Farm bill battle lines being drawn
It's not going to be easy or fun, but the U.S. will eventually climb out of its current economic cellar, as will American agriculture. How that all happens has a lot to do with what happens in Washington, D.C., over the next year or so, namely when it comes to the construction of the 2012 farm bill.
But, it won't be fun. Kansas State University Ag Economist Barry Flinchbaugh outlined how it will take place late last week at the Iowa Land Investment Expo, a gathering of farm real estate agents and farm managers.
"We need a good lesson in basic economics. We need to sober up. We need to solve this deficit," Flinchbaugh said. "We will cut spending and increase taxes. We will reform social security, Medicare and Medicaid. If not, we will live a life of unfulfilled expectations."
For the ag sector, there will be changes to the farm program in next year's bill, though existing program payment structures won't likely be altogether scrapped just yet.
"There will be a farm bill with a safety net, but with bigger holes in it in the past," Flinchbaugh said, adding President Barack Obama has stated in the past he doesn't want farm program payments going to farmers with a gross income of over $500,000/year. "The ACRE progam needs redesigned. The decoupled fixed payment will be damned hard to preserve. We will keep the direct fixed payment in the 2012 farm bill, but it will be scaled down 10%."
Beyond next year's farm bill, mechanisms inherent to the farm program will undergo quite a bit of change, namely the target for program payments. With the Obama administration so against revenue, that's out, Flinchbaugh says. Price has typically been the target for payments, though maybe not always rightfully so.
"If the price exceeds the target, there's no payment. If the opposite happens, we make a crop and have lower prices, but you get a payment," Flinchbaugh said.
Targeting "the margin" is the most "theoretically sound" option, Flinchbaugh added, but with variable values for inputs like land and labor, it makes that a moving target. And, though the current administration will likely have little to do with the writing of the farm bill, the current "mantra of Washington D.C." may have more influence on the bill than the White House.
"I will argue that now is not the time to eliminate the farm safety net. The mantra in Washington DC right now is cut, cut, cut, cut. We've already seen a 2/3 cut in the farm program. If every sector in Washington did that, we would have a real problem trying to figure out what to do with this surplus we'd have on our hands," Flinchbaugh said. "This administration has very little support in farm country and has very little influence on this farm bill."
And, throw in what's going on elsewhere in the world. That may also have a little to do with what the 2012 farm bill looks like, the economist added. "I'm ready to eliminate the safety net if everybody is ready. If the EU, Japan and China are ready," he added. "The U.S. has dropped from 22% to 10% in producer support. The EU is spending 2 1/2 times what we are."
Aside from the farm bill, other policy issues in play in D.C. -- like exports (about which President Obama and House Speaker John Boehner agree, Flinchbaugh says) and biotechnology regulation -- are being kicked around like political footballs now, something that will need to change.
"There's this cultural war going on -- some are trying to start a fight and undo progress between the small, organic niche farmer and commercial farmer. This is just plain dumb. It isn't either or. When Barack Obama appointed [Tom] Vilsack [as Secretary of Agriculture], he said the small farmers can feed your community, but only the large farmers can feed the world. I suggest they revisit that statement," Flinchbaugh said. "A world with full bellies will have little terrorism in it. You have to be bullish on that. If you are opposed to biotechnology, you are in favor of starvation and that's immoral! We must base biotechnology policy on sound science, not politics like it's being done now."