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

Ag Policy Update–7 Mar 01 (Sunup Program to be aired 8 Mar)

1. We’re getting more details about the President’s new budget proposal. What can you tell us about provisions for agriculture?

–More details are being publicized. However, the strategy of the Bush Administration is clear: provide few specifics on funding levels and targeted cuts until the tax cut is approved.

–The FY2002 Budget Blueprint identifies these priorities for agriculture:

(1) Reduce income taxes, eliminate the estate tax and establish FFARM accounts.

(2) Expand trade, pest & animal disease prevention, food safety and R/D.

(3) Assist low-income families & rural communities.

(4) Limit USDA discretionary spending growth to 5%.

(5) Eliminate programs not subject to merit-based selection.

(6) Establish a review process for efficient use of funds.

(7) Reserve fund for emergencies.

2. Any specifics beyond those general priorities?

–Bush and his supporters are hoping they’re saying enough about what most farmers want, and refusing to complicate the debate with details.

–There are no real specifics as are usually found with past budget proposals, but some statements provide clues where funds & cuts might go.

–Growth areas will likely be:

(1) Adding funding for trade.

(2) Add funding for biotechnology, new products, & protection against pests & diseases.

–Likely areas for cuts include:

(1) Expecting a lower level of USDA discretionary spending for fy2002 at $17.9 billion. That’s about the level of fy2000 years ago & 8% less than fy2001.

(2) Eliminate the emergency funding ($1.1 billion) and 300 earmarked research projects ($150 million), and eliminating/reducing lower priority programs ($200 million).

(3) Maintain a reserve for emergencies that is lower than authorized in recent years.

–Levels to expect maintenance of programs include:

(1) Funds crop insurance reform & livestock price reporting.

(2) Funds for meat/poultry inspection & food safety.

(3) Funds for FS fire management.

(4) Funds WIC.

(5) Funds aid for low-income rural housing & rural drinking water.

3. How’s this likely to play out politically?

–Bush seems to be saying: “Trust me. After we get the tax cut, we’ll be specific in what we can and cannot afford.”

–If that message sells, producers, agribusiness managers and consumers will need to be prepared for the consequences. Some will be pleased and others will be very disappointed when they learn their programs are cut.

–As we noted here last week, if the Bush tax cut is approved, it will be difficult to afford the level of assistance that was given to farmers in the past 3 years.

–Ironically, some of Bush’s conservative supporters in agriculture and in Congress are voicing a need for much more of a commitment to agricultural support.

–Agriculture’s potential cuts could be among the deal breakers that prevent the President from getting what he wants in the tax cut and budget package.

–There’s also no or little mention of some very real concerns of many producers:

(1) distribution of support to producers participating in commodity programs.

(2) calls to slow down concentration trends.

(3) claims that biotechnology is unsafe.

(4) expanded existing environmental programs and funds for new environmental programs.

(5) what help is available for producers who won’t be helped much by tax cuts because of persistent low earnings.

4. Latest on the farm bill debate:

a. American Farm Bureau called on Congress increase annual support for farmers by $12 billion.

--AFBF, one of the leading farm groups in pushing for reductions in government farm aid in the 1996 farm bill, has reversed its message in the past 3 years, and is now a key leader in asking for large levels of additional funding from the federal government.

–Additionally, AFBF is recommending program aid for fruit and vegetables, not currently covered by USDA.

–They also want an increase in the CRP and other environmental programs.

–Also, they want to re-establish wool and mohair support.

–They remain opposed to supply management programs.

b. National Farmers Union will announce its recommendations next week.

–Last week, NFU voiced increased support for environmental programs, including CRP.

5. There are claims that the Bush had a chance to show its support for independent hog producers and failed. What’s the story?

–Recall there was a referendum last year to eliminate the check-off for pork promotion, and elimination won.

–The Clinton Administration announced it would eliminate the program.

–But there had been an intense firefight going on between the independent hog producers and the larger and corporate hog producers.

–The larger producers and other contended USDA didn’t follow proper procedures and ignored irregularities.

–The Bush Administration decided to side with those concerns and shelved the referendum results.

–USDA also said it had negotiated some changes that would respond to concerns from independents:

–funds will go to the National Pork Board and not the National Pork Producers Council

–the Board & Council must maintain separate management, staff & offices

–allows 2 years for the board to build support for the checkoff program & survey about interest in another referendum

–Cynics say this is just another example of what will be 4 years of the Bush Administration supporting big agriculture at the expense of small and independent producers.

–The independents are expected to go to court to fight the USDA decision and try to prevent what they see as a stalling tactic.

6. What are the latest economic reports from Washington showing?

–Factory orders for January hit a 14-month low.

–Productivity remained strong in the final quarter of 2000, but the economy continued to grow.

–While mixed, this news lends support to those who are predicting the Fed will again lower interest rates 20 Mar.

–Producers and agribusiness managers who can delay borrowing may want to do so.

7. Other policy-related news affecting agriculture:

a. The Supreme Court upheld the Clean Air Act enforcement and stand-setting by EPA in a unanimous decision this week.

--Businesses and farm groups who were hoping to roll-back the authority of EPA were sent a clear message that, unless Congress acts to change law, EPA can continue on its present course.

--The may lead to calls from conservative Republicans and some farm-state Demos to change some environmental legislation.

b. USDA reported a 1.2% increase in the number of farms from 1990 to 2000, while farmland decreased over 4%.

–Farms numbered 2.l72 million in 2000.

–Farmland acres were 942.99 million in 2000.

–According to the data, small farms are increasing.

–There were less than 350,000 farms with sales greater than $100,000.

c. The House has passed and the Senate is considering a Bankruptcy Reform Act that will provide relief to farmers in need of Chapter 12 protection.

8. 107^th Congress:

a. Recent/Current:

–House Ag Committee reviewed federal farm commodity programs w/American Farm Bureau (28 Feb)

–Senate Ag Committee reviewed conservation programs (28 Feb, 1 Mar)

–Senate Ag Committee considers nutrition & school lunch programs (6 Mar)

–House Appropriations Ag Subcommittee FY2002 hearing schedule: FDA (1 Mar); IG (7 Mar)

–House Ag Committee postponed a review of farm commodity programs with the Coalition for a Competitive Food and Agriculture System (7 Mar)

–House Ag conducted public hearing on proposed rule providing for the issuance of national charters for the Farm Credit System (7 Mar).

–House Ag Committee reviews federal farm commodity programs with the barley growers (8 Mar).

b. Upcoming:

–House Ag Committee reviews federal farm commodity programs w/National Farmers Union (14 Mar)

–House Ag Committee reviews federal farm commodity programs w/wheat industry (15 Mar)

–House Appropriations Ag Subcommittee FY2002 hearing schedule:

–CFTC (21 Mar)

–Budget Overview (25 Apr)

–USDA Secretary (26 Apr)

c. Congressional Calendar:

--As of 12 Mar, about 99 weekdays remain in this Congressional session.

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

Work Period

July 4 Independence Day

August 4 ‑ Sep 4 Summer District Work Period

September 3 Labor Day

September 18 Rosh Hashanah

September 27 Yom Kippur

October 5 Target Adjournment