Thursday, May 30, 2019

You may have heard that our country’s administration is in a trade dispute with China. The US has imposed tariffs of 10 to 50% on a variety of Chinese goods including steel, aluminum, solar panels and clothes washing machines. China responded by imposing a 25% tariff on US soybeans and some other US products. China had been the biggest buyer of US soybeans, purchasing $12 billion-worth in 2017. Soybeans have traded as high as $17.40 per bushel (2012). They are trading for $8.70 per bushel as I write this and have been as low as $7.91 only two weeks ago.

As input prices (seed, fertilizer, fuel, chemicals, etc.) did not decline along with grain prices, farmers are getting pinched. In response, the federal government in 2018 offered about $12 billion in relief known as MFP (Market Facilitation Program) payments. Farmers growing soybeans were by far the largest recipients of the MFP payments. About a week ago, the administration announced that another $18 billion would be made available to farmers, again focused largely on soybeans but more widely distributed to other farm commodities compared to the 2018 program.

As you read this, be aware that I am not judging the propriety of the MFP payments. In fact, I would say that farmers deserve relief under the circumstances. I am going to try to put these MFP payments into the relative context of water quality and conservation. Since Iowa produces 13% of US soybeans, I’m estimating Iowa’s MFP portion to also be 13%, which amounts to $3.5 billion over the two years. What would $3.5 billion do for water quality?

  • Firstly, we know that land retirement reduces nutrient loss better than other any practice. According to Iowa State University (1), Iowa farmland now averages $7264/acre. Iowa’s MFP payments would pay to retire 482,000 acres of Iowa farmland, about the size of the Boone River watershed upstream of Webster City.
  • Iowa farmers plant crops in about 250,000 acres lying within the 2-year flood plain, where input losses are disproportionately high. Assuming a generous profit margin of $200 per acre, we could pay farmers that amount ($200/acre) to not farm those acres for *70* years.
  • Cover crops are perhaps the best hope for stabilizing water quality in the corn-soybean system. Assuming cover crops cost $30 per acre to plant, $3.5 billion would pay for cover crops on every single Iowa corn and soybean field for the next five years.
  • CRP stands for Conservation Reserve Program, a federal farm bill program that essentially allows the public to rent the land (almost always environmentally sensitive or marginal land) from the landowner. In return, the landowner agrees to plant and maintain species that will improve environmental health. Contracts are usually from 10 to 15 years in length. The current rental rate for Iowa averages $221/acre (2). Iowa’s MFP payments would pay for 10-year CRP contracts on 1.6 million acres, or about 7% of Iowa’s cropped acres, assuming that many acres would be eligible.
  • Denitrifying woodchip bioreactors are a cost-share-eligible practice under the Iowa Nutrient Reduction Strategy. Assuming they cost $15,000 each, $3.5 billion would pay for 233,000 of them (about 2400 per county). Currently we have less than 100 statewide.
  • Constructed wetlands are another cost-share-eligible practice. Assuming a $250,000 construction and design cost, $3.5 billion would pay for 14,000 of them. Currently we have about 90.
  • Looking at the downstream end of things, Des Moines Water Works (DMWW) is the state’s largest municipal drinking water utility. Their annual operating budget is $46 million (3). Iowa MFP payments of $3.5 billion are equivalent to the DMWW operating budget for 76 years. At a nitrate removal cost of $1 million/year, MFP payments would cover that for 3500 years.

I could go on with this exercise, but I think you probably get the picture.

We oftentimes hear that sufficient money doesn’t exist to fund all the practices we need to improve water quality. The total needed to fully-fund the Iowa nutrient reduction strategy has been estimated at an amount eerily similar to the Iowa MFP total: $4 billion (4). Senate Water Bill 512, which became law last year, only provides up to $282 million for water quality improvements over 20 years, an amount (in total) that is a mere 8% of the MFP payments.

Which brings me to my main point here. Whether or not overall water quality has improved over time (stream clarity has improved since the 1970s, while nitrate has gotten worse), the public has said that it wants something better than what they have now and is willing to pay for it. In fact, the public is practically begging to be taxed to raise money for water quality improvements (linklink). I say this with a certainty—water quality fails to meet our expectations NOT because we lack the collective wealth to improve it. This just cannot be true. Something else must be at work here. In my estimation, that something is that good water quality is bad for business. The evidence that this is a zero sum game is in plain sight. To illustrate that, I’ll return to MFP.

To be eligible for the MFP payments, farmers must plant a crop. Anyone that has eyes in their head can see that is one tough nut to crack in Iowa this year.  Thus, late planting farmers are faced with decisions that have absolutely nothing to do with producing food, fuel and fiber. Plant a crop with greatly diminished chances of reaching maturity and take the MFP payment, or choose to apply for “prevent plant” insurance payments. Farmers who want to plant but are being delayed by wet weather could end up in a trap where they are too late for an insurance claim but also ineligible for the MFP payment.

A very good summary of this was written by the Illinois Ag writer Stu Ellis. In that piece he states: “…The requirement to plant a crop for eligibility for the trade mitigation payment should please agribusiness. It ensures that every seed, fertilizer and crop input supplier will have as much business as possible. It ensures that every grain elevator and grain processor will have as much grain to handle and process as possible. And it ensures the U.S. grain trading industry has as much volume as possible to trade.

The Iowa River from the Burlington Street Bridge
Iowa River in Iowa City.

I write this today (5/29) looking out at some bad, bad water in the Iowa River. Two visitors from India briefly accompanying me today even remarked at the appearance of the water. Estimating some things from water quality data being collected right now, the Iowa River at Wapello will carry 170 million pounds of sediment and 2.6 million pounds of nitrogen to the Mississippi River, TODAY. The Des Moines River moving past Keosauqua today will carry 1.2 billion pounds of sediment, along with 3.5 million pounds of nitrogen. The Raccoon River, draining only 6% of Iowa’s area, will deliver over a million pounds of nitrogen to its confluence with the Des Moines River, “today”.

Yes, I know we are having an unusual weather condition right now, and it is a factor in those numbers. But the fact of the matter is, we made weather a factor by wiping out the ecosystems that provided weather resilience. The landscape has no resilience to extreme weather. We see this year after year after year. Heck, when it comes to nitrogen loss, it has no resilience to even average weather.

Clumsy ending: I think we deserve better.