The Congressional Budget Office released new budget numbers yesterday projecting that the nation will spend $164 billion on mandatory agriculture programs over the next decade, a decrease of about $14 billion from last year’s projections. The CBO is a non-partisan branch of Congress whose work is key to agriculture policy debates, because new program costs are compared against CBO baselines used to prepare the overall spending projections.
As in previous years, the CBO numbers reveal that the majority of agriculture subsidies go to producers of feed grains, rice, peanuts and cotton. Direct payments are estimated to be nearly $60 billion over the next 10 years, with corn receiving over $22 billion and wheat nearly $11 billion. Crop insurance subsidies to protect yield and revenue are expected to continue to increase, reaching nearly $89 billion over the next decade.
The CBO estimates for dairy support programs decreased significantly to only $443 million, less than 0.3 percent of total commodity support from the U.S. Department of Agriculture. This is down from CBO’s estimate last year, which had projected dairy spending at just under $700 million. Most of the projected dairy spending will be for payments under the Milk Income Loss Contract (MILC) program. Dairy is basically excluded from the $89 billion that is reserved for crop insurance, with the exception of the Livestock Gross Margin–Dairy pilot program that will cost less than $10 million in 2012.
Direct Payments on Chopping Block
Facing overall federal budget pressures, Congress is expected to make cuts in agriculture spending as part of the next farm bill, and direct payments are squarely on the chopping block. Even though dairy spending is less than a fraction of a percent that is available for crop commodities, the Agriculture Committees are looking to reduce dairy spending by about 20 percent.
“The reason that the Agriculture Committees were willing to submit a bill to the deficit-reduction supercommittee last fall is that they were hoping to limit the agriculture cuts, particularly the cuts to direct payments, to only $23 billion instead of the nearly $50 billion or more that some members of Congress are asking for,” said Jerry Slominski, IDFA senior vice president of legislative affairs and economic policy. “The committee hoped to convert some of the funding currently available for direct payments to expand commodity support programs, including an expanded revenue protection to cover shallow losses, yet none of this extra spending was being targeted for dairy producers.”
“Over the last decade, the dairy industry chose not to move toward risk management programs, and the funds for these programs were simply targeted to crop producers,” said Ruth Saunders, IDFA vice president of policy and legislative affairs. “As a result, dairy spending has significantly declined and spending for revenue protection for other commodities increased dramatically, even though dairy producers had lower net income compared to the other sectors."
Future Policies Must Support Growth and Profitability
IDFA believes this decline is the prime reason that efforts to establish milk production controls are finding support in Congress. Mandatory limits on milk production, proposed by Representative Collin Peterson (D-MN) in the Dairy Security Act of 2011 (H.R. 3062), work to keep government costs down, making quotas an easy option even though they would hurt the industry’s ability to expand, to increase exports and to create new jobs.
IDFA supports an improved margin insurance program and other risk management options for dairy producers and believes that future dairy policies should move away from increased regulation and government intrusion in dairy markets and towards growth and profitability for producers and processors.
For more information, contact Ruth Saunders, IDFA vice president of policy and legislative affairs, at firstname.lastname@example.org.