Agricultural Economics and Climate

(music) A tumultuous past year for Iowa agriculture between climate concerns, drought and economic forces. We sit down with Ag Economist Chad Hart and State Climatologist Justin Glisan on this edition of Iowa Press. (music)                    Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com. (music)                For decades Iowa Press has brought you political leaders and newsmakers from across Iowa and beyond. Celebrating 50 years of broadcast excellence on statewide Iowa PBS, this is the Friday, November 5th edition of Iowa Press. Here is Kay Henderson.  Henderson: By all accounts, Iowa is headed to have what the old folks used to call a bin-buster harvest in 2021. That didn't seem possible earlier this year given the weather challenge that farmers faced. Our guests today can provide some perspective to what is the reality today. Chad Hart is an Iowa State University Economist and Justin Glisan is the State Climatologist. Guys, welcome to Iowa Press. Welcome back to Iowa Press. Hart: Our pleasure to be here. Glisan: Glad to be back. Henderson: Across the table, Clay Masters of Iowa Public Radio and Erin Murphy of the Lee Enterprises newspapers. Murphy: Professor Hart, let's jump right into that big bumper, especially the corn crop. How big is that going to get? Hart: Well, it seems to be getting bigger every time we look at it. When we're looking nationwide you're talking about the largest production we've ever seen, over 15 billion bushels. Right now nationwide average yield we're weighing in around 176.5. So it's only a tenth of a bushel off the record in terms of that yield. So we are talking massive corn crop, basically same story on the soybean side as we're looking out there, a very large soybean crop as well. Murphy: Dr. Glisan, Kay mentioned the unusual weather we had this year, a lot of drought and then some late arriving rains to help us get caught up. How did we get to the point to have such a great crop despite some kind of uneven weather patterns during the year? Glisan: Uneven, it has been a roller coaster. So we have been in a structural drought since May of 2020. And we've had ebb and flow, we've had heat waves, we've had cold weather outbreaks, we've had very dry conditions, 8 to 12 inches of below average precipitation across the D1 and D2 region. So it is remarkable that we had the 10th wettest October on record, really supplied us with additional subsoil moisture for next growing season. But those timely rainfalls during the drought, during the growing season, really held the crop on and as Dr. Hart said, the yields look great. Henderson: Chad Hart, would this have been possible 20 years ago given the varieties of corn that farmers had the option to plant? Hart: No, probably not. I mean, the idea is what we have done over the past 40, 50, 60 years with these hybrids is we have developed hybrids that are more tolerant of a wider range of weather conditions and those changes are definitely paying off as we look out there. Masters: Let's talk about the severity of the drought. Justin Glisan, you had said that we've seen some pretty wild swings that have been going on. How does it look now with such a wet October in the rearview mirror? Glisan: Yeah, so we talk about drought busters. We're not in a drought buster now, but we're in a semi-drought buster. We've had anywhere from 3 to 5 inches over 14 days across much of Western Iowa. You look at Eastern Iowa, 2 to 3, even 4 inch totals, above average of course. We have received precipitation amounts in two weeks that we would see in a month and a half, especially in fall. So we have seen very good improvement. If you would look at a time series of drought since 2020 you would see peaks and valleys form, structural drought as I mentioned, D1, D2, severe drought has hung around for over 12 months. With these rainfalls that we've had in fall we've actually put a chip in those deficits and we've really seen improvement across the last month, a one category, two category improvement. In fact, there is no longer D2 severe drought across the state. Masters: The head of the Des Moines Water Works, Chad Hart, recently penned an op-ed in the Des Moines Register talking about concerns about swings in weather, having a lot of drought and then having a really wet spring, flushing nitrogen down, having trouble cleaning the water for the 600,000 customers. What kind of thoughts do you have as what kind of effect a very wet spring could have on nitrogen and nitrate flow in the rivers in Iowa? Hart:  Well, it really depends upon how much fall fertilization we're allowed to do, how much is delayed until the spring. A lot of that interaction has to do with not only the weather but the pricing we're seeing for fertilizer right now. You're having farmers look at very high fertilizer prices right now, a lot of them are either considering delaying that application until spring, so waiting until we're closer to that planting season, or looking at alternative crops where they would have to fertilize less. So I think there is going to be a fair amount of interaction here between what is going on with the weather, with what is going on in the economics, and that will determine what we're looking at in terms of that spring flush that we normally see with stronger rains in the springtime. Masters: And as far as fertilizer purchases go, that is something that a lot of them are making plans well ahead in advance. How much of that is stockpiled? How much of that is that they are buying ahead of time? Are they using less of it really right now? Hart: Well, in this case what was stockpiled is being utilized right now. As we're going through harvest this is when you see them pull that crop and then they come back in and till and fertilize for the next season. If they're looking to purchase right now, what they are finding is severe challenges either in very high prices or limited supplies. So you're not likely to see a lot of additional product moving in right now to be applied. Henderson: Let's go back to the drought. Justin Glisan, on the West Coast they have had a very long-term drought. What would be the prospect of something like that happening in the middle of the country? Glisan: That's a great question. Now, on the West Coast they are impacted by different weather patterns than we are in the central part of the United States. They have also had what we call the mega-drought along with heat waves, with forest fires of a record that we haven't seen before. When you have burn scars on the topography, you get rain events, that rain runs off, it doesn't soak in and it perpetuates that drought. Luckily, in the central part of the United States it doesn't look like we can get into a long-term perpetual drought given the moisture gate from the Gulf of Mexico but also the different air masses that impact us. So the drought that we're seeing now is by no means as devastating as on the West Coast, but again, drought is very fluid, for lack of a better word, in term of where you are on the Earth. So a drought in Florida is not the same as a drought in Iowa. Henderson: Chad Hart, what is the fluidity of the price impact of a drought? Hart: Well, as we look at our crop markets today we're seeing some of the best prices we've seen in roughly a decade. You can think of the reason I'm talking about decade is because think back a decade ago, we were staring at another drought. So droughts tend to be these times where we do see higher prices and they actually while they are challenging from a production perspective, from an economic perspective drought years tend to be some of the best years as far as farm incomes are concerned when we look across the Midwest. Murphy: Speaking of prices, I meant to ask you, Chad, that bumper crop, does that have an impact on prices at all? Hart: It does but right now we have been very lucky in that we're looking at this record crop coming in but we've also got very strong demand for our crops. And so that is helping utilize those crops and keep those prices high. Masters: Where is the demand coming from? Hart: It's a combination. Very steady demand here within the U.S. and what we've seen is a record amount of sales, especially over the past year, going into international markets. Murphy: Professor Hart, we'll stick with you, the John Deere strike continues. Beyond the direct impact obviously to the workers and the company itself, is there possibly an ancillary impact there in the greater ag economy? Hart: Oh yeah, when we're looking there what it's feeding into is that ag, like many sectors of the economy, is suffering through the challenges with supply chains but also you're seeing let's call it sort of a COVID bounce working in there. But when you think about this time of year, farmers are rushing to finish up that harvest, we have machinery breaking down, those parts are hard to get right now, with John Deere being under strike that has even more constricted those supplies as we move through the harvest season. Henderson: What is a COVID bounce? Hart: COVID bounce in this case is, I'll describe it this way, ag was one of the first sectors within the economy to really bounce back from COVID. If you think back to 2020 when basically we saw the depths of the economic impacts back in April and May, well commodity prices for the crop side started to improve basically almost immediately after that and now we're sitting here staring at some of the best prices we've seen in quite some time. Murphy: So how long does that go on before the concern gets to be really serious about the impact on the ag economy, that strike? Hart: Well, it's a matter of managing where do we go from here? Now we've seen not only those commodity prices rise but now we're watching those input costs rise significantly, fertilizer being the main thing we're looking at now. But as we look at agricultural chemicals like our pesticides and herbicides, those are also pressuring up and that is going to start to squeeze that profit margin for our farmers. Masters: I'm curious, Justin Glisan, are there any indications right now that you can watch as the weather pattern that we have been having in Iowa lately that tell you anything about what we can expect this winter or this spring? Glisan: So we're moving, we're actually in a La Nina advisory. So, La Nina is the cold phase of what everybody knows as El Nino, which is the warm phase. This is a Pacific Decadal Oscillation that impacts how thunderstorms form in the Pacific. In the La Nina phase, colder ocean waters push convention, or thunderstorms, further west in the basin and that impacts the jet stream over the United States. If you look at analog years in which we have had La Nina's, we have a bullseye for above average precipitation in the Ohio Valley into the Great Lakes and then the Pacific Northwest. Southern states are dry. Iowa happens to be right in the middle of that interface. Now, we were in La Nina last year in wintertime, we had about a degree below average temperature wise, but we had cold air outbreaks of course. We were about a half an inch below average, but we had the 12th snowiest winter on record with 9 inches above average. So it will depend on the strength of that La Nina phase. Right now it is looking weak. When we look at precipitation behavior for La Nina in the wintertime it is all over the board versus El Nino we would expect warmer temperatures and less precipitation. It's a coin flip right now. Murphy: You used a term there, decadal oscillation. For viewers, can you explain what that is? Glisan: I get that a lot. Masters: Look at the glossary real quick. Glisan: Decadal oscillation is a multiyear out, a decade or two, that impacts the larger scale circulation across the Northern Hemisphere. We have different phases of that, El Nino, La Nina, ENSO neutral. We also have a Madden-Julian Oscillation that is also a multiyear, decadal oscillation that impacts where thunderstorms set up over the Pacific. So all of these little cogs give me heartburn because we're not able to really get a good forecast because of the interaction. But knowing the phase of El Nino or La Nina does give us some good guidance for a season out. Henderson: Chad Hart, we have an announcement this past week that Alliant Energy plans to have the largest solar array in Iowa history. Is there opportunity here for farm income in the same way that the wind industry said hey, we'd love to put a turbine on your ground and pay you for that? Hart: There is that opportunity. I think the difference here might be though that when we're thinking about those solar farms you're talking about a larger land footprint than we have with our wind. And so that is creating some concern within farming communities if you think of, okay putting in these big solar arrays, that may be knocking out some cropland that could be utilized for crops as well. And so there's some back and forth within the farming community about how welcome they are to see that. Henderson: Is that a polite way of saying resistance? Hart: That's a polite way of saying resistance. I try to be polite. Henderson: Justin Glisan, I'm just wondering, is Iowa sunny enough to be a good place to have solar energy? Glisan: Yes, if we look at the climatology of cloud cover there are months in which we have more cloud cover in the wintertime basically and there are months in which we have lots of sunshine. So yes, right in the middle of the United States, right in the middle of the mid-latitudes, I would say a perfect spot. Murphy: Dr. Glisan, last time we had you on we were talking a lot about the derecho. We fortunately haven't had one of those since to deal with. But I did want to ask just kind of in that general arena of extreme weather events, do we have any data or evidence that shows that could be something we will have to be more on the lookout for more often, kind of like these more serious floods that we've seen more often? Are weather events like derechos going to be more common? Glisan: We're going to become more extreme. We are seeing weather patterns become more extreme, colder colds, warmer warms, and wetter wets. Across the state of Iowa, what keeps me up at night are the trends in which we're seeing higher precipitation events more often. And these are projected into the future. Now, these have implications on agriculture but also aerial flooding, flash flooding, we had the bomb cyclone event in March of 2019, historic flooding in Southwestern Iowa. So those extremes, yes, they are becoming more extreme. And the projections that we're seeing are showing us that with a warmer atmosphere, a warmer surface temperature, we're seeing extreme events lock in more often. So, yes, we're going to have droughts moving into the future, but it looks like we're going to become wetter as we move into the future. Now, the analog year that I use is 2018, record wetness across the northern third of the state, 149 years of records, D3 drought in Southeastern Iowa. So these conditions are going to mingle amongst themselves across the state and that should be our expectation moving forward. Murphy: That's interesting, so we could have more droughts but also be wetter at the same time? Glisan: Absolutely, yes. Murphy: Those kinds of things keep up Dr. Glisan, do they keep farmers up too? Hart: Certainly, they definitely do because you're always wondering did you plant for the right conditions? And as Dr. Glisan pointed out, 2018 was one of those weird extremes for the state because farmers could look just a few counties away and see a completely different weather pattern setting up and impacting their crops. Masters: So does that mean that farmers need to be buying more crop insurance? We've got a Farm Bill staring at us at some point here. If there's changes made to crop insurance, what might that do for farmers' decisions in buying more crop insurance? Hart: Well, definitely crop insurance is the major risk management tool that farmers would utilize. And here in the state of Iowa, no, farmers do buy a lot of crop insurance. They already have a great deal of coverage there. But they would look to tune that to face the risk that they're looking at here and especially you've been looking at some of the events that we're talking about, they can take out specialized insurance. For example, there's green snapper wind insurance that protects specifically against things like the derecho. Henderson: Let's talk a little bit about something that you have a family connection to, meat lockers. Hart: Yes, ma'am. Henderson: Your parents ran a meat locker in Southern Missouri, correct? Hart: That is correct. Henderson: So, as you know, the state of Iowa and the federal government are trying to spur growth in the number of meat lockers here and elsewhere. Let's just dial back. Why did the number of meat lockers dwindle in the first place? Hart: Well, I think when you're looking at that it's a combination of one, the economics. The idea is when we're looking at meat processing, scale does matter, and it does help to be of a larger scale, that brings down the per unit cost, makes them more competitive, more efficient. There is also let's call it the physical challenges of meat processing. It is a very labor intensive business, especially when you're doing it on a small scale. And that can be difficult for folks and especially as we've transitioned to more labor that is specialized in less, let's call it, brute force hard labor, which is what small town meat processing was. I remember with my parents' locker plant you're talking about horsing around sides of meat. I don't look like it mainly because my parents looked at me and said, no you're not built for this type of work, go study something. But the idea is you're talking about something that is very physically intense, does take a lot of work, you're not only doing that physical work but maintaining that customer base has been difficult. So, when you think about it, yeah, we saw these small town locker plants disappear due to one, the physicality of the work and two, the economics that drove larger and larger facilities to be built. Henderson: So let's talk about today's economics. Is a grant going to spur development of those? And also we have these sort of midsized processing facilities, they're not going to be producing for the local community, they are supposedly for maybe a series of counties or an area. And also, Iowans have seen processing plants close. What is the future of this industry in every kind of segment in terms of meat processing? Hart: Well, as you mentioned, the grants are going to help start up some new smaller plants. To me the big question will become, how do they build themselves up where they can maintain themselves? And I think the problem is going to be that, just like smaller plants disappeared in the past, it's likely a lot of these that are started up under these grants will likely disappear going into the future unless they can figure out how to specialize themselves within that local market to help drive demand for their services, reaching out to their cattle producers and hog producers in that area and saying, bring your animals to us, allow us to process them, and trying to make it where can we benefit from the local foods movements and things like that to truly drive that business. Because if you're just competing on the commodity scale and working against your Cargill's and your JBS', you're never going to be able to beat them on the low cost scale. So you have to offer something more. Murphy: I want to get to both of you on this but we'll start with you, Professor Hart. This week USDA Secretary Vilsack, our former Iowa Governor, said, "the time has come to reduce methane emissions on farms.” How much of that is already happening? How much further can be done for farmers to do their part in capturing the methane emissions? Hart: Well, I think when you look at agriculture and its work on trying to alleviate some of the climate change problems we've got out there, there has been a lot that has been done, but there is more than can be done. I think especially as we look at our dairy industry and our beef industries they are trying to consider what sort of maybe feed additives or how do we mix the ration where we can reduce those methane emissions yet maintain the efficiency within our feed side. I think there's a lot that can be done there, but I'm also, again, not a feed nutritionist. So I don't know exactly what they can do. But you're going to see a lot of innovation looking at what are the ways that agriculture, not only on methane, but as we look at CO2 emissions, NOx emissions, how can we evolve our industry to bring down those negative externalities while maintaining our productivity? Murphy: Dr. Glisan, where is methane's place within the overall picture of our climate health? How important is it to reduce that? Glisan: Sure, methane is a greenhouse gas. We call it radiative forcing and that is effectively the thickness of the blanket. So, methane is a shorter-lived greenhouse gas versus CO2. Now, radiative forcing is across the board with greenhouse gases. So, as I mentioned, we have seen a whole scale increase in temperature across the mid-latitudes and that impacts the weather patterns across the United States. I was reading a study about a kelp additive to cattle feed that can prevent or cut down substantially on methane emissions. So I really believe as a scientist, innovation will help us as we move forward. Masters: I want to go back to something, Justin Glisan, that you had said early on when we were talking about just the swings in patterns of weather that we're experiencing. With a wetter October I'm starting to think about what that means for spring, the floods that we have seen, no flood is the same. How are we going to see changes to the way that flooding impacts our infrastructure, our cities and towns? We spend a lot of time talking about agriculture and rural life and farms, but what is the impact on this on some of our urban communities in Iowa? Glisan: Sure. So, we think about my first time on Iowa Press was after the bomb cyclone event in March of 2019. Spencer Dam in Nebraska was destroyed. The infrastructure that we have now is not built for the precipitation regimes that we're seeing. We think of the June 30th, July 1st event in Ankeny in which 6 to 8 inches fell over 3 hours. Urban infrastructure is not built for that right now. So we have to look at the trends of where we're moving, they are definitely built in and have to address those on a city planning nature. And I talk with city managers and urban planners often. They see these trends as well and I think there is movement to address those issues. Henderson: When the atmosphere is ripe for a tornado there is a warning issued. When will we get to the point when the atmosphere is ripe for flash flooding we'll get a similar warning? Glisan: That's a great question. Our modeling in fact has become very good at getting smaller scale features. We have a derecho parameter, as I mentioned last time. We also have a set of tools in the forecast models that tell us if we have so much water vapor in the atmosphere and a pattern sets up we're definitely going to get flash flooding. We had those types of warnings on June 30th during the Ankeny event. But again, the infrastructure aspect is what is the problem there I would say. Henderson: Chad Hart, we've spent some time talking about corn and a little bit about beans and livestock. But is there a crop out there that you see as potentially yielding greater profit potential for farmers that you might see them plant more of in the future? Hart: Well, I think it comes back to how you can utilize that crop. The reason corn and soybeans dominate our landscape is because of the economic profitability that they offer, the flexibility of use. They are a food crop, they're a feed crop, they're a fuel crop. And so any new crop would have to compete against that. And right now you just don't see that combination with any additional crops coming down the line. That is not to say they can't develop and we will see things change. For example, right now I would argue that we may see in the future where soybeans supplants corn as the number one crop across the nation in terms of area because of that usage is increasing over time where corn is sort of staying stable right now. Henderson: Justin Glisan, we have less than a minute left. Your agency issues a crop and weather report during the growing season and harvest season. Do you see any potential there for something like oats or other grains to sort of be more attractive to farmers? Glisan: Well, in terms of weather extremes, cover crops, planting oats on top of bare soil impacts nitrate runoff, impacts soil runoff. So the implementation of cover crops as a carbon sequestration tool also will produce better results as we move into the future. Henderson: And just for the benefit of our viewers, Iowa PBS has produced a special about Iowa's wild, if not wacky, weather. And you can hear more from Justin Glisan. Please go to iowapbs.org to find more about this program. And we'll be back with Iowa Press next week at our regular times, 7:30 on Friday and noon on Sunday. Thanks for watching. (music) (music) Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com.