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Prices, Supplies May Ease Farm Reform Bill's Impact : Agriculture: U.S. subsidies could drop by $11 billion over next five years, government says.

August 16, 1995|From Reuters

WASHINGTON — High crop prices and tight global supplies of grain could help soften the brunt of farm policy changes that would sharply cut government payments to farmers through the year 2000, agriculture experts said Tuesday.

Government price support outlays to farmers over the next five years could drop $11 billion from previous estimates as strong demand for U.S. farm goods buttresses prices, the Agriculture Department's chief economist said.

While cautioning that the rosy outlook for U.S. crops could unexpectedly change, analysts said the more favorable market environment for American farmers will ease the impact of a new farm policy that is expected to dramatically diminish the government's role in supporting the agricultural industry.

Congress is set to begin serious debate next month on various proposals to cut government spending on agriculture and reform the nation's 60-year-old farm policy.

The proposal that appears to be receiving the most serious consideration now is the so-called "Freedom to Farm" bill put forth by the influential chairman of the House Agriculture Committee, Rep. Pat Roberts (R-Kan.).

The Roberts proposal represents probably the most fundamental change in farm policy being discussed. It would guarantee a certain payment to farmers for the next seven years, give farmers wide discretion on which crops to grow and reduce farm spending by $13.4 billion.

But because the Roberts bill is based on higher spending estimates arrived at earlier this year, economists said the actual spending cuts felt by farmers under the act could be minimal, at least for the first few years.

"If prices stay high, and markets stay tight for some sustained period of time, the real cuts that farmers could take under Roberts could really be quite small," said Keith Collins, chief economist for the Agriculture Department.

Collins said the department, in its mid-session review of the budget released at the end of last month, lowered its estimates for government crop support payments from 1995 through 2000 by $11.4 billion because of the higher prices and tight supply situation.

The biggest cuts were forecast for the next three years. Government payments to farmers are projected to drop to $6.8 billion this fiscal year from previous projections of $10.6 billion, to $5.5 billion in fiscal 1996 from earlier estimates of $9.6 billion, and to $5.9 billion in 1997, significantly below earlier projections of $8.8 billion.

The Roberts bill would cap--and also guarantee--total farm support outlays at $43.2 billion over the seven years. While this looks like a reduction in spending under the budget unveiled early this year, more economists are now saying that these numbers are actually above what will be spent.

"The early 1995 seven-year base-line spending estimate on which the [Roberts] guaranteed spending level would be based, is obsolete," said private consultant John Schnittker.

"If you think the President's mid-session review better reflects the world picture than the President's budget released in January, then Mr. Roberts captures a nice cushion for farmers," said Collins.

Industry sources said the new spending outlook could help make the Roberts proposal more attractive to commodity groups hesitant to accept big budget cuts.

"One way to sell this to farm groups is to note that $43 billion is more than what they'd be getting under the current program because of the higher prices and short stocks," said a grains industry lobbyist.

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