The problem with betting agriculture on exports

Via The Hill

Photo via The Hill / Getty Images

This article first appeared in The Hill as an opinion column on June 5, 2018.

An unspoken assumption in the farm bill is that in most years farmers will lose money from the market. Congress tacitly accepts these routine financial losses through its support of a variety of farm subsidy programs designed to soften the blow. The clear winners from this system are agribusiness buyers accessing cheap grain and feed while operating in global markets. As it writes a new farm bill, Congress should chart a new course by supporting a transition toward emerging, more profitable markets for farmers.

Farmers are feeling the weight of the 2014 farm bill. Four straight years of low prices, rising debt and more dark clouds on the horizon with escalating trade fights with major partners China, Mexico and Canada. Mental health and suicide hotlines are springing up in farm states. The state of the farm economy, with below-cost commodity crops, is not an anomaly, but rather “a return to normalcy,” according to Ohio State University and University of Illinois economists.

This below-cost “normalcy” stems from the farm bill’s blind faith devotion to expanding export markets. Combined with a series of free trade agreements, like NAFTA, the farm bill supports an agriculture economy that depends on volatile global markets to absorb the over-production of commodity crops like corn and soybeans. Several decades of mergers have left a handful of global companies controlling most segments of U.S. agriculture. Within this system, U.S. farmers are highly vulnerable to the whims of global agricultural markets and the global firms that play there.

While conventional agriculture markets struggle, a growing number of farmers see a profitable path forward in smaller, but higher-value, domestic markets emphasizing health and environmental sustainability. Increasing consumer and food company demand, often outstripping supply, is driving price premiums in the organic, grass-fed, non-GMO and locally-sourced markets. Food companies are responding to investor calls for greater environmental sustainability by increasing investments in these emerging markets. 

Farmers and ranchers are paying attention. Between 2015 and 2016, the number of certified organic farms increased 11 percent and certified acres expanded to 5 million. The number of 100 percent grass-fed cattle producers has grown from 100 in 1998 to an estimated 3,900 in 2017, according to the Stone Barn Center. In 2015, more than 167,000 U.S. farms produced and sold food locally through food hubs and other intermediaries, direct farmer-to-consumer marketing, or direct farm to retail, according to the National Sustainable Agriculture Coalition.

These shifts in consumer preference, and the marketplaces that serve them, offer new opportunities for both higher prices and in some cases, lower production costs for farmers. But the transition to new crops or systems of grazing require farmers to take risks — a difficult proposition in the current downturn.

Some certifications needed to access these markets can be costly and take time — for example, the transition to organic takes three years. Surges of imports, often fraudulent, continue to undermine domestic organic and grass-fed markets. Additionally, a robust infrastructure to process, store and transport foods targeting these new markets lags behind consumer demand. While food companies are demanding more sustainable practices of farmers, they often aren't willing to pay a high enough premium price to aid farmers in that transition.

Farm bill programs could play a major role in assisting farmers who want to access these emerging markets. Programs supporting soil or water quality, sustainable pasture management, organic transition, seed breeding, or local food infrastructure exist, but are grossly underfunded to meet demand. The once-rejected House farm bill threatened to further disinvest in these important programs by eliminating the nation’s most popular farm conservation program, and cutting rural development programs essential for local food infrastructure investment. 

Congress should check its assumptions and not simply accept financial hardship for farmers as a given. Reforms in trade policy to protect the integrity of emerging markets, combined with a strong competition policy, could further aid more profitable domestic market development. For our farmers and rural communities, new thinking on how we can better support profitability and locally-owned development — rather than repeating past mistakes — is urgently needed.