FOCUS ON AG
August 22, 2022
KEY AG POLICY ISSUES BEING ANALYZED
For several years, Farmfest has been a major event for discussing key issues affecting farm families, the ag industry and rural communities in Minnesota and the Midwest. Many of these same issues will likely frame the discussions on ag and rural policy issues in Washington, DC in the next couple of years. In addition to bringing together numerous ag and rural leaders, this year’s Farmfest also featured a Minnesota Governor Candidates Forum and two Congressional Candidate Forums, with all major candidates participating. This allowed for some lively discussion and perspectives on many of the key issues affecting agriculture and rural communities.
Following are some of the main issues that were discussed during the Farmfest forums this year:
- Developing the Next Farm Bill — Congressional discussions on the next Farm Bill began earlier this year and will likely continue into 2023. The current Farm Bill expires on September 30, 2023, so the current farm programs will still be in place for the 2023 crop year. The key messages that surfaced related to the next Farm Bill from agricultural leaders, as well as from some of the candidates for Congress that were at Farmfest, included:
- Protect the Federal crop insurance program as the corner-stone risk management tool for farm operators, and do not make large adjustments to the program. Some key questions with the crop insurance program are how to provide insurance for newer crops and when utilizing cover crops. Some groups would like to limit crop insurance benefits based on farm size; however, most ag groups oppose this idea. There was also discussion of modernizing a risk management program for livestock producers that is similar to the crop insurance program.
- Update the crop provisions (PLC and ARC-CO) in the Commodity Title of the Farm Bill to address the rising crop input costs, and to more closely match today’s market prices for various crops. This could involve increasing crop reference prices and loan rates, as well as making adjustments to the ARC-CO program payment formula. There was also some discussion about the need to make some adjustments in the Dairy Margin Protection program and the dairy support price formula.
- It will be interesting how the proposed provisions for “climate-smart” agriculture that are included in the large “Inflation Reduction Act”, which was signed into law, get rolled into the next Farm Bill. The legislation calls for a rather large expansion the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP), which are currently covered in the Farm Bill under the Conservation Title. There will also likely be considerable discussion regarding the expansion of the maximum Conservation Reserve Program (CRP) acres beyond the current maximum of 27 million acres, as well as increasing the maximum annual rental rates for CRP acres in order incentivize greater enrollment into the CRP program.
- Some concern was raised about the overall cost of the wide range of programs covered by the Farm Bill legislation, especially the rapidly rising costs of programs under the Nutrition Title. However, most participants in the Farmfest forums felt that the Farm Bill should continue to be a “food and agriculture security program” and that the Nutrition Title should remain included in the legislation.
In addition to farm programs, crop insurance, conservation programs, and the food assistance programs, the Farm Bill also provides provisions and funding for many rural development and low interest loan programs that benefit communities and small businesses, provides support for renewable energy, and provides funding for ag research and extension education efforts at land-grant universities. When a Farm Bill is passed by Congress, it is typically one of the most comprehensive pieces of legislation that is approved on a regular basis. Provisions contained in the Farm Bill affect every State in the U.S. and impact every congressional district in the U.S. Congress.
- Climate-Smart Agriculture — The recently passed $739 billion “Inflation Reduction Act” was widely discussed at the candidate forums, with some panel members touting the benefits to farmers and residents of rural areas, while others on the panel questioned the “high price tag” of the legislation. The core spending in the legislation (approx. $369 billion) will be targeted toward enhancing electric vehicles, expanding renewable energy, and reducing carbon emissions by utilizing a series of tax incentives. The legislation would provide $20 billion for so-called “climate-smart agriculture” practices, by providing incentives to farm operators to implement farming practices through existing EQIP, CSP and regional conservation partnerships.
- Renewable Energy — Future energy policy in the United States and in Minnesota received considerable discussion and debate during the forums, including the promotion of electric vehicles and the clean fuel standards that were adopted in California. The biggest issue affecting farmers and rural communities surrounded the role of ethanol and biodiesel in future energy policy. After passage of the Inflation Reduction Act, there is considerable anticipation around the development of renewable diesel from soybeans and the potential use of ethanol blends for sustainable aviation fuel (SAF), as well as for the added incentives to offer higher ethanol blends at gasoline pumps across the U.S.
- Rising Input Costs — A major discussion item at Farmfest was the rapidly rising input costs for crop and livestock production. Production expenses for fertilizer, chemicals, fuel, labor, repairs, and livestock feed have risen sharply in the past twelve months, which has some producers and analysts concerned about profit margins as we look ahead to 2023. In addition, land rental rates went up significantly for 2022 and are expected to increase again in 2023 in most areas. Interest rates on farm operating loans have increased by 2-3 percent in the past six months in most locations, due to the increases in the prime lending rate by the U.S. Federal Reserve. Farm operators have had some favorable market prices in 2021 and 2022, which resulted in favorable profit levels. However, there is concern as to whether market prices will continue at a level to support the higher input costs for 2023, in order to maintain farm-level profitability
- Livestock Related Issues — There were many issues affecting the livestock industry that were surfaced during the Farmfest forums. Efforts by the USDA, State Agriculture Departments, and the livestock industry to manage the outbreak of pandemic livestock diseases was a major discussion topic. Earlier this year, we have had the second major outbreak in recent years of avian influenza (HPAI) in the Upper Midwest, resulting in the loss of millions of birds and causing significant financial impact to poultry producers. The pork industry is very concerned about the presence of African Swine Fever (AFS) disease in the western Hemisphere and the protocols that are in place should AFS disease reach the U.S. border. Pork producers are also being challenged by the implementation of “Proposition 12”, which would require expensive updates to pork operations in order for the pork produced in the Midwest to be sold in California. Beef producers are concerned with the worsening drought situation in many cow/calf production areas of the U.S., as well as monitoring the Congressional and Department of Justice investigations into the beef processing industry. There was also a lot of discussion about providing the financial resources and necessary workforce for the expansion of local meat processing plants.
There were numerous other issues and topics that impact farmers and rural residents of the Upper Midwest that were surfaced during the forums. These topics included carbon sequestration, rural health care, labor shortages, farm transitions, increasing broadband coverage, infrastructure needs, and expansion of ag education opportunities. These topics and more will likely lead to important policy discussions as we head into the mid-term elections this Fall and will drive future policy debates in Congress and at the State legislative level.
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960) E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/