A PERSPECTIVE ON THE FARM BILL'S REFORMS OVER THE YEARS
Feb. 21, 2014
Source: Farm Policy facts news release
U.S. farm policy has undergone a radical transformation in recent history to better respond to evolving conditions, and the reforms made in the 2014 Farm Bill continues that trend.
The result: More market-oriented farm policies that reduce taxpayer expense and place more responsibility on farmers.
The road to reform began in the early 1990s. Global food and fiber demand was on the rise, commodity prices were strengthening, U.S. agriculture had rebounded from the farm crisis of the 1980s, and farmers were poised to harness the power of new technology to help feed and clothe the word.
But U.S. farm policy was not equipped for the transformation. Even with gradual market-oriented changes that had been implemented in successive farm bills, New Deal policies contained far too much government control over supply and demand decisions to thrive in international markets where nimbleness and flexibility is key.
So in 1996, Congress decided that farmers and ranchers, not the government, were best equipped to make business decisions about their farms. A new "freedom to farm" approach gave growers the flexibility to make planting and marketing decisions based on their own analysis of world markets and local growing conditions.
Key to the "freedom to farm" concept was the "decoupling" of payments that would unlink federal farm policy and production. The thought was that if support was not tied to a farmers' production then it would have a minimal effect on producers' decisions and the resulting production and commodity prices.
The policy this transformation produced -- today called direct payments -- was embraced by pro-trade advocates in the United States and international community alike. But providing this type of assistance to farmers in good times and bad was hard to justify to the American public. Plus, the policy proved insufficient in helping farmers cope with the weather or market risks of modern farming when these things turned really bad.
In the late 1990s and early 2000s, disasters outside of farmers' control set forth an unsustainable path of taxpayer-funded disaster bills. To help farmers better manage risk and to reduce taxpayer burden, subsequent reforms were made.
U.S. crop insurance, which requires farmers to pay premiums and shoulder a portion of their losses through deductibles, was strengthened in legislation passed in 2000. And in 2002, a new Farm Bill bolstered "countercyclical" farm policies. This assistance was still decoupled, but would only kick in when prices unexpectedly fall.
Then, late in the 2000s, a new challenge arose. The U.S. economy was struggling and the federal deficit was rising. So agriculture stepped to the plate and offered up cuts to its policies to better reflect the times.
All told, the 2008 Farm Bill and changes made to crop insurance in 2010 slashed more than $12 billion in farm policy-related expenditures. Among the signature changes was the application of income means testing to farm safety net participants. In short, very wealthy growers couldn't participate.
That trend of reduced spending and reforms to best reflect today's challenges continues in the 2014 Farm Bill. Some of the key reforms in the package which passed by significant margins in both the House and Senate and was signed into law as "The Agriculture Act of 2014" include:
Reduced spending on farm policies of more than $14 billion over 10 years.
• Elimination of direct payments.
• Total savings and reforms of $23 billion.
• Further strengthening of crop insurance and other policies that only kick in in the event of deep losses.
• New caps on individual farm policy benefits to further tighten budgets.
New environmental standards for farmers who purchase crop insurance.
Armed with a new Farm Bill to meet today's challenges, the future of U.S. agriculture looks bright. And that's a good thing since we have only a thin green line of 210,000 full-time farms left to help meet rapidly growing demand.