Farmers Dig Deep To Weather Slumping Ag Economy, But Don’t Call It A Crisis
Farmers Dig Deep To Weather Slumping Ag Economy, But Don’t Call It A CrisisFarm income has taken a long, hard fall, dropping 50 percent since hitting a high point in 2013. Add to that near-record levels of farm debt, and you have a recipe for financial stress.
But while economists say they can see storm clouds building, it’s not a full-blown crisis. That’s because relatively few farms have been pushed past the breaking point into Chapter 12 bankruptcy — or, worse, into losing the farm entirely.
Nebraska farmer Ben Steffen felt it worst with last year’s milk prices. Sales from his 150-cow dairy dropped 20 percent as the U.S. trade dispute with Canada and Mexico dragged on and exports lagged.
Is it a Crisis?
President’s Budget Released
President Trump released a “skinny” version of his FY 2020 budget request to Congress last week. The budget request is a little over a month delayed largely because of the government shutdown during the month of January. A more detailed budget request will follow in April.
The budget proposes an overall 15% reduction in USDA spending. As expected, cuts to crop insurance are included in the request. Specific crop insurance proposals are: to reduce the average premium assistance for farmers from 62% down to 48% (estimated savings $22.1 billion over 10 years), put in place an AGI means at $500,000 test in order to receive premium assistance (10 years savings estimated at ($641 million), and reduce the targeted underwriting gain of 14.5% down to 12% (estimated savings of $2.9 billion over 10 years).
Additional cuts to farm bill programs include the proposed elimination of the Conservation Stewardship Program (CSP), an AGI test of $500,000 for commodity and conservation programs, remove the separate $125,000 payment limit for peanuts, make Marketing Assistance Loan gains subject to the $125,000 payment limit, eliminate the use of Commodity Certificates, and eliminate the Livestock Forage Disaster program.
The budget is largely dead-on-arrival with this Congress, especially with the House and Senate leadership divided, the farm bill recently passed, and the current state of the farm economy. House Agriculture Committee Chairman Collin Peterson issued the following statement after the release of the budget proposal:
“The President’s budget request is a road map for how to make things worse for farmers, ranchers and those who live in rural communities: $26 billion in cuts to crop insurance; $9 billion in cuts to successful, voluntary conservation programs; $5 billion in cuts to Section 32 programs that help purchase commodities in times of need; $8 billion in cuts to programs that help ranchers recover grazing lands hurt by drought; yet another attempt to cut SNAP; elimination of the Rural Energy for America and Rural Economic Development programs and billions in other cuts. This proposal tells us one of two things: either the White House doesn’t understand why these programs are important, or they don’t care. What’s more, all of these shortsighted cuts are second and third attempts to revisit policy proposals that were rejected in the farm bill negotiations. This budget was concocted by a bunch of ideologues who can’t see what’s clearly going on in the farm economy. The good news is this budget is going nowhere in Congress, where the bipartisan farm bill passed with 369 votes.”
Farm Crisis? What Crisis?
In the wake of President Trump’s tariffs, agriculture interests are claiming that the farm economy is crashing. Agriculture Secretary Sonny Perdue said recently that farm debt is rising to levels not seen since the dark days of the 1980s, when thousands of farmers went bankrupt.
But new research from the secretary’s own Department of Agriculture shows there is no crisis: Farmers are actually expected to do better in 2019 than in recent years.
The Farm Income Forecast, released last week by the USDA Economic Research Service, paints a considerably better picture of the farm economy than many recent news reports.
Does the Crisis Exist?
EPA Issues Proposed Rule for Year-Round E-15 Sales
Last week the Environmental Protection Agency (EPA) issued a proposed rule to allow gasoline blended with up to 15 percent ethanol (E15) to be sold year-round without additional Reid Vapor Pressure (RVP) control rather than just eight months of the year. Written comments are due by April 29th, 2019.
The rule also makes alterations to the trading rules for Renewable Identification Numbers (RINs) credits. A public hearing on the rule has been scheduled in Michigan on March 29th. It is likely the rule will face court challenges.
Senate to Consider Disaster Bill
The House and Senate are in recess this week. Both return to Washington next week. The Senate, upon its return, will start to consider a disaster bill to provide relief for 2018 hurricanes and wildfires. The House already passed a bill, H.R. 268, in January to provide disaster assistance. The House bill includes $3 billion in ad hoc crop disaster payments structured similar to the 2017 Wildfires, Hurricanes Indemnity Program (WHIP) administered by the Farm Service Agency. WHIP payment recipients are required to buy crop insurance for 2 years for the crop indemnified under WHIP.
The Senate substitute has not yet been released, but it is expected to include a similar amount and program structure as the House passed bill for ad hoc agricultural disaster payments.
Crop Insurance CAT Fee to Increase
The 2018 Agriculture Improvement Act (farm bill) mandated an increase in the CAT fee from $300 to $655 for each crop in a county. Last week RMA issued a Manager’s Bulletin to notify growers when the fee increase will take place. According to the Bulletin beginning with the April 30, 2019, contract change date, the RMA will revise the CAT Endorsement administrative fee to $655 for each crop in the county through a Special Provisions statement for all insurance offers with catastrophic risk protection coverage until the change can be incorporated into the CAT Endorsement. This announcement effectively implements the increase in the CAT fee for the 2020 crop year.
USDA ARS Study Finds Beef Producers Not Major Contributors to Climate Change
A new USDA Agricultural Research Service study finds greenhouse gas emissions from U.S. beef production and inputs are not “significant contributors” to climate change.
The study, which began in 2013, measured the use of fuel, feed, forage, electricity, water, fertilizer and other inputs to raise beef cattle from birth to slaughter in seven major cattle-producing regions over five years.
The goal was to establish a baseline for the beef industry to measure any potential changes to the sector's environmental footprint and improve sustainability. ARS Agricultural Engineer Alan Rotz led the study and used data from 2,270 survey responses and site visits across the nation.
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Trade Negotiations Could Determine Future of Farming for Years
A deal ending the tariff war between the U.S. and China won’t automatically return profitability to U.S. farming operations, but the failure to reach an agreement could spell serious trouble for U.S. agriculture down the road.
That may sound contradictory, but Richard Brock, president of Brock Associates, said that’s the kind of world farmers live in when he spoke at the Saturday Ag Update Meeting for the recent Mid-South Farm and Gin Show in Memphis, Tenn.
What Does the Future Hold?
As USDA and FDA Agree on Oversight, Aggies Rail Against ‘Fake Meat'
In a step that moves a new industry closer to commercial reality, the premier federal food-safety agencies agreed on Thursday on how to jointly regulate cell-based meat, a laboratory-grown protein that farm groups call “fake meat.” The FDA will oversee cell collection and growth, while the USDA will oversee harvesting and processing, and have final say over labeling.
Despite farm groups’ opposition to cell-based meat, the FDA-USDA agreement was welcomed across the board as a wise collaboration that will take advantage of the expertise of both agencies. Ag groups generally cloaked their objections in statements that called for accurate labels and maintaining consumer confidence in the food supply.
What does the Oversight Mean?
‘Creating a Sustainable Food Future’: A Multi-Pronged Approach to 2050
Kids living on farms today have a lot to look forward to as they grow into adulthood, and a whole lot of work cut out for them as well. The World Resources Report “Creating a Sustainable Food Future,” released in December 2018, outlines projections offering both promise and peril for those in all areas of agriculture, be they consumers, producers, processors, or distributors. Produced in partnership with The World Bank and the United Nations, among other agencies, the report addresses a number of ag-related gaps to close before Earth reaches a projected population of 9.8 billion humans in the year 2050.
Agricultural producers might grimace at first blush when reading through materials that , on the surface, promise what appear to be more challenges. But a closer read opens the mind to new markets, new technologies, and billions more customers.
Take a Look into the Future
U.S. Unveils Plant to Allow Sales of HIgher-Ethanol Gasoline
The U.S. Environmental Protection Agency on Tuesday released its proposed rule lifting a summer ban on higher-ethanol blends of gasoline to help farmers, putting the agency on a collision course with Big Oil which has called the move illegal.
The proposal to broaden sales of the so-called E15 rule marks the latest flashpoint in an ongoing battle between the corn and oil industries - two crucial constituencies for President Donald Trump - over America's biofuels policy.
What does the Rule Mean?
Ag Must Adopt to Climate Change
Agriculture will need to change as the climate changes. So says Luke Bozeman, director of North American crop protection for BASF, who adds cropping practices will need to be adapted and technology applied to meet the climate challenges. Bozeman emphasizes that collaboration among crop protection companies will be required.
“One company, like a Bayer, a BASF or a Syngenta, one company, I don’t think can do it all. What we’re going to see is a lot more collaborations to share the costs and the risks of investing in some innovations for future potential changes,” Bozeman said at a forum on climate change and agriculture at the North Carolina Biotechnology Center in Research Triangle Park.
What Must Ag Do?