Veneman Outlines a Different Agriculture

September 28, 2001

Agriculture Secretary Ann Veneman Wednesday followed the outline of USDA's farm policy principles made public earlier this month, describing a farm and food system that operates "in a far more complex business environment than in the past. The situation today also is far different than when many of our policies, programs, regulations, and other aspects of the public infrastructure were put in place."

She told the panel it was time to consider whether the public policies, institutions, and investments that have served the sector well in the past century "are still the most relevant and effective." Past experience and changes to the agricultural and food system could form the basis "for principles to guide review and development of new policy approaches, revamped institutions, and redirected investments."

She noted the emergence of agricultural biotechnology and its rapid and widespread adoption in this country "is posing significant new challenges throughout our food system and the global trading complex." Agricultural biotechnology holds "tremendous promise," but the StarLink corn incident "clearly illustrated the importance of continuing to assure a coordinated and rigorous science-based approach to this emerging technology."

Agriculture is being influenced by many of the same forces that are shaping the U.S. economy, Veneman said, including the globalization of markets and culture; advances in information, biological, and other technologies; and fundamental changes in our family structure and workforce.

"The combination of these forces has now produced a decided shift from the commodity-based, surplus-oriented, production focus of the last century to one now defined by products, services, markets, and consumers. Increasingly, our consumers insist on defining what is produced, how food production takes place, and with what effects. The food system now is clearly consumer-driven."

In farming, a concentration of resources into fewer and larger farms occurred throughout the 20th century. While production doubled over the last 50 years, farm numbers declined by more than two-thirds. Today, about 150,000 American farmers produce most of the food and fiber. While among the world's most competitive farms, these commercial operations make up just one segment of U.S. agriculture. USDA counts another 2 million plus farmers who meet the criterion of potential sales of at least $1,000 of agricultural products annually, including many people with non-farm occupations but who enjoy rural lifestyles, she noted.

"A vast diversity of businesses and households emerges out of this multitude: niche farms, hobby farms, hunting preserves, dude ranches, you-pick operations, farms that sell directly to consumers through farmer's markets, bed and breakfasts, and more."

The widespread importance of off-farm income illustrates that for the majority of farm households, "the vitality of the general economy is far more important to their well being than the level of commodity prices," said Veneman, reflecting "the reversal of the long-term trend of declining farm numbers to the 1990s and modest increases since 1996. The long-time prosperity in the general economy accounts for this, particularly boosting small farm numbers that primarily serve as rural residences.

The Bush administration believes the concept of an economic safety net for farmers should be continued "to help cushion occasional adverse financial circumstances that are clearly beyond their control. The task then becomes one of defining such a safety net that is both appropriate for our diverse producers and suitable for the times," Veneman said.

Supporting prices "is self-defeating," she added. "Government attempts to hold prices above those determined by commercial markets have made matters worse time after time. Artificially higher prices encouraged even more unneeded output from the most efficient producers at the same time they discouraged utilization, consequently pushing surpluses higher and prices lower. Costs to taxpayers grew until the point was reached where something more had to be done. All too often, that turned out to be finding ways to restrict output."

Supply controls proved costly to taxpayers and consumers and the unused resources were a drag on overall economic performance. "But, perhaps most important, limiting our acreage was a signal to our competitors in other countries to expand theirs, and we lost market share that is always difficult to recapture," she said.

And while isolating stocks from the market when supplies are abundant is attractive for its short-term stimulus, "such stocks eventually must be returned to the market, and they limit the recovery of prices. Moreover, time after time, stocks have proved costly to maintain, distorted normal marketing patterns, ceded advantage to competitors, and proved tempting targets for political tampering."

Policies should provide a market-oriented economic safety net for farmers, said Veneman. "The national recognition that the farm sector is both unique and essential is long standing and widely held. The result is a parallel commitment to policies that support open markets and those that prevent excessive downturns in the farm sector. Thus, these programs must conform to basic public policy principles including effectiveness, transparency, equity, consistency, comprehensiveness and trade competitiveness."

Current policies take several forms including counter cyclical loans, crop and revenue insurance and direct payments but could be constructed with other programs (such as tax-deferred income accounts) that fully comply with such principles, according to Veneman.

A subject that has received little attention is what Veneman called the "agriculture infrastructure," the fundamental public sector underpinning for the industry. The agricultural infrastructure includes research, information, inspection, monitoring, testing, promotion--all of the basic services, facilities, equipment, and institutions needed for the economic growth and efficient functioning of the food and fiber markets.

"It means services to protect farmers and ranchers from the threats of crop and animal pests and consumers from foodborne diseases, the research and cooperative extension system that undergirds production, marketing and regulatory functions, food product inspection, nutrition information, and natural resource conservation. It means all other functions of USDA agencies, as well as farm service centers, data, information technologies and intellectual property management," she explained.

"We need to evaluate this broad infrastructure with a long term view as to what is required for a healthy and prosperous farm and food sector and trading system and, very importantly, to ensure that it continues to engender widespread consumer confidence and support. This may entail refocusing institutions and their missions, modernizing and better coordinating infrastructure and perhaps expanding investment in parts of the system."

Traditional land retirement (the Conservation Reserve Program) has dominated federal spending on conservation since 1985; 92 cents of every dollar spent on direct conservation payments to farmers pays for rental and easement payments for idling environmentally sensitive crop land and cost sharing for management practices that enhance the environmental benefits from retired lands, Veneman noted. "However, considerable conservation activities are carried out on vast stretches of working lands due to voluntary actions and to comply with conservation compliance and other regulatory requirements.

"We should continue to improve our approaches and tools, ensuring that farmers have access to conservation programs that fit their needs. Technical assistance, incentives for improved practices on working farm and forest lands, compensation for environmental achievements long-term and permanent easements, and continued dedication of certain farmland and private forest lands to environmental use will provide a coordinated and flexible multi-faceted approach to achieve agri-environmental goals."