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Ag experts warn Congress of impending farm economy cliff... A panel of experts testified Tuesday 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:
· 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 U.S. 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.
House Ag leader comments:
House Agriculture Committee Chair Glenn “GT” Thompson (R-Pa.) emphasized the bipartisan bill addressing the crises and supporting rural America. He highlighted 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 Commodity Credit Corporation (CCC) funds in the farm bill, 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.
Stabenow again plays the regional-biased farm bill card... In updated comments on a new farm bill, Senate Ag Chair Debbie Stabenow (D-Mich.) says the House proposal claims to enhance the farm bill but disproportionately benefits a few sectors. She says it heavily invests in commodity programs, which make up 80% of the House bill, with 73% of that directed at reference price increases for 22 crops. This leaves new and beginning farmers out and risks inflating land costs, she notes. Half of the investment benefits just 2% of U.S. farms, increasing taxpayer-funded subsidies by $22 billion over the next decade. She again charges the proposal favors southern crops like cotton, rice, and peanuts, exacerbating regional disparities. For balanced support, she concludes, a farm bill must equitably distribute resources across all regions and commodities.
Meanwhile... worried that “it may not be logistically or politically feasible to advance a farm bill early in the next Congress,” more than 500 state and national farm, sportsman, conservation and ag retail groups asked congressional leaders to pass a farm bill this year rather than extend current law.
Ag groups urge EPA to reform ESA processes for pesticides... In a letter signed by 318 agricultural organizations, these groups argue that without reforms to Endangered Species Act processes, farmers will face significant and costly restrictions that may be unnecessary to protect endangered species.
Josh Gackle, president of the American Soybean Association, emphasized that while the groups support EPA’s efforts to comply with legal requirements, the agency needs to go beyond minimal compliance. He criticized EPA for often making conservative assumptions instead of using the best available scientific and commercial data, leading to unnecessary restrictions for farmers and legal vulnerabilities for pesticide registrations.
Federal courts have repeatedly found EPA had not fulfilled its ESA obligations, leading to the striking down of pesticide registrations. To address this, EPA has attempted to bring its pesticide program into compliance, but the regulatory pendulum has swung too far, resulting in overregulation based on worst-case scenarios. Neil Rockstad, president of the American Sugarbeet Growers Association, stressed the need for EPA to use realistic data and engage with farmers to understand actual agricultural practices.
The agricultural groups advocate for the use of more accurate data and refined models to provide precise assessments and impose restrictions only when truly necessary. They call on EPA to engage with stakeholders by September 2024 to ensure timely refinements to the ESA processes. The organizations plan to follow up with EPA to facilitate stakeholder engagement and assist the agency in meeting its legal requirements while avoiding unnecessary restrictions on farmers.
SCOTUS overturn of Chevron doctrine alters tax legislation process... The recent Supreme Court decision to overturn the Chevron doctrine is poised to significantly impact how tax legislation is crafted and interpreted. The Chevron doctrine previously allowed federal courts to defer to agency interpretations of ambiguous laws. With its repeal, Congress, particularly the House Ways and Means and Senate Finance committees, may now need to provide more precise delegations of authority to the IRS and Treasury Department.
This shift emphasizes the importance of the Joint Committee on Taxation (JCT), which plays a crucial role in analyzing tax proposals and helping draft tax legislation. JCT, staffed with over 40 economists and tax attorneys, is expected to assist in creating detailed legislative histories and clarifying congressional intent. This support is critical as courts will now scrutinize legislative texts more closely without the Chevron deference.
Key lawmakers and committees are still assessing the full implications of this change. However, experts believe that tax writers’ existing practices of explicitly granting regulatory authority and considering revenue effects position them well to adapt. JCT’s deep expertise and institutional knowledge make it uniquely suited to support Congress in this new legal landscape, potentially enhancing its role in the legislative process.
House pushes back Ag/FDA funding bill... House leaders postponed consideration of the Agriculture/FDA and Financial Services bills, which had initially been slated for votes this week. Republicans were concerned they lacked support to pass the bills but are trying to work through issues. The proposed Agriculture/FDA bill includes a 4% cut in discretionary funding compared to the previous fiscal year, which has raised concerns about its impact on rural communities and critical food assistance programs. Specific cuts include reductions in direct loans for rural home purchases, water and waste grants, and energy savings programs for rural small businesses. These cuts are perceived as increasing costs for rural America and jeopardizing essential services. The bill threatens access to food for low-income and vulnerable Americans by cutting funding for programs like the Supplemental Nutrition Assistance Program (SNAP), the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and other food assistance initiatives. The inclusion of the “SNAP Choice” pilot program, which limits food choices for SNAP recipients, has been particularly controversial.
Of note: The Ag/FDA measure should come up again next week, key lawmakers said. But Rep. Jim McGovern (D-Mass.) said he’s skeptical the bills will come up. “It appears that a decision has already been made that they’re not going to pass,” McGovern said at a Rules Committee meeting yesterday. He added, “We may never see these bills on the House floor.” The White House listed more than a dozen objections to the USDA/FDA funding bill.