Farm Bill Work Begins

With work about to begin in the 2007 Farm Bill, USDA is attempting to frame the debate with a series of papers on a wide range of agricultural policy. The first, a look at government efforts to help producers manage risk, outlines three broad alternatives to current commodity support programs:

Alternative 1: Use the existing structure of farm programs but make them more WTO consistent, reduce their effects on resource use and farm structure, and better target them to producers in greatest need of assistance. Producers might receive less, but programs would be less vulnerable to WTO challenges.

Alternative 2: Replace marketing assistance loans and counter-cyclical payments with a program that pays producers based on revenue shortfalls. This approach would generate cost savings and generally be more effective at stabilizing farm income than current programs, but could affect supply, demand and prices depending on how the program is constructed and the level of the revenue guarantee.

Alternative 3: Phase out marketing assistance loans, direct and counter-cyclical payments and use savings to expand crop insurance coverage, fund farm savings accounts or expand conservation, rural development, or other programs. This would reduce Federal spending substantially, lead to a more market-oriented agricultural sector and remove the negative aspects of current programs to expand production and plant certain crops. Greater reliance would have to be placed on the development and use of private sector risk management tools to manage income risk.

“Our purpose with these analysis papers is not to suggest policy but to inform and educate the public,” said Agriculture Secretary Mike Johanns. “Creating the next farm bill should be a transparent process and I encourage everyone affected by farm policy to be actively engaged and to work with Congress on the next farm bill.”

Dairy processors were quick to applaud the USDA analysis. “USDA’s analysis acknowledges the flaws in current dairy and sugar programs, including increased costs for both the government and consumers, and serious implications for global trade,” said Chip Kunde, senior V.P. of IDFA.