Johanns hints at major shift in Farm Bill

Issue Date: November 2, 2005

By Kate Campbell
Assistant Editor

U.S. Agriculture Secretary Mike Johanns told those attending a Commodity Club gathering in Washington, D.C., in October that while there is "definite diversity" of opinion among farmers on a number of aspects of the upcoming 2007 Farm Bill, a consensus seems to be emerging.

He said the 2002 Farm Bill was the right policy for the economic conditions at that time, but, "I also recognize that times are changing."

Among the proposed changes is a shift in emphasis toward specialty crops, an increase in conservation program spending, a boost for international trade and expanded agricultural research.

Already a shift appears to be taking place in federal spending on agriculture. Last week the House approved an $83 billion appropriation for agriculture for the 2006 fiscal year. The spending package, if approved by the Senate and signed by the president, shifts funds to California needs like Central Valley air quality improvement programs, research on Pierce's disease in grapes, along with greater support for fruit and vegetable exporting activities.

Johanns told those attending the event, "Soon, we must decide as a nation whether to embrace a new age of agriculture or continue relying on a policy structure that was conceived 75 years ago, when the face of agriculture was very different from what it is today."

The U.S. Department of Agriculture has conducted forums in 26 states, he explained, and he has personally participated in forums in 17 states. He acknowledged that while there's significant debate on the 2007 Farm Bill taking place across the nation, there are aspects that have unanimous support.

Rural development efforts received generally good marks from forum attendees, as did conservation programs. Johanns said that farmers stressed the importance of competitiveness and opening doors to new and expanded markets for U.S. agricultural products.

"Farmers and ranchers believe in trade," he said, "but they believe it must be fair trade, and I share their view. Producers understand that more than one-quarter of U.S. farm cash receipts come from trade."

Rayne Thompson, California Farm Bureau Federation director for international trade, said, "Seeing that things are changing, various interest groups are gearing up to put their proposals on the table for the next Farm Bill.

"Environmental and nutritional interests are supporting programs that are called ‏green box' programs, which have few limitations under the World Trade Organization rules and are perceived more favorably by the public than ‏amber box' support programs. Green box programs include environmental conservation programs, disaster assistance, research and extension programs, and food stamps. Examples of U.S. amber box programs are the loan deficiency payments, market loan payments and dairy and sugar price support programs." Thompson said.

Johanns, in his comments to the Commodity Club, acknowledged the influence of international trading partners and the WTO, which could get more weight as the next Farm Bill is debated in Congress.

For example, Thompson said the most recent United States and WTO agricultural negotiations proposal reduces the U.S. amber box supports by 60 percent, and the European Union's and Japan's by 80 percent. These cuts to the European Union will reduce the difference between the EU and U.S. supports from a 4-1 ratio to 2-1.

Last week the EU offered to reduce average agricultural tariffs by 46 percent, its deepest tariff concession so far. Trade experts say this latest EU offer is aimed at breaking a deadlock that has stalled world trade talks. Included in the offer is a reduction in tariffs for beef, chicken and sugar--although the exact amount of tariff reduction for those commodities wasn't announced.

"Currently, the United States can spend up to $19.1 billion in amber box supports, while the EU can spend up to $73 billion," Thompson explained.

The U.S. proposal, one of many from nations around the world, is being introduced in meetings in the next month or two, she said. These proposals will start to take more shape, and they will have a great influence on how the next Farm Bill is developed and how much money is spent on U.S. price support programs.

In addition to a reduction in supports, the United States has proposed significantly reducing tariffs. U.S. trade officials have said one cannot happen without the other.

"By reducing our crop support programs, other WTO member countries say they're willing to agree to reducing their tariffs," Thompson said. "Tariffs applied to import products increase the price of the products when selling in a marketplace. For the United States, the average tariff on agricultural products imported into our market is 12 percent. In reverse, our agricultural exports face a world average tariff of 60 percent. Each commodity, however, will have to ask where their market is located."

On a broader scale, Johanns said farmers have expressed concern about farm payments being capitalized into increased land values, farm program supports being directed toward only a third of all producers, and the greatest benefits going to the largest farms.

"There will be a struggle to maintain the programs of the 2002 Farm Bill, while satisfying more interest groups and building a new farm policy that makes U.S. agriculture competitive with the rest of the world," Johanns said.

He said a California farmer commented during a recent forum that the "increasingly high investment costs and relatively low return rates associated with production agriculture are some of the most prominent unintended consequences (of the 2002 Farm Bill) that discourage future generations from entering production agriculture."

Johanns said many farmers have echoed those remarks and raised the issue that when farm support programs are tied to production, they translate into more land being acquired to continually produce more crops in an effort to obtain more support.

"When farm policy encourages farms to become bigger and produce more regardless of market demand, we should not be surprised when prices for our commodities are low," Johanns said. "Clearly, we do not have uniformity in the level of support offered by current farm policy. Program crops represent a quarter of production value, yet they received virtually all of the funding. Put another way, 92 percent of commodity program spending was paid on five crops: corn, wheat, soybeans, cotton and rice.

"The farmers who raise other crops--two thirds of all farmers--received little support from current farm programs," Johanns said. "And yet, as I travel the country I have not been hearing those two-thirds of farmers--the fruit and vegetable growers and others--ask for program support. Instead, they're looking to the future and asking for more focus on research and promotion, increased sanitary and phytosanitary enforcement, and access to new markets."

Emily Robidart, CFBF director of farm policy and taxation, noted that negotiations are continuing regarding the next Farm Bill and that it is important to weigh all of the issues involved.

"The outcome of the upcoming round of WTO negotiations in December will tell a lot about the future of our current farm programs. However, it is important to further the successful programs from the 2002 Farm Bill, while keeping an open mind in negotiating the next Farm Bill. Times may be changing, but the underlying concept of supporting our family farmers, keeping a domestic supply of food and having access to fair trade remains the same," she said.

(Kate Campbell is a reporter for Ag Alert. She may be contacted at kcampbell@cfbf.com.)

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