|Posted September 28, 2004:
For seven decades, U.S. farm policy has basically followed one track.
Some farmers get a subsidy check from the government when prices are
low. However, for the first time in memory, a real chance to debate
and change that track now seems possible. Surprisingly, the impetus
for change is coming from an unlikely source—the World Trade
Organization—rather than our own legions of disgruntled farmers
The primary purpose of farm policy has been to stabilize farm income.
Because weather and markets will always be volatile, it is in the
public interest to ensure a relatively stable farming sector to
ensure adequate food production.
But three flaws are continually embedded in farm policy. First,
from the beginning only a few chosen commodities were selected for
support. Corn, wheat, cotton, rice, and soybeans are the anointed
crops. Livestock, dairy, fruits and vegetables are left out. So
farmers who want to grow other crops must operate at an economic
disadvantage. Unfortunately, the designated commodities tend to
be row crops that require the greatest soil disturbance and use
of chemical inputs, leading to vast environmental degradation.
The second great flaw is that we reward for each bushel produced.
So farmers naturally try to maximize production of the protected
crops in order to maximize their income and minimize their risk.
This has led to a cycle of ever greater supplies with little change
in demand, which results in lower prices and thus the drive to get
more ‘efficient’ with expensive technology and inputs
in order to grow more and get a bigger check from the government.
The unintended consequence is more environmental harm and loss of
biodiversity as every available acre—hilly, wet, wooded, or
marginal—is drawn into production.
The third great flaw in commodity policy is that farmer payment
limits have proven impossible to enforce, whether because of a lack
of political courage or the legal creativity of some farmers. Essentially,
the government continues to underwrite the great consolidation in
farms that’s been under way for the past century. The big
get bigger using their enormous commodity checks, and, again, care
of the land suffers.
An ill-fated attempt to break this cycle of overproduction was
adopted in the 1996 farm bill. Unfortunately, “decoupling”—the
policy to gradually eliminate payments until we got the government
out of production agriculture—forgot about the original purpose
of U.S. farm policy. When income stability disappeared with dropping
prices a few years later, the old system of subsidies came right
back bigger than ever in the 2002 farm bill.
Now something has happened that has agriculture groups of every
stripe looking for a new approach. In a landmark ruling this summer,
the World Trade Organization affirmed a challenge from Brazil that
most U.S. cotton subsidies are illegal. Driven by hopes for export
markets, U.S. commodity groups had pushed for a level playing field
for free trade by reducing the various financial advantages countries
give to their own producers. Now, those same agriculture groups
seem surprised that their own commodity subsidies (even the direct
payments) are being challenged as unfair by other countries. Brazil
argued that the subsidies led to overproduction, U.S. dumping (selling
below the cost of production) on global markets, and suppressed
prices, thus giving the U.S. an unfair share of the world market.
While the decision will likely be appealed and has already influenced
new trade negotiations, it nevertheless brings into question the
future of subsidies for corn and other commodities
What is suddenly very much in demand is an alternative policy that
could contribute to basic farm income, but without driving overproduction
of commodities. The WTO designates such allowable subsidies as being
in their ‘green box.’ Of course, we already have the
essence of such a policy in the Conservation Security Program. When
fully implemented, this new program will be a green payments program
that offers farmers willing to meet high conservation standards
a yearly paycheck in return for producing conservation benefits
such as clean water, healthy soil, and wildlife habitat. In effect,
we will pay for conservation produced instead of commodities produced.
Powerful farm and commodity groups are sensing a real threat to
subsidies and are looking for options. As Bob Stallman, President
of the American Farm Bureau Federation, testified recently, “International
trade issues and budget pressures may cause a future evaluation
of the means of supporting agriculture. The conservation programs
authorized under Title II of the farm bill, which fit within the
‘green box’ of the World Trade Organization Agriculture
Agreement as non-trade distorting programs, are important to these
policy considerations” (U.S. House Agriculture Committee’s
conservation subcommittee, June 15, 2004).
It is not too early to begin shaping the discussion for the next
farm bill in 2007. It will take time to build a comfort level, support
and detailed proposals for green payments. The Minnesota Project
intends to be there every step of the way.
Published in the Autumn 2004 edition of Community Connections,
newsletter of the Minnesota Project, by Senior Policy Analyst Loni