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"The safest bet is that the commodity programs will not change
much," said Robert L. Thompson, the Gardner Professor of
Agricultural Policy in the Department of Agricultural and
Consumer Economics. "But there is just enough of a higher
likelihood of change -- due to the federal budget deficit, the
breadth of recognition that the programs are not achieving their
stated objectives and the current World Trade Organization
negotiations in Geneva -- that some more fundamental changes
might be possible." Thompson's remarks came in a review of the
next farm bill, delivered recently in Washington, D.C., at a
seminar hosted by the Cordell Hull Institute.
He contended that the current objectives of U.S. farm policy
are at odds with 21st-century reality.
"The most common arguments in favor of government support for
agriculture are low farm-family incomes and 'excessive'
variability in those incomes," he said. "Two-thirds of American
farmers receive no farm-program benefits because they do not
grow 'program' crops. There is no evidence that these farms are
less profitable than those receiving farm-program benefits."
There is also, he added, a misperception in the U.S. public
at large about modern farming.
"Most Americans are too far removed from the farm to have
much understanding of modern American agriculture," he said.
"There is a nostalgic view of the small, family farm that is way
out-of-date."
One source of these misperceptions is the government
definition that deems a farm to consist of any place that sells
over $1,000 worth of agricultural products a year. These are
further broken down into three groups: rural residence farms,
intermediate farms and commercial farms.
"Over 1.2 million of the 2.1 million 'farms,' so defined,
sell less than $10,000 worth of product per year," he noted. "In
no sense are these so-called farms viable commercial businesses
that can support a family. They are actually 'rural residence
farms' or 'hobby farms' or both.
"In fact, 77 percent of the farms in the United States, by
official definition, collectively contribute only 14 percent of
the country's production of food and fiber. On average, they
earn more than the median family income from nonagricultural
sources and lose money on their farming operations."
Another misconception, Thompson said, is that corporate
agribusinesses have taken over American farming and receive most
of the farm-program benefits.
"This is false," he said. "Most commercially viable farms
today are incorporated for tax and estate-planning purposes and
ease of transfer of ownership between generations.
Agribusinesses account for less than 10 percent of farm output,
and much of that is in the production of nonprogram
commodities."
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Despite shrinking numbers of farmers, agricultural commodity groups
have retained considerable political clout.
"U.S. farm programs have never been subjected to a binding budget
constraint," he said. "Even in 1985, when the Gramm-Rudman-Hollings
Bill mandated across-the-board reductions in federal outlays to
reduce the deficit, the Congress passed a farm bill that authorized
the largest farm-program benefits ever. Whether the environment in
2007 when the next farm bill is written will be any different
remains to be seen."
But, he added, the historical solidarity of the commodity groups,
which has enhanced agriculture's political clout, may be showing
signs of cracking.
"Leaders in farm and commodity organizations are beginning to
acknowledge that 2007 may be different, that Congress is really
going to have to do something about the federal budget deficit and
that agriculture will be forced to 'participate' in deficit
reduction," he said. "One hears suggestions that the intercommodity
and interregion solidarity may break down in the face of a tight
budget constraint."
Another factor with considerable potential influence is the
current WTO trade negotiation round.
"Because agriculture is so important in the economies of most
low-income countries, it is viewed as the make-or-break issue
in the negotiations," Thompson said. "The United States has said
that it would reduce its trade-distorting agricultural subsidies if
other countries will reduce tariffs and increase quotas to provide
greater market access. The developing countries say they cannot open
their borders to products whose world market prices are artificially
depressed by the subsidies that high-income countries provide their
producers. The developing countries say, in effect, that the
high-income countries have to go first."
Thompson said there will be no agreement in the current round of
negotiations "until both the least-developed and the developing
countries perceive there to be something of value in it for them.
The ingredients are in place for at least one more high-profile
failure at the upcoming WTO ministerial gathering in Hong Kong this
December."
There is a great risk, he said, that the current WTO negotiations
will end with a minimalist agreement in agriculture that requires
little change in U.S. farm programs and also forgoes the great
potential growth in world agricultural demand that real agricultural
policy reform and trade liberalization would enable.
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences] |
