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Historically, Kentucky has
not been a major beneficiary of government payments under the farm bill. While
ranking fourth in the number of farms and about 20th in agricultural sales,
Kentucky typically is about 30th in terms of government payments.
Will Snell
UK Agricultural Economist
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PRINCETON, Ky., (Sept. 14, 2005) – While
the current farm bill is not set to expire until 2007, work is already beginning
on legislation that will set agricultural programs through 2012.
Farm organizations, leaders, lobby groups and policymakers are discussing the
comprehensive legislation which impacts farmers, agribusinesses, the
environment, rural communities and consumers. Agriculture Secretary Mike Johanns
is hosting a series of open forums to receive comments on the farm bill, one of
which was held recently in Louisville.
Historically, Kentucky has not been a major beneficiary of government payments
under the farm bill, said Will Snell, an agricultural economist with the
University of Kentucky College of Agriculture. While ranking fourth in the
number of farms and about 20th in agricultural sales, Kentucky typically is
about 30th in terms of government payments.
Since 1980, government payments have accounted for 11.8 percent of Kentucky’s
net farm income, compared to nearly 27 percent of U.S. net farm income coming
from federal agricultural payments.
These statistics reflect the type of farming in Kentucky, where the average farm
size is about a third of the national average, Snell said. The state’s top four
agricultural enterprises – equine, cattle, poultry and tobacco – have typically
received limited direct benefits from farm bill legislation, other than for
emergency disaster payments.
In the past, most government payments were devoted to crops. But the 2002 farm
bill increased conservation-related payments, which benefits Kentucky. During
the tenure of the 2002 farm bill, about a quarter of Kentucky’s government
payments have been conservation-related compared to less than 15 percent
nationally and about 11 percent during the 1996 farm bill.
Given that conservation payments are viewed as acceptable within international
trade negotiations, conservation programs could expand relative to commodity
programs in the next farm bill, Snell said. A continued push to adopt risk
management tools as means to support agricultural income without violating
international trade agreements and reducing U.S. taxpayer assistance to federal
farm programs is also likely.
In addition to international trade issues, financial conditions in agriculture
as well as the federal deficit will factor into the debate, Snell said.
In recent years, U.S. agriculture has seen record net farm income, expanding
exports and improved debt positions. However, lower commodity prices and drought
conditions in parts of the country will likely cause farm cash receipts to fall
in 2005. Plus, higher energy costs, among other factors, will elevate production
costs for this year. Nevertheless, 2005 U.S. net farm income, accounting for
cash receipts, production costs and government payments, is expected to remain
relatively high by historical levels.
While policymakers will be closely monitoring the financial well-being of
farmers, they will be paying even greater attention to the federal budget
situation, Snell said. The 2002 farm bill was debated in a time of federal
budget surpluses. However, today’s budget deficit will constrain future funding
for farm programs, where government payments are projected to increase to more
than $21.4 billion in 2005, compared to an average of $14 billion during the
previous 10 years. The total U.S. Department of Agriculture budget is about $100
billion.
Much needed recovery efforts for victims of Hurricane Katrina will also affect
the overall budget situation.
Editor: Laura Skillman
270-365-7541 ext. 278
Contact: Will Snell,
859-257-7288
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