Congress is two years away from drafting the new farm bill but Roger Johnson already can name the leading question for farm policy. “The big issue in the next farm bill will be, is the safety net really working for farmers?” Johnson, the president of the National Farmers Union, told Ag Insider. “We have a lot of folks who are beginning to struggle financially.”
The USDA estimates of farm income — a gauge of farmers’ wealth and solvency — have fallen precipitously at the same time the farm program was remodeled along the lines of crop insurance.
“No matter what happens politically,” said Johnson, referring to the Nov. 8 presidential and congressional elections, “that issue will dominate” farm-bill discussions.
When the 2014 farm bill took effect, growers were given a one-time choice of insurance-like revenue protections or traditional subsidies. Many corn and soybean growers chose the revenue plan because payments were expected to be larger for the first couple of years. In a period of sustained low prices, which seems likely now, the traditional subsidies would generate larger payments in the final years of the 2014 law. Cotton growers say their subsidy program, a combination of revenue insurance and a support price, is a failure.
Just ahead of the planting season, the USDA said this year’s corn, soybean and wheat crops would fetch the lowest season-average prices in a decade. Following bumper harvests in 2013, 2014 and 2015, the United States has huge crop stockpiles. Insurance-like farm supports “don’t work very well” during periods of low prices, Johnson said. The revenue guarantees, based on crop prices in recent years, diminish over two or three years’ time.
While farm income is down, other measurements of the financial strength of the sector are encouraging. The debt-to-asset ratio is comparatively low, for example. After plunging 54 percent in two years, the drop in net farm income is forecast by the USDA to bottom out this year with a decline of 3 percent.
House Agriculture chairman Michael Conaway announced a series of six subcommittee hearings on “the downturn in the farm economy,” beginning on Thursday with one on “growing farm financial pressure.”
“With no relief in sight, it is more important now than ever that we protect the farm bill and push back against attacks on the risk management tools that are so vital in protecting our farms and ranches,” said Conaway. “I am increasingly concerned about the direction the farm economy is headed.” By risk-management tools, Conaway meant federally subsidized crop insurance, now the largest part of the farm safety net.
A committee spokeswoman was not immediately available to say what steps, if any, Conaway plans after the hearings.