I can't exactly remember when, but at some point a few months back the United States Department of Agriculture released formal farm bill proposals. It certainly feels like a long time ago, and since then those proposals have pretty much fallen off the face of the earth. (Note- we did review the administration's proposal in our March newsletter). And perhaps a bit more attention should have been paid to Agriculture Secretary Johanns and his proposals in the past few months, because he is now beginning to make a little noise- and probably make some people more than a little nervous.
One of the primary thrusts of the administration's proposal was ensuring a WTO-friendly commodity title. Along those lines, they proposed increasing direct payments (paid regardless of production or price, thus classified as "non-market distorting" by WTO), substantially changing countercylcical payments, and reducing marketing loan benefits (both of which are paid only when prices are low- not WTO-friendly). The adminstration also proposed doing away with the ban on planting fruits and vegetables on land receiving farm program payments, another item the WTO frowns upon. That ban is strongly supported by the fruit and vegetable industry, which does not want subsidized farmers competing with their producers, very few of whom receive farm program checks.
Unfortunately for the administration, the two gentlemen running the House and Senate Agriculture Committees have other ideas. They don't particularly like direct payments (a legacy of the 1996 Republican-written farm bill), so there is a great deal of chatter about taking money out of the direct payment program and putting it into countercyclicals and marketing loans- the exact opposite of what the administration proposed. The House approved a peanut support program that followed the reducing-direct payments model a week ago, and it is expected that the same general thrust will be included in the commodity title approved later today.
Not only that, but the ban on planting fruit and vegetables remains intact in the most recent version of the House farm bill. Essentially, to keep the fruit and vegetable people happy, you would have to give them a bunch of money (in the form of new programs) if you really wanted to do away with that ban. And as has been noted here before, money is very very tight. So the ban remains, another slap in the administration's face.
But now Johanns is fighting back. It has become ever more clear that the 2007 farm bill is shaping up to be something the adminstration really won't like, and Johanns is not sitting still. His fired his first salvo June 7th, according to DTN's Chris Clayton:
Secretary of Agriculture Mike Johanns expressed some specific worries to farm and commodity groups this week about the focus on proposals to move funds from direct payment programs to other commodity program uses -- changes he believes could increase the likelihood of World Trade Organization challenges...Obviously, the administration hopes that it can jawbone farm group representatives and the Congress away from programs they believe could make U.S. policies both less equitable and more subject to litigation by trading partners. At the same time, feedback from the meeting suggests substantial skepticism on the part of participants that the administration would actually veto a farm bill, especially one passed by a healthy margin. [Read More Here]
Is that the V word I just heard?
Continue reading the full post below.