Overview
- According to aUniversity of Michigan community profile, Washtenaw CountyAbout 35% of Washtenaw County’s acreage is farmland. There are more than 1000 farms.
- This season, farmers are feeling anxious. Inflation in every sector is driving up costs: fuel, diesel, fertilizer and seeds, as well pesticides, are all more expensive. Due to the disruption of the fertilizer import/export balance, fertilizer prices are increasing by as much as 40% due to the conflict between Russia & Ukraine. These uncertainties are compounded in part by flooding and excess precipitation that have occurred in the last couple of years.
- One option is to switch crops to maximize profit. Michigan Farm News claims that soybeans may be more profitable in 2022 than corn, according to Iowa-based modeling. Soybeans have always outperformed. If fuel costs and other factors are equal, nitrogen fertilizer costs will be the deciding factor.
- Despite uncertainty, farming should not be considered a net negative. Most farms in Washtenaw County are expected to turn a profit in 2022. The outlook is dimming if there are frequent droughts, flooding or storms due to climate change.
- Matthew Gammans states that, while fuel, fertilizer and other costs are out of the control of most farmers, there are steps you can take to maximize your profit per acre. The MSU Extension offers several benefits. Decision-making toolsto determine the best course. Matthew says that reducing tillage in fields will reduce diesel fuel use and cut operating costs. New online toolThere are many resources available to help you determine how to do this.
- Matthew Gammans joined MSU AFRE faculty as an Assistant Professor and Extension economist in 2020. He is currently in the tenure process. Matthew Gammans is a native Michigander who earned his engineering degree at Michigan State University before pursuing his doctoral studies in agricultural economics at University of California, Davis. His research aims to understand and measure the decisions made by agricultural producers. His dissertation examined how climate and weather risks affect crop yields, and acreage decisions. His work has been published in peer-reviewed journals as well as extension/outreach publications.
Transcription
David Fair:This is 89 one WEMU. Welcoming to Issues of the Environment. David Fair is my name and you might be surprised at how prominent farming and agriculture are in Washtenaw County. We are experiencing rising fuel prices, the Russian War on Ukraine and its global implications, as well as a changing climate and more severe weather. This all adds to the challenges of a difficult profession. Our guest today will help us understand some of the local impacts as well as what the future for local farming may look like. Matthew Gammans, assistant professor and extension economist at Michigan State University, is our guest today. Thank you so much for taking the time to speak with me today. I appreciate it.
Matthew Gammans: David, thankyou so much for having you.
David Fair: A broad perspective asks: When was the last time that the agricultural sector faced these challenges?
Matthew Gammans: It’s hard to imagine a world where we are faced with exactly this kind of portfolio and set of challenges. The agriculture industry is not immune to challenges, but with the current high-priced environment and recent weather issues, there is certainly a lot to do.
David Fair: According to a University of Michigan profile of Washtenaw County as I mentioned in my introduction, there are more 1000 farms within the boundaries, each of which deals with rising fuel costs. How important is this particular challenge for small farmers?
Matthew Gammans: Yes, fuel costs have increased. Last year, fuel costs were estimated at $17 per acre. This is an increase of 24%. Even with some inflationary pressure, we still see really high rising diesel prices. The fertilizer side of the budget is the larger.
David Fair: That is a spiraling effect, isn’t?
Matthew Gammans: Yes, it is. You might consider that $135 an acre was the average price for a acre last year. This is all the way to $220. This is a 63% increase in a single year. These have to be paid upfront. The farmer won’t see any return on the investment until they market their crop in fall. These costs add a lot to the farmer’s risk.
David Fair: These are the concerns I have if I’m a farmer living in Washtenaw County. What are the different concerns I should pay attention to as I watch the horrors unfolding in Ukraine from Russia?
Matthew Gammans: First, let me say that I don’t think agriculture is the main concern when people think about a raging conflict.
David Fair: But there are also implications.
Matthew Gammans: Absolutely. Absolutely. There are two main stories. One is the cost of fertilizer. Russia and Belarus, a tangential participant in the war are large fertilizer exporters. Russia will account for roughly 15 to 20% of the world’s fertilizer exports. You know that if you reduce that supply, it’s going to cause a huge price shift up. On the other hand, we are in a tight environment globally with a high demand for commodities. Both Russia and Ukraine are large grain producers. Both of them will have serious impacts on their production, which will result in a higher price environment across commodities. If you think about the Michigan wheat, soy, and corn farmers, that would be a bit of good news. Yes, input prices have risen, but outlook prices are expected to remain at or above normal levels.
David Fair: We can only hope that some of this is temporary, considering all of that. The changing climate, from flooding to drought and everything else in between, may pose the greatest threat to agriculture. How can you adapt to Mother Nature when she is angry? What lessons have we learned so far, and what can we do to move forward?
Matthew Gammans: It’s a great question. Climate has many effects on agriculture. The effects on one location are not the same as those in another. When you think about Michigan, you’re likely to hear a lot more about rising temperatures. Temperature is an important aspect of the growing season operations, there’s no doubt about it. The real problem, I believe, is the variability in precipitation. Think about warmer air which can hold more water and potentially lead to longer periods and even larger precipitation events. We are just starting to kick off the planting season. The question of whether the fields will be dry and able to be operated is a major concern. I believe that farmers will increasingly look for strategies to deal with the spring plant issue in the long-term. In a world where precipitation is not as predictable, there are likely to be some very large spring precipitation events.
David Fair: This is Issues of the Environment, on 89 one WEMU. We’re discussing farming with Matthew Gammans, MSU assistant professor and Extension economist. We know that food costs are rising and inflation rates are rising. Those costs will be passed onto the consumer. How do social and financial inequalities play into agricultural policy?
Matthew Gammans: The real problems are social inequity. This is because we consider high-priced commodity environments, countries that import large amounts of their food supply, and poorer countries where they expend a large amount of their income on food. In the United States, almost half of people spend less than half of their income on food. However, this is not the case worldwide. When you consider that wheat prices have nearly doubled in the last year, it has a huge impact on food security and the vulnerability of the most vulnerable.
David Fair: Farm subsidies. A large part of the federal budget is spent each year. Are lawmakers going have to explore other ideologies or methods to accommodate future and current circumstances?
Matthew Gammans: I believe there is always room for innovation at policy level. We have the 2023 farm bill. This is the biggest legislation Congress passes in agriculture every five years. There will be a lot of discussion on what the federal government should be encouraging and promoting in terms of agricultural subsidies. There are many perspectives. It is possible to tie some payments to what people may consider greener or more climate-smart practices. This includes using agriculture to combat climate change, sequestering the soil and reducing farm emissions. I believe there will be a lot of effort to help farmers manage this risk. The federal crop insurance program will play a part in this effort.
David Fair: Are there any Michigan farmers who might need to change the crops they produce as we look for solutions?
Matthew Gammans:That’s an interesting question. Michigan already has some of the most diverse agricultural practices you’ll find anywhere in the country. California and Michigan are probably second and third, respectively, due to the large number of properties that can grow here. Most of it is, however, in a corn/soy/wheat-type rotation. Even with a warmer climate, I would expect to see an increase in the number of soy and corn acres that are allocated here. When we think of our neighbors to Illinois and Indiana, we can see that they are in the traditional Corn Belt. There’s some hope that Michigan might be more included in the Corn Belt region due to warmer temperatures. In the short- to medium-term, I could see an increase in our corn soy acres.
David Fair: What are the options? What resources or tools are affordable that farmers can access to help them get to the other side of the fence?
Matthew Gammans: Farmers are very creative. Farmers are a creative bunch. Agronomically, farmers are constantly changing their plans and adapting because they have to. Weather can have such an impact on your crop that you need to be flexible. For example, you might go into your fields late and plant at a higher feed rate to recover some of your lost yield potential. We saw this again this year with farmers being more flexible in their plans when it comes to fertilizer application and finding ways to lower fertilizer rates. You also need to consider the economics of a marketing plan. As their risks increase, we’ll see more people using subsidized federal crop insurance programs. But also a creative marketing plan that allows you to market your crop through many avenues. You will be entering your growing season with a contract in place for the price you plan to sell your crop in the autumn.
David Fair: As we wind down, I have one final question. Do you have any modeling or educated guesses that could help us predict where we might be in a decade as you continue to study the Michigan agricultural industry and its economics here in Michigan?
Matthew Gammans:Yes, that’s a good question. I think it is important to remember that there are many risks and challenges. Over the past decade, we have seen some amazing technological innovation. I believe we will continue to see increases in yields and the ability of farmers to get more food from the same amount of land. However, this doesn’t mean that climate change won’t affect the acreage we see. This increasing pressure, I think to have farms be a part of the solution to climate change, I think these are trends that will continue.
David Fair:Matthew, thank you so much for taking the time to speak with us today. I appreciate it.
Matthew Gammans: Thank you very much.
David Fair: Matthew Gammans is the one. He is the assistant professor and Extension economist at Michigan State University. He is our guest on Issues of the Environment. This weekly feature, which you hear every Wednesday, is produced in partnership between the office of Washtenaw County Water Resources commissioner. Visit our website at WEMU dot org for more information. David Fair is the host of 89 one WEMU FM, and HD one Ypsilanti.
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