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Farm financial well-being affecting sustainability adoption

TAGS: Policy
Piggy Bank
Weakened economic indicators may pose challenges for supply chain sustainability efforts.

A prolonged period of low commodity prices has created significant financial pressures for U.S. agriculture, jeopardizing many farming operations and challenging the ability of supply chains to meet ambitious sustainability goals absent more direct support for growers. This is the key finding of a report, "Economic Sustainability: Trends in Financial Well-Being," issued by Field to Market: The Alliance for Sustainable Agriculture based upon research and analysis from economists at the University of Illinois.

Presented as a companion to Field to Market’s science-based sustainability trends analysis, the "National Indicators Report," this report analyzes publicly available data to present a set of indicators that evaluate the current state of the farm economy. The findings underscore the critical relationship between farm financial well-being and a producer’s ability to make operational changes needed to deliver improved environmental outcomes.

“Farmers are in a unique position to deliver broader environmental benefits to society based on their management decisions, but in many cases, they lack the financial resources needed to pursue practices that would improve sustainability outcomes,” Field to Market president Rod Snyder said. “While certain agronomic practices simultaneously deliver environmental benefits, operational efficiencies and cost savings, others require investments that farmers may not currently be able to shoulder, leaving a role for supply chain partners to help bridge the financial gap.”

The findings in this report specifically focus on crops included in Field to Market’s sustainability programs: alfalfa, barley, corn, cotton peanuts, potatoes, rice, soybeans, sorghum, sugar beets and wheat. 

The financial well-being of U.S. farms has decreased steadily since 2013, largely due to weaker commodity prices. These conditions have been exacerbated in the past two years by trade disputes, more frequent extreme weather events and the COVID-19 pandemic, which upended traditional supply chains and left many farmers without a market.

While overall financial health has not reached crisis levels like that of the 1980s, downward trends are a signal for caution, particularly given the extent to which the federal government has supported farm receipts in recent years with programs that are not guaranteed to continue.

The current financial situation will have a significant influence on the types of sustainability practices farms will undertake. Any management decisions that have immediate positive profit implications are likely to have priority. On the other hand, practices that reduce immediate profitability are less likely to be adopted, particularly if those practices negatively affect yields or come with investment expense.

Now, more than ever, the value chain should consider creative mechanisms that support farmers in transitioning to practices that will deliver more sustainable outcomes.

“American farmers are committed to sustainability and want to leave the land better than when it was first entrusted to their care, playing a leading role in promoting soil health, conserving water, enhancing wildlife and efficiently using resources. At the same time, economic sustainability is core to agricultural sustainability and a necessary part of farmer decision making,” American Farm Bureau Federation chief economist John Newton said. “Given the volatility associated with commodity prices and farm income detailed in this report, the entire supply chain must assist in making the upfront investment associated with implementing the climate-smart technologies needed to achieve our sustainability goals and outcomes.”

Although farming has many risks, there are public- and private-sector programs and tools farmers can use to mitigate these factors. Field to Market strives to create partnerships across the value chain through its Continuous Improvement Accelerator, which includes a project pathway specifically focused on delivering innovative financial support mechanisms for growers. The multi-stakeholder organization is committing an increased degree of focus on piloting and scaling solutions to enhance farmer livelihoods while supporting resilient ecosystems.

“Agriculture has never been an easy profession, but today’s family farmers and ranchers are facing some of their steepest economic and environmental obstacles in many decades. To adapt to and mitigate these ever-alarming threats, farmers are implementing new practices and systems — but they come at a financial and temporal cost,” National Farmers Union president Rob Larew said. “Food and agricultural companies must keep these expenses in mind as they work to reduce the environmental footprint of their supply chains."

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