Commission calls for ag safety net "The persistence of very low commodity prices has rendered existing farm program support inadequate" to address market/price problems of recent years, and farmers will need billions in federal programs to stay in business in the years ahead.
So says the report of the 21st Century Commission on Production Agriculture, recently presented to Congress and the White House.
The 11-member commission, which was created as part of the 1996 farm bill to review the directions for future farm policy, was charged with providing a comprehensive analysis of the current status of agriculture - taking into account economic risks, food security, trade, international competitiveness, farmland values, farmer income, and regulatory/tax relief - as well as a review of the future of production agriculture in the U.S.
Meetings were held at various cities to receive input from farmers, ranchers, farm organizations, agribusiness, rural residents, and others affected by farm policy.
Barry L. Flinchbaugh, professor and Extension state leader in the Department of Agricultural Economics at Kansas State University, served as chairman of the commission.
Panel members included Mississippi producer Bruce Brumfield; Arkansas producer James DuPree; Missouri producer Charles Kruse; Iowa producer William Northey; Indiana producer Don Villwock; National Farmers Union President Leland Swenson; American Farm Bureau Federation President Bob Stallman; Georgia cooperative leader Ralph Paige; Oregon grain growers association manager Donald Cook; and agribusiness executive John Campbell.
Commission members said the government should continue its $4 billion per year in guaranteed payments to farmers, but should add billions more to provide a "safety net" to farmers in times when commodity prices drop below certain levels.
It also recommended that Congress boost price supports for various crops, that it do away with the caps that now limit the amount of government payments individual farms can receive, and that there be no controls on crop production, allowing farmers the flexibility to plant the crops and acreages of their choosing.
Because the very low commodity prices of recent years have resulted in large emergency appropriations by Congress, the commission recommended a "Supplemental Income Support" (SIS) program to "address unforeseen changes in future market conditions, while continuing to provide a solid foundation of support for production agriculture."
Eight major crops would be covered: wheat, corn, sorghum, upland cotton, soybeans, rice, barley, and oats. While growers of non-program crops would not receive direct benefits from the SIS program, non-program crops could be added to the aggregate. Current planting flexibility provisions would be retained.
The program, along with the extension of the fixed AMTA payment, would provide a flexible income safety net for producers in times of depressed market conditions and/or weather-related disasters.
The Food and Agricultural Policy Research Institute estimates this policy could result in a government outlay of about $2.8 billion in 2003, declining to only $318 million by 2009, due to expected increased yields and stronger prices. Such a policy, the commission noted, would be consistent with rules of the World Trade Organization.
Producers would have an array of tools at their disposal to manage risk, including insurance programs and savings account programs.
"We recommend that the possibility of creating an actuarially sound insurance program, with coverage provided by private companies, be studied. We also recommend the implementation of Farm and Ranch Risk Management (FARRM) (savings) accounts, without a time restriction on how long money may be left in the account. These accounts would serve as both a cash reserve for low income years, as well as an alternative retirement fund for the producer. We also support a viable income averaging system for producers that is not negated by the effects of the alternative minimum tax regulation."
The commission also recommended programs to enhance producers' ability to undertake conservation and environmentally-beneficial practices in an economically viable manner through conservation reserve and conservation cost-share programs.
It also endorsed the comprehensive U.S. position on trade as tabled at the World Trade Organization negotiations in June, 2000, as well as giving the president "fast track" negotiating authority. "It is further the view of the commission that negotiations on trade reform in the WTO are not the appropriate forum for negotiation of environmental and labor issues."
The report also called for changes in milk, sugar, tobacco, and peanut programs, including subsidies to food manufacturers to purchase U.S.-grown peanuts.
"The goals for American agriculture have not changed much over time," Flinchbaugh noted in his statement to the House Agriculture Committee.
"Appropriate agricultural policy" should encompass four broad goals, he said. "It should enhance and support (1) the production of an abundant supply of high quality agricultural products at reasonable prices, (2) maintain a prosperous and productive economic climate for farmer/producers; maintain a family farm-type organization as part of the production system, and (4) allow a high quality of life for all individuals living in rural areas."
The role of the federal government, the commission members agreed, "should be limited to activities that involve issues unlikely to be solved through private sector initiatives. We concluded that the proper role of the federal government should be to pursue policies and programs that promote a number of outcomes," Flinchbaugh said. These include:
- Insuring a competitive agricultural economy through monitoring of concentration, enforcement of anti-trust laws and related regulatory authority, and insuring transparency of market behavior, including contracting.
- Developing policies and programs that enhance the competitiveness of U.S. agricultural products, reducing trade barriers, opening markets, and enhancing the ability of producers to maximize value-added opportunities.
- Basking all policy on sound science and insisting that foreign competitors do the same.
- Promoting and enhancing food safety and a clean environment and animal/plant health and safety.
- Providing support for agricultural research and education.
- Enhancing the development and use of risk management tools.
- Developing and funding programs that meet the special needs of small and limited resource farmers.
"This report will serve as a good starting point to help agriculture, Congress, and the White House frame the upcoming farm bill debate," said Bob Stallman, a commission member and president of the American Farm Bureau Federation.
"It represents broad concepts that will help agriculture to flourish in the future and provide opportunity for specific proposals that will encourage a healthy farm policy debate."
Stallman said the report "clearly recognizes that producers from all areas of the country, and virtually every segment of agriculture, are hurting. That fact is hard to ignore, and it was kept in mind throughout the commission's work."
He said Farm Bureau was "especially pleased" that the commission rejected calls to revert to "failed supply management schemes of the past," and that it "recognizes the need for counter-cyclical income support to help producers when prices tumble."
Members representing the commission's minority opinion said the Supplemental Income Support proposal would prompt other nations to object or to respond with similar measures.
"While the U.S. argues vigorously for benefits of freer trade and lower subsidies abroad, we appear to do everything we can to pump up and hide our own domestic programs," said commission member John Campbell. "We can't expect to have it both ways." He said such a program would be heavily influenced by prices for the two biggest commodities, corn and soybeans.
Leland Swenson, also representing the minority opinion, said elimination of payment limits would further exacerbate the trend to fewer, larger farms.
A complete version of the commission's report may be downloaded at http://agriculture.house.gov/hearings/testimony.htm