The Fate Of The Farm Bill

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0:40The squeeze is on. For American farmers, tariffs have raised the cost of equipment and services. Now the war in Iran is driving up the cost of fertilizer and fuel. In Congress, a gigantic sweeping piece of legislation called the Farm Bill is supposed to be there to help. It's traditionally filled with hundreds of billions of dollars in subsidies and goodies for everything from corn to farmed shrimp. It also carries vital food benefits for poor and low-income people. But a new farm bill hasn't passed since 2018. This week, the House has been trying repeatedly to get a new version on the floor. Here's California Democrat Representative Mike Thompson.

1:23This is not abstract. I just met with a group of third, fourth, and fifth generation family farmers from my district who are on the brink of bankruptcy. That's why the farm bill matters. The farm bill was finally up for a vote in the House today, and it passed. The House voted 224 to 200 with 209 Republicans and 14 Democrats, one independent, voting to support it. Before the House passed that bill, we talked about the farm bill. What's at stake for farmers and for millions of Americans and why until now the GOP House majority has been unable to pass that bill that so many lawmakers actually wanted to vote for?

2:06But before we get there, oil is one big, big part of the strain on farmers. Oil makes gasoline and it makes diesel. And of course, it makes fertilizer. When it gets more expensive, farming also gets more expensive. So let's start with a look at how the war in Iran is still sending shockwaves through global energy markets. BP reported first quarter profits more than doubled from a year ago thanks to surging prices. Meanwhile, the United Arab Emirates, one of the world's largest oil producers, is leaving OPEC. So who wins? Who loses when energy markets swing this wildly? I'm Todd Zwillick. In for Jen White, you're listening to the 1A podcast.

2:50We'll be back with more after this short break. Stay with us.

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3:42Join the conversation with Joe Weisenthal and Tracy Alloway every Monday and Thursday. Listen to Odd Lots wherever you get your podcasts. Welcome back to the 1A podcast. We're talking about fluctuating energy markets and what it all means for American farmers. Joining us from London is Javier Blas. He's a Bloomberg opinion columnist covering energy and commodities. Javier, welcome back. Thank you for having me again. Great to have you. Well, we've watched oil prices peak and dip often on the news of the day, attacks in the Gulf or talks between Iran and the U.S. on again, off again. What's the current state of the oil market today?

4:21Stable? Chaotic? Where is it at? I think that the word to describe the oil market today is waiting, waiting for the Strait of Hormuz to reopen and waiting for meaningful negotiations between Iran and the United States. Until the Strait of Hormuz reopen, oil prices are going to remain at current levels, if not higher. If anything, I am surprised that they are not higher than they are today. We are trading around$105,$110 a barrel. But no one, I think, in the oil market thought the disruption was going to last 60-plus days. But here we are, everyone waiting. Well, we mentioned that the United Arab Emirates, the UAE, They've been talking about leaving OPEC for years.

5:05Now they say they're going to do it. Why now? I think that it's in part unrelated to the world, but the world presents with a very good opportunity. In any commodity cartel or in any commodity market with a cartel, the best place to be is just outside the cartel because you benefit from the high prices that that cartel brings along, but you can produce as much as you want. The key question is when to leave and how to leave. And if someone leaves the cartel, you could crash the market. You could crash prices. That was the difficulty that the United Arab Emirates have had for many years. How to leave OPEC?

5:47They fell a bit prisoners because they didn't find a good time to leave where they will not impact the market by departing. The war has provided them with that off-ramp. they can leave the cartel without crashing the oil market. And that's exactly what they did. So for them, Iran was an opportunity to do something that is not related to the world, but it's a disagreement about how to manage the oil market between the Emirates and Saudi Arabia. The Saudis want to restrain production, and they want prices as close to$100 as possible. The Emirates thinks that they need to produce more. And if the price to pay for that is that the barrel of oil is cheaper, so be it.

6:29So the glut, the choke off in the Persian Gulf, all of that oil sitting in the Gulf and sitting in storage has given the UAE the opportunity it's been looking for to step out the door. Yes, they have been thinking about this at least for five years. They have clashed with Saudi Arabia about the direction of OPEC for several years. The first big public disagreement came in 2021. And a lot of that, so I will say that the road of the departure of the UAE from OPEC started in Saudi Arabia rather than Iran, but it has a stopover in Texas. It is the fear in the Emirates that they keep prices too high.

7:15The only thing that they are doing is subsidizing the American oil industry that the U.S. oil producers, and particularly West Texas and Southeast New Mexico, will have a price incentive to pump more. So it's the shale revolution and the disagreement with Saudi Arabia which is behind the thinking in Abu Dhabi to leave OPEC. Well, let's stay in West Texas for the moment because West Texas and the United States, not part of OPEC, of course, but we're now the world's largest oil producer. Only 8 % of U.S. oil imports come from the Middle East in the first place. But on Thursday, prices at the pump rose to the highest since the war began, an average of$4.30 a gallon.

7:58That's according to AAA. So a lot of Americans ask this question all the time. Why are gas prices so high here if we produce so much of our own oil in our own West Texas backyard? It is a global oil market. And at the end of the day, the American consumer unfortunately pays the price of oil of the global market. It doesn't matter how much you produce. Drivers in Saudi Arabia, they also pay a high price. It's a bit different in Saudi because they do get subsidies. But the price of gasoline is a global price. No matter how much you are producing, it's still the price of the global market. So I'm afraid that American drivers are going to have to get used to pay high gas prices as long as oil prices remain high.

8:46Even though the president says over and over when he talks about the war in Iran, we don't really need to open the Strait of Hormuz. We don't need their oil anyway. This is the rest of the world's problem because we're number one in production. That's not really true. It's not true. I'm afraid that the president is misleading the public. The U.S. needs also the Strait of Hormuz to reopen. And until that happens, prices are going to remain high. It's true that other countries and other regions are going to suffer more than the United States. Certainly Asia, certainly Europe are going to suffer more because of those high prices than the U.S.

9:22But at the end of the day, the American oil consumer will also suffer a price. So what about the oil companies? High prices mean high profits. I mentioned BP a moment ago. How's big oil doing? Big oil is doing fantastically well. I mean, this conflict is going to inflate the profitability of big oil, but it's not the kind of price shock that big oil likes. I mean, don't get me wrong. Everyone in big oil is very happy with the price of oil at$100. But they will rather have$100 because the global economy is booming rather than because there is a war in the Middle East. Because they know that this last ultimately is going to trigger an economic crisis.

10:02Interest rates will have to go up because inflation will be high. And then the employment market job losses will increase. We will have an economic recession. And that's ultimately bad for oil prices. So there is a bit of a celebration today, but it's a muted celebration because they know that if this continues, ultimately it will be bad for the companies and the market. We're talking to Javier Blas. He's a Bloomberg opinion columnist covering energy commodities. I mentioned storage a moment ago, Javier. I want to talk about it because the Strait of Hormuz is closed. The oil can't get out. But oil that comes from the ground is under great geological pressure, right?

10:47It still keeps coming, kind of like a faucet that's stuck on. It's very hard to turn off. So you've got to put all of that oil that's gushing out. You've got to store it. You've got to put it somewhere. What's the state of storage in the Gulf? And what happens if Iran's oil production starts to overflow its storage or anyone else's production overflows storage? What happens then? Well, outside Iran, storage in the Persian Gulf is absolutely to the maximum. And that's why every country in the Middle East have to shut down their oil wells and reduce production massively because they have reached maximum storage.

11:26Iran still has some capacity to continue producing because it still has some storage available to them. At some point, Iran will have to, if this blockade continues beyond middle of May, Iran will need to start shutting down production. And there is a huge debate right now in policy circles, in the oil industry, in the market, about what happens to the Iranian oil wells. President Trump says that they're going to be damaged significantly. Significantly, I speak to petroleum engineers who have a lot of familiarity with the Iranian oil industry, and they tell me that that's not the case. My belief is that Iran will be able to shut down their production in a controlled way gradually, and that will mean that it will not suffer damage.

12:11Javier, we have just a couple of moments left, but President Trump has reportedly, according to the Wall Street Journal, instructed the military and his aides to prepare for an extended blockade in the Persian Gulf. So as you think through prices and the future of prices, what does that mean? The longer the trade is blockade, the higher the price. It's as simple as that. The longer the blockade, the higher the price. Javier Blas, Bloomberg opinion, columnist covering energy and commodities. He's also co-author of The World for Sale, Money, Power, and the Traders Who Barter the Earth's Resources.

12:46Javier, as always, thanks for joining us. My pleasure. Sure. Well, coming up, how is the high cost of fuel and fertilizer straining American farmers? And is Congress going to do anything about it? Stick with us.

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13:46Welcome back. It's 1A. American farmers are facing a lot of pressure right now. Production costs are up. Crop prices are staying low. Last year, 315 farm operations filed for bankruptcy, up from 216 the year before. And the Department of Agriculture projects net farm income will slip lower in 2026, down 24 percent from where they were in 2022. Meanwhile, as we mentioned earlier in the show, Congress hasn't passed the massive agriculture package called the Farm Bill since 2018. Well, the House did finally today, but it's been a mess to get here. The Senate, a big question mark. This bill has not yet become law, but what does it all mean for the stability of U.S.

14:34farming? Before the bill passed in the House earlier today, we were joined by Leah Douglas, who covers agriculture strategy and energy for Reuters, and Jonathan Koppis. He's a professor of agriculture policy at the University of Illinois. Leah, we were just talking about the high cost of oil right now, the war in Iran spiking gas prices, not just gas prices, inputs, services, fertilizer, diesel. How exactly is oil market instability affecting farmers right now? Well, since the start of the war in Iran, we've seen fertilizer prices go way up. I think some inputs for fertilizer have actually doubled in cost since the start of the year.

15:15And part of the reason for that is that a lot of the world's fertilizer trade happens through the Strait of Hormuz. So all those issues with getting barges through that part of the world is really driving up prices. And additionally, talking about the price of oil, price of gas, farm diesel costs, according to the Farm Bureau, are up 46 % since the end of February. So all of that adds up to a huge spike in prices for farmers. And in a low-margin business, which I think farming is, that really matters. Absolutely. And coming into this season, farmers are already experiencing downward pressure on prices and upward pressure on inputs like fertilizer, which have already gone up in price.

15:55since the start of the war in Ukraine. So it was already a tough picture. So Jonathan, what does all this mean for the decisions farmers are trying to make now about how they're planting and planning for next year? Yeah, I mean, I think we have to feel a lot of sympathy for the frustration they're facing. You know, as a farmer, you're kind of used to dealing with weather issues and trying to think through, you know, is it going to rain enough? Is it going to be a drought and that sort of thing? And now all this chaos and uncertainty around the oil markets, diesel price, fertilizer prices, everything that you and Leah were talking about there and the previous guest, it just adds a level of uncertainty and a significant set of challenges.

16:39So which crops do you plant? How do you plan around your fertilizer purchases, what you've got pre-booked, and how many passes through the field and what's available and when it's available? All of those things just add a lot of complexity and challenges to that farm management. And look, the spring window is a critical time, right? Your planting window is short, tight in the spring. You've got a lot of work to get done. And so the timing of all this is just particularly bad. Jonathan, real quick, how much flexibility does, I mean, every farm is different, but how much flexibility does your average soybean farmer have?

17:15I realize that the seasons play a lot into it, but if you've traditionally, hey, the last nine years I've put soybeans in the ground. I'm part of the local soybean trade, the market. If soybeans just aren't working out, can you switch on a dime and say, nope, this year I'm doing corn? Do you have the flexibility? Sorry, yeah. You have some flexibility, but it's within a pretty limited space, right? A lot of that is limited by what you can sell, where you can sell it. So you're not going to start growing a crop that there's no elevator to run it to. So, you know, a lot of the soybeans are in rotation with corn.

17:51And so last year may have been a corn year in that field, and this year will be a soybean year. So there's some tinkering you might do. You might switch some acres around a little bit here and there. But overall, you know, your equipment, your grain bins, your storage, your marketing plans, all of that's pretty much built in advance. And, you know, you're not going to just buy new equipment or go out and try to hunt down seed for a different crop. So it is, and this is one of the things I think we have a real frustration with in the policy as well, is we've really locked farmers in and have put up a lot of barriers to innovation.

18:25So in general, you could make some minor shifts here or there, but it's not, you can't make major changes to a management. All right, well, let's talk about some of those pressures even before the war in Iran began. Here's Scott Metzger. He's a farmer in Ohio. He's also president of the American Soybean Association, and he spoke to our producer, Claire Muffson, a little bit earlier. You know, there's a lot of operations that have went out of business over this past year. And this is the toughest economy that I have personally been in during my farming career. With the input prices, where they're at, you know, they were already high before everything skyrocketed in the Middle East.

19:10And that just really added the pressure to it, whether it's seed, pesticides, fertilizer, fuel, even land rents, land costs. It's just all extremely high. Jonathan, Scott Metzger is reporting to high input costs even before diesel and fertilizer skyrocketed because of the Persian Gulf. Yeah, absolutely. I mean, this is historically a big problem for farmers going all the way back to the end of World War II. when prices and costs skyrocketed and then inputs became more and more expensive and you needed more of them and so forth. And this has been even more of a problem really since the COVID pandemic and the Russian war in Ukraine.

19:55All of these things are kind of pushing up prices for farmers and that overall cost part of the equation gets really tough, particularly if prices for the crop after you harvest it aren't also staying high. Well, we talk about the pressures with prices and with inputs. I want to talk about immigration and Donald Trump's immigration crackdown. A lot of farms, depending on what they produce, especially produce, but not just produce, rely heavily on foreign workers to make up for labor shortages. How has the immigration crackdown affected farms, Leah, their ability to produce and farmers' ability to get the labor they need at the right price?

20:33Sure. Well, at the start of the Trump administration, we saw some targeted immigration raids on farms. And that was really a departure from a historical norm that, you know, generally immigration enforcement sort of steered clear of agricultural labor because there really is no domestic alternative for that labor pool. And that is well known by political forces. So generally farmers were sort of left aside if there was immigration enforcement. But we did see some raids earlier in the administration. So in other words, go to the cities, Minneapolis, New York, Washington, D.C. with ICE roundups.

21:07Leave the farms alone? That's typically how things have worked. But we did see some immigration enforcement on farms, and it was very alarming for both operations and, of course, for the people working there. But after the first few months, we've seen an abatement in that, and there hasn't been as much immigration enforcement. There's still routine immigration enforcement happening in rural areas, but not as much targeted on farm sites. Jonathan, what do farmers tell the Trump administration when they talk about their labor needs and Donald Trump's political needs to deliver on his immigration crackdown that's so high profile?

21:41Yeah, I honestly don't know. It is such a tough conversation. And Leah's right. And much of it depends on kind of what area of farming you're in. Obviously, fruit and vegetable production is very seasonal. It needs a lot of labor in the high work period of the season. And the dairy farmers, I think, are having the biggest set of problems just because you've got to milk cows twice a day. And that's year around 365 days out of the year. So it is I can only imagine it is a very difficult conversation. And as Leah noted, you know, that the administration has at least stated that they're trying to take that into account.

22:21But I think when you strike fear across the country, across all the immigrant groups and communities, I think it's bound to hit farms whether they want to or not. Well, last year, the farm groups were very clear with the Trump administration that if there was wide-scale immigration enforcement and deportation of farm labor, that they would be in a situation where we could have a food production crisis in this country, really nobody to do the labor. And I think those conversations were in part why the administration eased up over time because they understood that this was an essential labor pool.

22:55This also has to be partly political. I mean Donald Trump has a demonstrated history. He's vocal about it, happy to crack down on the cities where he thinks his voters don't live. A lot of support in rural America and maybe he doesn't want to make life harder for farmers, many of whom are his supporters. Sure. And, you know, we've seen in this administration at first that, you know, there was some, you know, strong rhetoric against some of the farm interests. You know, we're not going to listen to captured lobby groups, you know, for instance, referring to the American Farm Bureau Federation. But over, you know, the course of the last year, we have seen that alliance grow stronger and the farm groups are now in the room with the administration officials.

23:33Well, let's talk about American consumers and prices at the grocery store. We've all seen them. I don't have to tell anybody what it costs to buy your groceries almost no matter where you live. Leah, are the production costs, the inputs, the war in Iran, fertilizer, diesel, those things, are those directly to blame? Is that why the grocery bill is so high at checkout? It certainly contributes. And one sort of factor in terms of grocery prices is that when the price of oil rises, the price of plastic also rises. So we see any type of packaged goods, anything involving plastic containers, wrapping, et cetera, that does contribute to high prices.

24:11There are also a lot of people taking bites at the apple when it comes to grocery prices. I want to ask about that. I mean, higher prices, you might want to think, oh, farmers are doing better. Hey, higher prices at the grocery store means more money on the farm. Is that true? Not necessarily. it can, but it doesn't necessarily imply that in part because you have wholesalers, distributors, retailers all along the supply chain and the prices for all of those middlemen are going up and that's going to drive prices up as well. Jonathan, talk about the trickle up of high grocery prices if there is any.

24:47Leah says lots of people are taking bites at the apple. If the money's not going to farmers, certainly it's not going to consumers because we're spending it at the scanner, where is the money going? I think that is probably one of the biggest questions. And Leah is absolutely right. Your question is absolutely on point in the sense that we have a situation right now where consumers are struggling to afford food and farmers are struggling to produce the crops for that food. So there's a lot of money in the system. It's just not getting to the groups on either end. And I think probably one of the biggest points to look at are oil prices.

25:23Diesel for everything from combines and tractors to the semi-trucks that drive things to plants to stores and so forth. Plastic, as Leah mentioned, I think that's a big, big contributor to it. But I think there's other factors too that could be looked at as how the pricing systems work. We've heard a lot of concern over the years and have seen a lot of consolidation and companies buying other companies and grocery stores going out of business and so forth. So I think there's a host of factors that really play into it. But it is a frustrating situation where we look at both consumers and farmers struggling at the same time in the food system.