Extension economist
Oklahoma State University Extension economist Larry Sanders, right, chats with National Peanut Board Vice President for Marketing and Communications Ryan Lepicier at the Oklahoma Peanut Expo.

Budget will dictate farm bill debate

Farm bill deadlines are rarely met, but farmers and their representative associations need to set priorities and prepare to fight for what they need, says Oklahoma State University Extension economist Larry Sanders.

Budget remains the overriding concern for agriculture as Congress begins early discussion on a new farm bill, with a fall, 2018, target to get a new farm law in place.

Farm bill deadlines are rarely met, but farmers and their representative associations need to set priorities and prepare to fight for what they need, says Oklahoma State University Extension economist Larry Sanders.

Sanders, speaking at the recent Oklahoma Peanut Expo in Altus, says things are about to get busy. “As a policy wonk, I don’t believe I have ever seen a more interesting time than now,” Sanders said. “The battle is engaged.”

He adds that agriculture is already a target for cuts. Only 25 percent of the U.S. budget is available to cut, he says. “The rest is mandated spending and that’s hard to change.” The agriculture budget accounts for about 1 percent of the total national budget, but is always an easy mark. That’s no exception with a new administration that has tagged agriculture for a 21 percent cut. “That’s one of the three highest percentages scheduled for reductions,” Sanders says.  “The Environmental Protection Agency, at a 31 percent budget cut proposal, is the top.”

CUTS HAVE CONSEQUENCES

Those proposed reductions have consequences. “Every program has a constituent,” Sanders says. “You (farmers) are constituents and through your associations you make your case.”

He adds that agriculture’s constituents will go to Washington and talk about the next farm bill. Some, he adds, will want to separate farm programs from nutrition, which he thinks would be a mistake. “Without the food program, who will support a farm title?” he asks. Rural areas, he explains, have too few representatives to carry a farm bill. They need urban legislators, who are interested in nutrition programs for their districts, to pull ag programs through.

He says the next farm bill likely will closely resemble the current one—with a few tweaks.  Risk management, with a strong emphasis on crop insurance, will remain the basic structure, with additional support as needed. He says Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) will remain, “but will probably be tweaked.”

Sanders says Congress may look into ways of getting program payments to farmers sooner. “Generic base will be another issue. Commodity programs and peanut programs are not likely to stay the same, but are not likely to be taken away, either. Subsidies for crop insurance probably will remain.”

He says payment limits will be on the table, including payment caps and also the definition of “actively engaged.”

“The farm bill has historically been enacted to provide stability for producers. That has not always worked,” he says.

As legislators begin discussing farm bill concerns and as farmers begin to put talking points together for a new administration, they work within an economy that may not be as bad as advertised.

PRETTY GOOD ECONOMY

“The last administration left a pretty good economy,” Sanders says. “GDP is up, consumer spending is up, wage and salaries are up (but not enough with pockets of problem areas), and the deficit has declined, despite what you’ve heard.”

He says a stronger dollar is hurting export potential, and foreign debt remains troubling. Inflation rate is relatively low and interest rates have risen recently but are still low.

The economic trend, Sanders says, shows improvement. “We had that hiccup just after 2008, but we are back on an upward trend. The trend is not on the original line,” he says, but it is in the right direction.

He anticipates a bit of “pull and tug” between President Trump and the Federal Reserve. “The president wants to get the economy going and create jobs, and the Fed wants to increase interest rates and keep a lid on inflation.”

He says foreign governments still see the United States as a good place to invest.

TRADE ISSUES

He is concerned about trade. Backing out of the Trans Pacific Partnership (TPP), for instance, may have little immediate impact on agriculture, “but it could be important in the long term.”

“Some 40 percent of economic growth is in the Pacific Rim,” Sanders says. “That’s where the long-term opportunity existed for TPP.” He says peanut export to Asia has been significant. “Exiting the TPP could affect that opportunity.”

He says getting out of the North American Free Trade Agreement (NAFTA) “could hurt agriculture.” Another pending trade agreement, one with Europe, would be a positive move for agriculture. “We’re not sure what Trump will want to do. A trade agreement with Europe is important and would be beneficial to peanuts.”

Developing countries offer the best opportunity for agriculture trade, Sanders says. “Most population growth will come from poorer countries; that’s where the growing market is; those are your customers.”

Sanders says farmers and ranchers face some interesting times as a new administration begins just as new farm bill discussions heat up.

Rural America expects much from Trump and a Republican Congress, but nothing is guaranteed. “Farmers must align with other interest groups,” Sanders says, “not just other farm organizations but outlying groups. You can’t stand alone and be successful in developing new farm policy.”

 

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