Budget Presents Opportunities for U.S. Farmers

A historical confluence of forces has turned agriculture in America into a complicated and highly subsidized industry.
Budget Presents Opportunities for U.S. Farmers
Andrea Hayley
5/11/2011
Updated:
5/11/2011
A historical confluence of forces has turned agriculture in America into a complicated and highly subsidized industry.

Many farmers are doing well, but have come to rely on government handouts, while hundreds of thousands of small farmers are shut out from help. The nation’s 1 million farmers that produce our food are competing within an arrangement that needs reform at a time of budgetary pressure.

“The system we have is one that has evolved over a period of time. It needs to be overhauled. There is no question about it from our point of view,” said Dale Wiehoff, vice president of communication with the Institute for Agriculture and Trade Policy, a Minneapolis-based nonprofit organization advocating for family farmers.

The U.S. government’s support of farming and nutrition assistance will total over $80 billion this year, according to the Congressional Research Service. With the crushing debt dominating political debates, these are billions legislators say will be under the budget-cutting microscope.

The president’s bipartisan fiscal commission recommended reducing spending by $10 billion over the next 10-year period. Obama’s 2011 budget request included a reduction of $2.6 billion, and House Budget Committee Director Paul Ryan (R-Ky.) has proposed $30 billion in cuts from the next Farm Bill.

“With an out-of-control federal debt, committee members are going to be expected to do more with less,” said Jerry Moran, member of the Agricultural Committee in a weekly radio address, “The Ag Minute.”

Savings, Revenue Neutral, or Reform?

The U.S. Farm Bill, which is updated every five years, is due to be revised in 2012. While powerful and entrenched interests work hard to maintain the status quo, the bill, and the industry, needs reform. Exactly how to work that out, is the debate that stakeholders will be having over the coming months.

The House Committee on Agriculture has begun a series of public hearings to collect input from farmers across the country.

“Writing a farm bill is always a challenge, but this next farm bill may prove more challenging than most,” said Agricultural Committee ranking member Frank Lucas on “The Ag Minute.”

The Farm Bill covers a variety of programs. Some directly benefit farmers, such as income support, crop insurance, conservation, agricultural export programs, irrigation support, and loan guarantees—while others are more indirect. Recent additions to the bill have included rural development assistance, and increased support for biomass production, and processing facilities.

At least 65 percent of the Farm Bill supports nutrition assistance for the needy, including food stamps and school lunch programs. According to Wiehoff, that amount can be as high as 85 percent, depending on how you calculate it.

Farm Bill costs have risen significantly since 2008, when legislators predicted a five-year total of $272 billion. The actual cost is now expected to top $400 billion. Increases in costs for the food stamp program due to the Great Recession account for the bulk of the increases, while higher than expected crop insurance payments add to a lesser extent, the Congressional Research Service found.

The Farm Bill is both controversial and popular with lawmakers. Conservatives, many representing farming districts, want to support their constituents; Democrats support the bill because of its social welfare component. A powerful industry lobby also makes it very difficult for lawmakers to reform the system.

The most controversial part of the bill came in 1996 when good intentions by Congress went wrong.

“In an attempt to get rid of subsidies they created a program that turned out to be a disaster,” said Wiehoff.

It happened during a good year, like the current year, when commodity prices were high. Congress decided to get rid of subsidies, only to have prices suddenly drop, forcing an emergency bail out of the farmers.

The benefits, now entrenched based on historical allotments, currently go to farmers of major commodities like corn, soybeans, and wheat—products desirable on the global markets.

Farmers of other products, such as fruits, vegetables, and organic and urban growers for example, have no chance of support under this system. Over a billion dollars a year of direct payments are estimated to go to people who no longer farm their land.

“It is not a very rational system. It could be done in a much more thoughtful way,” said Wiehoff.

The federal government’s intervention in the markets has also created a system where certain farmers are encouraged to overproduce using modern, capital intensive farming techniques, which increase yields, but may devastate the quality of the land.

Excess crops are then dumped on the world markets at prices lower than the cost of production, leaving millions of farmers in developing countries unable to compete with the cheap American imports.

The United Nations, developing countries, and the WTO have criticized the United States and other developed nation’s agricultural practices on numerous occasions.

An overhaul of the system could benefit hundreds of thousands more American farmers, as well as provide relief to subsistence farmers in developing nations.

The difficult question, particularly in tight budgetary periods, Wiehoff says, “is if we are not going to spend more money, if we are going to allocate the money differently, who is going to have money taken away.”
Reporting on the business of food, food tech, and Silicon Alley, I studied the Humanities as an undergraduate, and obtained a Master of Arts in business journalism from Columbia University. I love covering the people, and the passion, that animates innovation in America. Email me at andrea dot hayley at epochtimes.com
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