By Bill Horan: Rockwell City, IA
The Department of Agriculture has announced that it will spend $20 million to buy cheese from dairy farmers. The purpose of the purchase, according to an August 23 press release, is to assist “the stalled marketplace for dairy producers whose revenues have dropped 35 percent over the past two years.”
By recent standards, this isn’t exactly a massive bailout program—we’re talking millions of dollars, not billions—but it could be an ominous sign of things to come.
All across agriculture, production is up and prices are down. This fall, on my farm in Iowa, I expect to have a bumper crop of corn, growing more than 200 bushels per acre but also losing as much as $1.50 per bushel. Other farmers who grow different crops will suffer large losses as well, many of us for the third year in a row. Cutting back on our acreage won’t help because we have substantial fixed costs.
So, we’re going to hear more demands for emergency aid. The National Milk Producers Federation probably hopes the USDA’s cheese purchase is just a down payment: Earlier in August, it had requested up to $150 million in special assistance. Rep. Jim Moran, a Kansas Republican, wants the government to buy excess wheat. Boosting the ethanol mandate from 10 percent to 10.5 percent or even 11 percent would help corn farmers, though it would also raise gas prices.
Perhaps a few of these short-term solutions make sense. Even if they don’t, many farmers will applaud them, joined by bankers and suppliers who want to be paid back for the loans they’ve made and the equipment they’ve sold.
The calls for help could grow even louder in just a few weeks because we’re on the threshold of what might be the biggest harvest in the history of U.S. farming. In my area, the weather has been just about perfect, with hot days, cool nights, and timely rains, plus no major storms or flooding. I’m hearing similar reports from farmers who grow different crops in other states. Combined with advanced seed technologies, improved crop protection, and the revolution in precision farming, we’re growing more food than ever before.
Normally this would be excellent news. Yet at a moment of oversupply and weak demand, not to mention a strong dollar that discourages exports, it will make a bad problem worse.
Most farmers will just have to tough it out. Some years, when both yields and prices are high, we hit it big—and that’s when we have to save our money, for times like these. Over time, we enjoy gains, suffer losses, and eke out a living.
Then there’s the old saying: The cure for cheap corn is cheap corn. Today’s oversupply will persuade many farmers to switch to other crops, such as millet and pinto beans. Next year’s commodity situation could look very different, depending on everything from the unpredictability of the weather to the thousands of individual choices that farmers make in the coming months.
Lawmakers in Washington probably can’t stop themselves from reacting to the problems of the moment, but they’d be wiser to focus on expanding long-term opportunities. Foreign customers already buy more than $120 billion in U.S. farm products each year—and they might be encouraged to buy even more, if only Congress will approve the Trans-Pacific Partnership, a proposed trade agreement between the United States and 11 other nations.
TPP would boost farm exports over the next 15 years by $7.2 billion, according to the U.S. International Trade Commission. The benefits would spread across many agricultural sectors, but the biggest bumps would come in specific categories: $1.2 billion in new dairy sales to Canada, $840 million in new beef exports to Japan, and $721 million in new deliveries of fruits, vegetables, and nuts to Vietnam.
Farmers don’t need aid programs—we want trade opportunities. Customers are a much better and more reliable source of revenue than taxpayers.
Bill Horan grows corn, soybeans and other grains with his brother on a family farm based in North Central Iowa. Bill volunteers as a board member and serves as Chairman for the Global Farmer Network.
A version of this column first appeared in The Wall Street Journal on September 3.