Ag News
Finances, farm bill and farmland loss hot topics at Ag Issues Summit
Posted on Sep 12, 2024 at 1:47 AM
The potential for a farm financial crisis, the farm bill, water, and farmland loss, were a few of the issues members of Georgia’s agricultural community heard about at the 2024 Joint Agriculture Committee Chairmen’s Ag Issues Summit held Aug. 27 at the Georgia National Fairgrounds & Agricenter in Perry.
Rep. Robert Dickey and Sen. Russ Goodman, who chair the Georgia House and Senate Agriculture & Consumer Affairs Committees, respectively, hosted this annual event that gives Georgia agriculture leaders an update on current and emerging issues Georgia’s top economic sector is experiencing.
“It’s a pleasure to be here with all of you today. I want to thank all of you for turning out to hear updates on the pressing issues Georgia agriculture is facing, and we’ve got a few,” said Dickey. “Members of both the House and Senate Ag Committees are here today, so please take this opportunity to speak with them and tell them your concerns.”
Georgia Farm Bureau was one of the event sponsors along with the Georgia Cattlemen’s Association, Georgia Milk Producers, Inc., Georgia Forestry Association, Georgia Poultry Federation, Georgia Urban Ag Council, Georgia Green Industry Association, Georgia Fruit & Vegetable Growers Association, National Federation of Independent Businesses (NFIB), and Georgia Agribusiness Council.
“I want to thank Representative Dickey and Senator Goodman for holding this event and shining a light on all of these issues that our farmers are facing,” GFB President Tom McCall said. “I’d also like to thank each member of the House and Senate Ag Committees for the work you do during the General Session every year in Atlanta. I know firsthand the long hours that you put in while you’re in session and throughout the year as you visit with your constituents. Please know that Farm Bureau’s Public Policy staff is here to work with you whenever you need us.”
A frank financial discussion
Sen. Goodman stressed the dire financial situation many Georgia row crop farmers are facing. Goodman shared conversations he's had with a farmer who is a partner in a cotton gin that serves 70 farmers and estimates up to 35% of his customers may be out of business by the end of the year if nothing changes. Goodman said another friend, who is both a farmer and banker, estimates about 20% of the farmers affiliated with his bank could be out of business by year's end.
"This is real. These are the folks that are supporting our tax digest, small businesses, the parts store everywhere, and moving in those rural communities. And that's why we wanted to bring awareness to this," Goodman said. "We don't have a farm bill. I'm afraid that it could hit [financial situation], if nothing changes, it could hit like a nuclear bomb in rural Georgia at the end of the year. This is going to have huge impacts in the future in these rural communities, so we certainly need to be making our leaders in Washington aware. "
Two veteran ag lenders gave insight into the financial situation Georgia farmers are experiencing. Clint Hood, business development director and manager of Synovus Bank’s agriculture and timber division, and Jake Cleghorn, chief lending officer for Altamaha Bank & Trust, participated in a panel discussion led by Georgia Agribusiness Council President Will Bentley.
Hood grew up on a family farm and returned to it in the 1980s after graduating from the University of Georgia. The 1980s farm crisis, however, caused him to switch gears and go into ag banking when an opportunity arose.
“When I got into banking, it was tough. It was in the 1980s, with high interest rates, with low commodity prices, very, very similar to where we are today. The one difference that I saw in comparing the two is that back then, our farms were borderline insolvent. In other words, our assets were almost the same thing as our liability, sometimes a little bit underwater. Today, they're not as bad off because of what we call land equity. Having land equity is a positive that some farmers have going for them today that many farmers in the 1980s didn't,” Hood said. "I’m seeing good farmers sell off good farmland or put it into solar panels to wipe out debt and balance their books.”
Hood explained that land equity can be created in two ways – 1) by making payments on the debt you owe for the land and 2) by upswings in land values the market creates. He cautioned farmers to remember that “What the market can give you, the market can also take away. We're riding on a good, solid, ag land base today, and that's what's keeping us active right now.”
Cleghorn, who grew up on a family farm and now raises cows, pecans and timber, has been in ag banking for 20 years. He discussed the debt-to-asset ratio bank auditors expect lenders to approve.
“If you look at it for normal businesses, the regulators wanted to see that for every dollar in debt that business had, they had $1.20 to pay that debt with. They were always more lenient with that on the farming side and would say, ‘Hey, if you are from the ag side, if you’ve got $1.10 to pay debt with then we’re okay with that credit,’” Cleghorn said. "If I went to any farmer in the state of Georgia and said, I will let you sign a contract today that at the end of this farm year, you're going to have $1.10 cent to pay on every dollar of debt you have, every one of them would be jumping up and down, standing in line to sign that contract. They know that is not going to happen. Breakeven is great. I saw a farmer smile in my office for the first time in two years this week, and it was because he's getting a hurricane payment. That's the only thing that makes them smile, anything that they can come across that helps that cash flow right now."
Cleghorn explained that bankers are governed by regulators on what they can and can’t do when it comes to loaning money.
“What is our job as bankers, to help farmers and help them through these [rough] times? And how do we do it from a cash-flow standpoint,” Cleghorn asked. “If these farmers are borrowing 100% of what it takes for inputs, which a lot of them are, that historically wasn't the case, but more and more are having to do that. They have to pay a prime rate of 8.5 percent just to cover the interest. When you back into the number side of it, it's a difficult conversation for us as bankers to have. Doesn't mean we don't care. Doesn't mean we don't want to loan money, but when we know we're going to be sitting in front of the examiners being asked, ‘Why did you make this loan law when your projections show it's not going to break even?’ We have to have valid answers to that.”
Inflation appears to be easing and the Federal Reserve has indicated it will begin lowering interest rates, UGA Agricultural Economics Professor Ford Ramsey said.
“It's [inflation] still not at the level the Federal Reserve would like, but it's certainly not what it was even one or two years ago. Unfortunately, the cost of capital remains high,” Ford said. “The heads of the Federal Reserve are not really predicting a major decrease in interest rates until 2025 at the earliest, and we're certainly not going to get down to the interest rates we saw for 2017, 2018 until 2026.”
Hood said many farmers are seeking additional credit to get their crops harvested.
“Folks are running out of money to be able to get the crop to the end of the year before they start getting repaid for, but it's not just on the liability side. The balance sheet that we're seeing, we're seeing it on the asset side too. We have farmers that are deposit customers, and they don't borrow any money, and then not many of them, but even those type of customers are realizing the pinch, These deposit customers are coming back and they need to pull more money out of their accounts, maybe convert a CD to make it liquid so that they can get through the end of year.”
Hood discussed the five C's of credit that bankers use to determine whether or not to extend more money.
- Character. “If your character's in place, then you've gone all the way toward qualifying for a loan with your banker,” Hood said.
- Capital? “How much shirttail does that farmer have?” Hood asked.
- Capacity to repay. “Do they have the ability to repay your loan?”
- Condition. “That's your financial condition, your economic conditions. What's the shape of the industry? And right now, our industry is in tough shape,” Hood said.
- Collateral. “A lot of folks think the bankers' most important one is collateral, but this isn’t always the case. All of those C's are important, with character probably being the most important. But depending on the time of the economic cycle, which we're in the low part, some of those other C's are a lot more important. The capacity to repay is important. The financial condition is important, and the economic condition. All that is a fluctuation. I guess I'm trying to say there are a lot of challenges right now to being an ag banker, and you're trying to make the right decisions up front with your customers, and you don't want to get your customers into trouble loaning too much money. It's just mainly about cash flow, and that's really the name of the game right now,” Hood said.
Ford describes the long-term outlook for Georgia agriculture as strong, if farmers can survive the acute challenges they are facing in the short term.
“We've seen some signs of a slowing economy, but some movement on input costs coming down, so maybe those will balance themselves out in the agricultural sector,” Ford said.
Rep. Bishop gives farm bill update
U.S. Rep. Sanford Bishop, who represents Georgia’s 2nd District and is the ranking member on the House Agriculture Appropriations Subcommittee, gave an update on the farm bill.
Bishop acknowledged that agriculture drives Georgia’s economy, and said he is delighted to be a part of production agriculture, not just for Georgia, but for America.
“We are way overdue for the new farm bill, and I'm sure I don't have to talk to you about that. Our farmers across the country, and particularly here in the Southeast and Georgia, are distressed. We understand that distress, and that stress comes from a number of factors, including natural disasters as well as economic issues. We're doing our dead level best to get a farm bill done, to get it across the finish line,” Bishop said. “I wish I could tell you that it was going to be next week, but right now, it appears that it will not be before the election, because we only have a few congressional workdays before then, and the Senate is not up with us in terms of the House. We passed it out of the House Ag Committee, it’s been scored by the Congressional Budget Office and it's ready to be voted on by the House. But there's a lot of work that has to be done to resolve some of the sticking points that are there. The House bill has a good safety net in it, built into it for our producers, for our rural communities, with the reference prices and all of the things that we have heard from you over the last two years that are needed. The problem is how we pay for it. And so, there's a red line now on both sides as to where that money comes from. That has to be resolved, and hopefully we'll get it done in the lame duck session.”
As members of Congress returned to D.C., this week, more than 300 ag groups sent a letter to U.S. House and Senate leaders asking them to pass a farm bill by the end of 2024. American Farm Bureau and Georgia Farm Bureau were among the groups making the request along with the Georgia Agribusiness Council, Georgia Cotton Commission, Georgia Milk Producers, Inc., Georgia Peanut Commission and the Georgia/Florida Soybean Association. The extension of the current farm bill expires the end of September.
“One good, good thing for agriculture is that the House version [of the farm bill] has increased spending of $33 billion over 10 years relative to baseline, and that spending is primarily in the Title One commodity programs, ARC and PLC, and crop insurance programs,” Ford said. “That piece of legislation also has relatively favorable reference prices for peanuts and seed cotton, and the options for crop insurance continue to grow.”
U.S. ag exports continue to drop
UGA Ag Economist Ford Ramsey discussed how the strong U.S. dollar is causing the U.S. to have an agricultural trade deficit.
“The dollar remains relatively strong against the currencies of most of our agricultural trading partners,” Ford explained. “When we have a strong dollar, this leads to less demand for U.S. exports, because U.S. products become more expensive. The strong dollar is putting pressure on cotton prices. As most of you know, cotton, is a global commodity. Domestic mill use has been a flatline since 2019 and unlikely to grow. Cotton is really dependent on exports.”
Ford says the U.S. is projected to remain in an agricultural trade deficit with more imports entering our country than being exported.
“Aside from the past few years, we’ve never had an agricultural trade deficit over probably the last 30 years,” Ford said.
Declining ag exports is negatively affecting U.S. farm incomes that have declined over the past two years.
Ford said the top ag exports for Georgia are: 1) Poultry, including eggs. The top destinations for Georgia poultry products are China, then Canada, the Philippines and Taiwan; 2) Cotton. The top destinations for Georgia cotton are China, Pakistan, Vietnam, and then Turkey. 3) Feeds & meals. The number one export destination is China. 4) Pecans. The number one destination is China, then Mexico, the United Kingdom and Canada.
“I think you can see from that if we impose tariffs on these major trading partners, it's quite likely that agriculture would be in the crosshairs for retaliation. In fact, we saw this back in 2018 and 2019, so there's certainly uncertainty around international trade, especially as we go into the go into the election in November,” Ford said.
The USDA is projecting large increases in imports of horticultural products over the next 10 years, including fruits, vegetables.
Ga. Dept. of Ag teams honored & GDA continues to fight Yellow Legged Hornets
Georgia Agriculture Commissioner Tyler Harper discussed what the Georgia Department of Agriculture is working on these days.
“Our meat inspection team, our food safety team, our dairy team and our lab team have all passed their audits with flying colors,” Harper said. “Matter of fact, our meat inspection team has been asked by USDA to help with some other states and their meat inspection programs, to help them make sure they're doing things right.”
Harper said the GDA does more than 125,000 inspections every year and issues over 78,000 licenses annually. The GDA has 20 different divisions, Harper explained, that oversee everything from grocery store food to gas pumps and everywhere in between.
Harper said the GDA has installed more than 1,100 traps in Coastal Georgia counties to catch Yellow Legged Hornets. GDA employees have done about 9,000 trap inspections since eradication efforts began this time last year.
GDA has established a Facebook group: Georgia Hornet Watch to help educate Georgians www.gfb.ag/gdagahornetwatch.
Beekeepers across Georgia can make simple traps to watch for the YLH using plastic juice containers and other common items. The GDA has an instructional video on making a trap at agr.georgia.gov/Yellow-Legged-hornet, along with the latest updates and information.
Residents who see a suspected YLH nest are encouraged to take a photo and report it using an online form at a link located at the bottom of the aforementioned YLH webpage or email yellow.legged.hornet@agr.georgia.gov.
If you remove a YLH nest, it's crucial to ensure the queen has been eliminated to prevent her from establishing another nest. If unsure about removing a nest, contact GDA.
EPD Director Cown discusses new positions
Georgia Environmental Protection Division Director Jeff Cown introduced himself to Georgia's ag community. Gov. Brian Kemp appointed Cown to the position last year.
Cown thanked the Georgia General Assembly for funding five new positions for the EPD that will be dedicated to working with farmers who requested well permits.
“We have to know where your wells and pivots are because data drives decisions. These positions will also help with addressing backlogged well applications and permits,” Cown said. “These positions will help us be more hands-on in working with farmers out in the field rather than just sending you an email or a letter.”
Working to preserve farmland
Katherine Moore, president of the Georgia Conservancy, worked with a coalition of state legislators and Georgia Farm Bureau to get the Georgia Farmland Protection Act of 2023 passed.
She said that in the past 50 years Georgia has lost about 2.6 million acres of farmland.
“Some of those acres, for sure, have gone into forestry, but the vast majority of that 2.6 million acres has gone into some type of development, and that is very hard, if not impossible, to undo once it's been done,” Moore said.
She discussed analysis of Georgia land-use data from 1974 to 2021.
"The data told us that low-intensity development - residential office complexes, strip malls - not the urban centers, but the low intensity development is the main driver of land cover change across the state, and not just the big blob that you're going to see, which is Atlanta, and that is true, but also outside of all our metros, even our smaller metros across the state. Unchecked land cover change threatens our top industries, food, fiber and the outdoor economy."
Moore praised Rep. Dickey and Sen. Goodman for being instrumental in passing the Georgia Farmland Protection Program and helping secure initial funding.
“What this program will do, once Commissioner Harper's office has finished with its rules and regulations and puts that out in the public sphere, for willing farming property owners in the face of development, it offers the opportunity to sell the development rights on whatever acres of farming land the landowner may determine they want to preserve,” Moore said. “It gets a check in that farming landowner's hand because they've sold something that has a value. They sold certain development rights on a certain amount of acres. This is all in discussion. It's not a silver bullet, but it is a competitive alternative to the developer who wants to put the 500-home subdivision, or, a Quik Trip. It's a tool we did not have in our toolbox.”
Moore said about 28 other states have similar farmland protection programs.
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