NASHVILLE, Tenn. – The next round of U.S. farm subsidies won’t be as lucrative or as trade distorting as the last round, say American farm leaders.
“The amount of money that is going to producers is probably going to be less,” John Thaemert, president of the National Association of Wheat Growers, said during the Commodity Classic convention held in Nashville last week.
A report prepared by the Congressional Research Service estimates a 38 percent decrease in spending on the commodity programs that support the incomes of American farmers.
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The agency predicts $36.5 billion US will be spent on farm supports between 2008 and 2012. That compares to the $59.2 billion spent in the last five years.
“This lower estimate is driven primarily by projections for sustained high commodity prices for the foreseeable future,” said the report written by Ralph Chite.
The new bill is expected to follow the trend set in the waning years of the 2002 farm bill.
Spending over the six years since that bill was implemented has been $21.8 billion below what was budgeted for loan deficiency, counter cyclical and recourse marketing loan payments.
Rick Tolman, chief executive officer of the National Corn Growers Association, said high commodity prices are the main reason behind the estimate for lower commodity program support, but there is another key factor.
“We’re facing a tighter budget this year than we were five years ago,” he said.
Despite the government’s fiscal restraints, there is considerable political support for farmers in Washington. The Congressional Research Service estimates that while spending on farm support programs will drop, total farm bill spending will be $246 billion over the next five years, up from the $232 billion spent during the last five years, mainly due to more money devoted to conservation and food stamp programs.
Those spending estimates are based on the baseline expenditure established by the Congressional Budget Office. Democratic leaders in the House and Senate want to exceed the CBO’s budget by $10 billion.
The U.S. Department of Agriculture is calling for a more conservative $6 billion budget increase.
U.S. president George Bush has stated that any increase in farm bill spending would have to come at the expense of other budgetary items and not through any sort of tax increase, or he will veto the bill.
Whatever increase is finally agreed upon will likely go to the conservation, nutrition and energy portions of the bill and not the commodity programs that irritate farmers in other exporting regions of the world, said Tolman.
He also believes foreign farmers will be pleased with the new delivery mechanisms being proposed for the farm commodity program.
Corn growers have support in both the House and the Senate for a proposal to add a revenue-based support option for farmers.
Tolman said the current price-based system is flawed. For instance, corn prices have been high the past growing season but there were growers in Virginia and Maryland who had a crop wreck due to drought. Those growers were not eligible for support under existing legislation, which is based on target prices.
“I believe that the farmers in Canada and throughout the world would be much more supportive of (the revenue-based system), find that more friendly,” said Tolman.
Thaemert said wheat growers are pushing for direct payments and a more robust crop insurance program, which should also be viewed more favourably than the existing loan deficiency and counter cyclical payments.
“We do not want to do anything that would impact or distort markets. Our focus is on green box payments (as allowed under World Trade Organization rules),” he said.
The American Soybean Association wants to maintain the loan deficiency payment element of the farm bill and is seeking an increase in floor price supports to $6.30 per bushel from $5.80 per bu.
U.S. agriculture secretary Ed Schafer warned growers that if the ongoing 2008 farm bill negotiations break down, farmers will be stuck with the 2002 farm bill for one or two more years.
“That’s not a good option,” he said.
Left behind would be non trade-distorting subsidies, increased investment in conservation, energy and nutrition programs and new rules that prevent abuse of price support programs such as a cap on payments.
“(There are) people out there who are getting the subsidies that clearly don’t deserve them, don’t need them and shouldn’t have them,” he said.
