Ag Industry: The Best of Times & The Worst of Times, Part I

Like a Charles Dickens novel U.S. agriculture is currently experiencing a period of the best of times, and the worst of times. The U.S. agriculture industry is in one of its best periods in history. There are multiple components that generate such success and they include: adaptation to technology, meeting the demands of ever-changing and improving global diets, and the productivity and resourcefulness of U.S. producers.

Consider:

  • Net farm income is at a record level and
  • farm debt has declined by half since the 1980s.
  • Overall, U.S. agriculture is supporting 1-in-12 jobs in the United States
  • U.S. consumers provided with 83% of the food we produce.
  • U.S. consumers enjoy the bounty of the safest, highest quality and most affordable food and fiber in the world.
  • U.S. consumers spend about 9% of their income on food as compared to 50% in many emerging global markets.
  • Strong agricultural exports are continuing to contribute to a positive U.S. trade balance.
  • U.S. exported more than $137 billion in agricultural products, a record amount, and the trade surplus was nearly $43 billion.

And the Worst of Times…

It is unfortunate that all this good news surrounding U.S. agricultural exports will be tempered this year with nearly 80% of U.S. agricultural land experiencing the worst drought in half a century. The latest World Agricultural Supply and Demand Estimates (WASDE) report from the US Department of Agriculture indicates lower than expected U.S. export volumes for the major commodities (corn, soybeans).

Fortunately, incomes for row-crop farmers may not be substantially impacted since just over 90% of them maintain crop insurance. While each farmer’s policies vary among commodities and coverage amounts, overall a majority of U.S. row-crop farmers will not suffer an overwhelming financial loss this year. This year the federal government spent about $9 billion to help subsidize crop insurance premiums paid by farmers.

Some news reports are driving fears that the drought will cause substantial food price increases; but it may not be as bad as it is being portrayed. For instance in most cases, the corn in your breakfast cereal amounts to less than 10% of the total product retail price.

Long-term meat prices are a different story. Livestock producers may respond to the drought by liquidating their herds to alleviate rising feed costs which may initially keep meat prices low. However, smaller herds in the future will mean less meat on the market and rising consumer prices.

Since livestock producers do not have similar risk management products available to them as row-crop farmers, the Obama Administration and Congress have begun acting to help livestock producers. Specifically, on August 13, the Administration announced that the federal government would purchase $170 million of pork, lamb, chicken, and catfish for federal food nutrition assistance programs and food banks. The US Department of Agriculture hopes the purchases will help relieve pressures on markets and help balance the nation’s meat supply in line with demand.

USDA has also recently taken extraordinary measures including:

  • Opening Conservation Reserve Program (CRP) to emergency haying and grazing,
  • Lowering the borrower interest rate for emergency loans,
  • Authorizing $16 million in existing funds from its Wildlife Habitat Incentive Program (WHIP) and Environmental Quality Incentives Program (EQIP) to target states experiencing exceptional and extreme drought,
  • Authorizing the transfer of $14 million in unobligated program funds into the Emergency Conservation Program (ECP) to help farmers and ranchers rehabilitate farmland damaged by natural disasters and for carrying out emergency water conservation measures in periods of severe drought,
  • Authorizing haying and grazing of Wetlands Reserve Program (WRP) easement areas in drought-affected areas where haying and grazing is consistent with conservation of wildlife habitat and wetlands,
  • Lowering the reduction in the annual rental payment to producers on CRP acres used for emergency haying or grazing from 25% to 10% in 2012, and
  • Simplifying the Secretarial disaster designation process and reduced the time it takes to designate counties affected by disasters by 40 percent.

Part II of this series will cover what Congress is doing to help agriculture continue their best of times…


Cansler Consulting is a certified lobbying practice that is experienced in the multi-faceted and inter-related industries of Agriculture,  Food and Drug Safety, Rural Healthcare, Transportation & Infrastructure, International Trade and Energy.  Through our congressional and regulatory relationships established for over two decades we can help you influence the policy makers on Capitol Hill and navigate the federal budgeting process. You can contact us at info@canslerconsulting.com or at (202) 220-3150.

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