Climate, trade, environmental regulations and coronavirus questions need answered as Oklahoma’s food growers consider 2021’s future

Year in and out, farmers and ranchers weigh potential risks before committing to programs they hope will earn meaningful returns.

Climate conditions here and across the world and global geopolitical factors (famines, wars and other issues) impact markets annually for Oklahoma’s cattle, wheat, cotton and soybean producers.

So do political influences. The overhauling of trade policies between the U.S. and other countries was a major centerpiece under President Donald Trump’s administration. But will President-elect Joe Biden revisit those issues?

Environmental regulatory activities also can help or hurt farmers and ranchers. Presidents through the U.S. Department of Agriculture (USDA) and the Environmental Protection Agency typically influence agricultural endeavors to lesser or greater degrees, and producers are watching carefully to learn what they can expect from the incoming administration on the regulatory front during the coming four years.

Plus, they must continue to contend with the coronavirus pandemic. The various impacts it has exerted on producers and the ways their products made it to consumers in 2020 was unprecedented, leading to $46.5 billion in direct government farm payments to farmers and ranchers — up more than 107%, compared to 2019 — largely because of supplemental and ad hoc disaster assistance provided to assist them in dealing with the pandemic, the USDA's Economic Research Service reports.

This year, farmers and ranchers expect the pandemic’s influence will continue, at least for a while.

Clearly, 2021 isn’t just another year.

“As a farmer or rancher, you have no choice but to roll the dice because most crops take a few months and some (like cattle) take a few years to produce, so you always are looking into a black box of uncertainty,” said Rodd Moesel, president of the Oklahoma Farm Bureau. “Farmers are incurable optimists, and they have to be. You have to believe things will be good or better, or you wouldn’t be doing it.”

Climate defines success

For Oklahoma growers of cotton, soybeans and wheat, a successful crop is all about how much available moisture is available to tap when the crops go into the ground and as they mature.

Not enough moisture is generally bad, while too much at wrong times of the year can wreck a grower’s plans to either plant or harvest what they are growing.

The 2021 wheat crop is already in the ground — in fact, some pastures likely are already far enough along in growth to be grazed by cattle — and acreage that isn’t sidetracked by disease, wind or hail later this year will be ripe enough to harvest in May and June.

Oklahoma farmers will plant soybeans beginning in April, while cotton’s crop will be sewn in May, just as the wheat harvest is in full swing.

Climatologically speaking, Oklahoma appears to be in relatively good shape for now, even though much of the Great Plains currently is experiencing moderate to extreme drought conditions. A drought in Russia and the Ukraine is expected to impact production from those regions of the world, too.

“Oklahoma has dodged the bullet, somewhat” regarding drought this year, remarked Mike Schulte, executive director of the Oklahoma Wheat Commission. “Outside of the western extreme end of the Panhandle and far southwestern parts of the state, the pastures that make up our wheat belt are drought-free, at least so far.”

Climate issues abroad can help farmers here at home, said both Schulte and Michael Peters, a wheat grower in Okarche.

Both observed an announcement from Russia — that it will enact an export tariff on wheat to keep its harvest in-country later this year because of the drought and increased demand — should help U.S. producers compete globally.

“Right now, we have a decent price for wheat where you can make some money with average to above average yields. You can live with prices in the $5 to $5.50 range (per bushel), compared to the $3 to $3.50 range we have seen in past years,” observed Peters, who also serves as secretary-treasurer of U.S. Wheat Associates.

Trading on trade

President Trump made significant progress during his four years in office to address long-running trade-related issues, producers say.

But that didn’t work out so well for them early on after tariffs imposed by the Trump Administration on imports of steel and aluminum from certain countries and other imported products from China prompted the enactment of retaliatory tariffs on agricultural products the other countries imported from the U.S.

Farmers and ranchers saw a 53% decline in value of U.S. agricultural exports to China in 2018 alone, and a broader decline in exports across countries imposing retaliatory tariffs in 2019, the Congressional Research Service noted in a report it released on trade issues a year ago.

To help mitigate that, the U.S. Department of Agriculture (USDA) authorized two short-term assistance (“trade aid”) programs to producers of affected agricultural commodities, valued at up to $12 billion in 2018 and $16 billion in 2019.

Meanwhile, the United States and Japan signed an agreement increasing market access for many U.S. agricultural exports to that country and Trump signed an executive agreement with the Chinese government on trade and investment issues, including agriculture, just as the COVID-19 illness was developing into a global issue.

Under that agreement, China was not required to repeal any tariffs, but it did agree to reduce certain retaliatory tariffs and to grant tariff exclusions for various agricultural products in order to reach a target level of $32 billion in U.S. imports over a two-year period.

“The Chinese actually have been buying at a much heavier rate and the export business for most commodities has picked up some, with soybeans showing the most improvement,” Moesel said. “Some commodities are seeing prices they haven’t seen in years.”

Moesel observed that trade policies from administration to administration generally have followed familiar, proven paths.

“While the Trump administration created some disruption that we don’t see often, history will judge whether or not that was the right way to handle it. The fact that China is trying to honor recent agreements they have made on trade signals that hopefully it and the U.S. can keep up what Trump accomplished. It is much hopeful at the moment on the trade front. But only time will tell,” he said.

Schulte said annual wheat exports from the U.S. since July are running about 10% above where they were the same time last year, highlighting that exports of wheat to China have grown exponentially.

“The trade agreements Trump put into place greatly helped us gain access to markets where we haven’t been able to export to during the previous four or five years. Our hope is that the Biden administration takes a good hard look at the trade agreements we have in place now to see what is working and what is not working,” Schulte said. “Our hope is it won’t do anything radical moving forward that would diminish the benefits we are seeing.”

Peters, whose U.S. Wheat Associates develops, maintains and expands international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers, agreed but added a caveat.

“You have to worry about how the pandemic is impacting a lot of our trading partners. I am concerned about whether or not they will continue to have the money to buy our products. I don’t want to be an alarmist, but it is a concern to me,” he said.

Regulating costs

While many growers fear that potential regulatory activities that could be enacted by the Biden administration could increase their costs, some are moving in that direction.

In the case of both cotton and soybean farmers, growers who are members of their respective national and state organizations already are working with guidelines that are designed to encourage practices that focus on managing land use, soil carbon, water management, soil loss, greenhouse gas emissions, and energy efficiency in sustainable ways.

“We are ahead of the curve on the goals we have set for ourselves through our cotton trust protocol,” said Harvey Schroeder, executive director of the Oklahoma Cotton Council. “We are giving customers what they are asking for.”

Sources emphasized farmers and ranchers are generally good stewards of the land, given they must depend on its productivity year-end and out in order to make their livings and to leave something for their kids and grandkids to work with.

“If you have people making decisions who haven’t been involved in agriculture, they don’t have a full picture and won’t understand cost impacts on what could be required,” Moesel said. “That creates a whole level of additional uncertainty that we haven’t had during the past few years.”

Then, there is the biggest wildcard of the year — how the ongoing global COVID-19 impact will influence market demands for everything.

Winners, losers

One of the pandemic’s most remarkable influences in 2020 was the incredible spike in demand from consumers for household cleaners, toiletries and especially for grain-based products, fresh produce and meats.

For retailers and for meat packers, the demand spike created a windfall of profit as prices moved higher along with demand. As stockpiled grains have been drawn down because of increased demand from people who are eating at home, market prices for wheat, corn and other commodities have climbed.

But Oklahoma’s ranchers didn’t share in that prosperity during 2020.

Packers’ intermittent stoppages to control virus outbreaks among their employees created a backlog of animals in feedlots, dramatically depressing prices ranchers could get as they tried to move their animals from pastures and wheat fields to market.

As for 2021, ranchers' outlook appears much the same now as it did in January last year before the coronavirus pandemic emerged, observed Derrell Peel, the extension livestock marketing specialist at Oklahoma State University.

“We were kind of anticipating a modest improvement in the industry at the start of 2020. We knew we were probably going to have record production on the supply side, but we had good demand, both domestically and on the export side of the business. But once the pandemic hit, all bets were off and we spent the next six months playing defense as we dealt with all the unexpected shots that were aimed at us. We spent most of the year not knowing how bad it would get or how quickly we could recover.”

By the end of 2020, however, total beef production for the year amounted to about what had been expected before the pandemic happened. And because a slight decrease in cattle on the market is expected this year, Oklahoma’s ranchers should see modestly better prices for their harvest-ready animals, Peel continued.

“Obviously, with the vaccine implementation underway now, there generally is more optimism for 2021 at this point ... real potential for our ranchers to get back on offense. But at the same time, they recognize the first half of the year will be more like what we have experienced the past 10 months.”

Tom Fanning, manager at Buffalo Feeders (part of the Pratt Feeders operation headquartered in Pratt, Kansas), said 2020 was particularly hard on Oklahoma’s ranchers because it was the second of two consecutive bad years.

In 2019, ranchers had to contend with harvest backlogs that were created after a fire at a Tyson packing plant forced it offline until repairs could be made.

Fanning’s operation just outside of Buffalo, Oklahoma, feeds 32,000 head of cattle. He described both the fire and pandemic in 2020 as “black swan events” that ranchers always are wary of as they enter into each new year.

“We have had black swan events before, and those have taught us that risk management is really important because you can’t predict what that next event will be.”

However, Fanning agreed with Peel that 2021 is looking better for ranchers.

“Packers have figured out their work processes and flow to protect the health of their employees. For the past few months, it has been going pretty well. We have been able to sell all the cattle we needed when we wanted to. Prices for cattle are significantly better than they were a year ago and look like they will remain good during the summer and going into the fall.

“The biggest impact that a lot of us are experiencing is that corn prices have gone up significantly, impacting cattle feed costs. With the prices for beef coming up, though, that should be able to be managed. There is a farmer/rancher on the other side of that equation that is pretty happy.”

There’s that optimism, again.

“Trade and COVID are still major issues, but we are months into figuring out how to survive,” Moesel said.

Business writer Jack Money covers Oklahoma’s energy and agricultural beats for the newspaper and Oklahoman.com. Contact him at jmoney@oklahoman.com. Please support his work and that of other Oklahoman journalists by purchasing a subscription today at oklahoman.com/subscribe.