China, crop insurance and cash rent

ROCK FALLS, Ill. — He’s now retired from Iowa State University Extension, but the economist from Cyclone Nation donned the orange and blue of the Fighting Illini to talk about the future — and the past — to a group of northern Illinois farmers.

Steve Johnson, retired farm management specialist, wasn’t talking about $8 corn or $16 soybeans.

In fact, Johnson outlined the list of headwinds aimed at U.S. farmers in 2024, from large stocks of corn and soybeans, to reduced demand, especially on the export side.

After his presentation, AgriNews sat down with Johnson to get his thoughts on five hot topics.

On Crop Insurance In The 2024 Farm Bill

“The best-case scenario for crop insurance in 2024 is the same level of spending. If we did away with crop insurance and crop insurance subsidies, we would have the farm crisis of the 21st century. It would probably be even worse than what we saw in the 1980s. So many people are dependent upon that subsidized crop insurance to manage the financial risk associated with production. I think that if there is something to eliminate in the next farm bill, eliminate ARC/PLC. What difference does that make? We don’t need an ARC/PLC program — we need a strong crop insurance program.”

On Corn Acres

“We just need to rotate 10 million acres to soybeans, then we’ll trash the soybean market, but we’ll capture that corn market for a year. Farmers don’t think like that. They think of their own operation and they think, ‘why doesn’t Iowa not grow 10 million acres of corn?’ I think there is a concern that we should have seen, that we should have chased those corn acres out of those peripheral states that have fragile soils and don’t have water-holding capacity. But it didn’t happen this year. When you look at the last six months, where did all those extra corn acres come from? Then we have the corn yield, then we lose export share and now we’ve got corn exports down to 2.05 billion bushels. There are a lot of headwinds blowing against the corn market that aren’t going to turn anytime soon, in my opinion.”

On Corn Exports

“I think there’s a real concern. I don’t think it’s just politics. I think it’s the U.S. dollar. I think it’s the fact that we have competing entities in the world, especially with Brazil and the corn they have available. We have got to rethink our corn export market or we are going to have to expand domestic use or we are not coming out of this.”

On Cash Rent

“We had record net farm incomes in 2021, 2022, and the fact is cash rents will be slow. (University of Illinois agricultural economist) Gary Schnitkey says they are sticky. They just don’t flow with the net value of the crop. Some of the work going on, Iowa State was using 30%, of the value of the crop is reflected in fair cash rent, 40% of the value of soybeans. I think we probably have got to go back and start reflecting cash rents as a percent value of that crop and not some ‘what is the perceived market value.’ We are going to have a lot of operators who are going to have trouble in 2024 with these lower crop prices. We haven’t dropped costs far enough and I would say we are going to have lower net farm income in 2024.”

On Trump And Trade

“Trump negotiated a three-stage purchase of ag products that they were going to purchase annually. They met the required purchases the first year, but it was a three-year process, 2019, 2020 and 2021. As soon as Trump was not reelected, China said we negotiated with the Trump administration, so we are not going to honor it. So, they left. The whole idea of holding China’s feet to the fire went away. There was COVID and other issues. But China never came back into that market and never purchased as many agricultural goods as they agreed to in the agreement. We negotiated with China and China agreed that they were going to buy all these agricultural products over this period of time. They did that for one year. Why didn’t they buy any more? Because Trump wasn’t in power anymore. It’s a whole different administration. Why didn’t China purchase what they said they were going to purchase? Part of that was COVID and the world economy slowed down, but China just walked away from the trade deal, they just walked away.”