Reform the farm bill, agricultural regulation at the same time

Without question, agriculture is one of the shining stars of the American economy. At a time when the U.S. economy hungers for more jobs, agricultural exports alone provide a million of them.

That’s a track record to emulate elsewhere in our economy. But is some of that success attributable to subsidies that should be drastically reduced or eliminated by the congressional “Gang of 12?” With world demand for U.S. farm products growing, have we reached a point when our farm “safety net” can be discarded? Let’s analyze the question. 

{mosads}First, our situation today is eerily similar to the 1970s, when Russia became a major importer of U.S. grains (today it’s other nations, including China). Farm prices soared, and farmers responded by planting “fence row to fence row.” Unfortunately, we reaped the results in the ’80s. Thousands of American farmers went bankrupt, and Hollywood actresses advanced their careers by making sympathetic movies. The “bailout” of U.S. agriculture in the mid-1980s cost American taxpayers billions of dollars.

In the euphoria of the ’70s, many felt a safety net for agriculture was a waste of resources and should be abandoned. Some people are now making that same argument, but like then, they are mistaking short-term trends for permanent conditions.

There are ways today for many U.S. farmers to protect themselves from market fluctuations (for example, through the use of futures contracts and similar instruments), but the volatile weather this last year is a vivid reminder that farmers still face natural risks — from weather, disease and insects — that are wholly unpredictable, potentially devastating and fundamentally unlike those of any other industry. In today’s tight credit environment, such risk can be especially threatening to the farm economy. Bankers are in a conservative mood these days, uncertain as to what will happen in the U.S. or global economy over the next few years. They simply will not provide the credit many farmers need unless an adequate safety net is in place.

That’s why, even when prices are up (as they are, at least for now), the safety net can’t be abandoned. 

It can, however, use some basic redesign. In the past, the unparalleled risks of agriculture have been dealt with on three basic tracks: crop insurance, “permanent” disaster programs and “ad hoc” disaster programs, all of which have numerous shortcomings. If we were to put in place a truly effective crop insurance program, it could be the backbone of American farm policy (replacing, partially or wholly, traditional crop subsidies). We could forgo disaster programs altogether and cut billions from the budget (though Congress would need the self-discipline to resist bailing out farmers who either bought no crop insurance or bought inadequate policies). 

But if we’re going to expose farmers to greater risk than before, our own government should figure out cost-free ways to boost agriculture and, at the very least, stop piling on new risk through onerous regulatory policies. The trade bills that finally passed Congress are a good start. The next step should be real regulatory reform, which would essentially cost the American taxpayer nothing and would give farmers the confidence to produce more and their bankers the confidence to finance them. To be specific, we should:

1. Reform the approval process for biotech crops: Other agricultural powerhouses, like Brazil, are approving new biotech plants faster than we are. Even when a trait finally gets approved by the U.S. Department of Agriculture, it can be tied up in the courts for years by activists exploiting loopholes in the law. Unless we seriously reform this process, the U.S. is in danger of losing its competitive advantage.

2. Curb EPA’s regulatory excesses: The sheer number of new regulations being proposed by EPA is astounding. Put them all together and they’re enough to flatten the agricultural economy. These include new regulations on “rural dust,” pesticide spray drift, Clean Water Act permits to apply pesticides, a re-review of the herbicide atrazine, and many more. Congress could fix this in an instant, without harm to the environment or human health, by reigning in EPA’s indefensible initiatives.

U.S. farm policy could use some reforms. But so could regulatory policy. If we tackle all these issues soon — and in coordination — we can insure that agriculture remains a growth engine for the U.S. economy for years to come. 

Yeutter was U.S. trade representative from 1985 to 1988 and also served as secretary of Agriculture from 1989 to 1991. He currently serves as director of several major corporations and consults with others involved in international trade, finance and agriculture.