The man the Bush Administration wants to play a key role in development of the new farm bill says farm size may be a more effective determinant of who gets government payments than the present "one-size-fits-all" approach.
Arkansas native J.B. Penn, nominee for USDA agriculture undersecretary, said at his confirmation hearing before the Senate Agriculture Committee that the department will likely not provide the Bush Administration with a "full-blown" proposal for a farm bill, but instead will probably develop a book of principles that the administration can send to Congress to serve as a guide for replacing the so-called Freedom to Farm Act that expires in 2002.
Penn, who served as a staff economist for President Carter's Council of Economic Advisors, was senior vice president at Sparks Companies, a worldwide commodities operation based in Memphis, before being tapped by the president for the number three post at the USDA. The committee is expected to vote on his confirmation in the next several weeks.
In a 48-page "discussion paper" on agriculture policy, Penn suggests that government payments to the nation's farmers might be based on whether a farm is large, medium, or small.
o There are about 157,000 farms that fall into the largest category, he said, with sales topping $250,000, and producing 72 percent of the nation's agricultural goods. These could best be helped by government through some kind of federal safety net, as well as by improved risk management programs and greater trade opportunities.
o Medium-sized farms total about 190,000 and produce about 15 percent of the output. A large part of the income for these operations comes from off-farm jobs, and many are struggling, he said. Government assistance to these farms could be through programs to help them to increase their size and reach a higher economic level.
o Small farms number about 1.6 million, have limited farm sales, and rely almost exclusively on off-farm income. These, Penn noted, could be helped through economic development and/or conservation programs.
That approach is in keeping with Secretary of Agriculture Ann Veneman's questioning of the one-size-fits-all farm policy that has been used for decades.
In a recent Washington address, she noted that only about 18 percent of U.S. farms report gross sales greater than $100,000 per year. Those 344,000 farms produce more than 87 percent of the nation's total agricultural output.
"The needs of these farms may be very different than those of the 82 percent of farms that earn less than $100,000 and produce less than 13 percent of total production," she said.
At the Senate hearing on Penn's nomination, Agriculture Committee Chairman Richard Lugar, R-Ind., himself not a fan of the one-size-fits-all approach, characterized Penn's policy discussion paper as "remarkable."
The committee has indicated it will hold hearings over the next few months to obtain input for farm policy development. The chairman of the House Agriculture Committee, Larry Combest, R-Texas, has already indicated that he would like to have a House version of a preliminary farm bill wrapped up by the summer recess that begins Aug. 3, but that may be wishful thinking, given the numerous disagreements to be resolved. Beyond that, Senate/House drafting and conference sessions could well run into 2002.
"We will need to pick up the pace of things," Lugar told Penn during the hearing. "We need some idea of where the administration is headed so we aren't surprised, and so you aren't surprised by what Congress does."
Discussions related to a new farm bill come on the heels of three years of major infusions of government money into the farm sector to help producers cope with drought, floods, hurricanes, and other disasters, as well as dismal prices for most crops.
That $25 billion was money above and beyond payments provided for under provisions of the 1996 farm bill. And Congress has just approved new farm appropriations that include another $5.5 billion to go to farmers by Sept. 30 this year to offset a fourth year of in-the-cellar crop prices.
Penn told the Senate hearing that making payments to all farmers "may be causing us misery" by increasing costs to government and reducing U.S. agriculture's competitiveness in world markets."
While most farmers and farm groups have indicated to Washington that they like the planting flexibility provided in the 1996 farm bill, there is also widespread agreement that new legislation should include provisions for a "safety net" to provide aid during periods of adverse market prices.
Hard on the heels of the Senate hearing was the USDA's latest crop report, forecasting bumper crops of major commodities this fall, given normal weather and yields. The report predicts a record soybean crop and the fourth largest-ever crops of both cotton and corn. The only semi-bright spot from a price outlook standpoint was the winter wheat crop now beginning to be harvested. It is expected to be the smallest in 23 years and could result in a "modest" price increase.
This scenario of burgeoning supplies, department economists said, would torpedo prospects for any significant recovery in the farm sector this year. Soybean prices are projected to range between $3.90 and $4.50 a bushel — the fifth consecutive annual price decline and the lowest average price in 30 years. Corn prices are predicted to range from $1.65 to $2.05 and rice from $5.25 to $5.75 per hundredweight.
Cotton futures prices fell to a 14-year low following release of the USDA forecast.
News at the world level isn't much better: The USDA's May World Agricultural Supply and Demand Estimates show increasing stocks expected for most major crops except wheat.