Greg Cole admits he was disappointed when Congress decided not to continue direct payments in the 2014 farm bill. Now Cole says moving to Price Loss Coverage payments wasn’t such a bad thing after all.
Cole, CEO and president of AgHeritage Farm Credit Services in Little Rock, Ark., says the PLC payments USDA began making when commodity prices dropped 50 percent after the 2014 law was passed have been life savers.
“If we had stayed with the old farm bill, this area would have had less safety net,” said Cole, referring to the Arkansas Delta in the eastern half of the state. “Had we not had this safety net with the strong PLC payments here in the Mid-South, the Delta would be severely damaged financially.”
Speaking at the Mid-South Agricultural and Environmental Law Conference in Memphis, Tenn., Cole listed the average PLC payments received by Delta region rice producers since the advent of the new farm bill as an example.
“Look what was paid: In 2014, $111 an acre; ’15, $159; ’16, $213, rice has come up; and in ’17, it’s projected to be down to $112.” (Price Loss Coverage and Agricultural Risk Coverage payments are made the following crop year as part of the budget restraints Congress imposed prior to the 2014 farm bill’s passage.)
Although direct payments varied by yields and payment limit restrictions, they would not have been comparable to the Price Loss Coverage payments made to rice producers since the passage of the Agricultural Act of 2014.
Between 2007 and 2012, when farmers saw some of the highest commodity prices in their lifetimes, producers in the Delta doubled and, in some cases, made two-and-a-half times their net worth, according to Cole.
“Some people were smart enough to keep their liquidity; some didn’t,” he said.
In 2014, commodity prices fell an average of 50 percent and many growers lost money. “We had losses of $250 an acre and profits of $100 an acre,” he said. “In 2015, most producers lost money even with the PLC payment added in.”
In 2016, many farmers made money or broke even. Still, 40 percent had losses. “Some of these folks got restructured three times by their lenders,” said Cole. “This time last year, I was sitting here thinking this is going to be the fourth year of losses in a row, and we’ve got a big flood.
“Guess what? Things lined up, and we had a favorable year here in the Mid-South. Most of our producers – 80 to 85 percent – made money due to strong yields, a large PLC payment on rice and lower irrigation costs because of the weather. The average producer made about $80 an acre, so that was a nice break.”
One year doesn’t negate the need for a good safety net for producers in the Mid-South and in other parts of the country, said Cole, whose farm credit institution has about $2 billion in loans, mostly to growers in eastern Arkansas.
Value of Safety Net
“Even the producers who made money (in 2017) would have lost money if you take the PLC payments back out,” said Cole. “I can’t underscore that enough – we have to have that to be able to maintain a strong safety net for Mid-South agriculture.”
He acknowledged there are issues – “distractions,” as he called them, that could interfere with the passage of the 2018 or 2019 farm bill. Those include the debates over nutrition and immigration policies that led to the defeat of the first attempt to pass a 2018 farm bill in the House back in May.
The Senate Committee on Agriculture, Nutrition and Forestry was expected to consider a less-controversial version of the 2018 farm bill at a meeting on June 13.
“I get it that these issues are very political, and there’s a lot of big picture to them,” he noted. “I understand that. But let me put it in simple terms: If there is a disruption that lessens demand when you are a major exporter like U.S. agriculture, prices go down, profits go down and that exacerbates our situation.
“Unfortunately, I’m concerned that agriculture and farmers are going to get caught in the concept of collateral damage into a bigger picture.”
Cole said he played sports in high school and college – including winning two heavyweight boxing championships at Arkansas State University, his alma mater. “You quickly learn to look for the weaknesses of your opponents, and, in the current environment the weakness is food.”
He also cited the food vs. fuel debate, which is capturing a lot of attention in the Midwest. “It’s real simple,” he said. “If you reduce the demand for corn, that’s problematic for all of us.”