Transcript Document

U.S. Farm Programs and
Agricultural Sustainability
San Francisco, California,
February 18, 2007
Daniel A. Sumner
University of California Agricultural Issues Center and
Department of Agricultural and Resource Economics
University of California, Davis
Agricultural Issues Center
• A small research unit that considers a range
of agricultural policy and economic issues
– One major focus this year on the 2007 Farm Bill
– Collaborations with research centers from across
the United States and in China, Australia, Korea,
Germany, Belgium, France, Italy and Spain, etc.
– Based in Davis, but drawing on University of
California people all over the state
www.aic.ucdavis.edu
[email protected]
530-752-2320 (Laurie Treacher)
AAAS and Sustainability
• AAAS President Holdren identified four key S&T
challenges for achieving sustainable well-being:
“Meeting the basic needs of the poor;
“Managing the competition for land, soil, water, and
the net primary productivity of the planet;
“Mastering the energy-economy-environment
dilemma; and
“Moving toward a nuclear-weapon-free world.”
• Agriculture and agricultural policy can clearly
address the first three of these four.
Farm Policy Links with Agricultural and
Global Sustainability in Many Ways
• Sustainability could be a theme for U.S. farm policy,
just a “security” and “conservation” have been
themes and titles of past Farm Bills and Farm Bill
provisions.
– Subsidized farmers want assurances of a secure and
sustainable economic future
– Sustainable rural communities
– Secure and sustainable supplies of safe and healthy food,
fiber and (now) bioenergy
– Contributions to sustainable global agriculture and
sustainable farm economies, especially in developing
countries
– A sustainable rural environment with resource
conservation and contributions improving global
environmental sustainability
Farm commodity subsidy basics
• Commodity subsidies continue (after >70 years) to
stimulate production of grains, oilseeds and cotton
and depress market prices (especially when prices
would be low anyway).
– By stimulating production such subsidies increase input
usage and encourage expansion of program crop acreage
• Such subsidies benefit producers, landlords and
commodity buyers to the cost of taxpayers.
– Net budget costs range (inversely with market prices)
from about $10 billion to $20 billion annually)
• Producers in other countries face lower market
prices and have brought and won cases in the WTO
for suppressing their markets.
– Brazil won against cotton subsidies and Canada and
others have not brought a case against US corn subsidies
Periodic US farm bills are large and complex
• Hundreds of pages: $$ for food stamps, rural
telephones, R&D, foreign food aid, and since the
2002 Act… bioenergy
• Main focus is big $ for subsidy for production of
grains, oilseeds, and cotton. Regulations and trade
barriers support dairy, sugar, and others
• Most commodities get little subsidy (including 70%
of California agriculture)
• The politics of the farm bill has tended to be
dominated by interests of the five big commodities
Value Shares and Subsidy Outlay Shares
Commodity
Share of Value of Share of Subsidy
Output
Outlays
(Varies by Year)
(Varies by Year)
Feed grains
Soybeans
Wheat
13%
9%
4%
50%
10%
10%
Cotton
3%
12%
Rice
Dairy
Meat and Poultry
Horticulture
Hay and other
1%
10%
33%
25%
2%
7%
3%
2%
2%
3%
Commodity Payments as a Percent of Gross Cash Receipts,
State Rankings, 2004
Top 25%
Second 25%
Third 25%
Lowest 25%
TAXPAYER
FARMER
FARMER
Distribution of Government Support
Example: Cotton
Revenue per unit but not based
actual production
Reflects payments not on full production
payment acres = .85 x base acres
Target
Price – $0.724
CCP
Loan
Rate – $0.52
Market Price
Fixed payment – $0.0667
MLG/LDP
Market Receipts
}
}
}
Do not have to
produce to get payment
Must produce to receive
benefits from marketing
loans gains or LDPs)
Commodity subsidy impacts on
agricultural sustainability
Myriad impacts:
1. Increased production and income and use of resources
(land and water) that would otherwise shift to less
intensive uses
2. Production of favored crops that have some negative
environmental consequences (cotton and corn are heavy
chemical users), but in some regions program crops
offer environmental benefits relative to alternatives
3. More intensive production to achieve higher yields
4. Less production in less developed countries with income
losses to poor farmers, but lower food prices for
consumers
5. “Conservation compliance” limits opening new land to
program crops
Farm conservation and environment
program basics
• Initial focus on soil conservation, with no specific
connection to environmental externalities
– Programs focused on technical assistance and land
retirement
• More recent focus on “working lands”
– Cost share to undertake environmentally friendly
practices and with significant technical cooperation
– Payments for meeting environmentally friendly standards
• These programs do not effectively measure the value
of environmental outcomes, rather the focus is on
practices (including land idling) and some expected,
although not well grounded link to ultimate
environmental outcomes
– The quantifiable links off-site water quality, air quality or
species restoration, etc is remains poorly measured
Conservation Program Spending
5.0
3.0
2.0
1.0
0.0
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
$ Billion
4.0
Working Land Programs
Conservation Use Programs
Conservation Technical Assistance
USDA Conservation Program Funding ($ Millions)
Type of Program
Technical Assistance
Financial Assistance
Easements
Stewardship Contracts
Rental Contracts
Total
FY
2002
FY
2003
FY
2004
FY
2005
FY
2006
1,068
1,243
1,370
1,432
1,365
494
631
987
1,363
1,358
346
395
421
421
330
0
0
35
172
220
1,777
1,784
1,823
1,834
1,900
3,685
4,052
4,635
5,222
5,173
Conservation Payments as a Percent of Gross Cash Receipts,
State Rankings, 2004
Top 25%
Second 25%
Third 25%
Lowest 25%
Distribution of Farms and Payments
Received for Conservation, 2004
70
Red -- farms Blue -- payments
60
Percent
50
40
30
20
10
0
Rural Residence Farms
Intermediate Farms
Commercial Farms
Commercial farms get
about 58% of
commodity payments
and sell about 70% of
farm output, they are
under-represented in
conservation programs
Rural residences have very
small shares of sales
and land, but large
share of conservation
payments
• Conservation payments go mostly to non-commercial farms
that occupy a small share of the land that can contribute to
positive environmental progress. These operations get a
disproportionate share of CRP and EQIP.
Important sustainability questions for the 2007
Farm Bill
• Is there are feasible shift of funds from commodity
programs to environmental programs? Is that the
best use of such funds (rather than, say, nutrition
assistance for poor children)?
• Is it possible to design green payment programs that
are cost effective and target environmental
externalities?
• Why should we pay farmers not to pollute rather
than taxing them if they do?
• Is there convincing science to tie specific practices to
positive or negative environmental outcomes?
• What is the role for broader markets for
environmental property rights and pollution permits
that involve agriculture?