March 2007 Newsletter


INSIDE
Federal Micro Entrepreneur Bill Introduced
President’s Budget Endangers Rural Development Programs
Online Changes at the Center
Natural Amenities and Farm Income 
Corporate Farming Notes
Midstates Development Conference
Nebraska Year of the Windmill Proclamation
Development Matters
REAP Loan Limit Raised to $35,000
WTO Looms over Farm Bill Debate
ESSAY: Payment Limit Bipartisan Hypocrisy
FEATURE: Administration’s Farm Bill Proposal

Proposed Federal Legislation Promotes Rural Micro Entrepreneurs
Senate bill would use a successful model from Nebraska to support a growing and dynamic rural micro business-based economy

On February 13, U.S. Senators Ben Nelson of Nebraska and Ken Salazar of Colorado introduced S. 566, the Rural Entrepreneur and Microenterprise Assistance Act, to provide financial and technical assistance to microenterprises and entrepreneurs in rural areas. The Center worked with both senators in developing this bill, and it is a program the Center has advocated for inclusion in the 2007 Farm Bill.

Senator Nelson unveiled the Rural Entrepreneur and Microenterprise Assistance Act at a hearing of the Senate Agriculture Committee. Joining Nelson was Chuck Hassebrook, the Center’s executive director, who endorsed the proposal during testimony before the committee (see Chuck’s rural development testimony).

The bill would assist entrepreneurs and microenterprises by establishing a Rural Entrepreneur and Microenterprise Assistance program at USDA that would:

>> Provide low and moderate-income individuals with the skills necessary to establish new small businesses in rural areas, as well as providing continuing technical and financial assistance to such individuals and businesses – both critical to their success.

>> Provide grants to qualified organizations to provide training, operational support, or rural capacity building service to assist rural microenterprises, as well as assist in researching and developing the best practices for delivering training, technical assistance, and microcredit to rural entrepreneurs.

>> Establish a Rural Microloan Program to provide technical and financial assistance to sole proprietorships and small rural businesses through direct, short-term loans with low interest rates and deferral options.

>> Provide automatic eligibility to qualified organizations for an annual grant (limited to 25 percent or less of the outstanding loan balance) to provide marketing, management, and technical assistance to small businesses that are borrowers or potential borrowers.

The proposed legislation builds off a successful program Nelson instituted as governor. The Nebraska Microenterprise Partnership Fund, created in 1997, has provided nearly 4,500 loans – totaling $6.9 million – to Nebraska small businesses.

The Nebraska Microenterprise Partnership Fund estimated that last year alone the program helped create or save 7,500 jobs at a cost of just $330 per job. The Center’s Rural Enterprise Assistance Project (REAP) receives funding from the Nebraska program. (See more about small business development and REAP.)

In testimony before the Agriculture Committee, Chuck Hassebrook expressed strong support for the legislation, stating that it would, “tap the rural development potential of small entrepreneurship.” The legislation calls for an annual budget of $50 million for the program.

Contact: Jon Bailey, 402.687.2103 x 1013 or jonb@cfra.org for more information.

President’s Budget Again Endangers Rural Development Programs 
FY08 budget recommends near destruction of long-existing federal rural development and rural asset-building funds and policies

On February 5, President George Bush released his Fiscal Year 2008 budget, and as has been the case for the past several years there is little to cheer about for rural communities. Following are some of the president’s FY08 budget proposals relevant to rural development and rural asset-building:

>> Entrepreneurial Agriculture: The FY08 budget proposal recommends leaving the Value-Added Producer Grant program (VAPG) at its 2002 farm bill authorized level of $40 million. That’s the good news. The bad news is that in a different part of the budget the administration recommends cutting the VAPG program to $15 million (compared to the current $20 million appropriation level).

>> Rural Development: The FY08 budget recommends cutting all funding for the Rural Business Enterprise Grant (RBEG) and the Rural Business Opportunity Grant (RBOG) programs. The administration’s farm bill proposal recommended including these programs in a new, “consolidated” rural development business development grant program. It seems USDA uses the same definition of “consolidation” rural people have come to understand in terms of things like schools and businesses – elimination. The president’s budget also eliminates other rural economic development programs such as the Rural Empowerment Zones and Enterprise Community Grants programs.

>> Community Development: The president’s budget would eliminate the Economic Development Administration public works program that provides funding and leverages private funding for infrastructure projects in rural communities. The president’s budget would also eliminate the Rural Housing and Economic Development Program (in the Department of Housing and Urban Development) and would cut about 20 percent off the Community Development Block Grant program (which is used by many communities for community development, economic development, and infrastructure projects). The president’s budget also recommends nearly eliminating funding for the Resource Conservation and Development (RC&D) program, recommending over 70 percent less funding.

>> Small Business Development: In one piece of good news, the president’s budget does not propose the elimination of the Small Business Administration Microloan program as it has the past three years. However, the president’s budget does propose elimination of the Small Business Administration program that allows programs like the Center’s REAP program to provide vital non-loan assistance to rural entrepreneurs.

>> Housing: The president’s budget recommends eliminating all rural direct lending housing programs and eliminating or substantially reducing all rural housing grant programs.

As has been the case for the past several budget proposals, the president’s FY08 budget recommends the almost total destruction of a long-existing federal rural development and rural asset-building funding and policy program. As we have often said in these pages, that is the wrong direction for the future of rural America. More resources and more emphasis on rural development are needed, not less.

The debates over the FY08 budget and the 2007 farm bill will provide Congress ample opportunities to stand up for a vibrant rural America.

Contact: Jon Bailey, 402.687.2103 x 1013 or jonb@cfra.org for information on building rural assets and wealth. See our rural development virtual library for resources.

Online Changes at the Center

With the help of recent additions to our staff, we are working to redesign the Center’s website. We hope to unveil the redesigned and updated site around the first week of March. The Center’s site will have improved navigation, new features, and frequent updates. The popular Blog for Rural America will be integrated directly into the site.

Also look for future announcements about two more exciting online projects underway at the Center. One project will take the National Rural Action Network to the next level with its own website and a specific online organizing plan. The other will introduce a new site designed to provide a one-stop location for information about rural community development and revitalization consistent with the Center’s mission and values. These two projects will unfold over the next six months.

Stay up-to-date on all of the Center’s online efforts by joining the National Rural Action Network today. Visit www.cfra.org to sign up and see the in-progress updated site for yourself.

Contact: Brian Depew, our web development specialist at 402.687.2103 x 1020 or by email, briand@cfra.org .

Increasing Farm Income with Natural Amenities
Agritourism can increase income per acre, but growth may bring challenges to community stability

Last month we highlighted a study by ECONorthwest detailing the current use of Nebraska’s natural amenities and showing how that use might be adapted in new and different ways. This month we look at how farm income can be supplemented using natural amenity growth.

There is no doubt that agriculture is the economic powerhouse in Nebraska. However, farmers and ranchers constantly face challenges that amenity-driven growth might help to alleviate. Agritourism can reduce input needs while supplementing income up to $10 to $20 per acre by some estimates.

An increase in amenity-driven farm sector growth would be accompanied by a decrease in the detrimental effects on water and soil quality brought on by agricultural production. This creates two benefits — a direct positive income result from the enterprise and an indirect positive effect on protection of the environment.

Amenity-driven growth in Nebraska may also yield other benefits for farmers and ranchers who are able to use their assets and create a demand. As more people are attracted to the area, the demand for land by households, developers, and investors will increase.

This is speculative, but the study clearly shows a constant play between supply and demand across the Nebraska landscape over the next few years. Amenity-driven growth will play itself out in some areas while other areas will grow slower. And this type of growth will come with its own set of challenges.

Growth will bring instability to the current community. Some of this may be positive, but if left unchecked, the amenities we hold most dear may be bought and dealt and eventually be accessible only to the rich. These difficulties and others clearly illustrate why management of transition is so vitally important.

Even with great efforts towards this economic opportunity, there will be significant impediments to overcome. One of the biggest obstacles will be to change the conversation and attitudes currently driven by production agriculture. Other significant impediments will be to curtail any further degradation of our natural amenities and to improve the access available to many of our natural resources.

Next month we’ll wrap up this series on amenity-driven growth by showing how this conversation might look in your community.

Contact: Michael L. Holton, michaellh@cfra.org or 402.687.2103 x 1015 for more information on rural community development.

CORPORATE FARMING NOTES
Legislative groundwork is underway to include a broad competition title in the farm bill

On February 15, Senator Tom Harkin (D-IA) introduced legislation to foster competition in livestock markets that serve family farmers and ranchers. The bill lays the foundation for a competition title in the 2007 farm bill. Unfortunately, no stampede of senators is beating a path to Senator Harkin’s door to co-sponsor the bill, despite the fact that during the election cycle they made a lot of hay with rhetoric about “standing up for family farmers and ranchers.”

Let us give credit where credit is due, however. Senator Max Baucus (D-MT) quickly became a co-sponsor of Senator Harkin’s competition bill. And Senator Chuck Grassley (R-IA) has announced his intent to reintroduce legislation banning meatpacker ownership of livestock.

Harkin’s bill calls for fair treatment of producers who labor under contracts with packers and processors, will define what constitutes an undue price preference when packers deal unfairly with small and mid-sized farmers and ranchers, and will establish a special counsel’s office for enforcement of competition policy within USDA. Anyone who can’t muster the political will to support these provisions should not claim they stand with family farmers and ranchers.

The American Meat Institute and the National Cattlemen’s Beef Association are exerting pressure on Congress to oppose these reforms. But recently the Center for Rural Affairs joined 211 farm, faith, and rural organizations in calling for a competition title, with these provisions, in the farm bill.

Family farm and ranch livestock production has been decimated in the five years since a conference committee tossed aside the hard-fought competition reforms won on the Senate floor in 2002. Without action now, in another five years far fewer farmers and ranchers will be around to fight for.

Those senators and representatives whose voices are yet unheard on these issues, a vast majority, must steel their resolve and offer much needed leadership. Both Senator Harkin and Senator Grassley’s bills need and deserve broad, bipartisan co-sponsorship and support.

Each of us bears the responsibility of urging our senators and representatives to lead the debate, publicly, instead of following the herd. If enough of us demand they stand with rural America, demand the leadership they promised in their campaigns, we will not lose. Time is of the essence, but every day we stand, undaunted, brings us closer to victory.

Contact: John Cratree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

Midstates Development Conference in South Sioux City

On March 20, 2007, the Midstates conference will be held in South Sioux City, Nebraska, at the Marina Inn. This conference spotlights real stories about communities that have been successful in keeping their hopes and dreams alive. This year two breakout sessions will promote discussion around several topics: value-added agriculture, regional collaboration, diversity, creative financing, quality of life, Main Street, and entrepreneurship.

The conference’s featured speaker is Pat McGill from Training Resources. She will discuss how to get out of the Fear Zone and get into the Constructive Zone. As a motivational speaker, Pat has led people into living their best lives possible and helped to create positive reinforcement to communities who are seeking betterment.

Look for a copy of the Midstates conference brochure on the Center’s website. Contact Michael Holton for more information, michaellh@cfra.org or 402.687.2103 x 1015.

Development Matters

The debate over the farm bill, over all of rural America’s future has begun in earnest. And once again, I write here about acts of generosity and selflessness that leave me deeply humbled and grateful.

Several Center donors recently accepted the challenge of helping find ways to meet our goal to increase fundraising 50 percent this year. At their behest we have established a secure, automatic withdrawal system.

Some individuals find that contributing smaller amounts on a monthly basis provides the opportunity to share a larger annual gift than would be possible otherwise. If you would like to consider making a monthly gift, contact John Crabtree, johnc@cfra.org or Hayley Hallstrom, hayleyh@cfra.org for help in accommodating that request.

World Trade Organization Negotiations Loom over 2007 Farm Bill
Dismantling farm programs piece-by-piece is a possibility as legal challenges mount — including programs that help rural America

The looming specter of the World Trade Organization (WTO) haunts the debate over the 2007 farm bill. Our farm bill programs are subject to legal challenge through the WTO that could dismantle the farm safety net.

Already a case brought by Brazil has resulted in the WTO declaring major parts of our cotton programs illegal. Right now, there is a process underway that will determine exactly how Brazil will retaliate if Congress does not fully comply with the WTO ruling.

The economic measures that Brazil may use to retaliate are not limited to the agriculture sector – we may well see increased Brazilian tariffs on nonagricultural items from the United States, or even see Brazil ignore U.S. patents on other products. This could cause the producers of affected goods to bring serious pressure against continued cotton subsidies.

There is a moral element to the issue. U.S. cotton programs have driven small African farmers into poverty and hunger by stimulating over production and depressing world prices. That is not the case for wheat, where production-based payments have not been triggered since passage of the last farm bill. And it is certainly not now the case for corn, where the weight of U.S. policy is to raise world prices by stimulating corn-based ethanol production.

Direct payments are generally regarded as the most WTO-friendly. Based on farms’ historic production rather than current production, they are made regardless of market prices. But unless direct payments are aggressively targeted to small and medium-size farms, these payments are most likely to be capitalized into land costs, especially when prices are high. That benefits landowners rather than farm operators.

And direct payments made when market prices are strong are difficult to justify politically, unless they are revamped as carefully targeted “structure” payments to enhance opportunity for small, mid-size, and beginning farmers. If prices stay at their current strong levels, direct payments will be the only payments made on corn, wheat, and oilseeds.

Even direct payments have a feature that the WTO has ruled illegal – land on which direct payments are made may not be planted with fruits or vegetables. In response to that ruling, the Bush administration has proposed allowing such “planting flexibility.” Increased federal aid for fruit and vegetables in USDA’s 2007 farm bill proposals is partly in response to producers’ concerns over unfair competition from former commodity growers receiving direct payments on land converted to fruit and vegetable production.

Of course, the number of potential disputes and resolutions under the WTO is infinite. The real implication of all of these complex regulations and arcane classifications is very simple. We do, in fact, face the possibility of having our farm programs dismantled piece-by-piece by the WTO. That not only includes programs that have benefited the wealthiest producers and harmed rural America. It also includes programs that are integral to the health of rural America and that have provided an important safety net for our family farmers.

WTO uncertainty, growing ethanol production, and strong commodity prices create the potential to shift some of our farm spending to proven strategies that help rural America, including conservation, rural development, and research. The first step should be strict limits on payment to large farms. 

Such a shift would positively demonstrate our willingness to abide by international standards and our concern for producers in other countries. But hard choices will still have to be made regarding farm programs, and it is our collective responsibility to make sure those decisions support what is most important: the health of rural America.

If the WTO outlaws payments that have contributed to consolidation and concentration in agriculture, we should stand up and cheer. But if the WTO attempts to outlaw programs and payments that help rural America, support small and mid-sized farms, preservation of natural resources, and opportunity for all of rural America, we must fight.

Contact: Dan Owens, 402.687.2103 x 1017 or dano@cfra.org for more information.

Governor’s Proclamation — Year of the Windmill

On February 14, Nebraska Governor Dave Heineman proclaimed 2007 the Year of the Windmill. This proclamation is in recognition of the important role windmills played in the settlement of Nebraska and the symbol they represent in revitalization. The initiation of a statewide public arts and tourism project is the outgrowth of the Center for Rural Affairs’ commitment to the revitalization of rural America.

The state is excited and engaged in the project. Nineteen artists have committed to designing and erecting large outdoor sculptures across the state, and communities statewide are making plans to support creative community and individual projects. They will include exhibits of paintings, photographs, quilts, and other indoor artwork. Additionally, family tales and poems about windmills will be told and collected as an exciting oral history of our state.

We have developed a website that will showcase all artists, communities, and sponsors for the coming year and through March 2008. You can find the latest updates by visiting www.windsoflife.com . Make sure your community is included in this exciting focus on Nebraska and its effort to bring both rural and urban together through its creativity and joy of life. For more information on the windmill project, contact Barbara Chamness, barbarac@cfra.org or call 402.687.2103 x 1009.

Maximum Lending Limit Increased to $35,000 for Micro Businesses
New limit was raised by $10,000 and makes the Center’s lending rate consistent with state and federal definitions of micro loans

How many times have you heard the phrase, “You have to have money to make money”? Prospective business owners often have very little cash in hand, so need to borrow money to even have a chance to make money. So really, the phrase should be, “You sometimes need to borrow money in order to have a chance to make money.”

Making money in a business is much easier once debt is retired. The cold hard reality for most of us, though, is that we weren’t born with a silver spoon and have had difficulty in accumulating cash and/or equity in any true substantial amount. As long as we have done our homework in planning our business startups or expansions, borrowing money is many times the only way to get started in business or take a business to a new level.

Prospective businesses can now turn to the Center’s Rural Enterprise Assistance Program (REAP) for additional help in lending. After careful consideration, REAP raised their maximum lending limit from $25,000 to $35,000. This standardizes REAP loan limits with state and federal definitions of a micro loan – any business loan up to $35,000.

In 1998, REAP’s lending portfolio expanded to provide direct loans to individuals in addition to peer group loans – small loans obtained through a step-up peer group process. Peer group borrower businesses often grew beyond REAP’s lending limits, but were not eligible for loans at the local bank. And in areas where there were no REAP associations, individuals who could not access a loan at the bank did not have access to lending capital.

In the past fiscal year, REAP placed 41 Direct Loans totaling $380,560. These loans and extensive client technical assistance also leveraged over $1,398,250 in additional debt financing from traditional lenders, other revolving loan funds, and private sources. Since inception, REAP has placed 238 Direct Loans totaling $3,056,593.

The REAP Direct Loan Program is helping to leverage other funds. Clients often complete their business plans in consultation with area REAP Business Specialists and have then been able to secure a loan from a traditional lender, development district, community action agency, or a local loan fund. Historically, REAP has leveraged loans totaling $7,261,155.

Contact: Jeff Reynolds, REAP Program Director, 402.656.3091, jeffr@alltel.net for information or check www.cfra.org/reap.

The Center’s REAP program publishes the REAP Business Update, a quarterly newsletter focused on small micro businesses. The winter issue includes a feature on the growth of Muhammed Yunas’ Grameen Bank Model, which started a worldwide industry to lift people out of poverty. You can find the Update on the Center’s website, www.cfra.org/reap.

Time to Put-up or Shut-up: Bipartisan Hypocrisy on Payment Limits

Democratic congressional candidates scour the countryside for votes by proclaiming themselves the champion of the family farmer and little guy. Now they control both houses of Congress. It’s time to put up or shut up by addressing the long festering need for farm program payment limitations.

Rural politicians of both parties have long waxed eloquent about saving family farms while passing farm programs that subsidize their demise. The hypocrisy has been bipartisan. 

Northern representatives have generally given lip service to limits on mega farm payments, while southerners have opposed them in deference to large cotton and rice interests. In the end, enough payment limitation supporters have given in for big farm interests to win. In conceding, they typically justify unlimited payments as an evil necessary to maintain the farm coalition and get more money sooner for farm payments.

That is a profound mistake. The root cause of family farm decline is not insufficient government payments. The root problem is that both markets and government policy are biased toward bigness. In a pure market economy, the playing field is not level. Those with an initial advantage use it to bid land and assets away from those starting from a lesser position. And the big have economic power to gain price advantages.

The solution is to balance markets with countervailing government policies that offset the natural tendency to concentration of wealth and economic power. Without that, free enterprise ultimately consumes itself as wealth concentrates in a few hands, and there is no free enterprise.

But today, government policy reinforces, rather than offsets, the tendency toward economic concentration. Unlimited farm programs are the premier example. They are destroying family farming. 

That will change only when elected leaders demonstrate the spine to fight as hard for payment limitations as large cotton and rice interests fight against them – to block action on a farm bill until the issue is addressed.

To date, Iowa Republican Senator Chuck Grassley has provided the strongest leadership. He has argued, consistent with Republican philosophy, that there are limits to what government should do, and one thing it should not do is subsidize concentration.

With the change in control of Congress, it is critical that a Democrat of conviction step forward to lead the fight.

He/she could start by articulating a Democratic vision for how government can help create a better future for small farmers and ordinary rural people by offsetting the tendency toward concentration of economic power and wealth. That requires reducing payments to mega farms and investing the savings in small business development, value added agriculture, beginning farmer programs, and other initiatives that create a future in rural America.

In the end, rural Democrats must muster the conviction to block passage of yet another farm bill that destroys family farming while failing to invest in our future.

Congress will soon develop a new first farm bill – the first in three decades under Democratic control. The Party must decide what it stands for. Will it govern like it campaigns as the champion of the little guy? Or, will it engage in politics as usual by talking a good line but, in the end, lining the pockets of powerful interests?

Agree or disagree? Send your comments, questions, and opinions to Chuck Hassebrook, chuckh@cfra.org or 402.687.2103 x 1018.


FEATURE ARTICE:

Administration’s 2007 Farm Bill Proposal Critique
The Bush administration has released its proposal for the farm bill, including some disappointments as well as some valuable nuggets.

Payment Limitations

There is less than meets the eye. The press coverage focused on the proposal to deny farm payments to anyone with more than $200,000 adjusted gross income.

It won’t work. Large farms would easily create sufficient deductions to reduce their taxable income to less than $200,000 and keep the subsidies flowing. They would reinvest a portion of income in expansion, generating large depreciation, interest, and prepaid expense deductions to accomplish that.

The proposal may therefore have the opposite of its intended effect. It would create even greater farm program incentives for farm consolidation by dictating that mega farms either keep growing or lose all farm payments. Most will expand, if the alternative is leaving hundreds of thousands of dollars of farm payments on the table.

The proposal would also have unintended impacts on farmland rents. High income crop share landlords would be denied farm payments under the plan. Thus, they would convert to cash rents and indirectly capture the farm payment through higher rent. Cash rents are generally less advantageous for family farms, especially beginning farmers with limited capital.

A far better approach is to place an effective limit on farm payments. But on that issue, the administration would go backward. Its proposal would raise the limit on direct payments, the only payments that will be made for the foreseeable future on most commodities.

The direct payment limit would be increased to at least $110,000, from a paper limit of $40,000 and effective limit of $80,000 under current law. The administration would eliminate the three entity rule that allows farms to get around payment limits by forming three corporations. But it would apparently allow large farms to use the spouse rule to receive double the proposed $110,000 limit. The resulting effective limit of $220,000 would be nearly three times the current effective limit of $80,000.

The administration would continue to allow unlimited loan deficiency payments though generic certificates, though it would make those payments less likely by lowering the loan rate.

Nonetheless, there were three valuable nuggets in the administration commodity program proposal. It would provide a 20 percent bonus on direct payments to beginning farmers for five years – an excellent proposal. It would tighten rules requiring that farm payment recipients, except landlords, spend time working on the farm. That would block creation of phony farm partnerships to avoid payment limits.

And the administration would end payments on land purchased through future 1031 tax-free exchanges. Tax-free exchanges are driving up land prices and putting working farmers at a disadvantage with those who make a killing in superheated metropolitan land markets. The exchanges allow them to avoid taxes on their gains by investing in farmland elsewhere.

Biofuels and Energy

The administration’s proposal is focused on research to speed the development of cellulosic ethanol – the one biofuel option with the potential to displace a substantial portion of our national gasoline consumption.

The administration proposes substantial increases in existing research programs as well as several new programs. For each year, the administration proposes an additional $65 million on biofuel and bioproducts research, $20 billion on guaranteed loans for cellulosic biofuel plants, $25 million to subsidize feedstock purchases by cellulosic ethanol plants, and $50 million for the Renewable Energy Systems and Energy Efficiency Improvements grants program for smaller projects by farmers, ranchers, and small businesses.

In addition, the administration would create a new “biomass reserve program” that would allow production of cellulosic crops (i.e. switch grass, elephant grass, etc.) on land currently enrolled in the Conservation Reserve Program. The proposal has some merit, but it must ensure that the conservation benefits of the CRP are protected.

The proposal calls for delaying harvest until after the nesting season. It should also favor mixed grass plantings, which have far greater wildlife benefits than pure switch grass stands, and leave time after the last harvest for regrowth prior to winter.

Ultimately, the administration proposals are most notable for what they lack – a strategy to maximize the benefits and minimize the negatives of biofuels development. There is nothing in these proposals to encourage local ownership and control, factors critical in ensuring that farmers and rural areas fully benefit from biofuel development.

Nor is there a strategy to ensure biofuel feedstocks are produced in an environmentally sustainable manner. The conservation impacts of cellulosic production depend on how the feed stock is produced. If the research is focused on biofuel production from crop residue and we remove all residue from cropland, the soil will be degraded and erosion will increase.

In contrast, production from mixed grass prairies or production from limited removal of crop residues could have environmental benefits. Those factors must be considered upfront in prioritizing alternative approaches for research funding. As we move toward the future, strong, effective public policy will be needed to ensure that these challenges are met and the enormous promise of renewable energy realized.

Rural Development

The proposal includes some good ideas, but ignores the critical role of small entrepreneurship in revitalizing rural America.

The administration would provide $500 million in the first year of the new farm bill to address the backlog in USDA grants for water and sewer, broadband, and other infrastructure. It would spend $17 million annually to provide loan guarantees for reconstruction and rehabilitation of all of the 1,283 Rural Critical Access Hospitals.

These individual programs have merit. And the commitment of new funding to investing in the future of rural America is commendable. But overall, the administration proposal is disappointing in that it fails to recognize the importance of investing in small entrepreneurship. To the extent it invests in economic development, the focus is on biofuels.

Biofuels should be part of the strategy to revitalize rural America, but not the entire strategy. There will not be a biofuel plant in every community. Furthermore, there are advantages to small, owner operated businesses and farms that cannot be matched by a biofuel plant, especially a plant with absentee owners.

Helping rural people establish their own businesses enables them to build wealth and assets. It creates a core of local citizens with investment in and commitment to their community. It puts economic control in the hands of local residents who have a stake in their community’s future. Small entrepreneurship should be the rural development focus of the 2007 farm bill.

Beginning Farmers

The administration’s beginning farmer proposals are impressive. They include several positive changes to the down payment loan program for beginning farmer land purchases, including cutting the interest rates in half, deferring payments for the first year, decreasing the size of the farmer contribution, and increasing the maximum loan value.

The proposal would set aside 10 percent of total funding for each farm bill conservation program for beginning and socially disadvantaged farmers. In addition, it would increase technical assistance and cost share rates for beginning farmers and ranchers. As discussed above, the administration’s farm program proposal would provide beginning farmers a 20 percent direct payment bonus.

Unfortunately, the proposal fell short in one significant respect. It includes no funding for the Beginning Farmer and Rancher Development Program, created by the last farm bill but never funded. The program would fund education, technical assistance, research, market development, linkages of beginning and retiring farmers, and other initiatives to enhance opportunity for a new generation of farmers and ranchers.

Conservation Proposals

The administration’s Conservation Security Program proposal is disappointing. It would restore little of the funding previously cut from the program. As a result, the program would not be available to all producers who meet its standards for environmental stewardship, as originally intended. It would be available on only 12 percent of the nation’s farmland within the next 10 years.

On a more conservation friendly note, the administration would prohibit farm program payments on native prairie and permanent grasslands converted to cropping. And, it would roll the Farm and Ranch Land Protection, Grassland Reserve, and Healthy Forest Reserve into a single Private Lands Protection Program.

Interestingly, the program would give landowners incentives to provide public access for recreation. Depending on the details, this could provide incentives for farmers and ranchers to work with rural communities in developing natural space as a community development asset, as we have proposed.

Competition Title

Disappointingly, the administration offered no proposals to ensure competitive markets for family farmers and ranchers.

Contact: Chuck Hassebrook, 402.687.2103 x 1018 or chuckh@cfra.org or Traci Bruckner, 402.687.2103 x 1016 or tracib@cfra.org .

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