Transcript Slide 1
Dr. Jody Campiche
Assistant Professor & Extension Economist
Agricultural Policy
Oklahoma State University
November 4, 2011
Larry D. Sanders
Jim Novak
“Ag policy has a very, very, long history.
Current ag policy is driven by budget
and politics. Reality and economic
facts matter, but only in as far as it
affects those who have political
influence and can gain from reality
and/or economics.”
J.L. Novak, Auburn University
Background
Realities
Budget Developments
Budget Control Act of 2011
Farm Bill Negotiations
Conclusions
Background
Frank Lucas (R-OK)
Chairman
Collin Peterson (D-MN)
Ranking Member
Does not include:
school lunch and other child nutrition (Senate
Agriculture Committee has jurisdiction)
taxes (including ethanol-related tax credits)
trade law
climate change (or other environmental programs)
Realities
New Membership
House Committee On Agriculture
112th Congress
Northern Mariana Islands
Source: Congressional Research Service
Agriculture Program Audit Hearings: June – Sept 2011
Crop Insurance
Specialty Crops
Conservation
Foreign Ag and Food Aid
Farm Loans
Energy and Forestry
Nutrition
Commodity Programs and SURE
USDA Research Programs
USDA Dairy Programs
USDA Rural Development Programs
Budget
Gross Federal Debt
1940-2016E
25,000,000
In Millions of Dollars
20,000,000
15,000,000
10,000,000
Source: OMB
2015E
2011E
2007
2003
1999
1995
1991
1987
1983
1979
1976
1972
1968
1964
1960
1956
1952
1948
1944
0
1940
5,000,000
Agriculture & Nutrition Outlays 1962-2010
Agriculture’s
Share
(Non-Nutrition)
Budget Developments
Deficit Reduction Proposals
Budget…
Debt Commission
House Budget
Biden Group
Gang of Six
McConnell Proposal
Simpson-Bowles President’s Deficit Commission (12/1/10)
• Reduces deficits by $3.9 trillion over 9 years
• $15 billion in cuts to mandatory ag programs with $10 billion to
deficit reduction and $5 billion directed to extend the ag
disaster relief fund
President Obama’s framework deficit reduction (4/13/11)
• Framework for $4 trillion in deficit reduction over 12 years
• Mentions cuts in mandatory program ag subsidies, but not
specific programs or amounts
President’s 2012 Budget (CBO score released on 4/15/11)
• Increases deficits by $2.8 trillion over 10 years
• Cuts $2.5 billion in payments to “wealthy farmers”
House (Ryan Budget) passed budget (4/15/11)
• Reduces deficits by $1.6 trillion over 10 years
• $48 billion in cuts to mandatory ag programs, with
$12 billion from commodity programs, $18 billion
from crop insurance, and $18 billion from
conservation programs
RSC Budget Proposal (4/20/11)
• Reduces mandatory spending by $1.9 trillion over 10
years
• Eliminates direct payments, reduces premium
subsidy for crop insurance, no new enrollment in
CSP and CRP, eliminate MAP, and Wool and Mohair
program
House Democrat budget (5/25/11)
• Reduces the deficit by $1.2 trillion more than the President’s budget
• $20 billion in cuts to mandatory ag programs
Biden Group (6/2011)
• Farm subsidies mentioned frequently as target for cuts ranging from
$34 to $45 billion
• Direct Payments and Crop Insurance will absorb most of the cuts
“Gang of Six” (7/2011)
• Reduce deficits up to $4 trillion over 10 years
• $11 billion in cuts to mandatory agriculture programs
• No additional dollars directed to extend SURE
• Ag committees to determine $11 billion in cuts
• Protects SNAP
Senator Conrad’s budget (7/20/11)
• Reduces deficits by $4 trillion over 10 years.
• $11 billion in cuts to mandatory agriculture
programs. Agriculture committees to determine
$11 billion in cuts during Farm Bill.
Reid Plan (7/2011)
• Reduces deficits by $2.7 trillion over 10 years.
• $11 billion in cuts to mandatory agriculture
programs by reducing the payment rate from
85% of base acres to 59% of base acres.
Budget Control Act of 2011
Passed House on August 1, 2011 and became Public
Law 112-25 on August 2, 2011
Authorized increases in the debt limit of at least $2.1
trillion dollars
Established caps on the amount of money that could
be spent through the annual appropriations process
for the next 10 years
CBO estimates will reduce federal spending by $917
billion
Created a Joint Select Committee on Deficit
Reduction (i.e. the ‘Super Committee’)
Develop a bill to reduce the federal deficit by at least
another $1.5 trillion over the 10 year period ending in
FY2021
If the super committee proposal is not enacted by
January 15, 2012, the BCA established an automatic
spending reduction process that includes sequestration
Across-the-board spending cuts are applied to government
programs in order to meet a budgetary goal
About 200 programs are exempt from sequestration
House and Senate must vote on a balanced budget
amendment
Republicans
House
Camp (Michigan)
Hensarling (Texas)
Upton (Michigan)
Senate
Toomey (Pennsylvania)
Kyl (Arizona)
Portman (Ohio)
Democrats
House
Clyburn (South Carolina)
Becerra (California)
Van Hollen (Maryland)
Senate
Murray (Washington)
Kerry (Massachusetts)
Baucus (Montana)
1 Nov
Self-imposed, late deadline for farm bill cut details from
SAC & HAC
21 Nov
Deadline for CBO to provide SC with scoring for all
proposals
23 Nov
Deadline for SC to provide Congress with package for
cuts
23 Dec
Deadline for Congress to vote on SC package
2 Jan
Deadline for congress to vote on SC package
Farm Bill Negotiations
Farm Bill Process
Traditional process:
DC hearings, field hearings, move legislation
in 2012
Not currently happening
Current Reality:
Expedited process under the context of the
Budget Control Act of 2011
Changed the traditional approach to the farm bill
No time for problem framing, debate, or public input
Obama
proposes $33 billion in cuts to farm programs
Sen. Conrad (D-NE)
Reform DCP, ACRE & disaster aid
National Corn Growers
ADAP to replace ACRE, CCP, and Direct Payments
Brown-Thune-Lugar-Durbin
ARRM to replace ACRE, DCP, and SURE
National Cotton Growers
STAX
NFU
Farmer Owned Reserve
Peterson-Simpson
Bipartisan Dairy bill
Lugar
Farming Flexibility Act
National Sustainable Ag Coalition
preserve conservation and hunger programs, proportional cuts in
farm programs, ending direct payments
Organic producers
increase mandatory spending for organics, including research &
data collection
Rural development proponents
preserve/strengthen rural programs
American Farmland Trust
Strategic conservation initiatives, consolidate conservation
programs, subsidies only for a loss
Farm Bill Process – Main Ideas
Direct Payments repeatedly offered up for reductions
•
Most WTO compliant and have a differential impact by crop,
region, and generation
•
Integrated with other program components
•
simply eliminating Direct Payments has significant
drawbacks, but they are likely gone…
Farm Bill Process – Main Ideas
With extreme drought and flooding, crop
insurance is as important as ever
ACRE is too complicated
The Supplemental Revenue Assistance Payments
(SURE) Program, along with 36 other programs,
does not have baseline going forward
SURE likely gone
Shallow Loss Revenue Program
Recognize diversity in operations across the state
Different buy up levels of crop insurance
Different risk profiles for different crops
Issues with the loss threshold
Corn and soybeans have more shallow losses
This can trigger payments often on many acres
Eats up the baseline
Can’t design one program to benefit everyone
AGI limits are a major issue
Cotton payment program is also a major issue
Hesitant to have a separate program for cotton, but it is being
considered…
STAX is still on the table
May not solve WTO issues
Payments from this program are mostly from RMA
Get around payment limits and AGI threshold
Programs for other crops are subject to this
Crop Insurance seems to be safe for now
Other disaster programs (LFP, LIP, etc…) will probably be
continued to the drought issue
Conservation will see reductions
Fighting to protect EQIP
Reductions in CSP
Reductions in CRP (lower acreage cap)
Nutrition will be cut but will not really take as much of a hit
as commodity programs…
Main Goal of Chairman Lucas
for the 2012 Farm Bill
Wants producers to have a choice to best address
their risk needs
Currently working on a package but many
details need to be worked out…
Options
1) Revenue Guarantee Program (modification of ACRE)
2) Counter-Cyclical Program coupled with a shallow loss
program
Increase current target prices near the cost of production
Option to purchase additional area based deductible
coverage (similar to GRIP)
3) Possibly a cotton program
Producers would be able to enroll by crop (instead of by farm)
Started with 2009 crop year
Based on state and farm revenue shortfall using
national average marketing year price
•
If both are not triggered the producer will not get paid
Producers enrolling in ACRE receive:
•
•
•
No CCP payments
Direct payments reduced by 20%
Marketing loans reduced by 30%
Payment made on planted acres (up the # of
base acres)
Producer may not get a payment even if state
eligible
State ACRE payment guarantee can’t
increase/decrease by more than 10% from
previous year
Conclusions
Conclusions
2012 Farm bill is coming together
Risk management is a key priority
Still have many details to work out…
Jody Campiche
Assistant Professor & Extension Economist
Ag Policy
528 Ag Hall
Stillwater, OK
[email protected]
405-744-9811
Expecting a significant reduction in direct payments
and possibly CCP payments
New revenue based insurance program to replace
payment-based farm bill provisions
Area-wide revenue product delivered through crop
insurance
Protect against shallow losses
Ride on top of existing crop insurance
Modified marketing loan to satisfy Brazil WTO case