Agriculture Panel Calls for More in Budget

March 16, 2001

The House Agriculture Committee has called on the budget committee to authorize what could amount to several billion dollars more for farm programs. "We first wanted to make clear that the crisis in agriculture is not over," said Agriculture Committee Chairman Larry Combest (R-TX). "In fact, with increasing input costs and little to no price recovery, it is only getting worse, and based on this, assistance will be needed in 2001."

Combest and ranking Democratic Rep. Charles Stenholm (TX) said, "While the $25 billion in assistance that has been provided over the past three years has been effective, farmers need a farm program that they can bank on at this time of year. To make such long-term structural changes to our agricultural policy, we are clear that money needs to be added to the agricultural baseline. However, by making this investment in policy that will support farmers in times of need, we believe we could actually save money in the long run."

The text of the letter details certain factors considered beyond the control of producers that have contributed to wheat, corn and a soybean prices being 31% below USDA projections from the time the current farm bill passed: for the 2001 crop year, energy costs are expected to contribute to an additional $1.5 billion increase in production expenses; USDA estimates that the value of the dollar is up 25% relative to other currencies and up 40% relative to U.S. competitors' currencies, and U.S. producers face the "daunting challenge" of competing with the average 1997-99 European Union subsidy level of $342 per acre, while the average U.S. subsidy level was only $43.

"We recommend that, rather than providing additional assistance on an emergency, ad hoc basis, the budget allocation for agriculture be permanently increased," wrote Combest and Stenholm. Their rationale is twofold, they added, points Stenholm made in testimony this week to the budget committee.

First, ad hoc assistance is by its very nature unpredictable — producers and lenders alike are justifiably nervous about including any dollar figure for ad hoc assistance in cash flow calculations. The inability to count on this assistance affects not only producers and lenders, but ripples throughout the rest of the agricultural sector. When farmers are not sure about income, bankers are not sure about lending — and that uncertainty ultimately affects retailers, input suppliers, equipment manufacturers, and everyone else in rural America.

Second, increasing the allocation for agriculture is a more predictable and disciplined approach to budgeting. The past three years have shown that Congress has the will to provide necessary assistance when existing programs are inadequate, but emergency waivers of the budget act have led to spending greater than it might otherwise have been. "Indeed, we believe the more disciplined approach of providing monies up-front in the budget would result in savings over the long run."