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Inflation is a long-term headwind for farmers, economist says

Use of corn, soybeans for renewable fuels to flatten out, economist says.

Farmers need to be wary of rising inflationary pressures on their bottom lines, two economists stated Tuesday at the Iowa Renewable Fuels Summit in Des Moines, IA.

Seth Meyer, chief economist at the USDA, said during a roundtable discussion focused on the economic outlook for agriculture, that inflationary pressures have boosted farm input costs which farmers won’t be able to recoup until they sell their crops in the fall.

Meyer also said that demand for corn and soybeans as feedstocks for renewable fuels such as ethanol and biodiesel is projected to be flat in the near future. However, he stated, export demand for corn from China is expected to be supportive for farm prices in the coming months, although supply chain issues and other impacts from the Covid19 pandemic are expected to have a large influence on farm prices as well.

Ernie Goss, chairman of regional economics at Creighton University in Omaha, NE, agreed with Meyer that inflation will be a long-range threat.

“A little bit of inflation is good,” Goss stated, if it stays in the two- to three-percent range. An inflation rate of 7%, he warned, isn’t good for agriculture or any other segment of the economy. Goss advised those who need to borrow money to do so now on a fixed rate, not an adjustable one, because rates are certain to rise in the near future.

Supply chain issues will be one of the major factors affecting farmers, Goss said, along with rising prices for fertilizer and other farm inputs.

READ MORE: 2022 could be profitable despite skyrocketing input costs.

Carbon capture on the farm

An Iowa State University agronomist speaking at the renewable fuels summit said that his research has shown that farmers can help reduce the amount of greenhouse gases (GHGs) in the atmosphere by capturing and storing carbon in their farm fields. 

By using cover crops and reduced tillage techniques and by incorporating livestock manure as a crop nutrient, Marshall McDaniel, an assistant professor in Iowa State’s agronomy department, said farmers can utilize carbon capture techniques to help agriculture reduce its carbon footprint. 

According to his Iowa State web page, McDaniel’s research team seeks to understand how soils and plants are affected by management and the environment. “They use this understanding, under the framework of soil health, to make agriculture more regenerative and sustainable,” according to the web page. 

One research project McDaniel said he has conducted with the help of biodiesel producer REG of Ames, IA, has examined the impact of crude glycerin, a biproduct of biodiesel production, as a soil conditioner that can enhance farm sustainability.

In response to a question from the audience following his presentation, McDaniel stated that one estimate shows that the amount of carbon in the soil can be doubled from levels it contains today. 

No-till technologies, cover crops, and manure application all can help increase the amount of carbon sequestered in farm fields, McDaniel said.

Biofuels Access Bill

Iowa Governor Kim Reynolds opened the conference by saying she supports efforts to boost the sequestration of carbon on the farm because farmers can benefit economically from it.

Reynolds also touted her proposal, known as the 2022 Biofuel Access Bill, which has been introduced in the Iowa legislature. The measure proposes making a blend of 15% ethanol in gasoline (E15) available statewide by 2026 and updates Iowa’s existing E15 promotion tax credit to nine cents a gallon year-round through 2025. 

Iowa lawmakers currently are reviewing her proposal, Reynold said, and she urged biofuels supporters to contact their legislative representatives in Iowa and Washington, DC to tell them that biofuels have widespread support in the state.

Reynolds told Summit attendees that renewable fuels contribute more than $4 billion to Iowa’s economy. The renewable fuel has widespread support in Iowa, Reynolds noted, citing surveys that report that 85% of Iowans think ethanol is critical to state’s economy.

“We have to fight” because the Environmental Protection Agency (EPA) has worked against biofuels, the governor said, by favoring electric vehicles over biofuels. “We need to push for an all-of-the-above fuels policy,” Reynolds stated.
 

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