The full Senate begins debate this week on the 2007 Farm Bill, offering a chance for fresh new voices to enter the discussion on the future direction of our nation’s agriculture, food, energy, and trade policy. The $286 billion Farm Bill affects us all, which is why we at CAP welcome a full Senate debate.
The Senate Agriculture Committee will bring to the floor legislation that makes commendable progress in the areas of conservation, food stamps, nutrition, and agriculturally-based renewable energy—in particular, support for the next generation of sustainably produced biofuels. Nonetheless, a glaring weakness remains in the current legislation.
The Senate Agriculture Committee version of the Farm Bill is woefully inadequate on achieving reform of the status quo agricultural subsidy system. Fortunately, it is not too late for the full Senate to correct these flaws and secure meaningful changes on the Senate floor. But first, the background.
A flawed system
The Farm Bill doesn’t just provide a safety net to our farmers. It also establishes a blueprint and a mandate for the nation’s food stamp and nutrition programs, land conservation programs, renewable energy initiatives, international trade obligations, and numerous other programs vital to both rural and urban America.
Our current farm policy does not benefit as many American farmers, the American public, or small farmers in other countries as it should. Today’s commodity price-based programs do not apply to over 61 percent of U.S. farms. In 2005, 54 percent of all farm subsidies went to 9 percent of the nation’s farms. Five commodities—corn, soybeans, cotton, rice, and wheat—receive 90 percent of all farm payments.
Many of these subsidies distort prices, encourage overproduction, and leave small farmers in some of the world’s poorest countries unable to compete in agriculture—a critical sector of the global economy for sustainable development and poverty reduction. The reason: The U.S. government’s price-based subsidies encourage farmers to produce more and more. As commodity supplies increase, prices on open world markets tend to drop, leaving small farmers in developing countries unable to get a good price for their own unsubsidized crops.
Or consider the cost of so-called “direct payments,” subsidies that are automatically paid year after year to landowners of historically productive lands in good times and bad regardless of market conditions. Direct payments will cost U.S. taxpayers $26 billion over the next five years. The largest 10 percent of beneficiaries receive 60 percent of the direct payments.
Some estimates suggest that the federal government has paid over $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all. In addition, commodity-based direct payments also tend to inflate land values, which is a particular barrier to small farm operators and young, new farmers who rent land in order to farm.
Fixing the system
This week, the full Senate has an opportunity to set a new course. The United States has traditionally supported U.S. agriculture by investing in innovation and the development of new agricultural markets. The reauthorization of the Farm Bill provides Congress with the opportunity and the responsibility to reinvigorate and adapt our nation’s support for our farmers to meet the challenges of the future. The full Senate must shape the 2007 Farm Bill so that it more effectively rewards the hard work of a broader cross-section of farmers from more regions of the country, improves our food stamp and nutrition programs, and contributes to address the devastating effects (including in agriculture) of global warming by encouraging renewable energy and the next generation of sustainably produced biofuels. The 2007 Farm Bill should contribute to reductions in global poverty, neutralize bitter trade disputes, and open new markets overseas to sell U.S. products grown here at home.
The current bill provides a significant boost in our efforts to prepare for the next generation of cellulosic biofuels—liquid fuels sustainably produced from energy crops such as switchgrass and agricultural wastes such as corn stalks and rice hulls. Importantly, the bill also provides for the use of transparent certification and labeling criteria to encourage sustainable production of biofuels through the innovative “Voluntary Renewable Biomass Certification Program.”
An investment in advanced biofuels, however, must be accompanied by enhanced environmental safeguards and incentives for biofuel producers to conserve land and water resources, maximize lifecycle greenhouse gas emission reductions, and grow energy crops in a sustainable manner. At the same time, any attempt to introduce a Renewable Fuel Standard, which mandates a portion of our nation’s fuel supply consist of renewable fuels, in the Farm Bill at the eleventh hour is counterproductive to our nation’s overall energy policy and must be rejected. A Renewable Fuel Standard with meaningful environmental safeguards belongs in the Energy Bill—not in the Farm Bill.
In contrast, the so-called Voluntary Fuels Certification Program is a key component of the 2007 Farm Bill. The certification program is a voluntary, market-based mechanism that can be implemented in a short time frame (see chart, below). The inclusion of the low-cost certification program in the 2007 Farm Bill will expand and improve our nation’s farm and energy policy and it deserves our support.
Other key features of the new Farm Bill that deserve a fair hearing and then strong support include:
Promoting Sustainable Biofuel Production
The Farm Bill’s investment in advanced biofuels must be accompanied by enhanced environmental safeguards. This means incentives for biofuel producers to protect our nation’s land, air, and water quality and reduce greenhouse gas emissions with low-carbon performance-based advanced fuels. The primary goals of land currently enrolled in Farm Bill conservation programs should not be compromised for the sake of biofuel production.
Biofuel crops can be produced in a sustainable manner. The use of transparent certification and labeling criteria to encourage sustainable production of biofuels, such as the “Voluntary Renewable Biomass Certification Program,” should therefore be implemented immediately. And farmers must have a central role in this effort.
Payment Cap Limitations and Subsidy Reform
The current Senate Agriculture Committee legislation does not address subsidy reform in a meaningful manner. Changes in the subsidy system could enhance the safety net for U.S. farmers while imposing limits on the subsidies that encourage trade distortions and overproduction. This would mean enacting stricter payment limitations to ensure that assistance goes to actual producers and limiting payment limits to $250,000 per farm rather than the current $360,000 per farm.
Eliminating the so-called “Three Entity Rule,” which allows some land investors to reap more than their fair share of income support, would also go a long way toward making subsidies fairer. Instead, we need to reward all farmers for environmental stewardship, including growing dedicated energy crops sustainably, by encouraging reinvestment of $26 billion in direct payment subsidies into green payments for environmental programs on working lands. Additionally, voluntary alternative safety net proposals based on average revenue, rather than price, deserve strong consideration.
Opening New Markets
Our farmers compete in a global economy, which means the international dimensions of the Farm Bill must not be neglected. Our current farm policy and subsidy system is being challenged as a violation of international trade rules by Brazil, Canada, and several other nations.
Instead of defending ourselves against endless trade disputes, the full Senate should proactively enact farm legislation that strengthens U.S. agriculture, encourages exports to new markets and new customers, and ensures trade liberalization, development, and poverty reduction move forward simultaneously.
Conclusion
In the 2007 Farm Bill, the Senate has an opportunity to enlist more farmers in renewable energy and conservation, improve our food stamp and nutrition programs, strengthen the links between large and small producers at home and abroad, and reach out to our key trading partners to make progress on global trade negotiations.
In order to achieve these goals in fiscally challenging times, the Senate must address reform of the current subsidy system in a direct manner through payment limitation efforts and other means. The tools are available in the form of numerous amendments scheduled to be introduced this week. All that remains is the collective political will to act in the best interests of the entire nation and pass a 2007 Farm Bill we can all be proud of.
Jake Caldwell is Director of Policy for Agriculture, Trade, and Energy at the Center for American Progress.
Read more about the Farm Bill: