Category: Policy

While on the road doing preplant meetings around the country, one of the questions we’ve been asked the most by farmers is: with reduced farm profitability, why haven’t land values declined?  Over the past year, there have been two Southern Ag Today articles that have addressed different parts of this issue.  Kim discussed the trends in Southern farmland values while Loy and Biram addressed the relative profitability of U.S. farms, looking at the disparity between crop prices received and input prices paid.  Table 1 indicates that, while not very often, Southern state cropland values have occasionally decreased (indicated by numbers in parentheses) over the past nine years. 

The question of why land values haven’t reacted to reduced profits requires a multifaceted answer that most farmers don’t like to hear.  The first part of the answer is that land values should follow farm profitability to a degree, but farm profitability isn’t the only factor. Long-term interest rates – or the cost of borrowing money – also matters.  With current interest rates relatively high, there should be downward pressure on farmland prices.

The part of the answer they like the least is also where we tend to get agreement from them: farmers are not the only people trying to buy farmland.  During almost every one of our Agricultural and Food Policy Center (AFPC) representative farm updates, the farm panel members talk about how hard it is to buy land at prices that can realistically be paid back with expected farm profits.  So, who else is buying land?  Nonfarm real estate investors such as publicly traded farmland real estate investment trusts (REITs), insurance companies, and just about anyone who wants to use real estate as an investment are actively investing in farmland across the United States.  The two farmland REITs that people talk about the most are Farmland Partners and Gladstone Land. Both REITs own land in multiple states.

Farmland values and agricultural profitability are related, but in today’s farmland markets, there are many other factors and players that influence the value of U.S. farmland.

Table 1.  Change in Southern State Cropland Values, Annually from 2016 to 2024.

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Outlaw, Joe, and Bart L. Fischer. “Why Haven’t Land Values Reacted to Reduced Farm Profits?” Southern Ag Today 5(7.4). February 13, 2025. Permalink

The current outlook for the major row crops in the U.S. is pretty dismal.  The Agricultural and Food Policy Center (AFPC) at Texas A&M University has been working with farmers across the country since 1983 to develop representative farms in major production regions.  Currently, AFPC maintains the data to analyze 92 crop (64) and livestock (28) operations in 30 states (Figure 1). From the beginning, the representative farms have been utilized to conduct “what if” policy analyses for the House and Senate agricultural committees to help craft agricultural legislation.  Another use of the farms is to provide policymakers with an early warning system or agricultural barometer under current policy conditions.  AFPC has partnered with and uses price projections from the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri to project the financial wellbeing of the representative farms.

In the 42 years that AFPC has been projecting farm financial performance, the most recent crop outlook for the representative farms is the worst in terms of the number of farms in each of the four commodity types (feed grains, cotton, rice and wheat) that are not currently expected to have a positive cash flow over the next 5 years.  What makes this so troublesome is there is not a crop that producers can switch to from their current crops that would generate a positive return.  In other downturns, we would see producers that can grow several types of crops taking market signals and moving to more profitable crops.  Part of developing representative farms is collecting all of the cost information for the farms.  This makes it possible to develop cost of production data for each of the crops being produced on the 64 representative crop farms.  The bottom line is very few of the representative farms appear to have profitable crops on them at prices that are projected by FAPRI for the 2025/26 marketing year – which is very troublesome.  While the economic and natural disaster assistance provided in the recent American Relief Act of 2025 will help in the near term, the need for a significant enhancement to the farm safety net over the next 5 years is imperative… and the sooner the better.

Figure 1.  AFPC Representative Crop and Livestock Farms.

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Outlaw, Joe L., and Bart L. Fischer. “Why the Current Economic Downturn is So Troublesome.” Southern Ag Today 5(5.4). January 30, 2025. Permalink

On Monday, the U.S. Department of Agriculture (USDA) announced that enrollment for the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs will begin next Tuesday (January 21) and run through April 15. Even if you plan to keep the same elections, make sure to reach out to your local Farm Service Agency (FSA) office about signing your annual enrollment contract…preferably well before the deadline.

As you start to think about program election, the Effective Reference Prices for the 2025 crop year can be found in Table 1. The 2025 ARC-County benchmark yields and revenues as of January 6, 2025 can be downloaded here. While adjustments are being made to incorporate the latest data from FSA, the Agricultural & Food Policy Center’s (AFPC) 2025 ARC-CO/PLC Decision Aid will soon be available at https://afpc.tamu.edu. While we are more than a year away from knowing whether either program will trigger for the 2025 crop year, AFPC’s decision tool can be used to explore a variety of potential outcomes, including those based on the latest macroeconomic projections from our sister center, the Food & Agricultural Policy Research Institute (FAPRI) at the University of Missouri. If you have questions about the enrollment decision, don’t hesitate to reach out to us or a member of our team. We are happy to be a resource.

Table 1. Effective Reference Prices (ERPs) for the 2025 Crop Year

Covered Commodity	Units	2025 ERP
Wheat	Bushel	$5.56
Barley	Bushel	$4.95
Oats	Bushel	$2.76
Peanuts	Pound	$0.2675
Corn	Bushel	$4.26
Grain Sorghum	Bushel	$4.51
Soybeans	Bushel	$9.66
Dry Peas	Pound	$0.1163
Lentils	Pound	$0.2297
Canola	Pound	$0.2054
Large Chickpeas	Pound	$0.2477
Small Chickpeas	Pound	$0.2190
Sunflower Seed	Pound	$0.2015
Flaxseed	Bushel	$11.53
Mustard Seed	Pound	$0.2317
Rapeseed	Pound	$0.2015
Safflower	Pound	$0.2275
Crambe	Pound	$0.2100
Sesame Seed	Pound	$0.2317
Seed Cotton	Pound	$0.3670
Rice (long grain)	Pound	$0.1400
Rice (med/short grain)	Pound	$0.1400
Rice (temperate japonica)	Pound	$0.1990

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Fischer, Bart L., and Joe Outlaw. “ARC and PLC Enrollment Starts Next Tuesday.” Southern Ag Today 5(3.4). January 16, 2025. Permalink

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

For months, Southern Ag Today has been documenting growing economic pressure in the countryside, particularly for row-crop producers (see here, here, and here). We have also repeatedly highlighted the need for assistance to help growers shoulder losses in 2024 while preparing for a rather bleak outlook in 2025, particularly with farm bill negotiations having stalled in Congress. Following a weekend of high-stakes negotiations, Congress released its draft supplemental text on Tuesday, proposing $30.78 billion in economic and disaster assistance for the countryside. 

In October, we highlighted the introduction of the Farmer Assistance and Revenue Mitigation Act of 2024 (FARM Act) as introduced by Rep. Trent Kelly (R-MS). Of the $30.78 billion authorized by the supplemental, $10 billion is set aside for economic assistance that hews closely to the structure of the FARM Act. The supplemental did include a few key changes. For example, the payment factor was reduced from 60% (as envisioned in the FARM Act) to 26% to fit within the $10 billion budget for the program. Additionally, the supplemental also imposed minimum payments for economic assistance (based on 8% of the statutory reference price established in the 2018 Farm Bill), which serves to raise the payment rates for several of the smaller-acreage crops along with peanuts and rice. Table 1 includes an estimate of the payment rates for economic assistance. The payments will be based on acres planted to the eligible commodity in 2024 (for harvest, grazing, haying, silage, or other similar purposes) and 50% of the acreage prevented from being planted in 2024. Separate payment limits would apply for economic assistance: $125,000 for persons or entities that derive less than 75% of their income from farming, ranching, or forestry and $250,000 for persons or entities that derive 75% or more of their income from farming, ranching or forestry.

Eligible Commodity	Estimated Payment ($/Acre)
Corn	43.80
Soybeans	30.61
Wheat	31.80
Cotton	84.70
Rice (L/M)*	71.37
Sorghum	41.85
Oats	78.42
Barley*	21.76
Peanuts*	76.30
Dry peas*	16.16
Lentils*	19.32
Chickpeas, large*	24.16
Chickpeas, small*	25.04
Sunflower*	23.38
Rapeseed*	23.23
Canola*	26.76
Safflower*	15.71
Flaxseed*	17.48
Mustard*	11.42
Crambe*	19.37
Sesame*	5.28
*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.

In addition to economic assistance, $20.78 billion will be available for disaster assistance to help cover losses in 2023 and 2024. Out of this amount, $2 billion must be made available for livestock losses; $30 million maybe made available to crop insurance agents to help offset the freeze in administrative and operating expense reimbursements imposed by the Obama Administration; and $3 million must be made available to address concerns with circumvention of trade laws regarding molasses on the northern border. Importantly, there are a number of other items that may be funded from this amount, including block grants for various purposes.  For example, the bill allows for block granted funds to be used for agricultural producers who have suffered losses due to the failure of Mexico to deliver water to the United States in accordance with the 1944 Water Treaty. The provision closely follows Rep. Monica De La Cruz’s (R-TX) bill – the South Texas Agriculture Emergency Assistance Act – which proposed to allocate $280 million in grants to the State of Texas (via the Texas Department of Agriculture) to help offset losses incurred by border producers.

As of the time of publishing, the path forward is not remotely clear. Yesterday afternoon, President Trump and Vice President-Elect J.D. Vance released a statement noting that “Republicans want to support our farmers…” but highlighting that “[t]he only way to do that is with a temporary funding bill WITHOUT DEMOCRAT GIVEAWAYS combined with an increase in the debt ceiling.”  While this is strong support from the incoming Administration, the current Congress and Administration must sign it into law now for assistance to arrive in time to help with the 2025 crop year.

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Fischer, Bart L., and Joe Outlaw. “Congress Poised to Deliver Vital Aid to the Countryside?” Southern Ag Today 4(51.4). December 19, 2024. Permalink