Tough times on the farm: Why Midwest agriculture was on the ropes before coronavirus
Greg Porth harvests soybeans on October 2, 2013 | Scott Olson/Getty Images
All in all, 2019 was a terrible year for farmers across the Midwest. And 2020 doesn’t look much better.
Bad weather, trade wars and low prices due to oversupply all contributed to the grim economic news, even before the COVID-19 pandemic began wreaking havoc with export markets.
“Agriculture has been in a pretty strong downturn for a lot of commodities,” said Paul Mitchell, a professor of agriculture and applied economics at the University of Wisconsin, who’s of no relation to the Michigan congressman.
“Oversupply and low prices are a problem for corn, soy and dairy,” Mitchell adds. “Trade wars only exacerbated the problem. And 2019 was a horrible production year.”
The United States set a stunning record last year of 20 million acres of “prevented planting” on land that was unusable for crop production because of historic flooding and record rainfall, much of it in the corn belt. That was more than double the previous record of 10 million acres set in 2011.
Crop insurance payments to the farmers whose fields were destroyed, along with $14.3 billion in direct payments to farmers through the federal Market Facilitation Program (to make up for lost sales because of trade wars), propped up farm income, which otherwise would have been down from 2018 — another bad year.
“While this aid is appreciated, I fear I speak for the bulk of our nation’s farmers when I say it may be too little, too late,” Wisconsin Farmers Union President Darin Von Ruden said in a statement last August, after the President Trump administration released its emergency aid package for farmers affected by the trade wars with China and other nations.
“The USDA [U.S. Department of Agriculture] aid package is a Band-Aid on the gaping wound of unstable markets,” Von Ruden added, calling instead for efforts to work toward building an agricultural economy that is embedded in local and regional communities, rather than depending on exports.
With the COVID-19 crisis, many federal lawmakers are pushing for relief to rural areas across the country.
Farming in Michigan
Farming plays a crucial role in Michigan not only because of the amount of jobs that it provides, but because of the billions of dollars it contributes to the state’s economy.
The food and agriculture industry contributes $104.7 billion to the state’s economy annually and employs more than 805,000 people, accounting for about 17% of the state’s employment, according to data from the Michigan Department of Agriculture and Rural Development (MDARD).
There are 46,700 farms across the state, and 12,000 of them raise livestock, while others produce field crops, which are the two products that have the greatest impact on Michigan’s economy.
Combined, livestock including dairy and field crops account for $10.25 billion of Michigan’s farming industry annually — but those same sectors were hit by several hardships in 2019.
One hardship was flooded fields. The state saw 37.9 inches of rain between May 1, 2018, and April 30, 2019, as reported by the Advance, which made it impossible for farmers to plant crops like soybeans and corn.
In an effort to help farmers across the state, Gov. Gretchen Whitmer wrote U.S. Secretary of Agriculture Sonny Perdue in June 2019 urging the U.S. Department of Agriculture (USDA) to declare a disaster designation in 64 of Michigan’s 83 counties and to allow farmers flexibility under the Federal Crop Insurance Program by permitting them to harvest cover crops in September instead of October for livestock feed.
Perdue granted Whitmer’s request a day later.
While Perdue approved 43 counties as primary disaster areas, 31 contiguous counties — which border the 43 primary counties — also qualified for disaster designation, making a total of 74 counties in the state eligible for disaster assistance from USDA’s Farm Service Agency (FSA), provided eligibility requirements are met, according to Michigan Farm News.
In addition, Michigan farmers faced a rough harvest in fall 2019 due to variable crop conditions, wide-ranging stages of crop maturity as well as snowy and muddy fields, according to the USDA’s National Agriculture Statistics Service (NASS) website.
Bankruptcies were another hurdle for farmers in Michigan. There were 14 filings for Chapter 12 farm bankruptcy from July 2018 to June 2019, according to U.S. courts calculations, five more than the previous year, as previously reported by the Advance.
Tariffs also hit Michigan farmers hard in 2019 due to President Donald Trump’s escalating trade war with China and other major trading partners because they made it harder for farmers to export goods like soybeans, dairy products and other types of grain.
A deal was initially struck with China back in January, called the China Phase-One trade agreement, which requires the country to change their economic and trade regime in areas focused on intellectual property, technology transfer, financial services, and currency and foreign exchange, according to the USDA.
The agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years. Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.
Another trade agreement that has been billed as benefiting farmers is the United States-Mexico-Canada Agreement (USMCA), which is aimed at creating more balanced trade supporting high-paying jobs for Americans and growing the North American economy.
The USMCA signed in January replaced the previous trade agreement known as North American Free Trade Agreement (NAFTA) signed in 1994, which many have credited with hurting American manufacturing as companies moved production south to Mexico for lower labor costs.
During a February news conference, Michigan Farm Bureau president Carl Bednarski credited both Trump for successfully closing two major trade deals.
“January 2020 is one for the history books of American agriculture,” Bednarski said in the introduction. “We waited a long time, and we had a tough year in 2019, but we’re finally seeing the fruits of these efforts.”
Perdue, who also attended the conference said that NAFTA needed a “good house cleaning.”
Get big or get out
Experts agree that American farmers are suffering because of the way the system is geared toward more and more production and lower and lower prices.
Even after last year’s low yield, “basically, the [reduced] crop that was planted and harvested produced enough corn to meet demand at a fairly low price,” Mitchell said. “Same for soybeans. I cannot imagine if all those acres had been planted and yields had been good. Prices would have been very low.”
In other words, farmers do poorly when they don’t produce much, and when they produce a lot, prices go down, which also hurts them.
For every dollar American consumers spend on food, U.S. farmers and ranchers earn 14.6 cents according to a 2019 USDA report — a new low since the USDA began keeping track of the statistic in 1993.
“The market tells people, ‘We don’t need as much as you’re producing,’” Mitchell said. So American farmers have become heavily dependent on export markets to unload all their extra product. Right now, that makes their situation particularly dicey.
“Apple will never make more iPhones than they can sell for $1,000, or whatever their price point is. They’re highly coordinated,” said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin’s College of Agriculture and Life Sciences. The same is not true for farmers: “because they’re uncoordinated, they overproduce.”
But overproduction is also longstanding U.S. policy, ever since President Nixon’s Secretary of Agriculture Earl Butz told farmers to “get big or get out,” rejecting the New Deal supply management policies that protected farmers and kept a floor on prices, and moving the country toward a vision of agribusiness-friendly cheap, mass production.
At the World Dairy Expo in Wisconsin last year, Perdue told the state’s struggling dairy farmers, “We are a country so blessed that we have to depend on foreign markets because we are so productive.”
Asked about the future of the dairy business in Wisconsin, the state that leads the nation in farm bankruptcies, with years of low prices driving family farms out of business, Perdue channeled Butz: “In America the big get bigger and the small go out. I don’t think in America we, for any small business, we have a guaranteed income or guaranteed profitability.”
The wrong kind of farming
“He’s supporting all the wrong kinds of farming in my book,” said retired organic dairy farmer Jim Goodman, who recently gave up his small herd. “The trend has been to produce more and more with no one asking how much might be too much.”
“The price consumers pay at the store has nothing to do with what farmers are earning,” Goodman adds. A handful of large food companies reap the profits, while farmers continue to suffer from low prices.
A recent report by the Center for American Progress backs up his point: “Direct farmer-to-consumer sales make up a negligible portion of farmers’ sales; most farmers’ real customers are the processors, grain traders, and marketers that buy raw goods from farmers and then grade, package, process, manufacture and distribute them as food products.”
The report also notes that “almost every step of America’s food supply chain has grown more concentrated in the past few decades.” Pesticides, farm equipment, seed suppliers, processors and commodity buyers have shrunk to a handful of big companies thanks to mergers and acquisitions and increasing corporate consolidation, leaving “relatively small farms and ranches vulnerable to exploitation at the hands of the oligopolies with which they do business.”
Nestle, the world’s largest food company, reported that its 2019 net profits rose to $12.9 billion according to a Dow Jones Newswire report. “Profitability improved again and reached our guided range one year ahead of plan,” said Chief Executive Mark Schneider.
Dairy industry struggles
Dean Foods Inc., the largest dairy company in the United States, filed for bankruptcy in 2019, citing high debt and diminished consumer demand for milk as dairy alternatives like oat milk become more popular.
Nowhere has the farm crisis hit harder than in Wisconsin, where, for the last several years one to two dairy farms have been going out of business each day.
“We clearly are in a big crisis and that’s easily seen by the attrition rate on farms over the last three years,” says UW dairy expert Stephenson.
“But this is because of about five years of suppressed prices,” he adds. “It’s not that the price drop is so steep. It’s that it’s so persistent. If you look back in time, farms carried a lot more debt and banks were willing to lend at higher rates.” Farms could get through a downturn by putting off purchases and waiting for a better year. “This has just been too low for too long.”
What’s startling is that even as the number of dairy herds has been cut in half over the last 16 years — dropping from 15,838 in March 2004 to 7,258 in March 2020, according to the state agriculture department — the number of cows has stayed steady at about 1.2 million. There are just fewer herds.
“I read about a farm in Texas that’s milking 100,000 cows. If you extrapolate, we’d only need 90 farms that size to meet the demand for the entire U.S.” Goodman said. “Is that what we want? That’s just insane.”
What’s the solution?
The National Farmers Union’s “Farmer’s Bill of Rights” endorsed by U.S. Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), demands big, structural change in the whole U.S. food system.
That included a fair income for farmers, more competition and the break-up of huge agribusiness monopolies, local supply stores and processing facilities, and the “right to repair” farm equipment banning contracts that require farmers to take tractors and other equipment back to the dealer and pay for expensive repairs.
Goodman supports the Bill of Rights, as well as the idea of a Canadian-style production management system. “If we had programs similar to the New Deal — production limits and floor prices, farmers might stand a chance of making a decent living again,” he said.
Mitchell hesitates to go that far. “It’s very complicated,” he said, noting that many farmers are conservative and don’t like the idea of heavy-handed government regulation.
Still, times are tough for big and small producers alike, and there may be more openness to some sort of supply control model than there was in the past, he said: “Hey, they’re talking about it.”
“I don’t think we’ll ever go as far as a Canadian system,” said UW dairy expert Stephenson. “It’s very strict, you have a piece of paper saying you can only sell a certain amount. And there are strict import controls, too.”
Still, Stephenson believes there could be ”a system of supply control, one without strict limits, but you pay less if you go above and beyond a suggested amount in the market.”
“We have to either cut back production or enhance demand,” said Mitchell, who recently attended a dairy innovation conference that was all about developing new products that appeal to a public that has a declining appetite for milk.
“It’s the same with corn and soy — finding new uses for it,” he said. “Five or six years ago all the talk was about biodegradable plastic made out of corn.”
“The standard response is to find more uses for products,” he added.
There is no more obvious sign of the times than the fact that the top ag policy issue in Wisconsin is farmer mental health and suicide prevention.
The Department of Agriculture, Trade and Consumer Protection (DATCP), has begun offering a series of workshops entitled “unexpected tomorrows” to “support farmers facing increased stress due to economic challenges.”
DATCP has also been offering weekend couples workshops to help families cope with stress.
The Ag Department is struggling to deal with the human fallout from the statistics it keeps that show between December 2018 and December 2019, the state lost 691 licensed dairy herds — or nearly two herds per day.
“We have some tearful phone calls, borderline suicide phone calls,” said senior ag program specialist Mike Lochner at DATCP’s Farm Center, which offers help to farmers in distress. “Those are not the majority. But the stress takes all forms.”
The Farm Center offers $100 vouchers for mental-health counselors — part of a $100,000 package of farmer mental-health aid released by the state Legislature that was a subject of a high-profile struggle between Republican legislative leaders and Gov. Tony Evers last year.
“When a farmer calls us, we’ll talk about their financial situation,” said Lochner. Often, he said, “their lenders are putting pressure on them. Lenders are calling notes, not renewing notes going into spring, which essentially puts them in a real bind. We can make recommendations to them about whether bankruptcy is in their best interest, or how they can continue working with their lender.”
“Sometimes, by the time they call us, they’re in tough times,” he adds. “There are certain trigger words — staff will give farmers a voucher to go see a trained professional.”
Do the Farm Center staff feel like they are presiding over the disappearance of a way of life?
“No,” said Hummel. “… There are still 8,000 to 7,500 dairy farms left in the state.”
Times are tough, though, for 90 to 95% of dairy farmers, he estimates.
“They took on more debt than they were allowed to service with current pricing,” he explained.
Still, the Farm Center gets calls from people who are looking to get into farming. And many farmers who are selling their cows are staying on their land and looking for another way to make a living, Hummel said.
DATCP helps farmers who are looking for information on growing hemp and other speciality crops, and there is a lot more interest in agri-tourism, Hummel said. “They turn a barn into a [bed and breakfast], or maybe they start a farm to table event, bring in gourmet chefs to the farm. We’re seeing a lot of those.”
On most small farms, one member of a couple has an off-farm job, to help keep the family afloat.
“Farmers are resourceful and resilient,” said Lochner. “And they’re trying to find other ways of making income.”
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