Biden’s farm problem: sales rise raises questions about bailout money
President Joe Biden and Congress are facing an unfamiliar sight as they design yet another round of pandemic relief programs: a farming economy that is rapidly gaining momentum after years of recession. With surprisingly strong exports to China, declining crop supplies and one of the highest commodity prices in seven years, many farmers are looking forward to a highly profitable 2021 crop.
The upbeat outlook raises questions about whether Washington should start ditching the massive subsidies that have kept manufacturers afloat for years long before the coronavirus pandemic devastated the U.S. economy.
Observer groups say farmers continue to receive disproportionate aid, while troubled sectors such as restaurants and biofuel producers plead with lawmakers for a lifebuoy. But powerful industry and its allies on Capitol Hill say it is too early to announce agriculture and cut federal support, especially amid the ongoing Covid-19 crisis.
There is no doubt that the farm is doing well overall. Corn and soybean prices are rising, and some growers lock in profits by signing contracts to sell their crops before the peak of the fall harvest. Others are holding on, expecting even higher prices this year.
This is a healthier story than it has been in the last couple of years, said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri. This is a more compelling picture than we might have thought even a few months ago.
Positive trends for farmers
The Agriculture Department expects farmers to earn $ 11.8 billion more from crop sales in 2021 than last year. Livestock revenues are also forecast to grow by $ 8.6 billion, although higher grain prices will drive up animal feed costs and affect producers’ profits.
A recent analysis by the center-right American Enterprise Institute found that agriculture is in a strong financial position relative to the rest of the economy and can expect higher commodity prices in 2021. The claims that the sector is facing a severe financial crisis and needs additional government subsidies are exaggerated, analysts write.
Less than a year ago, at the start of the pandemic, the situation was dire. Desperate farmers and ranchers dumped milk, euthanized livestock and plowed crops into the ground as the mounting coronavirus crisis closed schools, restaurants and meat processing plants.
The government responded by injecting historic taxpayer dollars into the sector. Last year, direct subsidies to farmers were paid out at a record $ 46 billion, accounting for nearly 40 percent of the industry’s revenues last year. Sounds like a lot of dollars, but nobody got the whole, says John Linder, president of the National Corn Growers Association. They still had to go through the losses.
Linder, who grows corn, soybeans and wheat on his Ohio farm, said many growers hope to rely less on federal aid now that fundamentals are changing. But there are still many risks, including uncertainty about trading markets and rising production costs.
It’s great to see that 2021 looks like an opportunity for us not to have such big needs, he said. The fields are good, but low. Now that the industry is on a firmer footing, some agronomist economists and observers say Congress should release taxpayers after backing farmers through years of unrest, from the Trump administration’s trade wars to the pandemic.
These farm subsidies need to be cut, says Anne Schechinger, senior economic analyst for the Environment Working Group, a nonprofit group that oversees the farm and the environment. So many Americans are still struggling with the economic crisis caused by the pandemic, but farmers are really doing well.
Agriculture is a high-risk enterprise that is necessary to feed a nation, which is why it has been US policy for decades to help the industry overcome recessions, weather disasters and other disruptions. But in recent years, channeling huge sums of money into the agriculture sector has become almost reflexive for Washington, even as lawmakers argue over whether other industries need money and some complain about the cost of broader coronavirus aid packages.