Farmer Aid Urged Over Grain Prices

OMAHA (DTN) -- Crop farmers won't be able to count on any support from USDA commodity programs when payments are announced in October for Agricultural Risk Coverage and Price Loss Coverage -- ARC and PLC.

A new farm income update from the Food & Agricultural Policy Research Institute (FAPRI) projects farmers are expected to receive $204 million in ARC payments in October and just $10 million in PLC payments. That's higher than USDA, which places combined ARC and PLC payments at $124.6 million.

Still, USDA forecasts 2024 crop receipts for corn, soybean and wheat farmers to fall $26.2 billion. That works out to a 20% drop for corn, a 14.6% drop for soybeans and a 12.3% decline for wheat.

Farmers won't see safety net payments for those declining grain prices until October 2025 when ARC and PLC payments go out. Currently, FAPRI projects about $3.45 billion in ARC payments and $461 million in PLC. That is largely due to the vast majority of producers this year enrolled in ARC, said Pat Westhoff, director of FAPRI.

Yields may be good this fall, but with corn and soybean prices down as much as they are this fall, the ARC price guarantee is more than likely to kick in. "And again, parts of the country with extraordinarily good yields probably won't have ARC payments," Westhoff said. "We're right on the verge of having PLC payments for corn but until those prices drop further, there wouldn't be PLC payments for corn or soybeans."

How dramatic are those income drops for crop farmers?

"It's very dramatic, especially for people who are renting land," Westhoff said.

While some inputs have stabilized or declined in prices, that's typically not the case for cash renters.

"We have seen these large increases in rental rates, so for people who are renting a lot of land, that's a big concern."

Looking at how farmer income has both risen and fallen the past four years, "I can safely say it's a big drop from the peak," Westhoff said. "It's not as low as the pre-COVID average had been for a few years."

ECONOMIC FORECASTS

At an outlook forum in Kansas City, Missouri, USDA Chief Economist Seth Meyer pointed to income numbers, but also expenses, forecast to decrease nominally this year at 1%, and described it as "a cost price squeeze developing" for producers.

"We are moving into a narrow-margin situation perhaps faster than I would have anticipated in January," Meyer said. He added, "There's not an obvious point on the horizon where we will bring those prices back to where they have been over the last several years."

John Newton, former economist for the Senate Agriculture Committee GOP staff, said farmers visiting Capitol Hill in recent weeks are bringing in their balance sheets to show how much they are losing.

"We've entered a downturn in the farm economy. There's no question about it."

Looking at ARC and PLC, Newton, who now works for Terrain, said, "For what's happening today, they are not going to get any relief until (fiscal) 2026."

SENATORS CALL FOR AID

Sen. John Boozman, R-Ark., ranking member of the Senate Agriculture Committee, on the Senate floor earlier this week warned that row crop farmers are facing consecutive years of lower income while costs have remained high. Boozman said farmers will struggle to get operating loans for next year. He called for ad-hoc aid to address the situation.

"First, we need to provide emergency assistance to address the economic losses that farmers are facing associated with the 2024 crop," Boozman said. "Even with record yields, farmers are still not breaking even."

Boozman pointed to ad-hoc aid provided by USDA under the Trump administration during the pandemic. The senator suggested something similar. "That level of timely and urgent response by Congress and the administration is once again warranted."

Boozman stressed the need for a farm bill to make "long-term corrections to our safety net," but added, "farmers need timely support addressing 2024 losses as they enter the winter months when they make planting decisions and secure financing for the upcoming year."

Sen. Jerry Moran, R-Kan., also suggested at an agricultural outlook conference in Missouri earlier in the week that ad-hoc aid is needed. Moran suggested Sen. Debbie Stabenow, D-Mich., supported this idea, but Stabenow later countered that Moran misunderstood that she wants to get a five-year bill done.

AG SECRETARY NOT CONVINCED AID NEEDED

Agriculture Secretary Tom Vilsack seemed to reject the suggestion on a call Thursday that there is a "looming crisis ahead" over the drop in farm income for crop farmers.

Vilsack said overall farm income is above the 20-year average and pointed out 2022 was a record year for farm income. Vilsack also said input prices are coming down with declining fertilizer costs, and the Federal Reserve's announced cut in interest rates will help. "That is also good news and may very well make it just easier for producers," he said.

Vilsack pushed for key members of Congress to keep talking and finish their work on a farm bill.

"It's obviously a positive sign that folks are talking and thinking about the possibility of getting a farm bill done before the end of the year," he said.

Still, Vilsack also pointed out that much of the help for producers in the House version of the farm bill "would be a year or two down the road" in terms of higher reference prices.

The secretary also criticized "the existing system of agriculture" in which the largest 180,000 or so farms receive as much as 85% of the income while the other 1.7 million smaller farms largely rely on off-farm jobs.

Vilsack also was asked about Boozman praising former Agriculture Secretary Sonny Perdue for using the Commodity Credit Corp. (CCC) to help farmers when prices were falling. Perdue used the CCC to create the Market Facilitation Program during the trade war, spending $23 billion. Perdue also used the CCC for the Coronavirus Food Assistance Program (CFAP). Boozman pointed that out while Republicans included language in the House Agriculture Committee's version of a new farm bill to limit the secretary's control of CCC funds.

"It is a bit ironic where, on the one hand, they want to restrain the ability of a secretary to utilize those resources for certain circumstances or situations that arise, while at the same time touting the utilization of a rather substantial investment made in the CCC," Vilsack said.

The secretary called the CCC an important tool to help agriculture in unpredictable times such as low prices driven by surplus commodities, a weak global economy and a strong U.S. economy.

However, the secretary did not suggest taking any actions with the CCC funds now.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

(c) Copyright 2024 DTN, LLC. All rights reserved.