Brownfield, MO
09-22-06
University ag economists suggest major overhaul of farm programs
by Peter Shinn
The American Farm Bureau Federation and National Farmers Union may want
Congress to extend the 2002 farm bill, but not a single university ag economist
testifying at a House Ag Subcommittee hearing Thursday recommended doing
so.
Kansas GOP Representative Jerry Moran opened the hearing by telling the ag
economists that he hoped to get their unvarnished opinions on what the next
farm bill should look like. "My guess is that these agriculture economists have no
restrictions on what they will say today, and will feel comfortable in expressing
their opinions way outside the realm of politics," said Moran.
And Moran appeared to be right. Dr. Barry Flinchbaugh, the Kansas State
University ag economist who headed the Commission on 21st Century
Production Agriculture authorized by the 1996 farm bill, told lawmakers the next
farm bill should boost direct de-coupled payments to producers. He said not only
would such an approach be the least market-distorting of several alternatives, but
would also have the benefit of supporting a deal in the now-stalled Doha Round
of World Trade Organization talks.
"If what we want is a simple program that provides a safety net under farm
income with minimal market distortion, the answer isn't rocket science - a decoupled direct fixed payment," said Flinchbaugh. "This, I will submit, is what the
Doha Round is all about, and that failure of those talks will lead to more, rather
than less, market distortion, more, rather than less, need for commodity
programs."
Dr. Ronald D. Knutson, Professor Emeritus and Director of the Agricultural and
Food Policy Center at Texas A&M University, also argued for significant changes
to current farm programs. Knutson proposed eliminating the marketing loan and
counter-cyclical programs, doing away with current federal milk marketing order
system in favor of direct payments to dairy producers, ending the Milk Income
Loss Contract program and the current sugar program, and said all farm program
payment limits should be lifted as well.
Knutson said payment limits unfairly penalized efficient ag producers, and forced
an increasing number of ag producers into cash rental arrangements that
benefited landlords at the expense of farmers. "Payment limits should be
eliminated because they either do not work or are counter-productive," he said.
Iowa State University (ISU) ag economist Dr. Bruce Babcock said the
marketing loan program paid some farmers too much, while crop insurance didn’t
pay some farmers enough. He said the answer is to create a revenue assurance
program based on average county income.
"The first step is to recognize that under and over compensation can be
minimized by targeting farm programs directly at low revenue, rather than low
prices," Babcock said. "Next, by setting up a target revenue program to pay out
when county revenue is low, we would avoid the fraud and abuse problems of
the current crop insurance program, while still covering a substantial portion of
total farm risk."
Michigan State University (MSU) ag economist Dr. David Schweikhardt, for his
part, said MSU had studied the prohibition on planting fruits and vegetables on
program crop acres contained in the 2002 farm bill. He said the MSU had
concluded the potential effects, if Congress ended the restriction, varied by crop.
"For example, we would suggest the likelihood of program crop producers
entering dry bean production might be quite high," Schweikhardt said. "On the
other hand, the likelihood of program crop producers entering into blueberry
production is probably very low."
And Dr. Carl Zulauf, the Francis B. McCormick Professor of Agricultural
Marketing and Policy at Ohio State University, sided with ISU's Babcock on the
positive aspects of a farm program that focused on revenue, rather than price.
"Currently, no integration exists between commodity support and insurance
programs," Zulauf said. "A national revenue deficiency program is needed to
address the risk that revenue can decline for all farms due to lower prices or
widespread yield losses."
House Ag Committee Chairman Bob Goodlatte asked the panel members if the
next farm bill should factor in costs of ag production. None of the ag economists
thought doing so would be workable, or indeed, a good idea.