By Jessica Domel
Multimedia Editor
Low commodity prices, a strong dollar and global production are squeezing American farmers and taking a toll on rural economies. Secretary of Agriculture Sonny Perdue shared that update and what the U.S. Department of Agriculture (USDA) hopes to do about it during a hearing with the House Committee on Agriculture Wednesday, May 17.
“Our farm economy is down 50 percent in net income from where it was in 2013 as you all were looking at and contemplating the 2014 Farm Bill,” Perdue said. “We have some people, particularly younger farmers, who have levered up in this situation and the revenue is not supporting their debt structure. They’re in some dire straits.”
The farm bill safety net is working, according to Perdue’s testimony, but many farmers and ranchers say it needs to be updated to meet the needs of the farm economy.
“Over the past three years, a strong dollar, generally weak global economic growth and ample global production have combined to lower trade demand from the United States and to depress many commodity prices,” Perdue’s written testimony said.
According to USDA economists, net farm income this year, accounting for inflation, will be the lowest since 2002.
Farming is a cyclical business, so the good years tend to help farmers stay afloat during bad years. But more farmers and ranchers are increasingly exposed to financial risk, Perdue testified.
“Bank credit is tightening, delinquency rates on both commercial and FSA loans, while still at relatively low levels, have been trending upwards since 2014, and land values are falling in many agricultural regions,” Perdue said. “All are contributing to increased uncertainty and concern in rural America.”
About one-in-five cotton, wheat, poultry and hog farms have a debt-to-asset ratio of more than 40 percent. More than one-in-three young farmers are in a highly leveraged position, according to USDA.
The 2014 Farm Bill is helping many, Perdue said. About 1.8 million farms are enrolled in the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
To date, PLC and ARC have provided more than $5.3 billion in financial assistance for crop year 2014 to one million farms. About $1.7 billion has been paid out for crop year 2015.
In 2016, about $13 billion in farm payments were made. Payments are expected to reach $12.5 billion for this year.
But not all farmers received the assistance they needed. Many dairy farmers paid to participate in the Margin Protection Program for Dairy, but didn’t realize any benefits when they needed them.
Cotton farmers, too, were left out of the farm bill safety net.
“Many cotton producers have found faults in STAX (Stacked Income Protection Plan for Producers of Upland Cotton) and assert it is not as beneficial as the assistance provided to other crops,” Perdue said. “Both the dairy and cotton examples are the types of issues that producers hope will be addressed in the next farm bill.”
The next farm bill could also include ways to make USDA programs work better, Perdue said.
Part of that process is already underway.
Earlier this week, Perdue announced a reorganization at the USDA, which included the creation of an undersecretary for trade and foreign agricultural affairs.
The undersecretary will work with U.S. Trade Representative Robert Lighthizer and Secretary of Commerce Wilbur Ross to increase trade of American goods, including agricultural products, across the globe.
“We’ve got to sell our way out of this supply and demand situation that is depressing prices in the U.S. now, and that’s what we hope to do. We’ve seen some early successes of that, and we’ll continue,” Perdue said.
To further help the farm economy, Perdue said he will continue to work with the president and Congress to ensure farmers and ranchers have access to a legal and stable workforce.