5 questions for: Joseph Janzen, Ph.D., Department of Agricultural Economics and Economics, Montana State University
Q. What's your personal background in ag? A. I was raised on a farm near St. Francois Xavier, Manitoba. My dad, Jim, and younger brother, Bill, currently farm there, growing spring wheat, canola and soybeans. During and after college, I worked on...
Q. What’s your personal background in ag?
A. I was raised on a farm near St. Francois Xavier, Manitoba. My dad, Jim, and younger brother, Bill, currently farm there, growing spring wheat, canola and soybeans. During and after college, I worked on the farm. At some point, I got the itch to develop a deeper understanding of agricultural markets and policies, which led me to pursue graduate studies at the University of California Davis.
I am fortunate enough to be able to return often to our family farm. I try to make it back during harvest each year. It’s great to be able to drive the combine, turn a wrench, clean bin bottoms and generally have my little brother tell me what to do for a week or two every year.
In addition, being part of a farming family gives me a chance to ground truth some of my economic analysis against the know-how and common sense that can only be found on the farm.
Q. You’re an applied microeconomist. In layman’s terms, what does that mean?
A. Take the “micro” component first. Microeconomists focus on the interactions between individuals and businesses in the market for a specific good.
In agricultural markets, these individuals and businesses might be farmers, merchants, processors and end-users of agricultural commodities. My goal as an economist is to understand the impact of changing market conditions and policies on these individuals and businesses. It’s a bottom-up approach to understanding markets and economies.
The “applied” part means my research uses real-world data to measure these impacts. I apply various statistical methods to analyze data with the goal of inferring the likely response of individuals and businesses to shifting market and policy conditions.
For example, some of my ongoing research attempts to measure the impact of U.S. government purchases of pulse crops for food aid on prices received by farmers. I was intrigued by claims that U.S. government buying can cause shocks in pulse crop markets, so I collected detailed data on the timing and quantity of U.S. government tenders for pulse crops since 2002. Using this data and statistical methods, I try to identify what would have happened to prices in the absence of U.S. government purchases. The difference between the prices we have observed and this counterfactual scenario represents the impact of government purchasing behavior. So far, my analysis suggests the average tender has a fairly limited impact on prices - on the order of a 1 to 2 percent increase.
Q. What is the main difference between the U.S. and Canadian ag economy?
A. In many respects, farming is farming, no matter where in the world you are. My dad farms in Manitoba, and my father-in-law farms in western Nebraska. Their operations are very different, but they have plenty of things to discuss when they get together. There are far more similarities than differences.
That said, two major dissimilarities I see are exchange rates and farm policy. Exchange rate volatility is a major factor affecting farm profitability in Canada. Sudden changes in exchange rates can give and take. Canadian farmers are keenly aware of how inputs like machinery, priced in U.S. dollars, have become considerably more expensive in the past two years. At the same time, declines in agricultural commodity prices have been moderated by the declining value of the Canadian dollar. Because of the unique role of the U.S. dollar in the world economy, farmers and ranchers in the U.S. simply don’t worry as much about exchange rate risk.
A second difference is in how contentious some agricultural policy issues are north of the border. Farm policy always seems to generate debate, but in my opinion, the U.S. seems to have greater consensus at the farm level in making agricultural policy.
Canadian farm policy issues such as the Canadian Wheat Board single desk or supply management for dairy and poultry are incredibly contentious and long-lived.
Q. What one piece of advice would you give farmers and ranchers in this challenging climate?
A. In challenging times, it is worth going back to basics. It’s been said many times before, but it bears repeating: know all elements of your cost of production and take advantage of opportunities to sell at a profit.
When it comes to grain marketing, remember that marketing actions affect both revenue and costs. Putting grain in storage comes with a hidden cost, specifically the revenue you give up by delaying sales. Gains from delaying post-harvest sales need to cover these additional storage costs to improve profitability, so be judicious in using storage.
Q. What has you optimistic about today’s industry?
A. I am optimistic about the future of agriculture because I know the people in this business are resilient. So many farmers and ranchers I know are eager to adopt new technologies, try new crops and look for new markets.
For example, many farms in Montana are now growing pulse crops, adding resiliency through economic and agronomic diversification. This willingness to innovate has allowed many farms and ranches to survive and succeed in periods of low commodity prices.
Farmers and ranchers who have built stronger balance sheets in recent high-profit years are well positioned to seek out opportunities for innovation and take advantage of them. I am excited to find and understand the coming changes to our industry.
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