A recent U.S. proposal to reduce farm subsidies to enliven World Trade Organization (WTO) negotiations may have implications for the 2007 Farm Bill, say Ohio State University agricultural economists.
The extent of the impact hinges on whether the proposal is accepted, what programs are reduced and to what extent they are reduced, or even possibly eliminated. Whatever happens, farmers and agribusinesses are being encouraged to evaluate how they will manage the impact of reduced supports.
The current proposal calls for the U.S. to reduce its domestic farm programs — those that distort farm production and international trade — by 60%. If such a proposal were to be approved, the potential exists for a radical change in the 2007 Farm Bill.
“If the administration gets an agreement that substantively constrains U.S. farm policy, then we'll be writing this next farm bill with a constraint that has never before existed,” says economist Carl Zulauf.
Economist Luther Tweeten believes that changes will occur with the 2007 Farm Bill, whether it's written based on WTO events or not. Whether the bold changes being proposed in advance of the 2007 Farm Bill happen is another story. But both economists believe that it is smart for farmers and agribusinesses to prepare for a change.
“Growers have to be prepared for the possibility that the level of farm supports would be cut somewhat, but it wouldn't be terribly drastic and it'd be a gradual change, probably over a period of several years,” Tweeten says, adding that approximately 20-25% of the current land price is dependent on current commodity programs, so there would be some adjustment in land prices and farm rents because of the change in the programs.