Agriculture sector excited about president's infrastructure package
YANKTON, S.D. — President Donald Trump recently announced the details of his much-anticipated $1.5 trillion Infrastructure Plan. Farmers and farm groups were excited as the president specifically included rural America as part of that plan. Yet there is still some uncertainty as to what it will really mean for U.S. agriculture.
First, the plan spends $50 billion of the $200 billion annual federal investment on rural infrastructure needs, which don't have the ability to generate user fees. The funding would go to the states in the form of block grants, giving governors and state legislatures the authority to figure out the best way to spend that money. $20 billion would go to federal loan programs aimed at attracting private investment in infrastructure and into private activity bonds.
Mike Steenhoek, executive director of the Soy Transportation Coalition, says this is good news for the rural areas.
"We were happy that there's some attention to rural America with some of these block grants. We originate a lot of freight in rural America, but we don't have a lot of frequency and use of that system like in urban corridors," Steenhoek says.
Locks and dams were identified as a priority by the president, which are critical to agriculture and have been deteriorating for many years.
"Even being from North Dakota I understand that the locks and dams on the Mississippi River really need to be improved a lot," says Kevin Skunes, president of the National Corn Growers Association and a farmer from Arthur, N.D.
However, Steenhoek points out that just as in the past, there was no funding mechanism for projects.
"One of the biggest threats that we have is a failure at one of these lock and dam sites that needs to be prevented at all costs," Steenhoek says. "However, in the plan there's some curtailment of funding for the inland waterways system, so that's a real concern for us."
Railroads made investments in the northwestern Corn Belt after the rail crisis in 2014. In fact, the Burlington Northern Santa Fe Railroad pumped $5 billion into rail improvements in the Dakotas. However, farmers hope the plan will incentivize additional growth. Skunes says there are still hiccups in the system in his area.
"Our rail to the west coast has been affected the last few years with cold winters through the mountains," he says. Farmers in the northwestern Corn Belt are more reliant on rail due to their distance from river transportation.
With counties nearly out of money, there is also some optimism block grants in the plan could help fix thousands of rural bridges and roads that are deteriorating.
"We are very supportive of anything that can move our product to market more efficiently with less obstructions. And our bridges in South Dakota and our roads, some of our rural roads, have been a real obstruction to moving product to market," Kevin Scott, who serves on the American Soybean Association, says.
The big question is if the plan relies on a state-federal partnership for funding, where do the states come up with the money for a match?
"Road tax of course, fuel taxes are what we look at," Scott says. "The American Soybean Association right now is talking and discussing the potential of putting a dime on the fuel tax to raise money for the infrastructure, and we're trying to get that to stay local."
Scott says many times infrastructure gets proposed and when it comes out, the large cities pull rank because they have a huge infrastructure need and the population.
"So, it's kind of critical we keep that a rural focus," he says.
Steenhoek says agriculture needs to be open to the idea of accessing private capital to address some transportation needs.
"We need to be open to alternative sources of funding, but usually what happens when you have a new paradigm like that, there are tradeoffs. You might find that you have improved service, but it might be at the expense of increased rates," he adds.
From the river to roads, an efficient transportation system impacts farmer profitability.
"If you make it more efficient you'll get higher value for what you produce. If it's less efficient, your basis will widen, you'll get less percentage of the value of what you grow," Scott says.
Without major investments in infrastructure, U.S. farmers could lose the competitive edge they currently have in the global market.
"Brazil is currently building out railroad infrastructure. If they can get their beans to market as efficiently as we currently can, then we're going to be at a huge disadvantage. Their cost structures are a lot lower than ours, but the infrastructure makes up the difference for us," Scott says.