2021: A time of transition

Shelley E. Huguley swfp-shelley-huguley-tractor-sunset.jpg
2021 Southwest Economic Outlook: Southwest economists and specialists weigh in on the 2021 economic outlook.

outlook-logo-21-perry.jpgIt is safe to say we all hope for better things in 2021. We hope commodity prices will continue the recovery trend seen in the last part of 2020. We hope for an effective COVID-19 vaccine and a reduction in disease impacts in our communities. We hope for continued effective policy support in Washington D.C. However, recovery is uncertain, and it takes time.   

The November elections and retirements of key members will bring change with the next Congress. Of the four leaders of the House and Senate Agricultural Committees that passed the 2018 Farm Bill, only one (Sen. Stabenow) will return for the 117th Congress. The election of Joe Biden will also bring change to the leadership of USDA and all of its agencies. Wholesale changes in leadership in Congress and the administration don’t happen very often. Change is not bad; however, it does increase the amount of uncertainty that farmers and ranchers will face. 

The farm economy has been in a difficult place. Multiple years of depressed commodity prices have impacted revenues and cash reserves. The 2018 Farm Bill—a budget-neutral, baseline bill—helped refine the farm safety net, disaster, and conservation programs. For example, it provided the flexibility to shift between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs annually beginning with the 2021 crop year, a change that will allow farmers to adjust to evolving market situations.  

While these were positive changes, over the last three years, several ad hoc programs were required to counterbalance the impacts of adverse events like retaliatory tariffs, disastrous weather, and COVID-19-related market disruptions. Programs like the Market Facilitation Program (MFP) and the Coronavirus Food Assistance Program (CFAP) provided approximately $50 billion in assistance for farms and ranches.  This aid was absolutely vital in helping producers weather the economic downturn.  

As we start the new year, everyone is wondering how the federal government will respond, particularly in the absence of a significant improvement in the farm economy.  Will ad hoc aid continue to flow?  Will there be additional funds available for writing the next farm bill?   

If past is prologue, the 2002 Farm Bill process could prove insightful. Following terrible commodity prices in the late 1990s and years of ad hoc assistance, Congress added almost $60 billion to the already existing $85 billion budget for commodity programs in the 2002 Farm Bill. Despite the circumstances, that infusion in funding wasn’t automatic—it was largely due to an extraordinary amount of work on the part of leaders on Capitol Hill as well as a groundswell of support and pressure from the nation’s agricultural groups.   

A new president, new agricultural committee leadership, and a new secretary of agriculture are on the horizon—but we don’t yet know what this will mean for agriculture. In the near term, we don’t expect any major changes from an agricultural policy perspective, but the transition to a new normal has begun. 

2021 Outlook articles:

Source: is Oklahoma State University and Texas A&M University, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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