During the recent Southern Region Agricultural Outlook Conference in Atlanta, Oklahoma State University Extension Economist Larry Sanders became downright nostalgic and even a bit wistful when talking about government farm programs as we currently know them.
He’s not some prophet of doom, wondering the streets with a “The End Is Near” sign hanging from his neck. He knows, as do others, that this is the real deal — things will never be the same.
“Whatever happens with budget negotiations in the next few weeks and months, one thing is for certain: there will be some very significant changes in the landscape of how this social contract works between agriculture and the public, through government,” said Sanders.
While there are dozens of scenarios for how the federal budget drama will play out, everyone who thinks in realistic terms agrees we can already assume a certain set of outcomes as we move forward, and none of them bode especially well for U.S. agriculture.
On the chopping block, says Sanders, is perhaps $30 billion over 10 years, with cuts affecting direct payments, conservation programs, ethanol subsidies and crop insurance.
While the devil will be in the details, and there obviously will be the usual political haggling before there’s an agreement on specific numbers, participating farmers can expect less from federal programs in future years, says Sanders.
As a grower, maybe you’ve already resigned yourself to this reality. But the reality becomes even harsher when you consider that once these programs are gone, they’re not coming back. Unlike other budget items that might be restored when and if the economy recovers, farm programs will be gone forever. There’s no longer any political capital to be gained from being a champion for agriculture.
These budget decisions won’t only affect farmers, but they’ll also have a large impact on rural economies, says Sanders, as federal contributions to state programs and earmarked rural programs likely will see drastic cuts over the next several years.
A continuing sluggish national economy will dampen rural state and local economies, he says, and decisions will have to be made — at the local level — to cut public services or raise taxes. If Congress and the Obama Administration can find compromise and somehow stabilize the federal economy, it will ultimately help state and local economies weather the tough times, but that’s a big whopping “if.”
While farm prices are up for now, it’s important, says Sanders, to remember the factors that determine the level of general economic health — consumer spending, which is currently down; business investment, which is currently sluggish; and government spending, which is currently down — especially at the state and local levels.
“U.S. and global markets suggest that consumers and business are jittery and pulling back, but cheap money will help to slow the losses. Signals suggest that the demand for food and fiber will be down, at least globally, and prices will decline in the next 12 to 24 months,” says the economist.
The current debate focusing on the severity of the federal deficit certainly is not inconsequential, says Sanders, but it generally overlooks the impact of growing the economy domestically and globally. The 1990s deal President Clinton struck with a Republican Congress was successful in ending the deficit and beginning to pay down the debt, but such a bargain appears remote with the current cast of characters.
The importance of compromise in the success and stability of a democracy cannot be overstated, he says. “But voters may decide there are other values more important than democracy — if that’s the case, the decision needs to be made consciously and deliberately,” he says.
The take-home message from all of this to farmers, says Sanders, is that from here on out, risk management will be essential to profits and survival.