A news release from the House Agriculture Committee today stated that, “Today, Rep. Austin Scott (GA-8), Chairman of the House Agriculture Committee’s Subcommittee on Commodity Exchanges, Energy, and Credit, held a hearing to examine tightening credit conditions in farm country. This is the second in a series of hearings entitled Focus on the Farm Economy, where each subcommittee will examine the growing pressure in rural America from the perspective of the subcommittee [a summary of the first hearing in this series is available here]. Members heard from a series of witnesses who explained the impact the collapse in net farm income is having on the availability of credit, financial stress on both producers and credit providers, and the value of key producer assets such as land.”

Collapse in net farm income is impacting credit availability, financial stress on producers & credit providers, & reducing value of assets

— House Ag Committee (@HouseAgNews) April 19, 2016

In part, Subcommittee Chairman Scott noted that, “While providing credit to America’s farmers and ranchers is vital, it is a growing challenge for many lenders in the United States. Perhaps no one knows this better than lenders in cotton country. After a recent period of historic highs, crop prices have plummeted due to various factors which were discussed at last week’s hearing before the General Farm Commodities and Risk Management subcommittee. While input costs have softened, they remain near historic highs, and some of our biggest foreign competitors are sharply increasing their subsidies, tariffs, and non-tariff trade barriers…[M]eanwhile, farmland values are on a downward trend, and, while some livestock producers are rebounding on the balance sheet with lower feed costs, our western producers are struggling with consecutive years of drought. It is in times like these that our farmers and ranchers are most in need of reliable sources of credit at competitive rates.”

Kansas State University agricultural economist Allen M. Featherstone indicated at today’s hearing that, “[T]he declining net farm income in 2015, has made for an uncertain agricultural lending environment. The agricultural production sector and the agricultural lending sectors are intertwined causing many lenders to be asking the same questions as agricultural producers regarding the future of production agriculture as they make decisions regarding loan restructuring and other normal lending decisions…2016 will be a pivotal year in production agriculture. Given that average net farm income in some regions were the lowest they have been since 1985, a repeat of that in 2016 will cause some agricultural producers and lenders to make difficult decisions before entering the spring of 2017.”

Randy Nelson, President of CHS Capital, LLC added at today’s hearing that, “With the current stockpiles of grain and number of acres projected to be planted, the outlook through 2016 and into 2017 is for crop prices to remain depressed. A weather issue in one of the major growing regions could positively impact prices. CHS Capital estimates the breakeven cash price for many growers to be in the range of $3.90 – $4.25/bu. for corn. If prices remain low throughout 2016 and the outlook is not positive, CHS Capital believes that many farmers will choose to preserve their equity and will rent out their farmland or liquidate assets.”

Jacob Bunge reported last week at The Wall Street Journal Online that, “Vermont’s attorney general has asked a federal court to force big seed and food companies to turn over internal research on genetically modified crops, escalating a legal battle as the state defends its law requiring labels for GMO ingredients.

“State Attorney General William Sorrell filed motions this week in several U.S. district courts seeking to compel Monsanto Co., DuPont Co., Syngenta AG and other seed firms to produce studies or research related to ‘potential health or environmental impacts’ of the crops, as well as pesticides used on them.”

Mr. Bunge explained that, “The motions were filed in response to a nearly two-year-old lawsuit by the Grocery Manufacturers Association seeking to overturn Vermont’s law.

“A Monsanto spokeswoman said the Missouri seed giant ‘will oppose the motion as untimely and unwarranted,’ and that the safety of GMO crops is ‘well established.’

“‘We have already pointed Vermont to a variety of public government submissions and studies on the safety of GMO crops,’ she said.”

The Journal article noted that, “A spokesman for the Grocery Manufacturers Association said the trade group’s challenge to Vermont’s law ‘is still pending as we await a ruling by the court of appeals on our motion for a preliminary injunction.’

“Vermont passed a law in 2014 requiring labels for some food products that are made from biotech crops…[T]he Grocery Manufacturers Association, which represents food and beverage companies, sued in June 2014, arguing the law would open the door to a ‘patchwork’ of varying state laws on GMO ingredients that would inflate the cost of food. Mr. Sorrell argued that the companies’ internal research on GMOs is relevant to the group’s lawsuit, according to court filings.”

In the meantime, more food companies are voluntarily changing their labeling with respect to GMOs, while the U.S. Senate has struggled to pass legislation that would address the labeling issue at the federal level.

Senate Ag Committee Chairman Pat Roberts (R. Kans.) discussed this issue recently on the AgriTalk radio program, a transcript of his remarks can be found here.

Recall that recent news items regarding the agricultural economy have included phrases like, “Mounting Pressure,” and “There Definitely Could be Some Pain;” while the Federal Reserve Board indicated in its most recent Beige Book report that, “Some crop input prices, such as fertilizer and diesel prices, moderated from year-ago levels, but profit margins were expected to remain relatively weak due to suppressed commodity prices.”

The Fed added that, “A contact in eastern Montana reported that less- profitable farms were leaving the business, and more exits were expected.”

Yesterday, the House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management held a hearing on the “growing financial pressures faced by U.S. farmers and ranchers.”

A Subcommittee news release yesterday indicated that, “Conditions in farm country today contrast sharply with those during the formulation of the 2014 Farm Bill. 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.”

Subcommittee Chairman Rick Crawford (R., Ark.) stated that, “Next year, we will head into a new Congress, and we will write a new Farm Bill. As we head into that long and difficult process, I hope our colleagues who are less directly involved in agriculture or farm policy will reflect on just how critically important farm policy is in responding to a crisis that can happen overnight.”

USDA Chief Economist Dr. Rob Johansson indicated at yesterday’s hearing that, “A strong dollar coupled with high-levels of global agricultural production leave U.S. producers facing commodity prices that continue to decline from record levels and a more difficult trading environment than last year. As a result there will be growing financial pressures on some producers this year, as expected revenue may not be sufficient to cover expected costs. Overall, USDA forecasts that net cash income will fall again in 2016.”

And Texas A&M agricultural economist Joe Outlaw pointed out yesterday that, “Cash rents have come down a little, but nowhere near the amount that commodity prices and returns have fallen. This is due in-part because some producers have multi-year lease agreements. However several cash lease tenants reported their landlord’s have been unwilling to lower cash lease rates.”

Dr. Outlaw added that, “[T]the current poor situation on farms across this country would be considerably worse if not for the safety net provided by both Title I commodity policies and federal crop insurance. There are some in agriculture who say that commodity policies are more important than crop insurance or vice versa. I believe they are equally important – especially during times of low prices. For example, lenders tend to view crop insurance as being more important because the insurance guarantee is ‘bankable,” meaning it is something on which they can base a loan. On the other hand, producers see the commodity assistance as the only chance they have of coming close to breaking even in a low price environment.

Today, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

* Fifth District- Richmond– “Several District farmers reported that they have made limited capital purchases in recent weeks and project little change for the next six months. According to agribusiness contacts, input prices varied since the previous report. Chemical prices grew modestly while fertilizer prices decreased slightly and seed prices remained elevated. Crop prices stabilized on balance.”

* Sixth District- Atlanta– “Agricultural conditions were mixed, while most of the District remained drought free, there were some areas in Florida, Georgia, and Louisiana categorized as abnormally dry. Due to excessive rain and flooding earlier in the year, the USDA designated several counties in central and southern Florida as primary natural disaster areas. Florida’s orange crop forecast increased from the previous month but continued to be lower than last season. On a year-over-year basis, monthly prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs have declined.”

* Seventh District- Chicago– “Spring arrived early in much of the District, allowing fieldwork to begin. Corn, soybean, and wheat prices moved up, and fertilizer prices and land rents moved down. However, these changes were not large enough to appreciably improve crop farmers’ earnings prospects. Cattle prices edged higher, while hog and dairy prices were somewhat lower. The drop in dairy prices was large enough that many operations now face losses unless they had made forward contracts at higher prices.”

* Eighth District – St. Louis– “Still facing low crop prices, farmers plan to increase acreage to cover as much of their fixed costs as they can. District corn, cotton, rice, and soybeans acreage is expected to be higher last year. Concerns about December flooding impacting the winter wheat crop have been unfounded so far, as more than 93 percent of the crop is rated fair or better.”

* Ninth District- Minneapolis– “District agricultural conditions remained weak. A contact in eastern Montana reported that less- profitable farms were leaving the business, and more exits were expected. Reports indicated that District farmers intended to plant fewer acres of wheat but more acres of corn in 2016 compared with last year, and an early forecast pointed to a strong growing season in parts of the District this year. Logging in northern Wisconsin was slowed by a warm winter that made the ground too soft for equipment. Farm prices fell in February from a year earlier for corn, wheat, soybeans, hay, hogs, cattle, chickens, eggs, and milk; prices for turkeys increased from a year earlier.”

* Tenth District- Kansas City– “The District farm economy remained subdued since the previous reporting period, though crop prices improved slightly and growing conditions were mostly positive. Crop prices increased moderately in March, but were generally below previous-year levels. Some crop input prices, such as fertilizer and diesel prices, moderated from year-ago levels, but profit margins were expected to remain relatively weak due to suppressed commodity prices. Growing conditions for winter wheat in Oklahoma and Kansas were primarily rated between fair and good, but conditions deteriorated slightly from the previous month due to somewhat warmer weather and relatively little precipitation. Despite a brief rebound in March, livestock prices were significantly lower than a year ago, and profit margins at cattle feedlots remained soft, as livestock prices have decreased more than input costs over the past year.”

* Eleventh District- Dallas– “Row-crop farmers were busy preparing fields or planting, and the USDA Prospective Plantings report showed acreage increases in Texas for cotton, corn and soybeans this year versus 2015, and acreage declines for sorghum and wheat. Production prospects for 2016 crops are quite positive in light of healthy soil moisture and a favorable weather outlook. While crop prices generally increased slightly over the past six weeks, they remained low and contacts continued to mention stressful financial situations among many producers in the region. On the cattle side, prices increased over the reporting period, largely seasonally, and beef production was higher than a year ago.”

* Twelfth District- San Francisco– “Activity in the agriculture sector picked up over the reporting period. Growing conditions in California and other parts of the District have been bolstered by ample winter rainfall that has partially alleviated the challenges created by sustained drought. A seasonal improvement in domestic demand for timber products somewhat offset weaker foreign demand. However, contacts reported that the elevated dollar continued to weigh down exports for most products. Domestic sales of produce strengthened. Despite weak exports, herd costs fell, reducing losses in that sector. Contacts reported that capital spending plans were focused on productivity enhancements and replacing equipment rather than capacity expansion.”