Resume:

• US a natural exporting,  commercial (if originally traditional family) farm system, in a country committed to individual liberty and (+/-) free trade, [c.f. Europe]
• 2000 % PSE around 22 - 25% for the US ($50bn. total), c.f. EU of 38 - 42% ($100bn. total) [Canada 17 - 19% ($4.3bn total);  Japan, 62 - 64% ($56bn. total)]  (differences between natural exporter, with no substantial peasant sector, and a natural importers with substantial small farm sectors).
• Hence, policy designed to work with the market - any support provided largely through exchequer payments (though not in dairy!).
• Extensive R&D and extension - land grant colleges - + credit support, crop insurance, and infrastructure provision.
• Loan rates - to support and assist market price recovery and recovery of producer confidence in the 30s (CCC as implementation authority)
• Needed set-aside, to control production levels as loan rates set above market prices (+ some export assistance and subsidy)
• Food Problem confined to the poor - less well supported by social security than in Europe, and provided with food stamp programme - conditional (and thus paternalistic) support - spend the government support on food, or loose it.
• 1970s -> food shortage scares:  deficiency payments to secure future supplies, both against domestic food shortages and also to capitalise on strong world markets.
• Environmental Pressures (limited c.f.Europe, and more focused on Natural Resources than on landscape etc.) dealt with via paid Conservation Reserve programmes and sod buster/swamp buster provisions outlawing reclaimation of sensitive areas in response to market or policy incentives.
• Falling world prices in 80s ->
• Loan rates reduced (to 85% of Olympic moving average) - otherwise simply supporting world market prices (FSA, 85 and FACT, 90)
• increasing DP costs;  limited by freezing payment base (then reducing this base to 85% of eligible) (FSA, 85 and FACT, 90)
• Budget pressure (1995) (+ pressure from URAA on amber/blue box measures) -> freezing the payment per farm, and setting time-limit on payments (FAIR, 1996) - Production Flexibility Contracts - and supposed phasing out of federal support?
• But, falling world prices led to additional emergency assistance payments, as well as the traitional marketing loan and deficiency payments on non-programme crops, during 1998 - 2002, which more than doubled federal support.
• 2002: no budget pressure - because of sustained boom over late 90s, and now the apparent need to prevent a major depression -  and depressed world prices, + strong vested interests with considerable and differentiated political clout -> strong pressure to continue support.
• What might stop this??
• External pressure - Millenium round of the WTO - limits on Blue Box, and further constraints on Green Box??
• Internal Pressures:
• Taxpayers demands for other spending (only really effective if the Federal Budget is under pressure, which seems unlikely for a while)
• Taxpayers concerns over equity, justice, fairness of these payments?
• Constituency (farmer) pressures arising from the realisation that these payments simply increase costs for expanders and new entrants?
• The 20/80 rule - 20% receiving 80% of support approximately, may cause increasing friction over time.
• While US appeared to be leading the way to sensible policy reform in 1995 FAIR, its true colours are now re-appearing: 2002 FSRIA - if we are rich enough (no serious budget constraint) then we will continue to support existing vested interests, especially when (world) markets appear to be behaving badly, regardless of what the rhetoric in WTO etc. might say.

The 2002 Farm Bill FSRIA : - [the following taken verbatim from the conclusions of the 2002 farm bill notes in the US Farm Policy set]

What effects will FSRIA Have?

• Tendency to increase production (increase in the coupled effects over FAIR)
• Substantially increase Government spending on farm support.
• Exhaust, if not exceed, WTO limits on AMS payments, which are likely to be tightened eventually under the Doha round.  The FSRIA does include a provision which charges the Secretary of State with the responsibilty for compliance with WTO provisions - which means, in effect, that the adminstration has the authority to alter payment rates and conditions in the event that payments exceed the WTO limits (either as now set or as possibly altered under a new WTO agreement).  However, such authority will still remain more or less subject to Congress ratification.
• Substantially undermines the capacity of the US to lead further WTO reforms, and encourages other countries, including the EU to offer even more resistance to liberalisation than otherwise.

• The Budgetary Cost - as and when the budget ceiling comes down, and pressure on federal spending increases, so there will be considerable proessure on these rather expensive and demonstrably inefficient and inequitable programmes.  The Environmental Working Group (EWG - a non-profit environmental research organisation) in the US has already published on its web-site the names and addresses of indivuduals and firms obtaining government payments, and the amounts each gets. As and when the US electorate becomes fully aquainted with these data, one can expect that the political pressures may alter somewhat from those exhibited during the drafting and agreement of FSRIA. The top 20% of recipients claimed 85% of the total payments between 1996 and 2001.  Senate critics of the farm bill are already trying to tighten payment limits under the 2003 Agricultural Appropriations Bill - which actually authorises annual payments.
• International (WTO) Pressure - as the Doha round proceeds, the international aspirations of the US might be expected to increase in saliance compared with the domestic concerns which clearly drove FSRIA.  As they do, so there will be increased pressure on this level of support.
• Internal Farm Level Pressures?  How long can it be before the sensible farmers in the US realise that these generous payments simply result in increased demand for limited farm assets, especially land, and that, as a result, the payments simply drive up the costs of commercial operation of farms, rather than improving farm returns?  In addition, how long can farm pressure groups sustain the illogical and inconsistent argument that these payments help to preserve rural communities and encourage rural development?  Not for long, if the EWG and other similar organisations begin to challenge these spurious arguments.  Ultimately FSRIA is clearly unsustainable - it is a final (or at least one of the last) roars of a political dinosaur - doomed to extinction - the only real question is when.
• When?
• When world prices recover (a time which has now been delayed by FSRIA),
• When the political balance between the US international and domestic interests revert to more favour to international concerns
• When the political balance between competing groups and parties within the US democratic system provide more favour to non-farm interests
• When the budget runs out.
• When will that be?  Maybe in 2007.  Watch this space!
• When it does - what then?  Given this experience, the next reform of US policy seems very likely to have to take serious account of two vitally important componants of reform:
• stability of world commodity markets - how can this be improved and how can some security be provided to an inevitably atomistic sector (many relatively small producers - despite the apparently large size of many farms) which is otherwise vulnerable to small excess supplies leading to dramatic falls in prices?

compensation for reduced support - since elimination of support will inevitably undermine present asset values and bankrupt otherwise efficient farmers?

2007 Farm Bill:  Johanns Prepares Farmers for Lower Subsidies (January, 2007)
While no details are so far available, the 2007 Farm Bill that will be introduced next month is likely to call for less spending on farm supports, Agriculture Secretary Mike Johanns hinted during an address to the American Farm Bureau Federation's annual meeting in Salt Lake City on Monday (8.1.07). "Good policy must take into account much more than dollar count," Johanns said. "It must be tailored to provide strong support that is relevant to current trends and forward-looking for future growth."  If the 2002 Farm Bill had simply been renewed, as many farm organizations preferred, the dollar figure would have dropped by as much as $20 billion, he noted, due to stronger crop markets.  Crop subsidies reached a peak in fiscal 2000, a lackluster year, at $32 billion, and declined as farms became more productive and profitable, with subsidies now at the $20 billion level. Renewable energy has introduced a new market for key crops and while it has put pressure on the livestock industries, it has been good for farmers overall, Johanns said, adding that he expects the livestock industry to 'adjust' to high corn, soybean and other feed prices.  Farm spending is likely to shift from subsidies to providing higher loan limits for beginning farmers, Johanns said. That would bring the United States into closer harmony with international trade standards; Canada, Brazil and the European Union have filed complaints with the World Trade Organization in recent times over protectionist behavior in the U.S. agricultural sector, Johanns said.  He also said the bill is likely to address inequities in subsidies, 54 percent of which goes to the top 15 percent of farms by size and sales. About 60 percent of farmers, generally smaller, family operations, receive no direct subsidies at all.

See, also, recent report/comment