Agriculture February 2020

Farm Forecast: Unpredictability Ahead

farm forecast

By Tyler Hale

 

After a bruising farming season in 2019, Americans  got a better understanding of what farmers have always known – how much of agriculture is out of their hands.

 

 It’s a truism that farmers are at the mercy of the weather. When they don’t get enough rain, crops can wither without sufficient irrigation. With too much rain, as demonstrated in 2019, fields can be flooded and crops destroyed. But the elements of what farmers can and cannot control extend far beyond the weather.

 

Contemporary agriculture is impacted by a web of global connections from commodity prices, to local legislation, to the vicissitudes of political discourse both at home and abroad. Since 2018, American farmers have been affected by the ongoing U.S.-China trade war – a conflict that has seen agricultural products severely limited to China, which had been the United States’ largest or second-largest agriculture market since 2008. 

 

This vast web of factors has changed the face of agriculture in the U.S. and in Arkansas. Small- and medium-sized farms are increasingly decreasing in number, while large farms are becoming more common. 

U.S. Rep. Rick Crawford

In the 2017 Census of Agriculture, the U.S. Department of Agriculture reported there were 1,464 farms that were 2,000 acres or more – a sharp rise from 30 years prior when there were only 871 farms of a similar size. In the same time period, the number of farms in the 50-179 acre, 180-499 acre, 500-999 acre and 1,000-1,999 acre categories all decreased significantly. The only categories to increase in size, other than the 2,000 acres or more categories, were the 1-9 acre and 10-49 acre categories.

 

U.S. Rep. Rick Crawford, the Republican who represents Arkansas’ First District, attributes the increasing numbers of big farms to “economies of scale,” which allow larger farms, with the assistance of more sophisticated technology, to produce crops at higher profit margins than small farms. This historical development, he says, is the result of lawmaking that was designed to help small farmers but has backfired.

 

Taking the example of crop insurance, Crawford says that excluding large farms from programs has put more pressure on small farms, increasing their costs. Crawford argues that lawmakers have created a situation that forces farmers to either grow or stagnate and die.

Harrison Pittman

“If you’re going to exclude large producers from programs like crop insurance or any other type of program, basically you strengthen the actuary base, increasing the cost to the smaller farmer,” he says. “So much so that the smaller farmer cannot cash flow and the smaller farmers have to become bigger farms. So we have gotten this wrong over the years and instead of having more small farms, we’d actually contributed to the demise of small farms and created fewer farms, but they’re bigger.

 

“There’s this American notion of agriculture here in the United States: mom and pop and three kids and a dog and 80 acres of corn and a mama cow. That’s not the family farm. This isn’t 1920.”

 

This is only one example of how external forces have pressed on U.S. and Arkansas farmers and have impacted their operations. In 2020 and beyond, farmers will have a raft of legislation and other political and economic factors to watch. Their business depends on them.

 

The big issue

 

In January 2020, the National Agricultural Law Center (NALC) released a list of the top 10 agricultural law issues that it had encountered in 2019. These issues ranged from the increasing growth of industrial hemp to labeling laws, to pesticides, the redefinition of the “waters of the United States” and more. For NALC Director Harrison Pittman, though, one issue looms above the others for Arkansas farmers.

 

“In general, I would say the top issue in agriculture, day for day, is trade. I think that has been accentuated in the last couple of years. It started with China clamping off the market for soybeans with the United States,” he says. “Arkansas is a top 10 soybean state nationally, and we’re the largest in the mid-South. When issues like that happen, they do have a major impact.

 

“Sometimes if you were to ask someone involved in the ag industry the same question – what’s the top issue right now – depending on various factors, particularly what commodity they’re producing, you might not get the same answer from each one. It may not be one thing, but trade to me transcends all the commodities. It’s something that they’re all depending on, so to me, it’s always top of mind.”

 

On Jan. 15, President Donald Trump signed a “Phase I” agreement with the Chinese government, in which China agreed to increase its purchase of American goods by $200 billion over two years, including $32 billion in agricultural goods. In exchange, the U.S. agreed to lower tariffs and table the threat of tariffs on $160 billion of Chinese electronics.

 

At the time of the agreement, Agriculture Secretary Sonny Perdue declared that it was a “huge success” for American farmers. “This agreement is proof President Trump’s negotiating strategy is working. While it took China a long time to realize President Trump was serious, this China Phase I Deal is a huge success for the entire economy. This agreement finally levels the playing field for U.S. agriculture and will be a bonanza for America’s farmers, ranchers, and producers,” he said in a statement.

 

Arkansas Farm Bureau President Rich Hillman says the trade agreement has grabbed headlines but requires continued observation.

 

“But we must move forward with the details and accountability of those agreements. China has the need for so many of the commodities we grow and raise in Arkansas, but that deal must be pushed forward and monitored closely to ensure it lives up to its potential,” he says.

 

Pittman notes that the Phase I agreement is not a legislative action that is ratified by Congress like the United States -Mexico-Canada Agreement (USMCA). The agreement, he says, does not have the benefit of congressional oversight and unclear enforcement. If one side or the other did not abide by the agreement, the consequences are uncertain, although it would inevitably impact American producers.

 

“I presume that we could go back to adding tariffs or ratcheting up old ones,” he says. “There may be a desire to, instead of doing tariffs, to take an issue or two and litigate China at the World Trade Organization. That’s definitely an option later on.

 

“Hopefully both sides abide by the agreement in a way that’s satisfactory to the other, and we don’t reach any of those questions.”

 

According to U.S. Sen. John Boozman, the effect of the trade agreement on agriculture should be immediate. While farmers may not feel a major shift, the global wheels will be spun by the agreement. 

 

“These trade agreements don’t just affect farming, they affect manufacturing. They affect so many things,” the Republican says.

 

In addition to the China trade agreement, farmers will be impacted by the USMCA. The trade deal between the three North American countries has been ratified by Mexico, approved by U.S. Congress and awaits President Trump’s signature and ratification by Canada.

Rich Hillman

At home in Arkansas

 

One of the brewing issues in Arkansas is a fight over the composition of the Arkansas State Plant Board, which is responsible for devising regulations for the state’s agricultural community and enforcing those regulations. This battle could impact how farmers are regulated in Arkansas.

 

 According to Act 1056 of 2019, the state plant board is made up of 18 members with seven members appointed by the governor and eight selected by trade associations with two non-voting members selected by the University of Arkansas’ vice president for agriculture and one member selected by the Arkansas State Horticultural Society.

 

Pulaski County Circuit Judge Chris Piazza ruled in December that the state law allowing trade groups to name representatives to the board was unconstitutional. The plant board has since voted to appeal the ruling.

 

“There’s one side that would say they liked the structure the way it is because it basically has people who are already involved in that industry helping make informed decisions about what’s best for the industry itself,” Pittman says. “There’s another side that would say that they think the way it’s structured is antiquated and unconstitutional – that it really needs to be something that’s more under the authority of the executive, in other words, the governor.”

 

Farmers will have to wait to see how this court case unfolds.

 

Decisions made

 

In 2019 and early 2020, lawmakers have made decisions that will impact how farmers go about their business. A new truth-in-labeling law passed by the Arkansas legislature has gone into effect, a victory for agricultural producers – most notably in the rice industry.

 

John Cooper, chair of the Arkansas Senate Agriculture, Forestry and Economic Development Committee, says the passed bill provides both farmers and consumers with increased protection against products that are not produced on a farm.

 

 “Their position is that there are some products that are being manufactured by some process that is not really a product that is produced on the farm,” he says. “… that if you’re calling something rice, that should be rice grown on the farm, not some other substance. There are several different products like that.”

 

At the national level, Trump released a new rule change, redefining what are federally regulated “waters of the United States.” The rule, which changes former President Barack Obama’s 2015 Waters of the United States (WOTUS) rule, specifies that groundwater; ditches, including most farm and roadside ditches; prior converted cropland, farm and stock watering ponds; waste treatment systems and “features that only contain water in direct response to rainfall” are not federally regulated.

U.S. Sen. John Boozman

Looking ahead

 

Agricultural legislation at the state level in Arkansas will be mostly dormant in 2020 during the fiscal session. The federal level of the government, though, will likely be more active in regards to farm legislation.

 

The biggest piece of farm legislation – the national farm bill – is still a few years away, according to Pittman. An omnibus bill is renewed every five years, the most recent one was passed into law in 2018. However, lawmakers will likely start developing ideas for it soon.

 

 “Between now and 2021, people will start gearing up. There’s not a whole lot to plug in now,” Pittman says. “In another year or so, we’ll certainly start seeing more ideas and proposals and changes to the farm bill emerge, but we’re in the middle spot right now.”

 

Crawford is working on several pieces of legislation currently, including a farmer savings account and crop insurance reform. The farmers savings account is designed for risk mitigation, a way to self-fund disaster relief in exchange for tax incentives. 

 

“It’s not crossing the Pacific, and it’s not limited to large scale or smaller scale producers. Anyone can participate. That’s one thing I’d like to see us do,” he says.

 

Crop insurance reform, according to Crawford, is essential to preventing farmers from going out of business. While the legislation has not yet been seen, he says that it is being worked on as a way to solve the repeated Market Facilitation Program (MFP) payments that have been made in recent years to stanch farmers’ losses in the wake of the trade war and natural disaster.

 

Both Boozman and Crawford agree that farmers in the U.S. and Arkansas do not want to be dependent on MFP payments or other federal assistance. However, providing tools to prevent outside forces from driving farmers out of business is a delicate balance that Boozman argues cannot always be accomplished through federal legislation.

 

“Our farmers are very independent. They understand there’s only so much government. It’s a question of striking that balance and that’s why it’s so important when you represent the farm, you can stay in touch with them and we work very, very hard to do that,” Boozman says. “The answers to our problems don’t maybe come from Washington. They need to come from the farming community. And I think so far that, you know, we are striking that balance on compassion and very feasible legislation. This has been a really difficult time for the farm community. As a result, it’s been everybody working together so we can continue to have a very safe and cheap food supply.”

 

As Arkansas agricultural producers head into 2020, they face an uncertain future fraught with the possibilities of continued trade war and depressed commodity prices.

 

“The farmers and ranchers in Arkansas, and around the country, have faced a very challenging front the past several years, to the point that we have lost some farmers and ranchers,” Hillmans says. “A more stable and consistent trade environment can begin to bring profitability back to the farm, which only stands to help our state’s economy, the tax base of our state, and the largest industry in Arkansas.”

 

Lawmakers and other officials, though, are working to provide support as they continue producing food for the global market. This unpredictability, while disconcerting, appears to be the new reality for farmers, who are bound up in a web of constantly shifting market forces. 

 

READ MORE: Arkansas Farmers Grateful to Put 2019 Behind Them

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