National Farmers Union President Roger Johnson spent three days this week at the NFU’s annual convention highlighting increased farm-sector stress. He predicted even tougher times ahead thanks to the perfect storm of climate change, trade wars, federal foot-dragging, and corporate consolidation.
Yet as the meeting wrapped up earlier this week, Johnson told Agri-Pulse this perfect storm has created perfect opportunities for beginning farmers who write solid business plans that take advantage of lower entry costs at a time of depressed commodity prices.
“This is a better time to start farming than six or seven years ago” when U.S. net farm income peaked at $123.7 billion, Johnson insists. “No question about it.”
Recalling the 1980s credit crisis when he counseled “farmers who were broke or going broke and lenders who were having to deal with that,” he explains that “The worst time to start farming is when markets are heading higher, because then you’re buying in at a time when all the costs are going up. Then when the market peaks and starts going down, you’re locked into a much higher fixed-cost scenario.”
On Wednesday, USDA predicted a 10 percent jump in net farm income for 2019, but also pointed to increasing debt and production costs for the year ahead. Despite the expected uptick for net farm income to $69.4 billion, that would still be 44 percent below 2013’s $123.7 billion peak and 27 percent below the 2000 to 2017 average of $90 billion.
Johnson warns that after losing “a whole generation of farmers in the 80s, we may well be on the verge of doing that again now.” But “as it turned out,” he adds, “anyone who did start in the latter part of the 80s was better positioned than anybody else in the industry” because “everything was cheaper.”
With that picture of the 1980s in mind, Johnson concludes that today’s current farm-sector stress may have created another “good time to start farming. You just have to be smart about how you do it.”
Johnson is also hopeful that current challenges to the farm sector will wake Congress up to the pressing need for federal farm program changes.
Despite impassioned delegates in the NFU meeting calling for parity payments to farmers, Johnson said that the general sentiment among NFU members favors “some sort of focus on reducing supplies to nudge prices higher ... some form of supply management so that the taxpayer doesn’t end up paying that whole tab.”
Looking for a marketplace solution, Johnson says NFU analyses show the answer lies in supply management because “it doesn’t take very much of a supply reduction to move prices higher. Nor does it take very much of an oversupply to drive prices lower.” As a result, “fairly modest changes in production can have meaningful price impacts.”
To make farm programs work without excessive federal costs, Johnson says, “Let the farmers have total freedom to plant whatever they want wherever they want.” In return, farmers “could get a higher reference price on the condition that they set aside a certain amount of that production.”
Dairy farmer and Wisconsin Farmers Union President Darin Von Ruden is equally focused on supply management. He tells Agri-Pulse he’s pleased the conference agreed on the need for more support for farmers because, “not only dairy, but all commodities, corn, soybeans, beef, pork, we’re all struggling right now.”
Von Ruden insists farmers need to get more control over their own marketing through supply management because “we would much rather be receiving our dollars from the consumer versus getting a government handout.”
He sees the answer as what NFU is proposing: Supply management designed “to connect the consumer more closely to the farmer and not have the taxpayer continue to pay out large subsidies.” He believes the key is “to give farmers the authority to control supplies, to control their inventories.”
Von Ruden explains that agriculture needs to operate like every other major sector of the U.S. economy by controlling supply rather than “continue to oversupply, overproduce.” He says the problem today is that agriculture is “dependent on what the federal government says and deciding our pricing structures on a formula that really is manipulated by some of the markets ... We need to have a larger voice at the table in deciding how much milk we are going to produce.”
Von Ruden notes that Wisconsin Farmers Union has scheduled a series of “Dairy Together” meetings across the country starting later this month to reach consensus on supply management policies.
Johnson says NFU strongly supports federal conservation programs and welcomes the improvements made in the 2018 farm bill for conservation. But he adds that while the Conservation Reserve Program is a plus, it’s not an effective supply management program because its 10 and 15 year contracts do not provide the short-term flexibility needed to dampen market volatility.
Capitol Hill climate action desired, but not expected
Johnson is encouraged by current interest in a “Green New Deal,” but he sees progress on addressing climate change as something “launched by the private sector,” not by an “increasingly dysfunctional” Congress.
Johnson noted that NFU had “millions of acres under contract” in more than 30 states 10 years ago as part of its aggregator program to pay farmers for sequestering carbon. Johnson said that program failed because congressional attempts to pass cap & trade legislation failed. Today, with a sharply divided Congress, he’s not hopeful about any congressional action over the next two years. Despite that, he says NFU is “at the table” to discuss the latest attempts to address climate change.
Johnson points out that despite bleak prospects, “there’s a lot of discussion about climate change in this new Congress and that encourages me because NFU has long accepted the science behind climate change. We have been very forward about saying we need to get the incentives right because agriculture can be a real solution for climate change.”
Johnson’s private sector expectations are boosted by his view that dynamic leadership is coming from “the larger food companies because they’re recognizing that their consumers demand that their food needs to be produced in a more sustainable, climate-friendly way.”
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