US Agri-food Policy and the Farm Bill: A Canadian Perspective

Al MussellSenior Research Associate

Overview

Purpose/policy drivers

Basis for US Farm Bills

Major programs supported

Pressures/outllok facing 2013 Farm Bill

Why care? Canadian perspective

US Agri-food Policy Drivers

Fear that terms of trade will turn against farmers

Support of rural economic development

Control of treasury exposure to fund programs

International trade rules

Implicit focus on field crops, also dairy

Mix of stabilization and entitlements

US Farm PolicyMostly originating from New Deal period, 1930’s• Agricultural

Adjustment Acts- 1933, 1938

• Agricultural Acts- 1948, 1949

First “Farm Bill”- omnibus

legislation- 1965

Farm Bill roles:• Amend “permanent”

farm legislation- from 1938 and 1949

• New farm/food programming

• Appropriations to fund new and continuing programs

Major Programming Areas

Supplemental Nutrition Assistance Program

Crop insurance

Conservation programs

Crop-specific programs:• Direct payments• Marketing loans• Counter-cyclical payments

Crop Specific Programs• Farmers receive a set payment based on past crop

acreage, yield• Not contingent on current cropping decisions

Direct payments- historical acreage, yield

• Farmers receive loan on expected crop production at “loan rate”

• Repay at the lower of actual crop price or the loan rate; now loan deficiency payment

Marketing loans

• Deficiency payments based on crop target price vs actual price

• Allocated on historical “base” acreage, historic yield• Means of limiting program cost- “flex acres”

Countercylical payments

• Guarantees crop revenue/acre at a state average yield and price

• Update to higher price and yield versus other programs• Must give up some benefits under other programs to

enroll in ACRE

Average Crop Revenue Election (ACRE)

US Farm Bill- 2008

Followed by Commodity, Conservation, and Crop Insurance titles

Nutrition title about 2/3 of funding- SNAP (Food Stamps)

Major componentsCommodities Conservation Trade Nutrition Crop

insurance Research Rural Development Credit

15 Titles

Agricultural Policy Program Support Overview, United States

2005 2006 2007 2008 2009 2010

PSE ($US M) 40,626.19 30,496.30 33,174.15 30,477.49 31,423.17 25,551.50

Payments on Commodity Output ($US M) 15,187.35 6,931.62 13,448.17 1,925.39 5,174.78 1,885.99

Payments based on input use ($US M) 9,234.40 9,394.64 8,893.61 9,293.83 9,327.52 9,567.73

Payments Based on Area, Animal Units, Receipts, or Income ($US M)

13,804.28 11,741.28 8,494.36 16,905.81 14,306.44 11,489.78

Payments based on Non-Commodity Criteria ($US M)

2,400.16 2,428.75 2,338.00 2,352.46 2,614.43 2,608.00

PSE Percentage 15.26 11.22 10.01 8.76 10.07 7.04

Total Support/Cash Receipts %

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00PS

E Pe

rcen

tage

2005 2006 2007 2008 2009 2010

Source: OECD

Pressures on 2013 US Farm BillBudget- cuts

from 15-20% or more possible

Sequestration Discretionary budget

Demand for new programs,

solutions

“shallow loss”- grains Dairy Horticulture

Regional pressures

Crop insurance (Midwest) vs

direct payments

(South)

Greater budget exposure to crop ins., less to traditional

programs

Future of conservation programs in high price environment

Farm Bill Outlook

Extension of 2008 legislation to end of FY 2012/13

Ongoing budget uncertainty

Negotiation of new trade agreements

Downward revision in 2013 crop price outlook

Lack of agreement on dairy

Why Care?

US among largest players

in world grain/livestock

complex, sensitive to

policy changes

Agri-food policy

asymmetry; US vs. Canada

Canada in a free-trade relationship with US• mCOOL• Corn countervail

Canada competes with

US for ag inputs,

resources

Farm Bill distorts agri-

food investment

climate