Policy update for 2022 • farmdoc daily
This is a summary of the 2021 Illinois Agricultural Economics Virtual Summit (IFES) presentation. Webinar video and PowerPoint slides (PDF) are available here.
Net farm income in the United States reached nearly $ 95 billion in 2020 and is expected to reach nearly $ 117 billion by 2021 after averaging just under $ 76 billion from 2015 to 2019. Farm income from government payments in recent years has increased to unprecedented levels. since the long period of low commodity prices in the late 1990s and early 2000s (see Figure 1).
Over the past four years, significant federal support has been given to farmers, mainly through ad hoc programs that have averaged nearly $ 20 billion in annual payments since 2018 (see Figure 2). These payments were intended to offset losses associated with trade policy (market facilitation program), natural disasters (forest fire and hurricane compensation programs) and the Covid-19 pandemic (aid programs food and paycheck protection against coronaviruses, economic disaster loans).
Thanks to favorable corn and soybean prices, current budget projections for 2022 imply positive returns for grain producers in the Midwest (December 7, 2021). However, historically high input costs lead to high break-even prices for 2022 and a significant downside price risk facing farmers (December 21, 2021). Will the conditions that warrant additional ad hoc support for U.S. farmers reappear in 2022, or will the existing agricultural safety net of commodity and crop insurance programs be sufficient? This remains an important and open question as we approach 2022 and the 2023 Farm Bill debate process, as political debates take place with increasingly broad budgetary implications.
Among the wide range of policy initiatives that could have an impact on agriculture proposed in 2021, some have been passed into law while others have been presented for the time being or included in legislation that has not progressed. .
The landmark law on investment in infrastructure and employment includes little direct agricultural support, but aims to revitalize rural areas and improve transport systems important to farmers. The $ 1.2 trillion plan goes into effect on November 15, 2021 and includes $ 650 billion in earmarked funding and $ 550 billion in new spending split between surface transportation projects and basic infrastructure. The new spending represents $ 110 billion, or nearly 10% of the total cost of the bill, for improving roads and bridges. Railways, ports and waterways also receive significant funding. The bill also expands broadband, strengthens the electricity grid, and repairs and improves the country’s water supply systems. The agreement is expected to create more than 800,000 jobs at its point of maximum impact (Zandi and Yaros).
Another major legislative program, the Build Back Better Act, would expand the social safety net and policy on climate change. After drastically reducing to $ 1.75 trillion, the bill has passed the House but has an uncertain future in the Senate. Some parts of the package would benefit agriculture, but taxation is also part of the deal. The bill proposes $ 27 billion for âclimate-smart agriculture,â which would be the biggest conservation investment since the Dust Bowl. Some of that $ 27 billion would be used for new programs, including $ 5 billion for soil conservation assistance, a program that would fund the establishment of cover crops for soil health. Growers would be eligible for $ 25 per acre, and landowners who allow cover crops would be eligible for $ 5 per acre, but payable up to $ 1,000 acres. In addition to new conservation initiatives, approximately $ 22 billion of the $ 27 billion would expand the reach of four existing conservation programs: the Conservation Stewardship Program, the Environmental Quality Incentive Program , the agricultural conservation easement program and the regional conservation partnership program. As shown in Figure 3, additional funding beyond the planned spending for these programs from 2022 to 2026 is significant. The tax part of the bill could result in higher taxes for some farmers (see Farmdoc online seminar, October 21, 2021).
It remains to be seen whether some form of the Build Back Better Act will ultimately be passed. As the attention of the farming community begins to shift to the upcoming Farm Bill debate, what happens with the conservation-related provisions in this pending bill may impact that discussion. Other factors that could impact Farm Bill 2023, legislation that is generally a bipartisan effort, include the large ad hoc payments provided to farmers over the past 4 years and the high level of polarization in US politics.
IFES 2021: policy update for 2022. Friday December 10e, 2021. https://farmdoc.illinois.edu/assets/presentation/IFES_2021/2021-12-10-IFES-Policy-Handout.pdf
Schnitkey, G., C. Zulauf, N. Paulson, and K. Swanson. “2022 break-even price for corn and soybeans.” farmdoc daily (11): 168, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, December 21, 2021.
Schnitkey, G., C. Zulauf, K. Swanson, and N. Paulson. “Updated crop budgets 2022.” farmdoc daily (11): 162, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, December 7, 2021.
Zandi, M., Yaros, B. “Macroeconomic Consequences of the Infrastructure Investment and Jobs Act & Rebuilding a Better Framework. âMoody’s Analytics, November 4, 2021.