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Corn+Soybean Digest

The Farm Bill: A $12 Billion Question

The AMTA Debate

There’s a $12 billion Farm Bill question looming on the horizon waiting for an answer. A former Congressman from Minnesota says the debate to reach that answer may likely revolve around disparity.

Tim Penny, senior fellow at the University of Minnesota’s Humphrey Institute of Public Affairs, recently outlined his thoughts on the Farm Bill’s current challenges, and what it faces in the months ahead, during a speech at the third annual meeting of the Minnesota Agri-Women's Conference.

Penny believes that Congress will likely budget in $12 billion Agricultural Market Transition Act payment (AMTA) as part of the next Farm Bill. "The question is, how much will be in direct cash payments to farmers and how much will be split off into other programs," Penny says.

According to Penny, the typical Midwest family farm grosses $100,000 to $240,000, receiving $11,000 in subsidies and netting $21,000 in on-farm income. The next "level" of farmer, grossing between $250,000 and $500,000, receives nearly twice as much in subsidies and almost triple in on-farm income. In contrast, farms that gross $500,000+ receive $25,000 in subsidies but generate $175,000 in on-farm income. That's more than eight times the income of a typical family farm. From a production standpoint, Penny noted these three groups generate 13, 15 and 51% of the nations total ag output, respectively.

But the bigger question still remains: Who gets the money? Penny says congressional debate will rage over the argument that a sizeable share of the payments goes to producers that don’t really need it. The likely $12 billion figure is approximately double the AMTA payment, from 2000 and about equal to the current AMTA plus emergency payments.

Historically, Penny stated that farmers have liked the Freedom to Farm Act and its mantra of planting flexibility. Freedom to Farm passed with the idea that the trade-off for planting freedom was to implement a more market-based system. As part of the equation, the AMTA payments were scheduled to decline for several years and settle in at a few billion dollars around 2002. Instead, Penny says emergency payments have brought Freedom to Farm costs in at $19 billion over budget in the last three years. The major factor in this change was an enormous loss of export sales, brought on by the Asian currency crisis, the strengthening dollar and rising fuel costs, he says.

Editors note: Want your opinion to be heard on the upcoming Farm Bill? You can e-mail your congressman from the following link.

Likely Programs for Farm Bill

Besides the AMTA debate, Penny says Congress will be considering three components the next farm bill program.

The first would be similar to the status quo, a subsidy system linked to crops produced.

The second is a focus on risk management similar to the crop insurance bill that was passed last year and the introduction of a tax-exempt account for producers. This account would allow producers to save money in good years to draw from in bad years.

The third is an initiative by House and Senate Democrats to put more money into conservation programs and make conservation linked to payments. Currently one-half million acres are on a waiting list for the Wetlands Reserve program and 66 million acres are on a waiting list for the Environmental Quality and Incentives program. These programs could be given more funding and new programs could be developed.

Penny says that any or all of the above scenarios are a likely outcome of the Farm Bill.

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