Administration Calls for Broad Farm Policy Reforms

September 20, 2001

The Bush administration is calling on Congress to redirect farm and agricultural policy away from the emphases of the past toward what it sees as a new matrix of consumer, trade, environmental, technological and conservation concerns. Although not abandoning the more traditional farm programs, the USDA collection of farm policy principles, released by Agriculture Secretary Ann Veneman this morning, strongly advises redirecting traditional programs.

With a new emphasis on the demand side (retail, trade, etc.), the document, titled Food and Agricultural Policy: Taking Stock for the New Century, states flatly, "Even the most carefully designed government intervention distorts markets and resource allocation, produces unintended consequences and spreads benefits unevenly."

The 120-page document does not reveal new principles never considered before; instead it collects into one report a broad spectrum of policy directions discussed over the past several years but not yet incorporated into law.

It points out the well known fact that the large commercial farms receive 47% of direct government payments, yet these are the farms that manage incomes above the national average even without the payments.

"Intermediate farms," those that make a profit from farming but do not generate enough income to sustain the owners without income outside the farm, take 40% of federal payments, leaving 13% of the payments for "rural-residence" farms, operations so small that many of the owners don't even consider themselves farmers. These are owners whose incomes are nearly totally from off-farm sources.

By implication, the administration seems to be saying program payments truly matter only to intermediate farms; commercial farms can function efficiently and effectively without payments, and the small farms border on hobby operations.

It's a proposal unlikely to be implemented into policy to any great extent anytime soon, but it also is a document that can be embraced by several agricultural and food sectors and opposed by almost as many.

The document also flies in the face of the House farm bill that calls for target prices and an enhanced program payment system that retains annual payments similar to the Freedom to Farm payments in effect since 1996. That leaves the administration to the mercy of the Senate Agriculture Committee which has yet to finalize a farm bill.

USDA officials have presented the document to President Bush, the Office of Management and Budget and Capitol Hill officials and members of Congress as well as the various commodity groups that represent farmers in Washington. Bush approved the document.

Veneman, in announcing the document today, said, "Farmers today operate in a global, technologically advanced, rapidly diversifying, highly competitive environment that is driven by increasingly sophisticated consumers. The various policies, programs and supporting infrastructure that serves our food system will require updating to meet future needs."

The intermediate category of farms is considered "businesses in transition," according to the USDA document. "They may be beginning farmers or farmers nearing retirement, but a common characteristic is that keeping the farm going generally requires off-farm income sources. The path to profitability for most lies in lowering production costs – often available only expanding their farming operations, especially if their focus is crop commodities."