Farmers behind the figures

With as much data that gets accumulated, analyzed and applied these days, it’s easy to get numb to the numbers.

When data is used to make decisions that have impact on real people, those numbers must never lose their meaning. That’s why the Agricultural and Food Policy Center (AFPC) bases its figures on actual farmers.

“We’re not just mining some dataset on the internet,” said Marc Raulston, AFPC associate director. “We’re sitting across the table from farmers, hearing their concerns and talking about what they’re doing. This program allows us to develop a good baseline to provide a representative picture of what farming really looks like. That’s the real power.”

The representative farm program has been central to the research of the AFPC since it was established by Texas A&M University in 1983. For more than 30 years, AFPC has worked closely with the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI), which provides commodity prices and projections. FAPRI focuses on the sector level; AFPC focuses on the farm level, explained George Knapek, AFPC representative farm program manager. The two entities release companion baseline briefings each spring and present them Congress.

“The No. 1 use of our information is through the Senate and House Ag Committees,” Knapek said. “They often use us as a sounding board for questions like, ‘What are farmers saying about x?’ or ‘If we make this change, how will that impact your representative farms?’ We can run different scenarios in our models to show what might happen.”

To simulate its farm models, the AFPC gathers real-world information from 95 crop, dairy and livestock operations in 30 states. Many of those farms are in MFA territory, including seven in Missouri: three feed grain farms, two grazing dairies, one rice farm and one cattle ranch.

The farms selected in each area are similar in size and nature, Knapek said, and they’re typically top producers who keep good records, operate efficiently and are willing to share details about finances, production and expenses.

“We’re not modeling individual operations, but we’re building a representative farm that reflects each area,” Knapek said. “If someone said, ‘What does a farm look like here?’ we can provide a snapshot based on real information.”

The database is updated every two years using face-to-face panel interviews with the farm owners and key operators. AFPC personnel may also reach out to the panelists if something substantial happens between those meetings that could drastically impact the model’s accuracy.

“After those meetings, we have a virtual farm or ranch in the local area that can be simulated in our model,” Knapek said. “Economic analysis from the model shows income, cash flow, balance sheet, projected viability for 10 years and how changes in farm programs, income tax policy, trade and environmental regulations may impact the business.”

Many of the representative farms have participated in the program since its inception, providing valuable long-term insight to the research. Often, their involvement spans generations. Glenn Kaiser of Carrollton, Mo., became part of the “feed grain” panel in 1990, and now his son, Marc, is lending his input to the study as well.

“I really feel like this representative farm system does good because it has real emphasis,” Glenn Kaiser said. “In our talks with the panel, we try to keep it as legitimate as we can and reflect what’s going on with our farm, because we know it can make a difference in how different legislation is approached.”

Indeed, Raulston said, whereas farmers are often tight-lipped about their operation’s inner workings, he finds that they are open and honest when it comes to sharing intimate information with the AFPC panel.

“The fact that we’re not showing the world one person’s opinions allows them to talk and share a lot more freely,” he said. “They know, for the most part, what they say isn’t going leave the room. The message is going to be there, but it’s going to be packaged in a way that doesn’t reveal their personal information.”

Another Carrollton, Mo., farm included in the “feed grains” category is the diversified row-crop and livestock operation of Dennis Germann, who said he participates in the program to help ensure legislators have the knowledge they need to make informed decisions.

“If officials up in Washington don’t get their information from farmers like us, then they won’t set up farm programs and policies to where it will benefit people,” Germann said. “And personally, it lets me see how I compare to other people and pick up a lot of good ideas from other farmers who have similar operations to mine.”

Retired University of Missouri Extension Specialist Parman Green, who helped set up the Carroll County panel, said he’s experienced positive support for the program in his area. AFPC relies heavily on local contacts such as Green to identify farms that fit the model.

“It’s a real benefit for the farmers who participate and farmers as a whole to get this analysis,” Green said. “Policy-makers need to see what’s really happening in agriculture, not what some economist in an ivory tower is saying.”

AFPC classifies each representative farm as being in good, marginal or poor economic position over a five-year period. In the most recent Representative Farms Economic Outlook published in March, 11 out of the 23 feed grain farms were projected to be in “good” financial condition from 2018-2023. Knapek, who presented the latest analysis at the 2018 Abner Womack Missouri Agricultural Outlook Conference on March 16 in Columbia, Mo., said above-average yields over the last two years helped offset low prices to keep more of those farms from falling into “marginal” or “poor” condition.

Cotton farms are split 50/50 in “good” or “marginal/poor” condition, but rice operations are showing the worst results of any category with the majority in “poor” condition. None of the 15 rice farms in the model are in the green, Knapek said. For wheat farms, 60 percent are classified as marginal or poor.

Currently, 65 percent of dairies are classified as “good,” but ranches are mostly “poor.” Knapek attributes the negative ranch outlook to cattle price declines and forces such as fire, cold, blizzards and drought that have taken their toll on beef producers.

In addition to gathering quantitative data, AFPC officials also record qualitative data about challenges and opportunities the farmers are experiencing. Knapek said he finds striking similarities among producers—no matter how diverse their operations.

“It’s interesting to visit with different farmers in different places,” Knapek said. “As a whole, I find that producers are all the same. They face the same issues and have a lot of the same characteristics.”

As Farm Bill discussions heat up on Capitol Hill this year, AFPC and FAPRI officials said they hope their baselines will be used to address some of those concerns and produce practical policy that works for the benefit of farmers across the country.
“We don’t advocate for any particular policy,” Raulston added. “We make an unbiased analysis, give them the results and let them make decisions. I think that’s what has allowed us to continue doing this for so long and why we’re a trusted resource.”

For the full AFPC Economic Outlook, visit www.afpc.tamu.edu.

Outlook-alike
FAPRI baseline report shows continued pressure on farm finances

The date on the agenda was different, but the data was very much the same.

The latest analysis of national and global agricultural trends presented at the fifth annual Abner Womack Missouri Agricultural Outlook Conference on March 16 in Columbia, Mo., had a lot in common with the projections presented a year earlier. The 2018 U.S. Baseline Outlook from the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) indicates little change in net farm income this year and a slight increase in 2019.

A fifth straight year of global grain and oilseed yields above the long-term trend has made it difficult for crop prices to recover in the 2017-18 marketing year, the report said. Projected prices for corn, soybeans and wheat all increase slightly in 2018-19 and 2019-20, but large global stocks limit the increase. Corn prices are expected to average $3.57 per bushel for the 2018-19 crop, while soybean prices average $9.38 and wheat prices average $4.89.

“Even with modest projected increases in commodity prices, net farm income is expected to remain far below the record level set in 2013,” FAPRI Director Patrick Westhoff said. “The outlook for subsequent years is slightly brighter, but pressure on farm finances seems likely to continue.”

Good news in the report includes strong demand for meat, which offset downward pressure on prices from increased production last year. Feed costs remain a bright spot, as abundant grain and oilseed supplies limit input cost increases for livestock producers. With growth in all major meat sectors expected in 2018, however, University of Missouri ag economist Scott Brown said demand is critical.

“As long as demand outpaces supply, you’re going to like being in the livestock business,” he said. “However, growing supplies can be troubling.”

The baseline report is released each March by economists with FAPRI and the Agricultural Markets and Policy team. Their projections for agricultural and biofuel markets are based on market data available in January. All commodity markets remain sensitive to the health of the global economy and trade relationships.

“We use computer models to develop a range of projected market outcomes that takes into account some major sources of uncertainty about future supply and demand conditions,” Westhoff said. “We calculate hundreds of possible outcomes based on different combinations of factors and use those to produce an average.”

Other key results from this year’s report include:

• Upland cotton and rice prices are projected to fall in 2018-19, due to carryover of cotton stocks from 2017 and expected planting acreages for both rice and cotton.
• Cattle and hog prices are projected to resume annual declines in 2018 and 2019, as large supplies continue to enter the market. While demand still appears to be solid, it is unlikely that the strength of last year can continue.
• Agriculture Risk Coverage (ARC) payments are expected to decline rapidly. More farmers are assumed to choose Price Loss Coverage (PLC) in 2019 if current program rules are extended and they are allowed to make a new election.
• Crop insurance net outlays are projected to average more than $8 billion per year for fiscal years 2019-2027. Major commodity program outlays average a little over $6 billion per year over the same period.

The full 72-page 2018 U.S. Baseline Outlook is available at fapri.missouri.edu.