Agriculture Subsidies to Be Slashed

The Wall Street Journal is reporting that lobbyists for the agriculture industry are ramping up efforts after President Obama’s speech last night.

The agriculture lobby quickly recoiled Wednesday against President Obama’s vow to “end direct payments to large agribusinesses that don’t need them,” though industry leaders and farm-state legislators weren’t sure which government payments they’ll have to defend.

“We were surprised President Obama included farm payments in his speech,” said Bob Stallman, president of the American Farm Bureau Federation. “But it is Congress where the rubber meets the road.”

A plunge in commodity grain prices since last summer is shrinking profits across the farm sector, making it even more politically dicey for farm-state legislators to go along with any cuts in federal aid. Earlier this month, the U.S. Agriculture Department predicted that U.S. net farm income, a rough measure of profitability, will drop 20% this year to $71.2 billion from last year’s record-high $89.3 billion.

The line in the president’s speech about agribusiness seemed to merge two distinct ideas for overhauling subsidies. While the president didn’t define “large agribusinesses,” he favored as a presidential candidate limiting the amount of federal subsidies an individual grower can receive to $250,000, an idea that is included on the rural agenda of the White House Web site. The Senate voted down such a proposal as recently as December 2007.

The other idea floating around Washington is to scrap a type of subsidy check called the “fixed direct payment,” which since 1996 has put about $68 billion into the pockets of growers. According to farm lobbyists, Tom Vilsack, the newly minted agriculture secretary, has been telling farm trade groups in recent weeks that fixed direct payments have outlived their usefulness.

What happens to the price of corn, wheat, soy and other core food commodities when the government stops subsidising farmers? Will we see more farms go under, in addition to those that will collapse as a result of frozen credit markets? I suspect the costs will be passed on to consumers. Another reason to be investing some money into agribusiness and commodities right now.

Author: Mac Slavo
Date: February 26th, 2009
Website: www.SHTFplan.com

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