Lawmakers Concerned About Ag Funding

OMAHA (DTN) -- When Congress conducts a postmortem of agriculture's performance during the COVID-19 economic shutdown, chances are some segments of the industry could see structural changes, and the farm bill's role in preparing for major challenges could be altered.

Disruptions in the food-supply chain back in the spring as meatpacking plants closed from virus outbreaks exposed weak spots in food processing. The disruptions put a spotlight on how the federal government comes to the rescue when farmers and ranchers sustain big losses.

Rep. Collin Peterson, D-Minn., said during the virtual Agri-Pulse Ag and Food Policy Summit on Monday, Sept. 21, that ag aid provided by the Trump administration has essentially changed direction on the philosophy of government assistance to agriculture.

"I am concerned about the potential backlash on all the money spent the last couple of years," he said. "I spent 20 years of my life trying to get government out of this business. It feels like we're kind of back to where we used to be. We don't have any money. None of this is adding to our baseline. It's pretty clear these plants are not going to be able to run at the level they were. We're probably going to have higher prices. We need plants and farmers to be profitable."

Peterson said Congress will have to explore ways to help the meatpacking industry expand its plant footprint to reduce the likelihood of livestock processing backups from shutdowns. During the COVID-19 shutdown, many of the plants were larger operations.

At the top of his list is the difficulties in the hog industry. Plants were shutting down and farmers were forced to depopulate. Peterson said federal efforts should also focus on helping farmers that were hurt in the pandemic to reopen their operations.

"We need to figure out a way to develop competition," he said. "We need more packing plants and spread out geographically. Those folks need help and they need it now. It is kind of a crisis. I've told the hog industry they are too efficient. There was no room for any kind of glitch. I get the sense this all has to be addressed."

FOOD SELF-RELIANCE

Rep. Mike Conaway, R-Texas, said Congress should examine the current system of manufacturing logistics when it comes to hog and other livestock processing.

"We need to re-examine the just-in-time delivery system," Conaway said. "I think the capacity is there. It is dominated by large facilities. I think there will be a movement to allow smaller processors to get into the system.

"We don't want to create an impression of a food security issue with trading partners around the world. They are always looking for excuses for not trading with us."

Conaway said there will be a "struggle" when it comes to federal spending across the whole government. "Every aspect of federal funding is going to have to be looked at," he said.

Estimates are about 40% of farmers' net farm income this year will come from the tens of millions of dollars in federal aid during the pandemic.

"We cannot maintain this level," Conaway said. "It is a stunning amount of money. We got away from ad-hoc federal funding for a reason. Bulking up the safety net would be a better alternative. It is repeatable and sustainable for bankers and lenders."

Expanding the safety net in the farm bill, he said, would have to be done in 2023 with new resources.

GOVERNMENT FUNDING

At the moment, Peterson said Congress is focused on keeping the government funded, either through the end of the year or into next year. The Senate is considering doing so through a continuing resolution (CR).

"I thought this was an opportunity to do COVID stuff," Peterson said. "Now most likely it will be a clean CR."

Peterson said additional spending bills should focus on helping the ethanol industry as well.

The Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, includes a 45-cent-per-gallon payment for feedstock purchases by ethanol plants.

At one point during the economic shutdown, more than half of all ethanol plants were either shut down or had reduced production.

"I'm afraid we're going to lose some of those plants," Peterson said. "If there is another pandemic, I want to have a set of rules and funding."

Last week, USDA announced a $14 billion round of Coronavirus Food Assistance Program (CFAP) funds for farmers and ranchers.

As of Monday, the first CFAP package for coronavirus-related losses before April 15 has paid out $10.1 billion to 638,476 farmers.

Cattle, dairy, corn, hogs and soybeans are the main aid recipients. USDA had projected spending $16 billion for the CFAP. Signup for that program ended earlier this month.

USDA said funding for CFAP 2 will come from the Commodity Credit Corp. and the CARES Act.

Todd Neeley can be reached at todd.neeley@dtn.com

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