The omnibus five-year 2014 Agriculture Act (Farm Bill) will continue to govern federal agriculture policy through 2018, but American farms and industry remain uncertain about what the new Trump administration’s trade policies will mean to agriculture exports or what the change in government will mean to the continuing rapid technological reformation of farming.
The current farm bill brought significant changes in farm supports, especially dairy (see page 18). At the same time, advancing research on livestock genomes, new strains of feed and food grains, and precision agriculture are having a major impact on not only U.S. farm productivity, food quality, and workforce, but on global agriculture, as well.
Debate and lobbying on the 2018 Farm Bill already is well underway in Congress, although lawmakers and the farming and food production industries are still waiting for concrete policy objectives from the executive branch.
“How the Trump administration approaches the farm bill remains to be seen, with very few hints offered during the campaign. … Preliminary action on the next farm bill is likely to take place in 2017, even if the final bill does not materialize until 2018,” a Nov. 11, 2016 post by the National Sustainable Agriculture Coalition (NSAC) on its blog predicted. “It has often been said that farm bill politics is more regional than partisan, however, and there is good reason to believe that will continue to be the case for the 2018 Farm Bill negotiations.
“NSAC, like many other agricultural groups, will be submitting recommendations to the new transition team on our priority issues, including new and beginning farmers, food safety regulations, immigration, agricultural research and conservation.”
Analysts from the University of Illinois Department of Agricultural and Consumer Economics and the Ohio State University Department of Agricultural, Environmental, and Development Economics looked at the potential impact of the election on the 2018 Farm Bill, the first since 1954 to be written with both houses of Congress and the White House controlled by the same party.
“The next farm bill will undoubtedly be shaped by the election results, but exactly how is unclear. History can provide some perspective and precedent, but the current political landscape and the process will be the biggest determinants. Both tend to indicate that reforming programs and reducing Federal expenditures will remain leading drivers for the next farm bill debate. The bigger questions remain how these matters will shape programs and policies,” they wrote.
A wide range of domestic and international factors play significant roles in both the short- and long-term future of U.S. agriculture, including significant fluctuations in world currency exchanges; good or bad annual production – often weather related – primarily in the United States, Latin America, and Europe; increasing global demand (led by China) for higher protein and more varied diets; political policies unrelated to world markets, such as Russia’s ban on U.S. and Australian imports; the adoption of new technologies in agriculture; and concerns about finding new young farmers to replace the current aging generation (the average age of U.S. farmers is 58).
The last was the subject of a NSAC blog post from Oct. 20, 2016, which warned that while the 2018 Farm Bill will involve a number of high priority issues – including crop insurance reform, nutrition programs, and commodity price supports – “one issue could be key to resolving many of the others: supports for beginning farmers and ranchers.”
“[The] 2018 Farm Bill could become a ‘farm bill of the future’ by adopting an ambitious agenda to support the next generation of farmers. The tools provided in previous farm bills have made a dent in slowing the aging of U.S. agriculture, but it is very clear that greater investment and a more coordinated national strategy are needed to buck the trend and ensure that beginning farmers have the necessary support to successfully pursue a farming career. This next farm bill … represents an opportunity to dismantle barriers for beginning farmers, leaving a legacy that will reshape the future of U.S. agriculture.”
One such barrier facing beginning farmers was discussed in a recent article by NSAC senior policy specialist Juli Obudzinski in Choices, a publication of the Agricultural & Applied Economics Association.
“Nearly 100 million acres of U.S. farmland are set to change hands over the next five years, according to the latest data released by USDA’s National Agriculture Statistics Service [NASS]. Of this, just 21 million acres is expected to be sold to a non-relative, meaning that only a very small portion of our nation’s farmland will be available for new, non-heir farmers,” Obudzinski wrote.
“According to a recent report released by the [USDA] Economic Research Service, landowners not actively engaged in farming currently own 30 percent of U.S. farmland. Some of these non-farming landowners are retired farmers, farmers’ widows or non-farming relatives, the majority of whom choose to hold onto their inherited farmland and rent it out instead of selling the land to an aspiring or beginning farmer.”
That is the latest reflection in a trend that has taken the United States from a rural, farm-based economy 200 years ago, when 90 percent of the nation’s population lived on farms, to half the citizenry by 1900. Slightly more than a century later, only 2 percent of America’s urban, industrial society is involved in farming. But improved productivity since 1940 has increased by nearly tenfold the number of people a single farmer can feed.
One growing phenomenon is having a – so far – small but positive impact on both gross farm incomes and a new and active interest in agriculture on the part of younger generations. Going under a number of names, based on methodology – including organic, vertical, cubic, greenhouse, backyard, home garden farming, development supported agriculture (DSA) – it falls into the general category of urban farming.
USDA, recognizing this trend, has developed a number of support and guidance programs, as well as rules and regulations, the latter by the National Organic Program (NOP), with input from the National Organic Standards Board (a federal advisory committee made up of 15 members of the public). The NOP also maintains a handbook that includes guidance, instructions, policy memos, and other documents on organic standards.
Urban farming can be done anywhere, even in an apartment, although those small efforts typically are for the growers’ consumption only. But a growing number of what began as hobbyists are finding income-producing markets with local restaurants and groceries, which can obtain fresh-picked produce, for example, without the added costs of shipping or the possible use of preservatives and a greatly reduced shelf time.
Because USDA now defines a farm as “any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the year,” a well-crafted plot of only a few square feet can produce that level of local sales. While that increases the number of “farms” in the United States, introduces a new generation to the process of growing food, and increases the sources (and decreases the cost) of small quantities of produce for local eateries and retailers, urban farming has little effect on overall U.S. farming statistics.
While others deal with politics and future policy, the World Agricultural Outlook Board (WAOB) tracks actual numbers in U.S. and world agriculture on a daily basis. A component of USDA’s Office of the Chief Economist, WAOB is an interagency coordinating group that produces a monthly report on agriculture supply and demand for key commodities. Looking at world production, current market conditions, etc., the reports provide a quick look at global market conditions that farmers and food product producers use to adjust their operations.
“The chief economist handles potential policies and the WAOB handles the impact of policies already in place, with a neutral assessment of what their impact will be on the market. That applies to foreign as well as domestic policies and markets. We don’t incorporate any policies [in WAOB reports] that have not actually been put into place,” Board Chair Seth Meyer explained.
“We’re trying to reduce market uncertainty and help it reach an equilibrium price through universal information. Other organizations might have good information on specific areas, but not the broad view WAOB provides. Some countries will use our information rather than their own because they see it as the best unbiased view of what is happening. So the rest of the world also benefits from our reports.”
Meyer said a major impetus for creation of the WAOB was large-scale Soviet purchases of wheat in the 1970s – when no central market information was available – enabling the USSR to take a leading position in the market and causing prices to jump before the rest of the world recognized what was happening. WAOB’s charter was to make the market and each nation’s actions in it as transparent as possible.
“There are no changes coming in how we go about doing this,” Meyer said, noting technology is always changing for WAOB’s meteorologists, for example, but that is only a change in the tools they use, not what they do. “What is unique about the USDA compared to other countries is how we use data around the world, collected on the ground by our embassies and NASS. It’s all about market transparency, which is why we participate in international organizations to explain to folks how we do business and the benefits of doing it that way.
“That can be complicated by some countries reporting incomplete data or data that is not timely. USDA has the benefit of NASS and not all others have a solid domestic statistical service. A lot of nations will produce numbers for their own country, but for us, trade is so important we need a global look. Not every country considers production reporting to be unbiased; sometimes it is influenced by policy-makers. The WAOB puts out what we believe to be the best numbers, without regard to government policies – unless those, domestic or international, may influence demand.”
Overall, the news for farmers in 2016 was mixed. New technologies were proving to be valuable tools for cost reduction, yield and crop quality improvement, easier management of dairy farms, and an unprecedented look at what is actually happening in the fields, down to a plant-by-plant level. Bad weather and resulting lower production of some crops in Latin America also provided some U.S. farmers with expanded markets beyond the typical harvest season.
And despite recent setbacks in income and farm asset values, a December 2016 Congressional Research Service (CRS) report on U.S. farm income said average farm household incomes continue to be well ahead of average U.S. household incomes, as has been the case since the late 1990s. In 2015, the last year for which comparable data were available, the average farm household income (including off-farm income sources) of $119,880 was about 51 percent higher than the average U.S. household income of $79,263.
Nevertheless, continued declines in farm income remain a concern, especially for a sector trying to attract a new generation of young farmers, as well as the negative effect on total U.S. exports and the gross national product.
USDA’s Economic Research Service (ERS) estimated final national net farm income for the year would be $66.9 billion in 2016, down 17 percent from 2015 – the third consecutive year of decline and the lowest since 2009 in both nominal and inflation-adjusted dollars. ERS calculates net farm income on an accrual basis; net cash income (calculated on a cash-flow basis) also was projected to be 15 percent lower in 2016 at $90.1 billion.
The lower numbers stemmed primarily from lower livestock receipts, down $23 billion (-12 percent) as the year drew to a close. Total crop revenues were largely unchanged in 2016 as lower crop prices were offset by record yields. The fall in total cash receipts reflected continued declines in most commodities prices compared to 2011-2013, when prices for many major commodities hit record or near-record highs. The earlier period was significantly helped by strong exports, which have become an increasing focus for U.S. agriculture. But 2016, with exports accounting for more than 30 percent of gross farm earnings, was forecast to end down 7 percent from the previous year and well below 2014’s record $152.3 billion.
Those numbers were partially offset by a 3 percent decline in farm cash costs and a 19 percent increase (about $12.9 billion) in government payments. While the 2014 Farm Bill eliminated nearly $5 billion in direct federal support, the new Price Loss Coverage and Agricultural Risk Coverage programs triggered payments of nearly $8 billion in 2016.
Another piece of bad economic news for farmers was a year-end farm wealth projection of $2.846 trillion, down about 2 percent from 2015, which also had seen a decline. Farmland values had been on the rise, but forecasts for lower commodity prices and an expected decline from the strong outlook for the general farm economy during the decade’s first four years caused investors and lenders to lower expectation for long-term profitability for farm sector investments, thus reducing farm asset values.
“Because they comprise such a significant portion of the U.S. farm sector’s asset base, change in farmland values is a critical barometer of the farm sector’s financial performance,” according to the CRS report. “The outlook for a third year of lower net farm income, coupled with a second year of lower farm wealth, suggests a weakening financial picture for the agricultural sector as a whole heading into 2017, with substantial regional variation.
“Relatively weak prices for most major program crops signal tougher times ahead. Low prices are expected to trigger substantial payments under the new safety net programs of the 2014 Farm Bill; however, eventual 2017 agricultural economic well-being will hinge on crop prospects and prices, as well as both domestic and international macroeconomic factors, including economic growth and consumer demand.”
There has been a modest decline in the eight crops followed in the WAOB report, although future increases in prices may see production levels and planted acreage rise, as well.
“We also see a change in the mix of crops – expectations from this report show soybean crops and area will be up next year, driven by global trade, especially for soybean meal to feed animals in China. In other crops, we will see production run lower than the past couple of years, which had high demand,” Meyer said. “A lot of the growth in soybean trade will come from demand in China, as it has for several years.
“Protein demand growth globally, both for human consumption and to feed livestock, is the real story. We also do a 10-year report, a complete supply-and-demand balance for the U.S., which we put out in November, then we produce the global numbers in February. We’re coming off record wheat yields and stock levels we haven’t seen since the 1980s, so we expect some reductions there next year, with our prediction for 2017 being the lowest on record since 1919.”
Caption for top photo: Philip Marek has been a farm owner since 2010 and started with 210 acres. He and his cousin were able to use USDA small and new farmer and rancher loan programs, which provided them the ability to handle initial business start-up and equipment purchases. Support for beginning farmers is key to bringing new people into agriculture to replace aging farmers. Credit: USDA photo by Lance Cheung
This article was originally published in the 2017 edition of U.S. Agriculture Outlook.