The crop-price thresholds that trigger government payments to some U.S. farmers should be increased in the next farm bill to account for soaring fertilizer and fuel costs, according to farm groups that testified Tuesday to members of the U.S. House Agriculture Committee.
The committee met to review commodity support programs of the Agriculture Improvement Act of 2018, which is set to partially expire next year. The series of congressional discussions that lead to finalized farm bills can go on for well over a year.
Representatives of groups that advocate for farmers of about a dozen crops — including corn, soybeans, wheat, rice, peanuts and others — were universally concerned about increases in so-called “input” costs — the amount they pay to plant, grow and harvest the crops.
Double- and triple-digit percentage increases in those costs in the past year mean that farmers must be able to sell their crops at higher prices to recoup the extra expenses.
The farm bill’s Price Loss Coverage program makes payments to enrolled farmers when average crop prices are lower than certain thresholds, which are different for each crop. The payments are meant to help mitigate potentially crippling revenue losses.
The farm groups say the thresholds — or “reference prices” — have not kept pace with growing costs.
Here’s an example: The current reference price for soybeans is $8.40 per bushel, but the current estimated cost to produce each bushel is about $11, said Brad Doyle, president of the American Soybean Association.
“Our profitability is at risk now,” Doyle told committee members.
However, soybean prices are very high right now at more than $16 per bushel — the highest they’ve been in nearly a decade.
Doyle and members of the other farm groups declined to reveal what reference prices they desire but pledged to do so later this year.
Rice farmers at risk
U.S. rice production is at particular risk because those farmers often operate on smaller profit margins, said Jennifer James, a rice farmer in Arkansas. It has been difficult for James and other U.S. farmers to compete with farmers in China — the world’s largest rice producer — in part because that country has improperly subsidized its crops, the World Trade Organization has found.
The estimated $500 million increase in input costs this year for domestic rice farmers could lead some of those farmers to switch to other crops, James warned. The United States produces less than 2% of the world’s rice but accounts for 6% of global exports, according to the U.S. Department of Agriculture.
“Rice farmers simply can’t compete without U.S. farm policy to help level the playing field,” James said.
Jaclyn Ford of Alapaha, Georgia, representing the National Cotton Council, said the Price Loss Coverage program should take farmers’ profit margins into account when determining the payouts.
U.S. Rep. Randy Feenstra, R-Iowa, urged his fellow lawmakers to turn to biofuels produced from corn and soybeans to reduce the country’s reliance on foreign energy that has become more expensive.
“We’ve all seen how Russia chose to needlessly attack Ukraine, and the consequences of this will be significant to our agricultural community and even the farm bill,” he said. “Today, the U.S. imports 206,000 barrels of crude oil from Russia every single day. This must stop. We must become energy independent, and biofuels are ready to fill that gap.”
The farm groups also said Tuesday the USDA’s Farm Service Agency needs more staff and better outreach to help farmers navigate the Price Loss Coverage and Agriculture Risk Coverage programs. The former makes payments to farmers if prices drop below the reference prices; the latter makes payments based on total revenue losses. Each year, farmers can chose between the two programs.
The coronavirus pandemic also affected farmers’ participation in the programs because they were forced to submit information electronically rather than in face-to-face interactions with agency staff, said Chris Edgington, president of the National Corn Growers Association and an Iowa farmer near Saint Ansgar.
“Them not being able to go into the office has been a real hindrance,” he said.
This story was originally published by the Iowa Capital Dispatch.