tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.

Wednesday, December 08, 2004

New Ag Secretary will have to perform a tricky balancing act

Nebraska Governor Mike Johanns will be a key player in the formation of the nation’s farm policy when he becomes U.S. Secretary of Agriculture. President Bush nominated the Iowa native, Minnesota-educated 54-year-old attorney to the position last week, after Ann Veneman resigned.

It is worth it for everyone, even life-long city-dwellers like me, to keep an eye on farm policy. The U.S. Government spent about $16 billion on farm programs last year; that’s actually down from really expensive years like 1986 when the government spent $26 billion. Congress determines farm program spending levels through legislation it passes about every five years. Assuming the Senate confirms Johanns and he fulfills his term, he will be a key player in the formation of the 2007 farm bill. The big, on-going questions are, how much should we be spending on farm programs and who should get the money?

I was at a meeting last month in Minneapolis where a trade group brought in experts to debate these questions. Dr. Barry Flinchbaugh, professor of agricultural economics at Kansas State University, squared off against Kenneth Cook, president of the Environmental Working Group, a group advocating for the redistribution of farm subsidies. Flinchbaugh was instrumental in the creation of the 1996 farm legislation, commonly referred to as the “Freedom to Farm” bill, which was designed to integrate market forces into the government payments system.

Cook said the current subsidy program is flawed because most of the money goes to the biggest farm operations, while most small and medium size farm operations get little or no money. Across the country, Cook said, the 10 percent largest subsidized crop producers got 71 percent of all farm payments made between 1995 and 2002. He said 60 percent of farmers got nothing. Family farms, he said, generally get only a few hundred to a couple of thousand of dollars.

Cook argued that since farmers export 20 percent to 40 percent of their yield, the policy framework for the 2007 farm bill should be away from farm subsidies and toward “trade adjustment assistance.” He said he would like to see money currently earmarked for farmers mixed in with assistance programs designed to aid all workers, whether they work in agriculture, manufacturing, textiles or other industries.

Flinchbaugh disputed Cook, saying “one-fourth of all payments go to small farms, half go to medium size farms, and one-fourth go to large farms.” He said payments do go to family farms. Flinchbaugh described the typical family farm in Kansas: 1,800 acres with $240,000 in annual sales and $51,000 in net income. People working these farms typically have living expenses of $39,000 and receive $28,000 in government subsidies. He said there are 2,100 such operations in Kansas. “These payments are going to these farmers,” he said.

Flinchbaugh said it is very unlikely that there will be major changes in farm subsidy payment programs when the 2007 farm bill is passed. He said the eight states that gave President Bush his highest margin of victory on November 2 are the states that would suffer the greatest losses in farmland value if subsidy programs were curtailed. The decline in farmland value would be dramatic in Texas, for example, where it would drop 34 percent according to a 2003 study conducted by Kansas State University. Oklahoma would suffer a 44 percent loss in farmland value; Kansas a 35 percent loss; Nebraska a 31 percent drop; South Dakota a 30 percent drop and North Dakota a 47 percent drop. Farmland in Wyoming and Utah also would lose value.

Although Cook said he would like to make the largest ag producers ineligible for farm payments, Flinchbaugh called that idea impractical. He implied that large farm operations would simply restructure their organizations to fit the size requirements of any new subsidy parameters. Furthermore, he said large farms have to be included in programs if environmental goals are going to be attained.

And farms are getting larger all the time. Mike Boehlje, an agricultural economist from Purdue University, cited hog producers as an example. In 1988, less than 10 percent of hog operations sold 50,000 head or more per year. Today, 70 percent of them do. “We’re seeing the same thing in potatoes,” Boehlje said. “We’re seeing more and more 10,000 acre, 20,000 acre and 30,000 acre corn and soybean farms.”

Flinchbaugh said he would like to see farm payments “decoupled” from production and market prices. In addition, he said the United States should set up a farmers’ savings account program, which already exists in Canada. These accounts would help farmers weather periods of drought or other typically difficult times.

Flinchbaugh and Cook represent just two of the competing viewpoints regarding the country’s ag policy. Johanns ultimately will be judged according to his ability to balance the interests of competing points of view. My hope as a citizen who likes to eat is that the outcome does not add to the country’s debt burden, improves the security of our food processing systems, and assures the viability of a strong agricultural sector in the United States.

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