Administration Seeks Broad Agricultural Policy

April 19, 2001

The Bush Administration seeks an agricultural policy that extends far beyond price supports and income protection, according to Agriculture Secretary Ann Veneman. Trade, tax relief, research, biotechnology, energy and new uses for farm products are an integral part of the Bush policy structure, she said Wednesday in remarks prepared for delivery at the ninth annual Sparks Companies food and agriculture policy conference.

Bush wants taxes reduced for taxpayers in all tax brackets and is "committed" to eliminating the estate tax that "unfairly burdens the family farmers and small business owners," Veneman said. "He is committed to ensuring that all regulation be based on sound science and common sense, and that all sectors of the food chain are heard in the policy making process--from producers to processors to retailers to consumers. And he is committed to forwarding our progress in employing research that increases food safety, improves the efficiency of the food chain, and devises new uses for agricultural products."

Expanding trade, however, is Bush's top priority for USDA. "The benefits of free trade are clear, as are the benefits of trade agreements, both bilateral and multilateral," Veneman said. Most U.S. meat exports go to countries where the United States has trade agreements or preferential arrangements such as Canada, Mexico, Japan and South Korea. "And while it's true that the value of U.S. agricultural exports are down sharply from five years ago, the gains from NAFTA (North American Free Trade Agreement) and the WTO (World Trade Organization) should not be overlooked."

Expanding trade opportunities "presents clear implications for domestic farm policy." Domestic policies that artificially boost prices also reduce domestic consumption, reduce competitiveness in world markets, and "make our own domestic markets more attractive to foreign producers. A sound agricultural policy for a country that is extremely efficient and very competitive in world markets is one that expands export opportunities, rather than reducing our ability to compete."

When farm incomes decline significantly, farmers and ranchers should be helped, she added, but "when we do, we should help in ways that aren't counterproductive. Any successful new policy will have to walk a very fine line between providing an adequate safety net without encouraging dependence on government. Government payments should not obscure the adjustment in production and markets that inevitably must occur, if prices and incomes are to rebound."

Increasing incomes "beyond what is sustainable through the marketplace" also prevents land values from adjusting" and leads to increased production costs and a reduced ability to compete with overseas producers.

Annual ad hoc assistance to farmers, such as was appropriated in the last three years, has problems. "It does not provide farmers and ranchers, or their lenders, assurance about the role of the federal government in the future. It can also turn into a political bidding war, which attempts to relieve the patient's symptoms without addressing the disease. Furthermore, given the wide variety of issues facing farmers and ranchers, and the now unknown challenges that are sure to emerge, agricultural policy must be broader than simply writing checks when farm prices and incomes are weak," according to Veneman.

Contemporary agricultural policy "extends well beyond simply price and income support programs (and) includes trade, conservation, agricultural research, animal and plant health, food safety and human health and other programs. All of these programs must work to a achieve an efficient and productive U.S. food chain that provides safe, high-quality products."

One way to reduce the prospect that the "government will intervene too heavily in down years" is to introduce new programs that will better enable farmers and ranchers to protect themselves. "That's why the Administration supports the creation of farm and ranch risk management accounts, known as FARRM accounts. These accounts can provide a mechanism for producers to protect themselves from low prices and incomes, reducing the reliance on the federal government and the distortions that may arise," she said.

"Obviously, there is much concern about the amount of aid farmers and ranchers will receive this year, and in the future. The size and form of this aid raises some fundamental questions. For instance, what's interesting about the near-term aid is that we have only just begun to plant the 2001 crops and we don't know how the weather will affect production during the coming months. How can we determine the needs of producers without first getting a handle on the weather and the supply, as well as demand and price prospects for the 2001 crops?"

She added, "Before we provide for a large increase for farm program spending above current baseline projections, we need to at least ask the question: What is a sustainable level for spending on farm programs--is it $20 billion per year? $15 billion?"

Veneman also questioned whether there might be a need to target benefits to producers who need them most, echoing her Democratic predecessor, Dan Glickman. "Should the next farm bill continue with a one-size-fits-all policy? Currently, about 18% of farms report gross sales over $100,000. That 18% represents 344,000 farms which produce over 87% of total U.S. agricultural production. The needs of these farms may be very different than the needs of the 82% of farms which earn less than $100,000 and produce less than 13% of total production."

She also addressed the need for conservation as a component of farm policy. The demand for new types of conservation programs is strong, she said, but "unfortunately, there doesn't seem to be any kind of consensus about how they should look."

Said Veneman, "With the public demanding that we do more to protect the environment, from reducing farm runoff into our lakes and rivers to restrictions on the burning of wheat and rice straw, we must strive to strike a better balance between our investment in retiring land and our investment in managing producing land. We must do a better job of targeting the limited funds we have for cost-share programs. We have to do a better job of working with local and state governments, and our partners to ensure funds are spent effectively and leveraged to the maximum extent possible. We must work with Congress and other government agencies so that when regulation becomes the last resort, those regulations are based on sound science and allow for the utmost flexibility in addressing environmental problems. And, we must invest in agricultural research."