Published on Oct. 19, 2018

Farmers are no strangers to having their livelihoods dramatically shaped by often unpredictable ups and downs — left to the whims of weather and market volatility, year to year. It's a hazard that comes with the job.

But many around Missouri and Illinois say that 2018 has been unlike any year in memory, or at least decades. Forces ranging from drought to trade disputes with China have confronted regional farmers with diminished yields and prices far lower than they anticipated when the year started.

Drought conditions early in the summer yielded some undersized soybeans (left) and corn.

Soybeans — the country's most widely planted crop this year, and one that typically sees one-third of its domestic harvest sold to Chinese buyers — have tumbled about 20 percent in value since May. Though not as commonly sent overseas, corn — the other titan of U.S. row crops — has its own challenges wrought by trade and ethanol markets, and was particularly susceptible to drought in parched areas of Missouri.

But pain runs beyond the row crops. Dozens of other farm products — from pork to dairy to produce — are dealing with headwinds from new policies and market circumstances alike. Fallout is also affecting businesses that sell agricultural inputs and equipment, inflicting deep cuts across rural economies as farm incomes approach their lowest levels in a decade.

"As good as the overall economy is, we're getting hit from every direction in the ag economy," said Seth Ricketts, the president of Ricketts Farm Service in Salisbury, Mo., which sells products such as seeds and fertilizer to farmers.

"It's just been a very frustrating year on the farm," adds Ronnie Russell, a farmer from Richmond, Mo., who serves on the board of directors for the American Soybean Association.

"I've farmed a long time and I've learned to take the good and the bad. But sometimes the bads are really bad, and that's been the case this year."

Ronnie Russell

With the tumultuous growing season's harvest underway, the Post-Dispatch conducted interviews with more than a dozen farmers, seed and input sellers, academic experts and others in the agricultural sector.

A prevailing attitude they expressed was that it was a year of hardship and narrowly dodged bullets, with near catastrophe staved off — or at least cushioned — by late-summer rains or federal government bailouts. While some expressed cautious optimism about the future, others warned that with trade disputes ongoing — and targeted squarely at agriculture — farmers remain in a precarious position.

"It's like we're one inch from the precipice," said Scott Irwin, a University of Illinois professor of agricultural economics. "You can hear the big waterfall ahead of us. But we haven't gone over yet."

Dry year takes its toll

Rains in Missouri were spotty this year, with western and northern reaches of the state hounded by drought. Farmers in those areas — and officials tracking statewide data — cited that lack of precipitation as the year's biggest obstacle.

"We were the bull's-eye for the drought this summer. That drought actually stretched back into last winter," said Sean Cornelius, a dairy, corn, and soybean farmer in the northwest Missouri town of Hamilton.

His crops were pounded, mustering just a sliver of their usual production. Cornelius said yield estimates for his corn ranged from 17 bushels to 38 bushels per acre, compared to 180 to 200 bushels seen over the last five years. His soybeans, meanwhile, grew only to about knee height — so short he worried his combine might struggle to harvest them.

He's not alone.

"What is affecting farmers in Missouri and in the St. Louis area is that Missouri is one of the hardest-hit this year on drought," said Denny Mertz, a Chesterfield resident who farms in Elsberry, Mo. "Some of the reports that I have seen is as much as 70 percent of the Missouri crop has been hit to some effect by drought."

While drought has been confined to certain areas, the toll is reflected on a statewide level.

Corn has been affected most, and is on track to post the lowest statewide harvests since the major drought of 2012, according to Bob Garino, the Columbia-based Missouri state statistician for the U.S. Department of Agriculture.

The state average this year is about 142 bushels per acre — up from lower forecasts in August, but still well off the averages in the 160s, 170s, and even 180s that Missouri corn farmers reaped the last several years, Garino said.

"That's mainly because of the drought affecting the northern part of the state," he said.

Many said that late-season rains helped take the edge off the drought, and especially helped the recovery of certain crops, like soybeans. But the damage to corn had already been locked in, and many farmers simply cut their corn to use as silage to feed livestock.

Other parts of the country, though, are seeing bumper crops and even record-breaking yields of crops such as corn and soybeans. That puts drought-affected Missouri farmers at a two-pronged disadvantage. Not only are harvests diminished, but prices are depressed thanks to soaring supplies of corn and soybeans elsewhere.

Multiple people called it a textbook "double whammy."

"What has probably affected our price on soybeans more than anything is ourselves," said Dale Samp, a farmer from Cairo, Mo. "We're going to produce a huge crop this year. That has a toll on prices."

Soybean prices have fallen dramatically since the boom farmers enjoyed several years ago. Another slide has taken place during the 2018 growing season, when soybean futures dropped about $2 per bushel, or around 20 percent. This graph shows prices received monthly by farmers for soybeans. The decrease seen this summer — when few farmers sell soybeans — may not reflect price impacts that could loom later, when more of the crop is sold. "It could mean that when the farmer sells in December, those prices could be lower," said Bob Garino, the Missouri state statistician for the U.S. Department of Agriculture.

Drought has borne other cascading effects. Hay and water supplies ran short in many parts of the state, causing some ranchers to reduce herds of cattle. Official data reflecting statewide livestock changes will not be available until a survey is completed early next year.

Though Missouri and much of the Midwest battled through an even worse drought as recently as 2012, climate scientists say that data does not show evidence of a long-term trend suggesting that the region is more prone to dry spells, like the Southwest has experienced.

But even if the area is not vulnerable to more frequent drought, higher temperatures present their own challenges to farmers. Yields of major crops, including corn, are projected to decline and impacts of drought "may become more severe because temperatures are projected to be higher in the future," said Ken Kunkel, a professor who researches extreme weather at North Carolina State University and is also involved with the National Climate Assessment.

"That will dry out the soils quicker and the impacts of drought are likely to become more severe quicker, in the future," he said.

Front lines of a trade war

While drought only affected farmers in certain areas, U.S. agriculture has faced a sweeping impact from retaliatory tariffs from global trade disputes instigated by President Donald Trump.

Tariffs have levied direct impacts on some goods while triggering indirect effects on others. Collectively, it has meant turbulence and substantial price decreases across a range of commodities, though farmers and experts voiced the caveat that it can be difficult to fully separate and quantify the effects from tariffs.

The matter has been a “daily topic of discussion” in farm communities, and has distinguished the year from any others in recent memory. Some farmers said the only similar precedent they could recall was an embargo on grain exports to Russia that President Jimmy Carter put in place in 1980.

“We’re still a minor wheat producer in the world because of that,” said Art Leefers, a farmer near Carlinville, Ill. “The results from those kinds of events last decades.”

In this year’s wave of tariffs, perhaps the most dramatic hit has been levied on soybeans by the Chinese — where one-third of U.S. soy usually ends up as feed for livestock. The move from the largest market for the country’s most widely planted crop “just completely knocked the stuffing out of the markets,” said Blake Hurst, president of the Missouri Farm Bureau. Soybean futures fell by roughly $2 per bushel, or around 20 percent.

The hit has left some farmers reeling.

"Definitely the tariffs are the biggest negative thing we've seen," said Adam Jones, a farmer from Old Monroe in Lincoln County. "It feels odd to see these prices drop and not have any way to help yourself."

“The main cash crop I grow is soybeans, which has taken the largest hit,” adds Russell, the farmer from Richmond, Mo. He said his farm is “producing our corn and soybeans at negative returns,” including about a $2 per bushel loss on soybeans.

“That’s something that’s not sustainable,” he said.

He and many other growers said government payments to offset negative effects from certain tariffs — such as one round of aid that equates to 82.5 cents per bushel of soybeans, and possibly a second installment, later on — will help alleviate the pain, but that they would much rather have open markets as a long-term solution.

“We don’t want to earn a living from the mailbox,” Russell said. “We want to earn a living from the products we’re producing.”

Farm incomes are down, with some growers referencing a government forecast from earlier this year that projected they would reach a 12-year low. More recent projections said inflation-adjusted net farm income was on pace to be “just slightly above its level in 2016, which was its lowest level since 2002,” and net cash income would reach its “lowest real-dollar level since 2009.”

"The drought caused some of the corn to be 50 percent undersized," said Denny Mertz, who poses for a portrait holding an undersized ear of corn in one of his corn fields on Wednesday, Sept. 26, 2018, in Elsberry, Mo. Mertz, a corn and soybean farmer, said the drought has decreased the profits on both his corn and soybean fields by 20 percent.

Some farmers said they support the trade war, but regret that their profession is absorbing the economic brunt of the political fight.

“Most farmers are willing, I think, for the short term to hang in there to see if we can get something straightened out with China,” said Mertz, the Elsberry farmer.

In many cases, farmers such as Mertz are able to store harvests in grain bins and wait for potential rebounds in prices before they sell their product. Some observers say that means political anger over the tariffs hasn’t taken root — at least not yet.

"It's not a real cost to them yet. But if they have to move the beans when the situation isn't fixed, then it'll become a lot more real, and the patience will expire pretty quickly," said Ricketts, who runs the seed and inputs business in north-central Missouri. "Most of them out here are supporting Trump with some hesitation — more hesitation than they had a couple months ago."

Despite a recent breakthrough on trade negotiations with Mexico and Canada, some experts worry that quick resolution to trade disputes with China might not be in sight.

"I'm very concerned that this is going to stretch out quite a while," said Irwin, the agricultural economics professor.

"What you have are two sides, where each side believes they are negotiating from a position of strength. And that's not a formula for compromise," he said. "In contrast, with Mexico and Canada, the U.S. was negotiating from a position of strength."

Even though federal payments could help drag farmers' profit margins into the black, Irwin warns that taxpayer-subsidized bailouts need to avoid harming the efficiency of global supply chains.

"This is exactly the problem that economists point out when you start this tit for tat in trade. Where does it end, and when do you stop compensating the losers?"

Worries and weighing adjustments

Even as 2018's financial bottom line comes into focus for farmers, some already worry about consequences spilling beyond this year.

“I got several guys that are very concerned about being able to get money from the bank next year,” said Cornelius, the dairy and row crop farmer in northwest Missouri. “They’re up against a credit limit.... It’s expensive to put an acre of corn in the ground.”

With “high uncertainty about what will happen going forward,” Irwin, the economics professor, said he has advised farmers to use any money to pay down debt and improve their financial position, instead of making investments in new land or equipment.

But with farmer incomes down this year, farm supply companies have already been hurt.

Denny Mertz transfers a truckload of newly harvested corn into one of his silos on Sept. 26, 2018, in Elsberry, Mo.

“Risk level in lending to farm supply companies has increased,” said Jones, the Old Monroe farmer whose day job is with CoBank, a company that lends money to entities like grain elevators and input sellers. “Because farm income levels are so much lower… guys don’t spend an extra $30 an acre on an extra fungicide or something like that.”

Despite the challenges presented by the 2018 growing season, some hope farmers — and U.S. agriculture, more broadly — can adjust and emerge stronger from the experience, even if change is not easy to come by.

Though she wants traditional markets reopened and maintained, Meagan Kaiser, a soil scientist and farmer who lives in Carrollton, Mo., said that maybe this summer's chaos will force her farm and others to look at "diversifying our market strategy" and could help spark an eventual shift toward outside-the-box opportunities.

"We've been kind of looking at new uses and new markets, and maybe this is more of an impetus to not fall back where we've been," Kaiser said, mentioning aquaculture is a "big unknown" as a potential market for soy, along with the food industry swapping in high-oleic soybeans amid a shift away from trans fats.

"I don't think it's an overnight fix, but I don't think we're that far off, either," Kaiser said.

But given the hurdles that exist, some worry that certain farmers may not be afforded another chance.

"Margins are break even, at best, on many farms," Mertz said. "These are very difficult times for the younger farmers with high debt. There will be some farmers that don't make it, if the economic conditions do not change soon."

"Young farmers or small farmers or farmers in certain areas are certainly more vulnerable when tough conditions arrive," agreed Jones, who rattles off a list of compounding costs that conspire against them.

"Land is extremely expensive, machinery is extremely expensive, fertilizer is expensive," he said. "You hardly ever meet a first-generation farmer."

And on farmland around the fringes of St. Louis or other cities, there's added pressure to sell to developers, he said.

"In this area we also get a lot of extra pressure on land prices," said Jones, adding that land near his farm, just 45 minutes north of St. Louis, can net $20,000 per acre — an amount he said growers wouldn't make back "in 100 years" through farming. "Everybody thinks their farm could be a subdivision."