President Joe Biden and Congress are facing an unfamiliar sight as they craft another round of pandemic relief programs: a farm economy that’s rapidly heating up after years of decline.
Fueled by surprisingly strong exports to China, shrinking supplies of crops and some of the highest commodity prices in seven years, many farmers are anticipating a highly profitable 2021 harvest.
The upbeat forecast is raising questions about whether Washington should start peeling back the extensive subsidies that have kept producers afloat for years long before the coronavirus pandemic devastated the U.S. economy.
Watchdog groups argue that farmers keep getting a disproportionate amount of help while struggling sectors, like restaurants and biofuel producers, beg lawmakers for a lifeline. But the powerful industry and its allies on Capitol Hill say it’s too early to declare agriculture in the clear and pare back federal support, especially while the Covid-19 crisis rages on.
There’s little doubt things are looking up for the farm economy overall. Corn and soybean prices are soaring, and some growers are locking in profits by signing contracts to sell their crop before the peak of the fall harvest. Others are holding out, anticipating even higher prices later this year.
“It’s a healthier story than we’ve had the last couple years,” said Patrick Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute. “It’s a stronger picture than we would have thought even possible a few months ago.”
Positive trends for farmers
The Agriculture Department expects farmers in 2021 to earn $11.8 billion more from selling crops than they did last year. Livestock receipts are also projected to climb, by $8.6 billion — although higher grain prices will increase animal feed costs and eat into producer’s profits.
A recent analysis from the center-right American Enterprise Institute found that agriculture is “in a strong financial position compared to the rest of the economy and can expect higher commodity prices in 2021.”
“Claims the sector is facing a serious financial crisis and needs more government subsidies are overblown,” the analysts wrote.
Less than a year ago, at the start of the pandemic, the situation was dire. Desperate farmers and ranchers were dumping milk, euthanizing livestock and plowing crops into the ground, as the spiraling coronavirus crisis shut down schools, restaurants and meatpacking plants.
The government responded by pouring historic amounts of taxpayer dollars into the sector. Last year, a record $46 billion were paid in direct farm subsidies, accounting for almost 40 percent of the industry’s earnings last year.
“It sounds like a lot of dollars, but no one got whole,” says John Linder, president of the National Corn Growers Association. “They still had to weather losses.”
Linder, who grows corn, soybeans and wheat on his Ohio farm, said that many producers are looking forward to relying less on federal aid now that the fundamentals are turning around. But there’s still plenty of risk, including uncertainty about trade markets and rising production costs.
“It’s refreshing to see 2021 looking like an opportunity for us to not be in as big of a need,” he said. “Margins are good, but margins are thin.”
Now that the industry is on more solid footing, some agricultural economists and watchdogs say Congress should let taxpayers off the hook after bolstering farmers through years of turmoil, from the Trump administration’s trade wars to the pandemic.
“These farm subsidies need to be curtailed,” says Anne Schechinger, senior economic analyst at the Environmental Working Group, a nonprofit farm and environment watchdog group. “So many Americans are still struggling with the pandemic-induced economic crisis, but farmers are really doing well.”
Agriculture is a high-risk venture and essential for feeding the nation, so it’s been U.S. policy for decades to help the industry navigate downturns, weather disasters and other disruptions. But in recent years, steering huge sums of money to the farm sector has become almost reflexive for Washington — even as lawmakers haggle over whether money is needed for other industries and some complain about the price-tag of broader coronavirus relief packages.
“Farm groups have really powerful lobbying firms,” Schechinger said. “That definitely adds to it.”
It’s likely that Biden’s administration will take a different tack than former President Donald Trump, who frequently bragged about the high amount of farm bailout money on the campaign trail. The U.S. Agriculture Department is largely in a holding pattern while Tom Vilsack awaits Senate confirmation to become secretary, which is expected next week.
For now, the department has paused the latest round of coronavirus relief checks for farmers and ranchers. The new administration still has to decide how to distribute the bulk of the $13 billion in agricultural aid that Congress approved in December, and the latest $1.9 trillion stimulus proposal includes billions more for farmers.
During a virtual forum to discuss the 2021 agricultural outlook, USDA Chief Economist Seth Meyer said Thursday that department leaders are “intensely discussing what the next step is” on coronavirus relief payments, including a review of how much money is available in various pots and where gaps exist in the current aid programs.
“These are discussions that will happen in earnest, should the secretary be confirmed next week,” Meyer said.
Vilsack hasn’t yet hinted at any major pivot in terms of farm subsidies in general, though a steep dropoff from last year’s record levels is likely. Instead, USDA insiders suggest the focus will be on distributing assistance more fairly across disparate regions and sectors of agriculture.
“There are a lot of producers who have been hurt by Covid-19 market disruptions, trade disputes and extreme weather — and it’s the department’s responsibility to provide as much help to as many producers as possible without focusing on one group or geography at the expense of another,” said Matt Herrick, a spokesperson for the department. “What we’re doing now is determining how to get it right.”
More aid on horizon
Meanwhile, Democrats are fast-tracking yet another pandemic relief bill that includes more than $16 billion for nutrition and agricultural support. But in a shift from previous rescue packages, there’s less no-strings-attached money for producers and more focus on supply-chain upgrades, safety protections for food and farm workers, and financial relief for historically underserved farmers.
Republicans are also starting to show more interest in reining in USDA’s sweeping authority to dole out money at will — namely through the Commodity Credit Corporation, a Depression-era agency created to stabilize the farm economy in times of volatility.
The Trump administration made unprecedented use of that pot of money to send more than $23 billion in trade bailout checks to farmers from 2018 to 2020, and Congress funneled much of its agriculture-related pandemic relief through the fund.
Arkansas Sen. John Boozman, the new top Republican on the Agriculture Committee, has already brushed back calls from industry groups and lawmakers in both parties to expand the fund’s borrowing cap to $60 billion or beyond, which would give USDA even more of a blank check to prop up producers.
“That’s not going to happen anytime soon,” Boozman told POLITICO after Vilsack’s confirmation hearing. “The idea of giving not just this secretary but any secretary a $60 billion slush fund every year, I don’t think Congress is exactly ready for that.”
The GOP resistance is partly due to Vilsack’s interest in using the CCC to fund a “carbon bank” to facilitate payments to farmers and ranchers who sequester greenhouse gases in their soil. That idea has become a focal point for Biden’s climate agenda at USDA, even though there’s disagreement about his authority to act without authorization from Congress and skepticism about how beneficial such a program would be for the environment.
Schechinger of EWG is among the skeptics of the carbon bank concept, claiming it would be just the latest iteration of ad hoc support to the sector.
“It’s a way to continue these farm subsidies, but under the guise of fighting climate change,” she said.
Helena Bottemiller Evich contributed to this report.
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