The DeKalb County Farm Bureau building was bustling with people this month. There were farmers, landowners and even bankers at the recent Illinois Farm Economic Summit. Just about everyone has a stake in Midwest agriculture, and they’d gathered to hear the latest from farmdoc Daily economists.
The University of Illinois publication posts daily Corn Belt agriculture economic analysis. Meetings like this are an opportunity for economists to bring their research to farmers and people who find this work important.
To a non-farmer, it can be hard to keep up with the changes in agriculture. Policy, economy, and even wider global dynamics all have a part to play, and it can be helpful for stakeholders to hear from experts who are steeped in these topics.
Farmers have been operating on extremely tight margins for years. Inputs like fertilizer are more expensive, crop insurance is getting impossible to afford, and farm families are feeling that squeeze. In recent years, the federal government has been distributing one-off payments to close the gap. In the spring, it was called the Emergency Commodity Assistance Program, or ECAP. Nick Paulson, a professor of agricultural finance at the University of Illinois, said that it was a lifeline for farm families.
“The percentage of farms that had net farm incomes below their family living expense, a little over three quarters, were there with the ECAP payments," he said. "Virtually all farms would have been net farm income below family living without those ECAP payments.”
Historically, ad hoc payments come in the form of programs through the United States Department of Agriculture. They’re meant to cover losses that come from natural disasters, like hurricanes, wildfires or flooding.
“More recently, though," Paulson said, "we've gotten whether it's the administration or Congress, has gotten a little more creative with what we define as a disaster, and extended that to kind of broader economic disasters."
The Trump administration unveiled $12 billion in ad hoc payments for farmers earlier this month. It’s meant to offer relief for row crop farmers in the face of increased production costs and disruptions in global trade. China stopped buying U.S. soybeans in the fall, and it hit farmers hard. This is a truly unusual amount of money coming from the federal government in this form.
Gary Schnitkey, a professor of agricultural economics at the University of Illinois, pointed to the feedback loop these payments have turned into.
“You know why input costs haven't come down and cash grants haven't come down?" he said. "Because everybody sees these, these ad hoc payments coming out. And if I was a landowner, you know, you can see all that, so what? And again, it's just like taking cocaine. You get hooked to it, and the withdrawal is going to be hard.”
Questions coming from the farmers in the audience reflected the flaws in the larger system.
Chris Gould attended the summit. He's a third-generation farmer in Kane County, raising corn, soy and wheat, and he asked the economists what can be done about it.
“How in the world do we get the hard reset on input costs and cost of production?" he asked. "And we just spent half our morning talking about how much money we're getting from the federal government."
He wants that hard reset to shake up the system at its core, but he gets that there’s more at stake here.
“If you're somebody who had a good crop and you're going to survive till next year, it's easy to say," he said. "If you're someone who had a bad crop and is on the brink of bankruptcy. You really don't care what the next bridge is. You're just, you're happy to get a check to save the family farm and live to fight another year, basically. I don't know that the the our system of just handing out money can't last forever. It doesn't work.”
Gould said he understands these one-off payments aren’t sustainable, and he’s seeking real solutions.
“It's definitely good for the U of I to get their message out there so that more and more people start understanding what, what some of our real problems are," he said. "If you just have your head buried in the sand, it's easy to just go from year to year and not really know what's happening out there. But we've got real structural problems. Most of them are induced by our own government. So we need to fix that. And the only way to fix that is to, first of all, know about it.”
Again, economist Nick Paulson said, financial support payments like these feel politically necessary because the alternative is for farmers to suffer the consequences of the economic system as it’s set up currently.
“The challenge," he said, "and this is for policymakers — people have to get elected every two, four, six years — it's hard to make the tough decision to say, 'we're not going to send $12 billion out to the sector.' There's going to be some churn, there's going to be more consolidation as a result of that. But that's, honestly, the only way to get the hard reset. And there's going to have to be winners and losers in that process. And nobody wants to be the one credited with seeing what those winners and losers might look like.”
Farmers are continually faced with hard choices, year after year. The summit made it clear that trend's going to continue unless something really big happens.
One thing shaking up the farm scene is a lot of interest in farmland coming from solar companies. These developers are eyeing agricultural fields as potential solar farms, and they’re willing to pay for it.
Juo-Han Tsay, the assistant director at the TIAA Center for Farmland Research, watches farmland values shift as interest in ag land increases. Solar projects are moving steadily through county zoning boards. LaSalle and McHenry counties are just two examples.
“I always get a question that, 'is this solar impacting my farmland values?'" she said. "My answer to that is 'yes, but only to the parcels that are very close to the transmission lines.'”
She says some landowners are more likely to win the bid for solar than others, especially if their land is located near those coveted energy transmission lines.
These are incredibly tough decisions. Selling family farmland — for solar, or just to get out of these cycles of tight margins and losses — is a deeply personal decision. Economist Nick Paulson mentioned that he's having these conversations at home.
“We sort of had a family planning meeting earlier this year at home, with my parents getting older," he said. "And my mom just flat out told us when we met with the lawyer, 'If you even think about selling this farmland, I will haunt you.'”
The squeeze is just getting tighter, and it’s moving up and into landowners’ hands, who rent land to farmers.
“Right no, we don't have enough return left to get a fair return to you and a fair return to the tenant," he said. "And how much of the responsibility is on you to make the tenant better off, versus how much of the responsibility is on the tenant to make the landowner, whole... You can't eat capital gains on farmlands.”
Economist Gary Schnitkey offered an interesting piece of advice to farmers: maximize returns or profits instead of maximizing yields. Maybe it needs to be said, especially given the scale of row crop agriculture in the Midwest. He said it’s less about bringing in the most corn, and more about working out what it takes to bring home the most profit. It seems like just about everyone’s scrutinizing their balance sheets in the state, and there weren’t many answers to speak of.
The best farmers can do for now is wait for those ad hoc payments, due in late February.