Small, midsize farm opportunities: Vilsack visits farm in Illinois

HERSCHER, Ill. — A farm sector income report from the U.S. Department of Agriculture earlier this year reported record high farm income in 2022, but there’s more to those numbers beyond the headlines.

Secretary of Agriculture Tom Vilsack broke down the numbers, the trends in agriculture and the available tools for farmers to help improve the bottom line during a visit to Perreault Farms in Kankakee County in northeast Illinois on Oct. 16.

The fourth-generation farm is operated by father-and-son team Brett and Matt Perreault.

The USDA reported the 2022 net farm income, a broad measure of profits, reached $138 billon nationwide, increasing by $42.9 billion from 2021.

After the report’s release, Vilsack instructed his staff to do a deeper dive into the numbers.

“I couldn’t quite square that with the fact that nearly 50% of our farms didn’t make any money at all. So, I asked our research folks what the breakdown is. They said it depends on farm size,” he said.

“Farms with annual sales of $500,000 or more represent 7.5% of America’s farms. That’s 150,000 farms. The remaining 92.5% represents about 2 million farms of all sizes.

“During the record year last year, the 150,000 farms got 89% of the income. The 92.5% got 11% of the income.”

Vilsack noted the United States has lost 438,000 farms since 1981, equal to the number of farms currently in Iowa, Minnesota, Wisconsin, Illinois, South Dakota, Nebraska and Colorado combined.

“So, if you wonder why there’s an uncertainty out there in the countryside about the state of agriculture, it’s this and the 438,000 farms we don’t have anymore,” he said.

“It has an impact on communities, because when you lose that many farms, you don’t just lose those farms, you also lose the small businesses that depend on those farms, which is why many small towns in this country today in rural places have empty storefronts.

“So, the question is can we do about this? Should we do anything about this? I think we should, and fortunately we have an amazing opportunity.

“The folks on the 150,000 farms are amazing producers and we want them to continue. We want them to succeed. We want them to continue what they’re doing because they’re feeding us and feeding the world.

“The question is, what can we do about the other 92.5%? How can we create a companion system that allows those 150,000 farms to do well, because they deserve to do well, and they made investment to do well, and allow the 92.5% to stay in business and ultimately profit?”

Vilsack said funding to address the disparities are provided through the legislation already in the books, including the American Rescue Plan, Inflation Reduction Act and Bipartisan Infrastructure Law and options available through the Commodity Credit Corporation.

“It all starts with a very simple proposition, which is for these folks to stay in business they can’t just rely on the sale of commodities, of livestock, or government payment. As a farmer, you can do organic, you can do a commodity and get a government payment, but at the end of the day there are pretty limited options,” Vilsack said.

“The key here is for these farming operations to have additional revenue streams that come in at the same time they’re selling a crop or selling livestock or getting a government payment. So, when crop prices are down, there may be other sources of income that happen out there and make it easier for them to stay in business and eventually maybe expand.”

Climate-Smart

The new opportunities include the Partnership For Climate-Smart Commodities program that will finance pilot projects that create market opportunities for U.S. agricultural and forestry products that use climate-smart practices and include innovative, cost-effective ways to measure and verify greenhouse gas benefits that would result in payments from other entities.

Vilsack said the program through USDA’s Commodity Credit Corporation initially invested $1 billion and its popularity is evident in that there were 1,000 applicants with requests totaling $20 billion.

The $1 billion appropriated was able to fund 141 requests covering 87 commodities across 50 states.

“We anticipate when it’s all said and done this effort will create about 60,000 farmers on 25 million acres of land that are going to tell us what works in climate-smart agriculture,” Vilsack said.

“In addition to helping to pay farmers for doing what they want to do and are doing, we also teamed up in this initiative with partners. Those partners included major conservation groups, major environmental groups, major retailers, major food companies.

“And the deal was in addition to paying the farmers we would create the opportunity for the marketplace to pay farmers more for sustainably produced products.

“So, instead or organic and conventional, we now have a third commodity — a climate-smart agriculture commodity — which is a value-added proposition for farmers. In other words, they’re going to get paid more for this.”

The Inflation Reduction Act includes investing $300 million in measuring, monitoring and verifying the amount of greenhouse gas emissions reduced and how much carbon is sequestered.

“It’s going to allow farmers to participate in ecosystem service markets. These are markets in which foundations, organizations and industries are anxious to get the environmental benefits that they themselves can’t produce,” Vilsack said.

“So, a utility company, a construction company or a transportation company would love to get to net-zero, but their practices don’t allow them to get to net-zero. So, they’re willing to pay somebody to help them get to net-zero.”

Energy Grants

The Rural Energy for American Program, part of the Inflation Reduction Act, provides $2 billion for renewable energy systems and energy efficient improvement grants for agricultural producers and small rural businesses through 2031. Illinois currently has 250 REAP projects worth $22.6 million.

“This is an opportunity not just to reduce the (energy) cost on the farm, but the farmers have the ability to produce excess electricity above and beyond their needs,” Vilsack said.

“If farmers can come together through maybe co-ops and essentially combine the excess capacity that they have to produce renewable energy on the farm, do it by making sure we’re not taking productive land out of use, but nonproductive land, you could create a whole new commodity or new revenue source of selling power.”

Local Food

The local and regional food system can also provide a value-added resource for farmers to add income.

A series of regional business centers have been created to provide information about how best to develop a local and regional food system, including how to link up with a farm-to-school program, farm-to-grocery store program, institutional purchases and community-supported agriculture initiatives.

“In addition, we also realize that we purchased a lot of food for food banks and for schools. In the past, these dollars went to whoever could give us the most food for the most dollar, even if it got trucked 1,000 miles from where it was to the school,” Vilsack said.

Federal support has now been provided at the state departments of agriculture to purchase food from local producers for food banks to create a stronger local and regional food system to reduce the number of miles that food travels and to create better business opportunities.

“This is a tremendous opportunity for small and midsize producers to expand income. This is an opportunity to support this and making sure farmers get a fair price,” Vilsack said.