10.28.09 MU Transatlantic Center Ag Policy Forum
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10.28.09 MU Transatlantic Center Ag Policy Forum 10.28.09 MU Transatlantic Center Ag Policy Forum Presentation Transcript

  • Agricultural Policy in Transition:What’s Next?
    October 28, 2009
    National Press Club
    Washington, DC
  • CAP Prospects
    Michel Petit
    Professor, InstitutAgronomiqueMéditerranéen de Montpellier
    Commission in process of renewal
    Impact of Lisbontreaty?
  • A changing political context and new concerns for the future CAP
    Elena Saraceno
    Former advisor in the Bureau of European Advisors of the European Commission,
    Rural development expert for the European Network of Rural Development
  • Contents
    A changing political context
    New concerns, shifting priorities
    So, what is likely to happen (a personal view)?
  • A changing political context: a growing internal pressure for reform
    The budget review story (unfinished)
    The full and wide ranging review of the CAP: a modest start with the Health Check
    Limited financial resources (<1% GDP) + needs of “new challenges” (EU’s global role, security, climate change, energy supply)
    Member States: 3 groups, the reformers (UK,DK,SW,NL,CZ); the status quo; more CAP (CEEC countries)
    The more “flexible” position of farmer’s organizations: a propensity for keeping the core business (food)
  • Changing political context: the innovations introduced by the Lisbon Treaty
    Explicit stated objective of territorial cohesion (but is RD a problem of cohesion?)
    Co-decision procedure between the Council and the European Parliament on the CAP budget
    Qualified majority voting on CAP decision-making (no more unanimity = veto power)
  • Changing political context: the financial crisis and the CAP
    Impact on agriculture less severe than for other sectors, good price perspectives
    Impact on rural areas mixed:
    Two opposite visions: delayed crisis vs. rural areas as middle class green safety net
  • Changing political context: evolving transatlantic relationship
    A wider club of nations (G-20) with new coalitions and shifting power towards BRICs
    Softer, less strategic transatlantic relationships
    Delay of WTO negotiations: breakdown of traditional terms of trade between food and manufacture /services producers, restructuring of trade flows
    Implies stronger external pressure to abandon protectionism,from the real world
  • New concerns, shifting priorities (1)
    Climate change and environmental public goods
    Reorientation of Fischler reform approach: payments for public goods questioned by farmers (high food prices), quality producers, new MS; favored in marginal areas (not the point)
    Climate change issues (new challenge) require new approach, where farmers have to contract for providing specific services (far from indefinite subsidy logic)
    Biodiversity, carbon sequestration, water, energy, even land management are larger than farm issues, new ways of looking at it
  • New concerns, shifting priorities (2)
    Who will take care of wider (territorial) rural development?
    Linkages with farming stronger in developing regions (agricultural policy)
    Linkages with non-farm sectors, urban, stronger in older developed areas (regional policy)
    key question of coordination of policies
  • New concerns, shifting priorities (3)
    Food security is back
    not as a problem for the EU (high income), justified by need to maintain productive capacity
    Linked to issue of “food miles” (climate change) and higher standards
    Related to scare created by 2007 food crisis
    Justifies maintenance of minimum safety net (income support different from the past)
  • So, what is likely to happen?
    CAP reform bottlenecks are political not technical, a drastic step is not in the making
    Going back to the core business of producing food, with a much wider perspective
    A revised environmental agenda
    Some form of safety net (what rationale?)
    Better coordinated delivery systemsfor RD
    Less money (who will get less?)
  • U.S. agricultural policy in transition: Farmincome, budgets and institutions
    Patrick Westhoff
    University of Missouri
  • U.S.net farm income declines in 2009 from near-record levels
    Source: USDA, August 2009. The 2009 estimate is the lowest since 2002.
  • Crop and livestock receipts fall more than production costs in 2009
    Source: USDA, August 2009.
  • Lower milk prices one of many causes for lower 2009 farm income
    Source: USDA, October 2009
  • So far, policy response to lower farm income has been muted
    Appropriations bill provided additional $350 million for dairy
    On top of existing programs that buy dairy products, make payments to dairy farmers
    But support modest relative to $11 billion drop in milk sales
    Other programs have automatic stabilizers
    Revenue-based crop insurance indemnities up
    If prices low enough, crop farmers qualify for marketing loans, countercyclical payments
  • Projected U.S. prices are above levels that trigger “traditional” payments
    Source: FAPRI-MU baseline update, Aug. 2009.
    Note: “Payment trigger” is the price that would result in countercyclical payments.
  • FAPRI-MU projects slow recovery in U.S. net farm income
    Source: FAPRI-MU baseline update, Aug. 2009. Note the 2009 estimate is slightly above USDA’s.
  • CBO projects large budget deficits even if tax cuts expire on schedule
    Previous record deficit
    Extending 2001 and 2003 tax cuts would make 2013 deficit $264 billion larger than this
    Source: CBO, August 2009.
    Actual was $1.4 trillion
  • Nutrition programs accounted for most FY 2009 USDA spending
    Source: Monthly Treasury Statement, September 2009, fiscal 2009 total: $114 billion
  • U.S. farm program spending varies, depends on commodity prices
    Note: Net CCC outlays include spending on direct payments, marketing loans, countercyclical payments and other basic farm programs
  • Direct payments & crop insurance dominate projected spending
    Source: FAPRI-MU 2009 stochastic baseline, March 2009.
    *The baseline assumed much higher ACRE participation rates than now appear likely. If actual participation rates are lower, ACRE payments will be smaller and direct payments larger. Still, it seems likely that crop insurance net indemnities will exceed direct payments over this period.
  • Congress has critical part in farm policy
    2008 farm bill shows predominant role Congress can play in U.S. farm policy
    • Only a few Administration proposals adopted
    • Final bill became law over Presidential veto
    House and Senate are very different places
    • In House, only a few members represent rural districts
    • In Senate, North Dakota has same number of Senators as California
  • Changes in taxpayer costs due to 2008 farm billFY 2008-17 total, billion dollars, CBO estimates*
    *Estimates reflect changes from a baseline that continued 2002 farm bill provisions indefinitely
  • House and Senate play different roles in farm policy debates
    Legislation must be acceptable to urban/suburban members
    A few Members with deep interest
    A simple majority wins
    Larger share of Members with some interest
    Filibuster rule critical—60 votes to do most things that are controversial
  • New leadership in Senate Agriculture Committee matters
    Sen. Lincoln (D-AR) new Chair, after Sen. Harkin (D-IA) took over another committee
    Arkansas and Iowa are different places, with different types of agriculture, different politics
    Sen. Lincoln more likely to defend current farm policies, less likely to support climate change bill
    Chair can help set agenda and can more easily block measures she opposes
    But Chair’s power has limits in Committee with many independent, powerful actors
  • Budget legislation could be a way around filibuster rule
    If there is a major deficit reduction effort, probably done in “budget reconciliation”
    Bill cannot be filibustered: 50 votes + VP wins
    Committees are charged with achieving particular level of mandatory spending cuts
    If meet those budgetary targets, very difficult to amend bill on floor
    Can give majority on Ag. Committee significant powers to make otherwise difficult changes
  • Looking ahead
    Next farm bill could be as late as 2012 or 2013
    But farm income, budget could result in some changes far sooner
    As in past, starting point for discussion will be status quo
    Those who benefit from current policies will defend positions
    Those seeking new directions will face challenges, especially in a constrained budget environment
  • U.S. Agricultural Policy in Transition
    Neil Conklin
    Farm Foundation
  • The Changing Agenda
    Beyond our borders—The future of the world trading system
    The changing social contract with agriculture
    Changing institutions
    the Executive Branch
    The States
  • Beyond our Borders
    Declining ag sector support for trade liberalization
    A whiff of protectionism. Where do we go beyond the recession?
    Concern about failure of trading system to stabilize food price situation in 2007-08
    Beyond tariffs, export subsidies and domestic supports:
    The changing policy agenda creates significant challenges for the global trading system. International institutions appear ill-suited to dealing with emerging issues as we renegotiate the social contract with agriculture.
  • Washington Post October 25, 2009
    Growing season Galvanized by the local food movement, 20-somethings are turning to small farms to make a fresh start
    Back where virus started, new scrutiny of pig farming
  • Alternative Visions for the Future of Agriculture
    Large commercial farms driven by science and technology connected to consumers through global supply chains
    Small scale sustainable farms connected to consumers through local food networks.
    Increasingly the political question being posed is which vision will prevail
  • Agriculture’s Social Contract
    The 20th Century Contract (maintained by sectoral solidarity)
    Sectoral support
    Sectoral Sovereignty
    “...I can imagine a future in which farmers and farm organizations may be able to protect their existing policy privileges only by weakening their solidarity with farm input supply industries in favor of strengthening ties with consumers and environmentalists, from outside the agricultural sector.” Rob Paarleberg 1991
  • Energy and Climate Change the Big Drivers
    Energy and agriculture
    Economic linkages—both supply and demand
    2005 and 2007 energy acts arguably more important for agriculture than 2008 Farm Bill
    Climate change policy critical
    Impacts on input costs
    Impacts on commodity prices
    Prospect for revenues from carbon offsets
    Political prospects
    Agriculture is divided
    Can sectoral solidarity be rebuilt?????
  • The New Policy Agenda
    Energy and climate change
    Food safety
    Animal production and human health
    Animal welfare
    Water (quality and quantity)
    Local food systems
    Food security and global agricultural development
    Research, technology and productivity
  • Changing Institutions
    Executive Branch
    Shift from production centric to a food centric view of the world
    Rising importance of agencies beyond USDA
    Agricultural issues on the White House radar
    Greater role for States
    “laboratories for policy”
    Animal welfare
    Climate change
    The new “social contract” will not be a federal one.
  • Agricultural Policy in Transition:What’s Next?