Monday, February 20, 2017

As farm economy struggles, economists urge stronger federal safety net in next Farm Bill

Economists from the U.S. Department of Agriculture, the Federal Reserve Bank of Kansas City, Texas A&M University and the University of Missouri painted a dim picture for the farm economy and called for "safety-net changes" as lawmakers start the process of creating a new Farm Bill, Chris Clayton reports for DTN/The Progressive Farmer. The economists told the House Agriculture Committee that "farm finances look to dip in 2017 for the fourth consecutive year." Though its not as bad as the 1980s, farmers are struggling, Clayton writes.

"The House and Senate agriculture committees are both ramping up hearings with the goal of getting a farm bill done by the Oct. 1, 2018. The Senate Agriculture Committee will hold a field hearing next week in Manhattan, Kan.," Clayton writes. "In Washington, House Agriculture Committee leaders opened Wednesday's hearing by pointing out that the farm economy has slipped since the last farm bill was drafted. The 2014 Farm Bill also so far is projected to cost $100 billion less than initially scored, mainly due to fewer people enrolled in nutrition programs."

House Chairman Mike Conaway, R-Texas, told Clayton that the cost savings should push lawmakers to go beyond the target budget and start looking at the needs of rural America. "Because we were asked during the last Farm Bill -- when times were good -- to cut twice before measuring once, in the upcoming Farm Bill debate we will measure our requirements first and then determine what kind of a budget we will need to meet these needs," Conaway told Clayton.

"Joe Outlaw, an economist at the Agricultural and Food Policy Center at Texas A&M, broke down data on 100 "representative" crop and livestock farms in 29 states that he and others track the farms' cash flow and ability to maintain net worth or equity. An overwhelming majority of the crop farmers tracked by the food policy center are likely to face serious cash flow problems in 2017, barring a strong price rebound. Still, those grain farmers weren't as likely as other farmers to see large equity losses," Clayton writes.

According to Outlaw, crop insurance and commodity programs are helping farmers stay in business. "The safety net has largely worked with the exception of cotton farmers. Still, Outlaw said farm programs will probably need to be increased. He noted that farm income has fallen $23.7 billion since the last Farm Bill was passed while commodity program payments have been $13.2 billion, or a little more than half of the loss in crop receipts. Thus, in no way are commodity payments making farmer whole, he said."

Despite critics, Outlaw told Clayton that farmers are going to need more support if current market conditions continue: "Not only are programs not too lucrative, but there is a growing need to provide additional funding as adverse economic conditions are expected to continue." (Read more)

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