Shutdown forcing farmers to sell crops short, take out loans

Joe Derrick, the owner of a 1,500-acre farm in Edgefield County, signed a conservation contract with the federal government nearly a decade ago that paid him about $10,000 annually to plant perennial grasses, shrubs, and pine trees on his land to reduce soil erosion, improve water quality and enhance wildlife habitation.

Everyone won in the agreement.

Each fall, Derrick received a check in the mail that helped him pay for fuel, fertilizer and marketing costs as he began to harvest corn, soy beans, and beef cattle and poultry for the season.

In return, the U.S. Department of Agriculture’s Farm Service Agency was able to protect the nation’s long-term capability to produce food and fiber.

However, Derrick, and hundreds of thousands of farmers nationwide, are missing out this year on more than $3 billion in direct payments and conservation resource incentives already earmarked for their businesses because of the government shutdown.

“Nothing will be administered until the federal government comes back to work,” Derrick said this week at his farm in Johnston, S.C.

While Derrick said he will continue farming, the frozen financing stream has set off a chain reaction of economic pain for local produce planters.

Searching for ways to compensate for lost dollars, Greg Henderson, the Clemson University cooperative extension agent in Edgefield County, said farmers are taking out short-term operating loans and selling their crops at a reduced rate.

The result is a rising debt that Henderson said may take more than a month to reimburse after the shutdown ends, which the local farming community hopes could come to a close as soon as Oct. 17.

Complicating the problem, Henderson added, is both programs are funded through the Food, Conservation, and Energy Act of 2008, which is set to expire in 2014, unless Congress grants it an extension.

“This is changing the entire marketing scheme for local farmers,” Henderson said. “As they get down to the end of the fiscal year and those payments remain pending, producers are on their hip, sort to speak, until the government decides to sends its employees back to work and get those payments processed.”

Henderson said the importance of the direct payment and conservation resource programs, allocated $9.9 million and $2.1 billion respectively in fiscal year 2013, is they provide income support to eligible producers of covered commodities.

Toward the end of the summer, farms are inspected and certified by the Department of Agriculture, and then four to six weeks later, a check is cut to keep them afloat while crops are harvested.

“Even though crops are being harvested, many marketing decisions are based on cash flow,” Henderson said. “Farmers may defer sales of a commodity, such as corn, until later on in the year, when the price will recover, because they know they have these federal payments coming in.”

Without these payments, Henderson said farmers, such as Derrick and himself, are considering selling crops at a reduced price that they may otherwise hold until Jan. 1 to maximize profits.

“Because of the shutdown, I have lost the opportunity to market crop as I wish,” Henderson said.

Since Henderson works as an extension agent, he said he has the income to make up the lost funds. It’s a different story with Derrick.

“It would be nice to have some of that money to pay bills,” Derrick said. “What people don’t realize is when the government shuts down, it affects the price of everything. You have to ship a lot of crops overseas and a non-functioning government creates a lot of uncertainty.”

Derrick and Henderson did not place the blame on any particular person or party for the shutdown. Rather, they said it is the unclear future of the Food, Conservation, and Energy Act of 2008 that scares them.

“We will make ends meet,” Derrick said. “It’s just a matter of when you depend on these payments and they’re not there, it puts you behind schedule and under budget.”

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