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DAVID KRUSE

By Staff | Mar 23, 2009

The Obama Administration is working hard to erode its support from agriculture. They need to remember that “foodies” are a niche segment, nowhere near a majority in agriculture.

So by going with the political agenda of this small, but vocal, constituency it will eventually lead to a loss of political support for no constructive reason.

Political capital should be spent, but it should be wagered wisely. Things like the FDA deciding to regulate the dust coming out of combines, linking ag subsidy eligibility to gross sales receipts, and suggesting that there was some kind of choice to be made between farmers and feeding children will hasten the break between mainstream agriculture and this administration rather quickly.

Obama’s budget would eliminate ag subsidies to farmers who gross $500,000. Using a gross income benchmark to determine subsidy eligibility is an absurd concept choice. It shows an innate lack of understanding of agriculture, which inherently has big gross revenues, but very small net incomes in relative terms.

It isn’t a matter of deciding how much gross revenue that a farmer can receive to be eligible for subsidies, it’s a case of this benchmark not being an appropriate way to measure subsidy eligibility at all. There are farmers who gross $500,000 and lose money some years. There would be a lot more of those if they lost subsidy eligibility as the subsidies often represented their net income.

George W’s means testing was also a complicated, unnecessary way to benchmark subsidy eligibility. It forced the USDA to become intrusive in private financial affairs which conflicts with conservative philosophy.

Plain, simple, subsidy limits, dollar limits, with strict entity control so that an individual is limited to a set subsidy limit from all sources is the most fair and easy to administer. Senators Chuck Grassley and Byron Dorgan, have suggested this concept for a long time, with resistance from southern cotton and rice farming interests.

The Obama Administration suggested reducing the individual limit from $360,000 to $250,000. That extends a safety net to all farmers, but also says that if you want to work above it, you are on your own, which is how it should be.

The Obama Administration has found almost no political support for basing subsidy eligibility on gross revenue and substantial political support for reducing the total limit to $250,000.

I don’t see the point in fighting over this. It wasn’t revealed what constitutes gross revenue in their proposal. Do livestock sales count as gross revenue against the prospect of grain subsidies? If so, anyone raising livestock would lose farm subsidy eligibility. That would be stupid, and unfair and cause many small farmers to liquidate their livestock operations. Under a $500,000 limit on revenue, USDA calculates 76,500 farmers would lose eligibility. I believe that would be enough to destabilize the ag economy.

I thought the purpose of the Obama Administration was to fix the economy, not make it worse. The first rule should be to do no harm. We have a strong ag economy today and while we in agriculture need to share in the austerity which reducing the limit on farm subsidies would accomplish, pulling the safety net out from tens of thousands of farmers is not constructive policy.

There is also an implied continuity between Farm Bills so that major changes can be adjusted to and then set without the rules of the game drastically being changed midstream. Farmers and their bankers count on that.

The fact that the Obama Administration came with such proposals suggests poor input from advisers who know little about agriculture or have another agenda.

Secretary of agriculture Tom Vilsack said he was passing on the President’s instructions that he wanted Vilsack to make sure that America’s children, in particular, had more nutritious food.

That’s fine, even admirable, within a narrow context. U.S. farmers and U.S. agriculture can help make that happen by supporting increases in child nutrition programs. Who would be against it?

However, some would interpret the President’s words as suggesting a mandate to restructure agriculture in the image of organic cult-food production. This would ultimately raise the cost of U.S. food production, increasing the need for land utilization, rejecting technology adoption and ultimately starving some kids somewhere in the world by raising aggregate food costs for no good useful sensible purpose.

If that is the direction that they are heading, then the trouble is just starting.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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