Obama May be Forced to Rethink Farm Policy
President-elect Obama soon may be forced to address agricultural policy issues, even though the topic was not high on his campaign agenda.
Agricultural policy is one of the least likely candidates for the ‘change agenda’ that President-elect Barack Obama has promised to implement, says Oxford Analytica. “The 2008 Farm Bill extends well beyond Obama’s first term, and he supported that legislation.”
The president-elect also backs ethanol from corn (and other domestic feedstocks) and is likely to nominate a secretary of agriculture who is sympathetic to Mid-western agricultural interests.
Therefore, a major shift in US agricultural policy appears unlikely — although there are gathering pressures that may force Obama to consider change, even though it is not on his agenda.
Obama signaled his interest in attacking some of the excesses of farm subsidies at a press conference Wednesday, reports ABC News:
“There’s a report today that from 2003 to 2006, millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies. If this is true, it is a prime example of the kind of waste I intend to end as president.”
OxAn notes that The 2008 Farm Bill was passed before the full impact of the financial crisis was apparent:
- Booming commodity prices promised record farm incomes and low anticipated programme expenditures.
- The Doha Round of global trade talks was collapsing, and in any case it would have had little impact if prices remained high.
- Sustained growth in emerging markets, particularly in Asia, gave farmers favourable export prospects regardless of the trade policies followed by those countries.
All these ‘assumptions’ on which the Farm Bill was premised are now in question. Moreover, the strain on federal budgets caused by the rescue packages for financial institutions could well lead to pressure for agricultural spending and subsidies to be reduced.
One specific issue that may appeal to the incoming president is the pressing need to reinvigorate African agriculture. However, it is difficult to see how Washington could avoid making changes to its domestic cotton policy — even without a completed Doha Round — if it is to be credible as a driver of agricultural reform in Africa.
A prolonged global recession could add to the challenges faced by US farmers, thereby increasing the pressure to reform the Farm Bill. If Chinese GDP growth slows to a rate of 5-6%, US farm exports to this market could slump sharply. Coupled with a stronger dollar, this could have a major impact on US farm sector profits.
Agricultural exports could come down from their recent record high points and add to the weaker domestic market for farm products.
Even if none of these factors emerge to threaten the stability of the Farm Bill, there will still be domestic pressures to improve the oversight of food safety, to incorporate farming more fully into environmental stewardship strategies, and to strike the right balance between production of biofuels and food and feed use for the major crops. Climate change legislation will face the dilemma as to whether agriculture is to be treated the same way as other sectors when it comes to capping and trading emission permits.
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