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Today, the Small Business Committee’s Subcommittee on Agriculture, Energy and Trade heard testimony on the need to reform the Small Business Administration (SBA) small business size standards for agriculture.

A panel of stakeholders described to lawmakers how the SBA’s standards for determining which businesses qualify as small businesses put American farmers and ranchers at a serious disadvantage when competing for federal contracts and applying for SBA loans. 

The SBA’s current size standard for agricultural enterprises, which is set in statute, has not been updated in 15 years – failing to account for changes in industry structure, commodity prices, costs of production, and other economic conditions.

The single size standard applies to 46 diverse subsectors of the agriculture industry including soybeans, citrus, beef cattle and poultry. 

“It seems to me that small farmers and ranchers have been neglected for too long,” said Subcommittee Chairman Carlos Curbelo (R-FL). “The size standard setting process for agricultural enterprises needs to be modernized.  The existing statutory size standard does not account for changes in industry structure, costs of production, economic conditions, or other factors.” 

Last month, Small Business Committee Member Rep. Mike Bost (R-IL), introduced H.R. 3714, the Small Agriculture Producer Size Standards Improvements Act of 2015. 

This bipartisan legislation, which is cosponsored by Chairman Steve Chabot (R-OH), Subcommittee Chairman Curbelo, and Subcommittee Ranking Member Grace Meng (D-NY), would modernize the process of establishing small business size standards for small farmers and ranchers and ensure that they are reviewed every five years.

“(L)ow relative commodity prices, thin margins and increased costs for land and other inputs has resulted in the consolidation of many individual family-owned operations into larger, single family-owned business units. However, these operations very much remain small businesses,” noted Rep. Bost during today’s hearing. “An appropriate size standard for agriculture producers will help create new opportunities for small agriculture producers and help ensure government agencies are meeting Congressionally-established small business contracting goals.”

Key quotes from other witnesses on today’s panel:  

“The cattle operation my family owns today looks very different from how it started when you consider the market conditions and cost of production have changed significantly over time,” said Mr. Jeff Beasley, the co-owner of Beasley & Sons Livestock in Creal Springs, IL. “The outdated size standards of the Small Business Act clearly do not reflect the needs of modern agriculture.”

“A farm’s receipts are not necessarily indicative of their relative success, status or size. Through the years, my farm has grown in size. It has grown to allow me to spread out expenses, to allow for more family member involvement, and to ensure my wife and I were able to provide for our family responsibly,” said Larry Burgin, the owner of Mushkoday Farm in Delhi, NY. “But the growth in size was not directly commensurate with growth in income. Like in other businesses, input costs are volatile and seemingly always on the rise and margins are always shrinking. SBA programs should acknowledge these unique aspects of agriculture in order to be a partner in our success.”

“With higher commodity price levels, a significant number of crop farms may have shifted out of the small business category, as currently defined by statute, with no real change to the scale of their operations,” said Dr. Nicholas D. Paulson, Associate Professor Agricultural and Consumer Economics University of Illinois at Urbana-Champaign in Urbana, IL. “The farms most likely to be impacted by the SBA definition are those which currently contribute the majority of the value of production to US agriculture. Thus, it is even more critical to have an appropriate definition in place for small agricultural businesses to ensure continued access to and eligibility for SBA programs.”

You can view the video of today’s hearing HERE.

BACKGROUND:

In July 2014, John Shoraka, SBA’s Associate Administrator for Government Contracting and Business Development, testified before the subcommittee, “If SBA were mandated to review agricultural size standards, adjustments for inflation and other economic conditions could be made.”

“Currently, SBA does not adjust the statutory agricultural size standards for inflation,” Shoraka testified. “As a result, the agricultural size standard has remained at the $750,000 receipts level since 2000, while SBA has reviewed and adjusted monetary based size standards for inflation four times in that time period.”