It’s a good time for declining farm costs

LEXINGTON, Ky. – Taxpayer costs for farm programs are declining and that’s good news, according to University of Kentucky Agricultural Economist Craig Infanger.

USDA wins. President Bush sent a proposed federal budget to Congress in January calling for about $2.3 trillion in the next fiscal year. Of that, the USDA will receive $82 billion, up 5 percent from the current budget, and up 19 percent in the past three years.

Infanger said the good news is that while the USDA budget is up, farm program spending is down.

“USDA farm programs provide a broad safety net for U.S.,” he said. “In 2000, the USDA set an all-time record for spending on farm programs – $32 billion. With the United States coming out of recession and the farm economy improving, USDA spending on farm programs will be down to $14 billion in the current year and then an estimated $15 billion in President Bush’s new budget for fiscal year 2005.”

Factors. Several factors contribute to the lowering of farm program costs. Commodity prices have improved for many of the major crops and livestock.

Wheat, corn, soybeans and cattle have average prices well above their five-year market averages.

Also, export markets remain strong. Infanger said that with a better competitive situation and a weak U.S. dollar, agricultural exports in 2004 will total $59 billion, near the 1996 record.

Reducing costs. These positive market conditions are reducing USDA farm program costs, and if farmers have favorable weather this crop year, disaster assistance costs will again be low.

“This is a good time for farm program costs to be declining,” Infanger said. “The overall federal revenue for this fiscal year is projected to be $1.8 trillion, resulting in a $500 billion deficit.

“In the President’s new budget proposal, the budget deficit declines, but is still close to $400 billion. In other words, about 20 percent of federal spending is going to be on borrowed money.”

Few options. Infanger added that while the improving U.S. economy allows the government a good opportunity to repay this mounting debt, large federal deficits limit the options available to Congress and the President to respond to new needs or emergencies.

“As long as the situation continues on its current positive trend for agriculture, the federal deficits will not affect the overall safety net nor the ability of the USDA to meet other mandated needs like food stamps and school lunches, food safety and inspection, and the new concerns about animal health,” he said.

“But poor weather or a change in global markets could quickly change the budget picture at the USDA.”