What is in this article?:
• Over the longer-term, Congress will need to write a new farm bill in 2012, and some programs that are authorized by the bill will face serious funding challenges.
• The problem is that future spending will be based on past spending baselines.
Nutrition programs getting bigger
Of the $924 billion in spending authorized by the House Agriculture Committee under current baselines, $695 billion, or 75 percent, is for nutrition programs, and that slice is getting bigger. The remainder pays for crop insurance ($83 billion, 9 percent), conservation programs ($65 billion, 7 percent), farm payments ($64 billion, 7 percent) and other programs ($17 billion, 2 percent).
3.) Of the $64 billion in commodity program spending, most (77 percent) goes to direct farm payments. That makes them important to farmers, but it also makes them a big target for lawmakers looking for budget reductions.
4.) Crop insurance has grown into the largest non-nutrition program in the farm bill, representing 36 percent of non-nutrition funding, compared to 28 percent for farm payments and marketing loans, 28 percent for conservation payments and 8 percent for other programs.
The majority (69 percent) of crop insurance funding goes for farmer premium subsidies. If direct payments are eliminated or reduced in the next farm bill, crop insurance will become even more important to some farmers, but there are regional "winners and losers" if this happens because crop insurance works better for some crops than others.
5.) Federal spending for counter-cyclical farm payments and marketing loans (provide support if prices fall below loan rates) has decreased under the current farm bill because commodity prices have been high. This has saved taxpayers money, but farmers won't get many thanks for it.
Instead, these programs, which are major supporting pillars of the farm safety net, will lose baseline and, along with direct payments, could come under attack from those who want that funding for other programs and say that farm supports are not needed in a good farm economy.
It's important to remember, however, that just two years after Congress cut back on farm safety net programs in the 1996 farm bill, an Asian economic crisis devastated U.S. farm exports, market prices collapsed and Congress had to pass emergency "economic disaster" bills to avoid a catastrophe in farm country.
Long-term forecasts for demand of agricultural commodities are good, but as any market watcher knows, forecasts are based on the way the world looks today and can be wrong. "The share of the farm bill that goes to farmers and ranchers is getting smaller," said Thatcher, "but history has shown that we need to ensure that a meaningful safety net continues."