Need for change trumpeted at NICE: farm bill task force proposes actions to reserve farm-income downward spiral

Rural Cooperatives, Sept-Oct, 2001 by Dan Campbell

In meeting rooms, hotel hallways and around banquet room dining tables, the relentless topic discussed through-out this year's National Institute on Cooperative Education (NICE) in Atlanta was what role cooperatives should play in pursuing major changes to help restore the farm sector's fiscal health. A young farmer from Montana, noting the large size of the check from USDA he'll be getting as part of an emergency aid payment, said that money will keep him in business, but he looks at the aid as a type of welfare and wonders if there is a future in farming the way things are going.

He's not alone. Half of all U.S. net farm income will come from government payments this year. Small wonder, when you look at what has happened to the farmers' slice of the average "food dollar" spent by consumers, says Dan Kelley, GROWMARK board chairman. The farmer's share is down to 20 percent, the lowest level ever and down from more than 37 percent of the food dollar as recently as 1973, Kelley said during an address at NICE.

"Farmers need greater opportunity to generate income from the marketplace," Kelley said while presenting the findings of the National Council of Farmer Cooperatives's (NCFC) Farm Bill Task Force. Increasing the farmers' share of the food dollar by just one cent--to 21 cents--would generate an additional $6 billion in total income for farmers, he stressed. And an increase of 3 to 4 cents would offset all the government assistance paid to farmers, he added.

NCFC is supporting the Farmer Business and Income Opportunity Act of 2001 as a means to help farmers better manage their risk and improve income derived from the marketplace. Kelley said it will help farmers compete more effectively in the global marketplace and better capitalize on market opportunities.

NCFC developed its recommendations during a series of meetings attended by cooperative leaders from around the nation. Some of the sessions were standing-room-only affairs, underscoring the urgency of the need to boost farm income.

The key is to improve access to capital and other programs that enhance cooperative efforts, Kelley said.

To improve access to capital, NCFC recommends:

* Raising the $25 million loan limit on USDA's Business & Industry Loan Guarantee Program. Kelley noted that Plains Cotton Cooperative built its Texas denim plant for $25 million in the mid-1970s, but today that plant would cost more than $100 million to build.

* Clarifying lending authority under the 1996 Farm Bill so that traditional cooperatives would have the same ability to qualify for certain USDA loan programs as do new-generation cooperatives.

* Eliminating the triple tax on co-op dividends.

* Providing co-ops with new tax incentives.

* Establishing new sources for equity capital; this is needed because financially strapped farmers are often unable to invest in projects desperately needed to develop new products or open new markets; new venture capital funds for cooperatives are thus needed.

Other provisions within the bill would seek to revitalize USDA's cooperative programs by establishing the Farmer Cooperative Business Service as a separate agency and maintaining funding for USDA technical assistance grants for cooperatives. A Sense of Congress Resolution is also being sought to reaffirm congressional support for federal programs that encourage and enhance the ability of farmers to join together in cooperative self-help efforts.

"This may be our last opportunity (to enact needed changes)," Kelley said. "Farmers must work together to find ways to enhance their income."

Don't procrastinate, innovate!

In his lively NICE keynote address, Dennis Mullen, CEO of Agrilink Foods, also sounded the call to action. He used the example of a one-pound bag of corn to point out the crisis facing farmers. In 1991, that bag of corn cost 57 cents. Ten years later, the cost is 56.5 cents. "That is actual deflation," he said. "Dairy, cheese, oats, beans--the trend has been much the same."

Mullen said Agrilink has also seen the price for small ears of corn-on-the-cob it supplies to fast food outlets, such as KFC, remain stagnant for nearly a decade. And some apple producers had to sell their crop for 8 cents a pound this year.

"People get raises, electricity and gas costs go way up, but our (farm) prices don't keep up," Mullen said. "We should band together to fight this," he said.

Innovation in the face of rapidly changing technology will be the answer for many successful cooperatives, Mullen said.

"Innovation is needed to provide products when and where consumers want them--you must provide customers with service that sets you apart." He projected that in 10 years, "Walmart will dominate where we buy food, because it is the world's best distribution company--it gets products to stores better and faster than anyone."

Another food trend to watch is the growth in percentage of older Americans, which will drive increased demand for food perceived to be healthier and more nutritious. Mullen also noted that 70 percent of consumers believe organic foods are better for their health.