New U.S. Secretary Of Ag

President Bush has nominated Nebraska Governor Mike Johanns to be the new U.S. Secretary of Agriculture, replacing Ann Veneman. Governor Johanns grew up on a dairy farm in Iowa, and was Mayor of Lincoln, NE, before becoming the state’s governor. He was re-elected to a second term as governor in 2002. As governor of Nebraska, he has been a strong proponent of increasing ag exports and expanding trade opportunities with other countries. He has also been a strong advocate of ethanol, biodiesel and other alternative fuels. And he’s pushed for disaster assistance for farmers affected by drought and other natural disasters. He has championed many rural development efforts in Nebraska, but opposes the proposed federally mandated country-of-origin (COOL) labeling. The nomination of Mike Johanns has been well received by most farm organizations and commodity groups across the country.

Challenges For The New Secretary

The U.S. federal budget deficit is currently growing at a rate of approximately $2 billion per day. Obviously, things can’t continue at that pace indefinitely, so there is likely to be increased pressure from Congress in 2005 to address the rapidly rising federal budget deficit. This will be difficult with increasing costs of the war in Iraq and a “sluggish” U.S. economy. Spending programs, such as farm commodity programs, are likely to come under more scrutiny as Congress looks for ways to shave federal spending. However, it should be noted that federal spending on farm commodity programs has been way under budget during the first two crop years of the current Farm Bill (2002 and 2003), due to higher-than-expected commodity prices which have resulted in lower counter-cyclical payments (CCP’s) and loan deficiency payments (LDP’s) than expected.

Federal spending for the 2004 crop year is projected to be near allocated levels. By comparison, the federal government spent almost $26 billion on farm program payments in 1986, compared to a projected $16.5 billion for the current fiscal year. In the 2004-2005 USDA budget, nearly $50 billion is budgeted for nutrition programs, such as Food Stamps, WIC and the School Lunch Program, which is more than three times the amount allocated for farm program payments.

Thus far, USDA and Congress have been able to make necessary budget adjustments by cutting or controlling expenditures for discretionary spending programs such as conservation, rural development, implementation of COOL and other more flexible-type USDA programs. However, if larger budget adjustments are required in the future, USDA and Congress will have to look at other programs. The most likely portions of the commodity programs to be addressed would be reductions in CCP and LDP payments, which could be accomplished by adjusting crop target prices and national loan rates lower.

It appears likely that Congress will finally pass a Federal Energy Bill in 2005. This should help development for ethanol, biodiesel, wind energy and other renewable fuels. The next round of WTO trade talks , approval of CAFTA, and continuing discussions on revisions in NAFTA are all likely to be part of farm policy discussion in 2005. Currently, sugar imports through CAFTA are on the front burner. These discussions could expand if some of the large processors and livestock units decide to import more soybeans and soybean meal from South America. USDA is moving forward with implementing a “phased-in” national livestock ID program. Thus far, country-of-origin labeling has not been part of that effort. However, some members of Congress and farm organizations are very anxious to see mandatory COOL labeling implemented in the U.S.

Editors note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.