Q&A: Scott Irwin
DES MOINES, Iowa -- If trade is the hottest topic flowing through the agricultural industry at the present time, ethanol is right behind it. Both have been in the news headlines for over a year. When one ag economist in particular speaks (or writes) about ethanol policy issues, President Trump listens.
Recently, Successful Farming caught up with that ag economist who has his finger on the pulse of the Renewable Fuels war.
Scott Irwin, Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois, shares his thoughts on topics spanning his childhood farm background, the future of the ag economy, and the possibilities of a black swan event turning the industry around.
SF: Tell us about your farm background.
Irwin: I grew up on a grain and livestock farm in west-central Iowa, in Bagley, Iowa. My parents had 2,000 acres and raised about 2,000 head of hogs. Our family farm is still in operation, run by my nephew. And I still help with the grain marketing of our Iowa farm.
But I was a typical farm kid growing up, and I worked mainly in the hog operation. As I was attending college at Iowa State University, I learned very early the concept of the substitution of capital for labor. During the early 1970s, sophisticated hog operations were using skid steers to clear manure. While I was in high school, I begged my dad to get one, but he didn’t. After going off to college, I returned home, one weekend, only to find a brand-new Bobcat skid steer sitting right in the middle of the hog lot. At that moment, I understood the concept of the substitution of capital for labor – and the monetary value of my labor per year.
We had the sow crates where you let the sows out twice a day for feeding. We even farrowed sows in the pasture, during the summer, in A-frames.
SF: How did you get interested in grain markets?
Irwin: For years, my dad managed grain elevators, before settling on the farm. He knew a lot about hedging and staying very attuned to the markets. Right through my high school years, we had the 1972-1975 price boom in agriculture. And that is what really caught my attention. Dad took me to marketing meetings and it was so exciting and it hooked me. Forty years later, I’m still interested in the same things that I was as a teenager on the farm.
SF: Did you ever have the opportunity to make farming your occupation?
Irwin: Yes, my dad really wanted me to be a farmer. I had two sisters, but I was the only son. But after I finished my undergraduate at Iowa State University, I decided to get a master’s degree. At that point, I still always thought that I would return to the farm. But once I got into the master’s and doctorate programs at Purdue University, I discovered that the academia world was the place for me. I loved it.
Interestingly enough, from an early age, my family’s nickname on the farm for me was Prof, as in Professor, because I was reading all of the time.
SF: What’s the biggest improvement in farming, over the years, from your standpoint?
Irwin: I think the change in farmers’ personal health and technological change. My grandmother was a huge mentor of mine. She always marveled at how many farmers were overweight. Because, for most of her life, farming was such backbreaking, manual labor, that most farmers were terribly skinny and worked themselves, physically, to death. Technologically, the move from mules to tractors to four-wheel drive tractors, you can’t deny the technological changes in farming. And today, this data and informatics revolution is changing farming again.
SF: From your desk as an economist, is this farming industry going through a scenario similar to the 1980s?
Irwin: Not yet. Because we didn’t start this period of margin compression and losses on grain production with the same level of debt that we saw in the 1980s. We did not have the same debt-fueled bubble in farm asset values, in the last decade, like we had in the 1980s. The boom years, in the 1970s, didn’t last that long. This boom, 2006-2014, we had at least seven just outstanding income years. So for a variety of reasons, we have had a bigger boom, with prices staying higher longer.
But, could we be headed into an era like the 1950s and 1960s? There is a lot of technological change that is increasing crop yields, creating a consistent overhang of surplus in the markets and a slow grind downward in crop prices. This creates a chronic squeeze on income and liquidity on the farm.
The good news, in Illinois, our research shows a surprising number of farms that don’t have any debt. They may not be making any money right now. But, even with these low prices, they are not in 1980s-style financial trouble.
SF: You have become a national expert on the ethanol industry, writing weekly articles on farmdocDaily.com. Has the Trump administration consulted you on this topic?
Irwin: I have never been formally consulted by the Trump White House. I don’t know anybody, personally, inside the White House and have never had a direct connection, that I can remember. But I do know that what I have written about the Renewable Fuel Standard (RFS) policy has been read to President Trump. I have never taken a dime of funding from either side of what I call the RFS Wars. I don’t want anybody to question my work. People on either side keep trying to find the person who is funding my work; that person literally does not exist.
SF: You are a big fan of the social media network Twitter. Why?
Irwin: My students told me about four years ago that Twitter is where a lot of grain traders post comments. So, I decided to try and figure out how to post my comments on that platform. Man, have I enjoyed it. That’s the part of my job that I enjoy the most. And that has dramatically amplified the platform that I have for influencing the policy debate in all of the biofuels areas. FarmdocDaily.com is where I place analysis, tweet my opinions.
SF: What has to happen to bring back the ‘happy days are here again’ feeling in farming?
Irwin: I think there are two things that have to happen. One would be a front-loaded purchases of ag commodities in a China trade settlement. And one that is much bigger than expected. Another is a black swan event, a traditional way that prices come back. We need a drought on the scale of 1988 or 2012 to clear the decks of supply.
SF: If you could eat dinner with a farmer, what would you like to visit about?
Irwin: My dad always told me that he had above-average yields. I would like to talk to a farmer, in an incredibly detailed level, about how they approach planting decisions. I want to know how they plan for it, how they figure what the optimal planting window is, and how they configure their machinery and labor into optimizing the start of their spring crops. I think it’s a very underappreciated management skill. In fact, this might help us understand the differences between the most profitable farms from the less profitable ones. Secondly, it is an underappreciated factor in the yields recorded in the last five years. As a farm family, we put in as much time checking depth and spacing of seeds in the spring than anyone around us. Dad understood that top yields not only require good hybrids, fertilization, and herbicide programs but he also wanted his fields to be ‘factory even,’ meaning seed spacing and its depth in the soil as consistent as possible. Today’s technology is doing a lot of what my dad always tried to accomplish. I think these decisions have market implications. My career is not that complicated: I’m interested in anything that affects the price of corn and soybeans. Better understanding the efficiency and success of farmers can help us understand yield estimates.