The four-year slump in farm income is creating “real potential for a crisis in rural America,” said House Agriculture chairman Michael Conaway at the first House hearing for the 2018 farm bill. “A good farm bill,” he said, “will require resources,” meaning money to offset low commodity prices and unfair subsidies overseas.
Written every few years, the farm bill is broad-spectrum legislation covering farm subsidies, public nutrition, land stewardship, export promotion, overseas food aid, agricultural research and the taxpayer-subsidized crop insurance program. The 2014 law, enacted more than a year behind schedule was projected to cost $100 billion a year, three-fourths of it going to food stamps.
“In the upcoming farm bill, we will measure our requirements first and then determine what kind of a budget we will need to meet those needs,” said Conaway, who cited low commodity prices and “predatory trade practices of foreign countries.” As an example, he pointed to the U.S. complaints that Chinese wheat, corn and rice subsidies in 2015 were a cumulative $100 billion higher than allowed by WTO rules.
The Democratic leader on the committee, Collin Peterson of Minnesota, agreed, “We should write the bill based on what’s needed,” rather than a budget target set elsewhere in Congress. The 2018 farm bill should offer better protection to cotton and dairy producers, he said, and the Conservation Reserve, which pays landowners to idle fragile cropland for 10 years or more, should be expanded to 35 million or 40 million from its current limit of 24 million acres.
Money is expected to be tight for the 2018 farm bill. Farm group leaders have said they expect modifications of the 2014 law, which made crop insurance the largest strand in the farm safety net, rather than sweeping change. Conaway says he wants the new law in place before the current law expires in September 2018. South Dakota Rep. Kristi Noem “said the House Republicans’ goal is to move the bill to the Senate by the end of the year,” said the Mitchell Republic.
Conaway said a series of farm bill hearings will begin on Feb. 28, starting with the conservation subcommittee.
In writing the 2014 farm bill, the Senate and House Agriculture committees were instructed to shave $23 billion off the projected 10-year cost of the bill of $980 billion. The Congressional Budget Office now estimates the law will cost $100 billion less, chiefly because of lower enrollment in the food stamp program. The Environmental Working Group says crop subsidies over the next three years will cost $8 billion more than originally estimated.
Conaway asked a panel of five agricultural economists how the four-year slump in farm income compared to the hard times of the agricultural recession of the mid-1980s. Financial stress is less severe, the economists said, but the situation could deteriorate if interest rates rise higher and faster than expected and if a decline in land values accelerate. Land is 80 percent of farm assets, so a drop in value reduces a farmer’s financial standing.
Economist Joe Outlaw of Texas A&M said crop subsidy payments totaled $13.2 billion during 2015 and 2016, while cash receipts from crops fell by $23.7 billion. “In no way are commodity payments making producers whole,” said Outlaw. “There is a growing need to provide additional funding as adverse economic conditions are expected to continue.”
In the wake of the seven-year agricultural boom that collapsed in 2013, USDA estimates net cash income, a gauge of liquidity based on revenue, at $93.5 billion this year, a modest increase from 2016, but only 69 percent of the record set four years ago. Pat Westhoff, head of a University of Missouri think tank, said net farm income, a measure of solvency that includes the value of crops in storage, over the next several years would be similar to 2005-09, in the early days of the agricultural boom.
To read testimony from five agricultural economists and Conaway’s opening statement or to watch a video of the hearing, click here.