Ag Policy Wrap-up - Dr. Larry Sanders, Oklahoma State University

Ag Policy Update–6 Feb 01 (Sunup Program to be aired 8 Feb)

1. We talked last week about the release of recommendations for the next farm bill. Let’s take a closer look at the beginning of the debate for the next farm bill.

–Recall that the 1996 farm act called for a Commission on 21^st Century Agriculture to evaluate the status of agriculture and begin to make recommendations to Congress and the Administration.

–Barry Flinchbaugh, chair of the Commission, presented the report to the Senate and House Ag Committees last week.

–The Commission was composed of a broad-based representation from farm states.

–The report was based on testimony gathered in hearings around the country, public comments and analysis of data from USDA and universities.

–The Commission’s recommendations covered 6 areas: income safety net, risk management, environment, trade, special commodity policies, and small farms.

2. Let’s first talk about the essence of the recommendations. Is this likely to satisfy producers and other, as well as resolve the problem?

–That’s a complex question, and may be unanswerable at this time.

–If you are one who thinks the 96 act worked pretty well, but just needs some tinkering, then the Commission report is your ticket.

–Of the producers who receive direct payments, less than 10% get most of the assistance. Those are more likely relatively large producers who have either gotten there or stayed at that level in part because of such government aid.

–This camp suggests that market forces beyond their control demand that the government intervene to level the playing field and give “efficient” producers a chance.

–If, however, you tend to see the 96 act and the “freedom to farm” concept as a disaster, then you’ve got to wonder what the majority on the Commission was smoking.

–Most farmers in the US get little to no direct support from the Federal government.

–Recall that the past 3 years have been record-breakers in emergency aid to farmers and, without it, farm income would have been at record lows.

–If you are one who thought the 96 act was going to move agriculture to a free market and a day when government would get out of the way, you also must wonder about the Commission, because it is definitely not a market-oriented set of policy recommendations, regardless of the labelling.

–These record-breaking years of government aid are the opposite of what the 96 act called for. Some say we’re going in the wrong direction.

3. Let’s look in more detail today at just a few of the recommendations, and more over the weeks to come. What kind of recommendations did the Commission come up with for an income safety net?

–Flinchbaugh, on behalf of the majority of the Commission, recommended the following:

1. Continue a fixed AMTA payment based on existing allocations and a counter-cyclical income support program based on the Supplemental Income Support (SIS) program as a flexible safety net.

2. Retain loan deficiency payments and marketing loans, but adjust the marketing loan to balance inequities among crops. Key here is that the Commission is recommending that the limitation on payments be removed.

4. What impacts are likely from such recommendations?

–Continuing the flex payments gives producers and bankers some planning figures over the life of the next farm bill.

–A counter-cyclical program, depending on how it is set up, could provide a form of minimum income insurance.

–Such a program runs counter to those who favor letting market forces operate and determine who wins and who loses.

–It’s also interesting that many who favor the counter-cyclical program were and are against the pre-96 farm act programs of target prices and deficiency payments for producers, and a minimum wage for private employees. While these are different programs, there enough similarities with respect to putting a floor on income to make one wonder at one criticizing the others.

–The recommendation to eliminate limitations on payments would increase the Federal budget exposure, perhaps in an uncertain way.

–It would also exacerbate skewed distribution of payments to larger farms.

–Some would argue that is as it should be since those larger farmers account for most of the production.

5. I understand there were some minority views on some of the recommendations. Can you highlight some of these?

–Yes, it is clear that the conservative view led the majority view.

–Most minority views were led by Farmers Union President Leland Swenson.

–Among other things, the minority views stated the following:

1. The 96 farm act (freedom to farm) has failed & should not be continued.

2. Change the calculations of marketing loan rates, target benefits, encourage long-term stewardship.

–Swenson is speaking on behalf of smaller farms and those who didn’t like the way the 96 act played out.

–His concerns reflect the frustration of many who either want to go back to pre-96 act policy or to find a “new way”.

–Targeting of benefits has long been proposed, but no one, including Oklahoma’s former Senator Boren over a decade ago has been able to devise it in a workable and politically acceptable manner.

6. 107^th Congress:

a. Recent/Current:

–House & Senate Ag Committees heard 21^st Century Commission recommendations for next farm bill (30-31 Jan)

b. Upcoming:

–House Ag Committee business meeting (committee organization)& hearing to review of the current state of the farm economy and the economic impact of federal policy on agriculture (14 Feb)

–House Ag Committee hearing to review the future of farm programs (15 Feb)

c. Congressional Calendar:

--As of 13 Feb, about 117 weekdays remain in this Congressional session.

February 12 Lincoln's Birthday

February 19 Presidents Day

February 16 ‑ 26 Presidents Day District Work

Period

April 1 Daylight Savings Time Begins

April 7 ‑ April 23 Spring District Work Period

April 8 Passover

April 15 Easter

May 13 Mother’s Day

May 25 ‑ June 4 Memorial Day District Work

Period

May 28 Memorial Day

June 14 Flag Day

June 17 Father’s Day

June 30 ‑ July 8 Independence Day District