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2007 Farm Bill: Agricultural Policy Considerations

2007 Farm Bill: Agricultural Policy Considerations. Kelly Tiller. Burley Stabilization Corporation Board Meeting Knoxville, TN January 15, 2007. Agricultural Policy Analysis Center - The University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996

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2007 Farm Bill: Agricultural Policy Considerations

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  1. 2007 Farm Bill: Agricultural Policy Considerations Kelly Tiller Burley Stabilization CorporationBoard Meeting Knoxville, TN January 15, 2007 Agricultural Policy Analysis Center - The University of Tennessee - 310 Morgan Hall - Knoxville, TN 37996 www.agpolicy.org - phone: (865) 974-7407 - fax: (865) 974-7298

  2. Potential Farm Policy Drivers • Federal budget constraints • Trade policy negotiations / suits • Current ag economy / situation • Farm program payment distribution • Balance of power in Congress • Energy prices / renewable energy

  3. Budget Constraints • Very different budget situation than in 2002 • Got $79 billion ABOVE the baseline in ‘02 Farm Bill • Not likely to maintain this level, get the same dollars authorized • Even if Congress doesn’t cut, it won’t increase, affects how the pie is sliced • Divisive for the ag sector • But maybe not as bad as 2012, 2017 ??

  4. U.S. Federal Deficit/Surplus

  5. U.S. Public Debt

  6. Projected Government Payments

  7. Implications of a Dead Doha • Dead? Or on life support? • Administration still pushing, may offer further concessions • Blame is shared, successful conclusion difficult even if the U.S. concedes more • Commodity programs likely to be challenged under current Uruguay Round agreement • Likely challenge to EU tobacco subsidies • Increases probability of bilateral trade deals • Through June 2007 • Trade promotion authority unlikely to be granted again before 2008 elections • And probably not after 2008 either

  8. Future “Current” Situation • What matters most is the situation At The Time the bill is written • Crop prices very high, likely to persist • Up from historical lows, reduces “costs” of continuation • Driven largely by non-ag demands (ethanol) • Export prospects (China) improving ?? • Costs of production high • Especially energy-related costs • Interest rates higher • Labor/immigration policy pressures

  9. Distribution of Subsidies • Renewed push for payment limits • Necessary to hold down costs • Some reform necessary for damage control • Pressure to shift funds from program crops to specialty crops while reducing overall spending • 39% of farms receive government payments (Source: ERS, 2006) • 10% of farms receive nearly 75% of payments (Source: EWG, 2005) • Pressure to shift payment basis from production to conservation • Influenced by WTO commitments • Pressure to reduce the impacts of subsidies on land values and cash rents (transfers to landowners) • Since 2000, Illinois farm real estate values have increased 68% • 1994-1999: increased between 4.2% and 9% • 2000-2003: increased between 1.3% and 3.4% • 7.4% in 2004, 27.6% in 2005, 14.1% in 2006

  10. Shifting Committee Control • Generally, more of the same • More likely to have strict payment limits • Same size pie, greater redistribution • Expanded appropriations for conservation programs • More appropriations for bioenergy and alternative fuels • Strategic food reserve more likely

  11. A Billion Tons of Biomass • Sustainable annual supply of 1.3 billion dry tons • 932 M dry tons from agriculture • Crop residues (446) • Perennial crops (377) • Grains to biofuels (87) • Process residues (87) • 368 M dry tons from forests (forest residue only) • Manufacturing residue (145) • Logging debris (64) • Fuel reduction treatments (60) • Fuelwood (54) • Urban wood waste (47) Perlack, R.D., et al. 2005. Biomass as Feedstock for a Bioenergy and BioproductsIndustry: The Technical Feasibility of a Billion-Ton Annual Supply.

  12. Summary • Not a dramatic shift from ’02 Farm Bill • Less generous program overall • More emphasis on conservation-based “green” payments • Broader distribution of payments among commodities • More emphasis on ag-energy title • Potentially a strategic reserve program • Both dairy and sugar programs will need to be carefully addressed • Compliance with WTO and Budget Reconciliation will be factors

  13. Implications for Tobacco • Not much • May be new programs for which tobacco farmers will be eligible • Farm revenue safety net (insurance-type) • Expanded conservation/green programs • May level the playing field some compared to traditional program crops • Tobacco will look more attractive, cotton-corn-soybeans-peanuts less attractive • May be opportunities to address post-buyout tobacco concerns through specialty crops provisions • May be increased competition in the Southeast from energy crops

  14. www.agpolicy.org

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