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Ag economists worried about rural America

Several prominent agricultural economists speaking at crop insurance industry conventions in California last week week said they are increasingly worried about the state of rural America.

“It’s pretty tough sledding out there right now for grain producers,” Washington State University economist Randy Fortenbery said during a panel discussion at an annual meeting hosted by National Crop Insurance Services and the American Association of Crop Insurers. “If you look forward, I think the tough times will extend beyond 2016.”

Fortenbery explained that the high value of the dollar and commodity surpluses around the globe are making things particularly difficult for U.S. agriculture.

Joe Outlaw of Texas A&M University said more and more farmers are asking him about alternatives to cash rent for land, such as “shared leases” in which the landlords bear part of the risk.

It’s getting harder for farmers to get credit, Outlaw noted. Regulations now require banks to make loans to farmers based on cash flow, not asset values, as they did in the 1980s when a lot of farmers borrowed too much and went bankrupt.

But some lenders “have been cheating” and going back to making loans backed with assets, he said.

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Mechel Paggi

Mechel Paggi of California State University, Fresno, said the crop insurance program will come under scrutiny in the World Trade Organization, but that “U.S. farm policy is coming in well under the support caps agreed to by the WTO,” he said.

“With crop insurance costs going down, it would be harder to argue that current policy is a hindrance to foreign trade,” Paggi said.

Paggi also said research shows very weak linkage between crop insurance and producer planting decisions — a key indicator used by WTO when examining countries’ farm policies.

The economists agreed that so far land sale prices have not come down much.

“We are fortunate in this country we have crop insurance and a safety net,” Outlaw said. Whether the safety net is big enough is a question, he said, but it is there.

An attendee asked Outlaw if he thinks the farm bill might be reopened so that those farmers who signed up for the Agricultural Risk Coverage program and are dissatisfied could switch to Price Loss Coverage, an alternative program. But Outlook said he thinks Congress will not reopen the bill.

Last week Michael Swanson, the chief agricultural economist for Wells Fargo, told the Crop Insurance and Reinsurance Bureau meeting here that the positive trends for agriculture in the last 10 years may be “unreasonable” to continue.

–The Hagstrom Report


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