The new Farm Bill signed into law on December 12, 2018 generally provides some relief for beleaguered farmers who have been weathering the price volatility brought on by retaliatory foreign tariffs.
We sat down with Christopher Peacock to discuss some of the particular aspects of the new bill, and whether they are good or bad for farmers. At Halderman Real Estate and Farm Management, we provide guidance for owners and investors about farm operations, real estate and the farm economy.
Can you take us through some of the pros and cons of the farm bill for growers and dairy producers?
The bill is enacted for a four-year term, and totals $867 billion, about the same as the 2014 bill. About 76% of the bill is allocated to supporting Nutritional Assistance Program. The remaining 24% is split between Federal Crop Insurance, Conservation Programs, and Commodities.
What are some of the high notes for farmers in the new bill?
One of the best things about the new bill is that it greatly supports the dairy industry, including setting a floor for income for producers. The dairy industry was particularly hard-hit over the past few years.
Also, the federal crop insurance program was included in the new bill at the same rate as the previous bill, which is a relief.
A new "old" crop has been revived. The federal government has approved the production of industrial hemp. Hemp is one of the oldest agricultural crops in the U.S. and has a wide range of uses from CBD oil to paper, to hard plastics. In fact, Betsy Ross' flag was woven from hemp fiber. At one point, even the $10 bill was made from hemp! Estimates are for the hemp industry to grow to as much as $20 billion within the next few years.
What changes, if any, occurred for price and yield support in the PLC and ARC programs?
The new bill helps a lot with giving farmers much more flexibility from year to year. They can elect to participate in either the ARC or PLC program in 2019 and can then switch every year beginning in 2021 through 2023.
With the farm economy overall generating its 3rd lowest net operating income in 28 years in 2018, this is a much-needed risk management tool.
What are some of the reasons 2018 was such a difficult year?
There were a number of factors that converged in 2018. Harvest was delayed for many farmers due to late season rains. Trade challenges and tariffs affected many crops like soybeans very hard. There has also been an expansion in South American cropland due particularly to trade tariffs on U.S. soybeans and a greater trade opportunity for South America. The dairy industry has been financially challenged for the past few years.
For 2019, the costs of production have increased for basic inputs like pesticides and fertilizer. Fertilizer is up 16-19% over the prior year, translating into a cost of about $40/acre. Nitrogen costs were up 20%, and pesticides up about 10%.
The good news is that USDA has projected 2019 to have a 4.7% increase in net farm net income.
If you're still not sure how the new Farm Bill may affect you, contact Halderman Real Estate & Farm Management for prompt assistance. Call us at 800-424-2324 to talk about your needs.