With thousands of Iowa jobs already cut, how deep will the farm downturn will go?

A rush of farm-related layoffs in manufacturing and food processing has Iowa leaders and workers worried about how long and deep this agricultural downturn will be.

So far this year, Deere & Co. , Firestone/Bridgestone , Tyson and Smithfield have slashed about 3,750 jobs in Iowa and the Illinois side of the Quad Cities.

With more layoffs expected, experts question whether the downturn will be short-lived or replicate the six-year agricultural recession that began in 2014, costing 5,670 farm-related jobs in Iowa and pushing about 120 growers into bankruptcy.

Nationally, farm-related bankruptcies climbed 47% from 2014 to 2019, the U.S. Department of Agriculture reported .

“Every single farm is different … but for a lot of folks, with these prices today, they're in the red,” said Mike Naig, Iowa’s secretary of agriculture.

A new report says 22% of Iowa’s economy — or $53.1 billion — is tied to agriculture, from crop and livestock production to food processing and manufacturing.

Inflated costs to grow corn, soybeans and other crops as well as raise pigs, cattle and chickens, and generally lower prices at market, have farmers pulling back on buying tractors, combines and other equipment.

“We have seen the storm clouds coming,” said Michael Langemeier, a Purdue University agricultural economist. With high costs and low commodity prices, “I think we're right back where we were during the 2014 to 2019 period."

But Chad Hart, an Iowa State University economist, isn’t convinced Iowa will see a repeat.

“We're early on in the process, but what I see right now doesn’t point to this downturn looking to be as deep.," he said, though he noted "there’s a lot of uncertainty.”

Complicating the outlook are issues such as tit-for-tat tariffs that could lead to trade wars, softening global economies, and whether farmers will benefit from the next generation of low-carbon renewable fuel, economists say.

Creighton University economist Ernie Goss worries about politicians hiking tariffs against countries like China, which a growing proportion of Americans regard as an enemy, polls show.

“It’s like a nuclear war. Everybody loses,” he said, making goods more expensive to manufacture and for consumers to buy. “Agriculture would lose more than other sectors.”

So which way will the ag downturn go?

Deere cutting jobs faster than in 2019 farm downturn

Hart said Deere & Co.’s second-quarter report showed softness in most of the company’s markets — from tractors and combines to construction backhoes and dump trucks and consumer mowers and four-wheelers.

In May, Moline, Illinois-based Deere said it expected net income would be $7 billion this year, down 26% from its forecast a year earlier.

It’s in line with USDA’s projected 25.5% drop in U.S. farm income this year. Last year ag earnings fell 16% from record high in 2022.

Hart sees Deere more aggressively cutting workers to adjust production to demand than in previous downturns. Additional layoffs are expected, potentially this month.

“We ended 2023 with really low levels of large tractor inventory, but we think it's prudent to drive those levels even lower as we close out our 2024,” Cory Reed, Deere’s worldwide agriculture and turf division president, said in a May earnings call with analysts.

So far this year, Deere has cut about 1,830 workers in Ankeny, Dubuque, Ottumwa, Urbandale, Waterloo and the Quad Cities’ Davenport and East Moline, Illinois, plants, as well as at an Urbandale research center.

In the 2014-19 downturn, Deere cut roughly 2,470 people from its payroll, based on Iowa and Illinois historical layoff data.

“Think back to the 1980s farm crisis,” Hart said. “Deere and other companies didn’t cut back early enough and that led to an oversupply of machinery and some very rough times” for the industry.

Large supplies, possible tariffs work against ag recovery

The USDA this month pushed higher its forecast for corn production — and shrunk its soybean estimate — given that more acres than previously predicted were planted to corn instead of soybeans.

Hart said he believes the USDA will pull back on production forecasts as harvest nears.

“We do know that a lot got planted and the yield potential is there,” he said. But “we also know some of those acres got flooded out. And some are going to have yield issues.”

Iowa farmers, the nation’s largest corn and second-largest soybean producers, have been hit this year with cold, flooding, tornadoes, hail and derechos. And states like Illinois, Indiana and Ohio are struggling with lingering drought conditions, as well.

“We’re going to need a couple months to find out … if that will truly impact” overall production, Hart said, adding that the U.S. has seen good domestic and export demand for corn and soybeans.

More: Landus expects small 'green' ammonia plants to make big dent in farmers' fertilizer costs

“It’s just that supplies are large,” he said, pulling down crop prices.

The USDA said in May it anticipates a $32 billion agricultural trade deficit this yea r because of the lower prices, along with increased U.S. demand for imported fresh fruits and vegetables and horticulture.

Future U.S. exports could be hurt by “politically popular but economically damaging" tariffs, which both presidential candidates have embraced, said Goss, the Creighton University economics professor.

President Joe Biden has left in place many of the tariffs former President Donald Trump levied from 2018 to 2020 against China and other countries, and in a few cases expanded them, the Washington, D.C., Tax Foundation reported in May .

Trump also proposes more tariffs — 10% on all imports and boosting to at least 60% the tax on Chinese imports, according to the nonprofit Tax Foundation. The Biden-Trump tariffs have cost U.S. families at least $625 apiece annually since 2018.

In the depths of the 2014-19 downturn, the USDA also doled out $81.3 billion in farm subsidies, largely to offset losses that farmers encountered because of tariffs on China.

“I joke that I have this really bad dream, so bad I fall out of bed," Goss said, "and it's that somebody won the election."

Tariffs aren't "good for the economy,” he said. “They're certainly not good for agriculture. And they're not good for manufacturing.”

Privately held ag manufacturers say they take a long view

Steve Sukup, CEO of Sukup Manufacturing in Sheffield, said rising crop yields help support demand for the north Iowa company’s grain bins and drying equipment. He points to Stine Seeds in Adel and Indiana-based Corteva Agriscience, the parent of Pioneer seed in Johnston. Both companies are homegrown seed powerhouses.

“We depend on Stine and Pioneer to keep pushing the bushels per acres,” Sukup said.

Even with a four-year drought ending this year, Iowa farmers have produced strong corn and soybean harvests. Iowa farmers harvested their largest soybean crops on record over the past three years, USDA data shows. And the last three corn harvests ranked among the top 10.

Crop “prices have come down,” Sukup said, but the company’s grain bins allow farmers to store and sell grain when prices rebound. “It gives our customers the opportunity to sell at the highs.”

Nationally, corn prices are about half what they were two years ago; soybeans are down about 40%.

Sukup said the family-owned, privately held company’s employment is steady, with hiring primarily to replace workers who leave the company.

“We don't have to worry as much about the next quarterly report,” he says. “We can take the long-term approach.”

In Pella, about 20% of Vermeer Corp.’s business is agriculture-related, through equipment like its balers and mowers, said CEO Jason Andringa. Demand has been solid, given high beef prices and demand for hay and other forage, the supply of which was whittled down by the lingering drought, he said.

In addition to farm equipment, the company — like Sukup, family owned — sells forestry, pipeline, recycling and mining equipment. Andringa said the 2021 Bipartisan Infrastructure Act has helped drive demand for industrial equipment like directional drillers, although some projects have been slow to take off.

“Our markets are cooling a little, softening a little, but certainly not to the extent that row-crop agriculture has softened,” Andringa said. “We aren’t anywhere close to layoffs.”

He sees the company “settling into what we should think of as a normal business scenario."

“We had six to eight years where demand for our equipment outstripped our ability to meet” it, Andringa said. “Now we are able to supply the demand that's out there.”

High land values provide famers some cushion

Farmers enter the downturn with some positives, economists say: A runup in commodity prices after Russia invaded Ukraine in 2022 helped replenish U.S. and Iowa farmers' bank accounts. And farmland values, often a big part of growers' assets, are holding steady after a couple years of record high prices.

Average Iowa farmland values fell 6.4% from 2014 to 2019, an annual ISU survey shows, but have since risen 60% to $11,835 an acre.

“As long as that land holds its value, their balance sheet remains relatively strong,” even with lower crop prices, said Langemeier, who points to May's Purdue University/CME Group Ag Economy Barometer that showed farmers believe the economic picture will improve in 2025, 2026 and 2027.

“For that to happen, though, production costs have to come down,” said Langemeier, who helps conduct the monthly survey.

Keenan Bell, who leads the union representing Firestone/Bridgestone production workers, hopes the farm economy rebounds soon. The Nashville, Tennessee, company is laying off about 90 workers at its Des Moines plant, which makes tires for Deere and other farm equipment manufacturers.

The United Steelworkers worked with the company to reduce the cuts from 118, said Bell. Along with the layoffs, Firestone/Bridgestone told workers it's cutting 29 production days from its schedule, and they'll lose a month's pay between now and year’s end.

That’s on top of already reduced hours, Bell said.

“It’s not as bad as losing your job. But everybody is going to feel the pinch," he said.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457.

This article originally appeared on Des Moines Register: With thousands of Iowa jobs already cut, how deep will the farm downturn will go?