Policy Journal: Farm Income Figures Cast Shadow on Coming Farm Bill Debate

September 30, 2011 12:55 PM

Record farm income this year underscores the impact that lofty crop prices and strong exports and demand are having on the fortunes of U.S. agriculture. USDA Secretary Tom Vilsack hailed the income forecast by USDA’s Economic Research Service, praising the resilience of U.S. agriculture as the rest of the economy continues to struggle.

The optimistic financial data will likely play a big role in the coming farm bill debate. Why? It means the sector is exceptionally healthy and those seeking to defend the status quo have an even tougher fight on their hands.

Already, the National Cotton Council has shifted its stance, calling for some type of revenue-based crop insurance or revenue-based crop insurance safety net in the next bill. The group says it recognizes that some of the current farm programs (direct payments, in particular) are poised for significant changes or even elimination.

Along with the record farm income data comes another development that looms even larger in the farm bill debate: The supercommittee of 12 lawmakers assembled under the debt plan signed into law earlier this summer has to identify at least $1.2 trillion in budget cuts to take place in the next 10 years.

The committee comprises six Democrats and six Republicans: Sen. Max Baucus (D-Mont.); Rep. Xavier Becerra (D-Calif.); Rep. Dave Camp (R-Mich.); Rep. Jim Clyburn (D-S.C.); Rep. Jeb Hensarling (R-Texas); Sen. John Kerry (D-Mass.); Sen. Jon Kyl (R-Ariz.); Sen. Patty Murray
(D-Wash.); Sen. Rob Portman (R-Ohio); Sen. Pat Toomey (R-Pa.); Rep. Fred Upton (R-Mich.); and Rep. Chris Van Hollen (D-Md.).

The House and Senate Agriculture Committees are formulating their plans with an eye on Oct. 14—the deadline for standing committees to submit their recommendations to the supercommittee.

Odds are that if the supercommittee is able to produce a report and the House and Senate approve the plan, it will set the amount of money that farm bill writers have to work with. But if Congress fails to act or the supercommittee can’t come to an agreement, across-the-board cuts are still likely. Such cuts would not go into effect until January 2013.

As the farm bill process continues to unfold, the move toward reducing the debt and budget deficit will be a powerful driver. Add in the strong farm income footing and the stage is set for potentially revolutionary farm policy, not the incremental evolutionary shifts that U.S. agriculture has seen in recent farm bills.

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2011 Farm Income Forecast Highlights

  • All three measures of farm sector earnings (net farm income, net cash income and net value added) are forecast to rise more than 20% in 2011. Net farm income and net cash income are projected to exceed $100 billion for the first time in 2011. Net farm income is forecast to rise 31% in 2011 after increasing 28% in 2010.
  • A 17.8% increase is forecast for cash receipts from sales of farm commodities. Crop receipts are expected to increase $33.6 billion, with corn, wheat, hay, cotton and soybean receipts expected to show the largest percentage gains. Livestock receipts are expected to increase by $22.4 billion in 2011, led by rising cash receipts for dairy, meat animals and turkeys.
  • Total expenses are forecast to increase by $32.5 billion, exceeding $400 billion for the first time. Total production expenses in 2011 are forecast to be 11.4% higher than in 2010, following an estimated 2.2% increase in 2010. Government payments are forecast to be $10.2 billion in 2011, a 17.7% decrease from 2010.


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