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Q&A: John Lawrence

The interview below was published in the December 2016 issue of Successful Farming magazine.

John Lawrence has been helping farmers and future farmers his whole career. The former professor of economics, director of the Iowa Beef Center, and assistant director of the Experiment Station is now associate dean for Extension in Iowa State University’s College of Agriculture (among other roles). Lawrence has a practical and realistic view of the current farm economic situation. Here is his take.

SF: How do you rate the farm economy?

JL: I use the term purgatory for where we are in the farm economy right now. Good yields plus crop insurance are holding things together. We need a supply shock. We had a demand shock a decade ago with ethanol. Exports are another demand shock. Since 2013, the farm economy has been a train wreck in slow motion. It will take longer than we think to recover.

 SF: How do you track the situation?

JL: I started a task force in October 2014 that includes the Iowa Concern Hotline, FSA, Iowa Bankers Association, mediation services, and more. We meet quarterly and document the stress, mediations, foreclosures, default rate, and other tangible numbers. Concerns are beginning to pick up. The dollar volume of loan guarantees is up dramatically. Mediations are up sharply from last fall.  

SF: Does this downturn differ from the 1980s farm crisis?

JL: In the 1980s, the problem was land values, interest rates, and equity. This time, it is working capital and machinery debt. Farmers can’t cash-flow what they have. In the 1980s, there was one borrower and one lender. Today, there is one borrower and three lenders. In the 1980s, the plight of the farmer was different. Grandpa and Grandma were caught up in it, so there was a lot of sympathy from the public. Not sure that’s the case this time. Farmers had some good years, and many upgraded machinery.

SF: Who is most vulnerable in this farm crisis?

JL: Farmers who don’t own much land, who just rent. They will downsize or get out. Also, farmers who own some land, rent some, but who have a lot of machinery debt.

SF: Who is least vulnerable?

JL: Farmers sitting on cash. They didn’t overextend on machinery. They own most of their land. They will expand. Working capital is king. There is a lot of near-new machinery on the market. 

SF: Will we see a wave of farmers retiring?

JL: Yes. Those who went through the 1980s and recovered, but who are now seeing it sliding away – they are getting out. They may have a son or nephew who wants to take over, and they will hand over the keys.

SF: What else could happen?

JL: Divorces might go up. Unlike a generation ago, women today are less willing to go through this. The way some farms survived in the 1980s was that the wife got a job in town. Now, the wives already work. Farm assets and debt are tied up in a divorce, so that gets interesting.

SF: Where can farmers get help?

JL:

(Editor’s Note: Similar programs are available through Extension in other states.)

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