(Photo: Joseph L. Murphy/Iowa Soybean Association)
Policy Update: All Gas, No Brakes
January 20, 2021 | Michael Dolch
Looking out a full year into the future is challenging. As 2020 proved, a black-swan event like COVID-19 can catch everyone flat-footed and completely change the outlook. COVID-19 was the unexpected pothole of 2020, and vaccine efforts to squash the virus will be the story of 2021. Distribution of Covid vaccines is underway, with experts saying most Americans could receive a vaccine within six months. Successful COVID-19 vaccine distribution and implementation will not only boost demand for agricultural products and other commodities but also grow the U.S. economy.
All things considered, it stands to reason that farm income will pull back in 2021. The third round of Coronavirus Food Assistance Program payments will be made early this year. Higher commodity prices and food assistance aid will boost farm incomes, but those will not be nearly as much as in 2020 when government payouts accounted for more than one-third of total farm income. This will lead to a supercharged emphasis on building domestic demand and strengthening soybean exports.
International trade is one of the pillars of the U.S. soybean industry. In 2019, more than 50% of soybeans grown in the U.S. were exported to foreign markets. Access to existing and new markets and international food aid markets are all critical for Iowa soybean farmers. As the new administration transitions into the White House, trade policy will remain a focal point. President Joe Biden will keep implementing the U.S.-China Phase 1 agreement, wanting Beijing to fulfill its commitments in the second year of the pact. We anticipate talks will take place on Phase 2, but those are hard-to-conclude conversations. The Iowa Soybean Association (ISA) is monitoring negotiations between the U.S. and China, and we are hopeful that progress is a positive sign toward future tariff relief and other free trade agreements for soybean farmers.
The outcome of Georgia’s runoff elections flipped majority control of the U.S. Senate, shifting leadership. All committee gavels will shift from Republican leaders to Democratic, as will legislative priorities. Sen. Debbie Stabenow (MI), who will now lead the Sen. Agriculture Committee, has already pledged to lead efforts “to create a voluntary climate exchange and climate policy for farmers and ranchers.” These efforts and conversations ahead of the Farm Bill stand to shape farm policy for generations to come, conversations that ISA will track and inform.
Shifting gears and bringing into focus an outlook closer to home, the Iowa legislative session convened earlier this month. While control of the Iowa House and Senate will remain the same, there are many new faces walking the halls of the Capitol. As we anticipated, pandemic concerns are set to dominate the early agenda, with other shared priorities centered on tax reform, mental health funding and educational choice. While it is still largely unknown what the legislature can accomplish this session, ISA is committed to elevating the policy priorities of soybean farmers.
One priority is sustainable, long-term conservation and water quality funding. Although Gov. Reynolds has shelved her Invest In Iowa Act, for the time being, there’s work to be done laying the groundwork for future consideration. Similar to discussions at the federal level, we expect carbon to receive some increased attention at the state level. The development of a carbon sequestration task force is already underway, a recommendation brought forward by the Governor’s COVID-19 Economic Recovery Advisory Board. The state-level task force will study economic, social and environmental benefits of agricultural carbon capture and potential new income streams for Iowa farmers impacted by profitability challenges, supply chain disruptions and severe weather events.
At ISA, we work to support and increase the value of every bushel of soybeans produced in the state. The demand for soybean oil is revving up. In the last decade, biodiesel demand grew by 300%. Today, it supports 13% of the price per bushel of soybeans, which equated to $1.09 per bushel in 2019.
As you can tell, 2021 will be all gas and no brakes in support of Iowa’s soybean farmers. Buckle up, let’s ride!
This story was originally published in the January 2021 issue of the Iowa Soybean Review.