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by OFBF Staff

Editor’s note: Work has already begun on the 2007 Farm Bill. Please see the story on page 1, which looks into key policy questions and explains how OFBF members can contribute their ideas. Following are excerpts from Farm Bureau’s initial discussion guide that delves into many of the issues that will shape the debate.

Supports and Incentives

Direct government payments for the 1995 through 2004 period represented 6 percent of gross cash income for U.S. agriculture, but also accounted for 23 percent of net cash income. Roughly 70 cents of the government payment dollar finds its way into net cash income for farmers. In periods of low prices, these programs can have an even greater effect. For 2005, direct government payments will account for 9 percent of gross cash income and fully 31 percent of net cash income.

While farm program payments are a major component of the Farm Bill, conservation and other provisions are also very important. The 2002 Farm Bill shifted focus to conservation on working lands including a significant increase in funding for the Environmental Quality Improvement Program as well as establishing the Conservation Security Program. In rural development, the 2002 bill included provisions related to rural and strategic investment, additional support for broadband availability and numerous other programs to help stimulate economic growth in rural America.

To date, relatively few proposals for reform of the farm program in 2007 have surfaced. Many of those opposed to farm programs have called for elimination or severe reduction in support levels. Others have called for shifting the funding associated with commodity program operation toward conservation programs. Perhaps one of the most radical suggestions to date is to shift commodity program funding from the federal level into a set of state block grants for agricultural and rural investment.

The International Equation

In the current World Trade Organization Doha round of multi-lateral trade talks; the working outline contains cuts in the maximum amount the United States and other developed countries can spend on farm programs. If the final agreement follows the current working outline, it’s possible that current U.S. farm programs may be out of compliance during years of large government expenditures.

Implications of the Federal Budget

Writing farm legislation during a period of budgetary constraints poses a number of challenges. History suggests that federal budget deficits of the size forecast by the Congressional Budget Office will trigger cuts in farm program.

The budget deficit for the 2004 fiscal year was $422 billion. The Congressional Budget Office currently estimates a deficit of $298 billion for FY 2010 and $65 billion for FY 2014. These projections do not include the cost of the Iraq war. They also assume that, many of the tax cuts enacted in President Bush’s first term will be allowed to expire despite the president’ s vow to make these tax cuts permanent. In short, the potential budget deficit most likely exceeds the current projections.

Farm Bureau Policy:

The majority of the American Farm Bureau policy book relates to one provision or another of a farm bill. An excerpt from the National Farm Policy section lays out some general guidelines that merit particular discussion:

We support a consistent, long-term market-oriented farm policy that will:

• Rely less on government and increasingly more on the market.

• Allow farmers to take maximum advantage of market opportunities at home and abroad without government interference.

• Encourage production decisions based on market demand.

• Develop risk management tools to deal with the inherent fluctuations in revenue and income associated with farming.