As the budget-cutting begins to heat up in Washington, it is becoming increasingly apparent that direct payments are on the chopping bloc. This article highlights the quandary the Republican majority is in regarding farm program payments. Of course, at present, counter-cyclical payments are barely operational due to high prices, so there will be no projected budget savings from axing those programs. So, direct payments are the only real place to get any money out of the farm subsidy pot for deficit reduction.
The real problem facing farm subsidy advocates is that farm income without farm program payments is at record levels and, at least some parts of agriculture (read corn), are getting substantial direct and indirect subsidies from ethanol and biofuels. So, in a time of tight budgets, farms are an easy target.
I know…ag subsidies make up a small fraction of USDA’s overall budget and a tiny fraction of overall spending. But, as reported here, everyone’s ox is going to be gored…some more than others. The trick will be designing a program that gives risk protection, but is only operational when it has to be (direct payments come irregardless of the level of farm income) so that it demonstrates budget savings under current prices, but provides a safety net for farmers in case prices come crashing down.
Bottom line…expect some very strong challenges to farm subsidies going forward in general, with direct payments being particularly in the cross-hairs. This spring is likely to be a very interesting political season.