Some thinking that because of the US's budgetary constraints, the farm subsidy program could be up for the scrap. Also likely that with the Single Desk as good as gone, the Government may try to broker the removal of the US subsidies in grain. Interesting times ahead for the grain industry.
----------------------------------------------------------- US farm subsidies outmoded: Report
February 14, 2006 US FARM subsidies hurt poor farmers around the world while costing $US20 billion ($A27.1 billion) a year, the White House said today, contending there were "many forms" of aid that are cheaper and less wasteful.
The Council of Economic Advisers said agricultural support "can come in many forms, not all of which are equally market-distorting".
As examples, it cited "green" payments to reward land stewardship or revenue insurance to protect farm income.
"A more economically efficient farm policy would reflect contemporary economic conditions, environmental needs and public values," the council said in a report that foresaw gains at home and abroad from reform.
Farm supports, "as used by the United States and other countries, reduce farm income in poor countries", it said.
Congress is due to overhaul US farm policy in 2007. Agriculture Secretary Mike Johanns says the administration is months away from making its recommendations. The economic advisers' report raised ideas the White House supported in the past and that dovetail with US goals for freer farm trade.
At world trade talks, the United States has said it will cut its farm subsidies by 60 per cent if the European Union cuts its own by 83 per cent. It has also put forward a plan to cut the rich countries' tariffs on farm goods by 55 to 90 per cent.
Created during the Depression, the US farm program pours its benefits into a relative handful of crops, including grains, cotton, soybeans, sugar, peanuts and milk, either by assuring a minimum price or by giving money to farmers when market prices fall below targets set by law.
"In general, US commodity programs promote overproduction of commodities in the United States and hurt countries that could benefit from exporting these commodities to the United States," the report said.
The US farm sector has evolved dramatically since the Depression, the report said.
Farms are larger and far more specialised with operators who are savvy marketers and whose household income exceeds the US average. Federal payments to farmers will run around $US20 billion ($A27.1 billion) a year in 2005 and 2006.
"US agriculture will continue to be competitive if global agriculture policy distortions are eliminated," it said, before reviewing alternative approaches.
They range from payments not tied to crop production, which could include land stewardship, to agricultural research, market promotion, educational networks and rural economic development.
"Management of the risks faced by large commercial farms - who receive the biggest share of US subsidy payments - may be best served by crop or revenue insurance and forward pricing through participation in futures and options markets," the report said.
