Iowa corngrowers should dispense with last year’s crop to make room for perhaps an even bigger 2020 yield while markets are tanking from last year’s tariff wars and this year’s COVID-19 threat.
Iowa farmers should expect millions more in subsidies for a third year of federal crop price bailout payments for relief from trade deals that have yet to influence prices.
Iowa Secretary of Agriculture Mike Naig was among panelists at Cinnamon Ridge Farms annual agriculture summit April 1 who affirmed that Chinese and North American trade deals announced earlier this year have had no impact on markets shut down by trade wars with America’s largest partners.
“The history books will have some chapters to be written on that question. The government has done a good job from the standpoint of cushioning the producer with the market facilitation payment,” said Brian Basting, a market analyst for Advance Trading, Inc. “It goes without saying the economic impact has been detrimental to U.S. producers in terms of lower prices for goods. I’ll definitely acknowledge that.”
Basting, Naig and Wisconsin-based dairy analyst Aaron Stauffacher assembled online for Cinnamon Ridge Farm’s sixth annual spring summit. Instead of meeting at John and Joan Maxwell’s Donahue dairy farm, the trio spoke to an online audience of up to 90 for a two-hour conversation moderated by agriculture journalist Bruce Gaarder, of Brulin Communications.
Naig said he supported Gov. Kim Reynold’s reluctance to impose a stay-at-home order, and urged producers to “go ahead and take delivery of seed. Top off fuel barrels. Let’s be ready when crunch time comes.
“Rest assured there will be assistance coming. We don’t have a lot of details on the how, or when, or how much. Generally, what I’m hearing is all sectors of agriculture will receive some support,” Naig said.
Federal government commodity support in Scott County alone reached $7.8 million in 2018, and jumped to at least $9.96 million, mostly to compensate for tariff war price drops, according to Environmental Working Group presentation of USDA data.
Iowa remains No. 2 in the nation for crop subsidies directly tied to tariff wars.
Sell 2019 corn
Basting urged Iowa farmers to sell their 2019 corn ahead of a season that could see record acres further diminish corn prices.
“I have a strong belief that a considerable amount of old crop corn still is in the hands of producers. I strongly encourage the audience to look closely at those bushels. The market is breaking this morning to new lows. The challenge we see immediately for those folks is equity being drained on those bushels.
“I strongly encourage producers to get control. By control we mean establish a floor for those bushels. Sell, or put on an option. There are a number of different strategies, but getting control of your old crop is very important. It allows you to turn attention to your new crop.”
Basting said the most recent USDA survey estimates U.S. corn acreage at 97 million acres, about 10 percent higher than 2019.
“You could build quite a bearish scenario,” Basting said. “We could be looking at close to 97 million acres planted. We could be looking at burdensome corn production.
“We could build a scenario where corn could be below $3,” a bushel, he said. “I don’t want to be doom and gloom. There are things to be positives. We could move forward and see China buy quite a bit more corn. China did buy some corn in March. Dry weather is developing in key areas of Brazil. We’ve got a weather market going on in Brazil as we speak.”
Naig said last year’s tariff war worries have been eclipsed by COVID-19 in ways he never anticipated.
Even as U.S. ethanol policy remains in doubt, the fuel market tanked under travel restrictions.
“Absolutely the ethanol industry is in dire, dire straights right now,” Naig said. “The price of oil is below $20 a barrel. That’s an historic number. You’re talking a 20, 30, 40 percent reduction in amount of fuel needed, arriving at a time with still uncertainty of RFS policy.”
Naig expressed hope the Trump administration would finally give up its fight to allow small refineries to avoid renewable fuel standards. U.S. corngrowers and others challenged the president’s waiver of renewable fuel standards for small refineries. An appellate court on March 27 ruled against the president, lifting corngrowers’ hopes for a resumption of ethanol use.
But Naig said plunging fuel consumption will outpace any relief the court provided against the Trump EPA rule.
“The saga continues, unfortunately,” Naig said. “A billion gallons of ethanol demand got let out the back door. That doesn’t work for the long turn. There will be plants where production has to come off line. It’s several billion gallons’ worth of ethanol production that needs to come off line. It will affect amount of corn consumed.”
Naig said the Trump administration has not appealed the ethanol ruling. “It could appeal directly to the Supreme Court. They have until April 23 to decide. That’ll be next thing to watch. We’re trying to convince the administration this is exactly the wrong time to turn your back on rural America, or rural Iowa, certainly. These are manufacturing jobs, great jobs. Lot of time they are locally owned businesses.”
Conservation
Naig said Iowa remains committed to a largely voluntary nutrient reduction strategy that subsidizes conservation practices intended to keep fertilizer from washing down river.
“We believe non regulatory approaches really work, if they are locally led. We’ll support with some financial and technical assistance at the state level,” Naig said. “If we can’t ultimately prove that approach is better than a regulatory approach, then we shouldn’t be surprised if that comes in some fashion.”
He noted that consumer preferences might lead to market pressure for nutrient reduction. “You don’t want to end up with some end users – restaurants, grocery chains – saying this is how we decided we want products produced.
“If that restaurant is going to capture some value with how that product is produced, that needs to be shared back with the farmer.”
Looking ahead to November, Naig said if Congress, “flips one way or the other, we likely will have some sort of climate legislation that comes. Agriculture must be in a position to engage in that conversation.”
He said farmers must be part of any effort. “Agriculture can sequester carbon. We are a solution, not a problem. I think carbon is something we’re going to be talking a lot about in agriculture in the next couple of years. We can provide a service that is worth something to someone else who will pay for it.”