Ag Panel Warns Congress of Impending Farm Economy Cliff
‘Unless conditions change, I believe we’re heading into a perfect storm…’
A panel of experts testified Tuesday (July 23) before the House Ag Committee about the severe challenges facing the agricultural supply chain. Issues include plummeting crop prices, rising input costs, worsening credit conditions, and natural disasters. Witnesses urged policymakers to enhance risk management tools to avert a crisis.
Key statements:
• GT Thompson (R-Pa.), Chairman of the House Agriculture Committee: Emphasized the bipartisan bill addressing the crises and supporting rural America. He highlights agriculture as the backbone of the economy and national security, providing over 48 million jobs. He discussed unprecedented challenges, including declining prices, natural disasters, and rising input costs, leading to the largest two-year decline in farm income in history. He emphasized the lack of significant investment in the farm safety net since 2002, with a 30% decline in total resources and an 81% reduction in commodity title spending power. He noted the bipartisan Farm, Food and National Security Act of 2024, which represents the largest investment in the farm safety net in over two decades. Thompson refuted misinformation about the bill, stating it provides significant improvements for all producers and aims for the greatest return on investment. He reviewed past farm bills, noting cuts to commodity programs and increased spending on conservation and nutrition by Democrats. He expressed frustration with partisan politics and emphasized the need for bipartisan negotiation to pass the farm bill, keeping the door open for serious proposals. He concluded by stressing the urgency to act proactively to prevent disaster for producers and establish a strong foundation for the future of the farm economy.
• House Ag Committee Ranking Member David Scott (D-Ga.) emphasized the need for a stronger farm safety net during a full Committee hearing on farm financial conditions. Scott expressed concern about the elimination of USDA’s CCC funds in the farm bil, which have been crucial in past crises. Scott referenced the use of CCC funds during Covid-19 and the Trump trade war to support farmers, emphasizing the importance of maintaining this financial tool. He warned against the potential impact of new tariffs and trade wars proposed by Republicans, stressing the negative effects on farmers. Scott urged bipartisan collaboration to find alternative funding solutions for the farm bill without restricting vital support mechanisms for farmers.
• Dana Allen-Tully, PhD., Minnesota Corn Growers Association: Warned of a “perfect storm” with plummeting crop prices, high production costs, doubled interest rates, and natural disasters depleting working capital.
• David Dunlow, American Cotton Producers: Highlighted skyrocketing input costs and narrowing margins, stressing the need for a new Farm Bill.
• Tony Hotchkiss, American Bankers Association: Noted a projected 25% reduction in net farm income in 2024, emphasizing the need for the 2024 farm bill to support credit availability.
• Joey Caldwell, Agricultural Retailers Association: Mentioned rising business costs and inflation, advocating for a timely Farm Bill to reduce uncertainty.
• Ronald Rainey, Ph.D., University of Arkansas: Discussed the challenges of high input prices, low commodity prices, and high interest rates affecting southern farmers.
Key Takeaways:
• In 2023, agriculture represented nearly 20% of the US economic activity, with significant contributions to exports, tax revenue, wages, and jobs.
• Farm sector net income is forecast to decrease by $43.1 billion (27.1%) from 2023 to 2024, marking the most significant two-year decline in history.
• Production expenses are forecast to increase by $16.7 billion (3.8%) from 2023 to 2024.
• Producer sentiment and expectations are declining due to financial pressures.
• The 2024 CBO scoring baseline for the farm safety net is significantly lower than in 2002, amounting to an 82% cut when adjusted for inflation.