US Agri-food Policy and the Farm Bill: A Canadian Perspective Al Mussell Senior Research Associate

Overview Purpose/policy driversBasis for US Farm BillsMajor programs supportedPressures/outllok facing 2013 Farm BillWhy care? Canadian perspective

US Agri-food Policy Drivers Fear that terms of trade will turn against farmers Support of rural economic development Control of treasury exposure to fund programs International trade rules Implicit focus on field crops, also dairy Mix of stabilization and entitlements

US Farm Policy Mostly originating from New Deal period, 1930’s Agricultural Adjustment Acts- 1933, 1938 Agricultural Acts- 1948, 1949 First “Farm Bill”- omnibus legislation Farm Bill roles: Amend “permanent” farm legislation- from 1938 and 1949 New farm/food programming Appropriations to fund new and continuing programs

Major Programming Areas Supplemental Nutrition Assistance ProgramCrop insuranceConservation programsCrop-specific programs: Direct payments Marketing loans Counter-cyclical payments

Crop Specific Programs Farmers receive a set payment based on past crop acreage, yield Not contingent on current cropping decisions Direct payments- historical acreage, yield Farmers receive loan on expected crop production at “loan rate” Repay at the lower of actual crop price or the loan rate; now loan deficiency payment Marketing loans Deficiency payments based on crop target price vs actual price Allocated on historical “base” acreage, historic yield Means of limiting program cost- “flex acres” Countercylical payments Guarantees crop revenue/acre at a state average yield and price Update to higher price and yield versus other programs Must give up some benefits under other programs to enroll in ACRE Average Crop Revenue Election (ACRE)

US Farm Bill Followed by Commodity, Conservation, and Crop Insurance titles Nutrition title about 2/3 of funding- SNAP (Food Stamps) Major components CommoditiesConservationTradeNutrition Crop insurance Research Rural Development Credit 15 Titles

Agricultural Policy Program Support Overview, United States PSE ($US M)40, , , , , , Payments on Commodity Output ($US M) 15, , , , , , Payments based on input use ($US M) 9, , , , , , Payments Based on Area, Animal Units, Receipts, or Income ($US M) 13, , , , , , Payments based on Non-Commodity Criteria ($US M) 2, , , , , , PSE Percentage

Total Support/Cash Receipts % Source: OECD

Pressures on 2013 US Farm Bill Budget- cuts from 15-20% or more possible Sequestration Discretionary budget Demand for new programs, solutions “shallow loss”- grains DairyHorticulture Regional pressures Crop insurance (Midwest) vs direct payments (South) Greater budget exposure to crop ins., less to traditional programs Future of conservation programs in high price environment

Farm Bill Outlook Extension of 2008 legislation to end of FY 2012/13Ongoing budget uncertaintyNegotiation of new trade agreementsDownward revision in 2013 crop price outlookLack of agreement on dairy

Why Care? US among largest players in world grain/livestock complex, sensitive to policy changes Agri-food policy asymmetry; US vs. Canada Canada in a free-trade relationship with US mCOOL Corn countervail Canada competes with US for ag inputs, resources Farm Bill distorts agri- food investment climate