It Always Seems To Be Just More Bad News For Farmers

When something bad happens, it is becoming more of the norm to just shrug ones shoulders with the murmur “2020.” Nowhere does it seem like additions to the rolodex of bad luck occur more this year than in the farming business.

From an uncertain and seemingly always changing trade war with China, to bargain basement crop prices, to the coronavirus, to questions on which way the balance will tip for ethanol, what the agriculture industry thought would have to be an improvement from 2019 hasn’t gotten much better.

And now, we get to put one more addition to that list: derecho.

A derecho (pronounced deh-REY-cho), is defined as a widespread, long-lived, straight-line wind storm which is associated with a fast-moving group of severe thunderstorms, with windspeeds of at least 58 mph along most of its path and the wind damage must extend along more than 250 miles. It was one of these which devastated many parts of Iowa and Illinois as it ravaged the Midwest landscape earlier last week, leaving four people dead.

According to the NWS Storm Prediction Center, the derecho that tore across parts of the Corn Belt on August 10 traversed 770 miles in 14 hours. Windspeeds of over 100 miles per hour were reported near Cedar Rapids, Iowa. Those are speeds normally associated with Category 2 hurricanes.

A tally by state officials found that 14 million acres of cropland were damaged across the Hawkeye State. Another of the issues harming some farmers this season in parts of west-central Iowa — extreme drought — only received ¾ to 1½ inches of rain.

According to the United States Department of Agriculture, 8.18 million acres of corn and 5.64 million acres of soybeans in Iowa were affected by the storm.

“Millions of acres of corn around the state were impacted by last week’s storm,” said said Iowa Secretary of Agriculture Mike Naig. “The severity of the damage varies by field but some acres are a total loss and it will not feasible for farmers to harvest them.”

Iowa corn fields are currently in the late stages of development and the corn may not fully mature or recover before harvest, leaving farmers to deal with yield losses, grain quality issues and limited marketing options. Tens of millions of bushels of on-farm storage were also lost during the storm. This may create grain storage challenges as farmers head into the 2020 harvest. Preliminary estimates of the damage indicate that in excess of 57 million bushels of permanently-licensed grain storage was seriously damaged or destroyed. In 2019, Iowa farmers harvested 2.6 billion bushels of corn and 502 million bushels of soybeans, according to the USDA National Agricultural Statistics Service.

Writing about Illinois’ losses, DTN writer Todd Neeley reported that, “According to analysis of DTN weather data and public crop production data by DTN’s weather team and Gro Intelligence, an estimated 6.95 million acres of Illinois corn with an implied production of about 1.39 billion bushels along with and 5.82 million acres of soybeans with an implied production of 360.49 million bushels lay in the path of the derecho…That includes an estimated 823,600 acres of Illinois corn and 715,700 acres of soybeans in the five hardest-hit, wind-whipped counties.”

“We, along with I’m sure hundreds of other farmers across the Corn Belt, were severely hit by Monday’s storm,” Mazon, Illinois, farmer Paul Jeschke told Neeley. “In our operation, we had three bins totally destroyed and three others severely damaged. That’s over half of our grain storage in a year when the Illinois River is closed during harvest.”

Photos of affected areas show what used to be tall standing fields of corn, now just a flat landscape of green.

“Corn is flat on the ground in numerous fields in the region,” Meaghan Anderson, an Iowa State University extension agronomist who works with farmers in nine central Iowa counties, told the Associated Press. “The corn stalks had grown to full height and were in the final stages of producing ears and filling them out with kernels. Modern corn varieties can grow up to 8 feet tall making them vulnerable to powerful straight line winds. For plants that were bent, and stalks not broken, there’s some hope, with a significantly reduced yield. But it will be difficult to harvest. If the stalks snapped, the plant will die.”

While the economic loss probably won’t be known for weeks, it is definitely adding economic injury to injury for producers.

Thanks to the kaleidoscope of problems this year, as of June, farm bankruptcies grew by 8% with 580 filings from that same month last year, with 80% of those coming from the Midwest, Northwest and Southeast.

Prior to the derecho, an analysis by the University of Illinois Department of Agricultural and Consumer Economics showed farmers in central and northern Illinois were expected to see considerable losses on corn and soybeans. On average, those farmers were expected to lose about $30 an acre on corn in 2020 and $75 per acre in 2021, according to a balance sheet from the department. And that includes proceeds from government aid.

In an opinion piece in The Hill, Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA), wrote how the ethanol industry has been impacted by the coronavirus.

“In just four weeks this spring, ethanol demand fell by 45% and prices tumbled to record lows. Ethanol storage tanks across the nation rapidly filled to the brim. More than half of the ethanol industry was forced to shut down, sending rippling impacts through the rural communities where ethanol plants operate. Some facilities announced permanent closures; others scrambled to switch to hand-sanitizer production in an attempt to keep their doors open. Meanwhile, workers in the industry faced pay cuts, furloughs and layoffs.”

A new analysis by the RFA found the COVID-19 pandemic has already resulted in a $3.4 billion in lost revenue for the industry. These losses could expand even more, to in excess of $7 billion by the end of the year if fuel demand and prices remain as repressed as believed. An additional $1.8 billion in losses is expected in 2021, based on the latest fuel-demand projections from the Energy Information Administration. Estimates of nationwide losses to date by the RFA is consistent with a study from Iowa State University, which found COVID-19 likely reduced revenues for that state’s ethanol industry alone by $2.5 billion.

And it isn’t just row-crop farmers being hurt. Slowdowns from COVID-19 are impacting beef producers thanks to meatpacking plant shutdowns. According to a report from the Federal Reserve Bank of Kansas City, working capital on farms in 2020 already was projected to decline by about 16% at the start of the year. If the projection holds, the working capital on farms would be 72% less than in 2012.

Ethanol, a primary player for corn producers with 40% of the crop going toward the fuel, has also been a contentious debate the past couple of years with the Trump administration hemming and hawing between supporting farmers and oil interests, both bases of support for the president. The driver of dispute comes as the Environmental Protection Agency has been granting citing economic hardships waivers to the refiners, stating that the Renewable Fuel Standard — a federal program which requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels — has unduly harmed refineries putting them out of business.

Writes Cooper:

(T)he administration has taken unprecedented action to support the oil industry during the COVID-19 pandemic, with President Trump pledging to ‘never let the great U.S. oil and gas industry down.’ He personally intervened to slow down a crude oil price war between Saudi Arabia and Russia that was cratering global energy markets. The White House directed the Department of Energy to use the Strategic Petroleum Reserve to take excess crude oil off the market and drive prices higher. The Federal Reserve launched an aggressive bond buyback program benefiting large oil and gas companies and electric utilities.”

All of the economic uncertainties come on top of what was already expected to be a poor year. According to the USDA Economic Research Service’s February Farm Income Forecast, net cash farm income was already forecast to decrease $10.9 billion (9.0%) to $109.6 billion. Inflation-adjusted net cash farm income was forecast to decrease $13.1 billion (10.7%) from 2019 and would have been 0.6% below its 2000-18 average ($110.2 billion). All the while total production expenses were expected to increase $10.4 billion (3.0%) to $354.7 billion in 2020.

Since then, farm income has declined in the second quarter at the quickest pace since 2016, according to a Kansas City Fed Ag Credit Survey released earlier this month while weaknesses in both income and borrower liquidity were expected to carry into the coming months. Nearly 95% of bankers taking part in the survey said the USDA’s coronavirus aid program was likely to boost farm income, one of the only bright spots farmers are seeing a year of seemingly never-ending “2020” problems.