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Conservation subsidies could avoid WTO limits
By ANN HINCH
Tennessee Correspondent

WASHINGTON, D.C. — Of the myriad tasks each new federal farm bill must perform, balancing conservation against commodities payments may seem the most onerous.

Some subsidy cuts of the 1996 Freedom to Farm Bill were reinstated with passage of the 2002 bill, in the form of counter-cyclical crop payments.

Carrying that safety net through the 2007 bill – or 2008, depending on politics and World Trade Organization (WTO) provisions – will be a priority for many, according to Dr. Daryll Ray, director of the University of Tennessee Agricultural Policy Analysis Center.

“There’s going to be a tremendous push by the farmers and those who represent them to try to keep (the 2002 bill),” he said, since it provides “a fair amount of protection” against crop loss and low market prices.

Conservation programs have been no strangers to cuts. The discretionary portion of USDA budget in 2007 will be about $21.5 billion, or $228 million less than in 2006.

According to the White House’s Office of Management and Budget, conservation cuts will total about $543 million (including Forest Service and Rural Development) in order to provide cash for increases in commodities, marketing, regulatory and administration activities.

But after 2007? WTO may further restrict what most member countries perceive as unfair government subsidy payments to farmers in the United States and European Union, pointed out Dave Townsend, Ag Committee press secretary for Sen. Tom Harkin (D-Iowa).

“Investment in rural America shouldn’t be decreased,” he said. One way Harkin believes the United States could get around this restriction and still aid farmers is to increase funding for some conservation programs.

For example, the Conservation Security Program (CSP) rewards growers and producers for how well they farm while respecting natural resources. Townsend said with more funding, it would encourage good practices and give other farmers incentive to improve in order to qualify.

“This would pay farmers for how they farm” as opposed to basing it on how much or how little, he explained.

Harkin is not alone. Ray noted many commodities subsidy cuts may come from either raising loan rates or lowering counter-cyclical target prices.

Theoretically, some or all the remaining money could be funneled into creative conservation initiatives such as the CSP watershed program (in fact, the big criticism of CSP by farmers is its limited scope and funding).

Another idea is whole-farm insurance. Rather than pay varying support rates on individual crops, Sen. Richard Lugar (R-Ind.) proposed this concept years ago. It was not a popular idea, but Lugar Press Secretary Andy Fisher said through the years, it has gained momentum, since it is less restrictive than traditional subsidies. It may be another way around WTO prohibitions.

Sticky wicket

Other subsidy cuts would be possible by lowering the “cap” on individual annual payments, a move Ray said is a sticky political wicket. Many smaller farms probably wouldn’t mind if the capping were restricted to what are commonly called “corporate farms” – those with vast tracts of land and/or multimillion-dollar operations.

To cap everyone, though, is “hurting the small guys,” Townsend said.

On the other hand, Ray explained such a cap could be detrimental even to the big guys, and the overall farm economy, if, for example, corn prices dropped dramatically in the Midwest.

Too, not every farmer working thousands of acres is a mogul – Fisher noted it’s not uncommon for one full-time farmer or farm family to own only a few hundred acres, and also pay to lease hundreds or thousands more to work.

Rep. Lincoln Davis (D-Tenn.), a beef producer, said in many cases it is necessary for a full-time farmer to work thousands of acres in order to earn enough to justify time and expense.

As a former tobacco grower, he used that example to illustrate how smaller farms used to be able to depend on the type of crop (and accompanying subsidies) while growing less than they must plant now for a similar profit.

Farmer Ed Wiederstein of Iowa, however, thinks it might be to the U.S. producer’s advantage to eliminate subsidies.

First, without subsidy payments to those who lease out land for farming, he wonders if some non-farmer landowners might be willing to sell that real estate to individual growers and producers for lower prices, stimulating interest in smaller farms.

Second, “It seems we always talk about the European Union and how they heavily subsidize their farmers,” Wiederstein said, adding in his opinion, the EU is “building a box around themselves” with higher subsidies and trade restrictions.

America eliminating its farm bill might render the EU less competitive than the U.S. in the global market.

Davis explained in his experience, Wiederstein is definitely not alone in believing the American ag trade market should be more “pure” and without subsidies – but for now, he disagrees.

“As long as there are other countries interceding, that’s impossible,” he said.

3/29/2006