Author: Joe Outlaw

The final days of 2024 brought great news and some certainty for our cash-strapped farmers from our nation’s capital.  Disaster and economic losses were included in the continuing resolution that was passed by Congress and signed into law on December 21^st by President Biden. H.R. 10545 (the American Relief Act) extended federal spending and averted a government shutdown through March 14, 2025. It also provided farmers additional certainty by extending the provisions of the 2018 Farm Bill through September 30, 2025.  The bipartisan CR passed the U.S. House and Senate by votes of 366-34 and 85-11 respectively.  With all of this said, we had hoped and expected Congress would act to provide assistance to agricultural producers, and they delivered. Well done and thank you!

The “now what?” is…how will the assistance be implemented?  Since the bill passed, lenders from across the U.S. have been emailing and calling asking how much of the projected economic assistance payments should they realistically be including in producer loan packages. Of the $30.78 billion authorized by the supplemental, $10 billion is set aside for economic assistance with the rest targeted toward physical disaster losses. Congress provided detailed instructions on how the economic assistance should be distributed by USDA.  The final bill was largely the same as we described in a previous Southern Ag Today article.  As indicated in the footnote below the individual commodity payment rates in the previous article, “Commodities estimated to receive minimum payment, either through formula with complete data or based on assumption due to lack of publicly available data, final payment rates may vary”.  

This means that you and your banker probably shouldn’t include the listed payment rates multiplied by your crop acres in your loan as economic disaster loss payments. There is a finite amount of money to be shared among producers of the 21 covered crops, and if USDA’s estimates on the minor crops end up being significantly different, even though the acreages are not large it could lead to somewhat lower payment rates across the board.

In our opinion, based on years of watching programs get implemented by USDA, we would suggest that 85 percent of those rates should be the lowest amount lenders should use.  We can’t imagine payment rates being adjusted more than that. Further, the act called for the economic aid to be distributed no later than 90 days following enactment (or March 21, 2024), so the payment rates should be known before many (though certainly not all) producers start planting.

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Outlaw, Joe, and Bart L. Fischer. “Good News for U.S. Producers… Now What?” Southern Ag Today 5(1.4). January 2, 2025. Permalink

Recent articles in Southern Ag Today have detailed the financial stress that Southern crop producers are having to endure, although the problems are not unique to the South.  In economics, we talk about the “cost price squeeze” that is created by declining commodity prices and high input costs.  Our work at the Agricultural and Food Policy Center (AFPC) at Texas A&M University – with roughly 575 individual producers from across the country that work with us on 90-plus crop, livestock, and dairy representative farms – has given us a good feel for the relative costs of production and profitability across the country.  Those 575 producers are some of the very best from all regions and commodity types.  They also know that working with us provides them a voice in the policy world they would not otherwise have.  Because of this, I often get calls and emails letting me know when pressure is mounting.  In the last three months, there has been a steady stream of calls and emails saying that this is the worst year they have ever had and getting financing for next year has been incredibly difficult.

I have heard from some that if it wasn’t for their lender including an estimated payment from the FARM Act, they would not have been refinanced…which is troublesome to say the least.  Why?  Neither the FARM Act nor any other disaster/economic aid has been moved forward by Congress.  Others have commented that they are having to sell land to pay off carryover debt to get their 2025 financing.  All are saying that without pledging their land as collateral, operating loans for next year would not be happening.  Some might say this is business as usual but consider this: the 2025 crop year is projected to be worse than 2024 by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, USDA, and our own recent projections for our representative farms. 

Without getting into doomsday scenarios, I just ask the reader to consider the question that I keep getting asked: why should we continue to risk our financial health and continue to see our net worth evaporate when Congress can’t get their act together enough to pass much needed disaster/economic assistance that will help in the short-term or a new farm bill for the longer term?  My answer to that question is one of hope more than fact, but I am very hopeful that Congress will act decisively and soon.

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