The Water Table
The Water Table
What can farmers expect? An Ag economist's perspective
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As the chief agricultural economist and senior vice president at Wells Fargo's Agri-Food Institute, Dr. Michael Swanson has a big-picture understanding of energy markets and the economy of agribusiness. He stops by The Water Table to help us make sense of the impacts of the war in Iran and how the markets might continue to react.
What can we expect crude oil prices to do? What about commodity prices? How does this situation compare with the Russia-Ukraine war? Michael shares his wisdom on these topics—and an old adage or two—to keep the current situation in perspective and offer encouragement for farmers to seize the right opportunities for success.
Note: This episode was recorded on June 5, 2026.
Chapters
00:00 - Introductions
02:10 - Systems thinking and never-ending stories
05:28 - Challenging the popular narrative
11:02 - An opportunity to make money in this market
12:04 - Crude oil costs and stockpiling resources
16:10 - Global feedstock and energy markets
17:05 - A closer look at the numbers
19:10 - Fixing the cash rent problem
25:09 - Looking back and ahead
30:12 - Final thoughts
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#52: An Ag Economist Tells All: Critical Topics Impacting the Future of Agriculture
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Dr. Michael Swanson (00:00):
We need to look at things as systems. Everything's related. Even if I don't know how it's related, there's a linkage one or two steps away that's impacting me. If you're at a negotiation table and you can't say no, you're really not negotiating, you're pleading. If you need to sell an 80 to get liquidity to pay off your debt so you can go to sleep at night, that's what your grandparents want you to do. This is a race and I just need to be good at running this race, but it's not going away.
Jamie Duininck (00:37):
Well, welcome back to The Water Table Podcast. Thanks for joining us. Today I have Dr. Michael Swanson with me. He's a Chief Agricultural Economist and Senior Vice President with Wells Fargo Agri-Food Institute. He's based in Minneapolis, Minnesota and he's responsible for our macroeconomic analyst forecasting commodity trends and evaluating how high energy costs and international markets will impact agribusiness. I wanted to get Dr. Swanson on the line today and on the podcast to talk a little bit about how the war in Iran is going to affect agriculture and the energy prices and the energy costs within agriculture. So welcome to the podcast, Dr. Swanson.
Dr. Michael Swanson (01:26):
It's always great to be talking about this stuff.
Jamie Duininck (01:28):
Yeah. You've joined us a few years ago. We've been doing The Water Table for about five years and you joined us earlier on just to talk about agricultural trends, but we want to get kind of specific today on what this lingering war in Iran is, how it's going to affect us in agriculture. We've talked about that on a couple previous podcasts about just specifically the plastic resin costs for our business and our industry. But let's just talk a little bit about some of the highlights maybe, and then we can dive deeper into it of what you're digging into, what you're researching and what you're finding.
Dr. Michael Swanson (02:10):
Sounds good. Well, let's set the table, keeping in that theme of the podcast. First off, we need to look at things as systems. Everything's related. Even if I don't know how it's related, there's a linkage one or two steps away that's impacting me. And secondly, I have a saying for my kids that you're dressed for yesterday's weather. It's not that you're wrong, it's just that that was true 10 years ago, but it's not really the same market today. So I want to keep those two points front and center here when we talk about what the conflict in the Middle East is doing to the agricultural world because you see some obvious impacts and the best question to fluster an economist is when they tell you a story, say to them, "And then what happens?" Because the story never ends. So we'll start with that. We're going to think about the connections.
(03:03):
Some of our competition around the world that's being impacted more than we are, let's call them Brazil just for a name here. And then think about, well, what should I do about it?
Jamie Duininck (03:13):
Is that a question for me?
Dr. Michael Swanson (03:16):
Exactly. Should I put some more money? Should I buy some $15,000 farm ground or should I tile for $975?
Jamie Duininck (03:25):
Yep. Yep. And it's interesting you say that because just this morning I was out flying a little Super Cub that I bought, something that I've kind of had a dream of doing of just having a little airplane that I can fly low and slow over the landscape and actually see what's going on from a different angle really around what we do in agriculture and with water management. I saw some land that is really underproductive land 20 years ago. This land would've been 2,500 bucks an acre and they would've never tiled it for 750 bucks. So if you take that question you just asked and asked, "Just put it in that context of those years ago, should we tile our land?" The answer would've been, "Why would we do that? Let's go buy more land for $2,500 an acre rather than tile it for maybe 750 back then, whatever it was."
(04:21):
And so I understand where you're going on those questions and that the story never ends, right? Because today that same land is $8,000 an acre and it's not very good land and it still hasn't been tiled because they're saying, "This isn't that great of land. Now it's worth $8,000. Should we just sell it or should we ..." They have other questions that come into play.
Dr. Michael Swanson (04:44):
I can give you the answer. Yeah. Sell it. Put it into a S&P 500 ETF, even though it seems incredibly overpriced today. 20 years from now, you'll be doing so much better. But anyways, that's another story for another day.
Jamie Duininck (04:56):
Yeah. Well, let's have that conversation too, one of these days on The Water Table, because that is another great conversation when you see land that is selling in our area of central Minnesota in the 12s, 13s, 15s. And we all know those stories because we all see them in Iowa of $30,000 land every now and then and it's crazy.
Dr. Michael Swanson (05:20):
Yep. Yep. And so I was just in Indiana yesterday and they just use the same inflated numbers with just a little bit different story to them.
Jamie Duininck (05:28):
So when you think about what's transpired here in the last three months in America with the war with Iran and if you step back a little bit and look at two days before that, where were we at with agriculture? And there's some challenges going into 2026 growing season just with commodity prices. I don't know. It's time kind of goes kind of fast. Is it maybe the third year or maybe even a little bit longer than that of pretty challenging prices? And in some areas in 2025 got really wet, especially in the upper Midwest. I think more of the lower Midwest wasn't that way as much, but really wet and had some challenges, especially in specialty crops like sugar beets. So we were thinking already about what's this year going to be like. We're going to probably need something to happen with the commodity prices, whether that's a drought or something else to allow these farmers to make a little bit of money this year.
(06:42):
But how are you looking at that if we go back to say February and what were you thinking about and then how has that changed too after the war?
Dr. Michael Swanson (06:52):
Yeah. That's a great topic. So let's start with the old joke about 42 degrees in Fargo. For those who don't know Fargo and North Dakota, that's the average annual temperature in Fargo, North Dakota. But let me solemnly assure you that if you dress for 42 degrees when you're in Fargo, you'll be miserable for nine months and dead for the other three.
Jamie Duininck (07:12):
I was in Fargo last Saturday for the marathon. My daughter ran it and it was like 90 degrees and it was awful. So very different the other way, right?
Dr. Michael Swanson (07:22):
Exactly. Okay. So let's go back and there's another saying, the world's full of sayings, is it's not what you don't know, it's what you know that isn't so. So here's the narrative that we hear on the Wall Street Journal, in New York Times, farmers aren't making money. And the answer is, well, that's for sure that some farmers aren't making money, but we know that some farmers made really good money in 2025. And how do we know that? What do you know and how do you know it? Well, the Minnesota Farm Management Database, FINBIN, you can just Google F-I-N-B-I-N, FINBIN, longest running most public database out there. Methodology is straightforward. We saw that the average cost of producing corn in the upper Midwest and the Minnesota sample last year was $3.90. That's with government payments. Let's not sneer government payments. The gross margin on a government payment check is 100%.
(08:18):
It doesn't get any better than that. Oh boy, nothing gets better than that. So 3.90 and the average sales price was a little bit just south of $4. So on average, 42 degrees in Fargo, farmers made money selling corn in the upper Midwest last year. But we know to your point earlier about unproductive ground and people that sometimes don't make good decisions, they had people in that same sample that had cost of producing corn north of 5.75. And they had other people who were in the low threes. Now that's a heck of a spread, right?
Jamie Duininck (08:54):
Yeah.
Dr. Michael Swanson (08:55):
And I can tell you, looking at that database for many, many years, that's never going away. And so we're looking at 2026 here and there's an awful lot of farmers who have made decent land contracts. You don't get it for free. You're never going to get it cheap unless you're taking advantage of your elderly neighbor, which I don't recommend for your immortal soul. They also contracted their seed and their fertilizer at the right price. They got their equipment in the right price and they're good operators. They're getting good money here in 2026. They probably wish they would've sold a little bit more aggressively earlier in the year, but they're going to make good money. Now you pop open your browser right now, look at the CME, look at the corn contracts, 2027, 2028, and 2029. You have, let's just say $5 corn for an easy number on the board.
(09:48):
If we had a 3.90 break even in 2025, how can't you lay off 50% of your corn, expected corn production at $5 and take away a lot of risk in your life? So I'm going to go back and challenge this view that's currently out there in the market is that nobody made money for the last three years and you can't make money at these prices. They're very true for poor operators and we know the stress. I'm not going to ... Some of these people are very, very stressed. If somebody's stressed about farming right now, here's a very serious comment to them. One is you're probably sitting on some very valuable land and don't let the ghosts of your grandparents stop you from doing what's right. I mean, if you need to sell an 80 to get liquidity to pay off your debt so you can go to sleep at night, that's what your grandparents want you to do. They're not concerned about you buying another 80 so you can brag at the coffee shop about how big you are.
(10:44):
So if you're stressed right now in your agriculture and things aren't working because everything's not working for you, look for an exit strategy that will take care of you and your family because that's what your family wanted you to do when they gave you that ground. Now that's one segment. It's a pretty small segment, but they're out there so hopefully they get the help they need. But for the most part, there is an opportunity to make money in this market. We have incredible demand for biofuels right now, both renewable biodiesel and ethanol. They're just churning through an immense amount of crops. We're producing an incredible amount of pork and poultry and beef and they're just consuming an immense amount of corn and we still have the export market.
(11:27):
So we're going to burn up a lot of corn through those three major sources. And so we need these farmers to plant this corn and get it done. $5 corn is in the upper quintile, upper 20% of historical pricing. You can make money. So I'm going to challenge the current prevailing narrative just because diesel prices are high and diesel's not your major expense. And some of the other things, fertilizer, yeah, but 2022 was horrible for the fertilizer. You can make money. You can make money if you do it right.
Jamie Duininck (12:01):
Okay. Well, that's a great segue into what is 2026. A lot of the inputs were bought before any of this started. And so what are you guys looking at as longer term, at least into 2027 on some of these costs, whether it's diesel, fertilizer, we're talking about plastic resin in our business, those kind of things. But some of the things we're hearing about or concerned about is just as anything that stockpiles of resin in our business or any fuel that the governments have, those kind of things are all being used up and we're getting to be just kind of day-to-day. Well, how is that really going to affect us in your mind? Does that mean as it'll be more volatile on a day-to-day basis, but not necessarily more volatile over three months, or is that not the right way to think about that?
Dr. Michael Swanson (13:10):
I'm going to go back and ask about those numbers again. Okay. So just some really rough numbers. Right now, the United States produces about 13 and a half million barrels of crude oil per day all time record, just outstanding, just outstanding. And we have about another 10 million barrels a day of biofuels. And then a big piece about almost eight million is what we call natural gas plant liquids. So you put those two together and we have 23 and a half million barrels of crude oil production per day. We only need about 19 and a half domestically. So that leaves us about four million that we can take out to the world. And right now we're supporting our friends and allies by exporting maybe six million barrels a day. So we are kind of chipping away at our stockpiles. They've been releasing fuel from the strategic petroleum reserve.
(14:04):
Some of the commercial numbers are a little bit lighter, but not that much lighter. And so the question is, let's say this thing stays as it is, can we ramp up another million barrels in the next 12 months? The answer is probably these guys can drill like nobody's business have given an incentive to, but they're also concerned they don't want to drill well on $100 crude oil futures and then pump it at $55 like they were last November.
Jamie Duininck (14:29):
Yes.
Dr. Michael Swanson (14:32):
And then you take a look at the resins and stuff like that. It's kind of interesting. That's an interesting market because it's very global. The Chinese like producing resins. They have some strategic advantages, mainly that their environmental standards are pretty lax and their labor costs are pretty low, but they don't really have the feedstock. They're buying the feed stock and processing it. But resins at ultimately end of the day really are a feedstock question. And then going back to that, the feedstock is out there and it will come back on the market once the conflict is done. And so yeah, this is kind of a temporary thing and I'm going to take a parallel from the John Deere dealerships. So in 2021, 2022, when corn prices spiked in the Russian-Ukraine conflict, which is still ongoing, by the way, any John Deere dealership that had flooded their pad with trade-ins the year before randomly suddenly was the smartest guy in the block because he had all sorts of used equipment to price up 40%.
(15:34):
Well, when the market turned over, well, anybody with a heavy pad of used equipment that they paid too much money for was suddenly marking it down big. I think anybody with a stockpile right now that's marketing it up and making good money on it should be very prepared for the very classic whipsaw when it comes back the other way. So don't get overly excited and stock up everything you possibly can because these markets are born to make me look foolish. And so whatever I think, they're going to make me look dumb.
Jamie Duininck (16:03):
Yeah. That's, I think, good advice. The feedstock question is such a challenge because... You said it, but because it's a global market, China's having to buy their feedstocks to then make resin in China and they're having challenges getting those feedstocks. So at this point they're buying some resins from the US and from other places. So there is really a current bottleneck in several different places, but before this conflict happened, the supply of feedstocks and then ultimately of resins was very strong probably, I don't know if I want to use the word because I don't know enough about it, but overproduced, but it was very strong and there was some historically low prices in that market. So at what point does that straighten out and get back and how fast? Those are really the questions. It will happen obviously, but are we looking at six months or are we looking at 18 months?
(17:11):
Those are things I don't really know. And again, part of the beginning of that question was a lot of the materials farmers need to buy, whether it's seed or chemicals, that was all bought pre-war for 2026 or at least a lot of it. But how does this impact as we ... I think a lot of people, including myself, thought this conflict would be over by now and now we're 90 days in. So if this goes another 90 days or whatever it might, how does it impact 2027? Because it's starting to look like it will, where at one point you didn't know that. It's starting to look like it will to some point.
Dr. Michael Swanson (17:52):
So let's look at some of the numbers. Yesterday's market closed on the West Texas Intermediate contract right in the $93 a barrel range and you look at where the natural gas contracts are. I'm not going to have the number off the top of my head, but that's the feedstock for resin and all that stuff. Are those really, really high numbers? I mean, they seem high because we had a dirt cheap $55 barrel West Texas Intermediate last November, but that was such a low number. People were talking about not drilling more wells or moving more product. But if you can believe this, go back to 2008 when China was blowing and going for the Olympics in 2008, we hit $140 a barrel for the West Texas Intermediate. Think about that historically. $140 almost 20 years ago compared to everything else, that just crushed everybody. But today, low 90s, is that really a diesel price and a fertilizer price that's going to really crush this market or is it simply take some of the profitability out of it? I'm going to go with the second.
(19:05):
I think it takes some of the profitability out of it, but I'm going to circle back. The biggest problem most people have right now is cash rents are too high. So let's just take some Midwest numbers here. Let's say you're paying 250 for a cash rent, which is kind of right in the ballpark and you have $5 corn. Well, think about that. If you divide $250 by $5 corn, you can say, "Well, how many bushels am I really giving away?" And you're giving away 45 bushels there. Can you afford to give away 45 bushels? Well, if it's 235 bushel corn ground all the time, yeah, you can. That's a good rent. But if it's 170 bushel corn ground just west of buried before you get to Sisseton, yeah, I wouldn't do that. That's not going to work very well.
(19:51):
You're going to be in a hurting spot pretty quickly with the input that we have today. So the cash rents are too high depending on that, but I guarantee you're not getting 250 cash rents in Northern Iowa either. I mean, that'd have to be a family deal if you get into that. So until we fix the cash rents and the machinery side, the two biggest expenses right now, it's kind of tough to blame fertilizer and seed costs for anything. That's my takeaway.
Jamie Duininck (20:19):
Well, yeah, and we can talk about that for a minute because I'll argue with you a little bit on how are we ever going to fix cash rents if two things don't happen or maybe one of the two, but either taxes per acre have to go down because they go up every year and Kandiyohi County tends to be a higher tax county, but we're talking in the 50s and low 50s to high 50s dollars per acre tax now and then just the cost of land. It doesn't matter how people look at it. It doesn't matter if they paid 500 bucks an acre for that land in the 1960s. If it's worth 10,000 now, they want a return on the 10,000, not the 500.
Dr. Michael Swanson (21:07):
I hear you. I remember sitting out watching the TV in the 1970s as the state secretary was talking about property taxes. I mean, this is a perennial subject, but what the states think is, "Well, I got a mill rate and I'm looking at the average value of the ground, so why can't I get $50 per acre? Right?" I mean, Kandiyohi, you guys roll pretty rich out there. I mean, you got some Cadillac services in Kandiyohi but...
Jamie Duininck (21:39):
Yeah. It's true. It's true.
Dr. Michael Swanson (21:41):
But here's how you fix the cash run market individually. Here's the old saying. If you're at a negotiation table and you can't say no, you're really not negotiating, you're pleading. So you, as an individual, even though you got a crazy neighbor with a big checkbook, that's kind of a tough deal. Yeah. I don't like that. But it's up to you to look at the cash rent for that piece of ground, good, bad, or indifferent and say, "No, I'm going to lose money if I do that." And then people say, "Well, oh my goodness, I'm farming 4,000 acres. I can't drop to 3,500." You sure can. You're better off doing addition through subtraction. You're better off dropping acres that don't make you money. I mean, if you're going to lose $100 an acre because of the cash rent and the setups that you have going on there, you're better off farming 500 acres less at money losing prices, I guarantee you, addition through subtraction.
(22:40):
So this is how you fix the cash rent market individually and everybody's got their unique situation. The worst thing to be is in a market with five rich people who have inherited a ton of money, a ton of land. Yeah. That's a tough spot to be in, but it is what it is.
Jamie Duininck (22:56):
Yeah. And when you talk about what I was thinking about as you were explaining that a little bit ago, of 45 bushels an acre go to cash rent if you're paying 250, the other side of that equation is, and that's part of where you talk about guys making money is there are the farmers out there that own 1,500, 2,000, 2,500 acres, whatever it is, and they're not paying anything on those acres. So all 45 bushels you were talking about are going right to the bottom line.
Dr. Michael Swanson (23:32):
Yep. And here's what they're doing with that 45 bushels. They're subsidizing their neighbors. So when you look at that Minnesota Farm Management database, when you get into the biggest group, people that are operating on 6,500 acres of ground, that's the average in that last bucket that they have. About 85% of the ground they're operating on is cash rented. So even though they do have 1,000 acres owned or 1,500 acres owned, a big operation, all they do is take that money and simply subsidize their other 85% cash rent in markets. I often say if their wife really knew how much the land management company is subsidizing the farm operating company, she might put her foot down.
Jamie Duininck (24:19):
I think it doesn't help nowadays that you can do so much work in so little time. So it's like, well, why not take on that piece that's attached to this piece we own over there? And it literally might take you an extra half a day to plant it on 80 acres or even 160, maybe another day, whatever it is. So it's like, why wouldn't we do that? I think there's a lot of that that happens too.
Dr. Michael Swanson (24:50):
Yeah. Well, there's an old maxim in banking that you do your dumbest deals for your best customers. And I think that's pretty much true of about every industry that I know. So farmers are doing their dumbest deals on what they think are their best relationships.
Jamie Duininck (25:03):
I would like to know from you how you see this playing out. Yeah. Obviously you don't know anything or when this war is going to end or this conflict, but how does... Whatever happens, it's got to end at some point or stabilizing, where then maybe it's kind of stabilizing right now and we can kind of just plug along here with the conflict going on. I don't know. But how do you see the rest of maybe the next 12 months playing out from a commodity pricing standpoint?
Dr. Michael Swanson (25:42):
Let's just take a couple scenarios and it won't even assign probabilities to them. One is the conflict ends today and all the non-Iranian resources come back online. The LNG gets going to India so they can start producing their urea again. Where there's money involved, people solve the conflicts pretty quickly. So I always get a kick on of people say, "Well, that can't happen." It's like, "Well, tell me how much money's involved and I'll tell you how quickly you can get it fixed." So that's the scenario. But what would happen also is we'd shave off corn and soybean prices. The market would say, "Okay, if you're getting relief on your cost structure, I'm going to take away some of your opportunity on the revenue side." So I don't think it's a hundred percent wind for anybody there. This could go on for another three to six months and definitely push pricing decisions.
(26:33):
Even though the United States is not really short NPK, we produce... We're a little bit short on N because it's cheaper to just buy it on the global market. Yeah. We would still have to match the world price because if you're going to load up a ship, you're going to take it to the best price. We got to match or beat. So we'll have some of that going on. But I'm going to say, look at 2022, look at the Russian-Ukraine conflict. It's still ongoing right now. I mean, it was the hottest topic that we had when it kicked off, but the world's like, okay, I kind of figured this out, the numbers are in and the market chugs along. So you could have immediate resolution, intermediate resolution, or long-term on stability and the market's going to find the right prices to produce the grain and oil seeds at a breakeven. So what we want to be is the low breakeven.
Jamie Duininck (27:25):
That perspective is good to remember. The Russian-Ukraine thing continues to plug along now four or five years into this thing, and how many times a week? I was going to say a day. If I think of how many times a day do I think about it, the answer would be never, but a week, maybe once, maybe not at all, maybe once a month. At this point, whereas back when it started and you were seeing commodities run and different things of, okay, how is this going to affect me? And again, that's life, right? We always look right away and think about things that are going to affect us individually. And if we don't see that anymore, then that scenario could be out there where this could plug along a long time and the market figures out how to survive within that and just adjust to that. So I hadn't really thought of that as being a scenario.
Dr. Michael Swanson (28:22):
Yep. Yeah. Let's hope it's not the scenario, but yeah. Then people build infrastructure based on that. I mean, here's an aside for people. If you look at India, they're not a huge importer of N, but they are a huge importer of LNG to make the N. They used to gasify their coal. India has a lot of coal, but they decided that they wanted to be less carbon intensive and so they took out their coal gasification, which was feeding their urea production and they went to importing a cheaper, lower carbon footprint LNG from the Gulf region. Well, I suppose they wish they hadn't done that right now, but they can go back to coal gasification, soak in the Chinese. So it takes a while, but if the conflict drags on, people will reverse decisions on what they do. So like I said, dressed for yesterday's weather. That's what I always told my kids, "You're dressed for yesterday's weather." So the market might be dressed for yesterday's weather, but it can change.
Jamie Duininck (29:30):
Yeah. For sure, for sure. Well, good. I appreciate you joining us on The Water Table today and just talking through some of these scenarios and how you see things. Why don't you give us kind of the last word here on The Water Table on what you want our listeners to know or what you're thinking about that maybe you haven't shared yet?
Dr. Michael Swanson (29:53):
I'm going to go back to it. This is a great long-term business. Farmers are long corn and soybeans forever, but I guess, somebody's short corn and soybeans forever and that's the consumer. They either want the biofuels, they want the protein and everybody just wants that. So this is a great market. The demand is literally assured for you. I love being in a market where it's about my execution. So it's tough to be in a market where you might go away, people might not want what you do. So the real question for farmers, and this is why these assets are valuable and why they're so good at what they do is, okay, this is a race and I just need to be good at running this race, but it's not going away. And so really take that to heart that the consumer is perpetually short protein and biofuels.
(30:45):
And if you're good at delivering the corn and the soybeans, you're going to make money, your assets are going to be valuable and you're going to have a great, great job to execute on because farming's a great job. So even though every single day has issues going on, just remember you're in a great spot if you want to execute on it.
Jamie Duininck (31:04):
Yeah. I appreciate you kind of leaving us with that. I think it's motivating and inspiring to our consumers of The Water Table podcast and just know your job out there, everybody that is in our industry and not everybody, but most of us love being in the industry, love living on the rural landscape and all that benefits you for doing that. But it's about you executing. If you execute, you can do this for your career.
Dr. Michael Swanson (31:36):
Yeah. You're going to do it for 20 generation.
Jamie Duininck (31:37):
Yep, yep. So appreciate the time, Dr. Michael Swanson, Wells Fargo Chief Economist. So thanks for joining us here on The Water Table and we look forward to visiting more in the future.
Dr. Michael Swanson (31:49):
Sounds good. Have a great summer, everybody.
Jamie Duininck (31:51):
Yeah. Thank you.
