Saturday, February 03, 2007

Farm Bill Forum Roundup

Today I had the opportunity to attend a forum about the 2007 Farm Bill hosted by the Champaign County Farm Bureau and the St. Joseph Illinois Prince of Peace Lutheran Church. Dr. Bob Thompson a noted Ag Economist from the University of Illinois and Ron Warfield, former President of the Illinois Farm Bureau were the featured speakers.

Ron started off giving an excellent analysis of how the farm bill has evolved comparing the 1996, 2002 and the potential of 2007 versions. It was very interesting to hear how the farm bill has evolved from a government driven decision process about how many acres are planted to a market driven planting decision process. In each case farm supports were a major part of the equation, but in very different ways. The older farm bills essentially had the federal government in the business of owning grain. The more recent farm bills used loan deficiency payments (LDP's) and counter cyclical payments.

Also pointed out by Ron was the recent effect that energy (i.e. ethanol) has had on the recent cash grain prices with corn reaching $4 per bushel. This is probably the biggest thing to hit the farm community since 1973 when the Soviet Union came into the world grain market purchasing grain. The thought at present is that energy will continue to have a positive effect on cash grain prices.

Dr. Bob Thompson went on to explain more about this past weeks proposal rolled out from Secretary Johanns on behalf of the Bush administration. Bob explained this is the first farm bill proposal rolled by an administration since 1985 that wasn't dead on arrival. The administration took time to understand the reality of the change in the political climate in Washington and put together a farm bill that has some ideas that will gain support in the Senate and House Ag committee's.

As Dr. Thompson pointed out the Senate and House Ag committees are really different in philosophy. The House in general is more dominated by urban legislators with probably only about 35 house members having significant amount of voters who are farmers, while the Senate has several members who have large blocks of agriculture voters. Generally farm policy has been fashioned in a bi-partisan basis over the last few decades and this trend will likely continue into the 2007 farm bill.

Some important considerations of the farm bill to understand are key components beyond just farm payments. These include the nutrition component (i.e. food stamps), rural development (infrastructure loans, small business, etc), conservation incentives and now energy.

Many interest groups are weighing in on the farm bill, especially in the areas of conservation and energy. It has long been expected that conservation would have more emphasis in this bill and with the change in party control, this will likely become a reality. The Bush administration has realized this and has included some novel conservation approaches in the bill. Senator Tom Harkin who is the present Senate Ag committee Chair was the author of the 2002 conservation program and will likely be one of Senator Harkin's primary emphasis this year.

Energy is an emphasis as well with over a $1 billion proposed for research in the areas of biofuels and other forms of renewable energy.

Another change in this farm bill is the support for fruit and vegtable growers. In the past these groups have not had the clout in the bill that they might have liked. There is a considerable amount of price support included in this bill, which includes the government purchasing the crops and including these in the nutrition programs.

Other items are not much change for the sugar market and dairy compacts. A proposal to make land obtained through a 1031 exchanges ineligible for price support programs.

How are farm payments looking? With the current market prices many have wondered why you would have any price supports at all. Most farm groups are backing a safety net program that would be different than the LDP/Counter cyclical payments now in place. Projections are strong over the next few years for commodity prices to remain strong with the amount of ethanol plants coming on line. I believe the proposal was to have approximately $12 billion included the bill with the emphasis on disaster payments for those areas that are hard hit.

There is also an interesting option for a farmer to choose a "conservation" payment or to take the other alternative. This is seen as a way to encourage the conservation programs on farms. Many have seen farms as both a producer of carbon (i.e. livestock) and also as a source of the ability to "store" or use up carbon (i.e. crops).

Other discussions were about the need for immigration reform, how the WTO talks have effected farm policy (i.e. the cotton case), how the increase in ethanol plants will change the livestock feeding market, etc.

It was an outstanding session that was well attended. The key point being those concerned about farm policy should express their views to the decision makers.

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