LARRY D. SANDERS OCES INSERVICE CENTRA PRESENTATION 27 APR 2011 Political Change & the Next Farm Bill
LARRY D. SANDERS
OCES INSERVICECENTRA PRESENTATION
27 APR 2011
Political Change & the Next Farm Bill
2Source: US Bureau of Economic Analysis, 2009 (www.bea.gov) http://zfacts.com/p/318.html
US Budget Surplus/Deficit ($bil.)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 20
120
120
1
-1800
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
-330
-225-177
-151-50
70
124
232 268
-157.8
-374-413
-331
-314-162
-1173
-1588 -1537
-1550
-1300
?
Now above 90%
111th Congress 112th Congress
Senate 57 D 2 I 41 R
House 255 D 148 R
Senate 51 D 2 I 47 R
House 193 D 242 R
3
Congressional Shuffle of Power…
Key Leadership Changes in House4
Speaker: Boehner (OH)Agriculture: Lucas (OK)Approp.: Rogers (KY) + Flake (AZ)*Energy: Upton (MI)Finance: Bachus (AL)Budget: Ryan (WI)Rules: Dreier (CA)Oversight/Govt Reform: Issa (CA)Judiciary: Smith (TX)Ways/Means: Camp (MI)
5
2010 Midterm shuffle means changes for Ag Committees…
2009 – 2010 2011-2012Senate Senate 12 D / 9 R 11 D / 10 R
Lincoln (D-AR) Chambliss (R-GA) Stabenow, D-MI Roberts (R-KS
House House28 D / 18 R 26 R / 20 D
Peterson (D-MN) Lucas (R-OK) Lucas (R-OK) Peterson (D-MN)
7
http://ruralcommunitybuilding.fb.org/2010/12/01/rural-population-loss-through-outmigration-ers/
Much of farm country is losing population; Thus, representation.
For example…
Senate Agriculture Committee 11 D, 10 R
6 farmers*/ranchersHouse Agriculture Committee
26 R, 20 D 14 farmers*, 2 agribusiness
House Appropriations Agriculture Subcommittee 7 R, 4 D
3 farmers/ranchers*, 1 agribusiness
* self-identified
8
112th
Congress:House
3
2
2/1
1/2
2
1/2
3
2
111th Congress: House
3
2
2
2/12
2
22
1/2= D= R= Both
Chair
C
C
C
Note: ½ = 1 D and 2 R; 2/1 = 2 D and 1 R; Single Number indicates # on Committee from the state. No number indicates 1 R or 1 D
111th
Congress:Senate
1/1
1/1
1/1
112th
Congress”Senate
C
10
Budget Issues - States That Get More in Fed Subsidies Than Pay in Federal Taxes
http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html
12Map:http://www.cccarto.com/congress/ok_congress/index.html
3: Lucas$3.37 bil.(wheat)
1: Sullivan$34.7 mil.(wheat)
2: Boren$310 mil.(dis.)
4: Cole$615 mil.(wheat)
5: Fallin/ Lankford$29.5 mil.(wheat)
Farm Subsidies: 1995-2009OK: $5.01 bil.
(wheat)
Data: EWG/USDA
13
Senate Ag Committee House Ag Committee
Dems/Repubs want to protect funding, but at odds w/full Senate
Chair Stabenow favors specialty crops & food programs
Ranking Member Roberts favors commodity programs
Chair wants to move “at own pace” 2012? Later?
Dems/Repubs want to protect funding, but at odds w/full House
Chair Lucas & Ranking Member Peterson favor commodity & risk management programs
Chair wants economy & budget to improve first, but hopes for 2012 farm bill
Farm bill debate begins to take shape
14
Lucas frames the farm bill issues…
15 Mar 2011 letter to Ryan“Promote policies & risk management tools that will
keep American agriculture & rural communities strong & our citizens healthy & safe”
Budget reductions of past 7 yrs should count SRA adjustment $6 b. or greater to baseline Mandatory spending cuts $7.5 b. Actual spending declined 28%
SNAP a better target for cutsDon’t assume high farm prices are here to stayTimeline:
2011: regulation oversight; prep for 2012 farm bill (hearings & policy inventory
2012: writing the bill (assuming economy & budget improved)
15
House Ag Committee Dems Rap House GOP 2012 Budget
15 Apr 2011 House votes in favor of Ryan budget$177.86 b. in ag program cuts over 10 yrs
$127 b. cut in food stamp/nutrition programs $30 b. cut in commodity programs $20 b. cut in other ag programs
Senate unlikely to support; but could become rule for House budget actions
23% cut for ag; 14% cut for other programs“2012 House Budget Resolution is a non-starter”
“nearly impossible to write 2012 farm bill”
16
House Ag Cmte spending over 10 yrs (& % of all Fed spending) …
Total: $924 b. (2.15%)Nutrition: $624 b. (1.62%)Crop ins: $83 b. (0.19%)Conservation: $65 b. (0.15%)Commodity: $64 b. (0.15%)Other: $17 b. (0.04%)
Note: Craig Jagger, Chief Economist, House Ag Committee
17
Stabenow frames issues on Senate side…
“proceed on its own schedule…”; “the toughest fb to write since the first one…”; more experience than House
Hearings already in processRe-examine direct paymentsExpand crop insurance to cover more cropsContinue sugar programContinue specialty crops program (research, marketing,
state block grants)Support bio-fuels but may be changedSupports coop extensionCongress should consider cuts/reductions made over past
several yrs
Farm Bill Issues
(2012-38-9-6)
1818
Derivative support
Agency Budget Cuts
Commodity vs. Other($9 b.?)
Federal Budget Deficit & Debt
EPA ChallengedSURE gone?
DP gone?Disaster Assistance?
Immigrant laborProtection?
Renewable Energy
Environment forproduction
Cotton Case
International Food Aid gone?
Land-grant funding “Farm “ Bill, or
“Food” Bill
Livestock Relief
?
World Food Prices
FARM PROGRAMS AND THE BUDGET:“small” as compared to …
2012 Federal Budget (Billion Dollars)
Mandatory, 2,079DOD/DHS/VA,
850
Interest, 340
Other, 490
FARM PROGRAMS AND THE BUDGET:“big” as compared to …
2011 Budget Breakdown (Billion Dollars)
0 5 10 15 20 25 30 35
SBA
FAA
FBI
EPA
Commerce
Interior
Labor (no UIB)
Farm Programs
Energy
Justice
*
* Commodity, Crop Insurance & Conservation
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The next farm bill…
1. 2012? 2013?2. There will be cuts to programs3. There will be reform of programs4. DP, ACRE, CRP, RD at risk5. Contentious: SNAP, specialty crops,
disaster aid
Net Farm Income & Direct Government Payments (1991-2011f)
0
20
40
60
80
100
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
net farm income
govt payments
NFI-G
23
23
$ Billion
FSRIA 2002
$94.7 b.
$10.6 b.
$84.1 b.
FCEA 2008
26
Options for the next Farm Bill (odds vary)
Status Quo:(not
likely)
Phase out (not
likely)
Enhance all/most
programs (not likely)
Risk Management
Reform: shift $ to alt. focus; net change less $ (possible)
No reform: Reduce existing
programs w/some
enhanced; net change
less $ (possible)
THE ACRE/DCP DEBATE
Why was sign-up for ACRE so low in 2009-11? Too complicated? Didn’t “breakeven”? Landowners? Other?
What is the purpose of farm programs? Income distribution? Risk management?
Oklahoma payments: ACRE: $95 mil. SURE: $4.97 mil. DP: $128 to $131 mil. CCP: $$13.76 mil.
“Low” yield “High” yield
“Low” price Advantage: ACRE1. Entire DP, but no CCPuntil MP < TP - DP2. ACRE payment possibleif MP > TP or MP < TP.3. No yield risk protection forDCP, but possibly for ACRE
Advantage: ACRE1. Entire DP, but no CCP until MP < TP - DP2. ACRE payment possible if MP > TP or MP < TP.
“High” price Advantage: Leans ACRE1. Entire DP, but no CCP2. No yield risk protection for DCP, but possibly for ACRE3. DP loss likely < ACRE
Advantage: DCP1. No ACRE Payment2. No CCP3. Entire DP
OTHER THOUGHTS ABOUT THE ACRE/DCP DEBATE
The “lumpy payments” problemIf ACRE is a risk management tool, do payment limits defeat its effectiveness for risk management?
The budget cost/risk protection tradeoffLower level trigger means higher budget cost
The “luxury of choice” problemWas ACRE too much to explain to landlords?
29
30
Is a farm safety net necessary & affordable?
Do externalities exist?How do we consider moral hazard?How are priorities for public spending determined?
Do we manage to protect number of farms, production capacity, farm income, rural economic health, or natural resource protection?
31
Thanks for your attention!
Larry D. Sanderslarry.sanders@okstate.
edu405-744-9834
Now, finally a computer error message I can
understand