Farm program cost forecast to increase

Rice industry conference goers advised The nation's farm income is expected to languish below $40 billion for at least the next four years, a level $15 billion less than the peak of 1997, according to a pair of Texas A&M University economists.

Abner Womack and Ed Smith from the university's agricultural and food policy center told rice producers at the USA Rice Outlook Conference in Las Vegas in December that to keep U.S. agriculture economically viable, it will take at least an additional $12 billion to perhaps $20 billion during the life of the next federal farm bill to keep farmers whole.

This is in addition to the provisions of the FAIR Act like the AMTA payments.

And, according to Jim Wiesemeyer, Sparks Cos, Inc. representative in Washington, there's a good chance agriculture will glean that kind of support because the economy - outside of farming - is good and there is a surplus of money the government's bank account.

He also predicted the new federal farm bill will be written and passed relatively soon next year, provided commodity groups go to Washington united within themselves and armed with a better analyses of their situations and outlook than they did for the 1996 farm bill. When that bill was written, farm groups did not anticipate the low prices that loomed ahead and are now financially strangling farmers.

"The (agricultural) industry botched it last time," Wiesemeyer told the more than 850 at the rice conference.

No set-asides He predicted there would be no set-aside provisions in the farm bill. Those, he said, "reward inefficient producers." He expects planting flexibility to remain part of the federal farm program and that farmers practicing land stewardship will get "green payments" for their efforts. He also predicts estate tax relief will finally come during the next Congress.

He cited California rice growers and their success in flooding rice fields in the winter for wildlife flyways as an example of sound land stewardship that politicians will want to reward with green payments.

The government will be forced to provide additional direct payments to producers because they have not prospered as predicted under FAIR. One of the reasons for that is the failure of the U.S. to successfully negotiate access to foreign markets as promised when the farm bill was passed. He is not optimistic that worldwide negotiations will open markets any time soon.

He suggested farmers focus mostly on regional trade agreements to gain access to new markets rather than apply the majority of its efforts on WTO negotiations.

"We have been boxed in and out-negotiated for 10 years," said Wiesemeyer.

The big debate in the new farm bill will likely be the vehicle used to augment current direct payments. The Food and Agricultural Research Institute (FAPRI) based at the University of Missouri was asked by Congress to examine three of the safety net alternatives being considered. Texas A&M's agricultural and food policy center is part of FAPRI.

The three are:

- Modified Supplemental Income Payments (MSIP) with payments based on the 1995-99 reference period.

- Higher Marketing Loan Rates (LR) which would increase all loan rates by the same percentage to achieve additional spending.

- Market Loss Assistance (MLA) Payments would be distributed in the same fashion as previous MLA payments with some money included for oilseeds.

All three, according to the analysts, increase farm profitability and reduce economic risks, which look considerable based on the economists' crystal balls.

For example, they do not expect rice prices to reach 1997 prices until after 2009, when, they say, they'll reach $8.50 per hundredweight.

Farm income nationwide is expected to remain below $40 billion through 2004.

From 1979 through 1988, the federal government direct payments averaged about $8.5 billion annually. From 1983 through 2000, the average was $11.4 billion and over the past four years, they have averaged $12 billion, reaching more than $20 billion in 1999 and projected to be $23 billion in 2000.

Which of the three options is bests depends on the commodity. Rice producers do better under MLA while cotton receives the most under MSIP. Corn and wheat also do better under MLA while soybeans should reach the highest payment levels under the higher marketing loan rates.

The debate, according to the economist, will not be whether the government needs to step in to maintain a viable food and fiber industry, but which program to use and what the costs will be

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.