WASHINGTON — Members of the US House of Representatives Committee on Agriculture to consider how to help farmers who are struggling with rising costs for fertilisers, fuel, seeds and chemicals – the unfortunate harvest of the war in Ukraine, strains on the global supply system, inflation and severe weather.
A panel of the committee heard from agricultural economists on Thursday as lawmakers debated how to structure the federal safety net in the next farm bill, due when current programs expire in 2023.
The debate comes as traditional corn, soybean and wheat farmers are straddling both sides of inflation and the economic fallout from the war in Ukraine. They’re seeing both huge increases in the price of their crops, as well as rising costs for everything they need to buy to grow them.
“Since 2018, when the last Farm Bill was written, farmers have experienced the economic fallout of a trade war with China, marketing and supply chain disruptions from the pandemic, historic weather events and now extreme volatility in commodity and input markets,” said Rep. Cheri Bustos, an Illinois Democrat and chair of the subcommittee overseeing soft commodities.
“It all has implications for the next farm bill,” Bustos added.
Rep. Glenn Thompson, a Pennsylvania Republican, said he wants to pay special attention to margins for farmers as members work on the next farm bill. Thompson is the top Republican on the Agriculture Committee and could lead the Farm Bill process if Republicans take control of the House of Representatives.
“The bottom line is that farming is a business, and at the end of the day it’s not what you bring in, it’s the margin you’re left with,” Thompson said. “I have major concerns about where we’re going right now.”
holes in the safety net
The Farm Bill includes longstanding safety net programs that provide some risk protection and financial support to American farmers.
These include crop insurance and soft commodity programs that pay farmers when crop prices fall. But the programs fail to address the current challenge facing farmers from rising costs for fuel, fertilizer, pesticides and seeds.
Economists suggested that lawmakers consider pilot programs designed to help farmers struggling on those margins.
“Input costs are going up and with inflation you’re going to have a lot of pressure where that safety net is being weakened,” said Ronald Rainey, director of the University of Arkansas Systems Division of Agriculture.
The major commodity crops, particularly corn and wheat, are seeing high prices — in part due to the disruption of a global market where Ukraine and Russia are usually major players.
Expected prices for the 2022 US wheat crop are 50 percent higher than in January, according to Joseph Janzen, an agricultural economist at the University of Illinois Urbana-Champaign.
Futures prices for corn and soybeans are also rising: 30 percent higher for corn and 20 percent higher for soybeans.
But agricultural economists told lawmakers the sky-high prices could give the wrong impression, as farmers are also paying more than ever for fertilizer and fuel. Crude oil reference prices and US fertilizer prices roughly tripled between January 2021 and March 2022.
Russia and Belarus are also important fertilizer producers and exporters. These input prices are expected to remain high for years to come.
“What we do know is that prices will go down, but input prices will stay high for a while, they always do. And that’s going to put people in a cost-price squeeze,” said Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M University.
High fertilizer and energy prices have both short- and long-term effects on agriculture. If farmers respond by planting less and using less fertilizer, they will yield smaller crops – bringing less income to their farms and potentially exacerbating rising food costs.
expiry of the court account
Every five years, legislatures must re-approve the farm bill — an arduous process to re-examine the policy and funding structure for federal farm and food assistance programs.
The farm bill is unique in that it is provides “mandatory” funding for many of the programs it approves, so the programs do not have to go through the congressional approval process every year. As such, approving farm bills is a complex and contentious process as lawmakers debate how and where to spend more money.
Most lawmakers at Thursday’s subcommittee hearing did not call for a major overhaul of the long-standing soft commodities safety net.
“Our primary approach to writing any new farm bill should be a cautious one,” said Rep. Rick Allen, a Georgia Republican, noting how chaotic the past few years have been for agriculture and the economy. “We should not make any major changes unless we are able to fully assess the implications of those changes.”
However, some said they should consider more flexibility and innovation in farm programs to try to meet growing challenges from drought, severe weather and climate change. For example, more than half of Arizona experiences severe drought and another 10 percent experiences extreme drought.
“I have never seen conditions like this without relief in sight. We’ve got something to overcome, and we can’t do it by halves,” said Rep. Tom O’Halleran, an Arizona Democrat.
In addition to commodity programs, the farm bill includes crop insurance, conservation programs, and food aid programs. The bulk of farm bill spending goes to food programs, such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps) for low-income individuals and families.
