Farm Progress

Iowa State’s John Lawrence testifies before U.S. House subcommittee.

April 7, 2017

4 Min Read
WORKING CAPITAL: Farmers are being forced to use more working capital and short-term borrowing to meet their cash flow needs, as market prices have fallen sharply the last two years. If crop prices continue to remain low, the financial conditions of most farmers will slowly deteriorate.

John Lawrence, associate dean for Extension Programs and Outreach and director of Agriculture and Natural Resources Extension at Iowa State University spent March 23 on Capitol Hill in Washington, D.C., talking about the future of family farms.

Lawrence testified before the U.S. House of Representatives Small Business Committee, speaking about the link between family farms, local communities and global markets, as well as the challenges facing family farms and the role of land-grant universities in addressing them. Lawrence also used the opportunity to highlight Iowa State University Extension programming for farm succession planning and beginning farmers.

“Iowa’s landscape gives the impression of homogenous farms,” Lawrence told the House’s Subcommittee on Agriculture, Energy and Trade. “Crop rotations, tillage methods, machinery, facilities and farmsteads often look similar. However, the number of acres farmed, financial conditions and reliance on off-farm income are difficult to see from the road.”

More short-term borrowing for 2017
Currently, farmers are being forced to use more working capital and short-term borrowing to meet their cash flow obligations, as market prices have fallen sharply over the last two years. If commodity prices continue to remain low, the financial conditions of most farmers will slowly deteriorate, Lawrence said, but added economists are not expecting a crisis as was experienced in the 1980s.

“Farmers have working capital challenges, not a debt crisis,” Lawrence said. “Most farmers have the assets to refinance short-term debt to a longer-term loan with more manageable annual payments and continue to operate.”

The impact of these financial conditions differ he noted, according to the age of the farmer. Older farmers have less debt and more current assets than younger farmers. An increase in interest rates as indicated by the Federal Reserve will have a greater impact on younger, higher leveraged farmers as opposed to older farmers.

Family farms are also facing significant challenges managing a global marketplace, while also communicating and planning for the future of the business. Sustaining family farms and ISU Extension efforts through the Beginning Farmer Center was a focus of Lawrence’s testimony.

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John Lawrence

Efforts to support beginning farmers
Lawrence highlighted two specific programs from the Beginning Farmer Center:

• The Returning to Farm seminar is a pair of two-day workshops for farm owners and operators and their known business successors. The focus is on starting the communication and planning that may continue over multiple years.

• The Ag Link program links beginning farmers with established farmers desiring to transition their farm business to a new generation and who have not identified a family member as their successor.

Lawrence also informed the subcommittee on the efforts of ISU’s Women in Agriculture program, Start-to-Farm groups and partnerships with Iowa Veterans in Agriculture to address the needs of veterans returning to the farm, who are working in agribusiness or are interested in starting a farm business.

To continue to make these kinds of programs available, Lawrence emphasized to the congressional committee the importance of federal investment in agricultural research and Extension programs.

“Federal competitive funds and capacity-building funds help ensure innovative research and attention to local challenges,” he said. “State funds leverage federal resources and ensure integration between research and practical Extension education to address state and regional needs. Local resources help address a broad range of family farm issues from youth to family nutrition and finance to agriculture. They also relay emerging questions back to land-grant researchers.”

For more information, visit these ISU Extension websites:

Beginning Farmer Center coordinates education programs and services for beginning farmer efforts statewide.

Ag Decision Maker offers decision tools, factsheets and videos to help evaluate your financial situation and adjust management decisions accordingly. 

Farm management specialists helps you evaluate your options and determine a path forward.

Farm Financial Analysis Program offers one-on-one financial counseling, a computerized analysis of the farm business and referrals to other Extension programs or outside services that may be useful.

Iowa Concern Hotline at 800-447-1985 offers financial and legal education, mental health and stress counseling, and referrals.

A related ISU Extension publication, Income Trends for Iowa Farms and Farm Families 2003-2015, discusses how the downturn in the farm economy has impacted Iowa farmers and farm families. The study summarizes current trends in farm income and debt by type of farm operation.

Source: ISU Extension

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