New Farm Bill: Debate Begins

On January 31, in Washington, Agriculture Secretary Mike Johanns announced proposals for USDA’s 2007 Farm Bill. Then he hit the road to explain them.

His three-day tour began in Tunica, MS; then proceeded to Des Moines, IA; Modesto, CA, and Nashville, TN.

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In Tunica, Johanns was met by an estimated crowd of 300 people, who gave him a standing ovation, prompting him to begin with a tale of a similar audience. “As I was making my way to the podium, everybody stands up and applauds,” he said. “I told them that it was very nice, but that I had not done anything yet. Somebody in back yelled out, ‘and when you do, we won’t be standing.’”

Well, in Tunica, they stood at the end, too. In between standing ovations, Johanns spent 90 minutes expanding on USDA’s proposals.

“I want to highlight this: We started making preparations for the 2007 Farm Bill as soon as I came to this job two years ago,” Johanns said. “We wanted to know who to talk to; whose advice did we want? Where is the input? Our best approach, we decided, was to just simply go across country and talk to farmers. And that’s exactly what we did.”

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Yes they did, conducting 52 Farm Bill Forums in 48 of the 50 states. Mississippi and Louisiana were not visited at the time. “Not because they were not important,” Johanns said, “but right about the time we were doing them, the hurricanes hit. Obviously those two states had more to be concerned with, in a pressing sort of way, than trying to help us conduct Farm Bill forums. By being here today, we complete the loop.”

But in the states that were visited, USDA collected more than 4,000 comments and they were summarized into 41 theme papers. That was boiled down to five analysis papers, authored by USDA economist Keith Collins, who was in attendance in Tunica.

“What this Farm Bill will do is reauthorize many things — it reauthorizes our commodities program support; our conservation and forestry programs; renewable energy; trade; food stamps and other nutrition assistance, and rural development,” Johanns said.

Johanns pointed out that the current Farm Bill will expire this year and, “If we don’t get a new Farm Bill done, we revert back to the 1949 Farm Bill, which is not a good situation. Because of this consequence, there is a lot of pressure on us to get a new one done.”

USDA began the last several fiscal years with a budget of around $90 billion, with 54% going to food and nutrition assistance. Commodities programs account for only 26%. One of the most significant aspects of the new proposals is that the 2007 Bill calls for spending $10 billion less — in keeping with President Bush’s plan to eliminate the deficit in five years — but will provide $5 billion more than if the current Bill is extended, Johanns said.

The proposals are available at www.usda.gov/farmbill

Key Cotton Belt Points

The new Farm Bill proposals will:
• Convert the current price-based countercyclical program to a revenue-based program that is responsive to actual conditions. Under a price-based program, farmers who experience crop loss are often under-compensated while those with high production tend to be over-compensated. This new revenue program will factor in U.S. crop yield when determining crop payments to better target support.
• Reform and modernize the marketing assistance loan program for program commodities. The current law provides loan rates or price floors for corn, wheat, cotton, rice, soybeans and other major crops. The proposals set loan rates for each commodity at 85% of the 5-year “Olympic” average (average of last 5 years excluding the high and low year). This change minimizes market distortions and encourages farmers to plant crops based on market prices instead of the level of subsidy payment.
• Tighten payment limits by eliminating the three-entity rule to establish corporations and other entities, which allow the amount of payments received to exceed statutory limits. This plan also sets the subsidy payment limit for individuals at a total of $360,000. To receive commodity payments, producers must also meet a limit on adjusted gross income (AGI), which includes wages and other income, minus farm expenses and depreciation. This plan reduces the AGI limit of $2.5 million to a new limit of $200,000. If a producer has an annual adjusted gross income of $200,000 or more, that individual would no longer be eligible for commodity payments. This will affect 80,000 farmers in the U.S.
• Provide $1.6 billion in new funding for renewable energy research, development and production for cellulosic ethanol, which will support $2.1 billion in guaranteed loans for projects and includes $500 million for bio-energy and bio-based product research initiatives.
• Provide $250 million to increase direct payments for beginning farmers and ranchers.
• Support socially disadvantaged farmers and ranchers.
• Strengthen disaster relief.
• Dedicate nearly $400 million to trade efforts to expand exports, fight trade barriers and increase involvement in world trade standard-setting bodies.
• Maintain Federal Crop Insurance Program, with slight changes; dependent upon purchases of risk insurance and multi-peril insurance.
• Authorize $4.5 billion increase in conservation, invested primarily in the Environmental Quality Incentives Program (EQIP).

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