Proposed farm bill asks for stronger farm safety net, decreased subsidies

SALEM, Ohio – Farmer feedback is the foundation for what USDA has proposed for the 2007 farm bill.
Agriculture Secretary Mike Johanns revealed the policy Jan. 31.
Among the plan’s ideas are creation of programs to support specialty crops and beginning farmers, and tying commodity subsidies to production instead of price.
Johanns calls the proposals “reform-minded” and “fiscally responsible” steps toward making federal farm policy “more equitable, predictable and protected from challenge.”
Changing times. Johanns said the proposals build upon the structure of the 2002 farm bill.
The newest proposal updates the system’s supports to better address current farm struggles. One of the most sweeping changes may come for farmers who receive federal crop subsidies.
Johanns’ proposal would completely cut off subsidy payments for farmers with adjusted gross incomes above $200,000. And farmers would be capped at $360,000 in total subsidy payments, regardless of commodity.
That proposal would save about $1.5 billion over the 10-year life of the farm bill, according to Johanns.
Educated. Johanns said he got a real education as he traveled to 48 states for farm bill listening sessions over the past two years: He thought the 2002 farm bill addressed a farming safety net, but producers said otherwise.
“When [farmers] told us the safety net wasn’t doing the job, we listened very seriously,” Johanns said.
He brought those comments back to Washington and studied records, and found farmers were right. It seemed in some of the best production years, farmers were receiving the highest commodity payments. And when crops failed, farmers were falling straight through the safety net.
USDA’s new thought is a countercyclical payment program based on revenue generated on the farm, not production.
“It’s based on a revenue trigger, not a price trigger. The price trigger is going to deal people out of the safety net when they need it the most,” he said.
Lower rates. Along the same lines, the proposal asks to lower marketing loan rates to reflect the actual market.
USDA also wants to increase direct payments for commodities without paying attention to price or production. The plan calls for a 7 percent increase in payment in the third through fifth year of the farm bill.
Farmers who acquire property through a 1031 tax exchange – a shelter used to avoid taxation – or farmers who convert grassland to cropland would also be ineligible to collect commodity program payments on that property.
Getting started. Also of special interest in the USDA’s proposal is added help for beginning farmers and socially disadvantaged farmers. The disadvantaged label is used to describe female and minority farmers, according to Johanns.
USDA proposes setting aside a full 10 percent of all farm bill conservation funds specifically for use by beginning and disadvantaged farmers.
Johanns also proposed increasing direct ownership and operating loans to a combined total of $500,000.
“Young farmers were asking us to figure out ways to be creative in assisting them in getting started in farming,” Johanns said, noting 70 percent of operating loans and 100 percent of ownership loans will be targeted at beginning farmers.
Other methods to ease the burden on beginning farmers are cutting the loan interest rate in half; deferring payments for a year; and eliminating the $250,000 cap on the value of property that may be purchased with those loans.
Johanns also mentioned a 20 percent increase in direct payments for beginning farmers. The increase would be payable for five years.
Environment. The USDA proposal ups conservation by $7.8 billion over 10 years.
Johanns said he wants to consolidate several cost-share programs into a single new Environmental Quality Incentives Program (EQIP).
His proposal also includes a conservation enhanced payment that would replace commodity supports on land set aside for conservation efforts. Farmers would skip LDPs and countercyclical payments in exchange for 10 percent more in direct payments.
Energy. On the energy front, USDA called for $1.6 billion in new funds for renewable energy research, development and production.
Of special interest is cellulosic ethanol. USDA threw in an extra $2.1 billion in loans for projects that research or produce the ethanol from switchgrass or feedstocks other than corn.
A new $150 million Wood to Energy program, which would strengthen technologies that would turn woody biomass into energy, was also discussed.
Moving ahead. Johanns said if no farm bill is passed this year, USDA will revert to the 1949 farm bill, “which nobody wants to do.”
“We want to get a farm bill to the finish line this year.”
The administration’s 2007 farm bill proposals would spend approximately $10 billion less than the 2002 farm bill spent over the past five years, excluding ad-hoc disaster assistance, upholding the president’s plan to eliminate the deficit in five years.
These proposals would provide approximately $5 billion more than the projected spending if the 2002 farm bill were extended.
(Reporter Andrea Myers welcomes reader feedback by phone at 800-837-3419 or by e-mail at amyers@farmanddairy.com.)