The House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management April 14 held a hearing on the growing financial pressures faced by United States farmers and ranchers.

Conditions in farm country today contrast sharply with those during the formulation of the 2014 farm bill, Subcommittee Chairman Rick Crawford, R-AR, said in opening the hearing.

“When America was going through the Great Recession, agriculture was one of the bright spots in the economy. It provided jobs, a trade surplus and security for our nation. Now, as the overall economy continues to recover, the farm economy has been turned on its head,” Crawford said.

“In fact, net farm income has dropped 56 percent over the past three years alone. While many producers are struggling just to hang on, some in Washington continue to advocate for gutting the farm safety net. Those same folks refuse to acknowledge that the 2014 farm bill was written for times just like these and that we would be spending considerably more were it not for the reforms included in the 2014 farm bill. Now is not the time to pull the rug out from under our nation’s hard working farm and ranch families.”

“Today’s hearing was the first in a series the Agriculture Committee will be holding to focus on growing financial stress in farm country,” House Agriculture Committee Chairman Mike Conaway, R-TX, said after the hearing. “With low commodity prices, high input costs and no relief in sight, the farm safety net is proving vital to helping our nation’s farmers and ranchers weather growing economic uncertainty. Today’s hearing was also a reminder that farm policy critics live in a fantasyland where markets are fully functioning, foreign countries play by the rules and the weather always cooperates.

“Unfortunately, our farmers and ranchers must operate in the real world, and it is in our nation’s best interest to continue providing them with the risk management tools they need to continue feeding and clothing our nation. I look forward to further exploring this topic with the rest of our subcommittees.”

While high prices for many farm commodities led to tremendous growth in net farm income through 2013, many of those prices have spiraled downward over the past three years. Witnesses spoke broadly about the factors that are driving current market conditions, the bleak outlook going forward and the impact that both are having and could continue to have on our nation’s farmers and ranchers going forward. They also spoke to the vital role that farm policy and crop insurance are playing in helping absorb some of the shock, and they stressed the devastating impact that further reductions to these vital tools could have.

For example, USDA chief economist Rob Johansson told the subcommittee that farmers are forecast to collect $7.2 billion from agriculture risk coverage and nearly $2 billion from price loss coverage programs during this year.

“Overall government payments, which are more tied to economic conditions than before, are expected to rise from about $10.6 billion in 2015 to about $13.9 billion in 2016, which also includes conservation payments of approximately $3.6 billion.”

USDA estimates that net farm income, which reflects the net value of production and is a measure of wealth, will stabilize this year after plunging by a combined 54 percent from 2013’s record $123 billion. The debt-to-asset ratio, a widely used indicator of farm sector health, is forecast for a low 13.2 percent this year.

Longer-term projections by the U.S. Department of Agriculture leave net cash income averaging less than $80 billion for the coming decade and net farm income at less than $70 billion over the same period.

“While borrowing is up, the level of bankruptcies and farm loan forfeitures remain at historically low levels,” said Johansson, because farmers and ranchers used the agricultural boom to pay off debts and build up their bank accounts.

Farmers are feeling the pain of the continued slump in commodity prices, American Farm Bureau Federation President Zippy Duvall, said.

Lower prices will affect income for all farmers and ranchers, but will have an even greater impact on new and young farmers who have not built up equity, are renting a significant portion of their land or are paying off equipment.

“The bottom line is that farmers and ranchers are being forced to tighten their belts and pay much closer attention to their financial situation,” Duvall said. “They will be in greater need of safety net and risk management programs than has been the case for some time—for some, since they started farming.”

Duvall’s testimony included a long list of bad economic news.

Cotton, at 80 cents a pound just a few years ago, now brings prices in the 50-cent range. Milk that was selling for $20 or more per hundred pounds a couple years back now fetches $15 or $16.

Bad news notwithstanding, Duvall said he found hope on the horizon, telling the subcommittee members there were numerous things they could do to help the farm economy, including:

Approving the Trans-Pacific Partnership to raise overall farm income without adding to government spending;

Stopping the Waters of the U.S. rule, which places additional costs and burdens on farming;

Reversing spill prevention and control requirements that add costs without clear environmental benefit; and

Establishing a voluntary nationwide labeling standard for genetically modified food to avoid a patchwork of state laws.

In his testimony, National Farmers Union President Roger Johnson told the subcommittee that a prolonged period of low commodity prices will result in farmers having to deal with trouble accessing credit, negative farm budgets, depressed markets and tests to the farm safety net.

”The downturned farm economy has put a significant strain on farm financials,” Johnson said. “We are seeing this manifest itself in the Farm Service Agency’s loan portfolio, an early indication of challenges ahead.

“Local lenders are concerned that with high yields being necessary to protect from low prices, weather-induced yield losses will exacerbate an already difficult situation. One thing that my local lenders wanted to drive home to members of this committee is the importance of a strong safety net.”

While Johnson felt that, overall, commodity programs are functioning as designed and assisting producers through challenging times, he did acknowledge several programs that need thoughtful attention today and others that would benefit from additional changes in the next farm bill.

Specifically, he mentioned the Agriculture Risk Coverage program, Price Loss Coverage program, Dairy Margin Protection Program and the Stacked Income Protection Plan.

Exploring bright spots in the farm economy, Johnson highlighted the organic and local food sector, which has grown by nearly 300 percent since 2002. He noted these sectors seem to be less subject to the falling commodity prices.