Ag Department (Finally) Listens, Gets it Right

The cynic in me thought I’d never live to write this…and thinks I may well live to regret it. But as Will Rogers liked to say, “You've got to go out on a limb sometimes because that's where the fruit is.” So out I climb: I predict the next Farm Bill will actually help rural America.

Okay, that’s hyperbole…to a degree. Farm Bills are designed to help rural America and have. The overwhelming majority of that help, however, has gone to a narrow slice of rural people: growers of subsidized crops. The last Farm Bill spent 82 percent of funds on farmers and 0.7 percent on non-farm rural development efforts. What’s more, growers of five crops (corn, cotton, wheat, rice and soybeans), which together account for only 30 percent of U.S. agricultural revenue, got 92 percent of the payments. The top 10 percent of producers grab some 70 percent of the payments.

Supporters of this and previous Farm Bills claim, of course, that raising farm incomes—even so few farm incomes--improves the overall rural economy. They are wrong. First, most farmers depend on the rural economy surrounding them, (most of which is not tied to farming), not the other way around.

Second, crop payments don’t even do much for areas that are heavily farm dependent. Sometimes, payments hurt them. According to research by the Kansas City Federal Reserve’s Center for the Study of Rural America, counties getting the most payments see no growth in jobs, businesses or population. In fact, from 1992 to 2002, 21 percent of such counties lost jobs; 60 percent lost population. Payments, says the study, don’t create new engines of economic growth; they create dependency on even more payments.

Of course, none of this is new. I wrote about it last fall. What is new is that the U.S. Department of Agriculture seems finally to be getting the message. As evidence of that, the 2006 Agricultural Outlook Forum—USDA’s annual flagship event, held last month--went where none had gone before. It focused on the importance of rural, rather than farm, prosperity. It finally got the horse before the cart.

Why? A convergence of factors.

First, Ag Secretary Mike Johanns told in his opening speech of hearing again and again on USDA’s Farm Bill listening tour last year of the need and appreciation for the department’s rural development efforts. “After hearing such compelling stories about the importance of rural development,” he said, “I came back to Washington eager to examine the state of our rural economy.” And, apparently, to put things in proper order.

Second, a system that subsidizes 30 percent of farmers and leaves the other 70 percent to fend for themselves, creates an uneven and politically unstable playing field. Why, for example, should specialty crops—equal in value to program crops—get no payments?

Third, the statistics on the rural economy and the research on the counter-productive performance of farm payments cited above are simply inarguable.

Fourth and most important, there’s a new sheriff in town—the WTO. If the United States intends to honor its trade agreements (and avoid sanctions), farm production subsidies as we know them will have to go. When they do, billions in crop payments will be freed up and up for grabs. USDA knows that. My guess is that the department would rather keep that money in house and use it for rural development than turn it over to the Treasury for deficit reduction.

Regardless of the causes, the shift in focus is encouraging. As Charles Fluharty, Director of the Rural Policy Research Institute put it, “The 2006 Forum was a watershed moment in USDA history and could become a landmark event for U.S. rural policy. For the first time ever, these issues were central. I am hopeful this represents a new USDA perspective and commitment taking hold."

Whether that new perspective and commitment results in a change of policy now rests with the Congressional ag committees as they formulate the next Farm Bill. In his speech, Johanns said, “What we as policymakers owe are policies that recognize the changing face of rural America—it has changed—and provide support that is equitable, predictable and beyond challenge.”

He was listening. Is Congress?