Despite the strong foundation of the farm sector, “it is clear financial stress is increasing and some producers are more exposed to financial risk,” said Agriculture Secretary Tom Vilsack in Senate testimony that balanced concern with falling farm income with a valedictory list of the administration’s eight-year record in agriculture. Vilsack said crop subsidy payments in October will be much larger than the $5.3 billion paid a year ago, and when it comes to helping dairy farmers, “I have spent every dime … that Congress has provided.”
Without going into details, Vilsack told the Senate Agriculture Committee, “I anticipate we will see some changes” in the so-called food-stamp retailer rule. It would require stores to carry a larger stock of healthy foods if they redeem food stamps and would disqualify stores that sell a lot of hot food. Convenience stores say the proposed limit on hot food sales — 15 percent of total food sales; the current limit is 50 percent — would bar tens of thousands of stores. Vilsack was the highest-ranking official to indicate revisions are forthcoming.
Agriculture Committee chairman Pat Roberts said farmers and ranchers are worried by the downturn in commodity prices since 2013, when a seven-year boom collapsed, and forecasts that prices are not likely to improve greatly in the near term. “The downturn in the agricultural economy is taking a toll on [the] pocketbooks and the health of many family operations,” said Roberts, of Kansas.
“We are facing some challenges but I think we’re up to it,” said Vilsack, after pointing to signs of strength in the farm economy. The debt-to-asset ratio, a gauge of financial stress, is a low 12.4 percent. During the agricultural recession of the mid-1980s, it was 22 percent, said Vilsack. Net farm income, a measure of wealth from farm production, is estimated at $71.5 billion this year, the lowest level since 2009 but comparatively high by historical standards.
The farm safety net will help producers, said Vilsack. Farm supports are forecast for $13.8 billion this year, up $2 billion from 2015, and the federally subsidized crop insurance program will pay $9 billion in indemnities this year, up by $3 billion from 2015. The operators under the greatest stress, said Vilsack, are those with high production costs, those who rent most of their cropland and those who have borrowed money to cover operating costs.
Roberts and several other Republicans on the committee said the agricultural downturn was compounded by federal over-regulation, much of it from EPA rather than Vilsack’s shop. Dairy-state senators from both parties said the insurance-like Margin Protection Program created by the 2014 farm law failed to shelter milk producers from low prices. “I hear from them every day,” said Sen. Pat Leahy, Vermont Democrat.
Many dairy farmers opted for low levels of protection under MPP, which makes payments when the gap narrows between dairy prices and feed costs. Vilsack said MPP payments would be much larger if farmers purchased higher coverage.
“They thought it was a waste of money,” responded Sen. Kirsten Gillibrand, a New York Democrat. She said MPP would be more useful if it looked at regional feed costs rather than a U.S. average.
“I can’t do that on my own,” said Vilsack, because Congress would have to alter the 2014 law. Changes to MPP would be an appropriate topic for the 2018 farm bill, he said, along with complaints from cotton growers about their support program.
“Yes, there will be another farm bill,” said Roberts, sparking some ironic chuckles as he closed the two-hour hearing. Congress was more than two years late in enacting the 2014 law. The drawn-out process included the first-ever House defeat of a farm bill as Tea Party Republicans sought the largest cuts in food stamps in a generation. The turmoil led to suggestions that the urban-rural coalition behind farm bills was no longer relevant. Conservatives want to split the the farm bill in two in hopes of dramatically reshaping food stamps and farm supports.
To watch a video of the hearing or to read Vilsack’s 17-page statement, click here. Roberts’ opening statement is available here.