Farmers are feeling the pain of the continued slump in commodity prices, American Farm Bureau Federation President Zippy Duvall told Congress.
Duvall addressed the House Subcommittee on General Farm Commodities and Risk Managment on the state of the agricultural economy on April 14. He noted that lower prices will affect income for all farmers and ranchers, but will have an even greater impact on new and young farmers who have not built up equity, are renting a significant portion of their land or are paying off equipment.
"The bottom line is that farmers and ranchers are being forced to tighten their belts and pay much closer attention to their financial situation," Duvall said. "They will be in greater need of safety net and risk management programs than has been the case for some time — for some, since they started farming."
Duvall's testimony included a long list of bad economic news including downward spiraling prices for the cotton and dairy industry. Only a few years ago, cotton was commanding 80 cents per pound. Today that price hovers in the 50 cent range.
"Industry analysts indicate there is in excess of 100 million bales of cotton lint on hand worldwide, with China alone holding more than 60 million bales," Duvall said. "The carryover stocks along with strong competition from manmade fibers have pushed market returns for cotton farmers down an estimated 23 percent in the last two years."
Dairy farmers are also struggling. Milk that was selling for $20 or more per hundred pounds a couple years back now fetches $15 or $16.
"Recently, we have seen all-milk prices decline by more than $5 per hundredweight, with projections for this year staying in the $15 to $16 range," Duvall told Congress.
Net farm income, which includes other factors like depreciation, inventory change and other non-cash costs, declined from $123 billion in 2013 to $56 billion in 2015 and is estimated at $55 billion for 2016.
In addition, longer-term projections by the Agriculture Department leave net cash income averaging less than $80 billion for the coming decade and net farm income at less than $70 billion over the same period, Duvall said.
In response, farmers and ranchers boosted production, bringing more land into production and expanding herds and flocks.
"As we all have witnessed, the outcry of just a few years ago regarding rising food costs is now pretty much just a memory," Duvall said. "As our economists have warned over the years, once demand stops growing and the inherent delay in those signals reaching farmers and ranchers is realized, agriculture experiences a period of effectively producing the profit out of the system. And that's where we find ourselves today."
Bad news notwithstanding, the Farm Bureau president found hope on the horizon. Duvall told lawmakers there were numerous things they could do to help the farm economy, including approving the Trans-Pacific Partnership to raise overall farm income without adding to government spending.
"Demand growth will be critical to helping the sector get out of this revenue downturn. The Trans-Pacific Partnership is a great example of action Congress could take that would help raise farm income without the need to boost government spending," Duvall said. "This agreement, when fully implemented, will boost animal protein exports to Japan and other Asian countries, and has the potential to raise net farm income by $4.4 billion on an annual basis. Passage of that agreement
is one of the American Farm Bureau Federation's highest priorities."
Other measures include stopping the Waters of the U.S. rule, which places additional costs and burdens on farming; reversing spill prevention and control requirements that add costs without clear environmental benefit; and establishing a nation-wide labeling standard for genetically modified food to avoid a patchwork of state laws.
"We appreciate your leadership and look forward to working with you as you seek ways to ensureAmerica's farmers and ranchers are sustained through the economic challenges we face today," Duvall said.