Obama’s First Forty Days: What Are the Signals for Agriculture and Food?

Friday, 06 March 2009 17:29

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President Obama’s administration is moving rapidly on many fronts. Like Franklin Roosevelt’s situation in 1933, economic events leave Obama little choice but to act decisively. Given his initiatives and accomplishments in the first forty days—between inauguration and the end of February—Obama appears to be on a pace similar to Roosevelt’s famous first “One Hundred Days”. After considerable public uncertainty between the election and inauguration about Obama’s agricultural and food priorities, we are now getting indications that progressive policies may indeed receive significant attention, though the real priorities will only become clear over time. Will the President’s priorities favor agribusiness and big farms, or will they favor environmental sustainability, small- and mid-sized farms, and healthy food?

Obama’s nomination of former Iowa governor Tom Vilsack for Agriculture Secretary was received with some disappointment in sustainable agriculture and healthy food circles, in part because of Vilsack’s record of support for and affiliation with agribusinesses. His support for the ethanol industry (like Obama’s, as a Senator from Illinois) was a concern of some sustainable agriculture advocates, as ethanol production has come under increased scrutiny for its competition with food production and effects on the environment. Moreover, Iowa’s heavy reliance on government ‘commodity subsidies’—Federal farm program payments to the State’s corn and soybean farmers—caused many to doubt that Vilsack would place much priority on USDA’s long neglected agri-environmental and food programs.

In four specific areas the words and actions of the Obama administration give hope to advocates of agriculture and food policy reform that would put the country on a new path of environmental sustainability and healthy diets

The first area is healthy food. The White House itself is giving high visibility to healthy eating. Barack and Michelle Obama have added a chef from Chicago to the White House staff who has a strong reputation for emphasizing organic and local food. One could say this is merely symbolic, but the White House can set a powerful example

Tom Vilsack has given more attention to food consumers and nutrition in his initial days in office than any Secretary of Agriculture in my memory. According to a February 5 article by Washington Post writer Jane Black, Vilsack said, soon after taking office, “This [USDA] is a department that intersects the lives of Americans two to three times a day. Every single American. So I absolutely see the constituency of this department as broader than those who produce our food—it extends to those who consume it.” According to Black’s article, Vilsack favors the establishment of state food policy councils, having created one in 2000 when he was Governor of Iowa. Vilsack’s first official act as Agriculture Secretary, according to the article, was reinstatement of $3.2 million in grant funding for fruit and vegetable farmers that the Bush administration had rescinded in its final days in office.

The second area of hope involves food and nutrition funding. The economic stimulus package that President Obama signed into law on February 17 (the American Recovery and Reinvestment Act of 2009) contains $20 billion to increase food stamp benefits by 14 percent. According to the February 17 Argus Leader, some $42 million could go to recipients in South Dakota. The stimulus bill also includes an additional $500 million for the Women, Infants and Children (WIC) feeding program.

Food and nutrition programs also appear to receive solid prioritization in the FY2010 “budget framework” that the Obama administration released on February 26. An additional $1 billion in annual funding is provided for “program reforms aimed at improving program access, enhancing nutritional quality of school meals, expanding nutrition research and evaluation, and improving program oversight.” “Funding is also provided to support over 9.8 million participants in the WIC program”, according an Obama administration release, as well as funding for a pilot program to increase participation of low-income seniors in the Supplemental Nutrition Assistance Program (formerly the food stamp program).

The third area of hope for many sustainable agriculture progressives is already causing a political fire storm in farm country. In the 2010 budget framework, the Obama administration has proposed to begin phasing out “direct” payments to farmers with annual gross sales over $500,000. It is estimated that, after a 3-year phase out period, this would reduce federal payments to larger farms by $1.2 billion annually. The Obama administration is also proposing to reduce crop insurance premium and underwriting subsidies.

These ‘direct payments’ have their origin in the 1996 Federal Farm Bill, in which they were referred to as “production flexibility contract payments”. At the time, they replaced crop-specific ‘deficiency payments’. Allocations to each contract farm were based on the farm’s historical base acreage and yield, not on current acreage planted to individual crops. In farm policy jargon, the payments were ‘decoupled’ from actual production. They were scheduled to run through the year 2002 and, presumably, then terminate. The nationwide payments started at $5.6 billion in FY1996, were supposed to reach $5.8 billion in FY1998, and then were to decline to $4.0 billion in FY2002. Although never officially the policy, the implication was that these payments were to provide cushion and some protection to farmland values while the nation transitioned to a more market-oriented farm policy.

The phase-out of these payments never occurred. The 2002 Farm Bill changed the name to ‘direct payments’, while at the same time restoring a form of partially ‘coupled payments’ that they were originally intended to replace. So, the ‘direct’ (more accurately described as ‘fixed direct’) payments became a sort of permanent fixture, even while federal farm policy continued most of the old price support mechanisms, albeit in new and ever more complicated forms. The new Farm Bill passed in 2008 (Food, Conservation and Energy Act of 2008) also continues the fixed direct payments, as well as virtually all of the price and other income support programs of the 2002 Farm Bill and some new subsidy programs or options, like the Average Crop Revenue Election (ACRE) provision. Attempts to reform farm policy by further ‘decoupling’ payments to farmers, tying payments more closely to environmental performance, and bringing U.S. farm subsidies more in line with World Trade Organization (WTO) rules largely failed with passage of the 2008 legislation.

Since 2004, the annual fixed direct payments to farmers have been approximately $5.2 billion. (Other kinds of Federal farm subsidies tied directly or indirectly to ‘commodity’ production (mainly corn, soybeans, wheat, rice, and cotton), as well as government subsidized crop and revenue insurance payouts, vary from year to year depending largely on market prices and crop yields.) The 2008 Farm Bill calls for only a slight reduction in these fixed direct payments over the next three marketing years, and no reduction at all from 2002 Farm Bill levels after that. By contrast, Obama’s proposed $1.2 billion annual reduction (after full phase-in) would constitute an approximate 23 percent reduction. This, of course, is the estimated overall effect; farmers with less than $500,000 in annual gross sales would not be affected by Obama’s proposal.

To hear the howls of protest from politicians in farm country and mainstream farm organizations, you would think that Obama’s proposal would gut the existing lavish farm subsidy program. According to recent articles in the New York Times and the Grand Forks Herald, North Dakota Senators Conrad and Dorgan are among those opposed to the proposal, as is Representative Collin Peterson, of Minnesota, Chairman of the House Agriculture Committee. A Reuters article reports National Farmers Union president Tom Buis as saying a $500,000 cut-off is too low and would harm “family farmers”. American Farm Bureau president Bob Stallman also opposes the proposal, according to The Washington Times.

Let’s give this a little perspective, however. In the year 2007, according to recently released Agricultural Census data, slightly more than 5 percent of the nation’s 2.2 million farms had gross sales of $500,000 or more (the percent was no doubt higher in 2008, because of quite high commodity prices during much of last year). In South Dakota, 2,844 (9 percent) of the State’s 31,169 farms had gross sales of $500,000 or more, and in North Dakota there were 3,625 such farms (11%) out of 31,970 total farms.

Combining census data with data on fixed direct payments compiled by the Environmental Working Group, we can determine the importance of those payments in the Dakotas relative to the total value of agricultural products sold in 2007. In South Dakota, fixed direct payments (to farms of all sizes) were equivalent to 2.6 percent of the value of agricultural products sold, and in North Dakota they were 3.7 percent. Of course, fixed direct payments would constitute a much higher percentage of net farm income in each State. Nevertheless, these figures show that phasing out fixed direct payments for the largest 10 percent or so of farms in the Dakotas is hardly a deal breaker! Moreover, why should the average Federal income tax payer, who typically has far less income and wealth than the owners and operators of these large farms, be responsible for subsidizing them anyway?

Ironically, the fixed direct payments are less objectionable to the World Trade Organization than other more ‘coupled’ commodity subsidies in the U.S. system. But the fixed direct payments do stick out like a sore thumb to those who ask, “What does the taxpayer get in return?” If those payments were converted to some kind of environmental stewardship payments, they would be much less objectionable.

Finally, a fourth area that gives hope for progressive food and agricultural policies under the Obama administration is the recent nomination of Kathleen Merrigan as Secretary Vilsack’s Deputy, the number two position in the USDA. The deputy position is not highly visible outside Washington. But the deputy is the person who will see the Secretary most often, and through whom much that is of critical importance in the USDA will flow. Dr. Merrigan will come to this position from Tufts University, where she has been Director of the Agriculture, Food and Environment Program in the Friedman School of Nutrition Science and Policy. She had major responsibilities as a staffer on the Senate Agriculture Committee in 1987-92 (under Chairman Patrick Leahy) in developing legislation for the National Organic Program and the Sustainable Agriculture Research and Education Program. Later, in 1999-2001, she was Administrator of the USDA’s Agricultural Marketing Service, which oversees the federal organic agriculture program. She was with the Henry A. Wallace Institute for Alternative Agriculture, in the Washington, D.C. area, for several years during the 1990s. I have been crossing paths with Kathleen for the past 15 years, and I know her to be a person of immense knowledge and integrity. She will have very broad responsibilities in her new post at the USDA, responsibilities that go far beyond sustainable agriculture and healthy food. But having someone as Deputy Secretary with Merrigan’s understanding of the fundamental issues facing U.S. (and world) food and agriculture—and her commitment to progressive policies—is an important basis for hope.

President Obama is off to a fast start, but much remains to be seen as he navigates through the next few years. Will agri-environment programs be sacrificed in the years ahead—when budgets are extremely tight—in order to keep commodity program subsidies flowing to big farms? How will the Obama administration deal with ethanol in its alternative energy plans? And, what postures will the Obama administration take regarding agriculture if and when international trade talks resume under the WTO’s Doha Round? Advocates of sustainable agriculture have been disappointed before, but so far, the signals are positive.

EDITOR'S NOTE: Thomas Dobbs is an Emeritus Professor of Economics at South Dakota State University (SDSU), and lives in Brookings, SD. Since 2007, he has also been a Fellow in the W.K. Kellogg Foundation’s Food & Society Policy Fellows Program (http://foodandsocietyfellows.org). At SDSU, Tom taught courses in public policy, and for the last two decades of his career, he concentrated his research on sustainable agriculture and on agricultural and environmental policies. In 2000, he was a Fulbright Scholar at the University of Essex, in England, where he began to analyze European approaches to agricultural and food policies based on the concept of “multifunctionality”. He continued that work through collaborations and short-term Visiting Professorships in France between 2001 and 2006. Dobbs was a Visiting Scholar at the Henry A. Wallace Institute for Alternative Agriculture in 1993, where he explored ways to make the then upcoming (1996) Federal farm bill more compatible with sustainable farming systems. Earlier in his career, Dobbs taught at the University of Wyoming and worked for the U.S. Agency for International Development in Pakistan and Washington, D.C. His Ph.D. in agricultural economics is from the University of Maryland, where his dissertation focused on the “Green Revolution” in India.