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Eliminating commodity programs reduces net farm income by 25 percent

(Friday, Sept. 2, 2005 -- CropChoice news) --

1. Eliminating commodity programs reduces net farm income by 25 percent
2. ACGA calls on Congress to provide emergency assistance
3. Going organic to feed the soul
4. California tomato farmers dabble in sustainable agriculture

1. Eliminating commodity programs reduces net farm income by 25 percent

by Daryll E. Ray, Ph.D.
Agricultural Policy Analysis Center
University of Tennessee

The structure of the 2007 Farm Bill has engendered a lot of discussion at most of the meetings we have attended this summer. Of particular interest has been the impact that trade negotiations will have on the shape of the new farm legislation. The impact of trade negotiations has generated significant attention since the recent cotton ruling went against the U.S. While not dealing with other U.S. crops, some of the language in the decision makes it clear that government support for other crops might be in danger as well.

One of the provisions of current commodity support programs restricts those participating in these programs from taking the direct payments and then switching to the production of vegetables and fruits. Because this provision influences production decisions, it could be held to be trade distorting, possibly throwing U.S. direct payments out of the green box (non-trade distorting) and into the amber box (trade distorting).

Some would like to solve the issue of subsidies and boxes by eliminating all subsidy programs in the U.S. and allowing agriculture to respond to market forces. Those who advocate this solution argue that trade subsidies in countries of the global north, like the U.S. and the E.U., are responsible for overproduction and low prices.

Proponents of this view hold that if agricultural markets are allowed to work freely, the agricultural sector will prosper. So that farmers, agribusinesses, and consumers can make efficient decisions, it is necessary to eliminate any government actions that may interfere with market signals. The expectation is that all market forces ≠ supply, demand, price, and structure ≠ will respond to free market signals and adjust in a timely and efficient manner.

To estimate the potential impact of a policy that involved the elimination of the three major sources of U.S. farm program payments (direct payments, marketing loan payments, and counter-cyclical payments), our office (the Agricultural Policy Analysis Center at the University of Tennessee) conducted a study to see what would happen if subsidies were eliminated. This study is available online at http://www.agpolicy.org/blueprint.html .

Counter to the expectation of the advocates of the elimination of U.S. crop subsidies, in response to the elimination of the three subsidies, total U.S. planted acreage for five crops (corn, wheat, soybeans, cotton and rice) fell only slightly from what would have been expected under a continuation of present policies. By 2011, the five crop acreage decreased by one million acres out of 234 million acres, all of which can be attributed to cotton and rice. This was not unexpected due to the tendency of farmers to plant all of their acres under a wide range of prices and conditions. Cotton was down slightly less than 900,000 acres from what would have been expected under a continuation of current policies.

Prices for the various crops increased over the 2003-2011 period, but not enough to stop a drop in U.S. net farm income from around $50 billion a year to $33-$36 billion a year, a decline of 25 percent or more. Government payments dropped by $14 billion a year, an amount almost identical to the drop in net farm income. For major crop producers, net farm income declines by well over 50 percent.

The prices for corn, soybeans, and wheat do not increase while the prices of cotton and rice increase by less than 10 percent in 2011. The general expectation for crop agriculture was that U.S. production would decline appreciably and prices would increase significantly. This was not evident from the simulation. Developing countries were no better off as the result of the elimination of U.S. subsidies than they were under current policies. This study suggests that the expectations of trade negotiators that developing countries will benefit from the elimination of subsidies may not be realized in the real world.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UTís Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; dray@utk.edu; http://www.agpolicy.org. Daryll Rayís column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

2. ACGA Calls on Congress to Provide Emergency Assistance

For Immediate Release
Contact: Larry Mitchell (202) 835-0330

WASHINGTON ≠ Aug. 30, 2005 ≠Keith Bolin, president of the American Corn Growers Association (ACGA) and a corn farmer from Manlius, Ill., today called upon the United States Senate and House of Representatives to act immediately upon their return to Washington next week to extend expired emergency assistance for farmers and ranchers hard hit by natural disaster in the 2005 crop year.

"Farmers in many parts of the nation are continuing to experience financial hardship due to weather related disasters, especially the recent hurricane as well as drought in many parts of the country," said Bolin. "For all the good intentions of the last Farm Bill and the latest improvements in crop insurance, there is no management tool available which could have prevented the financial devastation associated with the kind of losses we have experienced. When you make every necessary investment in a crop only to see it washed and blown away in a matter of hours or the hot sun bakes and withers it away day after day and week after week, it is a very disheartening experience."

Under Public Law 108-324, enacted by President Bush last October, "the Secretary of Agriculture shall use such sums as are necessary of funds of the Commodity Credit Corporation to make emergency financial assistance authorized under this subsection available to producers on a farm (other than producers of cottonseed or sugar cane) that have incurred qualifying crop or quality losses for the 2003, 2004, or 2005 crop (as elected by a producer), but limited to only one of the crop years listed, due to damaging weather or related condition, as determined by the Secretary." But assistance for those 2005 losses is " limited to only those losses caused by a hurricane or tropical storm of the 2004 hurricane season."

"Today we ask Congress to amend this expired law by adding all 2005 crop-year losses," said Bolin. "We also call upon Secretary Johanns and President Bush to provide the leadership and initiative to advance this emergency assistance. Without their leadership on this issue, this critical assistance will never be available to the many farm and ranch families facing the onslaught of the financial disaster which comes after natural disasters. Passage of this critical assistance must happen and it must happen as soon as possible."

The program, enacted last fall, but now expired, included:

  • Emergency funding ≠ no budgetary offsets required from other programs.
  • Funding was "such sums as necessary". No prorating was required.
  • Provided emergency assistance in the form of a Crop Disaster Program (CDP), Quality Loss Program (QLP) and a Livestock Assistance Program (LAP) for eligible losses sustained by producers in counties designated as primary or contiguous disaster areas during the 2003 or 2004 production years.
  • Producers had a choice to select either 2003 or 2004 production years, but not both years.
  • Payment limitations: Same per person payment limitation and maximum personal gross income eligibility provisions as in previous disaster assistance legislation.

"We need the law to be amended to include all 2005 losses and that producers be eligible for assistance for losses to their 2005 crop, even if they have already received previous assistance for either the 2003 or 2004 crop year," added Bolin. "Leadership and expedience is crucial on the part of Congress and the President on this issue.

The American Corn Growers Association represents 14,000 members in 35 states. See www.acga.org .


3. Going organic to feed the soul

By Andrea Useem
Special to The Examiner

For Mona Salah, a practicing Muslim living in Herndon, getting meat and vegetables for her family involves more than a trip to the local supermarket.

Every six months or so, she and her extended family, who live in the D.C. area, have a custom slaughterhouse near Winchester butcher a locally raised, grass-fed cow according to Islamic dietary laws. She deep-freezes and stores the meat.

For vegetables, she and others in Herndon pick up a weekly shipment of fresh, organic produce from local farms through a Community Sustainable Agriculture group.

She buys organic food "because in the Quran, God says that we are the leaders of the Earth, and we have a religious obligation to take care of it," said Salah, a mother of three.

Salah is one of a growing number of religious people who seeks out organic products - a trend that a coalition of national religious organizations hopes to build upon with their new Sacred Foods Project.

Launched earlier this summer, the effort is the combined work of the National Catholic Rural Life Conference and Aleph, a Jewish renewal organization, along with an Oregon-based nonprofit, Food Alliance, and a Chicago-area interfaith group, Faith in Place.

"We are promoting the idea that eating is a moral act," said Brother David Andrews, executive director of the National Catholic Rural Life Conference.

The Sacred Foods Project, he said, "invites consumers to think about where their food comes from - about the environment where it's produced, the well-being of workers who harvest it and the farmers who may or may not get a fair price."


For Catholics, such reflection would follow from the Catholic teaching on social justice, said Andrews, as well as the idea - such as "fish on Fridays" - that eating is integral to religious observance.

For Jews, the tradition of following Jewish dietary laws is an obvious starting point, said Debra Kolodny, executive director of Aleph, which recently received a $200,000 grant from the W.K. Kellogg Foundation for the Sacred Foods Project.

"But the hope is to involve all denominations and religions in the U.S.," Kolodny said. "We want to create a large market demand for foods that are environmentally and socially friendly."

An immediate goal of the project is to encourage religious institutions - such as churches and schools - to order food from suppliers offering organic, locally produced food.

Other strategies may include calling for "reverse boycotts," in which certain organic companies or products are given a religious seal of approval.

Kolodny said there is a new synchronicity between the also-booming kosher food industry and the natural foods industry.

Mordechai Yitzhaky, owner of the dual-location KosherMart in Rockville, the largest kosher retailer in the area, said he started stocking organic kosher chicken breasts six months ago because of customer demand.

"Right now it's a little difficult to find organic kosher meat, but a lot of kosher manufacturers are looking into organic food certification, so I expect to see more products in the next five years," he said.

Options opening up

For Muslims seeking meat that is both religiously approved, or halal, and organic, the options are also slowly multiplying.

The Masjid Muhammad in Northwest is currently raising money to buy a 72-acre farm in Charles County, Md., on which to raise organic lambs, turkey, chicken and goats slaughtered in the religiously mandated way, according to a flier from the mosque.

For now, however, Muslims seeking organic halal meat must make private arrangements, as Salah's family does.

If religiously approved organic food were more widely available, life for Rachel Weintraub, a lawyer and orthodox Jew living in the Shepherd's Park area of the District, would be a lot easier.

"I dream of one-stop shopping," said Weintraub, the mother of a toddler. But when she plans her Friday Shabbat meal - to which she and her husband usually invite eight or more guests - she finds herself making three or more stops in her effort to buy foods that are both organic and kosher.

Weintraub said the effort of keeping kosher and eating organic is worthwhile: "It makes you realize that every time you put something in your mouth, you can make a connection to God." And having kept kosher her whole life, she said she is used to paying a premium for food that meets her religious needs.

This spirit of sacrifice, said Kolodny of Aleph, is what the Sacred Foods Project hopes to strengthen. Many people see organic food, with its higher price tag, as a luxury option.

"For lower income earners, [buying organic] can feel like a financial burden," Kolodny said. As organic food becomes more popular, however, manufacturing systems should become more efficient and prices may drop, she said.

In the meantime, Kolodny said, people with less money can still choose to buy organic food.

"Even in the lower economic realm, people give to charity," Kolodny said. "So think of it this way: If you buy organic and sustainable food, you are keeping local farmers in business, and that's a charitable act."

How it works

Through Community Sustainable Agriculture, groups of people buy a seasonal share of a farmer's produce. Organic fresh fruits and vegetables are delivered each week to a place where the local "buying group" divides the food into individual shares.

To find a CSA organic farm that serves your area in Virginia, Maryland or the District, visit http://www.greenpeople.org/csa.htm .

For more information about the Sacred Foods Project, visit:

4. California Tomato Farmers Dabble in Sustainable Agriculture

August 26, 2005 ó By Jim Wasserman, The Sacramento Bee

California's Central Valley growers want to make the humble tomato, the main ingredient of ketchup, pizza and spaghetti sauce, into a dominant new player in a growing movement to curb the use of pesticides and fertilizers on U.S. farms.

After years of unsteady prices and crop yields, farmers in leading tomato counties such as Fresno, Yolo, San Joaquin and Colusa hope to boost profits and keep consumers happy by dabbling in the burgeoning movement known as "sustainable agriculture."

Central Valley farmers supply 95 percent of the nation's processing tomatoes.

Tomato growers and processors hope special labeling will one day generate sales for their produce, much as organic growers do for their crops. Some industry representatives have begun teaming with a nonprofit Maryland group known as Protected Harvest to use that moniker as a label for "sustainably grown" tomato products.

Labeling could begin within two years for tomato juice, salsa, sauces and ketchup -- more than half of a product lineup that grosses a whopping $5 billion on grocery shelves.

"We're kind of putting our toes in the water and getting a feel for it," said Rich Rostomily, administrator of the California tomato industry's largest processor, Woodland-based Morningstar Packing Co. "We do support it."

Asked what percentage of the tomato crop currently is sustainably grown, Rostomily said: "I'd be surprised if it's more than 10 percent. It's just not very much at this stage."

Estimates are hard to come by because the industry has not yet defined what sustainable agriculture means in the tomato business, but Protected Harvest has a plan to do just that.

So-called eco-labeling represents the newest twist in a food labeling movement that touts organic produce nationally -- "California-Grown" food in the Golden State, "Healthy Grown" food in Wisconsin, and in some instances, food and wine from California counties that ban genetically modified foods.

Even as organic growers often criticize "sustainable agriculture" as falling short of their environmental objectives of ending the use of chemical pesticides and fertilizers, its boosters believe they can prod more change on the farm with a gradual approach.

"We strongly support organic agriculture," said Erik Olson, senior attorney for the Natural Resources Defense Council, a New York-based environmental group. "But this can be an addition that can reach a much wider swath of the economy and of agriculture."

Winters-based tomato grower Bruce Rominger acknowledged a need for changes, saying: "We use pesticides that you can use at ounces per acre. But we have some we need to phase out, realistically, and we're working on that."

Sustainable farming is a 1980s label that has come to mean greater use of predatory insects to control pests, less plowing to curb dust and planting more offseason crops that replenish soil nutrients. It advocates family farms, greater crop diversity, better farm labor conditions and healthier rural economies.

The 4-year-old "Protected Harvest" logo, which already marks sustainably grown potatoes from nearly 6,000 acres in Wisconsin, won both praise and more than $500,000 in government funding Monday in Sacramento.

During a capital city appearance, U.S. Environmental Protection Agency Administrator Stephen Johnson stressed that "sustainable agriculture is very important to President Bush."

"Consumers want to know the food they buy is healthy for their families and is grown responsibly," he said.

Johnson's appearance marked the agency's $78,000 contribution to the tomato effort, alongside $425,000 from the California Water Resources Control Board.

The money, given to Protected Harvest, will fund a book of mutually agreed practices that specifically define "sustainably grown" for tomato processors.

Only growers and processors that follow those practices can label their product, said Carolyn Brickey, executive director of Protected Harvest, based in Arnold, Md. The group has also received a $1 million U.S. Department of Agriculture grant to eventually launch more sustainable farming practices in the state's tree fruit industry.