U.S. farmers are holding their own financially, for the most part, but mainly because U.S. farm programs are expected to provide nearly $25 billion in assistance helping offset the low commodity prices in 2015 and 2016.
That’s the upshot of testimony provided by Agriculture Secretary Tom Vilsack in what may have been his last appearance before the Senate Committee on Agriculture, Nutrition and Forestry before he leaves office in January.
The testimony, delivered during a committee hearing Wednesday (Sept. 21) contradicts recent papers published by groups like the Heritage Foundation that claim farmers are “doing quite well financially” and that programs like Agricultural Risk Coverage and Price Loss Coverage are no longer needed.
Vilsack said the farm safety net is working but the stronger dollar and increased global production leading to lower commodity prices worldwide have resulted in expected large drops in 2015 and 2016 net farm income in the U.S.
“USDA expects real net farm income this year to be the lowest since 2009,” he said. “There has been a slowdown in the rise of land values in most agricultural regions, with some seeing values come down slightly from recent record highs. Demand for farm loans has been increasing, driven in part by the need to cover operating expenses as commodity prices have fallen more quickly than costs.
“While the data suggests that net farm income remains relatively high by historical standards – it is clear financial stress is increasing and that some producers are more exposed to financial risk. In general, those producers with high costs of production, rent a significant portion of their land base, or have increased borrowing to cover operating costs will be most exposed to financial risk as returns decline with commodity prices.”
Vilsack said there’s no doubt current conditions are leading to increased uncertainty and concern in rural America. “But even as falling global commodity prices continue to depress farm income, the current farm safety net that was created during the last farm bill is providing support for producers.”\
In 2015, government farm program payments totaled about $10.8 billion and are expected to increase to nearly $13.8 billion in 2016. In addition the crop insurance program offset more than $6 billion in farm losses in 2015 and is expected to cover more than $9 billion in 2016.
“Last year, USDA enrolled 1.76 million farmers in the new Agriculture Risk Coverage and Price Loss Coverage programs by conducting an unprecedented education campaign,” he said. “ARC and PLC are a part of the farm-safety net, providing assistance only when there are year-to-year crop revenue or commodity price downturns. To date, ARC and PLC have provided $5.3 billion in financial assistance for crop year 2014, to more than 1 million farms.”
While the farm bill has resulted in a strong safety net for producers, the secretary said USDA has also utilized other existing authorities to provide assistance to producers when possible.
Cotton ginning assistance
“Cotton producers are experiencing lower market prices and have indicated that the current safety-net is not providing adequate protection for cotton. We have used the Commodity Credit Corporation’s statutory authority to implement the Cotton Ginning Cost-Share program, which is providing needed assistance to financially stressed cotton producers.”
Through the CGCS program, eligible producers receive a one-time cost share payment to expand and maintain the domestic marketing of cotton, he noted. To date, the program has provided about $325 million to assist cotton producers.
For more on the hearing, visit http://bit.ly/2d61clJ.