Updated with comments from American Farm Bureau Federation, USDA.
“A global glut of food production has sent U.S. farm revenues down sharply. With farm income down 56 percent in the past two years alone, America’s farmers and ranchers face difficult times,” said American Farm Bureau Federation president Zippy Duvall. “Yet, the president’s just-released budget would cut 27 USDA programs, including a 10-year, $18 billion cut to the federal crop insurance programs so important to farmers. And all this happens as farm income is projected to decline another 3 percent in 2016.
The Obama administration released its final budget proposal on Feb. 9. Perhaps the most talked about part of the budget in agricultural circles has been the proposed changes to crop insurance.
The proposal includes two proposals to reform crop insurance. The first reduces subsidies for revenue insurance policies that insure the price at the time of harvest. The second reforms prevented planting coverage and removes the optional buy-up coverage.
The changes are being proposed because USDA has been criticized by the Inspector General and the General Accounting Office for management of the crop insurance program, specifically as it relates to prevented planting, Agriculture Secretary Tom Vilsack said during a Feb. 9 conference call.
“We also believe, given the circumstances, that this is a partnership, a balanced partnership, between taxpayers, farmers and insurance companies and the reality is that in some of our . . . in the price harvest loss program, we are funding, or subsidizing 62% or so of the premium, that is taxpayers are. We think it makes more sense in a partnership to be closer to 50/50 so that’s the reason.
“And, you know, the fact is, if you surveyed the United States, if you surveyed the population of the United States, and you posed the question to them about this, I would be surprised if there wasn’t support for the administration’s position,” Vilsack said.
The federal crop insurance program costs the government about $9 billion a year, on average, including $3 billion for private insurance companies to administer and underwrite the program and $6 billion in premium subsidies to farmers.
The reforms are expected to save $18 billion over 10 years.
The American Soybean Association agreed with AFBF regarding the crop insurance proposal.
“We once again find ourselves fighting attempts to cut crop insurance,” said Richard Wilkins, ASA president and a farmer from Greenwood, Del. “Our policy has always been that we will strongly and absolutely oppose any attempt to target farm bill programs for additional cuts, and it goes without saying that we will continue to fight proposed cuts to the farm safety net. All it takes is a quick glance around the farm economy to see that we need a stronger safety net for our farmers, not a weaker one.”
There's a whole lot more than crop insurance in the USDA budget. -- >>>
What else is in the agricultural budget proposal?
The mandatory budget for USDA for fiscal year 2017 is $130 billion and the proposed discretionary budget is $24.6 billion.
USDA’s budget covers everything from support for rural infrastructure and beginning farmer loans to trade, research, conservation and nutrition.
“The challenge for us is to make sure that we are continuing to be good stewards of the resources that are available to us, that we continue to build on the record amount of activity this department has had over the past seven years, that we continue to invest in rural America, creating economic opportunity, that we continue to provide an appropriate safety net for farmers and ranchers while also encouraging young people to get into the business and by making sure that everyone, regardless of their zip code, gets a fair shot in life, which we can do through our nutrition programs,” Vilsack said.
What are some of the items funded through the proposed budget?
- The budget provides $700 million, including $325 million in mandatory funding, for the nation’s premier competitive, peer-reviewed research program for agricultural sciences. Investment in agricultural investment yields high returns per dollar spent, according to USDA.
-The budget for broadband grants is tripled to $39 million to bring broadband to rural residents. About 25 percent of rural households lack access to high-speed internet, according to USDA.
- It provides $15 million for the purchase of food aid commodities for shipment overseas and calls for USDA to have an in-country presence in Cuba.
In fiscal year 2014, Cuba imported more than $2 billion in agricultural products, including $300 million from the United States, according to USDA.
Having a representative in the country will expand this market.
“We believe that having people in Cuba would help facilitate opportunities now and in the future,” Vilsack said. “I don’t think that we currently have the authority, absent some direction from Congress to be able to use existing resources within the USDA budget to fund personnel.”
- The budget provides $11 million for conservation, which is expected to result in an additional 2.9 million acres of conservation being put into place, and it funds the Environmental Quality Incentives Program at the authorized funding level of $486 million.
-The budget supports farm loans, ensuring access to credit for more than 43,000 farmers and ranchers to cover operating costs and purchase or refinance farm property.
-There’s $30 million to increase preparedness for animal disease response, such as avian influenza.
-The Food Safety and Inspection Service would receive $8.5 million to modernize its science-based decision-making process.
-The budget provides funding for the Women, Infants and Children nutrition program, the Supplemental Nutrition Assistance Program and a Summer Electronic Benefits Transfer for Children Program. More than $18 billion is budgeted for WIC and the summer feeding program.
What do ASA, AFBF see in the proposed budget?-- >>>
Positives in the proposed budget
Wilkins said the ASA is pleased with the $330 million for CFTC oversight.
“Market integrity is not front-of-mind until something goes wrong, and adequate resources for oversight of futures markets are an important priority for farmers,” he said.
ASA will also fight for funding for trade promotion programs, including the Market Access Program and the Foreign Market Development program, which the president included in his proposal.
“That money helps to fund valuable research and market development work by the U.S. Soybean Export Council, which translates directly into increased exports and revenue for American soybean farmers,” Wilkins said.
Duvall singled out increases in funding for food and agricultural research and antimicrobial resistance research as positives.
Negatives in the proposed budget
The budget cuts funding to the Army Corps of Engineers by 22 percent, according to the ASA. The Corps oversees the maintenance and construction of locks and dams on the nation’s waterways. The budget cuts more than 41 percent from the Corps’ construction account, $2.7 billion from the operations and maintenance account, and fails to fund the Navigation Ecosystem Sustainability Program.
“We’re disappointed with this budget’s neglect of investments in waterways infrastructure, which is vital to rural economies as it is a means of efficient transportation of soybeans and a key component of our global competitiveness in export markets,” Wilkins said. “Infrastructure investments should not be limited to highways, mass transit, and high speed rail, but should include those aspects important to rural America too.”
Duvall said provisions in the budget would raise taxes on inherited assets.
“Such treatment is a recipe for farm fragmentation and an unnecessary obstacle for agriculture’s next generation,” he said.
Will it pass?
From a legislative standpoint, the president’s budget is a non-starter in an election year and with a Republican-controlled Congress, Wilkins said, however the release of the budget can start a productive conversation on the importance of funding many of the programs critical for soybean farmers.
“Every year, we bring the same funding fight down to the wire in November and December. Party leaders hold one another’s feet to the fire, and at the eleventh hour we manage to eke out funding for programs that are essential to farmer success,” Wilkins said. “Regardless of the long-term prospects of this specific proposal, let’s use it to at least start a discussion about how important these programs are to farmers, and how we get them funded for the coming year.”
“That work has to start with farmers,” he said. “We need to turn up our volume and increase our face-time with lawmakers so that they understand these programs aren’t simply line items on a budget, but real, working tools that help us operate more successfully.”
Read the administration’s USDA proposal.