NASHVILLE, Tenn. – The United States will not abandon its farmers even with soaring deficits, world trade organization pressure to scale back support payments or changes in government, says a Kansas State University agriculture economist.
The bill will be tweaked but not overhauled as agriculture secretary Mike Johanns’s farm bill wends it way through Congress, said Barry Flinchbaugh, who has been studying American farm bills since 1968.
The government may authorize less money but what is important is what is spent through special appropriations.
“Farm program payouts are entitlements. It is not what is authorized but what is spent that counts,” he said at a special session of the National Cattlemen’s Beef Association annual convention in Nashville.
Read Also
Canola oil transloading facility opens
DP World just opened its new canola oil transload facility at the Port of Vancouver. It can ship one million tonnes of the commodity per year.
Record federal deficits for the last five years had analysts musing that agriculture funding could be scaled back, but the U.S. national deficit is 2.6 percent of the gross domestic product, which is manageable, Flinchbaugh said.
In the last 10 years, net cash farm income has been above average but he expects the final figures for 2006 to be lower because of higher energy costs.
In 2000, $32 billion were delivered in farm payouts. In 2006, about $20 billion were paid out. He expects 2007 payments to shrink again because ethanol makers are pushing up the price for corn.
Payments will also continue to flow because government programs are capitalized into land values.
For example, if government payments stopped, Kansas land values would fall 36 percent, Oklahoma values would fall 43 percent and North Dakota land values would plummet nearly 45 percent.
Some reform to the 2007 bill may come if the World Trade Organization talks resume. Suspension of WTO talks took the pressure off the U.S. government to overhaul the farm bill.
“We have to clean up our act with this farm program. We have to move in the direction of less market distortion,” Flinchbaugh said.
More money is being poured into rural development tied to renewable fuels. Cellulose technology will take over and plants will need to be able to convert from corn to cellulose. Government funding is also directed at other forms of energy like wind, hydro, solar and nuclear power.
The U.S. government wants 25 percent renewable fuel use by 2010.
“It does not mean 25 percent will come from corn made into ethanol. It is impossible,” he said.
Government will continue to support renewable energy because if provides national security and reduces dependence on crude oil imports from unfriendly countries. It also increases farm income and decreases energy costs.
