Forces Shaping the U.S. Farm Bill. Henry Schmick USDA/FAS/Geneva

Size: px
Start display at page:

Download "Forces Shaping the U.S. Farm Bill. Henry Schmick USDA/FAS/Geneva"

Transcription

1 Forces Shaping the U.S. Farm Bill Henry Schmick USDA/FAS/Geneva

2 Forces shaping agricultural policy Social and Political The Market Environment Budget Constraints Trade Commitments

3 In the U.S., diverse stakeholders contribute to Farm Bill debate Farm and Commodity Associations Agribusinesses Consumers & Food Safety Group Environmental Groups Rural Communities Taxpayers Biofuel Interests

4 Farm sector diversity impacts debate Farm household income by farm typology, Income from farming Income from off-farm sources Total income $ 1, Average U.S. household income $60,528 0 Rural residence farms Intermediate farms Commercial farms -50

5 Distribution of production and government payments, 2003 % Type Rural residence Intermediate Commercial Farm share Production share Payment share

6 Rural economies have become less dependent on farming Nonmetro farming-dependent counties Non-Metro Farming Dependent Other Non-Metro Metro Source: Farming-dependent counties are defined by ERS. Metro/nonmetro status based on Office of Management and Budget June 2003 classification.

7 Farm Act legislative process House and Senate Budget Committees set budget targets House Agriculture Committee (committee members introduce legislative proposals) Stakeholders testify and lobby for provisions USDA provides proposals and consultation on technical details Farm organizations Agri-business Environmental groups Taxpayers Rural communities Research scientists House debate and passage of House bill Senate debate and passage of Senate bill Conference Committee House passes conference bill Senate passes conference bill President signs bill into law USDA establishes rules and regulations to implement Farm Act Senate Agriculture Committee (committee members introduce legislative proposals) 1995 Farm Bill => Farm Bill -> ?

8 U.S. farm policy trends 1996 Freedom to Farm end of supply control 2002 Farm Act: Countercyclical 1981 Act high loan rates Uruguay Round Doha Agenda 1985 FSA market orientation 1990 FACTA partial decoupling

9 2002 Farm Act: Broad and Complex Legislation TITLE I: Commodity Programs TITLE II: Conservation TITLE III: Trade TITLE IV: Nutrition Programs TITLE V: Credit TITLE VI: Rural Development TITLE VII: Agricultural Research, Education, and Extension and Related Matters TITLE VIII: Forestry TITLE IX: Energy TITLE X: Miscellaneous

10 About 80% of U.S. Farm Bill spending supports non-commodity programs Other 6% Commodity 21% Agri-environmental 5% Domestic Food Assistance 68% Source: Congressional Budget Office March 2002 Baseline and May 2002 Farm Act Score

11 Commodity Credit Corporation (CCC) net outlays* Actual outlays under 2002 Farm Act Projected outlays, Feb 2005 Actual outlays under past legislation f * The Commodity Credit Corporation (CCC) is a Federally owned and operated corporation within the U.S. Department of Agriculture created to stabilize, support, and protect farm income and prices through loans, purchases, payments, and other operations. All money transactions for agricultural price and income support and related programs are handled through the CCC. Source: USDA, CCC Budget, February 2005.

12 Increase in USDA Conservation Expenditures $ billion 5 Conservation Technical Assistance Land Retirement Programs 4.5 Working Land Programs Agricultural Land Preservation 4 Other Major Conservation Programs

13 Direct government payments account for a small share of farm cash receipts $ billion Government payments Other farm-related income Livestock Crops Calendar year

14 Direct government payments (e) calendar year Fixed Price-linked Conservation Other 1996 $U.S. billion

15 Direct government payments to producers $ billion CRP and other conservation Direct payments Counter-cyclical Dairy Production flexibility contracts Emergency assistance Marketing loans & LDPs Peanut & tobacco buyout Source: Data Farm Income, November Economic Research Service, USDA.

16 Why Farm Programs might change between Farm Bills Meet need not covered by existing program Ex.: disaster assistance Cut spending Ex.: budget reconciliation to reduce deficit Meet WTO requirements Ex.: circuit-breaker Political trade-offs provide opportunities Ex.: tobacco buyout gained votes for overall tax bill

17 Mandatory vs. Discretionary spending Mandatory (often entitlement ) programs Ag. Committee jurisdiction; multi-year Govt. costs vary depending on participation levels, market conditions, etc. Ex.: commodity programs, domestic food aid (food stamps) Discretionary Appropriations Committee jurisdiction; annual When spending reaches the designated level, no more can be spent (unless more money appropriated) Ex.: research programs

18 WTO Circuit Breaker U.S. Aggregate Measure of Support The U.S. AMS remains within the Ceiling established in URAA AMS Unused AMS ceiling 15 Farm Bill includes a circuit breaker to ensure that domestic supports do not exceed WTO limits $ Billion

19 Forces shaping the upcoming U.S. Farm Bill debate Most farmers agree that: Planting flexibility, and the ability to maximize net returns, is desirable Some type of income safety net is needed But, issues arise regarding: How to meet the needs of a diverse array of farms at reasonable cost... and in a manner that is WTO-compliant

20 USDA Forums Key Issues USDA Secretary Mike Johanns -- A farm safety net that is: Equitable Predictable Beyond WTO Challenge

21 2007 Farm Bill Timeline 52 USDA farm bill forums in 2005 Congressional hearings in 2006 and 2007 Complete WTO agreement by? Spring 2007 debate/write farm bill July-August Finalize Legal text September 2007 passage of new Farm Bill Wildcard: Extending 2002 bill

22

23

24 Website Economic Research Service U.S. Department of Agriculture