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Farmers, be ready to justify government aid

Dollar Signs on Green Lawn
More strings could be coming on government assistance if farmers expect to see more money from the government.

This year farmers saw high levels of net farm income, second only to the record set in 2013. However, when $446 billion of the $120 billion coming from direct federal support, it sets the table for an important discussion of how much is too much government support headed to farmers.

Nick Paulson, University of Illinois assistant professor and ag economist, says it may be time for the agricultural sector to “rethink their ask” on what groups request from Congress in formalizing programs that provide that necessary support and safety net for the farming sector. “It’s time for those in the agriculture industry to justify the support we receive,” he adds.

In the past, the ag industry justified support by continuing to provide an abundant, cheap food supply. “I think moving forward we can be more proactive in bringing other aspects to the table: climate-related, conservation or sustainability-related or other things we haven’t been thinking about,” Paulson says.

With the anticipated move by the incoming President-elect Joe Biden administration, those in the ag sector prefer a climate policy that offers a carrot-based incentive approach rather than a stick-based regulatory approach that could negatively impact agriculture.

Joe Janzen, another ag economist at the University of Illinois, adds that whatever form future farm support takes, “it will likely have more strings attached to it.”

Farmers will have to decide whether they’re willing to follow those conditions. “My guess, you’ll tend to see the spread of benefits of conservation-based programs across the country,” Janzen says. “Some farmers are willing to meet those conditions.” Others may choose that isn’t worth it for them.

And while the farm programs in recent farm bills offered support for traditional row crops, Janzen expects if future policy targets more conservation objectives rather than targeted sectors, it will spread out assistance more broadly.

Congress has typically held the purse strings on who gets what for farm aid, but the ad hoc assistance offered under the Market Facilitation Program and the Coronavirus Food Assistance Program gave USDA authority to choose how and who needed the assistance. Assuming the COVID relief package gets signed by President Trump, Congress – not the ag secretary - made some very specific stipulations on who gets the money, with $5 billion for crop producers and $225 million for specialty crops, and $3 billion for livestock producers.

In a recent AgTalk call featuring agricultural producers, Chris Hoffman, a first-generation hog farmer from Pennsylvania, says he expects more aid will be needed in 2021. “I really believe that it’s going to probably be needed as we roll into the first quarter or second quarter of next year,” he says.

Most farmers say they want to drive profits from the marketplace, and Kevin Ross, a  cattle, corn and soybean producer from southwest Iowa near Council Bluffs and former president of the National Corn Growers Association, says the same goes for him. Corn and soybean prices were stronger this fall than even in 2019, so Ross isn’t expecting a big boost from ag subsidies in 2021 as in recent years.

The MFP payments were a recognition of some of the trade issues and the CFAP with the downturn created from the COVID pandemic. He’s not ready to take a stance on future government aid, but adds, “Hopefully we can move forward with good markets we’re seeing right now in the grains and actually see some black ink without having to have this discussion with the federal government. That’s definitely not where I want to make money out here.”

The recent surge in ad hoc assistance could set the table for future changes in farm policy. Janzen says going into any future discussion on farm program changes, ad hoc programs may have identified where more support was needed.

While speaking in early December at the National Grain and Feed Association’s County Elevator Conference, Secretary of Agriculture Sonny Perdue says the many natural disasters “cracked the egg on ad hoc assistance” but crop insurance needs to be that safety net for producers.

With commodity prices strengthening, Perdue says he hopes now is a good time to “wean ourselves off” these ad hoc programs. “I don’t think there’s an honest farmer who wouldn’t prefer a good crop at a fair price rather than a government check. Although we’re all vulnerable if we get the check in the mail, that we’d love for it to keep coming." he adds.

 

TAGS: Farm Bill USDA
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