While the 2007 Farm Bill has a long and winding road to travel down before it reaches the final-draft stage, there's likely to be less money for farm-support programs. USDA Secretary Mike Johanns has planted that seed several times during ag-industry meetings and events in recent months. Most recently was this week at the American Farm Bureau Federation's annual meeting in Salt Lake City.
"Good policy must take into account much more than dollar count," Johanns said. "It must be tailored to provide strong support that is relevant to current trends, and be forward-looking for future growth."
If the 2002 Farm Bill had been renewed, which is what many farm groups wanted, the dollar amount in the new bill would have dropped by as much as $20 billion due to strong crop markets.
As it stands, crop subsidies peaked in fiscal 2000 at $32 billion. That was a tough year for prices. From there, the program bill declined as farms became more productive and profitable. Subsidies now tally around $20 billion. Now, the push toward renewable energy has expanded the market prospects for key program crops. Of course, the increased demand and prices have put pressure on livestock industries, "but it has been good for farmers overall," Johanns said. He believes the livestock industry will "adjust" to high corn, soybean and other feed prices.
No doubt they will, but that adjustment will take a toll on many. Just how many will pay a price and how big a price before the equilibrium comes back into play remains to be seen. I does seem as though Johanns and others in Washington are denying that the impact will be significant.
Johanns offered other insights into the next Farm Bill's direction. "Spending is likely to shift from subsidies to providing higher loan limits for beginning farmers," he said. That would bring the United States into closer to international trade standards. That would be a good thing. After all, it's hard to tell other countries what to do when the United States doesn't play along. Canada, Brazil and the European Union have all filed complaints with the World Trade Organization concerning protectionist behavior in the U.S. agricultural sector.
The next bill "is likely to address inequities in distributing subsidies," Johanns said. At the moment, 54 percent of the payments go to the top 15 percent of farms by size and sales. About 60 percent of farmers, generally smaller, family operations, receive no direct subsidies at all.
While he didn't talk specifically about the Dairy payment program, there are increasing questions about the validity and necessity of that program. Even a major Wisconsin paper drafted a letter to the state's senior senator, Herb Kohl, arguing for the need to end the cash outlay.
It's still a long way off, but with a looming national deficit, and farm productivity increasing and many commodities facing decent markets, ag-program subsidies should finally and seriously be redesigned.