Today the President of the United States presented his fiscal year 2011 budget, which requests $26 billion for the US Department of Agriculture, a reduction of $1 billion from what was enacted a year ago. Since the budget has just been released, details of where the reductions in agriculture, on the discretionary side of the budget ledger, will come later. Additionally, the budget process has a long way to go before it is finalized, so the administration's proposed changes may not be in the final budget.Here is what we could glean from the budget presented on the White House’s website, in total it appears nine programs or grants are being terminated by the budget—including commodity storage payments and the Resource Conservation and Development Program (RCD). The administration states that the RCD program, which began in 1962, has “outlived its need for federal support.
Here is the administration’s justification for terminating the Commodity Storage Payments program, something peanut and cotton farmers have grown to like.
“This proposal would eliminate cotton and peanut storage credits. The credits allow producers to store their cotton and peanuts at the Government’s cost until prices rise. Therefore, storage credits have a negative impact on the amount of commodities on the market. Because storage is covered by the Government, producers may store their commodities for longer than necessary. There is no reason the Government should be paying for the storage of cotton or peanuts, particularly since it does not provide this assistance for other commodities.”When it comes to reductions, five programs appear scheduled for a reduction. Among the more controversial may be the Market Access Program. Another proposal is to reduce the spending in the Commodity Payments to Wealthy Farmers program. Here is what the administration hopes to do and the justification for the potential actions:
“The Administration proposes to limit farm subsidies to wealthy farmers by reducing the cap on Direct Payments by 25 percent, and reducing each of the Adjusted Gross Income (AGI) commodity payment eligibility limits for farm and non-farm income by $250,000 over three years. This proposal will allow the Department of Agriculture (USDA) to target payments to those who need and can benefit from them most, while at the same time preserving the safety net that protects farmers against low prices and natural disasters. [] This proposal would reduce the cap on Direct Payments from $40,000 per person per year to $30,000 per person per year and reduce the two AGI commodity payment eligibility limits by $250,000 each. Direct Payments are payments made to farmers based on historical production, regardless of whether they currently produce crops. They distort production and drive up the value of farm land. Currently, farmers can collect Direct Payments as long as their average farm AGI (the portion of their AGI that is attributable to activities related to farming, ranching, or forestry) is $750,000 or less, and they can receive Direct Payments and all other commodity payments if their average non-farm AGI (the difference between a person’s average AGI and their farm AGI) is $500,000 or less. This proposal would reduce the farm AGI limit to $500,000 and the non-farm AGI to $250,000. This would allow USDA to target commodity payments to those who need and can benefit from them most, while at the same time preserving the safety net that protects farmers against low prices and natural disasters. The President wants to maintain a strong safety net for farm families and beginning farmers while ensuring fiscal responsibility.”The Market Access Program could see a 20 percent reduction if the administration has its druthers. The justification is that the program overlaps with other “Department of Agriculture trade promotion programs and its economic impact is unclear.”
How Congress and the American farmer will react to these proposed terminations and reductions is unclear. One thing is clear though, agriculture will have lots of stakeholders and members of congress storming Capitol Hill fighting for their priorities, and it is much easier to put something in the budget than to take it out.
Meanwhile, according to reporting from Bernama online (the Malaysian National News Agency) China’s central government is making rural infrastructure and improving agricultural a priority. “Vice Director of the Central Committee Rural Work Leading Group Office of the Chinese Communist Party (CPC), Tang Renjian, Monday told a press conference this was in line with the State Council's policy document which recommended bridging the gap between urban and rural development.”
Coming to the Chinese farming community could be modern farming technologies and techniques as well as subsidies for the purchase of technology that will increase crop output. This is what is being advocated in a major policy paper “No 1 Central Document,” which was issued by the Central Committee of Communist Party of China (CPC) and the state council—to bridge the urban-rural gap.
The China Daily online has an article by Jin Zhu and Xin Zhiming about the policy paper and what it could mean for Chinese agriculture. A Chinese agricultural policy official “said the government has realized that the integration of urban and rural areas would be the solution to large disparities between both regions and their residents.” Essentially, the Central Document, according to China Daily, puts a priority to infrastructure in rural areas and program, which could help improve agricultural output and the well-being of China’s roughly 500 million farmers.
China will funnel subsidies to farmers to increase potato production, highland barley, and peanuts, and for the purchase of agricultural machinery. The government will also implement additional policies for the purchase of excess commodities. The goal behind this is to help stabilize the prices of the major farm products. According to the Steel Guru website, China will allocate $104 billion for rural development.
While the difference between the attitudes of the two countries with regards to their agricultural budgets appears stark, perhaps this appearance is due to where the countries are, logistically, in terms of agricultural output in their domestic and global markets.
To see the agriculture portion of the White House budget click here.
To see a list of terminations, reductions, and savings, click here.
To read the Bernama piece click here.
To read the China Daily article click here.
To read the Bernama piece click here.
To read the China Daily article click here.
To read the steel guru report click here.
Posted:02/01/10
