Podcast Episode 42

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How The War in Ukraine Could Impact Agriculture

How The War in Ukraine Could Impact Agriculture

Episode 42 | 22 min

With Guest:

Collin Peterson, Former Congressman of United States House of Representatives

Former U.S. Representative and House Agriculture Committee Chair, Collin Peterson, joins Jamie to discuss the possible impacts of the war in Ukraine on agriculture. They cover topics such as opening the CRP, changes in global imports/exports, rising land prices, fluctuating commodity prices, and implications for the world market.

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Guest Bio

Collin Peterson represented the 7th congressional district of MN for 30 years and has served on the House Committee on Agriculture for 15 years, most recently as Chairman. As a strong advocate for agriculture in the US House of Representatives, the Congressman has left his mark on agriculture. Collin is currently advocating for agriculture through his work with The Midwest Council on Agriculture.

Jamie (00:02):

This is the Water Table.

Speaker 2 (00:05):

A chance to hear the agricultural side of these issues.

Jamie (00:09):

A place for people to go find information and education.

Speaker 3 (00:14):

Water management is just going to become even more critical into the future.

Jamie (00:19):

How misunderstood what we do is.

Speaker 2 (00:22):

I would encourage people to open their minds, and listen to this dialogue.

Jamie Duininck (00:32):
Welcome back to the Water Table podcast. Today, back by popular demand, I have former Congressman Colin Peterson. Many of you know the name, or know Colin. He spent many years in Congress, and most of those years on the Ag committee, with time as chairman and as ranking member. A really good knowledge of what’s happening in the world of agriculture, and in Washington. I wanted to take some time today and talk a little bit about what’s happening geopolitically in the world, with Ukraine and Russia at war, and how that might impact agriculture. Welcome to the podcast, Congressman Peterson.

Colin Peterson (01:10):
Well, thank you Jamie. Glad to be with you.

Jamie Duininck (01:13):
We’re sitting here in spring of 2022, from an agricultural perspective, things seem to be going quite well. Commodity prices are high, they’re rising. There are some challenges with supply chain, and with inflation, and fuel and things, but I think farmers in general feel pretty good about the year they have in front of them, just because of commodity prices, where they’re at. Let’s talk a little bit about what’s happening in Ukraine, and in the war with Russia, and how that might impact this year, and then into the future of agriculture.

Colin Peterson (01:52):
It’s hard to say exactly how it’ll play out. One thing I’ve been concerned about is, if you look back in history, whenever we’ve had these price spikes that have happened, it has come back to haunt us, and we’ve had challenges that have developed because of that situation. That’s somewhat what I’m concerned about, is that we’re going to go through a high price era right now. It’s hard to say how long it’ll last, it looks like it will be a while. The input costs and the land costs and all that stuff, when we get into one of those cycles, those things go up, and generally they don’t come down. Looking back over history, when we’ve had this in the past, it’s caused problems policy-wise, and within the government, in the future.

In terms of what is going to happen here with what’s going on over there in the Ukraine, there’s a bunch of stuff that’s already surfacing. One thing I heard yesterday, the Ukrainians now have stopped exporting wheat, or Ag products. We already have a shortage of stocks and so forth, and wheat’s at an all time high, so that is going to reverberate through the marketplace. And you’ve got Russia, which is also a big wheat producer, what they’re going to do, anybody doesn’t really know what’s going to happen. The other issue is, the way this is going to play out, because of the planting season that’s coming up, are they going to be able to plant in the Ukraine? If they aren’t, what impact is that going to have on the world market, and on the whole stability of the economic system? Having war going on with a couple of major Ag exporters is uncharted territory.

I’m concerned about what might happen. The other thing that’s already surfacing is, we’ve got people talking about opening up the CRP. It’s equivalent to people talking about stopping Russian imports of oil into United States. It’s not going to make a whole lot of difference in the short term, but this is something that people have brought up in the past because of different reasons, and that’s surfacing again, that they want to take the land out of CRP and put it into production, because of the situation. I think that’s a bad idea. For one reason, because the USDA doesn’t know what the good land and bad land is. That’s been a big problem. I’d be all for it if we could differentiate between the different types of land, but they don’t really have that information.

People are blaming this war and the what’s going on for the high food prices. That I think is going to put pressure on ethanol again, because there are people out there trying to blame it on ethanol. The thing I’m concerned about is that we’re going to end up causing a war within agriculture over these issues that we’ve fought over the last 10, 15 years, had actually put them to bed, and now they seem like they’re coming forward again. I think it’s a lot of uncertainty, a lot of concern about where this thing could go. I think farmers are doing pretty well with the prices they are right now, but it is really hard to see how this is going to play out.

Jamie Duininck (06:07):
Yeah. You said a lot there, just take those issues one by one. If you go back to the last price spike in agriculture, that 2008, ’09 to 2012 timeframe, before that, if you go back to the early 2000s, crop land prices throughout the Midwest, $2,000, $3,000, an acre and spiking all the way up to over $10,000, $12,000 an acre, and the cash rent for those same lands going up and doubling, and some more than that. And going into some years that were more lean in agriculture, through the mid teens, and not really seeing, yes, land came down, but it maybe came down 25%, not the 300% that it went up. And cash rents didn’t come off that much, maybe that was 10%, 15%. Those are two inputs that speak to what you’re saying about. When things go up, they don’t really come down on the backside, even if the commodity price does.

Colin Peterson (07:22):
Yeah. The other thing, we’ve got this fertilizer spike that’s going on, and we’re not exactly sure where that’s going to all end up, but right now it’s a pretty huge increase. There’s talk about Russia cutting off fertilizer exports, which could exacerbate that problem. I think it potentially is going to cause some shifting of what people plant this spring in the United States, because I’m already hearing farmers talking about going to crops that take less fertilizer, because of the situation.

It’s going to be a very uncertain time, but going all the way back to the seventies, when we had the price spike back then, every time we’ve had it since, it’s caused problems down the road. We went through the eighties, and to some extent I think that was created by the boom that happened in the seventies. That was really painful, to get through that. I just worry about if we’re going to have these rents at the level they are, have these inputs at the level they are, and then we have the price of commodities come back to the historical norms, I think it’s a big problem. We’ll just have to see where it goes.

Jamie Duininck (08:41):
Yeah. We don’t really know, going to that next point around, what’s going to happen this spring, and in Ukraine and Russia, as far as planting. I heard somebody talking about Ukraine, their wheat is really spring wheat, so it’s all planted, and we don’t necessarily have to worry about that. As you hear more, there’s a lot of potential damages to roads and bridges, and getting to that crop could be the real challenge.

Colin Peterson (09:13):
I think that they grow some winter wheat we over there as well. I may be wrong about that, I’m not an expert on the Ukraine. The winter crop of course is planted. I’m not sure that they’re cycle is that much different than ours, I’m not sure they’re going to plant the spring crops until April and May. I’m not sure they’ve planted the spring crops at this point.

Jamie Duininck (09:40):
Yeah, I think that’s right. I think it would be the winter wheat that would be-

Colin Peterson (09:43):
Right. Are they going to be able to even get into the field to plant? And if they do, if this war keeps going on, are they going to be able to get in and spray, and do what they need to do to make sure that they have a decent crop? I don’t know how much impact it’s going to have on the export market or the worldwide stocks of these commodities, but clearly it’s going to have some kind of impact, and it could be significant.

Jamie Duininck (10:14):
Yeah. Throughout your time in Congress, as ranking member and chairman, did you have an opportunity to travel that part of the world and see what goes on agriculture-wise, either Ukraine or Russia, or Eastern Europe for that matter?

Colin Peterson (10:31):
Well, I was there a couple of times. I was in the Ukraine once, and we were on a congressional trip, and this was in ’92, I think it was, ’93, shortly after the Soviet union had come apart. At that time, the old communists were still in charge. They weren’t a communist country, but they were some tough characters that were lined up across from us. At that time they wouldn’t even let us stay in the country. We flew in the morning, and they made us leave in the evening, because the state department said it wasn’t safe. I’m not sure if that’s true or not, but we didn’t really get a chance to go out into the country and see it first hand. We flew over it, obviously they have a lot of productive farmland there, and the same thing in Southern Russia. I’ve got some contacts of people that have done business over there for a number of years.

I’ve talked to them about, about some of this stuff over the years, but I’m certainly not an expert. I was in Romania, which is also a country that has a lot of arable farmland, and I think that was in the mid-nineties. At that time, people were so disillusioned with what had happened after the Soviet Union broke up, and the way the big co-ops, collectives had treated people, they couldn’t get people to go back into farming. The other problem is, they split up the land into such small parcels that it wasn’t feasible to farm. Romania had all of this land that was not being farmed, and I had this guy come up to me from USAID at that trip, and he was a Californian that was working for USAID.

He said, “The Romanians are looking for people to come over here and farm this land, because the local people won’t or can’t do it. They will give folks a long term lease, 50 years or a 100 year lease on as much as 50,000 acres, and the price is very minimal.” What they were looking for is people to bring their equipment and their knowledge, and farm that land. I came back and talked to some of the farmers here in my district, and they were not interested because they didn’t want to live in Romania. There are a lot of challenges, but they’ve overcome a lot of that now. They got back to where they’re getting somewhat productive again, and now they’re in the middle of this big mess, and who knows how it’s going to end up.

Jamie Duininck (13:34):
Sure. Moving to talk a little bit about what you mentioned earlier on CRP, and the potential of certain groups talking about we really need to think about taking land out of CRP and putting it back into crop production. Talk a little bit about that. I pretty much can understand how that can be a sticky wicket, but what does that do in agriculture, from the standpoint of create fissures and friction in different groups?

Colin Peterson (14:08):
Well, one of the big problems we have in agriculture is that there’s so few people in the country that are really in agriculture, in a commercial sense. There’s not a lot of understanding amongst city people and other elements of our society. One of the ways that we’ve been able to put farm bills together is by putting coalitions together of people, the crop folks and the farmers want title one programs, they want crop insurance, they want a safety net for what they’re doing. Then you have other elements out there, conservation people, environmental people, hunting/fishing people, that have different ideas and different interests. The conservation stuff, and CRP being the biggest conservation program, was one of the ways that you helped build this coalition.

Even though some of these groups didn’t like the title one programs, if they got what they wanted in the conservation title, they would go along, and you could put together a bill that could get enough support to pass. We also have the nutrition folks, which the urban people are probably more interested in that than anything, and that’s part of the coalition as well. What I’m worried about is, if some way or another this gets legs, and they start talking about making significant changes in CRP, what that does is it cracks the whole coalition that they had, and I don’t think it’s a solvable situation. I don’t think there is a way you could come out of that with an answer that actually makes any sense.

I worry about getting into the Farm bill situation, and having that whole controversy out there not resolved. The other thing would be, this whole group is, in my opinion, fostered by the oil companies that are trying to undo ethanol mandates. You’ve got people now using this as an opportunity to say, “We need get rid of the RFS, we need to get rid of ethanol.” There’s another group to put study out there that said that ethanol is 25% worse for the environment, and carbon and climate change, than gasoline, which is not true.

I worry about all that stuff getting some legs, and getting people at each other’s throats. For example, on the ethanol situation, we had people in California, and people in the Northeast, that bought into this whole food versus fuel thing, and tried to get rid of the ethanol mandate, which caused the people in the Midwest to get all stirred up. We don’t need those regional problems that are going to be created by some of these ideas.

Jamie Duininck (17:15):
It’s been pretty stable, the whole industry has worked really hard to get to where they are, and has been fairly stable on some of these things. It’s pretty interesting to see, take this all the way back to the beginning, with Russia invading Ukraine, and how the step up in supply chain and in fuel can end up creating all these issues down the road. Some of these probably will start soon, but we won’t really see the results of them for several years.

Colin Peterson (17:53):
Yeah. And on this whole feed availability situation, it’s a big concern, I understand that. Our livestock producers are very worried about where this is going, and the prices that they’re having to pay for feed is also way out of sight. Now some people are talking about, we’re in the middle of a signup for CRP, the first rental sign up we’ve had for quite a while. They’re talking about delaying that or putting it on hold so that they don’t put this land into the end of the process. I think the ending date for this signup is the 18th of March. We’re about at the end of the signup, we’ve gone through the whole situation. And now some people are asking USDA to stop the process, and delay taking any acres into the situation.

Vilsack, when confronted with this, he said, “We’re not going to do that. We’re going to move ahead.” These are the kind of things that potentially could cause a rift within the agriculture community, which is the last thing we need. There’s just not enough of us in agriculture, in rural America, that are directly tied to this stuff, that understand it, to hold something together if we don’t have these coalition partners.

Jamie Duininck (19:17):
Yep. This is why you formed the Peterson Group, and the Midwest Council on Agriculture. It’s why companies like Prinsco have been involved for a long time in trying trying to educate the general public on what’s really happening, because there’s less than 2% of the total population that really work in this industry.

Colin Peterson (19:42):
Yeah. The city folks are further and further removed, even in cities that you would think would have a better understanding, like Fargo or Willmar, Marshall, even in those communities, you’ve got a lot of the populace that just does not have the understanding of what goes on in the real world, and it’s very troubling.

Jamie Duininck (20:06):
Yep. As land prices go up and farms get bigger, it’s probably a challenge that’s going to remain into the future.

Colin Peterson (20:17):
Well, it’s hard to say how it will play out, but hopefully won’t have a big crash, we won’t have a big problem like we had in the eighties, that would be a disaster. Right now, the equity situation for farmers is the best I think it’s ever been. Foreclosures are down as much as they’ve ever been. We’re heading into this in good shape, but it could be a problem.

Jamie Duininck (20:45):
Yeah.

Colin Peterson (20:45):
If it hangs on very long.

Jamie Duininck (20:47):
I appreciate your time today on some of these very complex issues about agriculture. I didn’t know that I’d ever say that, but about agriculture and war together, and how they’re linked. I really appreciate your time with us today on the Water Table, and thanks for joining us.

Colin Peterson (21:05):
Well, thank you, and thank you guys for what you do. If we can get people to understand that drainage contracting probably does more for the environment than anything else, in terms of dealing with water. You got a lot of folks that do not understand what you guys do. We’re trying to educate them.

Jamie Duininck (21:24):
It’s part of what makes North America competitive in the world. You have a lot of great farmland in places like Ukraine and Russia, but some of the places don’t have the infrastructure from the standpoint of rails and storage, things like that. Most of them don’t have the proper drainage in place, the proper water management in place to grow the most healthy crop they can.

Colin Peterson (21:54):
Yep, that’s exactly true. It’ll probably be a while, given what’s going on over there.

Jamie Duininck (21:59):
Exactly. It’s all combined, you got to have an economy in order to spend money on stuff like that. I appreciate your time, thanks for joining us Congressman, and we’ll see you again soon.

Colin Peterson (22:14):
Yep. Thanks Jamie, I enjoyed it. I’ll talk to you, thanks.

Jamie Duininck (22:16):
Bye-bye.

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