American Farmers to Feel Some Economic Pain in 2016
By Lorrie Baumann
U.S. Secretary of Agriculture Tom Vilsack said February 25 that he’s optimistic about America’s farm economy. “It’s easy to look at things in a pessimistic view because of softening commodity prices and decreasing farm income, but I don’t share that pessimistic view,” he said.
Vilsack was speaking at the U.S. Department of Agriculture’s annual Agricultural Outlook Forum, which is intended as a discussion of novel and innovative ways to expand opportunity and provide support for America’s farming families. He noted that among his reasons for optimism is that the unemployment rate is falling in rural America, and rural America’s poverty rate is also falling. “We’ve lent a hand in making sure that rural America continues to thrive,” he said.
Vilsack’s sunny outlook is in dramatic contrast to the more dismal forecast offered by the department’s Economic Research Service, which is forecasting a $9.6 billion drop in cash receipts for the country’s farm sector. ‘The expected drop in 2016 cash receipts is led by declines in nearly all major animal/product categories (including dairy, meat animals, and poultry/eggs), as well as vegetables and melons,” according to the USDA’s farm income forecast for 2016. Those drops in farm income are driven by falling commodity prices that reflect higher production. While farmers have tightened their belts on expenses, commodity prices are falling faster, which means that farmers are likely to have to borrow more money to stay in business, according to USDA Agricultural Economist Ryan Kuhns. Farmers will also offset some of the decline in their revenues through federal subsidies, which are dependent on commodity prices. Direct government farm program payments are forecast to rise by 31.4 percent in 2016 to $13.9 billion, according to the USDA.
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Strong export sales of American agricultural commodities over the past seven years as well as increased numbers of acres enrolled in conservation programs are bright spots for American agriculture, Vilsack said. He added that the USDA has invested to provide additional jobs in rural America so that more jobs will be available to farmers who need off-farm income to keep their family farms afloat. “Because of the investments and hard work of folks in rural America, I’m optimistic about the welfare of farm communities,” he said. “I’m extraordinarily optimistic about he future because I see the potential for expanded exports.”
He noted that the Trans-Pacific Partnership agreement, which would reduce or eliminate tariffs on American exports to member countries – which can be as high as 700 percent for American agricultural products – would provide extra opportunities in countries with which the U.S. does almost half of its trade and which have expanding middle classes. “They are expanding middle classes and they are interested in our agricultural products – our quality is the best, and our safety is the best,” Vilsack said. “Our expanding efficiency will keep us competitive on the world market.” Through expanded trade with countries like Japan and China, TPP can increase annual net farm income by $4.4 billion, compared to not approving the pact, according to the American Farm Bureau Federation.
American farmers are growing more efficient and more productive, and 95 percent of the world’s consumers of products, services and goods living outside the U.S., said Vilsack, who noted that there’s an opportunity cost to delays in approving TPP because American food producers are missing out on those new markets in the meantime. Vilsack noted that the Cuban market presents an opportunity for American food exporters. “We should be dominating the Cuban market. There’s tremendous demand in Cuba, which imports about 80 percent of what they need to feed their people. We have the logistics capability to dominate that market.” He added that before that can happen, the U.S. will need to lift its current embargo against Cuba. That embargo currently forbids the USDA to use any of its programs for Cuban trade.
