Agriculture Secretary Mike Johanns has made no secret that he thinks Congress should write a new farm bill when the House and Senate agriculture committees get down to the task later this year.
So it wasn't much of a surprise when Johanns took his case for overhauling the current law to members of the American Farm Bureau Federation and the National Cotton Council, both of which are on record as favoring an extension, in back-to-back speeches to the groups Jan. 8 and Jan. 10.
For openers, Johanns said the setting for the 2007 or 2008 farm bill is totally different than that for the Farm Security and Rural Investment Act that President Bush signed into law in May 2002.
“I will be the first to argue that the 2002 farm bill was good policy for its time,” Johanns said at the Farm Bureau annual meeting in Salt Lake City. “But the agricultural and economic realities that influenced the development of the 2002 farm bill simply don't exist today.”
In 2001, he said, agricultural exports had declined for five straight years and were down to $50 billion a year. Since then, exports have risen to a record $68.7 billion (in 2006) and are expected to reach $77 billion in 2007. Farm cash receipts, meanwhile, have been climbing and are expected to hit $242 billion in 2006 — $41 billion more than in 2001.
“Clearly, we're seeing a much stronger agricultural industry than we saw five years ago,” Johanns said. “Interestingly enough, in fiscal year 2000, we provided the highest subsidy payments on record: $32 billion, and yet the farm economy was far, far from impressive.
“The 2002 farm bill was written for an industry that was far different than that of today. We've had both good yields and strong prices, which have created an increase in revenue. The increase in exports has had a positive impact because we're taking advantage of greater international demand for the products you raise.”
Many of the speakers at the farm bill forums USDA held in 2005 were calling for “a straightforward, simple extension” of the current farm bill, “but I don't hear that so much any more,” said Johanns, speaking to reporters following his speech at the National Cotton Council's Beltwide Cotton Conferences in New Orleans.
He acknowledged that many cotton growers would like to preserve the commodity provisions of the 2002 law in the next farm bill. But he said cotton growers must be wary of farm policies that subject them to even more challenges in the World Trade Organization.
“If I'd walked into that room today and said, ‘I've been thinking about this, and I've got an idea I'm going to develop policies that will jeopardize 80 percent of your market,’ they would be booing me and justifiably so. Eighty percent of their crop goes into the international marketplace. You lose that, and you've just lost cotton in the United States.”
Producers of other crops are also having second thoughts about the current farm bill, in part, because they probably will not receive counter-cyclical payments or loan deficiency payments for their crops in 2006 or 2007.
“Prices for those crops are very high, and it's allowing those farms to produce for the marketplace,” the secretary said. “Since I was that high, I can remember farmers saying they didn't want to farm for the government but for a price and a profit.”
Farm groups also are concerned, and rightly so, about the lower baseline for farm programs — a product of the savings from the 2002 farm bill. “If you just simply extend the current farm bill, you have a situation where you simply won't have as much money compared to 2002,” he noted.
And specialty crop producers, who have not received farm program payments, are saying they want help in the next farm bill.
“Now I didn't have a single one of those farmers come in and ask for a cash subsidy,” he told reporters at the Beltwide. “But they did ask for increased funding for conservation, research, market promotion, phytosanitary/sanitary issues and border issues.”
Johanns said he believes it's possible to write a farm bill that will withstand WTO challenges like Brazil successfully brought against the U.S. cotton program in 2004 and 2005.
“There are many ways to support agriculture,” he noted. “Under WTO rules, direct payments, for example, are not considered market-distorting. In general, if you tie your program to price or production; i.e., you get paid more with more production or if a program kicks in because of a certain price, you're likely to have a bull's-eye on your back relative to WTO.”