Commodity farmers across the nation are struggling under the weight of low prices and tariffs, resulting in bankruptcies and crisis in farm country. In this second conversation with Roger Johnson, farmer and president of the National Farmers Union, we talk about how putting controls on production may be the toughest and most important battle for the future of agriculture.
Lindsey: Hey, this is the Young Farmers Podcast. I’m Lindsey Lusher Shute.
In our last episode, Roger Johnson, President of the National Farmers Union, walked us through how US commodity producers face declining prices and a trade war with China. I’m looking for ideas about how family farmers can get out of this mess and stay in business. Today, we’re going to see if Roger can offer us any solutions.
Selwyn Justice: Hi, this is Selwyn Justice of Justice Brothers Ranch in beautiful Waddell, Arizona, where we grow citrus and raise beef cattle. I’m a member of the National Young Farmers Coalition because even beginning farmers need every chance they can get to create a more sustainable future for farming. For just $35/year you can join too. In addition to being part of a bright and just future for agriculture in the United States, you’ll also get discounts like 40% off Filson and 25% off Farm to Feet socks. To join go to youngfarmers.org.
An Extraordinarily Difficult, Uphill Battle
Lindsey: I wanted before we talk about sort of policy opportunities and changes that are necessary. In the National Farmers Union policy book, it talks about the family farm as a keystone of a free progressive democratic national society. And it says that a vertically integrated in our multinational grain and food conglomerate is not a family farm. So I’m just wondering before we talk about policy, how do you distinguish between who you’re helping when, when we’re talking about international trade and supporting viability of, of farms and specifically trying to give some sort of preference for family operations.
Roger: Sure. The way we decide what we’re going to do, what we’re going to advocate for, is decided entirely by our membership. This, this question of economic concentration and large corporate – either buyers or sellers in agriculture – is a question that we have wrestled with since we were organized more than 100 years ago and it’s one of the reasons why, uh, much of our formative years were spent organizing cooperatives. That question is really important and family farmers, we need to live in an environment where there are fair markets.
Lindsey: So I’m wondering in this current situation where we have, sort of, one crisis on top of another crisis for commodity producers and thinking about those family farmers – what can be done to turn this situation around, to create a more stable situation for American family farmers?
Roger: Yeah. And let me answer that in the context of the dairy debate that’s going on right now because milk prices are very low. There’s significant oversupply, over capacity in the marketplace. USDA just announced a special program where they’re gonna buy I think $50 mIllion worth of fluid milk and donate it to food banks. That’s one way of dealing with a surplus supply. So we have long advocated and what a lot of the dairy producers are re-advocating right now is some system of supply management. Now this doesn’t have to be the heavy hand of the federal government in saying what you can or can’t do on your farm, but there does need to be some sort of a policy put in place that provides incentives when there’s overcapacity in the market for farmers to produce less. And last time we talked, I spent a lot of time talking about how when farmers are producing and the prices get low, there’s no incentive to cut back on production. And so we keep adding to this excess supply and keep driving prices even lower and lower. And the only thing we’re waiting for is some major weather catastrophe somewhere in the world to cut production so we bring it back in balance. For many, many years the federal government served, uh, in a way to balance those supplies. And we’ve had different programs so that if you had too much production on the market, there would be incentive for farmers to set aside some production, to not produce. Maybe they’re paid to produce less, or maybe the market price they get for all of the milk that they produce is a little higher if they hold their production constant to what they have historically produced or higher still, if they cut it, let’s say, five percent below what their average production has been. But that they be financially penalized with a lower price if they’re expanding production at a time when there’s a surplus in the market. That’s the concept of supply management and it works because of this fundamental economic characteristic that we talked about last time. Which results in, in the market really not being able to send the right signals to farmers to cut back on production during times of overproduction. The signals are too slow and in fact they’re too weak. There needs to be an additional kind of signal that comes in. And that’s one of the things that we’ve argued for in farm bills, that there should be that kind of a policy that incents folks to produce less because it would be far cheaper for the government to provide modest incentives for people to produce less than it would be for the government to come in with these big bailouts. This bail out that USDA is talking about doing – it’s a one time deal. It’s going to largely be paid out in advance of the election. It’s going to be paid out for losses that are presumably largely to the degree that they can calculate it incurred as a result of the trade war. Okay? But as we talked about before, this trade war will have very long lasting implications and markets are going to be lower for a long period of time to come as a result of this trade war. So there’s likely going to be a need for additional sums of money to be paid out over the upcoming years instead of a more thoughtful policy that’s laid out in advance that says, you know what, we’re going to protect prices to a certain level, and we’re going to hold these prices relatively constant. It is the beginning farmers that suffer the most with this high price volatility because their future is going to depend almost entirely on when they chose to start farming. If they started farming when we were looking at $13 or $14 soybeans, the relatively high price period, they’re starting to farm at a time when the land values are high, machinery values are high because commodity values are high.
Lindsey: Because, so they paid too much for everything, to start their farm and they can’t sustain it.
Roger: Exactly. And so they go in, they’re gonna take on a whole bunch of debt and then the market falls to a point where now they’re going to have to farm for a number of years at a loss. They haven’t had a chance to build any equity so they cannot survive that loss and they’ve got too high a cost structure built into their farm because of when they started. On the other hand, in the 80s when we had the economic collapse and I worked as a farm credit concert during that period, that would have been a really good time for young people to start farming. Land values were low, machinery values were really, really cheap.
Lindsey: But every farm parent was probably saying “Do not get into, don’t get into this! This is not a good business.”
Roger: Exactly. The psychology was against doing it then, so, so bringing some sort of…
Lindsey: Which is when we lost the generation that’s missing now, it was in the 80s, because you have these family farmers now that our retiring that should have, should have kids ready to step up. But kids that were told to do something else during that, during that period of crisis.
Roger: Or they started farming and they went broke and left, you know. And as they left they didn’t have a, a family that was there. And so you just, as you pointed out, you lost a generation. And in some cases we lost more than a generation.
Lindsey: So Roger, a lot of what you’re talking about sounds like what Canada is doing with milk and that supply, which is something that we hear a lot of farmers complain about and even the Trump Administration complain about. So is Canada doing doing the right thing by their dairy farmers with, with that inventory management, their supply management. Is that something that we in fact should sort of, look to model here in the US?
Roger: I think we should. Now that’s not to say that the Canadian system is perfect because I think there is a part of it where they’re cheating. But one of the principles of some sort of supply management program that countries need to follow, is if they’re going to do this, they cannot set prices at a level that incent more production. And then instead of doing programs to moderate production, to bring production down during periods of big surpluses, if countries are just taking that surplus and dumping it on the world market, that’s when you create a problem. And that’s what the Trump Administration is objecting to relative to the Canadian system. Because what Canada is doing is they’re, they’re not throttling back production quite enough. And so they’ve put in place this thing called a class seven milk, which is priced very cheaply and then is sold into the international marketplace. That’s the part that folks are objecting. In the overall scheme of things, it’s relatively modest, it’s probably having very little impact on our prices here. But just the fact that they’re doing it is something that, that gets a lot of people really concerned. Having said that, Farmers Union state members have done a number of meetings where they’ve invited a farmers, dairy farmers from Canada, down to speak to us. They’ve had overwhelming attendance and overwhelming support from the dairy farmers in the room after they hear how the Canadian system works. Dairy farmers are very reluctant…
Lindsey: So U.S. dairy farmers are interested in having a system like Canada’s?
Roger: Very much so, yep. Earlier this week, in fact, there was a meeting in Albany, where a big dairy coop, uh Agrimark did that meeting and there were, I think 300 or 400 dairy farmers that came in and my, I wasn’t at the meeting, but the reports I got back were, people were very interested and very animated about putting in place some sort of a supply management system because there’s just too much milk on the market right now. It’s very destabilizing.
Lindsey: And I think it’s worth pointing out for listeners who might not understand sort of just the degree to which dairy farms have scaled. Here in New York, we see multigenerational dairy farms that haven’t really changed in scale too much, but you know they’re doing 30 to 50 cows. And then you have these newer dairy farms that are doing hundreds if not thousands of cows at their, their operation that are milking that many.
Roger: Yeah and in some places it’s tens of thousands of cows on a single farm and so. Listen, this isn’t sort of a diatribe against, uh, you know, the, the size that everyone has to be, it is more, we need to understand what the consequences of these kinds of policies create for us. And if we had a supply management system that sort of held people to something close to what their historical production was, and we can meet the market demand, you can hold prices relatively constant. Consumers are also going to be better off because they’re not going to have those prices fluctuating up and down. And the farmers are going to be better off because they’re going to have, you know, a, a narrower a channel in which prices are going to be moved. They’re going to have a much more predictable, way of, of living. And if you, if you survey dairy farmers in Canada and compare their economic well being to dairy farmers in this country, I mean, you would see a dramatically different result and much more favorable positive attitudes on the part of the Canadian dairy farmers. And that’s really what I hear from all of these meetings that have been held all over the, especially the northern part of the country this past year.
Lindsey: So what are, what are the chances that we’re going to be able to have supply management for commodities, for dairy in the United States? Is there a political support for that? Is there bipartisan support for that? Are there bills that are trying to craft how this might work or would that be something that would happen on the administrative side? How do you get there?
Roger: No. I think the only way you get there is we continue to have really major economic problems in agriculture to the point where farmers stand up and start saying, we want this to happen. Because right now the politIcal atmosphere in Congress is they’re not going to do this.
Lindsey: Why is, why is that?
Roger: Well, it can best be summed up by a comment that then Speaker John Boehner made on the floor of the House during the debate over the 2014 Farm Bill when he called the supply management provisions a Soviet style agriculture. And it’s so unfair and so untrue. It’s not that they have supply management, they got a whole entirely different system and negative incentives and all that kind of stuff. It was an unfair characterization and it was made over a provision of dairy policy. And so what we ended up with a dairy policy was just incredibly, uh, almost useless but despised, I think is a good way to describe it by almost all dairy farmers. They just hated the program.
Lindsey: And, oh so this is just the last, the policy that’s currently in place, from the last farm bill?
Roger: Yup. We’ll see whether, whether this is going to change, but there’s no question that getting supply management provisions in the farm bill is an extraordinarily difficult uphill battle.
Lindsey: It’s too late, right?
Roger: For this farm bill, no question it’s too late. I think we are likely going to be in a position, uh, like we were in, uh, following the 1996 Farm Bill. And for folks that maybe don’t remember in 1996 or weren’t around, they had had high prices when they passed it, but after they passed it, we entered into a period not unlike what we are facing today where there was relatively good weather, production overtook demand and you drove prices into the toilet and you had very, just a lot of financial distress in agriculture. And so Congress, every year for a number of years, just did a big – they call it economic emergency, uh, payments that were made to farmers. Not particularly well targeted, but they had to respond to this economic crisis. That’s essentially what Secretary Perdue is doing right now with this $12 billion plan that’s been announced. He’s got a crisis on his hand. It’s not solely because of trade, but it’s exacerbated because of the trade war that the Administration is promulgating. Um, and I don’t see any way that Congress or the Administration is going to avoid having to do this again next year and maybe the year after and the year after. There’s just going to be too much financial disruption. That really argues that people ought to put some of these sort of prejudices aside and sit down and talk about – is there a better, cheaper, you know, a more thoughtful way that we can proceed? If you look at the cost of farm bills before the ‘96 Farm Bill, when we had paid land diversions and set asides, and things that, that were designed to incent farmers to cut back on production during periods of, of, of too heavy stocks. Uh, the costs of those farm programs was far less expensive to the government than the cost of the more modern programs after they took all sorts of controls off production, let production run wild, and then they tried to fill up the economic, uh, jar that was only half full with tax dollars. And I think we’re back in that scenario right now.
Lindsey: So the 1996 Farm Bill signed by Bill Clinton sort of, started a different era of farm policy. Is there opportunity for bipartisan support? Is there, is there a leadership that is starting to talk about what else can be done? Because clearly this system is broken and not working.
Roger: I would say in Congress, not yet. And it isn’t going to happen in Congress until it really happens out in the countryside. I mean that’s the way our political system works. And so as more and more farmers are struggling and are saying something needs to be done, uh, then they put pressure on members of Congress and then eventually you get someone who will stand up and say, you know what, we need to do this.
Lindsey: The Chinese tariff clearly were aimed at US farmers and I, you know, like, uh, and our rural population, uh, that oftentimes voted to make America great again and, and for President Trump right? I, I live in a district that voted for Trump in upstate New York. Do you think that that pressure specifically put on Trump voters can help to, to spur some new conversations about a change in agricultural policy?
Roger: Uh, yes it can. I mean, but I do want to make a point here. When the Trump Administration decided that rather than sit down and, and talk to other countries and bring the rest of the world together in an effort to bring China to hold them to account because they’ve been cheating, they’d been stealing, they’ve been, you know, they behave in non-market economy ways. I think most people agree that something needs to happen with China on the world stage, that they need to be constrained in some fashion because of how they operate economically. But what should have happened in my opinion, is the President should have sat down with other world leaders who largely view China the same way that I’ve just described them and would have, I think been willing to work with us, uh, to bring pressure on China. That would have been one way to do it. But rather than that, it seems like the President has sort of picked a fight with all our allies, in addition to China. And so it, I don’t know how this ends, we’ve offended a lot of the allies, natural allies that would have been in our corner. The other point I want to make is that no one should be surprised that it was agriculture that was targeted for retaliation by China. And the reason I say that is because the US has an enormous trade deficit and it is the biggest share of that trade deficit is with China. A trade deficit simply means that, that we are buying more from China than we’re selling to China. And so China ends up with a whole bunch of US dollars because we’re buying all this stuff and it’s unbalanced. Okay? Because the US has such a large trade deficit, there are not very many exports that we send to China that China can put tariffs on except for agricultural exports. Okay? And that’s the one place where the US has a trade surplus and so the chinese obviously responded to agriculture. Well first of all, they had no other place to go, but then secondly, the political benefit was they could, they could very much target Trump voters. And that’s what you typically see when you find countries retaliating against other countries. There’s a lot of thought that these countries put into, how they impose tariffs to extract political pain, uh, in the country that they’re imposing them on in order to try and get a result and so we shouldn’t be surprised that the tariffs came back against agriculture.
Lindsey: In all of this farm expansion that we’re seeing, these very large dairies coming online in particular, to what extent should the farm credit system and banks take responsibility for that? I just don’t understand how all these banks think that these farms are going to do well given the current situation. So it’s always, it’s kind of surprising to me and maybe it shouldn’t be that someone is lending to this farmer to create this enterprise that clearly is not going to be profitable and by the way, this bank probably holds loans with all these other producers in the case of farm credit in particular, that, that need to do well also. So should we also be targeting the farm credit system and other agricultural lenders to take charge here and to take leadership and help to have some common sense when funding these farms?
Roger: Yeah, that’s a really good and sort of complicated question. Lenders, they kind of make their decisions like farmers do. They make them based on the application in front of them. But you raise a larger question about if you think about the overall health of the economy, if you have a lender who’s got lots of loaners to smaller producers and then they make loans to really large producers that are going to put those smaller ones out of business, how does that impact your book, the business? To that point, local lenders generally, in my opinion, make decisions that are better for local economies. Because the larger the business, the more likely it is that the financing for that business is gonna come from further away and from larger entities that have fewer connections to the local community. And that raises a really important public policy question about whether we should have policies that provide incentives for these local communities, larger incentives for them to build themselves and perhaps disincentives for these very large businesses. Because from a public policy standpoint, from a societal standpoint, communities are better off if we have more producers in the area, then if we have fewer. But that’s only true if the more producers are profitable and so all these policies need to kind of work together. As a country, we’ve gone too far down this “let’s just deregulate everything” road. As farmers, we love it because we don’t like anyone telling us what to do. But to deregulate sort of, the financial industry and, and allow these really large corporations to grow and grow and grow and get to the point where there’s, their monopolistic or at least oligopolistic in how they impact us. Those are negative impacts on society and that’s what Congress should be put in place to pay attention to – to have an economy that’s more competitive, that extends its benefits more broadly to more people rather than more narrowly just to the largest corporations that are out there.
Speaker 2: Well, there is work to be done. Roger, thank you so much for your time. And you know, I think it’s a, it’s a message to people who are listening to this podcast, both farmers and consumers, that to change any of the above it really does take grassroots action. Everyone needs to hear that something is very wrong in farm country and that we need some common sense policies put in place to make sure that the farmers that we have in place can stay there, can do well, can make a fair living.
Roger: Thanks Lindsey.
Lindsey: Thanks for getting on the phone again today. I just felt like, man, we’ve got to talk about what you do about it. The problems are so immense, we need to know, how to, how to direct our energy.
Roger: We have a responsibility as citizens to hold our representatives to account and I think that’s really the bottom line. We need to engage and I think when we do you’ll find members of Congress and local legislators and others that will be more responsive to us.
Lindsey: Roger, thank you so much.
Roger: You’re welcome, take care Lindsey. Bye.
Lindsey: Okay everyone, we have our work cut out. To find out more about the National Farmers Union go to NFU.org. Please subscribe and rate and review the podcast on iTunes so more people can find us. Thanks to Radio Kingston, to Andrew Jerome and Roger Johnson of the National Farmers Union, the wonderful team at the National Young Farmers Coalition, Hannah Beal for editing and thanks to you, for listening. Talk to you next week.