State ag secretaries look ahead to 2002 farm bill

COLUMBUS — Getting the federal government to tie highway funding to ethanol use may have been in the hopper for action, but it was the upcoming farm bill that was on everyone’s mind.

      The National Association of Secretaries of Departments of Agriculture met in Columbus Sept. 22-26. Ohio Department of Agriculture Director Fred Dailey is the outgoing president of the organization of state officials.

      Ohio Gov. Bob Taft appealed for ethanol support in his comments to the group, asking that NASDA support a resolution that would tie federal highway funds to ethanol usage.

      During the organization’s business meeting, NASDA members approved an amendment in support of redirecting 3.1 cents of the ethanol tax to the Highway Trust Fund.

      Farm bill topic.

      The 2002 farm bill reauthorization, which many are hoping will be moved back to 2001, was the primary topic for discussion.

      And during the meeting’s plenary session, at least five perspectives on farm policy were presented for the group to consider.

      There were some hints from officialdom presented by Undersecretary of Agriculture Gus Schumacher.

      There was a preview of the recommendations from the Commission on 21st Century Production Agriculture, which is studying the economic impacts of the 1996 farm bill. Director Mechel Paggi said the commission expects to publish its findings after Jan. 1.

      Policy panel. And there was a farm policy panel that included three different outlooks on what kind of government program agriculture needs now.

      The single most important concept dominating the discussions was “safety net.” Farmers cut loose from federal control under the 1996 Freedom to Farm program should not be pushed out of the protective cover of federal farm programs and into the uncertainties of the free market economy without some guarantee of income security.

      USDA proposals.

      USDA Undersecretary Schumacher told the state secretaries that some kind of safety net program, to realign the “market weaknesses that provides disproportionate benefit to the largest and most productive farmers,” would be one of the four pillars of farm policy reform.

      ”It’s like an oak chair with four legs to stand on, and a good strong back for support.”

      The four legs that USDA has determined will be necessary for any reformed farm bill include the safety net of income protection; the reform of the crop insurance program; a conservation package that expands those conservation programs that really help; and an end to the U.S. use of trade embargo for foreign policy reasons.

      The strong back of the chair of farm policy, Schumacher said, would be the use by American farmers of good management practices, and the encouragement of such programs as ethanol development and value added incentives.

      Commission findings.

      Paggi told the state secretaries that in its study, the Commission on 21st Century Production Agriculture has identified the issues likely to be important in any farm policy debate: conservation, risk management, trade increases, and a farm income safety net.

      The farm sector safety net has been the most discussed of these issues, he said, and everyone seems to agree there needs to be some kind of income support.

      Some, he added, have talked about recoupling that support to set-asides in a program that is now being called “flexible fallow.”

      Risk management. In the area of risk management, Paggi said, there isn’t a great deal of support for proposals that change farm insurance programs.

      What is being discussed, he said, is the need for more education on what tools are available and how they can be used, and the need for a kind of “Farm IRA” or funded account that would allow farmers to set aside parts of their income in good years to cover the bad years.

      The conservation agenda, he said, will likely include an expansion of programs that “pay farmers for what they have already been doing for years.”

      Paggi said that in those areas of agriculture where government regulation and supports still exist — dairy, peanuts, sugar — there is little chance that anything will change.

      The Farm Policy Reform panel that spoke to the 2002 Farm Bill included Mary Kay Thatcher, senior governmental relations director for the American Farm Bureau Federation; ag columnist Alan Guebert, and retired Ohio State ag economist Luther Tweeten.

      Farm Bureau opinion.

      Thatcher said the opinion expressed by Farm Bureau members is that the new farm bill needs to be significantly different than what they now have. However, she said, the only consensus about what should happen is that there is no consensus.

      There is Farm Bureau support for continued AMTA payments, and support for some kind of “counter-cyclical” proposal, but Farm Bureau members oppose any attempt to return to land reserves, and support the flexibility of the last farm bill.

      WTO concerns.

      What Thatcher is particularly concerned about, however, is an issue she said nobody talks about — how any new farm program will fit support limits imposed under U.S. agreements with the World Trade Organization.

      Guebert, in his analysis of farm policy in general, rejected much of what had previously been stated. He indicated that much of the discussion has been directed by the American Farm Bureau and that “we have put ourselves into the box.”

      The story of what has happened to American agriculture, he said, can be told by the price of wheat.

      In 1958, the price of a bushel of wheat was $1.80. The price of a barrel of oil was $1.77.

      ”Today,” he said, “it would take 11 bushels of wheat to buy one barrel of oil.”

      Coming disaster.

      The current farm bill and the proposals to reform it, Guebert said, “is a recipe for disaster.”

      The emphasis on strengthening farm exports, he said, isn’t working. It is a race to the bottom that the United States is winning.

      ”We have lost the battle in Europe with biotech, and we may be losing it here.”

      ”There will always be overproduction, and we will always be giving food away. If you give away $7 or $8 billion in food each year to developing countries, why would they ever buy it.

      ”If we have so much production we have to give away, it is time to ask why we produce it. We have to do something in relation to not growing so much.”

      Farm income.

      Tweeten, on the other hand, used farm income statistics to point out that farmers have already adjusted to the current situation in agriculture.

      Farm income statistics, he said, indicate that family income from farming is 15 percent higher than family income from nonfarming activities.

      For those farm units selling more than $250,000 in production, the average rate of return was 6 percent. And this level of sales accounted for half of farm output.

      ”This is not an economic disaster,” Tweeten said. “You have to ask, who should be helped, what criterion would one use. The wealth of these farmers is twice that of the nonfarm household.”

      Smaller farms, he said, are losing money, but they are owned and operated by people who define themselves as something other than a farmer. Between 40 percent and 50 percent of these operators say they are not farmers.

      ”These are the hobby farms,” he said. “They are also tax write-offs.”

      Farms in the middle.

      That, he said, rules out everybody but farm families in the middle. On farms with assets under $150,000 and sales under $100,000, average income is $10,000.

      But these farmers, he said, account for 1 percent of farm output and a tiny portion of federal farm payments.

      As long as the farm program offers payments that are higher than the cost of what the good farmer can produce it for, farmers can totally ignore the market and will produce for the government.

      As long as farm income is subsidized, Tweeten said, the market cannot work. There will be overproduction, and farm prices will remain low.

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