By Andi Anderson
The economic pressures facing Iowa agriculture are significant, but experts at the Iowa Farm Bureau’s annual economic summit on June 14 in Ankeny provided reasons for optimism. Farmers and agricultural stakeholders gathered to hear forecasts and strategies to navigate the volatile environment caused by domestic inflation and global conditions.
Don Vaske, a farmer from north central Iowa, attended to learn about industry trends. “It’s always good to have a perspective on past and future trends,” he said. “Basically, you don’t want to make the same mistake twice, and we know the farming economy is volatile and goes up and down.”
Farmers have been impacted by inflation and high interest rates, leading to rising input costs and reduced margins over the past two years.
While net farm income reached record highs in 2021 and 2022, crop prices have since cooled, and costs for inputs like fertilizer, machinery, and labor have risen, driving down farm income in 2023.
Jim Knuth, a lending executive at Farm Credit Services of America, explained that this has led to a high-cost, low-margin environment for most grain producers. To remain profitable, farmers need to enhance risk management, use crop insurance, market meticulously, hold onto more cash, and cut costs.
“2023 was the most expensive crop we’ve ever planted, and ’24 will be the second-most expensive crop we’ve ever planted,” he said.
The USDA expects net farm income to decrease by 25% in 2024 from 2023, following a 16% decrease from 2022 to 2023. Despite inflation easing on consumer food prices, input costs have not decreased accordingly.
Michael Folsdick, a corn and soybean farmer from Sperry, Iowa, anticipates higher production costs will continue to be a challenge.
Interest rates have risen due to efforts by the Federal Reserve to cool inflation, increasing borrowing costs for machinery and land.
Austen Goolsbee, president and CEO of the Federal Reserve Bank of Chicago said that interest rates will decrease only if inflation does. However, Knuth does not expect rates to return to the 1-2% range seen over the past decade.
High interest rates particularly challenge younger farmers like Folsdick, who lack the operating capital and liquidity to expand their operations. “It is certainly a little bit of a disadvantage for a younger producer,” he said.
Despite these challenges, there are areas of optimism. Advances in technology are driving productivity, allowing farmers to achieve higher yields. Iowa’s crop yields in 2023 were sustained despite drought conditions, thanks to engineered seeds that can survive drier climates.
Goolsbee emphasized the potential long-term payoffs of capitalizing on technological improvements.
Photo Credit: gettyimages-d-keine
Categories: Iowa, General