As bad as fiscal 2011 federal budget cuts were, 2012 could be even worse — “cuts will be much deeper under all the proposals we’ve seen,” says Chip Morgan, executive vice president of the Delta Council.
“I don’t know if our friends on the agriculture committees in Congress have the stomach to write a farm law in such a bad fiscal environment, so it may be later than expected, before they actually get around to it,” he said at the annual meeting of the Delta Council/Southern Cotton Ginners Association’s Ginning and Cotton Quality Improvement Committee. “If they extend the present law, they will be forced to mandate cuts across all spending accounts.”
The fiscal 2012 budget in the House would cut $30 billion from commodity programs and crop insurance, $18 billion from conservation, and $127 billion from nutrition programs — a total of a little less than 15 percent for all three, Morgan says.
“In my 37 years with Delta Council, the fiscal outlook for writing a farm bill is about as bleak as I’ve ever seen for southern agriculture.”
Entitlement programs and defense take about 82 percent of the total federal budget, Morgan notes, and “farm programs are a drop in the ocean in comparison to the costs of those programs.
“One issue that is absolutely going to influence congressional attitudes about the 2012 farm bill is that, in recent years, we’ve had the biggest commodity price increases in history.
“The perception in Washington is that everyone’s selling cotton for $1.40, and with such high prices for commodities today, there’s no reason to have farm programs.”
The federal budget is “what’s driving the train in Washington,” Morgan says, and “we can expect cuts to agriculture in the budget reconciliation process. When we hear that a debt ceiling has been agreed to, the waves will start coming in as to the cuts we can expect in fiscal 2012. From what we’re seeing, it looks like we’re facing about $10 billion in cuts to agriculture next year.”
The likelihood of Congress doing much on the farm bill this year is slim, “unless something dramatic happens. Our friends in the House are carefully monitoring whether it is a good time to begin farm bill debate.”
Penalized for success
Ironically, says Morgan, the success of the 2008 farm bill and higher commodity prices will have an adverse impact on the 2012 bill.
“Spending on the commodity titles, countercyclical payments, and the marketing loan haven’t cost as much as was expected when the 2008 bill was written. Because we’ve spent less, our baseline spending going forward will be less — in effect, having a success in the current law will penalize us in the new law.”
And, he says, direct payments “will have a big bullseye painted on them when it comes to cutting farm program spending, even though this is only about $5 billion per year for all crops. There’s just not much federal outlay on agriculture left to cut.
“The Congressional Budget Office is using March 2011 baseline numbers to determine market prices for the life of the next farm bill and, with the exception of soybeans, their projections show reduced market prices. This is pretty frightening, in light of the increases in farm input costs.”
“In all our talks with people in Washington, we don’t hear anything about expansion of farm programs — it’s just ‘cut, cut, cut.’”
Congressional staffs are looking at all the options, Morgan says, but “the big question is: Can agriculture take these kinds of cuts, and will there be anything left for continuation of effective farm programs?”
There are 38 programs in the 2008 farm bill that have zero funding for 2012, he says.
“It would take $8 billion to $10 billion to reauthorize these programs. If we want to maintain them in the future law, we’ve got to take money from somewhere else in the agriculture pie to offset the costs. Commodity, conservation, nutrition, and crop insurance programs are key targets because that’s where the funds are.”
One scenario Morgan fears: If the only objective is to save money, some would suggest that a great way to do it would be to update cotton bases, and not yields — but that would have a major impact on the value of farmland and a drastic impact on income protection.”
Changes in roster of friends
Last November’s mid-term election brought major changes in agriculture’s roster of friends in Congress, he says.
“A lot of new members came to Washington with just one message from their voters: reduce the cost of government.
“The huge gains by Republicans in the House took its toll on many of the Blue Dog Coalition, mostly Southern Democrats who were friends of farm programs. However, many of the new members are also good friends and have helped us on farm issues.
“We lost nine members on the House committee, seven of those from cotton districts. There are now no Democrats on the Senate Agriculture Committee from a cotton or rice state. As we move forward with the farm bill process, we’re working with the new members who recognize the importance of agriculture to the nation.
“This may be the first time in my memory that there is an effort to determine if a crop-specific farm policy would be better than everyone being covered by the same policy. That’s a pretty foreign concept to most of us.”
The Brazil cotton case — and what will have to be done to carry out the terms of that agreement — will also have to be factored into the new farm bill, Morgan says.
Also, the SURE program is not funded for 2012. “SURE costs about three times as much as direct payments, and in the Mid-South it has had very low participation.”
Morgan and Bowen Flowers, Delta Council president, were in Washington during the period when there was major flooding along the Mississippi River.
“There was a lot of interest in the flood, but there was very little interest in drafting disaster legislation,” Morgan says. “And that’s pretty much the current attitude about the 2012 farm bill, — not many of our friends can figure out how to write a farm bill with drastic reductions in funding allocations.
“The bottom line is that we need to try and impress on the people in Washington that agricultural market prices have not reached some new plateau that has a floor under it, that commodity prices will not always remain at current levels, and that all farm programs should not be thrown away.”