Overview
- According to aUniversity of Michigan community profile for Washtenaw County, around 35% of Washtenaw County acreage is farmland, and there are over 1000 individual farms.
- Anxiety is high for many farmers this season. Costs are increasing due to inflation in every area: fuel, diesel, fertilizer, seeds, and pesticides all cost more. In addition, the conflict between Russia and the Ukraine is spiking fertilizer costs as much as 40% because the fertilizer import/export balance is disrupted. These uncertainties are compounded by excess precipitation and flooding that occurred in the past couple of years.
- Switching crops to maximize profit is one option. According to Michigan Farm News, based on modeling from Iowa, in 2022 corn may be more profitable than soybeans; soy has come out ahead historically. Nitrogen fertilizer costs are the deciding factor in this equation, if fuel costs and other factors are equal.
- Despite the uncertainty, farming is not expected to be a net negative and most farms in Washtenaw County should turn a profit in 2022. However, if climate change-driven flooding, storms, or drought are widespread, the outlook is less rosy.
- Matthew Gammans says that while fuel, fertilizer, and other costs are outside of most farmers control, there are steps to take to maximize the profit per acre. The MSU Extension offers a number of decision-making tools to determine the best course. Matthew says that reducing the amount of tillage in fields reduces the amount of diesel fuel used and cuts operating costs, and there is a new online tool available for determining how to do this as well.
- Matthew Gammans joined the MSU AFRE faculty in 2020 as an Assistant Professor and Extension Economist and is appointed in the tenure system. A native Michigander, Matthew earned an engineering degree from Michigan State University prior to beginning his doctoral work in agricultural economics at the University of California, Davis. His research seeks to measure and understand the decisions of agricultural producers. In particular, his dissertation studied how climate and weather risk affect crop yields and acreage decisions. His work has appeared in peer-reviewed journals, as well as extension/outreach publications.
Transcription
David Fair: This is 89 one WEMU, and welcome to Issues of the Environment. I'm David Fair, and you might be a little surprised to find out just how prominent farming and the agricultural industry is in Washtenaw County. We have rising fuel prices, the Russian war on Ukraine and its global implications, and a changing climate with more severe weather. It all adds to the challenges to an already difficult profession. Our guest today is going to help us better understand some of the local impacts and what the short-term future may look like for local farming. Matthew Gammans is assistant professor and extension economist at Michigan State University. And thank you so much for the time today. I appreciate it.
Matthew Gammans: Thank you so much for having me, David.
David Fair: From a broad perspective, when was the last time the agricultural industry was facing the kinds of challenges we see presented today?
Matthew Gammans: Well, in terms of, you know, facing exactly the kind of this portfolio and set of challenges, I would have to say never. I mean, certainly, the agriculture industry is no stranger for challenging times, but, certainly right now, with kind of the high-priced environment that we're facing, as well as some of the recent weather issues, there's certainly a lot on this plate.
David Fair: According to a University of Michigan profile of Washtenaw County, as I mentioned in the introduction, there are over 1000 individual farms within the borders, each one of those farms dealing with spiking fuel costs. How significant is the impact on the ability of small farmers to fully produce and harvest given that particular challenge?
Matthew Gammans: Yes, the fuel costs are kind of one piece of the budget that has certainly kind of increased. You know, last year, we might think about, you know, $17 an acre going to fuel costs. That's up 24%, right? You know, even on top of maybe some inflationary pressure, we're still seeing really high rising diesel costs on top of that. But the bigger slice of the budget has got to be on the fertilizer side.
David Fair: Yeah, that is spiraling, isn't it?
Matthew Gammans: Yeah, it's way, way, way up. So, you know, last year, you might think about, you know, $135 an acre. That's all the way up to $220. So, a 63% increase in one year. These have to be paid upfront, right? So, you know, the farmer won't see kind of any sort of return on this investment until they market their crop in the fall. So, all these costs really add a lot of risk to a farmer's operation.
David Fair: If I'm a farmer sitting in Washtenaw County, I have those concerns immediately. What are the various concerns I need to pay attention to while watching the horrors of the Russian invasion of Ukraine?
Matthew Gammans: First, I mean, I just want to say, you know, agriculture in the United States, I don't think it's kind of the direct kind of main issue that people are concerned about when we think about, you know, a raging war.
David Fair: But there are implications.
Matthew Gammans: Absolutely. Absolutely. So, I think there's kind of two main stories there. So, one is the fertilizer cost. For Russia and also Belarus, who's a tangential player in the war, they're big fertilizer exporters. You know, roughly, anywhere from 15 to 20% of world fertilizer exports are going to be coming from Russia. So, you know, when you cut off that supply, that's going to be responsible for a really big price shift up. On the other side, we're in a kind of a tight environment globally with demand for commodities. Ukraine and Russia are both big grain producers. They're going to both have serious implications on their production, and that's going to lead to a higher price environment for commodities across the board. You know, I would say that would be kind of a sliver of good news if you think about kind of corn, soy and wheat farmers in Michigan. Yes, input prices are certainly up, but the outlook prices are looking to be well above normal levels as well.
David Fair: So, as we consider all of that, some of that we certainly hope is short term. But there may be no greater immediate or long-term threat to agriculture than the changing climate from flooding to drought and everything in between. How do you plan for or accommodate Mother Nature when she's angry? What have we learned to this point, and how is that going to carry us forward?
Matthew Gammans: That's a great question. And the thing about climate is that it, you know, it affects agriculture in so many different ways. And the effects in one place are never going to be the same as the effects in a different location or on a different crop. You know, thinking about here in Michigan, you know, you hear a lot about rising temperatures. And, certainly, I mean, temperature is an important part of the growing season operations, no doubt about that. But the real issue, I think, is precipitation variability. You think about kind of warmer air that can hold more moisture and potentially lead to kind of longer periods of drought and then, also, you know, some really large precipitation events. Right now, we're kind of just kicking off planting season. So, kind of whether or not the fields are going to be dry and operable is a big issue. And I think, you know, longer term, I think farmers are going to increasingly be looking to strategies to deal with the spring planting issue. And, in a world where, you know, precipitation is just kind of not as predictable and potentially some really large spring precipitation events.
David Fair: This is Issues of the Environment on 89 one WEMU, and we're talking about farming with MSU assistant professor and extension economist Matthew Gammans. We know that food prices are soaring, and inflation rates are going up. Those costs are going to be passed along to the consumer. How are matters of social and financial inequity playing into agricultural policy?
Matthew Gammans: The real issues are around social inequity as we think about kind of a high-priced commodity environment, countries that import a lot of their food supply and where poorer countries where they spend a large share of their budget on food. You know, here in the United States, most people are spending certainly less than half of their income on food. You know, that's not the case everywhere globally. So, when you think about prices for wheat that have almost doubled in the past year, that has a really big impact on kind of the most vulnerable from a food security standpoint.
David Fair: Farm subsidies. Big part of the federal budget every year. Are lawmakers going to have to explore different ideologies and methodologies to accommodate current and future circumstances?
Matthew Gammans: I think there's always room for innovation at the policy level. You know, we have the 2023 farm bill. So, this is kind of the big legislation as it relates to agriculture that Congress passes every five years. There'll be kind of a lot of discussion about what should the federal government be incentivizing and promoting when it comes to agricultural subsidies. There's a lot of different perspectives, I think. There certainly will be an effort to try and tie some payments to, you know, what people might think of as greener or climate smart practices, using agriculture as a way to actually combat climate change, sequestering soil on the ground, and reducing emissions on farm. There also, I think, will be a big push to, again, kind of help farmers manage this risk. And part of that will be through the federal crop insurance program.
David Fair: As we consider solutions in moving forward, do many of the farmers in Michigan perhaps need to consider changing the crops that they produce?
Matthew Gammans: That's a really interesting question. Michigan already has kind of some of the most diverse agriculture that you'll see in the country. Maybe California and then Michigan is kind of number two in just the vast array of property able to grow here. A lot of it, though, still is in kind of a corn/soy/wheat type rotation. You know, even with a warmer climate, I think if anything, I would expect to see, you know, maybe an increase in some of the corn and soy acres that get allocated here. So, if we think about our neighbors to the south, Illinois and Indiana, they're right in kind of the traditional Corn Belt. You know, there's some hope that kind of a warmer temperatures might lead to Michigan to be a little bit more included in that Corn Belt region. So, I could see potentially an increase in some of our corn soy acres in the short to medium term here.
David Fair: What measures are available? What affordable tools or resources can a farmer go to and access that would help them get through to the other side?
Matthew Gammans: Farmers are a very creative bunch. You know, no one is kind of more focused on innovation than them, I think. So, from an agronomic perspective, farmers are always kind of shifting their plan and adjusting because they have to. You know, so much is determined by the weather that, you know, having a flexible plan where, you know, maybe you go into your field late, but maybe you plant at a higher feeding rate to try and recoup some of that lost yield potential. And we saw that this year too a little bit with farmers being flexible in their plans as it relates to fertilizer applications and finding opportunities to reduce fertilizer rates. On the other side, you know, there's kind of the economics and having a marketing plan. As the risks that they're facing increases, we'll see kind of more and more use of subsidized federal crop insurance program, but also just creative marketing plan where you're going to kind of market your crop through a variety of avenues. You'll be going into your growing season, and you'll already kind of have a contract in hand for the price that you're going to sell your crop in the fall.
David Fair: Our time together is winding down, but I want to ask one final question. As you continue to study the agricultural industry and the economics of it here in Michigan, do you have some modeling or even an educated guess that tells us where we might be in a decade?
Matthew Gammans: Yeah, that's an interesting question. I think one thing that is important to remember--kind of in the context of climate change--is that there are certainly, you know, really big risks and really big challenges. But we've also seen really fantastic technological innovation, you know, over the past decade. So, I think we'll continue to see kind of increases and in yields in kind of a farmer's ability to get more food out of the same amount of ground. At the same time, that doesn't mean that, you know, climate change won't kind of shift the acreage that we see. And, again, this increasing pressure, I think, to have farms be part of the climate solution, I think those are trends that are likely to continue.
David Fair: I really appreciate you taking the time to talk with me today, Matthew. I appreciate it.
Matthew Gammans: Yeah, thank you so much.
David Fair: That is Matthew Gammans. He is assistant professor and extension economist at Michigan State University--our guest on Issues of the Environment. This weekly feature is produced in partnership with the office of the Washtenaw County Water Resources Commissioner, and you hear it every Wednesday. For more information, visit our website at WEMU dot org. I'm David Fair, and this is 89 one WEMU FM and HD one Ypsilanti.
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