The Black Sheep of Climate Change

There's a good interview at NPR's The Salt with Chris Clayton, ag and policy reporter with DTN/The Progressive Farmer, who has become the Cassandra of climate change in the farming community. For those unfamiliar with the general attitude about the subject inside agriculture, it should be an informative read. The impolitic rollout of the Waters of the U.S. (WOTUS) rule by the Obama EPA will have lasting cultural effects among farmers and their perception of government regulations and agency overreach. There's a treatise on energized elitism in that. 

But producers who do not embrace climate change as a reality are taking a dangerous and, sometimes, outright fatuous position. In the first place, planning for environmental variability and thinking long-term about water availability are simply good risk management strategies. The bigger issues is the lost opportunity for farmers to portray themselves as a solution to climatic disruption. If they push the narrative that conscientious farming can sequester carbon, limit emissions, and lead to cleaner water, it's a marketing coup. But it also might lead, eventually, to policy that puts money in their pockets for building soil and the productive quality of their farms. 

It's fascinating and nearly unbelievable to read that, 20 year ago, American Farm Bureau was a primary advocate of cap-and-trade carbon policy:

During the Clinton administration, Farm Bureau was really one of the leaders in helping pitch the concept of a cap-and-trade plan that also partially would have paid farmers for sequestering carbon in soil, using the kind of practices that build organic matter. Farm organizations helped pitch this idea to the Clinton administration. By the time you get around to the debate in 2009, Farm Bureau takes a very skeptical attitude, and then starts inviting some of the strongest climate critics to become speakers at its convention.
— Chris Clayton

Be on Notice: GIPSA Farmer Fair Practice Rules

chickens.jpg

USDA programs are the product of good democratic compromise. While some farm constituencies may not benefit directly, as is the case with small-scale vegetable farmers and safety-net programs like Agriculture Risk Coverage and Price Loss Coverage, they are not actively discriminated against in the rule-making. Rather, the more populous, prosperous, and influential group — row-crop producers, for example — has the loudest voice and the final say. While the outcome may not always be equitable for all of USDA's stakeholders, at least it is without nefarious intent.

It's what happens outside of USDA that creates problems.

The Grain Inspection, Packers & Stockyards Administration’s (GIPSA) “Farmer Fair Practices Rules,” as mandated by the 2008 Farm Bill, are designed to protect contract livestock and poultry farmers from anti-competitive, unfair, discriminatory, and downright abusive practices by vertically-integrated meat processors, who have monopolized their relative markets to a monstrous degree (see Michael Pollan's quote). It's hard to imagine arguing the worth of such a measure — tantamount to the political sacrilege of demeaning the American farmer. However, lawmakers are infinitely subject to suasion, particularly if they hail from states with large poultry companies. Since 2008, the rules have never gone into effect, neutered by what has become known as the GIPSA Rider, a recurring amendment tacked on in the appropriations process to prevent the rules from going into effect. Despite a law on the books to protect farmers, the regulations and enforcement have never made it out of the legislature ... until last fall.

According to one traditional yardstick, an industry is deemed excessively concentrated when the top four companies in it controls more than 40 percent of the market. In the case of food and agriculture, that percentage is exceeded in beef slaughter (82 percent of steers and heifers), chicken processing (53 percent), corn and soy processing (roughly 85 percent), pesticides (62 percent) and seeds (58 percent).
— Michael Pollan, "Big Food Strikes Back"

Per the National Sustainable Agriculture Coalition, the point group advocating on behalf of farmers on this matter, the Farmer Fair Practices Rules, at last finalized, contain two proposed rules, plus an interim final rule:

"The proposed rules address the poultry tournament payment system and issues of undue preference, while the interim final rule clarifies that farmers need only prove they were treated unfairly by a company to secure legal remedy. Currently, farmers are required to not only prove harm to themselves and their businesses, but they must also prove that the result of the harm impacted competition industry-wide. The interim final rule will clarify and underscore the plain language of the Packers and Stockyards Act, which requires no proof of harm to competition from a complainant."

But we're not out of the woods yet. With the Trump administration's pause on new regulations, the comment period and effective dates have been pushed back, with the comment period extending for all rules at least until March.

In the ceaseless hue and cry of current politics, remember GIPSA. The end is so close. As the son of a chicken farmer who suffered the fearful intimidations of the poultry industry, we can't let this die now.

 

Further Reading

The other side's take on GIPSA:

From the National Cattlemen's Beef Association (it's curious that a cattle organization would be so vociferous against GIPSA since the diffuse and individualized nature of the industry would seem to leave it the least affected):

Here's The Poultry Federation's take.

Details on the USDA Farm Storage Facility Loans

Farm Storage Facility Loans (FSFL) provide low-interest financing for producers to build or upgrade farm storage and handling facilities and to store eligible commodities they produce. The program is administered by the USDA Farm Service Agency (FSA).

A producer may borrow up to $500,000 per loan, with a minimum down payment of 15 percent. Loan terms are up to 12 years, depending on the amount of the loan. Producers must demonstrate storage needs based on three years of production history. 

There is a nonrefundable application fee of $100.

Microloans

Producers who select the microloan option can borrow up to $50,000, with the minimum down payment reduced to 5 percent and shorter loan terms. Producers can self-certify the storage needs of the eligible commodity and are not required to demonstrate storage needs based on production history.

Eligible Commodities

  • Grains, including rye, peanuts and rice
  • Pulse crops
  • Hay
  • Honey
  • Renewable biomass
  • Fruits, nuts, and vegetable — cold storage facilities
  • Floriculture
  • Hops
  • Maple sap
  • Dairy products
  • Eggs
  • Meat/poultry (unprocessed)
  • Aquaculture (excluding live-animal systems)

Eligible Facilities, Equipment and Upgrades

The following types of new/used facilities and upgrades are eligible and must have a useful life for at least the term of the loan (this list is not exhaustive, and producers should check with their local FSA office on the eligibility of other retained "equipment," such as returnable CSA boxes):

  • Conventional cribs or bins
  • Oxygen-limiting structures
  • Flat-type storage structures
  • Electrical equipment and handling equipment, excluding the installation of electrical service to the electrical meter
  • Safety equipment, such as interior and exterior lighting
  • Equipment to improve, maintain or monitor the quality of stored grain
  • Concrete foundations, aprons, pits and pads, including site preparation, off-farm labor and material essential to the proper operation of grain storage and handling equipment

For more information and current lending rates, see the USDA Farm Storage Facility Loan Program page

Getting the Farm through 2017

cashreceiptsselectedcrops.jpg

My story on the 2017 economic outlook is up at Growing Georgia. Many thanks to Kent Wolfe, Director of the University of Georgia Center for Agribusiness and Economic Development, and Brady Brewer, Assistant Professor of Agricultural and Applied Economics, for their time. 

Much of the advice from the experts should be obvious for any business operator: know your costs to operate and reduce them in whatever possible. However, as a farmer, there are some agronomic limitations, where revenue opportunity may come at the expense of long-term soil and plant health. I particularly like Brewer's suggestions about diversifying debt, but his recommendation to "get to 2018 with the least amount of damage" also sticks out.

Some of Brewer's comments are copied here for background:


"What we've been advising farmers is now is one of the most important times to know your cost of production. We're starting to transition farmers to where they keep accurate records. They know their input costs and exactly, down to the penny, what it takes to grow a certain crop. But that is our number one recommendation: Knowing your cost of production, what it is going to cost you is step one. Step two is choosing the crop that you think is the sure bet to cover your cost of production. … Different crops bring different risk levels, either through price risk or production risk. Certain crops take more water. Other crops might have historically variable prices. On the output side, those crops might be good in the good times when there's not much chance of going negative. But in times of lean margins, now might not be the time to take those risks. Once you know your cost of production, it's essential to pick the crop that, barring a complete catastrophe, you now is going to get you through this production year. … Let's get to 2018 with the least amount of damage." 

"Take the peanut for example. Due to certain pests, whether it be nematodes or fungus, it's a crop where you don't want to mess a whole lot with the rotation. However, with that said, we have seen some farmers start to tweak their rotation a little bit. Now obviously you can't just go completely away from it. But any tweak that you can do or any slight change is going to help you. Agronomically, if you're at a certain point in your rotation you can't just go completely away from it, but farmers have shown pretty good resiliency in being able to plant a little bit extra of a certain crop in the rotation and take away from another crop in the rotation. Any acre planted to something that is going to help you persevere is going to be better. … You have to think about the long-term so that if you do persevere through the next year, you don't want to completely ruin your soil agronomically. But any tweak is going to help." 

"The strong dollar is not helping us from an economic standpoint. The oversupply of corn and soybeans is really hurting the price for those two commodities. Peanuts and cotton are going to be more demand drive than corn and soybeans. But on the world market just because of the strong dollar, that demand is going to elsewhere just because it's cheaper to find those commodities elsewhere on the international stage. The two commodities that aren't oversupplied — cotton and peanuts — are being hurt by the strong dollar."

"When you speak with bankers they understand what's going in the industry of agriculture right now. They know that farmers' cash flows are tight, and they don't expect a farmer to walk in and say I'm planning for another bumper crop years … They know they're going to have some farmers coming after money, and that money may turn into a negative net loss. What they want farmers to have is a plan in place. Budgeting is going to be essential. If a farmer can go into the bank and say look, this is what my cost of production is, this is what — worse case scenario — I expect to receive at the market. It doesn't look too good, but the good news is that I have some working capital and I'm going to be able to pay you at the end of the year, or most of it. Bankers are going to understand that. From a risk standpoint, I always advise farmers to have multiple lending relationships. Any time you can diversity your banking portfolio, it's going to increase the chances that you keep receiving your lines of credit from lenders. Different lenders have different risk appetites. The more you have, the higher the probability there is that you're going to keep receiving the credit you need."