Category: Policy

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

As we have noted over the past few months (see here and here), there is growing pressure to complete a farm bill in advance of the 2025 crop year and to provide economic assistance for 2024 losses given the low levels of support being provided by the current farm bill extension.  Hurricanes Helene and Milton have also resulted in renewed calls for natural disaster assistance for the 2023 and 2024 crop years.

While work continues behind the scenes on the farm bill – with no clear indication of the path forward – economic assistance for 2024 losses is starting to take shape. Most of the chatter concerns the significant collapse in commodity prices over the past two years coupled with costs of production that have continued to remain high. That cost-price squeeze has resulted in the largest 2-year decline in crop cash receipts in history (here).

Rep. Trent Kelly (R-MS) has introduced the Farmer Assistance and Revenue Mitigation Act of 2024 (The FARM Act) which would provide emergency assistance to producers of eligible commodities for which the expected revenue in crop year 2024 is below the projected per-acre cost of production.  Acres planted or prevented from being planted in 2024 to the following crops would be eligible for assistance: barley, corn, cotton, dry peas, grain sorghum, lentils, large chickpeas, oats, peanuts, rice, small chickpeas, soybeans, other oilseeds, and wheat. FARM Act payments are calculated as follows:

FARM Act Payment = (Projected Cost – Projected Returns) x Eligible Acres x 60% where:

• Projected Cost is the per-acre cost published by USDA’s Economic Research Service for corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley and otherwise as determined by the Secretary in a similar manner.

• Projected Returns for corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley are determined by multiplying the projected 2024 marketing year average price published in the WASDE by the 10-year national average yield for the eligible commodity and otherwise as determined by the Secretary.

• Eligible Acres consist of 100% of the acres planted to an eligible commodity plus 50% of the acres prevented from being planted to an eligible commodity in crop year 2024, as reported to FSA by the producer.

Existing provisions relative to attribution of payments, actively engaged in farming, and other regulations apply. With respect to payment limitations, persons or entities that derive less than 75% of their income from farming, ranching, or forestry are subject to an overall limitation of $175,000. Persons or entities that derive 75% or more of their income from farming, ranching, or forestry are subject to an overall limitation of $350,000 in assistance.

Table 1 provides an estimate of the per-acre payments under the FARM Act. In this analysis, we use estimates from the October 2024 WASDE for the marketing year average price along with harvested acre yields from NASS. Most importantly, these are merely estimates and are subject to change.  For example, Congress may choose to reduce the payment factor, or they may choose to go a different direction altogether. Regardless, proposals are starting to take shape, and the levels of support being discussed would provide a meaningful amount of assistance to help offset losses in 2024.

Table 1. Estimated Per-Acre Payments for Select Commodities under the FARM Act.

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Fischer, Bart L., and Joe Outlaw. “Economic Assistance for the 2024 Crop Year Starting to Take Shape.” Southern Ag Today 4(43.4). October 24, 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

Over the last two weeks, row crop producers descended on the nation’s capital, lobbying for passage of a new farm bill and highlighting the need for ad hoc disaster assistance. If you do not personally live with the constant barrage of challenges facing our nation’s farmers and ranchers – ranging from droughts, wildfires, and hurricanes to inflation and market collapses – it’s easy to grow numb to their plight. Besides, aren’t farmers and ranchers always on Capitol Hill asking for assistance?

We understand the cynicism, but most people do not realize that this is a direct consequence of the way farm bills are negotiated.  While many federal programs are on autopilot (e.g., Social Security, Medicare, Medicaid, etc) – where we don’t think about them until someone tries to change something – farm bills are negotiated roughly every 5 years on the premise that they need to be responsive to the needs of producers. Unfortunately, rather than responding to the needs of our nation’s farmers and ranchers, farm bills now get caught up in annual spending fights with growers constantly having to defend the farm safety net from attacks. On top of that, the short-term nature of the farm bill leaves producers in a regular state of limbo about what the safety net will cover. For example, producers are planning for the 2025 crop year, but they still have no clue what the safety net will look like for the upcoming crop year (nor do they know if any assistance will be provided to help with 2023 and 2024 losses). If that were not enough, these dynamics have culminated in a situation where “direct government payments” to producers in 2024 are forecasted to hit a 42-year low. The last time we saw so little investment in direct producer support was in 1982 in the midst of the farm crisis of the 1980s.  So, while it’s easy to joke that farmers and ranchers are always asking policymakers for something, the system is designed to work that way.  Whether or not that approach makes sense is open for debate, but we will save that conversation for another day. 

In the meantime, between a stagnating farm bill process, a farm bill extension that is slated to provide virtually no help in 2024, and no ad hoc support from Congress over the last two years, an outside observer might quickly conclude that things must be going extraordinarily well in the farm economy.  To the contrary, USDA’s latest net farm income estimate showed a $35 billion decrease in crop cash receipts in 2024 alone, the largest single-year drop in the last 50 years (and the largest 2-year drop in history).  2025 is on track to be considerably worse. 

As we noted above, farm bills are on a 5-year cycle because they are supposed to be responsive to the needs of farmers and ranchers.  But, support levels are at 42-year lows and growers are facing the prospect of enormous losses.  Congress passed a continuing resolution yesterday to extend current government funding levels through December 20^th and promptly left town for the final stretch of the campaign season.  When they return on November 12^th, they will face a very short runway to wrap up farm bill negotiations and provide ad hoc disaster assistance.  If Congress decides not to act – and absent a major rebound in the agricultural markets – many of our nation’s producers will enter the New Year in arguably some of the most challenging financial circumstances they’ve faced in decades.

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Fischer, Bart L., and Joe Outlaw. “The Losses are Mounting…and are Projected to get Worse.” Southern Ag Today 4(39.4). September 26, 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