Inside the freshly harvested Farm Bill with Vilsack
Federal role 'far more defensible' with shift from direct payments, U.S. Secretary of Agriculture Tom Vilsack says
February 7, 2014
U.S. Secretary of Agriculture Tom Vilsack
The meat of the just-passed farm bill, expected to be signed by President Barack Obama today into a law governing agriculture for the next decade, is the elimination of the $4.5 billion annually in direct payments in favor of an expanded crop-insurance program.
The package also reduces spending on food stamps by about $8 billion over 10 years - about 1 percent of the total Supplemental Nutrition Assistance Program (SNAP) budget.
Those items have received the headlines and lion's share of media coverage. But the 959-page, $956 million bill - known as the Agriculture Act of 2014 - includes a king's ransom of lower-profile provisions intended to have wide-ranging impact on the estimated 16 million Americans involved in agriculture and the people who consume their goods.
In a half-hour phone interview with The Daily Times Herald Thursday, U.S. Secretary of Agriculture Tom Vilsack, a former two-term Democratic governor of Iowa, delved deeply into the spending and policy in the farm bill, saying Iowa producers can mine it for opportunities to improve rural life.
The Daily Times Herald asked Vilsack to focus on some of the under-the-radar elements of the legislation.
The farm bill, for example, includes a series of programs to create new market opportunities for small- and medium-sized operations, Vilsack said, adding that one of the challenges in agriculture is the perception that "you've got to go bigger or you're not going to survive."
"We want to rebuild the smaller and mid-sized operators, and to do that, we've got to give them options outside of marketing in a commodity market," Vilsack said. "A commodity market basically puts a premium on efficiency and volume."
Smaller producers need new, direct-market opportunities, the ability to sell direclty to a customer, Vilsack said.
The bill includes more funding for farmers' markets, value-added producer-processing opportunities and money for state ag departments to promote specialty crops, he said.
Here's another nugget: Returning veterans interested in getting into farming have been able to access a microloan program for up to $35,000. Congress has increased the credit limit to $50,000.
"So you could as a returning veteran or someone interested in beginning farming use that money for a wide variety of purposes, buying a piece of equipment, renting some ground, buying inputs, to begin starting your operation," Vilsack said. "That may be something folks may not be fully appreciative of."
On the beginning-farmer front, the bill includes $200 million in insurance-premium support for new farmers and ranchers, those with less than five years of experience.
"That's a new wrinkle," Vilsack said.
Vilsack said the bio-based agricultural economy is affording more ways to use byproducts from from grain and livestock operations for profitable side ventures - "a corn cob into a plastic bottle, a cornstalk into a sheet of clear plastic that can be used in the windows of envelopes."
"There's a whole new world of opportunity here with bioprocessing and manufacturing, taking crop residue and livestock waste and woody biomass and converting into these chemicals and materials," Vilsack said.
The bill allows programs that in the past had been geared for renewable energy and fuel to help finance bio-based manufacturing.
"That's an exciting opportunity," Vilsack said.
American agriculture has never had a vehicle for research similar to health care, a one-two punch foundation seeded with government money and augmented with private funds.
The bill provides $200 million and requires matching dollars for a foundation that will spin out innovations in agriculture.
The intent is to do for agriculture what the National Institutes of Health does for medicine.
"Yes, it's similar to that," Vilsack said.
According to Vilsack's department, U.S. agricultural exports reached a record $140.9 billion in fiscal year 2013 and supported about a million U.S. jobs. In fact, compared with the previous five-year period from FY 2004-2008, U.S. agricultural exports from FY 2009-2013 increased by nearly $230 billion.
Vilsack, echoing the the president's State of the Union comments, said the past five years represent the strongest five-year period ever for American agricultural exports.
Since 2009, USDA has led more than 150 U.S. agribusinesses on agricultural trade missions to China, Colombia, Ecuador, Georgia, Indonesia, Iraq, Panama, Peru, the Philippines, Russia, Turkey and Vietnam.
"We are aggressively promoting agricultural exports overseas," Vilsack said. "We're breaking down trade barriers. We're negotiating free-trade agreements. We're proposing additional free-trade agreements in the South Pacific and in Southeast Asia as well as in Europe."
The bill maintained controversial Country of Origin Labeling (COOL) supported by consumer groups but opposed by livestock producers who say the measures are unnecessarily burdensome and could spark a trade war with Mexico and Canada.
The World Trade Organization, Vilsack said, had criticized the more generic labeling developed by the USDA, and forced the department to require more information about where animals are being raised, slaughtered and processed.
"We've done that with the new new label," Vilsack said. "The Canadians and Mexicans are still concerned about this, and we're still in the midst of working through that dispute. I think it's important to let that dispute run its course so we can get clear direction."
On the center-stage provision, Vilsack said it was time to end the $4.5 billion a year in direct payments, fixed per-acre disbursements that had nothing to do with crop prices - and often went to people not actually involved in agriculture.
"It's pretty obvious to me that the direct-payment system was the source of justifiable criticism on the part of those who don't farm," Vilsack said. "It was frankly hard to explain to people why farmers were receiving checks when corn was selling for $8 a bushel and soybeans were at $15 a bushel, at record prices. And the same was true for cotton and other commodities."
The farm bill, which is expected to reduce the deficit through $23 billion in savings, some tied to SNAP, some savings connected to consoldiation of conservation programs, does expand crop insurance by $7 billion over the decade.
"We now have a system that's far more defensible because it's a system designed to help farmers when they need help, not when they don't," Vilsack said. "It does put a focus on crop insurance."
Vilsack - saying he was directing his remarks on crop insurance at Americans who don't farm - stressed that insurance programs are partnerships between producers and the government. Both pay part of the premiums.
"There's a real simple reason, and that is that we want to save taxpayers money," Vilsack said.
In the absence of government assistance, crop insurance would be dramaticlly higher, with insurance companies pricing packages high to protect the $62 billion worth of crops produced annually in the United States, Vilsack said.
"That's the extent of risk that insurance companies would be asked to bear if the government weren't involved in any way in this program," Vilsack said. "So the premiums would be so high that very few producers would actually buy crop insurance."
Here's what Vilsack says would happen under such a scenario: There'd be a drought or a flood or other disaster and farmers would seek relief through congressional disaster bills.
"This is really designed to save money in the long term," Vilsack said.
According to The New York Times, the crop-insurance program, which is administered by 18 companies that are paid $1.4 billion annually by the government to sell policies to farmers, pays 62 percent of farmers' premiums.
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