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Regulators Now Driving Farm Decisions And Driving Up Farm Costs

Regulators Now Driving Farm Decisions And Driving Up Farm Costs
Financial and environmental regulations will cost farmers a lot more to stay in business predicts ag lender.

Barry Sands was in a "catbird seat" last week, offering his view of agriculture's opportunities and challenges during an early morning Dairy Pros meeting at Penn State's Ag Progress Days. But he slipped out of his conservative ag banker role for a realistic glimpse at agriculture's future.

Agriculture and the dairy industry may be a great place to be over the next 10 years, says the Harrisburg, Pa., based vice president of Fulton Bank's Agricultural Financial Services Group. "But (the United States) has potential to regulate us right out of being a global player," he warns.

EVEN AG LENDERS ARE SQUEEZED: Fulton Bank's Barry Sands contends that federally-driven regulations are driving up the cost of food production and business costs.

Farmers with cash equity have great opportunities, especially with today's low interest rates, Even so, he notes that farmers have to build liquidity in their businesses to take advantage of those opportunities.

Dairy farmers have had great opportunities to cull their herds, taking advantage of historic cull cow prices, he points out. With aggressive culling, they're able to substantially reduce herd somatic cell counts. "They may give up some production with new replacements. But at the end of the day, they can increase margins."

Regulatory challenges to agriculture are huge
"Regulators (chiefly the USDA, Environmental Protection Agency) are driving a lot of today's decisions," laments Sands. "Regulations, for instance, have taken new hog facility projects from $30,000 to $40,000 to as much as $90,000. The increased costs of permitting, conservation and environmental compliance are squeezing agriculture from all directions."

Sands also notes that regulations have a direct impact on bringing the next generation into the business. The skill sets needed require risk management and financial management ability, and they're increasingly required to report to regulators. Pressure from U.S. EPA, for example, forced Pennsylvania to require manure management plans for livestock farms.

Even banks fear a growing regulatory burden, adds Sands. Congress has a bill of more than 1,000 pages that would ultimately hurt smaller banks and farmers."
TAGS: USDA Livestock
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