DES MOINES — Joe Outlaw, a noted economist at Texas A&M University, likes to refer to himself as “Dr. Doom.” His thoughts on the agricultural economy’s outlook during the Iowa Farm Bureau Federation annual meeting Dec. 3-4 provide some proof the moniker is accurate.
“It is not sunshine and rainbows out there,” Outlaw said during his presentation.
If there is any good news, he says, it may be that Iowa farmers are better off than many producers in other parts of the country.
“You’re in the best shape of anybody,” he told the audience, though he added that Iowa’s biggest hurdle may be that cash rents are too high and cannot be justified by today’s corn or soybean price levels.
Outlaw, who does research for Congress as it writes farm bills, said the last two farm bills included attempts to help farmers, but there simply wasn’t enough money available to really get the job done. And the Market Facilitation Program payments being distrubted in an effort to offset U.S. farmers’ losses due to the trade war with China are helpful, but they are only a Band-Aid.
As of last week, Outlaw said, corn futures for next summer are only at $4.03, and that doesn’t take into account basis levels or storage. There are farmers who could make a profit at that level, he said, but there are also a large number of farmers whose bankers will look at those levels this winter and will be hesitant to provide operating loans for operations that don’t cash-flow.
The outlook for cotton or rice producers is worse than for corn or soybean producers, he said.
The overall outlook isn’t good. It wasn’t good before the present trade war, and the trade war made it worse. Ethanol is still a plus for the corn market but is trending down. Livestock trade is still a relatively bright spot.
With all that in mind, Outlaw says the outlook for 2020 and beyond is for a flat market at best.
“It’s a tough world,” he said.
That likely means there will be more farm bankruptcies in the coming year and more situations where farmers do not technically go bankrupt but they decide — or are pushed to decide by lenders — that now would be a good time to retire or find another line of work.
There are still farmers making money, Outlaw said, but the industry has shown itself to be too good at production and not good enough at finding new crops or specialties that push them out of producing a cheap commodity and into producing a more valuable end product.
He said hemp may work for some producers, but he suggests that those interested in growing it be very wary and make sure they have good contracts and can get paid.
And as an economist who works with Congress, Outlaw said lawmakers soon will likely look at some legislation related to competition in the livestock packing market. They may also push to provide more incentives to beginning farmers in the next farm bill.
Texas A&M has a decision aid website that could be useful for some farmers, and Outlaw said farmers can see his work for the Texas A&M Food and Policy Center at www.afpc.tamu.edu.