Skip to main content
You have permission to edit this article.
Federal farm programs helps ag producers through economic lows

Federal farm programs helps ag producers through economic lows

  • 0

The United States Farm Bill, established in 1933 and originally put in place to assist farmers through market fluctuation during the Great Depression, continues to play a crucial role in historical and modern agriculture production. It’s proving to be even more vital in 2020.

“Anytime we talk about farm programs and their impacts, it is important to remember the reason for them,” Jay Rempe, Nebraska Farm Bureau senior economist, said. “Food security is national security for America.”

The first United States Farm Bill and federal farm aid programs, put in place 87 years ago by President Franklin D. Roosevelt, allowed the government to provide financial support to farmers during economic lows in agriculture markets.

“It is hard to say for sure what agriculture would look like without farm programs, but it’s possible we could see fewer, but larger farms with agriculture being more vertically integrated,” Rempe said.

The presence of farm programs proves to be just as significant to producers in 2020, as it has been in the past. Nebraska Farm Bureau President Steve Nelson said the role of farm programs and federal assistance in 2020 is vital to the agriculture industry.

“Many farmers and ranchers were already feeling financial challenges prior to this year due to low prices, flooding, and trade disputes,” Nelson said, “The COVID-19 outbreak has only increased the financial difficulty. Some estimates suggest aid or assistance could account for 30-50% of net farm income this year. If so, the assistance will be crucial for helping farmers and ranchers weather this unprecedented situation.”

Through the key role of federal farm programs, farmers have been able to manage year-to-year market volatility, protecting them during years when prices are low.

When in comparison to the early development of federal assistance programs, the goal of sustaining the food supply chain remains consistent throughout modern day farm programs, but today’s approach differs.

“We are now in a transition of focusing more on helping producers manage risk as opposed to explicitly trying to prop up an income, we support crop insurance and other insurance products at a much greater level,” Brad Lubben, University of Nebraska Extension associate professor, policy specialist and director of North Central Extension Risk Management Education Center, said, “In fact, more federal dollars are spent on crop insurance programs than on direct commodity programs.”

The transition of farm programs over the years, has involved a change of focus from price support, to income support and now onto at least a partial transition toward risk management, Lubben said, but some tools are still available to producers which represent both income support and risk management.

“We have made those moves in the sake of efficiency, and cost effectiveness,” Lubben said, “And moving toward risk management to let producers manage risk as opposed to inflating them from risk, seems to be a more efficient tool to allow the ag sector to adjust and to continue to prosper over time.”

Rempe said an example of the importance of risk management usage is last year’s occurrence of flooding in the eastern part of the state and blizzards in the western part of the state. Risk management approaches gave producers the ability to come back from circumstances which were beyond their control.

“But we do still have a mix of tools today that represent both income support and risk management,” Lubben said. “If you talk about sugar beets right there in Scottsbluff, recognize that we still have policy that are intended to manage supplies in a way to support prices, so we even still have some of those older generation policies available to producers.”

The Coronavirus Food Assistance Program (CFAP) recently put in effect aims to assist producers who have suffered a 5% or greater price decline due to market supply chain disruptions caused by COVID-19, another example of federal aide to combat circumstances which are beyond the producers control.

“Farmers and ranchers would much rather make their living from markets than government assistance. With that said, the challenges facing the agricultural economy and the reality that agriculture could be one of the slowest sectors to recover from the COVID-19 pandemic could prolong the need for some assistance. Only time will tell,” Nelson said.

With commodity market lows due to COVID-19, and the substantial dollars put into ag producers cash flow through CFAP, Lubben said this initiative could assist some producers which were otherwise going to be pushed out of business or pushed into substantial financial adjustment.

“The next Farm Bill is supposedly due in 2023, we just put the 2018 Farm Bill to bed in terms of getting programs implemented. It’s time to start talking about the next one and yet so many issues are overshadowing what farm policy looks like that its hard to imagine what the next Farm Bill debate really looks like,” Lubben said. “Fundamentally, the future of farm policy is really difficult to assess right now because to wean ourselves back off of that substantial assistance seems very challenging to return back to the traditional sort of policy development system.”

Be the first to know

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Get up-to-the-minute news sent straight to your device.