American farmers are not happy. The Ag Economy Barometer is a joint survey by Purdue University and the CME Group that measures the mood of farmers nationwide. It found plummeting confidence as winter approaches.
“These were the weakest barometer and future expectations readings since March 2016, when the farm economy was in the throes of an economic downturn,” the Purdue Center for Commercial Agriculture announced in an October news release. It pointed to “weak output prices combined with high input costs” for the farmers’ funk.
Farm profits are down. Statista has estimated total farm income this year at $116.1 billion, and the final numbers may fall short of that. Even if those projections hold, it would not be great news for domestic food producers. That would still pencil out to the lowest total in four years and two consecutive years of decline.
The estimate also represents total revenues, not profits. Farm revenues are spread out over an industry that employed 2.6 million workers at the last measure, according to the U.S. Department of Agriculture.
The U.S. has just come out of a period of high inflation. Yet even during the last several years of rapidly rising prices, food prices pretty consistently outpaced monetary inflation. What that means is that something else has been pushing up prices, and farmers are quick to say “not it.”
Bad weather is one thing that affects prices, by reducing or even wiping out crop yields and causing other damage to farms. Hurricane Helene is estimated to have done about $125 million in damage to agriculture just in Virginia, for instance.
Farms in Grayson County, in the southern part of the commonwealth, suffered an estimated $58 million of the damage from that hurricane. “We’re not a big county, but we’re hurting,” Virginia Cooperative Extension agent Kevin Spurlin told the trade publication Feedstuffs.
Yet it’s not simply the dumb luck of bad weather that is pushing up food prices. In many cases, amid these rising food prices, farmers who suffered no weather-related setbacks are going out of business. Why?
Farmers and related experts whom the Washington Examiner consulted said rising labor costs, regulations, trade wars, and foreign competition are making it increasingly hard to do business on U.S. soil.
Price takers and profit breakers
In the main, rising food prices have not led to higher per unit payments for farmers. And a tightening of food prices could hit them extra hard.
“Most of our inputs (seed, fuel, fertilizer, feed, etc.) have gone up in price by 15%-20% average while the price we receive … has not gone up as much,” Virginia dairy farmer Dave Grenier said in an email. Some prices in 2023 “were higher but have since fallen back.”
Grenier directed the Washington Examiner to data on the federal “mailbox prices” of milk to prove his point. The average price paid to farmers per hundred pounds of fluid milk at the beginning of 2023 was $22.28. At the beginning of this year, it was $19.14, according to USDA numbers.
Minnesota farmer Jim Schumann agreed with that general dour assessment.
“Food prices paid at the store in of themselves don’t really offset anything,” the Minnesotan told the Washington Examiner. “Yes, the price of grain affects the cost of production for the finished product, but the raw materials are generally the cheapest cost.”
Schumann remembered that “back in 2012 or so, corn prices nearly made $7 locally,” while “today, they may break $4.” Over that same rough period, the land’s value has doubled and property taxes have increased.
Additionally, “seed, fertilizer, equipment, insurance, and fuel have all gone higher,” Schumann said. He lamented that those prices “seldom fall back to where they had been.”
The bottom line is that farmers are seeing hardly anything of the food price increases. Why is that? The way the economy of food production and distribution is structured is one answer. Most farmers are what economists call “price takers,” and that is not a good place to be in the economic food chain.
A price taker is a “market participant that is not able to dictate the prices in a market,” according to the Corporate Finance Institute. “Therefore, a price taker must accept the prevailing market price. A price taker lacks enough market power to influence the prices of goods or services.”
Put in a more colloquial way, “farmers are effectively wholesalers with their products — fruit, vegetables, livestock — being sold to processors, grocery stores, restaurants, and so on, which, in turn, add their price mark up before sale to consumers,” explained Pamela Lewison, a farmer in Washington as well as an analyst for the Washington Policy Center think tank.
Prices on the farm have increased like everywhere else, squeezing profits. “With increases in fuel, minimum wage, taxes, and other input costs, the margin has narrowed from thin to razor thin,” Lewison told the Washington Examiner.
“Trucking, distribution, warehouses, retail, all of those can pass those costs along upstream until it hits the general consumer, except the farmer at the bottom of the chain,” added Dillon Honcoop, head of communications for the group Save Family Farming.
No party for farmers
Farmers have suffered over the last decade because of the policy preferences of both parties. They could lose ground regardless of who enters the White House next, if recent trends hold.
Former President Donald Trump started a trade war with China and many other countries. He promises more of that in a second administration. One of the lowest-lying, well, fruits for those countries to go after when they were leveling retaliatory tariffs was U.S. produce, and they did so with gusto.
The Trump administration admitted some amount of fault in this, a rarity, by using an agricultural slush fund to compensate farmers. Direct federal government payments to farmers surged from $12.9 billion in 2016, the year Trump was elected, to $22 billion in nonpandemic assistance in 2020, the year he was up for reelection.
Payments fell back to $12.2 billion last year under President Joe Biden’s administration, according to data from the University of Missouri’s Food and Agricultural Policy Research Institute. And the Biden administration has tried to sell farmers on the other things it has done to bring back the pre-Trump status quo.
“We welcome today’s news that India has agreed to reduce tariffs on its imports of U.S. turkey, duck, cranberries, and blueberries, creating new market opportunities for U.S. producers and exporters in the world’s most populous nation,” Agriculture Secretary Tom Vilsack said on Sept. 8 of last year, for instance.
There’s another way that the Trump administration could be uniquely difficult for farmers. He has promised to stop the flow of illegal immigrants into the country and deport millions of people whose legal status here is tenuous at best. That would be a huge problem for farm labor.
“The share of hired crop farmworkers who were not legally authorized to work in the United States grew from roughly 14 percent in 1989-91 to almost 55 percent in 1999-2001; in recent years it has declined to about 40 percent,” a recent study by the USDA’s Economic Research Service reported.
Those two issues, trade wars and illegal immigration, are problems for farmers from the Republican Party. On virtually every other issue, from pesticides to groundwater and wetlands regulations to free-range mandates to protections for endangered species and wolves to “equity” in farm payments, the very urban Democratic Party might as well be the “Anti-Farmer Party,” and it shows.
Farm protests in the US?
Across the Atlantic, farmers became exceedingly fed up with attempts by the European Commission and some European Union members to micromanage them via regulation. They launched their own protests that amounted to mini revolts, with long-running political implications. It was a bit like the Canadian trucker COVID-19 lockdown protests, except that no war powers acts were invoked to shut them down.
In the Netherlands last year, a farmer-backed party called the BBB enjoyed a lead in certain opinion polls to take control of the parliament, though it fizzled at the last minute. The current populist majority of the EU’s European Parliament was in part fueled by farm protests. The European Commission announced a “commitment to ease administrative burden for EU farmers,” aka a ceasefire, in March.
Why aren’t farmers in the U.S. taking that confrontational approach? The Washington Examiner put the question to farm advocate Honcoop, who knows a thing or two about protests.
Honcoop comes from farm stock, having worked on his parents’ raspberry farm growing up. He zigged into radio, as the manager of the local news and views station KGMI, and then zagged back into farm advocacy for Save Family Farming.
His talent for weaponizing produce proved uncanny. In one of several interviews, at a restaurant in Lynden, Washington, Honcoop bit into a particularly succulent jalapeno and sent juices flying. The acid hit this writer right in the eye, a good 5 feet across the table.
Honcoop squirted acid in the eyes of Washington state politicians as well, metaphorically, in January. He helped organize a protest by farm workers in Olympia against the state’s new farm overtime law.
“About 300 farm workers rallied Jan. 25 to protest Washington’s agricultural overtime law, which went into full effect Jan. 1 after a two-year phase-in,” reported the farm publication Capital Press.
Those farm workers chanted from the Capitol steps in both English and Spanish, “We don’t want overtime! Overtime will not be paid! We want hours!” Because these were farm workers, legislators had to pay at least lip service to their concerns.
In that case, a very progressive Washington Supreme Court had invalidated a state law for dairy farmers, who were exempt from state laws on overtime pay. The court also opened the industry up to the possibility of lawsuits for alleged back pay, even though they were following the law at the time.
The state legislature headed off the lawsuit threat but phased in a 40-hour workweek as the norm for all farming. Farms thus cut back significantly on hours for workers, who now often have to work for multiple farms to try to make what they once did. Bills in the legislature to try to get a “harvest exemption,” favored by farmers and many farm workers, have not made great progress.
Honcoop hoped to move the needle a little but complained that often farmers’ protests fall on deaf ears in the state legislature. Their influence “continues to dwindle, for a variety of reasons,” he said, and one of those reasons is the disconnect between food producers and people who depend on that food to live.
“When you have lawmakers who answer to a populace that doesn’t know much about this and most of the lawmakers don’t know much about this, you get rules that don’t make sense,” he said. “And you have the farmer who has to implement them whatever the cost.”
Save Family Farming is more in-your-face than most farm advocacy groups. It helps organize protests and takes out full-page ads in Washington newspapers calling legislators out.
These tactics have scored some legislative wins, though mostly of the defensive variety. Save Family Farming managed to beat back an attempt to turn all farm ditches into wide buffer zones to protect the state’s salmon, for instance.
Honcoop said he could foresee a time of mass farmer protest in the U.S. but that it is still a ways in the future.
“We’re moving in that direction,” he told the Washington Examiner. “As more and more people feel the pain, there’s more and more of an appetite for extreme measures. But I don’t think we’re as far down that road [as Europe] yet.”
Farmers in the food chain
In the meantime, a huge number of U.S. farmers face significant threats to their business. Here, the farmer’s well-known knack for jerry-rigging fixes comes in handy.
“Farms compensate by creating local specialty markets or by creating economies of scale to make less on more acres to earn a living,” Minnesota farmer Schumann said. In short: “We adapt.”
A renaissance of urban farmers markets, along with roadside stands and you-pick options, allows farmers to be price setters rather than price takers. These are useful options but usually amount to a small fraction of a farm’s produce.
Some farms have experimented with farm-to-table restaurants, though those come with additional labor and regulatory hassle. Other farms have had at least part of their operations certified as “organic” and gone after that market with a higher markup.
And some farms decide to go big, by building out their own processing and storage facilities. That vertical integration can give them more power to capture additional profits when food prices rise, though at the cost of significant additional debt to service.
Unfortunately, innovation will only take you so far in a shrinking market. Many farmers know this and worry about the future. Honcoop said farmers around the state keep telling him that they are getting out, are considering it, or are committed to keeping it going but utterly unsure how to do that.
“Family farming is in crisis,” he said. “The old ‘get big or get out’ adage is more apropos than ever. That being said, even bigger farms are facing, in some cases, insurmountable pressures.”
Jeremy Lott is the author of The Warm Bucket Brigade: The Story of the American Vice Presidency.
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Publish date : 2024-10-18 12:36:00
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