In a preview of issues for the 2018 farm bill, the leaders of the two largest U.S. farm groups argued against cuts in farm subsidies as the agricultural sector endures years of low commodity prices and income that is a fraction of the record set in 2013 at the end of a seven-year boom. “The last thing the sector would need at this point is some substantial reduction in the level of federal commitment,” said president Zippy Duvall of the 5.9 million-member American Farm Bureau Federation. Arkansas Rep. Rick Crawford, who presided over the first of six House Agriculture subcommittee hearings on the farm economy, gave mixed marks to the 2014 farm law and asked, “Can the existing safety net meet the growing challenges of a prolonged period of depressed prices?”
Roger Johnson, president of the National Farmers Union, joined Crawford in saying the cotton program, revamped due to an adverse WTO ruling, is insufficient and needs reinforcement. The cotton industry has pressed for creation of a $1 billion-a-year cottonseed subsidy.
“The safety net needs to be protected from those entities that would like to see it torn apart,” said Johnson. “There must also be recognition on our part that these programs are not perfect and will need to be modified where necessary for the benefit of producers.”
The insurance-like Agricultural Risk Coverage (ARC) subsidy for grains and soybeans has proven complex for USDA to implement, said Johnson, citing unresolved questions of local yields to be used in calculating payments. The 2014 farm law gave farmers the choice of two crop subsidy programs, ARC and the traditionally styled Price Loss Coverage. “NFU would have liked to see a single program in the form of PLC that contained higher reference prices with crop insurance seving as a backstop,” said Johnson. NFU is a longtime proponent of a robust government role in agriculture.
Farmers are forecast to collect $7.2 billion from ARC and nearly $2 billion from PLC during this year, said USDA chief economist Rob Johansson. “Overall government payments, which are more tied to economic conditions than before, are expected to rise from about $10.6 billion in (calendar year) 2015 to about $13.9 billion in CY 2016, which also includes conservation payments of approximately $3.6 billion.” The $13.9 billion would be the largest pay-out since 2006, when the agricultural boom began, said Bloomberg.
USDA estimates that net farm income, which reflects the net value of production and is a measure of wealth, will stabilize this year after plunging by a combined 54 percent from 2013’s record $123 billion. The debt-to-asset ratio, a widely used indicator of farm sector health, is forecast for a low 13.2 percent this year. “While borrowing is up, the level of bankruptcies and farm loan forfeitures remain at historically low levels,” said Johansson, because farmers and ranchers used the agricultural boom to pay off debts and build up their bank accounts.
“With low commodity prices, high input costs, and no relief in sight, the farm safety net is proving vital to helping our nation’s farmers and ranchers weather growing economic uncertainty,” said Agriculture Committee chairman Michael Conaway.
To read statements submitted by witnesses or to watch a video of the hearing, click here.