A recent article from the Federal Reserve Bank of Minneapolis discussed the downward economic trajectory that has impacted the U.S. farm economy in recent years. Secretary of Agriculture Sonny Perdue, in remarks this week to USDA employees, noted that trade is an area that could help provide relief for surplus stocks. News reports yesterday indicated that President Trump could sign an executive action withdrawing the United States from the North American Free Trade Agreement; since NAFTA's implementation, U.S. agricultural trade has grown significantly. However, subsequent news developments explained that Trump had decided not to pull out of NAFTA. Many in the agricultural sector are already anxious about U.S. trade policy, yesterday's executive branch actions on trade may not alleviate ongoing concerns.
Last Tuesday, the House Ag Committee’s Subcommittee on Livestock and Foreign Agriculture held a hearing to examine perspectives from the U.S. livestock sector. And on Wednesday, the full Committee took a closer look at economic and policy issues impacting the U.S. dairy sector. The meetings were part of the Committee’s ongoing series of hearings that are setting the stage for the next farm bill. Today’s update provides a brief look at some of the highlights from the hearings last week.
Subcommittee on Livestock and Foreign Agriculture- Livestock Sector
Subcommittee Chairman David Rouzer (R., N.C.) pointed out on Tuesday that, “From wildfires across the Plains, to recently confirmed cases of high path avian influenza in Tennessee, to an ongoing battle against cattle fever ticks in South Texas, there is no shortage of challenges facing America’s livestock producers.”
As background, recall that in February, the U.S. Department of Agriculture’s Economic Research Service (ERS) stated that, “Overall, animal/animal product cash receipts are expected to remain stable in 2017, rising $53 million (0.03 percent) in 2017. Relative to 2016, annual price changes are mixed as to direction in 2017, with increases expected for milk and eggs, declines expected for red meats and turkeys, and stable prices for broilers and farm chickens.”
Nebraska rancher Craig Uden, who serves as President of the National Cattlemen’s Beef Association pointed out to the Subcommittee that, “The vast majority of my fellow livestock producers believe the livestock industry is best served by the process of free enterprise and free trade. Market freedom works better in our industry than government-regulated markets which deter innovation and distort production and market signals. We continue to oppose attempts to narrow the business options or limit the individual freedom of livestock producers to innovate in the marketing of their product.
We also oppose inclusion of a ‘Livestock Title’ in the next farm bill. Items with industry-wide support can be included in the ‘Miscellaneous Title.’ I ask for the support of members of this committee in opposing a Livestock Title in the next farm bill.
Mr. Uden noted that, “Another 2018 Farm Bill priority for NCBA is the protection of conservation programs. Several of these programs authorized in previous farm bills have played an important role in assisting farmers and ranchers in the enhancement of our nation’s natural resources for food production, wildlife habitat, and water quality. In Nebraska, the Environmental Quality Incentive Program (EQIP) is improving habitat for grassland-nesting birds under consideration for listing as threatened or endangered species, enhancing the health of grazing lands, improving water quality, improving soil quality, and reducing soil erosion. One important feature of EQIP has been its focus on livestock operations, and we would like to see continued funding to preserve this program. Federal funds spent on conservation are a good investment in our country’s natural resources and the sustainability of agriculture and wildlife.”
The NCBA President added that, “Trade is vital to the beef industry, and protecting trade promotion programs such as the Foreign Market Development and the Market Access Programs within the 2018 Farm Bill, are important to us. Ninety-six percent of the world’s consumers reside outside U.S. borders. We recognize that the growth and profitability of the U.S. cattle and beef industry is closely tied to our ability to market our products to those consumers.”
Meanwhile, North Carolina producer David Herring, who serves as Vice President at the National Pork Producers Council indicated on Tuesday that, “Over the past several years, the United States has made significant progress in [Foot and Mouth Disease (FMD)] preparedness through the development of secure supply plans for milk, pork and beef, and [USDA’s Animal and Plant Health Inspection Service (APHIS)] continues to work with the livestock industry to improve its preparedness capability. Fixing the antigen bank capacity and improving vaccine availability must be a priority in future preparedness efforts.
“Establishing a more robust FMD vaccine bank will require a significant increase in budget outlays. (The current FMD efforts are funded at just $1.9 million.) But the cost pales in comparison to the economic cost of an FMD outbreak in the United States.”
Mr. Herring added that:
According to one recent study, prevention of FMD is estimated to be worth $137 million a year to the U.S. pork industry.
“NPPC urges Congress to provide the authority and $150 million a year in mandatory funding for USDA APHIS to protect the U.S. livestock industry from an FMD outbreak,” Mr. Herring said.
Full Committee- Dairy Sector
At the Agriculture Committee hearing on Wednesday, Chairman Mike Conaway (R., Tex.) noted that, “While the entire agricultural industry has been experiencing low prices—leading to a 50% drop in net farm income over the past 4 years—the dairy industry has been in an unenviable position. After hitting $24 per hundredweight in 2014, milk prices fell to around $16 per hundredweight in 2016.
“While we often say that the farm safety net is designed for times like these, the Margin Protection Program in the 2014 Farm Bill has provided virtually no assistance. Underperformance of MPP has resulted in very few producers purchasing buy-up coverage levels in 2017, leaving producers even more exposed to market volatility.”
In its February 2017 Farm Income Forecast, ERS explained that, “Milk receipts are expected to increase $4.7 billion (13.7 percent) in 2017 from 2016, reflecting expected increases in both the price and quantity sold.”
ERS added that, “The Dairy Margin Protection Program (MPP) is forecast to return $15 million to the Federal Government in 2017, after payments from the program are adjusted by the fees and premiums paid by dairy producer participants. This reflects the impact of higher milk prices expected in 2017. Supplemental and Ad Hoc Disaster Assistance payments are forecast to decline in 2017 due to large expected declines in the Livestock Indemnity and Livestock Forage Programs. Conservation payments—reflecting Farm Service Agency (FSA) and Natural Resource Conservation Service (NRCS) financial assistance programs—are expected to decline slightly in 2017.”
Jim Mulhern, the President and CEO of the National Milk Producers Federation stated on Wednesday that, “Dairy farmers have explained to us that even the record prices of 2014 did not fully restore their financial condition from the battering it suffered in 2009 and 2012.”
Mr. Mulhern added that, “All told, the value of the fresh milk produced by America’s dairy farmers in 2016 was down fully 32 percent from its 2014 high, and 19 percent less than what it averaged over the previous five years. In all, these difficult economic conditions facing our industry over the last decade have resulted in the loss of more than 20,250 family dairy farms across the United States, or nearly one-third of our total farms since 2006.”
With respect to policy, Mr. Mulhern stated that, “The reason that MPP has not performed as an effective safety net for our nation’s dairy farmers, as I noted earlier, is because of the arbitrary changes in the formula used to calculate dairy farm feed costs that were deemed necessary to meet the Congressional Budget Office (CBO) score.”
He followed this up by explaining that, “The first area that must be addressed in order to make MPP a functioning risk management safety net relates to the feed cost calculation in the margin formula. It is this feed cost formula that is the central reason the program is currently failing. The current formula reflects harmful changes from the one we initially proposed, again changes that were made at the behest of an incorrect CBO score.”
To remedy this problem, NMPF is seeking restoration of the original feed cost formula that we put forward several years ago.
In his weekly Email newsletter, Ranking Member Collin Peterson (D. Minn.) noted that, “The current Margin Protection Program is an improvement over the previous dairy safety net but sign up has been poor and there are real concerns about its effectiveness. Changes need to be made in order to provide meaningful risk management for the dairy industry.
However, Congressional Budget Office is making our job pretty difficult right now.
“At the hearing, I expressed my concerns about finding a solution that can operate within the budget confines that we have to work with.”
To listen to a portion of Ranking Member Peterson’s remarks on this issue from Wednesday, click on the audio link above.
The House Agriculture Committee continues its work in preparation of the next Farm Bill this week. On Tuesday morning, the Subcommittee on General Farm Commodities and Risk Management will examine commodity policy, while on Tuesday afternoon the Subcommittee on Nutrition will examine the future of the SNAP (food stamps) program.
On Wednesday morning, the full Committee will hold a hearing to review the Farm Credit System.