Many farmers will “face tight bottom lines, even negative returns in some cases,” during 2018, said Agriculture Secretary Sonny Perdue in describing the state of the rural economy as fragile. “We project continuing low commodity prices and trade challenges in the face of large global supplies and a relatively strong dollar in the coming year.”
The USDA is scheduled to release on Wednesday its first forecast of farm income for this year. Perdue’s comments, along with recent USDA projections of lackluster commodity prices and large U.S. crops, point to another year of stress. Farm income stabilized in 2017 after a three-year plunge. Net cash farm income, a measure of liquidity, was the lowest since 2010. Production costs remain high and margins are low. University of Illinois economist Gary Schnitkey says many farmers will need above-average yields just to break even this year. The USDA expects global production to expand, meaning abundant stocks and pressure on prices this year.
Producers are adjusting to the regimen of comparatively low market prices by trimming expenses and borrowing money so they can pay bills while waiting for crop or livestock revenue. “While conditions are testing the resilience of the American farmer, the Trump administration and USDA are focused on creating economic conditions where they can prosper,” said Perdue in a seven-page statement. He cited tax and regulatory reform and ongoing trade negotiations.
“I am more hopeful than I have been” about success in negotiations for a new NAFTA, said Perdue. Talks are likely to recess to allow campaigning around the July 1 presidential election in Mexico, he said, and wrap up in the second half of the year. “I think we’ll have a deal by the end of the year.”
A key issue at NAFTA is U.S. insistence that Canada phase out its supply management system for dairy, poultry and eggs. Canada calls the proposal a non-starter. U.S. farm groups are wary of the possibility of a disruption in duty-free trade with Canada and Mexico, which account for one-third of U.S. food and ag trade. “They’re very nervous,” said Rep Don Bacon, Nebraska Republican, in describing the mood of farmers in his district.
Perdue encouraged lawmakers to use the farm bill to “re-balance” the Food Safety Modernization Act, which requires operators throughout the food chain to look for ways to prevent food contamination. “I think we probably over-pegged the meter” with the law, he said. “It’s going to be a huge regulatory concern” at the farm level with FDA in the lead role. “Their (farmers’) concern is, ‘We are going to be regulated out of business with a clipboard’…We would love for USDA to have more influence on safe production of food.”
Perdue declined during a session with reporters to say if the White House will seek big cuts at USDA, as it did last year, when it unveils its budget proposals for fiscal 2019 next week. “We’re going to be trying to move forward in a fiscally responsible way,” he said.
The Hagstrom Report cited the deputy agriculture secretary, Steve Censky, as saying recently that last year’s package was an indicator of what to expect this year. That package included a 36 percent cut in crop insurance. A month ago, the president told the largest U.S. farm group that he supports a farm bill “that delivers for all of you and I support a bill that includes crop insurance.”
To watch a video of the House Agriculture Committee hearing or to read testimony by Perdue and the opening statement of chairman Michael Conaway, click here.