“Unless conditions change, I believe we’re heading into a perfect storm…”
Today, a panel of witnesses before the House Committee on Agriculture—including producers, a lender, an input supplier, and Extension economist—warned of the dire outlook facing our agricultural supply chain. Plummeting crop prices, escalating input costs, worsening credit conditions, and sustained natural disasters are creating a “perfect storm” of headwinds for farm country. Witnesses urged policy makers to “head off the economic hemorrhaging” and take advantage of the opportunity to substantially course correct the farm safety net through the enactment of enhanced risk management tools.
“The testimony from today’s hearing painted a dark picture of the American farm economy and should be a wake-up call for my Democrat colleagues,” said Chairman of the House Agriculture Committee, Glenn “GT” Thompson (PA-15). “This Committee advanced a bipartisan bill that effectively responds to the crises outlined today and the pleas of rural America.”
Notable Testimony:
“Unless conditions change, I believe we’re heading into a perfect storm, a storm that I don’t think will be fully appreciated until early next year when farmers try to get loans but are unable to do so because they cannot demonstrate the ability to cash flow,” said Ms. Dana Allen-Tully, PhD., a family farmer and President of the Minnesota Corn Growers Association. “There are a myriad of factors contributing to this situation, including plummeting crop prices, very high costs of production, interest rates that have doubled, natural disasters for so many around the country, and tightening credit. Our working capital is fast being depleted.”
“I have never known a worse time in my 40 years of farming, and the stress has led to personal health issues as I wonder how our operation will survive. Inputs such as labor, supplies, equipment, parts, fuel, land rent, fertilizer, and seed have skyrocketed,” said Mr. David Dunlow, Chairman, American Cotton Producers. “Some of these expenses have nearly doubled, and my margins have narrowed over the last several years. Things have gotten so bad that these days a bumper crop is required just to break even… The bottom line is we need a new Farm Bill this year.”
“The agricultural economy is in a position it has not been in for many years. There is a return to the cyclical agricultural conditions that were present before the surge of government support during the COVID-19 pandemic. Rising input prices, combined with lower commodity prices, have resulted in USDA projecting a 25% reduction in net farm income in 2024 compared to 2023…” said Mr. Tony Hotchkiss, Chairman, Agriculture and Rural Bankers Committee of the American Bankers Association. “The meaningful changes proposed in the 2024 Farm Bill will allow bankers to better serve their customers and ensure they have high levels of credit availability in the years to come.”
“The rising cost of doing business and inflationary pressures are chipping away at farmers’ margins,” said Mr. Joey Caldwell, on behalf of the Agricultural Retailers Association. “It is for this reason, that passing a Farm Bill, sooner rather than later, will lighten this burden of uncertainty… The Biden Administration’s climate policies have increased costs for crop inputs in agriculture. Higher natural gas prices have made nitrogen fertilizer more expensive, while rising diesel prices have elevated transportation costs for products to farms and the operation of agricultural equipment. Diesel, crucial for ag retailers, grain shippers, and farmers, now costs significantly more.”
“Farmers across the South continue to adapt to the challenging agriculture environment made worse by relatively high input prices, historically low commodity prices, and current relatively high interest rates,” said Mr. Ronald Rainey, Ph.D., Assistant Vice President, University of Arkansas System Division of Agriculture.
Key Takeaways:
- In 2023, the agriculture sector represented nearly 20 percent of the country’s economic activity. Agriculture represents more than $9.6 trillion in outputs, yielding $181.4 billion in exports, $1.3 trillion in tax revenue, $2.8 trillion in wages, and provides 48.6 million jobs. However, collapsing on-farm prices, a lack of market expansion, and increasing input prices are driving a decline in farm financial security.
- Farm sector net income is forecast to fall for the second consecutive year in 2024. Net farm income (NFI), a broad measure of profits, is forecast to decrease by $43.1 billion (27.1 percent) from 2023 to $116.1 billion in 2024.
- This represents the most significant two-year decline of NFI in history.
- While cash receipts continue to decline year-over-year, production expenses are forecast to increase by $16.7 billion (3.8 percent) from 2023 to 2024 to a total of $455.1 billion.
- Producer sentiment and expectations regarding the future are declining in the face of financial pressures.
- The last time significant resources were added to the farm safety net was in the 2002 Farm Bill. At the time of enactment, the Congressional Budget Office (CBO) projected $142 billion in outlays through Title I policies over the following decade ($248 billion in 2024 dollars).
- In comparison, the June 2024 CBO scoring baseline projects outlays under the current safety net at roughly $44.4 billion. Accounting for inflation, this amounts to an 82 percent cut in the Title I baseline from 2002 to 2024.
