Category: Policy

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

The Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs are vital components of the farm safety net for many producers, helping them manage the considerable risks they face. Eligible commodities for these programs include wheat, corn, sorghum, barley, oats, seed cotton, long- and medium-grain rice, certain pulses, soybeans/other oilseeds, and peanuts. Given the importance of these programs, we are often asked why the payments are made so late, generally well over a year after harvest. This article illustrates the timeline for the ARC and PLC programs, explains the reasons behind the one-year delay in payments, and examines the impact on current farm bill discussions.

Typically, prior to planting a crop, producers must make a decision (i.e., an election) between ARC and PLC on a crop-by-crop and farm-by-farm basis. They generally have until March 15 to notify USDA’s Farm Service Agency (FSA) of their election decision and to enroll in an annual ARC/PLC contract for the covered commodities for which they have base acres. Because ARC and PLC are decoupled from production, a producer’s individual production, harvesting, and marketing decisions have no bearing on ARC and PLC payments. In fact, the marketing year is standardized and does not depend on when a farmer harvests their crops on individual farms. Instead, it is based on a fixed start date specific to each commodity, which generally aligns with the typical harvest period for that crop and lasts for 12 months from this standardized start date. For example, the marketing year for cotton and peanuts starts on August 1^st and lasts until the following July 31^st. The national average price over this “marketing year” is then used to calculate any required ARC or PLC payments. Farmers can then expect the processing of ARC and PLC payments to occur after October 1 following the end of the marketing year, in accordance with the farm bill. 

Figure 1 illustrates the timeline of the ARC and PLC programs using cotton and peanuts as examples. For the 2024 crop year, producers signed up for ARC/PLC and planted the crop this past spring. The marketing year started on August 1, 2024. Some producers (e.g., South Texas) have already harvested, and the remainder will be harvested this fall. The marketing year will continue into next year, concluding on July 31, 2025. USDA will then calculate marketing year average prices and county yields, and they will make any ARC/PLC payments after October 1, 2025. In other words, more than 18 months will have transpired between the time a producer enrolled in ARC/PLC and the time when assistance was eventually paid.

Interestingly, it hasn’t always been this way. Using the Counter-Cyclical Payments (CCP) program – the predecessor to PLC – from the 2002 Farm Bill as an illustration: the 2002 Farm Bill required USDA to make payments “as soon as practicable after the end of the 12-month marketing year for the covered commodity.” To help lessen the impact of the lagged payment timing, if the Secretary estimated that a CCP payment would be required, the 2002 Farm Bill required the Secretary to “give producers on a farm the option to receive partial payments of the [CCP] projected to be made for that crop of the covered commodity.” This all changed in the 2008 Farm Bill. The 2008 Farm Bill required any CCP payments to be made “beginning October 1, or as soon as practicable thereafter, after the end of the marketing year for the covered commodity.” In other words, payments were further delayed – until after October 1 following the end of the marketing year – and no partial/advance payments were allowed. The payment timing introduced in the 2008 Farm Bill was maintained with the creation of ARC and PLC in the 2014 Farm Bill, and it is still in place today. This all naturally leads to the question: why? 

First, both ARC and PLC use the marketing year average price to determine if assistance is warranted. That necessarily means waiting until the end of the marketing year before final ARC and PLC payments can be made. While some attempts have been made to reduce the wait time – such as utilizing prices based on the first few months of the marketing year – those haven’t taken hold. Regardless, that doesn’t explain the further delay introduced in 2008. When the drafters of the 2008 Farm Bill delayed payments until after October 1, they effectively pushed payments into a subsequent fiscal year, as the federal fiscal year starts on October 1 each year. In so doing, this “timing shift” resulted in one less year of assistance that had to be funded by the 2008 Farm Bill, freeing up those resources to be used on other priorities. The problem: reversing this would result in another fiscal year of ARC/PLC assistance having to be provided by the existing farm bill budget. While complicated, it is simply a matter of policymakers deciding if it is better to use scarce resources to (1) accelerate the timing of payments or (2) make programmatic improvements like increasing reference prices. Over the last two farm bill cycles, policymakers have opted for leaving the timing alone and making programmatic improvements instead.

The more acute concern is this: even if Congress passes a new farm bill this fall (in time for the 2025 crop year), under current ARC and PLC payment timelines, producers will not see any assistance until after October 1, 2026 (the first month of fiscal year 2027). Given growing concerns about the state of the farm economy, even with a new farm bill in place, there undoubtedly will be tremendous pressure on Congress to provide ad hoc assistance for the 2024 crop year this fall, as was highlighted in a recent Southern Ag Today article, to help fill in the gap.

Figure 1. Two-Year Timeline for Key Dates of ARC and PLC Payments Using Cotton and Peanuts as an Example

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Li, Yangxuan, Bart L. Fischer, and John Lai. “Timeline of the ARC and PLC Programs: Why Are Payments Received a Year Later?” Southern Ag Today 4(35.4). August 29, 2024. Permalink

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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

The U.S. House of Representatives departed Washington, DC, for the August recess last week, and the Senate is currently wrapping up its business. When Congress returns in September, most of the legislative agenda prior to the Presidential election will be focused on funding the government past September 30, 2024. This naturally raises the question: will we see a new farm bill this year?

We can look to the past 10 farm bills (over the course of the last 50 years) for guidance. As noted in Table 1, only 2 of the last 10 farm bills were enacted during presidential election years (1996 and 2008 Farm Bills), and both of those were signed into law before Congress left town for the August recess. The remaining 8 farm bills were enacted in the Congress following the Presidential election, with 2 of those (1990 and 2018 Farm Bills) coming in the lame duck session following the midterm elections.

Table 1. Enactment of the Past 10 Farm Bills

Enacted during a…	Farm Bill (Month Enacted)
Year Following Presidential Election:	1996 Farm Bill (April) 2008 Farm Bill (June)
Year Following Presidential Election:	1973 Farm Bill (August) 1977 Farm Bill (September) 1981 Farm Bill (December) 1985 Farm Bill (December)
Midterm Election Year:	1990 Farm Bill (November*) 2002 Farm Bill (May) 2014 Farm Bill (February) 2018 Farm Bill (December*)
Year Following Midterm Election:	None

While history does not bode well for wrapping up a farm bill this year (i.e., none of the last 10 farm bills were completed immediately prior to or following a presidential election), it’s not out of the realm of possibility. So, what would it take to get it wrapped up? Following are the key issues holding up completion: 

• Improving the farm safety net. As we’ve said for the last two years – and there seems to be growing agreement on this point – there is no point in doing a farm bill absent improvements to the farm safety net, namely improving the Reference Prices in the Price Loss Coverage (PLC) program and the loss thresholds in the Agriculture Risk Coverage (ARC) program. With that said, there is still disagreement on the extent of the improvements and how to pay for them.

• Commodity Credit Corporation (CCC). Discretionary use of the CCC has long been a sticking point for lawmakers, but that concern has grown dramatically over the course of the last two Administrations, where the CCC has been used to deliver tens of billions in aid to agricultural producers and, more recently, climate-smart programming. Many in Congress would like to restrict the Secretary’s use of the CCC, returning decisions about funding to Congress. Doing so would save money that could be used to offset improvements to the farm safety net. While we discussed CCC funding in detail last Fall, the Congressional Budget Office (CBO) will officially weigh in on this topic tomorrow when they release the cost estimate for the House Agriculture Committee-passed farm bill. 

• Inflation Reduction Act (IRA). While there seems to be growing consensus over bringing the IRA conservation funding inside of the farm bill, there are ongoing disagreements about whether that funding should continue to be restricted to climate-smart practices. Some lawmakers would like to put those decisions – like most other conservation decisions – in the hands of local decisionmakers.

• Thrifty Food Plan (TFP). There is still considerable frustration among most Republican lawmakers over the Biden Administration’s roughly $250 billion unilateral increase to the Supplemental Nutrition Assistance Program (SNAP) via adjustments to the TFP in 2021. Similar to the discussion on the CCC, many lawmakers would like to return decisions about future increases in SNAP spending to Congress.

While there are certainly disagreements, in our view, the list above is by no means insurmountable. While there is very little legislative runway prior to the election, we do think it’s possible to wrap up the farm bill during the lame duck session, perhaps as part of a supplemental. Why?

A recent hearing before the House Agriculture Committee highlighted the mounting concerns about financial conditions in the countryside. With sustained high input costs and prices that continue to collapse, growers are facing a precarious situation as they plan for the 2025 crop year. That dynamic – coupled with natural disasters like the wildfires in the Texas panhandle – are triggering alarm bells and resulting in calls for additional disaster assistance.

Congress has a lot on its plate going into a new Congress. For example, the debt limit – which dominated much of the conversation in the first half of the current Congress – is currently suspended through January 1, 2025. In addition, several major provisions from the Tax Cuts and Jobs Act of 2017 – including several that are important to the agricultural community – are set to expire at the end of next year. Rather than punting the farm bill into the new Congress and relying on another year of disaster assistance, Congress could choose to reauthorize the farm bill in the lame duck session – improving the farm safety net and side-stepping the need for disaster assistance – all the while keeping the farm bill out of what will already be a very crowded legislative calendar in 2025.

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Fischer, Bart L., and Joe Outlaw. “Will We See a New Farm Bill This Year?” Southern Ag Today 4(31.4). August 1, 2024. Permalink