preparing_for_ag_policy_changes_2017

U.S. Agriculture: Get Ready for the Ride

The agriculture industry waited with great anticipation for Congress’s confirmation last month of Sonny Perdue III as U.S. secretary of agriculture. Most in the industry are heralding the former Georgia governor’s rural roots, strong credentials and expertise to help lead the industry through a period of economic downturn with depressed farm incomes, lower commodity prices and tight profit margins. Now, observers are anticipating the implementation of the policies of Perdue and his boss, and their impact throughout the food chain.

After his swearing-in, Perdue said he would be “an unapologetic advocate for agriculture, ensuring that Americans who make their livelihoods in the agriculture industry have the ability to thrive.” Perdue spoke of helping farmers and ranchers by removing the obstacles that are blocking them from prospering. President Trump welcomed Perdue on his first day in office by conducting a White House “Farmers Roundtable” and signing an executive order establishing a task force on agriculture and rural prosperity.

While there is relief in the ag community that the USDA now has a pilot at the helm, there are many unanswered questions around policy under the new Trump administration. How will deregulation affect management decisions being made for this growing season and the next? What factors will be considered as policymakers start developing the next farm bill? And what impact will Trump’s overarching policies have on the farm?

What are you hearing?

The changing of the administration guard gives all marketers reason to think about the impact on their businesses. Projected USDA budget cuts and President Trump’s policies around foreign trade, immigration reform and federal regulations will likely have lasting implications for agriculture.

President Donald Trump and Ag Secretary Sonny Perdue lead a White House Farmers Roundtable. (USDA photo)

Through it all, it’s incumbent on your agency partner to not only stay abreast of the changes but also translate what they might mean for those who are marketing to farmers, ranchers and livestock producers. When your sales and research teams are meeting with distributors, retailers or growers, they should understand the nuances of how a customer may be making his operational decisions differently to deliver a quality product with financial viability.

Trade talks and TPP

No single policy has more impact on the farm than trade. The economic realities of low commodity prices mean that access to overseas markets is vital. Perdue has emphasized the need for more exports to help alleviate the farm sector slump, promising he would serve as “USDA’s chief salesman around the world.” The president himself calls agriculture “the largest positive contributor to our nation’s net trade balance, generating 10 percent of our exports and millions of American jobs.”

Agriculture experts are watching to see if policy will align with the rhetoric. There is a lot at stake. Since more than 25 percent of all U.S. ag production ultimately goes to markets outside this country, disrupting U.S. exports would have a devastating impact for not only farmers but the entire processing chain. The recent withdrawal of American support for the Trans-Pacific Partnership (TPP), the NAFTA agreement now in review and the tenuous trade relationships with China and even Canada over dairy exports are signaling potentially choppy waters ahead.

In particular, the TPP withdrawal signals a shift away from promoting free trade blocs, and we will be watching what comes next. Negotiating trade deals and developing new markets for U.S. agricultural goods will be critical, as will maintaining common ground with our NAFTA trade allies to ensure viable markets for our agricultural products.

Laboring over immigration policies

As trade gets sorted out, concerns are also growing about having a reliable source of employees. Crackdowns continue on undocumented immigrants, and the ripple effects are being felt throughout the country’s agriculture workforce. Two affected sectors where our clients have significant interest are the dairy industry and specialty crop growers in the western U.S., who produce more than half of the nation’s fruits and vegetables.

About a quarter of the nation’s farm jobs are performed by undocumented workers, and pressures on immigrant laborers could further crimp margins and put many farms at risk. Dairy farmers have long struggled to find enough labor, and ramped-up ICE audits and farm raids across many states will likely further stifle the dwindling supply. Perdue says that as the son of a dairy farmer, he understands the impact that labor has on the industry. Finding a way for H2A visa holders to stay in the country for a longer period may be one solution.

How policies unfold and affect the workforce throughout the food chain is a reality that we will be watching closely. Today, at a minimum, producer and processor employers should be ready for worksite enforcement visits – even raids – and verify Form I-9 documentation. Farm employers should be ready for higher labor costs, which will take a bigger bite out of profit margins.

Regulations and ag policy

Another priority of the White House, Perdue says, is “halting the regulatory onslaught for farmers and ranchers.” Certainly, one of the more contested decisions of the previous administration was when the Environmental Protection Agency (EPA) ruled in 2015 to expand its definition of “waters of the United States” (WOTUS) under the Clean Water Act to include streams, marshes and lakes. In his first days in office, President Trump signed an executive order directing new EPA administrator Scott Pruitt to begin the process of rewriting the two-year-old rule.

For WOTUS and other regulations, Pruitt’s appointment and that of other like-minded cabinet members could signal that the administration will work to roll back directives that have the potential to hamper progress in agriculture. At a minimum, there will be a tendency not to introduce new ones. Many experts believe that will be the case with GMO labeling. Trump’s executive order requiring two regulations be slashed for every new one implemented could slow down – if not halt – any movement for federally mandated GMO labeling.

The administration’s drive to reduce the number of regulations could also have an impact on programs included in the next farm bill, which is due in 2018. The House and Senate ag leadership have started farm bill discussions, and the vibe from many insiders is that there will not be a complete overhaul of commodity support programs but merely tweaking to address needs of growers and producers.

Whatever happens, it will be interesting to see the developments. A recent report by Rabobank predicts a revision of crop programs to reflect the currently tight row crop margins. This would help provide farmers some relief from depressed grain prices and tumbling farm incomes. Under the Trump administration, the tone of the farm bill could move towards business sustainability and away from conservation, Rabobank further projects. Ag policy analysts have noted that the Republican majority in both houses of Congress will likely make the approval process smoother than previous farm bills.

Hang on. It’s going to be a wild ride.

For many, the current atmosphere in the administration is evoking a roller coaster of emotions. Rural America helped pave the way for President Trump’s ride to the White House, and his rhetoric continues to be pro-ag. Perdue has promised to “champion the concerns of American agriculture and work tirelessly to solve the issues facing our farm families.” Will the future policies fall into line with the pledges?

What are you hearing? It’s incumbent upon marketers to monitor developments and conversations – in both markets and regulatory bodies – and take appropriate actions. With diverse backgrounds that include government relations, business development and public relations, we at Woodruff are ready for the ride.