Despite news from the Congressional Budget Office that federal debt held by the public may reach 77 percent of gross domestic product (GDP) by 2025, there was at least one pony in the pile from a budget perspective: Farm bill costs are projected to be down another $5 billion beyond the anticipated $23 billion saved under the 2014 rewrite.
It’s understandable if you missed it. The farm bill is a tiny portion of the overall budget, comprising just 1.9 percent, with farm bill safety net provisions for producers and crop insurance standing at less than three-tenths of 1 percent.
{mosads}Miraculously, amidst a 43 percent decline in farm income, the farm bill safety net provisions are still mustering savings compared to the repealed direct payment.
Farmers and ranchers are dutiful folks, so under most circumstances they would feel good about putting their shoulders into deficit reduction. But producers are feeling anything but good right now.
To throw light on the situation, consider these factors.
Had the direct payment continued, producers would have received help against a 43 percent drop in farm income this past fall. But under the new farm bill, producers will wait until October 2015 for the first sign of help. Now, stop to consider the loans that have to be repaid and the financing that has to be secured during this period and the current financial environment.
One banker from a farming state that made better yields than most in 2014 paints a bleak picture. He told me that but for crop insurance, sharply pared back capital investments and the potential for help under the farm bill, most producers would negatively cash flow for 2014 and 2015. Machinery sales are minimal and land sales often end with no sales. About 10 percent of producers are in serious financial trouble and that number will grow unless prices recover.
Now, imagine what bankers are saying in states making substandard yields, some experiencing severe drought over multiple years where there has been no opportunity for producers to build up reserves. Despite their best efforts to restructure producer debt, liquidations are beginning. Producers are going under, and the first to go are young producers in debt with no equity.
Yet despite the shaky financial ground producers find themselves on, the administration last month unveiled a budget that proposes to shake it up even more with a plan that targets a key element of crop insurance, threatening the ability of many farmers to manage risk through forward contracting. And this month, congressional budget committees may put forward plans to further disorient producers and lenders already reeling from plunging markets and complex farm bill decisions.
Imagine how bewildered producers are when they consider that they just contributed to deficit reduction through cuts to the farm bill last year; they have experienced a deep plunge in commodity prices; they will not even sign up for the new farm bill until March 31; any help to crop producers under the new legislation will not be realized until October; and Washington is already talking about more cuts and changing the rules again.
If this latest round of messing with the farm bill and crop insurance somehow succeeds, we could see a very serious deterioration of the farm economy, something most policymakers today have not witnessed while in office. But even if the efforts fail, the mere talk of it adds confusion and anxiety for producers and casts further doubt in the minds of lenders.
And this is taking place at a time when producers are hearing that the government has enough money to empower the Environmental Protection Agency (EPA) to start regulating drainage ditches.
In my part of the country, farmers are extremely frustrated when they are able to sell a higher quality cotton on the cash market for just 60 cents a pound, with no price-based safety net, while on the very same day communist China is guaranteeing their cotton farmers $1.45 per pound and Heritage Action is lecturing anyone who will listen on how ending U.S. farm policy will give the world a free market.
It is one hell of a way to run a railroad. It’s time to leave the Agriculture Committees, farmers and ranchers, and rural America alone to do their work.
Combest represented the 19th Congressional District of Texas from 1985 to 2002 and chaired the Select Committee on Intelligence and the Agriculture Committee. He is now a principal at Combest Sell & Associates.