Exciting Times? The Outlook for U.S. Agriculture during a World Food Crisis. Dr. Vincent Smith Professor of Agricultural Economics Department of Agricultural Economics Great Falls: May 6, 2008 Billings: May 8, 2008. Is There A World Food Crisis. What is the Evidence?
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Dr. Vincent Smith
Professor of Agricultural Economics
Department of Agricultural Economics
Great Falls: May 6, 2008
Billings: May 8, 2008
High prices raise intriguing issues:
We are all waiting, as of May 3, for Congress and the White House to come to an agreement. Hopefully, we will know more by next week!!!!!!!!
Here are some things we do know from last week’s Senate/House conference committee discussions
2. Funding for direct payments will be cut by about 2% for three years (a reduction of about $100 million a year among all crops receiving direct payments). The direct payment for wheat is currently 52 cents per eligible bushel. For corn it is 28 cents and for barley it is 24 cents. The proposed change would result in about a 1 cent reduction in that amount.
3. Some changes will be made in target prices, with implications for counter-cyclical payments. Increases for wheat, soybeans, oats and minor oilseeds, but not for corn or barley.
The alternative Average Crop Revenue program provides a fixed per acre payment plus an additional payment when the average crop revenue for the crop of interest in a state (or nationally) falls below a certain percentage (90 percent in the senate bill) of its long run average.
No direct payments or stewardship payments for non-farmers with Adjusted Gross Incomes in excess of $500,000.
Reduced payments to farmers and ranchers with AGI’s in excess of $950,000.
6. A Standing Disaster Relief Program will be established for crops (called the Supplemental Revenue Assistance of SURE program in the Senate Bill). Funding is at approximately $1 billion per year.
The conference committee has also added in a Livestock Forage Program, funded at $75 million per year. Payments will be triggered by a drought index for each county
The new standing disaster program is called the Supplemental Revenue Assistance Program (SURE)
It is a “whole farm” revenue guarantee program.
Payments will be made only to counties that are declared to be disaster counties by the Secretary and other counties that are adjacent to them.
At the farm level, average revenue is estimated for each crop or forage and the revenue guarantee no more than 90% of that whole farm average revenue.
Farms receiving disaster payments that also receive crop insurance indemnities will have those indemnities reduced by the amount of the disaster payments
Farms must have crop insurance or NAP for all crops and forages covered by those programs.
The goal is to end ad hoc disaster payments.
7. The Federal Crop Insurance program will remain largely unchanged, at least from the perspective of agricultural producer.
Funding is being cut by approximately $570 million per year, mainly through reductions in reimbursement payments to insurance companies for their administration and operations expenses.
8. Conservation programs continue including:
b. Conservation Security (now Stewardship) Program (with additional funding of about $250 million per year).
9. Energy Policy:
b. Funding for new subsidies for the construction of cellulosic based (switchgrass, corn stalks, etc.) ethanol plants.
10. Organic and Specialty Crops:
b. $230 million over four years for specialty crop research (including genetics, plant breeding, mechanization, food safety and pests and diseases).
1. The Senate and the House still want to subsidize farmers and ranchers and there is little change in the total level of direct subsidies.