Ag Budget To Hold About Steady

Offsets will re-deploy some Title I commodity program money.

Published on: Feb 27, 2009

President Obama’s budget unveiled yesterday calls for $24.6 billion in agricultural department spending in 2009 and $26.0 billion in 2010. Those figures compare with 2008 actual spending of $26.1 billion.

However, the budget lays out some significant readjustments in spending.

Funding Highlights:
• Provides over $20 billion in loans and grants to support and expand rural development activities, including small businesses, renewable energy and telecommunications.
• Includes a $50 million increase to address deferred maintenance on the most critical health and safety infrastructure within our national forests.
• Supports the implementation of a $500,000 commodity program payment limit. The payment limit will help ensure that payments are made to those who most need them.
• Reflects the President’s commitment to wildfire management and community protection by fully funding suppression costs at the 10-year average, establishing a discretionary contingent reserve for wildfires, and including program reforms to ensure fire management resources are focused where they will do the most good.
• Fully funds the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to serve all eligible individuals.
• Includes $1 billion per year for the Child Nutrition reauthorization.
• Supports a pilot program to help increase senior participation in the Supplemental Nutrition Assistance Program.
• Reflects the President’s commitment to supporting independent producers through improved enforcement of the Packers and Stockyards Act and investing in the full diversity of agricultural production, including organic farming and local food systems.
• Reflects the President’s commitment to fiscal responsibility by reducing direct payments to the largest farmers, reducing crop insurance subsidies, eliminating cotton storage credits, eliminating funding for the Resource Conservation and Development program, and reducing program funding for overseas brand promotion.

Pursues fiscal Responsibility. As part of the president’s commitment to fiscal responsibility, the Budget includes several significant offsets. The proposals include programmatic changes that:

Reduce direct Payments. As part of an effort to transition large farms from direct payments provided to owners of base acres to increased income from revenue derived from emerging markets for environmental services, the President’s Budget phases out direct payments over three years to farmers with sales revenue of more than $500,000 annually. Presently, direct payments are made to even large producers regardless of crop prices, losses or whether the land is still under production. The program was introduced in the 1996 Farm Bill as a temporary payment scheduled to expire, but was included in the 2002 and 2008 Farm Bills. The President wants to maintain a strong safety net for farm families and beginning farmers while encouraging fiscal responsibility. Large farmers are well positioned to replace those payments with alternate sources of income from emerging markets for environmental services, such as carbon sequestration, renewable energy production, and providing clean air, clean water, and wildlife habitat. USDA will increase its research and analytical capabilities and conduct Government-wide coordination activities to encourage the establishment of markets for these ecosystem services.

Reduce Crop insurance Premium Subsidies and underwriting Gains. This proposal would reduce the Federal subsidy to both insurance companies and farmers. Over the last several years, subsidies for crop insurance companies have grown rapidly without improving program coverage or customer service for farmers. Current subsidy levels exceed what is necessary to encourage farmer participation and they do not constitute a sound value to taxpayers.

Eliminate Cotton Storage Credits. The President’s Budget proposes to eliminate the requirement for the Government to pay the storage costs of cotton that is put under loan with USDA. Cotton is the only commodity for which this assistance is provided. Storage credits for cotton have been found to have a negative impact on the amount of cotton on the market. Because cotton storage is covered by the Government, producers may store their cotton for longer than necessary.

Eliminate the Resource Conservation and development program. The Budget eliminates funding for the RC&D program. First begun in 1962, the program was intended to build community leadership skills through the establishment of RC&D councils that would access Federal, State and local programs for the community’s benefit. After 47 years, this goal has been accomplished. These councils have developed sufficiently strong State and local ties that the Administration believes they are now able to secure funding for their continued operation without Federal assistance.

Reform the Market Access Program. The Budget reforms MAP by reducing program funding for overseas brand promotion and minimizes the benefits that large for-profit entities indirectly gain as members of trade associations who also participate in MAP. An annual funding reduction of 20 percent will reduce Federal spending and place a greater emphasis on promoting generic American products overseas.