The student news site of the University of WI - Eau Claire

‘Fog of stress’ blanketing state’s agriculture industry

March 2, 2018

With another proposal to increase federal military spending, local dairy farmer Mark Kaeding wonders why lawmakers aren’t prioritizing food security.

“Are bullets and bombs more important than food?” said Kaeding, whose 500 dairy cow operation sits between Augusta and Fall Creek.

Tony Bowe, who farms with his brothers in Chippewa Falls, predicts with low dairy price futures, the year will end in a loss for his farm. © 2018 Travis Nyhus

Local farmers and producers face uncertain time with the combination of an aging population, low market prices mixed with increasing expenses and looming trade negotiations that might further affect exports.

U.S. Sen. Tammy Baldwin joined a roundtable of local farmers and agricultural cooperative members in both La Crosse and Altoona on Feb. 19 to listen to concerns about the issues they’re facing.

With the national farm bill reaching it’s five year renewal period, Baldwin shared recent updates to the Dairy Margin Protection Program (MPP), which offers dairy producers insurance coverage.

Changes include lower insurance premiums for small and medium sized farms and an increase of $1 billion in possible funds.

“There is not one person in this room who can survive without eating,” Kaeding said to Baldwin. “Why are we not considered important? I don’t care if it’s a billion dollars, it’s not enough, it’s not even close.”

The Agriculture Act of 2014, which Baldwin is working to renew before next year as a member of the Senate subcommittee dealing with agriculture, failed to provide the safety net farmers at the roundtable said they hoped for in the face of suffering commodity prices.

“A lot of things producers are experiencing right now are hard to just go out and wave a magic wand and fix,” said Mark Hagedorn, Eau Claire County UW-Extension Agriculture Agent.

The industry

The agriculture industry is a driving force in Wisconsin’s economy and a major source of employment in the state. According to the Department of Agriculture, Trade and Consumer Protection (DATCP), the industry provides jobs for 11.9 percent of the states labor force.

Nearly 70,000 farm operations contribute $88.3 billion to the state’s economy each year,
but the industry’s current climate has negatively affected many who choose to labor on their land. Forty-five farms and fisheries declared bankruptcies in 2017, as reported in Wisconsin Public Radio.

An aging labor force

The aging farmer population has contributed to the increase in bankruptcies over the past year, as farmers retire without anyone to pass the business on to.

“We don’t have a lot of youth wanting to get back into the industry,” Hagedorn said. “The industry is aging, and then you couple that with this fog of stress and the financial difficulties that we’re experiencing, it’s just almost a perfect storm giving you an excuse to say, ‘I’ve just had all I can take.’”

The 2012 agriculture census reports that 56-years-old is the average age of farm operators.
Ideally a new generation of farmers would take over as the older generation retires, but young farmers face many challenges starting from scratch, said farmer Dave Peterson of Boyd.

“I see lots of farmers my son’s age (37) that are trying to get going,” Peterson said. “The capital to get going is tough and with these dairy prices I am afraid we are going to lose a lot of these (farm) families.”

Decline in small, family farms

Smaller farms can struggle to invest in the increasing capital of necessary equipment, building and land.

“What used to be a collection of very diverse sized farms are becoming increasingly large scale,” Baldwin said, “because the view is that’s the only way to be able to support a family and make ends meet.”

Local dairy farmers shared their concerns at the Eau Claire County UW-Extension office on Feb. 19 with Senator Tammy Baldwin. © 2018 Travis Nyhus

Tony Bowe, co-owner of Triple T Farms in Chippewa Falls, felt compelled to support their families by expanding their farming operation.

“The cows don’t stop,” Bowe said. “You’re (working) seven days a week and in order to get vacation you have to have some help around (the farm) to do it. So you have to expand and get bigger. That is why we are losing a lot of the smaller family farms.”

The expansion of Triple T Farms included a new barn more than 300 feet in length, which allowed the farm to reach current cattle numbers of about 500.

Expanding creates levels of debt the farms must slowly work out of, Hagedorn said. When commodity prices are low most of the income goes directly into the product, and this causes farmers’ balance sheets to quickly decline into the negative as equipment and facilities cannot be upgraded.

Hagedorn said that farmers who can maintain day-to-day operations with incoming cash flow still struggle because of constant, inevitable depreciation of property.

Even with the depreciation of assets such as building and equipment, farmers know that the land they own still has value, but Hagedorn said having the land isn’t enough, without the right equipment and the money to purchase seed to produce the crop, the field will remain empty.

“You’re sitting here working your rear off and you’re watching your assets disappear and that really only leaves farmers with one thing,” Hagedorn said, “and that’s dirt.”

Fixing low prices

The increase in technology in the industry has both hurt and helped farmers. Kaeding said that farmers use every bit of technology developed to become more efficient, but then they are penalized for creating an oversupply of products.

When markets are low the easy fix is to produce more to counteract lower prices, thus creating a larger supply that far exceeds the level of demand. Those that can handle the trough of the commodity prices will hold on until eventually markets will correct, as they usually do, typically due to sharp changes in supply.

“The banker says if the prices stay where they are right now it’s going to cure the milk supply, because there isn’t going to be anybody around to farm,” Bowe said.

Thomas Kemp, chair of the economics department and professor at the University of Wisconsin-Eau Claire, said agriculture markets can fluctuate a great deal and unforeseen weather events that wipe out large amount of supply can quickly change prices.

“Ag tends to operate on very narrow margins,” Kemp said. “What could be a profitable crop with an unexpected change of the weather could turn into a non-profitable crop. As a consequence of that there is not a lot of wiggle room in those markets.”

Banking on the failures of other regions to correct the market lows isn’t a viable option for Wisconsin farmers. Their hope must remain on what is being done internationally, as agriculture has become a global industry. The USDA released their forecast for the upcoming year, as U.S. agriculture exports remain a critical piece of the health of the industry.

“The USDA team continues to work around the clock and around the globe to boost export prospects for American farmers and ranchers not only by expanding existing markets and improving existing trade agreements, but also by aggressively pursuing new markets and new opportunities,” said Secretary of Agriculture Sonny Perdue in a statement regarding the forecast.

A global food industry

Markets for agriculture products are already low and current negotiations over U.S. trade agreements throw another wrench into the works.

Wisconsin exported $3.5 billion in agriculture products in 2017, with Canada and Mexico being the biggest importers of these products.

The North American Free Trade Act (NAFTA) established in 1994 created an agreement between the U.S., Canada and Mexico. These two nations are among the biggest importers of U.S. agricultural exports, which tallied $12.7 billion in December of 2017 alone.

Baldwin said renegotiations of NAFTA are centered more on possible improvement for U.S. manufacturers, rather than agriculture producers.

“NAFTA impacts our farming community very differently than it impacts our manufacturing community,” Baldwin said, “and I do believe there are lots of ripe areas for robust renegotiation in NAFTA as it impacts our manufacturers.”

One of Baldwin’s goals is to avoid bruising Wisconsin farmers when fighting for better trade guidelines in other industries vital to the state’s economy.

Wisconsin farmers are well aware of how international trade impacts their farms, big or small. Last year Grassland Dairy gave notice to dairy farms throughout the state that they would need to find another buyer for milk. This was due to a change in Canadian dairy policy, which impacted how they imported Wisconsin milk products.

“Trade agreements and exports are now synonymous with agriculture,” Hagedorn said. “I don’t care if you have 35-40 cows or 3,500-4,000 cows, you’ll be influenced one way or another by what the global market is doing.”

Kemp said that international trade for the most part is like domestic trading, but with trade across borders it is helpful to have guidelines.

“With international transactions it can be more complicated,” Kemp said. “The people are physically further away, so they’re harder to know. They may operate under different cultural norms, so their expectations about how transactions should take place may be marginally different. We generally rely on trade negotiations to dictate the terms.”

Small farms critical to agriculture

Even with Baldwin presenting a positive look at NAFTA negotiations, many local farmers are still cautious about what the upcoming year will look like.

“I don’t think we are going to see as good of prices as last year,” Kaeding said. “I think it is going to be a very tough year, unless Mother Nature steps in. If the corn prices go up and the soybeans prices go up we could have a better milk price, but all those have to work together.”

With all the uncertainty in the future Hagedorn said many local farmers must continue to “navigate the fog,” as small farms face challenges not seen by earlier generations.

Small farms once filled rural areas of the state, but they are slowly disappearing and Hagedorn said the definition of family farm is ever changing.

The tradition of small-family farming is vital to Wisconsin’s strong agriculture roots, Baldwin said.

Baldwin said it is important to continue to find ways to help these families and continue the rich tradition of Wisconsin’s strong agriculture roots.

“We need to do whatever we can to make smaller scale farming still possible,” Baldwin said.

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