With the new Congress holding hearings about issues related to the 2007 Farm Bill, farmers rightfully ask for the latest inside information and educated guesses about what will be included in the legislation. There may be some foregone conclusions, but there is also a lot of coffee shop conversation, interspersed with Internet bloggers offering opinions. The opinions provided here today are from inside sources.

With the political change in Washington, one of those in the catbird seat is Stephanie Mercier, who is the staff economist for the Democratic members on the Senate Ag Committee. Another source is Vince Smith, agricultural economist at Montana State University. Their collaborative analysis is published in the latest issue of the agricultural economics e-magazine Choices.

Following structural change in agriculture since the 1930’s, Mercier and Smith say contentious issues this year will include payment limitations, broadening the scope of subsidies to a wide area of commodities, the impact of international trade, the demands of the budget, and the involvement of agriculture in the energy debate.

Budget. In March 2001, just before the 2002 Farm Bill was considered, the Congressional Budget Office forecast a $5.7 trillion budget surplus from 2002 to 2011. However in August 2006, the CBO forecast a budget deficit of $1.8 trillion between now and 2016. However, the costs of continued Mideast conflict, reductions in tax laws, increased deficit interest, are not included in that calculation, and those writing the next Farm Bill will have less funding available. The 2006 budget resolution requires the House and Senate Agriculture committees to cut an additional $3 billion from commodity, conservation and research programs over the next 5 years. The CBO will issue another 10 year budget projection in March, and that will likely guide the total Farm Bill appropriation.

Demographics. Agriculture is losing political clout with reduced population in rural areas. Each member of the U.S. House represents 646,000 people, and of the 435 Congressmen, fewer than half have more than 1,500 farmers in their district. Many non-farmers are concerned about the distribution of farm payments, and prior to the 2002 Farm Bill the Environmental Working Group released an analysis of where payments were distributed resulting in Farm Bill amendments to substantially cut farm program payments. They were dropped from the final legislation. The issue has already resurfaced this year.

Political Interests. 20 years ago the Farm Bill addressed feed grains, wheat, cotton, rice, milk, and conservation interests. Since then, producers of minor oilseeds and other small crops have gained program benefits, and there will be more for 2007. Some of the benefits will be in crop insurance, particularly for livestock. Other interests will include the low income recipients of food programs, environmental groups, lobbyists for renewable energy programs, humanitarian aid programs, and those who want all farm programs eliminated. But many of those programs have contributed to a 20% increase in land values, and elimination of that type of support would have a negative effect across much of the US.

Trade. Since the 2002 Farm Bill, US farm programs have been attacked by other nations as distorting trade and depressing prices for their producers of similar commodities. The US was forced to eliminate several commodity support programs, and others such as the counter cyclical payment program will not find their way into the 2007 Farm Bill. While Congress debates a new Farm Bill, trade negotiators will try to work out a new international trade program, but it may be subject to Congressional modification because the President’s exclusive trade negotiating authority has expired.

Summary:
The development of the 2007 Farm Bill comes in the midst of substantial budget restrictions, increased political debate from special interest groups, and the parallel environment of international trade negotiations. Observers say agricultural supporters in Congress will not allow a dismantling of farm programs, but the debate could be lively due to the potential for tradeoffs between traditional commodity support programs and innovative programs that allow income transfer unhooked from commodity production.