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2007 REAUTHORIZATION OF THE FARM BILL Feb 12, 2007
The following concerning the 2007 reauthorization of the 2007 Farm Bill may be of interest to you.
Two weeks ago I attended a national meeting concerning the reauthorization of the 2007 Farm Bill in D.C. The participants included all of the chairmen of the state senate and house ag
committees. We met with Sec. of Agriculture Michael Johann, members of the new House and Senate Agricultural Committees, and with our congressional delegation.
In the past
the focus on U.S. farming has been on Food and Fiber. The new farm bill will now be that of Food, Fiber, and Fuel. There will be a major enhancement in the new farm bill which will include an estimated
$1.6 billion to support research, incentives, and infrastructure in the production of alternative fuels. The goal as outlined in President Bush's State of the Union address is to produce 35 billion gallons of
fuel (or power equivalent) by 2016. This includes ethanol, bio diesel, wind, wave, and other forms of alternative power.
The wave power potential is being pursued by Oregon State University (as a Sea Grant University) to generate power from waves and tide. The proposed site will be in the Newport area.
Ethanol production with corn as the base material is transforming the rural economy of midland America. Legislators from Heartland America reported that the rural economy in their states is booming.
There are many farmer owned ethanol plants. The cost of a new plant is in the $50,000,000 area, and the cost of the plants are generally paid off within an 18-24 month period.
Bio diesel production from soybeans and other crops is also moving ahead. Currently there is a 51 cent/gallon tax incentive to encourage the production of ethanol. In Idaho an ethanol plant is scheduled to be built in Burley this summer.
The downside of producing ethanol from corn is that the price of the commodity has soared to over $4.00/bushel. Currently according to USDA we only have 24 day of reserve of
corn in the U.S. The higher cost of corn is hurting the cattlemen, dairy, and the poultry industries.
We may soon see an increase in meat products at the market. For Palouse farmers there is an upside to all of this activity. For example, production of corn has greatly increased in the South and North Dakota replacing wheat acreage. This has resulted in a smaller wheat supply available and has driven up wheat prices. USDA is predicting an increase of 10,000,000 acres of corn to be planted this year.
There was major agreement that one of the long term solutions is production of ethanol from biomass or cellulose products.
Common sources would include straw, wood chips, switch grass, corn stover, and other biomass potential. There will be considerable funding available to encourage research to demonstrate how ethanol can be converted from biomass cellulose based products. Sugar cane in Brazil is the major product which is converted to ethanol. In the Pacific Northwest one possibility is that bluegrass straw might be an important source for producing ethanol.
Major incentives for producing energy will be available as we look to expand power produced by wind. The U.S. now ranks third in the world in terms of power produced via the wind. German and Spain are in the lead. There is bipartisan support for the funding of these alternative sources of power.
It is interesting to look at the components of the Farm Bill. Over 64 percent of the funding goes to nutrition programs. This includes food stamps and other
programs related to nutrition. Farm subsidies represent only about 22 percent of the budget.
During the last five years about $20 billion in subsidies was not spent. Some of these funds sent to payoff the Katrina reconstruction in New Orleans. It is quite clear that subsidies will be cut in the next farm bill. Sixty percent of farmers do not receive any subsidies. It appears that there will be a cap placed on subsidies. USDA has received bad publicity about huge payments made to corporate farming operations.
Rural Development which only represents about 2 percent of the budget may receive a slight increase in funding.
There appears support for building up rural infrastructure, rural business incentives, and broadband expansion. The discussions indicated that funding for the Conservation Reserve Program might be cut back. This is one of the most effective programs that we have had to take marginal land out of production and seed it to grass, cover crops, and trees.
There was also discussion about exports of U.S. farm products.
We have moved from exporting about $57 billion in farm products in 2002 to $77 billion in 2006. Idaho exports about $2 billion in agricultural products to China, Canada, Mexico, and other Asian countries as the major consumers of these products. It should also be pointed out that the U.S. is still a net importer of food products.
U.S. farm production increases about 20 percent/year, and our consumption increases only about 10 percent/year.
The key in current on going trade negotiations is to provide fair access for U.S. agricultural products in other countries. The access to countries with increasing middle income populations is most important to the U.S. farm economies. Trade negotiations are currently being carried out in Davos, Switzerland.
I hope that this provides an overview of the discussions we had during the two day meeting. Hearings concerning the farm bill will be held throughout Idaho, and I urge all
those with agricultural interests to attend and provide your input. The final shape and funding of the Farm Bill will, no doubt, change with time.
Rep. Tom Trail
Chair, House Ag Affairs Committee
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