National budget concerns are not just an issue for 2011. "Budget challenges will drive us for a generation of farm policy," according to Brad Lubben, University of Nebraska public policy specialist. He offered observations on budget battles and the upcoming Farm Bill debate to producers attending a soybean management field day at Matt and Dallas Breitbarth's farm near Bancroft recently.
Direct payments to farmers will be a target for reductions in the next Farm Bill, Lubben said. "Some say that they are gone altogether," he said. "They are certainly ripe for cuts.
Direct payments will be a shrinking part of the policy."
According to Lubben, direct payments account for $5 billion annually. These payments are easily targeted for cuts because they are fixed and are paid to farmers no matter what, even as net farm income has risen to record levels in recent years.
Crop insurance subsidies are another target for reductions, Lubben said. Accounting for $5 to $8 billion each year, subsidies from the federal government to support crop insurance have gone up because rising commodity prices have caused insurance premiums to jump. "Such cuts will really hurt at the farm level," said Lubben.
Even conservation programs are on the chopping block these days, he said. These so-called "green" payments account for about $3 to $4 billion each year, so cutting such programs would carve into annual deficits.
Programs like food assistance, which account for 80% of the Farm Bill, are not mentioned often for cuts, although they make up the biggest chunk of expenditures. "It's difficult to target food," said Lubben, particularly when the economy is poor.
In the global economy, Lubben said that controlling supply and demand in order to increase price levels is not as feasible as it once was. He sees a major shift in farm policy to support of risk management tools. Some experts are suggesting that programs like Average Crop Revenue Election (ACRE) and Supplemental Revenue Assistance Payments (SURE) might be combined with a crop insurance component in the next Farm Bill, to eliminate overlap between programs and efficiently deliver some relief to farmers. "It's possible to imagine a program that more effectively manages risk and costs less money," Lubben said.
Although it is not discussed much in budget debates, how Farm Service Agency (FSA) delivers farm programs to farmers administratively is also part of the budgetary equation. Combining staff and local offices to cut costs will continue to be part of the budget discussion, Lubben said.
Because the federal safety net that farmers count on will apparently shrink, Jeff Peterson, president of Heartland Farm Partners, told producers that they need to be prepared. "The marketplace is changing and there are greater risks," said Peterson.
"You need to assess your risk and maybe use strategies that get a strong floor in place" to protect current commodity prices on crops.
"Pay attention to global markets," Peterson said. "Practice yield estimates and understand the tools and options you have available." He suggested that farmers analyze the new Farm Bill as it develops and build a management strategy that takes emerging farm policy into consideration.
If you'd like more information on Farm Bill policy debates and strategies in risk management, contact Lubben at 402-472-2235 or email [email protected].