Iowa's Dependence on Farming Stronger than Ever

Doug Bradley has begun selling off portions of his 1,600-sow hog operations near Latimer. He said that’s because sky-high corn prices make it impossible to make money — or even break even. “We’re getting $50-$60 for a 400-pound sow, and we’ve got $225 in them,” he said. This downturn follows a period of prosperity for hog producers.

Corn prices that rose above $6 a bushel are forcing some livestock producers to cull hog and dairy herds. National pork leaders, seeking federal assistance, say producers have lost $2.1 billion in seven months.

Farmers, eager to get corn and soybean seed in the ground, also face the added challenges of rising input costs, such as higher rents for farmland and fertilizer prices. "It's a very mixed picture," said Patrick Westhoff, an economist at the University of Missouri.

"There are some producers who are doing quite well right now. But even the ones who are doing well are experiencing higher costs of production," he said. "And for the folks on the livestock side, particularly hog producers, this is a pretty bad time."

Growing global markets, along with ethanol and biodiesel demand, are pushing crop prices to new highs, experts say.

Ethanol production capacity, for example, has spiked nearly 50 percent to 8.2 billion gallons over the past year as hog profits have plummeted. Since 2002, ethanol production has quadrupled, along with the corn used to make it.

Iowa's dependence on farming is strong, despite the growth of industries like insurance, financial services and technology.

Farmers buy seed, fertilizer, tractors and combines made in Iowa. Iowa producers also supply corn for livestock feeders and ethanol plants, soybeans for food processors and animal feed and pork, beef, eggs and poultry for the dinner table.

Farming accounts for about 18 percent of Iowa's gross domestic product — or about $22.6 billion of the state's overall economy, said David Swenson, an economist at Iowa State University.

"Farming is a very important part of the state's economy," he said. "It's stable and predictable."

Fortunes reverse for hog producers

Until recently, hog producers were making money.

Dave Moody, president of the Iowa Pork Producers Association, said the economic situation in Iowa's hog production industry "is approaching a crisis. There's no light at the end of the tunnel."

Both the U.S. Department of Agriculture quarterly hogs and pigs report and the planting intentions report showed that hog supplies will remain plentiful and feed costs will stay high, said Moody, who manages hog operations near Nevada.

"We're looking at negative numbers for the rest of the year and possibly into 2009," he said.

Ron Litterer, president of the National Corn Growers Association, plans to grow 1,000 acres of corn this year and 500 acres of soybeans near Greene. He also raises hogs.

The high price for corn, as much as 60 percent of the cost of raising a hog, is hurting producers, Litterer acknowledged. "The losses in the hog industry are pretty severe. There's no question the hog guys are in a bad way," he said.

"There's a number of factors coming together. Higher input costs are one of the reasons why, but there are also huge numbers of hogs depressing prices."

Manufacturers expect record sales

Increased farm income is driving development across the state — such as Deere & Co.'s $90 million expansion in Waterloo or Hagie Manufacturing's 75,000-square-foot addition in Clarion. Sukup Manufacturing in Sheffield added a second production line.

Kinze Manufacturing employees near Williamsburg work Fridays and Saturdays in addition to their regular schedule of four 10-hour days, said Susie Veatch, Kinze's vice president.

So far, the company's wagons are sold out. The planters are nearly gone. "It's shaping up to be our best year ever," Veatch said.

Strong domestic and global demand is driving sales, said Veatch and others. The weak dollar is helping boost export sales of Iowa-made equipment.

Hagie's sales manager, Shane Williams, said buyers in countries like Ukraine and Russia are purchasing 50 to 60 pieces of Hagie equipment at a time instead of a half-dozen. The company has tripled sales over the past five years and nearly tripled employment, to 300.

With expanded capacity, Williams hopes to cut delivery times from six months to 30 to 60 days.

Delays — even shortages of equipment — are common, said Andrew Goodman, chief executive of the Iowa-Nebraska Equipment Dealers Association.

Goodman said prices are up across all farm equipment. "We see regular price increases and surcharges," primarily related to increased fuel prices for delivery, he said.

"If you're ordering equipment, you have to order some distance out," he said.

A possible threat to Iowa's farm economy is a weakening in worldwide demand, especially if the United States' credit woes spread to the global economy.

View the DesMoinesRegister story by clicking here.

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