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Rosmann: What lies in store for agriculture in 2016?

Michael R. Rosmann, Ph.D.

Based on the number of telephone calls and emails I have received lately, many people involved in agriculture are concerned about what 2016 has in store for them economically and for their behavioral/emotional well-being. Most questions came from farm men and a few farm women; several farm business consultants, agricultural mediation providers and reporters from various news media also contacted me.

The most common query was: How can agricultural operations be profitable this year? This is the first of two articles about agriculture in the foreseeable future and what can be done to farm profitably and happily.

I asked people who have considerable experience and wisdom to offer their advice: Paul Lasley, well-known Iowa State University rural sociologist; several successful farm men and one woman who have been involved in agriculture for 30 years to 65 years each; a U.S. Department of Agriculture administrator; and Ann Johanns, an Iowa State University Extension specialist in farm management.

Agricultural profitability is difficult to predict for 2016 because every producer's situation is different and there is little certainty how the weather, markets and other uncontrollable factors will play out, said Lasley. "My counsel," he said, "is to get a good grasp on their cost of production and to calculate if they can make money on today's prices. They should know their cost of production ... and belt-tightening measures can be an appropriate response."

Minimizing expenses is key. While producers have little control over prices for inputs, market prices and crop-growing conditions, farm people can mostly determine their farm and personal expenditures.

Farmers may be able to change some inputs, such as planting non-GMO seeds—soybeans, for example, which are usually less expensive than seeds with built-in GMO traits.

Look for alternatives, said all the experienced farmers. If the cost of production exceeds the expected income from the livestock or crop operation, there is still time to "sit out" the unprofitable parts of farming in many cases.

One livestock producer said there is no requirement that an independent pork, beef or dairy producer who owns the facilities must keep all—or even any—of the feedlots or barns continuously full.

Sometimes even producers with contracts can renegotiate their terms. The producer has the right to request legal representation and other consultants, and for everyone at the table to have equal standing in renegotiation discussions.

Crop farmers have options, too. The USDA official I interviewed said there is more interest in the 2016 Conservation Reserve Program administered through local USDA Farm Service Agency offices than there has been for several years, especially for filter strips along waterways, wildlife habitat and pollinator habitat.

While the current farm bill reduces total enrollment acres, the CRP reimbursement rate per acre exceeds what many applicants might earn from farming these acres.

There is no deadline for continuous sign-up CRP practices. However, interested farmers should enroll soon while guaranteed federal funds are still available, the USDA official noted. The annual CRP payment limitation is $50,000 per farm operator.

The Conservation Stewardship Program, administered through the USDA Natural Resources Conservation Service, is also available, but the deadline of March 31 is fast approaching for CSP applications.

The CSP has increased the minimum contract this year to $1,500 per farm; $150 million is allocated nationwide for about 10 million acres this year. Those who are interested can visit their local NRCS office or the website: www.nrcs.usda.gov. The same acres cannot be enrolled simultaneously in CSP and CRP.

Farmers can sometimes change crops. It could be wise, for example, to plant alfalfa and other hay/straw crops on land that is planned for soybeans, in order to capitalize on high prices for premium-quality large-square and small-square alfalfa or straw bales, and particularly if harvesting equipment and storage facilities are already owned or can be arranged.

Having a ready purchaser is recommended. Good haying weather during the first crop in the Midwest, and sometimes later cuttings as well, has been sporadic the past several years, so alternative plans for use of weathered hay might also need to be made.

Prime quality hay is being sold overseas to cattle and dairy operations and domestically to dairy and horse farms. Straw and lesser-quality hay are sometimes needed for roadside cover establishment following highway renovations, and by tree nurseries or as bedding in hoop barns, and by ethanol processors of cellulosic fodder.

Agriculture in 2016 will be a "hang-in-there" year for most, but for satisfactory profits in specialty arenas like organic food. I don't look for a protracted farm recession. A era of gradually increasing profits in corn soybeans and food-grade small grains will begin in 2017 as the worldwide glut of grains diminishes.

Most remaining conventional livestock operations that produce beef (both cow/calf producers and feedlots), pork and dairy products will begin to see black ink after a shrink-out of defunct operators.

Look next week for a sequel about additional resources.

Mike Rosmann is a Harlan, Iowa, psychologist and farmer. To contact Rosmann go online to: www.agbehavioralhealth.com.

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