NAFTA – Implications of Termination

While the United States Government negotiators prepare to enter into the seventh of the North American Free Trade Agreement (NAFTA) discussions in Mexico City, a new report has been published by the Business Roundtable and Trade Partnership Worldwide, LLC, entitled ‘Terminating NAFTA: The National and State by State Impact on Jobs, Exports and Output.

The Executive Summary section of this report issues dire warnings of the negative consequences the U.S. would fact should it terminate the NAFTA agreement.

“Using a methodology that enables us to capture the full impacts (both positive and negative; direct and indirect) across the U.S. and international economies, we find that a termination of the North American Free Trade Agreement (NAFTA) would have significant net negative impacts on the U.S. economy and U.S. employment, particularly over the immediate years after termination. Termination would re-impose high costs of tariffs on U.S. exports and imports, which would reduce the competitiveness of U.S. businesses both domestically and abroad. U.S. exports would drop, both to Canada and Mexico and globally, as U.S. output becomes more expensive and therefore U.S. businesses would be less competitive in these markets. Foreign purchasers would shift away from U.S. goods and services in favor of lower-cost goods and services made in other international markets, particularly those made in Asia.

These efficiency losses and trade shifts would have an impact on U.S. production of both goods and services, and thus also on U.S. employment. We estimate that, if NAFTA is terminated and most-favored nation (MFN) duties are re-imposed for U.S. trade with Canada and Mexico, the level of U.S. real output would fall 0.6 percent below levels that would prevail if NAFTA were in effect in each of the first one to five years after termination. Lower output means less employment after all the gains and losses are tallied: on balance 1.8 million workers would immediately lose their jobs in the first year with full termination and the return of MFN tariffs.

While the focus of our study is the short- to medium-term, we also examine the national impacts of terminating NAFTA over the longer term (i.e., 10 years and after). Terminating NAFTA would have negative impacts on jobs, exports and output even after new supply chains are formed. In this longer run, we estimate that U.S. GDP would remain depressed by over 0.2 percent, permanently.”

A January 30 Market Watch article pointed out that, despite slow progress, Merrill Lynch reduced the odds of the U.S. exiting NAFTA this year to just 25%. A few months ago, many trade watchers thought the chance of a U.S. withdrawal was at least 50-50, if not higher.

As always, we will continue to keep you abreast of the status of the negotiations.

 

Dairy Safety Net Discussions

Margin Protection Program fixes, or a Replacement Program?

            Morning Ag Clips on January 25 contained an article that started with a quote from the National Milk Producers Federation (NMPF). “NMPF President states current Farm Bill’s dairy Margin Protection Program (MPP) is inadequate”. The article goes on to say that the USDA has recently published its principles for the Farm Bill. The document from Secretary Perdue starts with improving safety nets. Fixing MPP is also a priority for the National Milk Producers (NMPF). The article additionally says that NMPF indicates that it is time for legislative changes to MPP, and that making the program reliable is vital to encouraging participation. The Morning Ag Clip ends with “Margins are poor and it is time to rectify the situation”.

In May of 2016, Agri-Pulse published an article that began with a quote from Colin Peterson, Ranking Member on the US House Agriculture Committee.  “The biggest problem with MPP is that farmers are not signing up for it”. When dairy farmers did sign up, they paid premiums of $73 million, and, in the first downturn of milk prices, had payouts totaling $750,000 nationwide. Now Peterson is talking with the dairy industry to find changes to the program to make it work and to encourage producers to sign up again. Peterson has said, “The program is not a complete failure…Farmers need to understand that it is for the worst of times.” The Congressman admits that MPP is not as attractive as it needs to be. When the last Farm Bill was negotiated and voted on, the calculation for average feed cost was trimmed by 10% to save money, making the margins seem better than they really were. The reality was that fewer farmers qualified for payments under the program. The latest figures indicate that 24,748 dairy farmers are signed up for MPP, but only 261 are signed up at the highest level. Farmers are once again experiencing low milk prices and no safety net benefit. Colin Peterson has also been thinking about moving the program from FSA to Risk Management Agency (RMA). Agri-Pulse ends its article with “MPP is not adequate”.

W. ‘Bill’ Herndon, PhD, Professor of Agriculture Economics at Mississippi State and past President of Southern Agriculture Economics Association, wrote an article in the January 25 issue of Hoard’s Dairyman entitled ‘Farm Bill Could Have Multiple Safety Nets’. Dr. Herndon predicts that the all milk price in 2018 will be $1:00 to $1:50 below the average 2017 price. The Professor goes on to say, “Given the glum market outlook, there is an urgent need for an effective program in the next Farm Bill that adds financial and economic stability for milk producers and related businesses that are so important to many small rural communities”. The last Farm Bill replaced Dairy Product Support Price (PSP) and Milk Income Loss Contract (MILC) with the new MPP.

Professor Herndon tells us that there are several possible fixes to MPP:

  • Lower the premiums
  • Change milk margin calculations
  • Procedural changes

There is concern, however, that farmers may not accept these changes, as the whole program left a bad taste in their mouths.

Dr. Herndon says that small dairy farms are asking to have a return of the 2002 version of MILC, or, as it was known then, Price Loss Coverage (PLC). It was not insurance, had no cost, and only small farms benefited with counter cyclical payments. Professor Herndon suggests that this may be an option for small dairy farms. It could be based on Class I price, the All Milk price or Class III price. It could pay out the difference between the current price and 100%, 45% or 34% of the trigger price.  The 34% trigger is the level at which the MILC paid out. It is estimated it could cover between 2 million and 5 million pounds of milk per year. Lawmakers would have to find a balance between making it effective for the producers and the cost to the US Treasury.

Dairy farmers could opt for MPP or PLC, but the option would last for the life of the Farm Bill. PLC would be simple to understand and easy to implement. So that small farms would have skin in the game, farmers would be charged a fee of perhaps $200 or $400 per year to join PLC. MPP will work better for the bigger dairy producers. Dr. Herndon believes that PLC is needed to ensure the survival of small dairy farms and local milk supply. He argues that row farmers have choices of safety nets, and therefore dairy farmers should, too. He states that a choice between MPP and PLC is gaining support among dairy farmers and politicians alike.

Until the Farm Bill is completed, agreed to by both Houses of Congress and signed by the President, conversations about safety nets for dairy producers is just that, a discussion. One only hopes that the Congressional policy makers do the right things to save our small northeast dairy farms.

We will keep you updated on the status of the Farm Bill negotiations as they become public.

FCC asks for comments on rural health program for broadband

The Federal Communications Commission (FCC) is considering changes to the popular Rural Health Care Program (RHCP), a fund that helps rural health providers access broadband for telehealth and health information exchange. The RHCP is capped at $400 million per year, but for the last two years, requests exceeded the cap.

With increased attention to broadband’s role in rural development generally and its role in healthcare delivery specifically, many stakeholders believe demand on the RHCP will continue to increase, particularly in states with large rural areas. The National Rural Health Association and the American Hospital Association have called for raising the cap to keep up with demand. One analyst noted that the RHCP is a victim of its own success as more providers have turned to the fund due to both growing interest in telehealth and the need for broadband to comply with federal regulations on health information technology. Additionally, Congress recently made skilled nursing facilities eligible to participate, increasing the number of providers potentially able to apply for funding.

In response, the FCC is seeking public comments on possible changes to the RHCP, including raising the RHCP cap. However, the FCC questioned whether increasing the cap will lead to greater incidents of waste, fraud, and abuse. Additionally, the FCC is interested in comments on whether the FCC should adopt certain factors to prioritize which providers should receive a grant.

Interested parties must submit comments by February 2.

The Importance of Agricultural Education in Schools

          Kate Ziehm, publisher of ‘Morning Ag Clips’, wrote an article for her publication on December 8th entitled “It is our Responsibility”. Kate received a note from a teacher who said that he shares the Morning Ag Clips with his class and raved about how that helps keep his students current on agriculture issues. She goes on to say, “It is our responsibility to get our children/students who love agriculture hooked into something every day that keeps them aware of what is going on in the industry.”

Ms. Ziehm goes on to say that the future of agriculture lies with our kids. “They are the next generation that is going to feed the world and be the stewards of the land.” She suggests that knowledge provides the power, while personality provides the action. Kate goes on to say that it is pretty simple. Get the youth tuned in, whether it be through podcasts, radio, industry publications or Morning Ag Clips.

The task is bigger than keeping the young people that want to go into the industry we call agriculture interested. It is also getting the youngsters that live in more urban and suburban neighborhoods to cultivate an interest in farming, or food distribution or processing. The industry is so much bigger than just producing the food, forage, and fiber. It is the responsibility of us involved in agriculture to also tell the story of our family farms and the farmers that care for the land, care for the soil, and the animals that they care for seven days a week. There is so much misinformation circulating about agriculture and it is our responsibility to correct the record.

Most non-rural people are far removed from the farm. So many today do not know where their food comes from. It just is on the grocery store shelf, and little thought is given by the consumers to how it gets there. As the saying goes, “If you like to eat, then you have to like agriculture.” It is our responsibility to ensure everyone knows how food gets to their plate, and how much the farmer cares that it is safe, nutritious and good tasting.

There are two organizations for young people and youth: the 4 H, sponsored by the Cooperative Extension, and the FFA that is in many high schools. I can think of no better organizations for educating our kids about agriculture, but to also develop leadership skills. Maria VanderWoude, the Executive Director of the Granite State Association of FFA says “Agriculture requires professionals with specialized skills to accept the stewardship of the environment, producing safe products for consumption and maintaining a competitive advantage in a worldwide market.” Maria goes on to say “Youth training for careers in agriculture must have viable ways to develop their leadership skills as they prepare to take the reins and guide the industry.” The FFA promotes premier leadership through its many events, programs and competitions.”

Farming First publication from August 2013 encourages school systems across the world to include agriculture in the curriculum at all grade levels. The article goes on to suggest that we in the industry use social media to convey to students and consumers the story of our farms and farm families. It rightly says that today’s youth are the next generation that is going to feed the world, and we need them prepared to take on that responsibility.

Since it is our responsibility to educate our youth about agriculture, we need to encourage school districts to look for creative ways to pique the children’s interest. Suggestions are to teach agriculture as part of a science curriculum, or adding some agriculture as part of a math lesson. Elementary school children can get a great deal of motivation by planting herbs in classroom window boxes, caring for those herbs and then harvesting them for the school cafeteria to be used fresh or dried throughout the year. School gardens are another way to teach children about farming and gardening. You can even experiment with organic and non-organic methods in adjoining gardens. As Agriculture Legislators, you have a unique opportunity to spread the agriculture and wholesome food message to your constituents. As legislators, you need to ensure that your state and provincial budgets adequately fund agriculture education programs.

While FFA and 4 H in schools are very highly recommended in the development of agricultural, forestry and leadership skills, the Ag in the Classroom program cannot be forgotten.  In this program, adults volunteer to read the Ag in the Classroom ‘book of the year’ to third graders.  Each year, a different area of farming is featured.  Equally important to familiarizing school children with life on the farm is the Farm to School program, where farmers provide food to schools cafeterias, bring farm animals to the school, or host tours of their farms for the school children.

Kate Ziehm is right. Educating youth and consumers about agriculture and our family farms is our responsibility. If we do not do it, who will? Kate’s article in Morning Ag Clips can be found here:

https://www.morningagclips.com/its-our-responsibility/

2017 Census on Agriculture

According to a December 4 press release, the National Agricultural Statistic Service division of the USDA has this week begun to mail the 2017 Census of Agriculture to the national’s farmers.  The census is a critical tool in determining the number of farms there are in the country, and their economic health.  All farms which produced and sold, or normally would have sold, $1,000 or more of agricultural product in 2017 are required to participate in the census.

“The Census of Agriculture is USDA’s largest data collection endeavor, providing some of the most widely used statistics in the industry,” said U.S. Secretary of Agriculture Sonny Perdue. “Collected in service to American agriculture since 1840, the census gives every producer the opportunity to be represented so that informed decisions can support their efforts to provide the world with food, fuel, feed and fiber. Every response matters.”  The resulting data are used by farmers, ranchers, trade associations, researchers, policymakers and many others to help make decisions in community planning, farm assistance programs, technology development, farm advocacy, agribusiness setup, rural development and more.

This year, the NASS has made it easier for farmers to complete the census.  In addition to the ‘snail mail’ census, there is now an updated online questionnaire, with auto calculations and online and desktop compatibility.

The deadline for submitting the census response is February 5, 2018.  Response is required by law.  All information received is required to be kept confidential and is to be used only for statistical purposes.  The data will only be published in aggregate form to prevent disclosing the identities of any individual producer or farm operation.  The results of the census will be released in February 2019.

Here is a link to the NASS Census PowerPoint presentation:

https://www.agcensus.usda.gov/Partners/2017/2017_Census_PPT_FINAL.pdf

And here is a link to the USDA Census website for all the information you and your constituents might need:

https://www.agcensus.usda.gov/

 

Please urge your farmer constituents to fill out the questionnaire and submit it prior to the deadline.  It is only with accurate data that we can know what our farmers need and how to get it to them.

Commissioner Steve Reviczky Elected President of NASDA

Connecticut’s Agriculture Commissioner will lead the National Associations of State Departments of Agriculture (NASDA) for 2017 -2018.

          One of the ERC member states has a Commissioner leading the prestigious, non-partisan group of Commissioners, Secretaries and Directors of Agriculture. The remaining elected officers of NASDA for this term include State Agriculture Departments’ leaders from New Mexico, Michigan and Kentucky, with Mike Strain from Louisiana as the Past President. Some of you will remember Mike Strain from past meetings of State Agriculture and Rural Leaders (SARL).  North Dakota fills the At-Large position on the board of officers. New York’s Commissioner Ball continues to lead the Northeast Region as the NEASDA President. Lorraine Merrill, Commissioner of the Department, of Agriculture, Markets and Food for New Hampshire, says of Commissioner Reviczky, “He will, as NASDA President, highlight agriculture in Connecticut, New England and the Northeast as a region during his term as President”.

Commissioner Reviczky has been the Connecticut Commissioner of Agriculture since 2011, and has a BA in Public Policy and Government from Eastern Connecticut State University.  In 2014 and 2015, Steve was the President of the North East Association of State Departments of Agriculture. Prior to Reviczky being appointed by Governor Malloy as Commissioner, he was the Executive Director of the Connecticut Farm Bureau Federation. In that role, he oversaw the day-to-day operations of the Farm Bureau. Steve, from 1998 until 2006, was with the Connecticut Department of Agriculture as the Property Agent of the Farm Land Preservation Program.  Prior to that, he worked for the Connecticut Department of Environmental Protection. Steve started his career in public service as a Selectman in his home town of Ashford.

NASDA President Reviczky is looking forward to working with the 50 states and four Territories’ Departments of Agriculture and Congress on formulating a new Farm Bill this year – one that works for our nation’s agriculture industry.  NASDA is a non-partisan, non-profit association which represents the elected and appointed commissioners, secretaries and directors. NASDA’s website says the organization “grows and enhances agriculture by forging partnerships and creating consensus to achieve sound policy outcomes between states, federal government and stakeholders”.  Following his election, Reviczky appointed the policy committee chairs and vice chairs. Those policy committees are: Marketing and International Trade, Natural Resources and Environment, Animal Agriculture, Rural Development and Financial Security, and Food Regulation, as well as the Communications Working Group.

Commissioner Merrill has noted, “The timing of Steve’s election as President is beneficial, as NASDA is an increasingly influential organization, and Commissioner Reviczky will ensure the northeast perspective is heard on issues such as food safety and other regulations and key farm bill programs like dairy, conservation and farmland preservation, specialty crops, food and agriculture research and more”.

Some of you might remember meeting Steve at the Tuesday morning breakfast meeting at the CSG / ERC annual meeting in Connecticut this summer. Let us congratulate Commissioner Reviczky on his election as President of NASDA.

Annual Meeting Recap

 

2017 Annual Meeting

Agriculture & Rural Affairs Program

Recap

 

The 57th Annual Meeting of the Council of State Governments-Eastern Regional Conference, held August 13 through 16, 2017 at the Mohegan Sun Resort in Uncasville, Connecticut, was the site of much information gathering and relationship building among the attendees.

The Agriculture & Rural Affairs Committee had a particularly full slate of meetings, discussions and site visits.  In addition, the plenaries, roundtables, workshops and receptions and dinners filled the three days to the brim with things to do and information to absorb.

State Updates

 The Ag Committee began the conference on Monday morning with our ever-popular State by State Recap.  This is the opportunity to hear from members from each state the pressing issues that they have been facing in their committees this year.  Each year it is apparent that the 11 member states in our ERC region experience the same challenges to our farmers and rural areas.  It is through these discussions that we learn of solutions to our shared problems.

Among the issues discussed were tax credits to assist farmers facing low prices and high costs, agritourism laws, deer depredation, legalization of marijuana, neonics and pollinator protection, drought, Lyme Disease and ticks, aging farmer demographics, industrial hemp expansion, reporting of opioid prescriptions by veterinarians for animal use, dog licensing law changes, puppy mills, noxious weeds identification, prohibition of mango exportation from the U.S. Virgin Islands, farm labor issue, loss of low grade pulp plants, water quality, and FSMA implementation.  It was a lively discussion, with many ideas shared.

Washington Updates

The second presentation at Monday’s morning session was by Fran Boyd, partner in Meyers & Associates in Washington, D.C., who has been CSG-ERC’s ‘Washington insider’ for many years.  Fran assured us that the northeastern states were being heard in the recently initiated Farm Bill negotiations.  One problem he sees in the agricultural sector in Washington is the lack of appointments to the U.S. Department of Agriculture.  Sonny Perdue, the Secretary of Agriculture, is assisted by only a handful of helps in his department, making meaningful progress in issues difficult if not impossible.

The recent Budget for Agriculture is particularly draconian.  The question of whether Congressional leadership is capable of getting an Appropriations bill passed is yet to be answered.  There is a possibility that Washington will be operating under a Continuing Resolution, which might be kick started in September and dealt with in October and November.

There are two big issues that must be addressed in the 2018 Farm Bill – Dairy and Cotton.  The Margin Protection Program in the Dairy sector has never functioned as it was originally intended, and the opposition is clamoring for a fix to the problem.  Cotton, on the other hand, has no program and is looking for one to be offered in this Farm Bill.

The Nutrition Title of the Farm Bill, which is 87% of the total funding for Agriculture, might be facing some changes, including work requirements, and a cap of the money going to the states.  Another change that might be proposed is a change in who can offer the SNAP benefits.  Some want to allow only large grocery stores to participate in the program.  Others want an expansion of places that offer the program, including small neighborhood groceries and more Farmers Markets.

Fran will continue to keep our committee up to date on developments in the turmoil that is Washington.

2018 Farm Bill

Monday afternoon featured a briefing on the 2018 Farm Bill by Julian Baer, Senior Policy Advisor for Chairman Pat Roberts (R-KS), Chairman of the Senate Agriculture Committee.

Mr. Baer gave us an overview of the makeup of the U.S. Congressional Committees on Agriculture – both Senate and House – particularly concentrating on representation on either committee from our northeastern states.  There is a lot of work to be done by the committees (appointment approvals, reauthorization of bills including Farm and Pesticide, and implementation of standards).  The going is slow because of the lack of appointments.  The positions of Deputy and Undersecretary are still pending review.

Julian then reminded us of the painfully partisan progression of the 2014 Farm Bill, with splits in both parties making any compromise possible.  He compared the makeup of the committees then to the one now.  He discussed outside interests and their influence in the negotiations.  He also noted the increased needs of the stakeholders.  The farm economy is much worse now than it was during the last Farm Bill negotiations, therefore there are more people needing help.

The total Federal Budget is $52.5 Trillion.  Of this, 1.3% is for Supplemental Nutrition Assistance Program (SNAP), and 0.3% is for Agriculture.  Despite the relative small percentage of agriculture-related spending, the proposed budget is still seeking $10 million in cuts.  Of the total Farm Bill spending, 77% is Nutrition, 9% Crop Insurance, 7% Conservation, and 7% Commodity Programs.

There are people who want more spent on Commodities, Conservation, Loan Assistance and Research Programs; while others want to spend less, including environmental groups and budget hawks.

The most stark budget reality is that 39 programs in the existing Farm Bill have no baseline, meaning that there is no guarantee that there will be funding for the program going forward.  There are there themes in this Farm Bill negotiations – Champion for Farms, Rigorous Oversight of Programs, and Transparent and Inclusive legislative work.

Julian went on to describe the current listening session process.  The Senate Chairman’s first priority is to sign a bill into law.  The CSG-ERC Agriculture & Rural Affairs Committee held several conference calls in an effort to identify issues that are of high priority for our area in the Farm Bill.  These items included:

  • Dairy
  • Nutrition
  • Broadband
  • Specialty Crops
  • Conservation
  • Local/Organics
  • Hemp
  • Poultry & Grain

He discussed each of these issues and the problems, if any, associated with each.

The Committee had drafted a Resolution on the 2018 Farm Bill, which was then distributed to the members for review and discussion.  (Note:  This resolution was unanimously approved by the committee, and was introduced at the Executive Committee Meeting, where it was passed on a voice vote.  This resolution will be sent to the Congressional Delegations from the 11 Northeastern States in the ERC Region, as well as the Senate and House Agriculture Committees, among others

FSMA

At our Tuesday morning breakfast meeting, we were joined by NY Commissioner of Agriculture and Chairman of Northeastern Association of State Departments of Agriculture (NEASDA) Richard Ball, who spoke to us about the implementation and enforcement of the Food Safety Modernization Act (FSMA), and the potential financial and administrative impact this Act will have on our states.

He began by saying that FSMA was in Transition and Change.  The Produce Safety Rule, which is actually in effect, is ‘like GAP on steroids’.  The water quality part of this rule is the main concern for our farmers and our states.  The Preventive Control Rule is similar to GAP (Good Agricultural Practices), although now mandatory rather than voluntary.  The monitoring and verification of paperwork required by the Rule is going to be difficult to handle for the states.

Sanitary Transportation of Food is another Rule that will soon be in effect, but there is very little guidance from the FDA how this will be implemented.

The most problematic and potentially controversial rule is the Foreign Supplier Verification Standard.  American farmers will not accept one rule under which they are required to operate and foreign importers aren’t, particularly since there is little or no oversight of the farming practices in foreign food imports.

New York State has an Alliance Group that is training for FSMA.  They are traveling throughout the state, training farmers and training the trainers in the rules and good practices.

Funding is essential for the implementation of FSMA.  Some money has been appropriated in Congress, but we don’t yet know if this is funding that will really be coming to the states.  The FDA has provided the states with funding for the first rule – the Produce Safety Rule.  Whether more funding will be coming for costs and expenses related to the other rules we have yet to see.

The compliance strategy is to roll out the rules for bigger facilities first, with more time being permitted for preparation for smaller farms and facilities.

Commissioner Ball estimated that it will take five times the amount of time necessary to inspect the food and manufacturing facilities than they are currently spending.  A potential solution to this is spending more on IT.  Currently there is no training and no guidance.

One concern that the Commissioner identified was needing to know the rules of the road.  Many FDA divisions function in isolated silos.  There needs to be streamlining of the information and communication pathways.

Commissioner Ball’s main mantra has been ‘Educate before we regulate’.  We have not had time to educate our farmers in the rules prior to the mandated 2018 rollout of the Produce Rule.  We also need to be involved in the Guidance when it is developed.

Other problem areas include the definition and rules regarding Terminal Markets (packing houses).  Also there needs to be a science-based requirement for water testing, which there is not as the rules currently stand.  In addition, foreign importers have to be held to the same standards as U.S. farmers.  We also need to know what the FDA inspectors are going to be looking for when they are on the farm.  We don’t yet have that guidance.

Commissioner Ball discussed briefly the current North American Free Trade Agreement (NAFTA) negotiations, and what to expect from those.  Dairy is one of the main points of dispute.  It will take years to change NAFTA.  The first meeting will be in Denver in October – the Tri National Accord.  The discussions should prove very interesting.

Site Visits

Th Site Visits were very interesting and informative.  We visited Cushman Farms, a dairy farm milking 1,000 cows on an automated carousel.  They are members of The Farmer’s Cow, a cooperative of six farms, and ship to Agrimark and distribute value added products through their own manufacturing facility.  Our second stop was to Scott’s Miracle Gro, where we saw their new composting facility that handles yard waste and turns it into mulch.  And our final stop was to the University of Connecticut Veterinary Diagnostic Laboratory, where was learned how critical the job is that they do to protect our animals and population from disease and infection.

 

If those of you who were not able to attend would like more information, we would be happy to provide you with it.  We look forward to sending you future updates on these topics critical to agriculture in our region.

 

 

Bob Haefner and Tara Sad

CSG-ERC Agriculture & Rural Affairs Policy Consultants

bobhaefnerjp@comcast.net    tara.eric@gmail.com

Is Rural America the New Inner City?

On May 26 of this year, the Wall Street Journal published an article entitled “Rural America is the New Inner City”.  We decided to investigate this claim to see if it was, indeed, true.

The Wall Street Journal starts its article with the statement ‘There are twice as many funerals in Rural America as there are Baptisms’. For years, rural America thrived on a combination of mostly light manufacturing, distribution and agriculture.  In many cases across the country, manufacturing and distribution have left the rural areas, and agriculture has in many cases become less labor intensive.

The socio–economic charts have flipped. Rural counties now rank worst among the other categories of urban, sub-urban and small cities in terms of poverty rates, educational level, teenage births and labor force participation rates.  Poverty rates are up 45% in rural America, and income is down 7%.  Comparatively, urban and small city poverty is on the decrease, and incomes up 6%. The WSJ states that opioid use in rural small towns is up and driving the resulting crime rates up as well. As population has declined and businesses have left, real estate values in the commercial sector have plummeted, and many building are left vacant. Employers have said that the loss of employment is not due to a lack of jobs, but a lack of qualified employees. Those business simply moved to suburban areas where the qualified labor exists. A number of rural areas during the ‘80s and ‘90s opened call centers for major corporations. Those call centers have left for overseas locations where labor is cheaper. Advances in telecommunications and technology has enabled this exodus to happen.

Federal and state anti-poverty programs designed to help the urban poor have failed to address the rural poor. Many of those programs helped with public transportation and day care, which is lacking in small towns and rural areas. There has always been a wage gap between non-metro areas and their urban counterparts, but in recent years that gap has grown as manufacturing left the small towns.  The last recession widened the gap as well. While other sectors have recovered from the recession, the rural areas have not.  Consolidation has shut down many rural hospitals in the past decade.  Not only did this cause a loss of jobs and rural income, but it left the residence with much longer drives for health care.  And rural residents are among those most in need of health care, since smoking has not decreased among the rural population as much as it has in the urban centers, and obesity rates have been increasing. Rural America and its small towns do not have the treatment facilities for opioid addiction that our urban and sub-urban counterparts have, and yet the opioid crisis has hit the rural parts of our nation at a disproportionate level.

There has been a lot of federal and state money directed to helping the urban areas of our country, funding efforts to improve education and skills training, medical care, public transportation, jobs and rebuilding the inner cities.  Very little funding has gone to rural America.

In November 2016, many voters in the country’s rural counties cast their ballots for now President Trump in record numbers, thus electing him. He promised to revive our small forgotten towns, reduce regulation, increase trade, curb illegal immigration, and bring jobs back.  Many small town and rural people think Trump cared about their plight, and felt that other politicians have not for a number of years.

Let’s look at some USDA data.  While the population drain from rural to urban areas in 2015 slowed to no loss of population from rural counties, the population shift for the last half of the prior century was dramatic.

Percent of US Population

 

Rural Counties Urban Counties Suburban Counties
1950 44% 33% 23%
1999 18% 25% 57%

 

As of 2014 only 14% of the population is rural, but those rural counties amount to 72% of the land mass of the country.  Many farmers, departments of agriculture, and conservationist have pointed out that the 14% of our population produces 90% of our food on that 72% of the land.  Many counties are continuing to lose population, and what population remains is getting poorer.  These rural counties have lost a total of 650,000 people over the last four years.  But there is a flip side – other rural counties gained a total of 500,000 people, decreased poverty rates and increased employment levels.

From 2000 to 2015 total rural population grew at a rate of 4.5%. During that same period, the rural Hispanic population grew at a rate of 45%. The USDA commission on Rural Affairs states that currently rural employment is lagging urban employment.  The largest population losses are in the most remote areas. They also report that much of the loss of employers are due to the closing of large industrial plants, other manufacturing and distribution, and farms that have become more efficient with technology. Service producers and retailers are the bright spot, albeit paying lower wages.

One more set of statistics paints a rosier picture of rural America.  It is safer to live in Small Town USA. Urban violent crime per 100,000 is 74% higher than rural towns, and even the suburbs have a violent crime rate 37% higher than their rural counterparts. Gun crimes are far higher in both urban and suburban locals than in rural counties. And 95% of rural household own a car, while only 13% of inner city households do (although the presence of rapid transit in urban areas reduces the need for automobile ownership).

Now that we have begun to dig through data and ireports, we have found that there is a vast amount of information available on the subject – enough to warrant a second blog on the issue of urban vs. rural, which we will be bringing you soon.

Meet the Legislator – PA Senator Judy Schwank

This month’s featured CSG-ERC Agriculture and Rural Affairs legislator is Senator Judy Schwank of Pennsylvania.

Senator Schwank was first elected to the senate in 2011. The long-serving and well-loved senator from Judy’s district unexpectedly passed away, and the seat needed to be filled. Judy was on vacation with her husband when she got the call from the Party asking her to run. Judy says her husband often reminds her “You never said ‘no’.” He, of course, was concerned about the amount of time and energy this job would require. She would also be required to resign from the job that she loved – that of Dean of Agriculture and Environmental Sciences at Delaware Valley College.

So, knowing she would be out of a job if she lost the election, she signed up anyway. “I was very nervous,” she admitted, “but I had an incredible amount of help. Volunteers stepped forward to help.” And she gave her normal 110% to the campaign, doing everything she could, and then more. It paid off in the end, and she has been filling the large shoes of her predecessor ever since.

We asked Senator Schwank what the biggest issues are facing Pennsylvania agriculture today. “Pennsylvania is primarily a dairy state, and the biggest issue right now is that of dairy profitability.” She added, “Following that is the trade issue, especially with the uncertainty of the new administration, and the renegotiation of NAFTA, which is a big concern. Food processing is big business in my state, and the cost of food may rise as a result of the trade deals.”

When asked what the big non-agricultural issues are in the state, she immediately said, “The huge budget deficit. Our state has a $3.1 billion budget, and our deficit is $3 billion. The governor is committed to resolving this problem but it will mean some very difficult decisions of what to cut and who will suffer.” She added, “The Affordable Care Act is a big issue as well. In Pennsylvania, 700,000 people are on expanded Medicaid. This is an important resource for the treatment of opioid addiction, which is a public health epidemic in our state. Overdose deaths have more than doubled. If ACA funding is taken away, we will lose the ability to treat so many people in need.”

When we asked about the state of the Dairy industry in her state, Judy noted that it is very precarious because of the low prices the farmers are receiving. Some are selling off their herds. However, she understands there is going to be an uptick in the prices, which will help. It is a problem that needs attention at the federal government level as well. On the plus side, they’re seeing a lot of automation come online on dairy farms, and more and more young and beginner farmers are interested in getting into the business.

We asked Judy how she first got interested in agriculture. She said she has always been interested in horticulture, even from a very early age. “When most kids at 8 or 9 are reading comic books, I loved reading horticultural magazines. I would look at the pictures of the flowers and plants, and just dream of one day being a horticulturist.” So it was poppy seed packets, not paper dolls, for Judy! She added, “I even studied Latin starting at age 11, not because I wanted to speak it, but because I thought it would help me with the botanical names of the plants and flowers I loved.”

It was only natural, then, that she study at Pennsylvania State University, where she received her BS in Agricultural Education, and a Masters in Agricultural Education with a Horticulture minor. She went on to become an agriculture extension agent with the Cooperative Extension, where she worked on community development projects, including a developing a wholesale produce auction with Mennonite farmers to supply farmers markets in the state. Because of her work with the county commissioners as an extension agent, when a Commissioner’s seat opened up, she decided to run, and won.

We asked her, of the many jobs she has had in her career, which one was her favorite. “This one,” she said without hesitation. “I love being a state senator. I love being in a position where I don’t have to run for my life or run to support my family, but I run to do the best job I can for my constituents.” She adds, ‘I have found my voice as a senator, speaking out on issues.’ She said, ‘That is what I love the most, the public service aspect of the position. When someone pulls me aside and says, ‘Your staff just did an amazing job and helped me or my family members’, that makes me feel terrific.”

When we asked what Senator Schwank dislikes most, she answered, “I dislike it when people disparage politicians so often. I wish they knew how hard my colleagues work, and how serious they take the work that they do. I may not agree with them politically, but to a person my colleagues are very sincere and want to do the best job possible for their constituents.”

Judy is an active member of CSG-ERC, and we asked her why. ‘I am just so thankful that CSG-ERC exists. I come from academia, where we have in-service education and continuing education opportunities where our colleagues convene and meet to discuss common issues. CSG-ERC makes sure we legislators have the same kind of high educational opportunities. Networking is valuable. A number of the bills I have sponsored have come from the discussions at our annual meetings.”

Senator Judy Schwank is just one of the many great members of our Agricultural & Rural Affairs Policy Committee. Come and meet her, and all of us, this summer at the Annual Meeting in Uncasville, Connecticut, August 13 through 16

 

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Bob, Tara and Elsie

 

Understanding the Margin Protection Program (MPP)

You may have heard complaints from our dairy farmers about the Margin Protection Program (MPP), who say that the insurance program for dairy has been a failure. Let’s take a look at the program, what it was meant to do, and what the problems are.

To be sure, our dairy farmers have had their share of low milk prices, the up and down cyclical nature of prices that the farmers receive for their product, and the high cost of producing milk in the northeast. We covered this part of the story in our January blog (http://www.csg-erc.org/blog/2017/01/16/can-small-northeast-dairy-farms-saved/). And this year many in our region have been hit with unprecedented drought that has stunted the crops needed to feed the herds. On top of this, we have the highly touted new insurance program fail the farmers, which is adding salt to the wounds.

When we were preparing to tackle this blog, we both thought we understood the MPP. However, as we went to put pencil to paper (or fingers to keyboard), we found ourselves having a hard time explaining the program. So we did what we are good at – we set off to research the issue.   There were many explanations being bandied about, all of which were long, obtuse and leaving one scratching one’s head and saying, “Huh?” We need to thank a friend, Jay Phinizy, former USDA–FSA director in NH and Chair of the House Ag Committee, for his patience in making sure we understood the issue. We hope we are able to explain it more simply than most of the attempts we have read.

We will start with a little history. The MPP came about in the 2012 Farm Bill that was actually not finalized and signed into law until 2014. Many in the dairy industry had asked for an insurance program to replace the previous MILC safety net program. Congress wanted to eliminate Milk Income Loss Contract program (MILC), because it was viewed as a subsidy for dairy farmers. In fairness, many of the dairy producers also preferred to pay into a program meant to protect them from either low milk prices or high feed costs, rather than the MILC handout. The insurance program MPP became a reality in the last farm bill, and MILC was repealed. (There are other programs for dairy, but we will concentrate only on the MPP in this article)

So how does the insurance program work – or how should it work? The program on one side of the ledger takes the “all milk price” as the revenue for the program, and uses the Midwest feed price on the Chicago Mercantile Exchange as the expense side of the equation. The difference between the revenue and the expense is the ‘Margin’. As of this writing, those numbers are $17.05 per cwt (a cwt – or hundredweight – is 100 pounds of milk), $7.89 in feed costs to produce that 100 pounds of milk; resulting in a margin of $9.16. The margin is the important number.

The MPP provides insurance that protects the farmer against the Margin falling below a specific level. The farmer needs that Margin to be reasonably high, because they have plenty of other costs to cover, such as heat, electric, labor, taxes, and on and on. You can purchase MPP to protect that Margin from going below $8:00 (the top level) or from falling below $4.00 (the lowest level). You can buy protection in 50-cent increments anywhere between those numbers. The $4.00 is premium free, except for a $100 annual fee. Above that, premiums go up and are based on actuarial data.

Even if you bought the most coverage of protection at the of $8.00 Margin, you would receive no payments because the margin is $9.16. Should milk prices drop by more than a $1.16, feed prices rise by an equal amount, or some combination of the two, the coverage would kick in if you had bought in at the high margin level.

So what is the problem with MPP? There are several. The ‘all milk price’ is a national average price for milk, and the ‘feed price’ is the Midwest price on the Futures Market. Neither of those is reflective of our Northeast region. Milk prices vary in different regions of the country.   The feed cost vary from region to region. This government insurance program is a one-size-fits-all average, and does not vary by region. Therefore, it is not taking into consideration varying cost factors. The MPP also does not consider other cost issues, which also vary by region. We all know that it costs more to operate a dairy farm in New England than it does in Louisiana.

Another problem is that the margins are calculated in two-month increments. Let’s assume you bought in at the $8 margin level.   If the margin calculated for January is $7.50 and in February the margin went back up to $8.52, the two-month average is $8.01 and the farmer would receive nothing. However, if the margins were calculated one month at a time, the farmer would have had a payout for January but not February. Lastly the margins have been relatively steady (in the $9 to $10 range), so there have been very few payouts. Even though dairy prices are extremely low, the Midwest corn, soybean and other grain prices are low as well. As a result, the numbers we hear are that the program has collected $78 million in premiums and paid out $11.2 mil. (Using New Hampshire as an example, only nine of the 101 dairy farms in that state received an MPP payment).

It is clear that the system is not working for the dairy farmer in our region. Congress has just begun its negotiations on the next Farm Bill. We need to make sure the needs of our Northeastern Dairy Farmers are represented. We will be facilitating discussions for members of our region to develop specific wording for changes we seek to the existing MPP subchapter in the Farm Bill (Title 7-AGRICULTURE, CHAPTER \ 115-AGRICULTURAL COMMODITY POLICY AND PROGRAMS, SUBCHAPTER III-DAIRY Part A-Margin Protection).

 

Bob, Tara and Elsie