Key Farm Policy Issues For 2006

As we head into 2006, there are many unresolved farm policy issues that will likely on the “front-burner” in the coming months. Depending on the course of action by USDA, Congress and others, some of these issues could have an impact on Midwest farm operators. Following are a couple of policy issues that were acted on late in 2005:

Federal Budget Deficit
The Federal budget deficit continues to grow by leaps and bounds each and every month. In an attempt to address the rapidly rising deficit, Congress has reached an agreement on legislation that would result in a reduction of $39.7 billion in Federal spending from 2006-2010. The budget cuts include a total of $2.7 billion in reductions in spending for farm programs from 2006-2010, including:

Commodity Programs:
No extension of current Commodity Programs beyond 2007. Total farm program cuts of $1.7 billion from 2006-2007. No across-the-board reductions in commodity payments. No cut for the Sugar Program. MILC Dairy Support Program extended for two years. Reduction in Advance Direct Payments for all commodities. Current advance direct payment level is 50 %. For 2006, advance payments will be reduced to 40%, and for 2007 and beyond advance payments will be 22 %.

Conservation Programs:
Extends the Conservation Security Program through 2011. Extends the EQIP Program through 2010. Total reduction of $934 million in conservation program funding from 2006-2010.

Other Agriculture Program Reductions (2006-2010):
Rural Development Programs – $399 million reduction. Agriculture Research Programs – $620 million reduction. Renewable Energy Program – $ 20 million reduction.

What’s next: It is possible that there could be additional measures proposed in Congress in 2006 to reduce the Federal budget deficit through cuts in Federal spending, some of which could impact farm commodity program payments.

WTO Negotiations
The World Trade Organization (WTO) Ministerial meeting was held in Hong Kong in mid-December, as part of the continuing Doha Round of WTO trade negotiations. There were very few final policy agreements at the recent meetings. However, following are some items that were agreed upon: The three “main pillars” for the Doha Round of WTO negotiations are Export Competition, Market Access, and Domestic Support. Also, there will be an elimination of Export Subsidies by 2013. Finally, there is a deadline of April 30, 2006, to have models developed for proposed WTO revisions in tariffs, domestic support programs and export programs.

For more details on the WTO negotiations at Hong Kong, please refer to the WTO web site at: www.wto.org.

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.