NFU Wants More Aid to Farmers

Groups Push Back on Ag Secretary's View of Farm Income, Economy

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Net cash farm income for 2016 is forecast at $94.1 billion, down 13.3% from the 2015 estimate. Net farm income is forecast to be $71.5 billion in 2016, down 11.5%. If realized, 2016 net farm income would be the lowest since 2009. (Graphic courtesy of USDA Economic Research Service)

WASHINGTON (DTN) -- The National Farmers Union is calling on Congress to pass disaster aid and consider starting work early on a new farm bill as they and other ag leaders seek to draw more attention to the state of the farm economy.

Roger Johnson, president of the National Farmers Union, said in a phone interview on Wednesday that NFU and the leaders of Farm Aid want some emergency disaster aid to help producers weather the current downturn.

"Obviously, you have to have a Congress receptive to making some changes," Johnson said. "People understand there is a problem. I think there is much more of a recognition in Congress that times are getting difficult in agriculture than what we heard from the secretary."

NFU brought in 275 farmers from around the country for their fall fly-in. Johnson said some of them were a little taken aback on Monday when they met with Agriculture Secretary Tom Vilsack. The secretary said he understood that some farmers are having a difficult time.

"Many of their friends and neighbors are facing challenges with references to low prices," Vilsack said in interview with DTN on Monday. He added that USDA has made several moves using programs and funds to help. "Everything that I can do, I am doing."

However, Vilsack also reminded NFU members that farm income levels over the past five years have been some of the best in recent history. "They needed to understand when they talk about tough times, there are a whole lot of people out there who are not doing as well as many farm families are doing," Vilsack said.

The secretary said he told NFU members to consider where they stand relative to the average American family, Vilsack said. The average American farm family has a median income of about $76,282, according to USDA, which is $19,782 higher than average U.S. household. Median farm family income for the average household was $56,500 in 2015, according to the U.S. Census Bureau. However, the Bureau noted just on Tuesday that median household income in the U.S. rose 5.2% last year, the most since the 1960s. (…) Net farm income is falling with USDA forecasting 2016 to be the lowest since 2009 when President Barack Obama took office. (…)

The secretary also pointed to current farm debt-to-equity ratios, which is averaging 12.5%. In 2012, when debt-to-equity reached its strongest point, the ratio was 11.3%. In the 1980s, when a high share of farmers were financially challenged, debt-to-equity reached 22.2%. The percentage of farmers considered either extremely leveraged or higher leveraged equates to roughly 10% of all producers.

Still, Vilsack stressed USDA is doing what it can within its authority to help farmers right now. In June, USDA announced a $300 million Cotton Ginning Cost Share program after Vilsack rejected calls from cotton farmers to allow cottonseed to be declared as an oilseed under the Price Loss Coverage Program. USDA also has moved funds around to cash flow the Farm Service Agency's loan program, which is seeing higher demand.

"(Farmers) have concerns about the safety net, which I hear, depending on what part of the country I'm in, I hear these from time to time," he said. "And I wanted to make sure they knew, that every tool I have, that I'm able to use -- that Congress has not prevented me from using -- that I'm using."

USDA paid out $11.2 million to dairy farmers under the Dairy Margin Protection Program earlier this summer. After calls from lawmakers to further help dairy farmers, USDA agreed to buy $20 million in surplus cheese to give to food banks.

Regarding commodity programs, NFU wants changes made to the Agricultural Risk Coverage and Price Loss Coverage programs (ARC and PLC) that would specifically advance payments to farmers during the crop year. That seems like a simple change, but the programs are pegged to the average price for a full marketing year. That is the reason payments are delayed until after the marketing year has ended. Congress has advanced estimated commodity payments in the past when farm bills were not working.

"We want the payment moved up to the year for which it is earned," Johnson said. "That is particularly a concern right now as you are seeing a pretty significant pinch on cash flow."

Finally, NFU is asking Congress to add funds to FSA for direct and guaranteed operating loans as lawmakers work on a continuing resolution to fund the federal government until a spending deal is reached. Demand for USDA loans has increased as commodity and dairy prices have continued to decline. FSA announced earlier this month that it had made available enough funds to leverage up to $185 million in additional loans. The $185 million would address roughly 30% of the shortfall in funds through the end of this month. Producers now are dealing with a 60-day wait to get credit lines through FSA.

Johnson said he got positive reports back from his members who fanned out across Capitol Hill over the last few days. At least some lawmakers appear receptive to making legislative changes to help the farm economy.

Chandler Goule, chief executive officer at the National Association of Wheat Growers, spoke to DTN briefly on Tuesday about the struggles facing wheat growers with low prices. He noted cash basis in some areas is nearly $1.50 under CME futures. Goule said producers are reaching out to NAWG to express their concerns.

"They are basically in distress and letting people know that if something doesn't change in the near future that they are not going to be here for the next planting season, and a lot of things they have pointed to is the help that the cotton industry got, the purchase of dairy products for the feeding programs, and you know, wheat is a unique commodity because it is a food grain," Goule said. "But the emails are starting to roll in that our producers are being squeezed and hurt by these low prices. They are looking for relief, even though we have hit LDPs (loan-deficiency payments). The rhetoric that 'I'm not going to be here next year' is concerning to us and we've relayed that to USDA."

Johnson added that Sen. Charles Grassley, R-Iowa, and House Agriculture Committee Ranking Member Collin Peterson, D-Minn., have indicated support for writing the next farm bill early. "So those conversations are happening up here and they are happening in particular because ARC has been real problematic," Johnson said.

Vilsack reiterated a point he has made frequently that a lot of concerns being raised about the way the Dairy Margin Protection Program or ARC come back to the way the programs were drafted in the farm bill. The secretary has stressed to audiences that talk around the next farm bill should not begin with a dollar figure that needs to be saved. The House and Senate Agriculture Committees committed to cut $23 billion from the 10-year budget score for the farm bill. Vilsack said that initial decision hemmed in the ability of the agriculture committees to address the needs in agriculture and rural America.

"When you start with how much money you have to save, you automatically pit everybody against each other and you divide the constituency groups that are incredibly important to getting a farm bill through," Vilsack said. "And you open up the opportunity for folks like the Heritage Foundation to say 'Oh heck, let's just get rid of it all. Let the market decide.' In which case we will have fewer farmers, bigger farms, we would have more expensive food and we would be importing more food. That's what would happen. Why would we want that?"

Heritage came out with a report last week calling on Congress to get rid of commodity programs and reduce the subsidized protection levels under crop insurance.

Vilsack's comments on the overall state of rural America also came under fire at a Farm Foundation forum Tuesday morning at the National Press Club. Dan Keppen, executive director of the Family Farm Alliance, questioned a Sept. 7 op-ed by Vilsack on the USDA website headlined "Rural America is Back in Business." (…)

Keppen, whose group focuses largely on regulatory water policies in Western states, noted the optimistic message was better than normal doom and gloom. Still, Keppen questioned whether rural America was faring better. "And I don't mean to hammer on Secretary Vilsack, but there are some things going on out there that I don't think are being fully captured by our policymakers," Keppen said. He quoted comments from his members who cited high local unemployment, demand at local food banks and current economic struggles of farmers.

"So it's grim out there and those sort of stories need to be recognized and drive towards solutions to the policy challenges that we have," Keppen said.

The Senate Agriculture Committee has scheduled a hearing for Sept. 21 with Vilsack specifically to look at USDA and the state of the farm economy.

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Chris Clayton