With the availability and affordability of our food at risk, it is in America’s interest to aid farms and agribusinesses in financial distress caused by the coronavirus emergency.
The Trump administration has promised $16 billion in direct payments to farmers and $3 billion to buy dairy products, fresh produce and meat for food banks. The Wisconsin Assembly passed legislation, awaiting Senate consideration, that includes grants to dairy processing plants, $30 million in property tax cuts for farm buildings and a promotion boost for dairy exports. Farm organizations have asked Gov. Tony Evers to designate $50 million for farmers from $1.9 billion in federal aid the state is receiving. Even more appropriations might become necessary if the coronavirus crisis persists.
The economic stakes are high for Wisconsin, known as America’s Dairyland. The state is the nation’s top cheese maker and a major producer of milk and other dairy products. It’s a big producer of several crops and livestock. Agriculture generates about $105 billion in economic activity here and accounts for nearly 438,000 jobs, according to a 2017 study.
As state and federal governments provide aid, policymakers must make decisions about how much is enough and what conditions should be attached. Three principles should provide guidance.
First, policymakers should separate short-term problems related to the coronavirus from long-term problems plaguing the agricultural economy. This is a time to focus on solutions for the short-term.
The short-term problem is that with everything from school cafeterias to restaurants closed, food processors who serve those markets have curtailed buying from farmers. Many meat processing plants have closed, shutting off markets for some livestock farmers. Though President Trump declared meat processors critical infrastructure, it’s unclear when plants will reopen. Furthermore, travel has plummeted, cutting the need for ethanol, nearly eliminating one market for corn. Consequently, prices for farmers’ products have collapsed, and some farmers cannot find a buyer at any price.
This has occurred on top of financial distress that was widespread among farmers and agribusinesses before the coronavirus pandemic. Farms have long been under pressure from price declines for their products. Lower prices are related to greater production efficiencies, which put more supplies into markets. That’s good for consumers but means farmers must aim for even greater efficiencies, which tends to make prices even lower in a spiral that is difficult to resolve.
Some farm groups propose to seize this opportunity to address long-term problems. For example, some dairy groups asked the U.S Agriculture Department to create a voluntary program to reduce milk production. Those kinds of proposals should be left for later discussion. What the nation needs now is enough aid to help farmers and agribusinesses through an economic crisis that is not their fault.
Second, aid should have a minimum of strings attached. Officials should learn from mistakes made with the recent Paycheck Protection Program. That aid contained restrictions that rendered loans useless to many restaurants. For farm aid, officials should work with farmers and processors to ensure any conditions are not counterproductive.
Third, policymakers should cap payments to individual recipients to make sure a few extra-large operators do not absorb most of the money. Again, officials should learn from mistakes made when large, public companies were initially permitted to gain big loans from the PPP, crowding out small businesses. Not only does the public backlash in such cases erode support but also the skewing of aid toward large operators worsens the income gap between big and small.
Guided by these principles, policymakers can craft efficient aid programs.
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