Industry Expertise · July 24, 2020

How Changes in Agriculture Policy Affect Your Business

For decades, agriculture policy has shaped the growth of American agribusiness. Congress introduced the first Farm Bill in the 1930s to help farmers weather the Great Depression. More recently, agribusinesses received benefits from the assistance programs introduced to help Americans cope with the COVID-19 pandemic.

Often known as the farm policy, agricultural policy in the United States produces a Farm Bill or Farm Act approximately every 5 years. In addition to new or revised rules and regulations on farming, food and nutrition, and rural communities, it often includes direction on farm credit, crop insurance or other financial aspects of agriculture.

Over the years, farm policy evolves to address the needs of the times. Changes to the agricultural policy could affect your own agribusiness, including creating opportunities for growth or expansion.


Farm bills

Farm Bills or Farm Acts usually include details on new programs and revisions or restrictions to existing programs. The most recent Farm Bill is the Agricultural Improvement Act of 2018, which will be in place through 2023. It's important to understand how changes to existing farm policy and new programs could positively and negatively affect your farm or agricultural business.

Short-term policy changes

Although major revisions and new programs get rolled out every 4 to 5 years, sometimes agricultural policy gets introduced to address a short-term issue.

The United States Department of Agriculture, or USDA, recently earmarked $16 billion in 2020 to help agribusinesses experiencing financial issues due to the pandemic. However, it's important to note that the funds are limited to $250,000 per business.

New restrictions

You might get excited when you read about a new or changed agricultural policy that could mean additional opportunities for financing growth. However, keep in mind that new programs or policies can also come with limitations.

For example, the Conservation Loan Program offered through the USDA Farm Service Agency, or FSA, provides guaranteed loans to qualified agricultural businesses. These loans help promote conservation practices on farms and ranches across the country.

This program was introduced to give farmers and ranchers an incentive to protect the nation's natural resources. However, in order to receive the loan, the Natural Resources Conservation Service must approve a plan to improve the natural habitat on your property.

This could mean changing or reducing the acreage used to support livestock and crops in favor of planting more trees or prairie grasses. So you'd need to weigh the benefits the loan provides against the reduced income that may result from lowering your working acreage.

Impacts on business operations

Agricultural policy in the United States often includes incentivized production of staple crops, income assistance to protect against significant yield loss, and FSA direct and guaranteed loans.

One of the key ways agricultural and farm policy has changed the way farmers and others carry out their business is through incentives to restrict production of certain crops or farm produce, such as dairy products or eggs.

While restrictions on producing specific crops could have a negative impact on your business, it could also be an opportunity to change your business to meet the demands of the modern consumer. For example, what other crops could your land provide? Crops that are becoming more popular with the market?

Consider some of the lesser-known crops to replace those that have been restricted. For example, the herbs and flowers used to produce herbal remedy products, such as ginseng or lavender, might be a good choice.

Why you need a banker who knows agriculture

Changes to agricultural policies can happen quickly. That's why it is important to work with a banker who specializes in the agricultural industry. It's their job to stay up to date on the latest changes to policies that affect agribusiness.

Your agribusiness banker keeps an eye on agriculture policy changes so you don't have to. Even better, they can keep you in touch with these changes. That way, your business can quickly adapt to seize any new opportunities for financing to help grow your business.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.