You are here

Straight Talk on the Farm Economy

John Lawrence gives his take on the economics of agriculture in 2016.

John Lawrence has been helping farmers and future farmers his whole career. A former professor of economics, director of the Iowa Beef Center, and assistant director of the Experiment Station, and 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 is the farm economy?

JL: I use the term purgatory for where we are in the farm economy right now. Last year’s good yields, plus crop insurance, are holding things together, but 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 farm downturn differ from the farm crisis of the 1980s?

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. I'm not sure that’s the case this time. Farmers had some good years and many upgraded machinery, pickups, and homes.

SF: Who is most vulnerable in this farm crisis?

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

SF: Who is the 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, recovered, and now see it sliding away – they are getting out. They may have a son or a 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 financial stress. The way some farms survived in the 1980s is 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?

Call the Iowa Concern Hotline at 1-800/447-1985 or go online at http://www.extension.iastate.edu/iowaconcern/.

Iowa Mediation Services can be reached at 515/331-8081 or online at http://www.iowamediationservice.com.

Contact your county Extension office or go to http://www.extension.iastate.edu.

Read more about

Talk in Marketing

Most Recent Poll

How many 2019 inputs did you buy in 2018?