A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Focus on issues

Back to the Farm Bill saga

Momagri Editorial Board

January 2, 2017

“The only certainty is that nothing is certain”, said Pliny the Elder. This is also what we keep in mind upon reading the latest special issue of Choices
1 magazine on the Farm Bill and its potential evolution during the Trump era. As a journal of popular science, this issue of Choices presents six articles aimed at igniting the debate on the next Farm Bill reform which will take effect on 1st October 2018. In particular, three articles caught our attention because they offer historical depth on the main components of US policies for agriculture and food.

The article by Carl Zulauf and David Orden
2 describes the “saga” of the Farm Bill’s evolution over 80 years. In an evolutionary approach to public policy, the two researchers highlight the flexibility of the Farm Bill, which has adapted to social, economic and political developments, in order to constitute “an on-going series of experiments undertaken to fit circumstances of the time”. In the end, the main constant of this evolution lies in the subjects under consideration. For eighty years, the Farm Bill has been based on three pillars: farmers, food and land. We note in particular that the countercyclical era that began in 1973 and for a time considered as in decline, was reinforced by the elimination of decoupled aid in 2014. The analysis by yield shows the relative importance of the various plant and dairy yields in terms of budgetary aid since 1980. Though the authors remind us that sugar is the only yield to have escaped the elimination of supply control mechanisms, they remain quite cautious with regards future developments by indicating that as anticipated with each reform, it is not excluded that the “nutrition” factor be removed from the Farm Bill. More convincingly, they discuss the possibility of a fusion between the two main field-crop countercyclical programs: ARC and PLC3. The current environment for low prices renders the ARC scheme, which triggers aid based on the difference of average incomes, the amount of which is capped at 10% of crop turnover, less useful. Zulauf and Orden also point out that the perspective of low prices is likely “to increase pressure to save [public] money on crop insurance”.

The article by Gary Schnitkey and Carl Zulauf discusses in more depth the dimensions of current aid and future developments concerning field crop safety nets
4. With regards the arbitration between PLC and ARC, they remind us that the turnover guaranteed by the ARC programme is calculated in relation to the PLC reference price when the prices are lower than the latter. The authors refer to the changing context for agricultural prices: “The 2014 Farm Bill was discussed with an expectation of a downward moving price environment but prices were not expected to be average much below the references prices”. For them, one of the main challenges for the next Farm Bill will be how to make the PLC program less costly for public spending and insurances. One way to reduce the cost of insurance would be to eliminate the possibility that turnover insurance be advantageous to farmers in the event of a rise in prices. Thus, for Schnitkey and Zulauf, discussions on the upcoming Farm Bill “would be the first time that target price programs, in the form of PLC, will be pitted against crop insurance”.

Another sector, other issues and other programs. In the third article, Andrew M. Novakovic and Christopher Wolf discuss the specifics of the dairy policy
5, which was reinforced by the Agricultural Act of 2014, by reminding us that “milk production supply controls were also seriously considered and proposed [during the negotiation]”. They report the reasons that lead to the creation of the Margin Protection Program (MPP): the previous MILC support program was limited to small-scale operations and the margin insurance system (LGM-Dairy, Livestock Gross Margin for Dairy Cattle) had a poor subscription rate. Reporting the latest data on MPP participation in 2016, they show that though the subscription rate to the program remains fairly stable compared to 2015 (around 50% of farms opted for the program), the insurance cover chosen is clearly down, with 77% of beneficiaries selecting minimum coverage, which costs only $100 in subscription fees. Novakovic and Wolf explain this evolution by the formula that calculates aid activation which is poorly calibrated6. Development on this subject is expected in the next Farm Bill. This is likely to be the case for the Federal Milk Marketing Order to the extent that we are expecting a reform of the fixed-price double-quota system which is still in effect in California. In order to integrate California into the federal policy, the FMMO framework could be expanded to include other regulatory measures in addition to those currently in place. In conclusion, the two experts remind us of the importance of marketing boards in understanding the sector's position on international trade issues: ensuring the sharing of added value between producers and processors, the sector is more competitive in export. Unfortunately the same cannot be said for everyone...

The investiture of Donald Trump carries its share of uncertainties with regards agricultural policy and other issues. Does this mean there will be a revaluation of the Farm Bill nonetheless? It is unlikely that the US agricultural policy, cleverly formed over eighty years, firmly secures its farmers whilst improving the competitiveness of its produce for export. At best, a budget adjustment towards countercyclical mechanisms and to the detriment of insurance should be one of the subjects of discussion. It is in this sense that Momagri also advocates restoring the CAP’s economic dimension. Moreover, it has been almost three decades since the United States turned its back on stabilizing international trade prices, and Trump's isolationist inclination toward US participation in world affairs only confirms this.

1 http://www.choicesmagazine.org/choices-magazine/theme-articles/looking-ahead-to-the-next-farm-bill
2 http://www.choicesmagazine.org/(...)/looking-ahead-to-the-next-farm-bill/80-years-of-farm-billsevolutionary-reform
3 http://www.momagri.org/(...)/The-new-US-Farm-Bill-Reinforcing-agricultural-insurance-subsidies-(...)_1515.html
4 http://www.choicesmagazine.org/(...)/looking-ahead-to-the-next-farm-bill/the-farm-safety-net-for-field-crops
5 http://www.choicesmagazine.org/(...)/looking-ahead-to-the-next-farm-bill/federal-interventions-in-milk-markets
6 For more details http://www.momagri.org/UK/focus-on-issues/Milk-crisis-US-made-pragmatism_1787.html

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