U.S. farmers are the envy of the world. They have access to the best technology and till some of the finest cropland on the planet. Better yet, in 2016, the price of fuel and fertilizer is down, and production is up. In spite of all this, U.S. farmers are just making it financially. And the farm economy is on shaky ground.
The fact is that in 2016, U.S. grain prices are not just lower—they are severely depressed. As a Kansas wheat farmer, I can attest to the fact that in mid-August, the cash price of a bushel of wheat at our local coop was $3.08—about half what it was a year ago—and less than half of the average $7.48 per bushel paid for Kansas wheat in 2012. The prices of other grains have followed similar declines.
While it’s true that the cost of inputs—fuel and fertilizer—also has fallen 10 percent over the past year, using more of those inputs to increase production per acre is still a losing proposition.
For example, producing 45 bushels of wheat per acre at $6.02 per bushel generated $270.90 of income per acre in 2015. But in 2016—even as farmers increased inputs per acre to maximize production on fewer planted acres—at $3.08 per bushel, producing 70 bushels on that same acre generated only $215.60 in income, erasing what normally would be the benefits of lower fuel and fertilizer costs.
Here in Kansas, wheat farmers planted fewer acres than normal in 2016, but had record yields and produced a crop of 462 million bushels. But that success carries a price. While the domestic market for wheat is stable—with wheat prices so low that some of it is being used for livestock feed—export markets are a different story, thanks to a number of factors.
For one thing, the strong U.S. dollar is hurting our overseas grain sales, giving Russia, Canada and Australia a major competitive edge. Take wheat, for example. While the world loves our high-quality wheat—as well as our shipping practices and on-time delivery—it cannot resist buying the cheap, low-quality Russian wheat that continues to drive down world wheat prices.
With that kind of cheap grain flooding foreign markets, the cost of shipping our own products around the world makes it even more difficult for U.S. farmers to compete in many foreign markets—like those in the Middle East and Northern Africa—where U.S. wheat once enjoyed a far healthier market share.
Add to those concerns the rising cost of farm equipment and repair, higher utility costs, and tighter credit, and farmers today—in Kansas and across the country—have little to cheer about.
The question is: Given these issues, what can we do to help America’s farmers? How can we stop the slow withering of our rural towns, where empty storefronts are the becoming the norm? The answer is: Plenty.
While commodity prices are largely subject to the laws of supply and demand, there is much we can do to improve farm economies—especially at the federal level.
First off, there is just too much regulation affecting the daily activities—and pocketbooks—of America’s farmers. In case after case, farmers are forced to absorb the costs of a rising tide of regulations coming out of Washington. When agencies—such as the Environmental Protection Agency—impose new constraints on how farmers can operate their businesses, they also must create some means to recompense those farmers for their compliance, rather than simply take more money from their pockets.
Stricter federal banking regulations also are putting the squeeze on rural America. New laws have tightened credit, making it less accessible to the people who need it most—our farmers, and the businesses that support their communities. Those regulations must be redrawn to better accommodate the needs of the rural economy.
Then there is the issue of higher labor costs—attributable in large part to minimum wage requirements that have driven up the cost of the manual labor so necessary to the planting and harvest of the nation’s agriculture products. This not only pressures farmers, but also drives up costs to consumers.
We also need to create new policies that make it easier to export our agricultural products—whether to nearby Caribbean nations, or to countries on the other side of the world. One of the most expedient moves our government can make today to bolster our exports is to normalize trade with Cuba—a major market 90 miles off our coast that imports much of its food from countries thousands of miles away, all because of dated trade restrictions from nearly 60 years ago.
Those are some of the challenges. And the solution is clear: Our policymakers must simplify and streamline the dizzying array of regulations that restrict U.S. agricultural production and trade—not only to enhance the competitiveness of our products abroad, but also to ensure the continued economic viability of our nation’s farms and farm communities.
The health of rural America is on the line.
The author is the owner of Keesling Farms in Chase, Kansas and the former chairman of the Kansas Wheat Commission.
The views expressed by authors are their own and not the views of The Hill.