Are Your Programs on the Chopping Block in the Next Farm Bill?

In mid-April the U.S. House of Representatives adopted a budget resolution (235-193) for fiscal year 2012.  It estimated that the 2012 Budget proposes $178 billion in agriculture program cuts over the next 10 years. While the Budget Committee made it known that the Agriculture Committee will choose what programs to cut, they did suggest:

  • $127 billion in cuts to the food stamp programs,
  • about $30 billion in cuts to commodity programs,
  • about $20 billion in cuts to other programs, and
  • specifically mention conservation programs.

In the U.S. Senate, Senate Budget Committee Chairman Kent Conrad (D-ND) has unveiled a tentative draft that would cut the federal deficit by about $4 trillion over a decade.

Conrad’s draft proposal raises taxes by about $2 trillion and cuts spending by $1.5 trillion. Additional savings of about $600 billion would come from reduced interest payments. Savings of about $900 billion are achieved from defense programs and $300 billion in savings are proposed from non-security spending over a decade. It would also secure about $300 billion in entitlement savings over the decade.

Why this is important:

Budget cuts are imminent!  In fact, in previous years the U.S. House has deemed their budget resolution as binding for writing the Farm Bill. 

Moreover, current economic considerations will dictate the importance and probability of continuation of policies in the Farm Bill.  Consider, during the writing of the 2008 Farm Bill commodity prices witnessed dramatic increases; prices inflated 74.7%, skewing the Farm Bill budget projections. Since then, commodity (Corn, Wheat, Soybeans, Cotton and Rice) prices have continued to increase by an additional 64%. With such high commodity market prices being obtained now, and continuing into the future, cost projections for commodity support programs will decrease substantially and give cause for lawmakers to decide the support programs will not be needed in the future. Over FY’s 2013-2021, only $2.5 billion is projected by CBO to be spent on the Marketing Assistance Loan Program and Counter Cyclical Payment Program.

Programs Under Threat from Brazil

In addition, the Marketing Assistance Loan Program and Counter Cyclical Payment Program are jeopardized by the case won by Brazil in the World Trade Organization (WTO) (see our earlier article at ). By winning the case, the WTO rules allow Brazil to retaliate against the U.S. and Brazil has developed a list of (at least) 102 U.S. products that it may choose to retaliate against by imposing import tariffs of up to 100 percent.

Brazil has also threatened to retaliate by restricting U.S. patent and intellectual property rights. In a Framework Agreement reached in June 2010 the U.S. agreed to pay the Brazil cotton industry $147 million per year to prevent retaliatory action. In addition to savings achieved by eliminating these programs additional savings may be achieved by discontinuing the agreed upon annual payments being made to the Brazilian cotton industry.

Another program, the [GSM-102] Export Credit Guarantee Program, which guarantees commercial financing of U.S. agricultural exports, was also ruled inconsistent with U.S. WTO trade commitments in the Brazil/U.S. cotton case. Yet, in the President’s 2012 budget proposal, a total $5.5 billion is included for the overall annual program level.

The Impact

The bottom line is: Organizations directly and indirectly connected to agriculture, commodity trading, or the food industry, will be impacted by the Farm Bill. It is important to analyze and decide the program(s) that affect your company and design a strategy to protect your interests. Then the proper information must be presented to the lawmakers shaping the 2012 Farm Bill. As Farm Bill hearings are set to begin at the end of the month and policy is being formulated, now is the time to present your policy ideas to Members of Congress.

Cansler Consulting & The Farm Bill

As an agricultural lobbying firm, Cansler Consulting is well versed in the intricacies of the 2012 Farm Bill and all the factors and agendas involved. If your organization needs its interests protected during this time of decision, please contact us today at (202) 714-2822 for a consultation today to see how we can help your organization build support where it needs it most.

Tim Cansler