You could say that Casey Langan, executive director of public relations for the Wisconsin Farm Bureau Federation, has the back of Wisconsin farmers, and nobody is happier about the way things turned out for them in 2011. Coming off a solid growing year with healthy milk prices and production and even better overseas prospects, Wisconsin farmers have moved past the gloom of 2009, when foreign demand was scaled back for dairy products and their balance sheets suffered as a result. Looking ahead, Wisconsin farmers, who already benefit from international trade, are pleased with the enactment of long-shelved proposed free trade agreements with South Korea, Colombia, and Panama, but there are some concerns for the state’s $59 billion agriculture industry, and they begin with the federal budget deficit’s impact on the 2012 farm bill.
IB: What’s your general assessment of the state of agriculture in Wisconsin?
Langan: As one of the most diversified agricultural states in the nation, it’s often difficult to make sweeping assessments. However, 2011 was a pretty good year for most farmers. Corn and soybean growers have had two strong earning years fueled by strong international demand for their crops. Some of their profits were offset by higher prices for fertilizer and fuel.
IB: How about dairy farmers?
Langan: 2011 turned out to be better than expected for dairy farmers. Historically high milk prices meant income gains for most dairy farmers. Profits were pinched, however, for those dairy farmers that need to buy grain for feed. Wisconsin has an economic advantage over some Western livestock states because many of our farmers grow their own feed and do not have to rely on the sometimes-volatile grain market.
Farmland values have been surging in the Midwest due to higher grain prices. According to the U.S. Department of Agriculture’s National Agricultural Statistics Service, farmland values in Wisconsin grew about 8% last year. This adds strength to the balance sheets of farmers, most of which are not having trouble meeting the collateral requirement of lenders.
IB: What is the likely impact of the recently enacted trade measures on Wisconsin agriculture, which is already benefitting from overseas trade?
Langan: The three agreements in total are expected to increase direct ag exports from Wisconsin by $63.7 million annually. It is estimated that the increased marketing opportunities for Wisconsin’s farmers and agribusiness will add nearly 575 jobs to our state’s labor force.
The recent good fortune of our state’s farm economy is due in large part to international trade. Strong demand for food from the burgeoning middle class economies of China, India, and Brazil have been driving strong prices for what our farmers produce. It’s important to note that this demand has been fostered by a relatively weak U.S. dollar. If the U.S. dollar rises in value compared to other currencies, then demand for U.S. farm products will likely trail off as a result.
IB: Do you have any industry concerns that are a bit over the horizon? Langan: With its fate directly tied to unpredictable factors like the weather and global economies, agriculture will continue to be a high-risk endeavor. There are a number of concerns on agriculture’s horizon.
A downside to high grain prices and rising farmland values is the fierce competition and increasing rates for when farmland is rented. Bidding wars for rental land, based on the assumption of continued high grain prices, transfer profits from farmer tenants to their landlords. It remains to be seen if the farmland value boom is a bubble that will eventually burst.
IB: What about all the negative talk about ethanol and other Congressional concerns?
Langan: Aside from foreign demand, ethanol has also altered the nation’s corn market. Ethanol’s rise can be traced to the federal government’s blending mandate, known as the Renewable Fuels Standard, and subsidies that come in the form of a tax credit that goes to oil companies. The blending subsidy-tax credit is not a popular item in Washington and it is scheduled to end on December 31. However, if the Renewable Fuels Standard’s blending mandates are kept in place, then demands for corn to produce ethanol should stay close to current levels.
The news from the congressional Super Committee is probably the most pressing concern to agriculture right now. A healthy farm economy coupled with a federal government awash in red ink will likely mean a drastically different looking U.S. farm bill in 2012. A cutback in subsidies and income supports does not have to be viewed as a negative. A movement towards a more market-and-trade-oriented farm economy would likely benefit many of Wisconsin’s farm families.
The Wisconsin Farm Bureau will be lobbying our federal government to equip farmers with tools to better manage their financial risks rather than just providing hand-outs during times of disaster. These hand-outs often hurt us on the trade front, as they weaken our hand in trade negotiations with foreign governments.
