Author: Joe Outlaw

Tuesday’s election will bring a significant change to the leadership in Washington D.C., with Republicans taking over leadership of the Senate and former President Trump being re-elected President.  As of late Wednesday evening, it appears Republicans will remain in control of the House of Representatives, albeit with a very small majority.  Leadership elections over the next couple of months will determine if Chairman Thompson (PA) and Ranking Member Scott (GA) will continue to lead the House Committee on Agriculture.  Of the 29 Republican members currently on the committee, only 10 were around to vote on the 2018 Farm Bill (green represents they voted for the 2018 Farm Bill).  Eight of 25 Democrat members were around to vote on the 2018 Farm Bill.  So, only 18 of 54 members of the committee were around to experience the process and vote for the last farm bill.  Most of the current Republican and Democrat members were re-elected on Tuesday with the exceptions of Republican Marc Molinaro (NY) and Democrats Abigail Spanberger (VA) and Elissa Slotkin (MI) who both left to seek other offices. 

There is more experience on the Senate Committee on Agriculture, Nutrition and Forestry as 8 of 12 Democrats and 8 of 11 Republicans were around to work on the 2018 Farm Bill, although Senator Grassley (IA) voted against the bill (indicated in red).  After Tuesday’s election, it is presumed that Senator Boozman (AR) will become Chairman, and the Democrats will select a new ranking member as Chairwoman Stabenow is set to retire at the end of the year. In terms of departures, Senator Braun (IN) is leaving to become the Governor of Indiana, and Senator Brown (OH) was defeated.

What does this mean going forward for the next farm bill?  While the House and Senate differ in terms of experience, there should be plenty of motivated and experienced leaders in both the House and Senate to push the farm bill through whether it be before the end of the year or shortly into next year.  After all, the need for a better safety net is currently being felt across the entire country. 

House Ag Committee

Senate Ag Committee

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Outlaw, Joe, and Bart L. Fischer. “Election Impacts on Current Ag Committee Members.” Southern Ag Today 4(45.4). November 7, 2024. Permalink

One of the most misused and abused numbers in the agricultural policy world is the Net Farm Income (NFI) projection developed by the USDA Economic Research Service.   As described in the news release from USDA announcing the latest (September 5^th) farm income projections, “Net farm income, a broad measure of profits, is forecast at $140.0 billion in calendar year 2024, a decrease of $6.5 billion (4.4 percent) relative to 2023 in nominal (not adjusted for inflation) dollars.”  Figure 1 contains the past 21 years of inflation adjusted net farm income data from the most recent release.  

There is nothing wrong with the net farm income number… it just doesn’t mean what people think it means. Why?  It is widely used in Washington D.C. as a measure of how well farmers and ranchers are doing which indicates whether or not the safety net needs strengthening in cases where NFI is declining – like now.  How does it relate to how well a farmer anywhere in the U.S. is actually doing?   It really doesn’t since it is an estimate of the farm income of all types of agricultural operations in the United States.  To be meaningful to a farmer, the farmer would have to raise all the commodities included, which would be very unlikely.

Figure 2 presents the change in inflation adjusted net cash farm income (NCFI) for the commodity categories provided by USDA.^[1]  Notice while inflation-adjusted NFI in Figure 1 only fell by $10 billion dollars ($150 billion to $140 billion), or 6.7%, from 2023 to 2024, there were significant NCFI declines for crop operations while livestock operations saw increases.

This means that the significant losses in crop agriculture are being masked by the recent boom in profitability of livestock operations.  Don’t tell wheat farmers they should feel good that U.S. NFI at $140 billion is above the 21-year average (red line in Figure 1) in 2024 when wheat operations are forecast to have a 50-percent decline in their NCFI.  That would be a complete misuse of the data.

Figure 1.  U.S. Inflation Adjusted Net Farm Income, 2023 to 2024.

Figure 2.  Percent Change in Inflation Adjusted Net Cash Farm Income by Commodity, 2023 to 2024.

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^[1] NCFI is calculated as gross cash income minus cash expenses. NFI is a broader measure of farm sector profitability that incorporates noncash items including changes in inventories, economic depreciation, and gross imputed rental income.

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Outlaw, Joe, Bart L. Fischer, and Natalie Graff. “USDA Farm Income Projections… Misused and Abused.” Southern Ag Today 4(41.4). October 10, 2024. Permalink

During every farm bill cycle, we get asked to provide updates at county, regional, state-wide, and national meetings in the years leading up to the bill, during bill development, and in instances where it appears progress has stalled – like now.  Sometimes the message is not fun to deliver.  But, it’s the job, and it’s better to give an honest assessment than to sugarcoat the situation and have a producer think things are better than they are and make a bad financial decision because we didn’t want to come off as being too negative.  One of us (the old one) has been referred to by just about everyone in Texas as Dr. Doom for most of his 30plus year career in agricultural policy, and he wouldn’t have it any other way.  Why?  Because of the hundreds of producers that have told us we truly helped them by giving them our honest – and most of the times blunt – assessment of the situation.

A producer recently sent an email with the following questions.  “If Congress doesn’t value what we do enough to provide a meaningful safety net… why should we keep risking hundreds of thousands to millions of dollars per year trying to make a crop?  Should I just quit and do something else?”

When we get these types of questions, it helps us remember that the approximately 300,000 to 350,000 producers in the United States who rely on agriculture for their living need to hear the positives too.  The rest of the article summarizes the positive response to the producer’s questions.

First, while not large in number, there are members in both the House of Representatives and Senate who truly understand how dire the situation is and are absolutely trying to help.  It’s all about money and timing, and in our opinion, if this wasn’t an election year, a new farm bill would be signed into law by now.

Second, we feel strongly that Congress will also see the need and provide financial disaster assistance to help out in the short term since safety net enhancements that will be included in the new farm bill will not trigger payments until October 2026. 

Third, it has taken a while, but all of the key agricultural stakeholders (general farm organizations, commodity groups, lenders, input suppliers, etc.) are working together and in unison, calling for the farm bill to be completed.   It is important that members of Congress hear a consistent message.

And finally, agriculture profitability always has been and will continue to be cyclical.  This means the bad times – just like the good times – don’t last for more than a few years before some unforeseen event (e.g., drought, floods, war, or pandemic) around the world causes it to change.  Things will get better.

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Outlaw, Joe, and Bart L. Fischer. “Staying Positive While We Wait for a Farm Bill.” Southern Ag Today 4(37.4). September 12, 2024. Permalink

Over the past three years, we have written a lot of articles for Southern Ag Today about the need for a new farm bill that increases the support provided by the farm safety net.  While it was important three years ago, it is much more important now.  The steady decline in market prices has continued, with current price projections from USDA below the average cost of production for some crops (Table 1).  Why?  While costs for some inputs have decreased from their 2022 highs… commodity prices have fallen more.  While Marketing Year Average (MYA) prices in Table 1 don’t look very good, current futures prices at harvest look even worse.

Some producers still have their 2023 crop in storage, holding on and not wanting to sell below their cost of production.  The 2024 harvest is not far away.  Using corn as an example, the USDA projected marketing year average price is $4.40/bu for the 2024/25 marketing year which is right around the U.S. average cost of production.  That would mean producers still holding their 2023 crop would be looking at two crops in a row not making any money.  Reports from Federal Reserve banks around farm country indicate loan delinquencies are on the rise.  What does all this mean?

Either we see a farm bill this year or there will be loud calls for financial assistance for farmers.  Recall, in the last presidential election year (2020), record amounts of assistance were provided to agricultural producers due to short-term price declines when the pandemic almost broke the supply chain.  A strong farm bill would be much better than ad hoc assistance, but if Congress can’t come to an agreement… there will be pressure to help producers endure the current financial downturn. And, even if a new farm bill is put in place this Fall, the fact that it is not slated to kick in until the 2025 crop year – with support not arriving until Fall 2026 – will undoubtedly put tremendous pressure on Congress to help bridge the gap. 

Table 1. Historical and Projected Marketing Year Average Prices for Major Commodities.

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Outlaw, Joe, Bart L. Fischer, and Natalie Graff. “If It’s Not Time to Hit the Panic Button… We Are Getting Close.” Southern Ag Today 4(33.4). August 15, 2024. Permalink