CHAMPAIGN — The past two years, and 2019 in particular, have been a wild ride for farmers.
“So many unusual events occurred in 2019,” said Scott Irwin, an agronomist at the University of Illinois.
He spoke Friday at the annual Illinois Farm Economics Summit about “all the turmoil with the trade story with China” and “the weather.”
He noted the price of soybeans in early 2018 was about $10 a bushel, before the trade war began.
“In early February (2018), the United States announced import tariffs on solar panels and washing machines,” he said. “To me, there’s just something truly ironic that this whole trade situation or trade war with China started with washing machines.”
That quickly escalated to steel and aluminium, which led to retaliatory tariffs on a long list of products from the U.S., including soybeans.
Despite these announcements, “the futures market didn’t really change the valuation of the 2019 soybean crop,” Irwin said. “Initially, the sentiment in the market was that this was all going to get taken care of.”
But everything didn’t get taken care of, Irwin said. The tariffs went into place, and “soybean prices cliff-dived” to about $8.75 a bushel.
President Donald Trump announced a $12 billion aid package for farmers, and “then the rest of 2018 was, I would characterize the market as a sentiment of rising sense that the negotiations were going to work, and therefore we had a recovery of soybean prices back up above $9 a bushel.”
Meanwhile, corn prices were relatively flat, Irwin said.
That September, Illinois also saw nearly 2 more inches of rain than it usually does, and that increased the next few months and into the spring.
“Anybody farming in Illinois remembers how wet it was,” Irwin said.
In the spring of 2019, Irwin said there was continued optimism on the trade front, until “things fell apart again in April and May” and soybean prices dropped to $8.25.
While corn prices fell, they didn’t drop as much as soybeans and farmers planted more corn than expected, Irwin said.
“What else was going on with Mother Nature? We all know it just kept raining and raining and raining,” he said. “So by the time we got to May 2019, we were cumulatively over 10 inches above normal rainfall here in Illinois.”
That led to late planting, with only 45 percent of Illinois corn planted by early June.
Some farmers planted in wet ground, while others decided to cut their losses and take their crop insurance payment for acres that were prevented from being planted by the rain.
Around the same time, the Trump administration announced another $16 billion aid package.
Throughout the summer, the U.S. Department of Agriculture released reports estimating that number of corn acres planted would only be down a little bit.
“Down a little, but not anywhere near what I was expecting,” Irwin said.
“Did the USDA get the corn and soybean planted acreage right? And if I had a show of hands, there’d be only a few brave souls that would agree with me that the USDA got it right,” Irwin said. “The USDA was basically right, when I define right being within their normal error bands at various points in the season.”
The numbers “tell us a really interesting story of what farmers did in the heat of the battle in June 2019,” Irwin said. “They said, ‘I’m going to keep my corn acreage constant. I’m going to take a record amount of prevent-plant, but very cleverly, I’m going to take my corn prevent-plant acres out of the commodity that’s most oversupplied: soybeans.’”
Farmers planted much less soybeans than usual, helping reduce the oversupply in the market.
“That’s the silver lining to much of the dark clouds of 2019,” Irwin said.
And despite the wild ride, net farm income overall in the U.S. is forecasted to increase in 2019, according to the USDA.
Farmers overall are expected to make about $92.5 billion this year, an increase from last year and just above the 2000-18 average.
“This is the whole U.S., and this is all types of commodities,” said Dale Lattz, a research associate with the UI’s Farmdoc team. “It is interesting to note that I believe about $8 or $9 billion of that $92.5 billion is the MFP payment,” referring to the aid package payments.
“So that is a big factor,” Lattz said.
He said weather and related issues were big factors in income, as well as government policy, such as the aid package and the trade issues.
“Farm incomes can vary a lot from farm to farm,” Lattz said. “There’s a lot of different situations going on out there besides the weather; financial structure of leases and so forth. This year, I’m sure it’s probably going to vary a lot more than normal.”