The 2007 Farm Bill has moved to the front burner at 14th and Independence, S.W., in the District of Columbia. The comments of more than 4,000 speakers at 52 USDA Farm Bill Listening Sessions were sorted into 41 pigeon holes and summarized by USDA.

The summaries represent the notes taken when those 4,000+ farmers and agribusiness folks stepped up to the microphone at all 52 of the listening sessions around the nation and spoke their deepest convictions about the state of agriculture today. The entire staff of the farm gate writers, researchers, and production assistants (1) will pour over these and USDA’s subsequent analysis papers to provide some early hints at what the 2007 Farm Bill will look like. Yes, Congress writes the legislation, not USDA, but Congressional committees are just beginning their own hearings and are just now learning what USDA heard last summer and fall. ‘That said; let’s find out what the Secretary heard about production costs.

“Many participants expressed concern over rising costs of fuel, fertilizer, and other energy-related inputs. They noted these cost increases were having a negative effect on farm profitability and on the competitiveness of U.S. producers in world markets.” That is how USDA characterized the overall observations on production costs, which should not come as a surprise. USDA economists reported agricultural production costs had climbed nearly 13% from 2002 to 2005, slightly more than prices paid for finished goods as reported by the Producer Price Index. USDA’s estimation of farm expenses included a 61.5% rise in fertilizer and 200% jump in fuel costs. Those increases came when prices received by crop producers were flat when 2005 was compared with 2002. Farmers at the Listening Sessions told USDA such conditions were making it difficult for some farms to continue, and for new people to enter agriculture.

Looking at the inflated energy costs, farmers gave USDA suggestions on “how higher energy and energy-related input costs could be minimized through various incentives or programs (typically through the tax code) to increase renewable or alternative energy sources, achieve greater energy efficiency in production systems, or bolster domestically produced input use.” Some wanted support prices linked to production costs, or payments to offset such costs.

Regarding fertilizer costs, suggestions for relief included:

1. provide incentives to increase domestic production of fertilizer
2. provide subsidies to farmers who reduce fertilizer use.

Regarding energy costs, suggestions for relief included:

1. Stronger promotions for domestic biofuels and solar energy use
2. Fuel tax credit for transporting commodities, or rebates on fuel costs
3. Increased focus on energy reduction and greater energy efficiency

Other novel ideas include:

1. Redesign Direct Payments so they can only be redeemed for purchasing inputs
2. Monitor worldwide input costs, and compensate farmers when US costs are higher
3. Higher subsidies for crop insurance would lower premium costs
4. Provide USDA funding for chemicals that are needed to control invasive species
5. Eliminate government regulations that increase production costs

There were many other novel ideas, some of which will never see the light of day.

Summary:

To its credit, USDA made a significant effort to listen to anyone who wanted to weigh in on the process of creating a new Farm Bill. Anyone could speak, diversity was encouraged, and any idea was welcome. By displaying the thousands of comments, USDA is ensuring that every idea is on the table and up for discussion. Of course, everyone is concerned about production costs increases, so there is no controversy here. However, there are some intriguing ideas both here and on USDA’s website, which will draw fans like iron filings to a magnet. The USDA will not be able to do much to address high production costs other than report aggregate production expenses. It will take legislation from the Congressional Energy committees to do the most good to reduce fuel bills and fertilizer expenses.

Stu Ellis