Bridges Weekly Trade News Digest • Volume 16 • Number 6 • 15th February 2012

Obama Proposes Billions in Subsidy Cuts as Farm Bill Process Kicks Off

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The US Congress is set to start hearings on Wednesday 15 February concerning the US Farm Bill - the omnibus legislation on US agricultural policy that is up for renewal this year. The hearings begin just two days after US President Barack Obama announced a federal budget proposal for the 2013 fiscal year that would cut farm subsidies by over US$30 billion over the next decade.

Congressional budget negotiations in late 2011 had shown Congressional agriculture committees willing to agree to a US$23 billion cut over 10 years. Those budget negotiations failed, however, putting the farm bill process temporarily on hold. Under the proposed 2013 budget, however, the President has made clear that he would like to see greater cuts over the same ten-year period, in the order of US$32 billion in spending.

The budget puts US$5 billion of politically unpalatable direct payments on the chopping block and trims crop insurance programmes by US$7.6 billion. Farm Bill activity is traditionally the domain of Congressional agriculture committees, and similar proposals from the administration were largely ignored in last year’s ‘Super Committee’ negotiations on federal spending. (See Bridges Weekly, 23 November 2011)

Farm committee chairs respond

Discussions on the farm bill have gotten off to a shaky start during the early months of 2012. In recent weeks farm groups have met and been unable to coordinate compromises between competing interests - such as Northern versus Southern farm commodities. Nonetheless, the Chairs of the House and Senate agriculture committees have both reacted strongly to the President’s budget proposal.

Debbie Stabenow, a Democrat from the US state of Michigan who chairs the Senate committee, said in a statement that she could not “agree with further cuts to crop insurance.” From the House side, Frank Lucas, the Republican Chair from the US state of Oklahoma, was more critical, arguing that “neither rural America nor fiscal discipline is a priority for this administration.” Both committee chairs agreed that direct payments needed to be cut but that crop insurance should not be touched.

Farm bill discussions in 2011 focused largely on the tradeoffs between “shallow loss” crop and revenue insurance schemes - which cover 80 to 90 percent of losses caused by falling prices or other events - and money targeted directly towards specific commodities.

On the Administration’s part, US Secretary of Agriculture Tom Vilsack attempted to cushion the political blow from the cuts, using language that emphasised the record-breaking farm revenue from exports in recent years. High farm incomes have made support for subsidies a political liability, due to the impacts of the ongoing recession.

He added that the US would seek to “reduce trade barriers” for its farm goods to ensure that rural incomes continue to grow. Under the proposed budget, the US Department of Agriculture will see its own discretionary budget trimmed by three percent and will achieve the savings by streamlining operations, reducing costs, and closing offices.

New farm bill in 2012 unlikely, some say

For many observers, its still unclear whether or not there will even be a farm bill in 2012 - estimates have ranged from 15 to 50 percent on chances that any version of the legislation will pass. In the absence of a new Farm Bill, it is likely that Congress will authorise farm expenditures based on current legislation for another year.

With this context in mind, agriculture lobbyists - ranging from the National Sustainable Agriculture Council to the American Farm Bureau Federation - sent a letter to Congressional committee chairs on Friday 10 February calling for a new bill this year.

Followers of the farm bill process have indicated that the environment for funding could be very different next year and that much hangs in the balance on budget projections and the hoped-for economic recovery in the US. Speaking to Bridges, an official commented that the “real question is - will the budget be better in June or January.” Given their call for a farm bill this year, the farm lobbies may not have been convinced by improving economic indicators to bet on better days ahead.

ICTSD reporting; “Farm bill challenges,” AG WEEK, 13 February 2012; “UPDATE 1- Obama reiterates call for U.S. farm subsidy cuts,” REUTERS, 13 February 2012.