findings showed an $88.4 billion ($33 billion in value added and $55.4 agriculture inputs) economic impact to the Missouri economy. In congressional district 6, the economic contributions of agriculture, forestry and related industries are:
• Sales: $19.3 billion
• Jobs: 88,705
• Value-added: $7.2 billion
• Inputs: $12.1 billion
• Labor income: $3.8 billion
• Taxes: $1.3 billion
The break-down by county can be found at http://agriculture.mo.gov/economicimpact/.
What challenges have farmers and beef/hog producers had due to COVID-19?
COVID-19 has been challenging to everyone. All producers had to think about their workers’ safety and COVID-19 precautions. However, it was the livestock producers that were hit the hardest by COVID. When the lockdown went into place, restaurants and schools closed. All of a sudden, the demand for products suddenly dropped. Dairy farmers had a surplus of milk with nowhere to go. Cows are milked every day, so if it is not being picked up or processed, than it has to be dumped. Additionally, outbreaks of COVID-19 at meatpacking plants led to significant disruptions and created issues of oversupply and low prices for livestock producers. All of a sudden there were all these animals ready to be processed, and had no where to go. Local processors were soon overwhelmed by demand and could not keep up with it. Without processing facilities for these animals, hog and poultry producers faced having to make depopulating (euthanization) decisions for their animals. This had a huge impact, both emotionally and financially, to livestock producers. In the beef industry, many held back animals from going to the sale barn due to reduced prices or because the sale barns wouldn’t take them. This affected their cash flow, as they didn’t have income coming in and had more feed costs associated with those animals. Overall, market prices for livestock are still depressed, due to backlogs from reduced processing capacity. COVID is forecasted to affect the livestock industry into 2021.
How does the future look for farmers in northeast Missouri?
I’m an optimist, so I believe the future is what you make it. I do think we will see more challenges in the next few years, but I also believe farmers are resilient. Risk management is key in moving forward. Be good managers – work with your lender, know what your operating costs are, market your products to get the best possible price, and pay attention to your input costs and cash rent. I also encourage farmers to be open to new ventures and opportunities.
Like everything, agriculture is constantly changing. Those producers who are willing to change with it and adapt will do well. Those who want to farm like their parents or grandparents did and make no changes, will probably struggle. Again, risk management is the key in moving forward.