Focus on Ag: Many key ag policy issues on the horizon

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank
Kent Thiesse

Over the past few years, Farmfest has been a major event for discussing key issues affecting farm families, the ag industry and rural communities in Minnesota and the Midwest.

Many of these same issues that were discussed at Farmfest in early August will likely frame the discussions on ag and rural policy issues in Washington, D.C. in the next few years. Following are some of the main issues that were discussed during the 2021 Farmfest forums:

Impacts of the 2021 drought and available resources

Nearly all of the Farmfest forums considiered the drought impact on crop and livestock producers as a central point. Based on the U.S. Drought Monitor in early August, over 75% of Minnesota was categorized to be in either the extreme drought or severe drought category, with only the southeast quarter of the state being largely spared from these conditions.

Nearly all of North Dakota and South Dakota were at some level of drought, with over two-thirds of North Dakota and a large area of north central South Dakota in either extreme drought or exceptional drought. Areas that are in extreme or exceptional drought are likely seeing significant crop loss and extremely limited forage production, as well as longer term effects on lakes, rivers, streams and ground water supplies.

Throughout the summer of 2021, drought conditions have intensified in most of the Northern Plains and Northwest Corn Belt states. Livestock producers in those areas are being especially hard-hit by the extended drought conditions with exhausted pastures and depleted feed supplies.

Many beef cattle producers are being forced to reduce their herd sizes due to limited pasture and hay resources. USDA has announced the potential for emergency haying and grazing on land enrolled in the Conservation Reserve Program (CRP) in areas of Minnesota that are the most severe drought. Livestock producers should check with their local FSA office regarding eligibility, enrollment details and requirements for emergency haying and grazing of CRP acres. Eligibility requirements and details on all USDA drought assistance programs are available at local FSA offices.

Details and updates on USDA drought programs can also be found at: https://www.fsa.usda.gov/programs-and-services/disaster-assistance-program/index.

Carbon sequestration and carbon credits

Carbon sequestration, carbon credits and potential legislation to address climate change garnered considerable discussion during the Farmfest forums by elected officials, ag leaders, and experts in the carbon industry.

One quote of note was: “the carbon market is like the wild, wild west,” meaning there is no clear-cut path as to where the U.S. or the ag industry is headed related to the carbon market. There was considerable discussion regarding opportunities for crop and livestock producers to participate and benefit from carbon credits; however, it was very unclear how those carbon credits will be valued or traded.

It was also very uncertain as to what practices will qualify for carbon credits that have value and whether producers that have already adopted carbon-friendly practices will be eligible for any compensation.

The bottom line from the Farmfest forums was that it is probably better to “walk before you run” when it comes to make major changes in a farming operation strictly targeted toward gaining value from the emerging carbon market.

Grain markets and rising input costs

One of the major discussion items at Farmfest was the trends in the grain and livestock markets in the coming months. Crop production expenses and land rental rates have risen sharply in the past six months, which has some producers and analysts concerned about profit margins as we look ahead to 2022.

Prior to 2020, profit margins in crop and livestock production had been quite tight in recent years, which put many farm operations at the brink of financial disaster by the end of 2019. Fortunately, a combination of one-time government aid programs, together with the strongest grain prices in several years, allowed farmers to rebound financially in 2020 and 2021. 

U.S. energy policy

There was considerable discussion at Farmfest as to how climate change legislative proposals, such as the Green New Deal or further implementation of the California Fuel Standards might impact agriculture industry and future development of biofuels.

On one hand, farm organizations and commodity groups point to the climate benefits of expanding the use of biofuels by moving toward E-15 blends of ethanol and higher levels of biodiesel. On the other hand, many special interest groups are calling for reductions or elimination of the federal renewable fuel standards (RFS) and other measures that would hurt the renewable fuels industry, while calling for additional resources into expanding electric powered vehicles, as well as wind and solar energy.

Many states in the Upper Midwest, including Minnesota, have a well-established corn-based ethanol industry, which utilizes over 35% of the corn produced each year in the United States. In addition to the direct benefits to farmers, renewable energy plants have become cornerstones in rural communities by providing jobs, adding to the local tax base and enhancing the overall economic vitality of communities.

Livestock-related issues

There were many issues affecting the livestock industry that were surfaced during Farmfest. The pork industry is being challenged by the implementation of Proposition 12, which would restrict a significant amount of the pork being produced in the Midwest from being sold in California.

Pork producers also want to keep export markets open for U.S. pork and are concerned with the outbreak of African Swine Fever in the Dominican Republic and ongoing challenges with PRRS disease.

Beef producers are very concerned with the worsening drought situation in many cow/calf production areas of the U.S., as well as monitoring the Department of Justice investigations into the beef processing industry. Dairy farmers have seen some improvement in profit levels during the past year; however, the long-term trend in the dairy industry is for continued tight profit margins. This will likely result in a continued trend of smaller dairy producers exiting the industry in the next few years.

Looking ahead to the next Farm Bill

The current Farm Bill expires on September 30, 2023, so congressional discussions on the next Farm Bill will likely begin later this year and continue into 2022. It will be interesting how issues like providing adequate safety nets for crop and livestock producers, climate change and social issues affect the Farm Bill discussion. Some key questions relative to development of the next Farm Bill that surfaced at Farmfest include:

  • Will crop insurance continue to be protected as a corner-stone risk management tool for farmers? 
  • Will crop producers still have farm program choices (PLC and ARC-CO)?
  • Will carbon sequestration efforts be linked in the commodity title the next Farm Bill?
  • Will there be a move to further expand CRP acres or add set-aside acres for carbon sequestration?
  • Will enhanced risk management tools be added for livestock producers?
  • What will be the budget allocation and how much will be allocated the Nutrition Title?

There are numerous other issues and programs that impact greater Minnesota in a variety of ways that were surfaced during the Farmfest forums including rural health care, labor shortages, expansion of broadband coverage and infrastructure needs.

Congress is likely to make some key policy decisions in the coming years.

For additional information contact Kent Thiesse, farm management analyst and senior vice president, MinnStar Bank, Lake Crystal, Minn., at (507) 381-7960 or kent.thiesse@minnstarbank.com, or visit www.minnstarbank.com.