The 2020 budgetthat President Trump sent to Congress on March 11 cut USDA spending by 15 percent.
While this proposed budget may be dead on arrival, with Congress likely to ignore it as they have done with the last two budget proposals, it suggests a lack of concern about the financial crisis that is slowly — or not so slowly for those on the financial edge — enveloping U.S. agriculture.
There may be a slight uptick in net farm income this year, but the long-term trend is clearly downward, and we see little in the Trump administration’s proposal that will turn things around.
While talking about maintaining a strong safety net for farmers, the proposed budget calls for "reducing the average premium subsidy for crop insurance from 62 percent to 48 percent and limit commodity, conservation, and crop insurance subsidies to those producers (who) have an adjusted gross income of $500,000 or less."
The $500,000 limit on AGI would not impact a large number of farmers, but the reduced insurance premium subsidy, if enacted, would inflict serious economic harm on most farm budgets.
The expected savings from reducing crop insurance subsidies is $2.253 billion in the 2021 fiscal year. Limiting crop insurance eligibility to $500,000 AGI will save another $62 million; limiting eligibility for agricultural commodity program payments to $500,000 AGI will save $117 million.
While we argue that crop insurance is not an effective counter-cyclical farm income program, any farmer who must borrow crop input expenses from their local bank knows that their banker will not give them any money if the crop is not insured.
The result is that any cut in the crop insurance subsidy is a direct increase in the cost of production for the crops. Now is not the time to enact USDA budgets that will increase the cost of production.
The administration also would like to establish or increase user fees for the Food Safety and Inspection Service, the Animal and Plant Health Inspection service, the Packers and Stockyards Program, and the Agricultural Marketing Service. In 2021, the estimated user fees from these services is expected to total $727 million.
If those fees are increased, who is ultimately going to end up paying those costs: the packers and processors, consumers, or farmers? Our guess is that it will probably end up coming out of the pocket of farmers by way of lower prices for their animals and commodities.
The budget does not take into consideration the longer-term impact of the trade dispute and the disruption of agricultural trade relationships. It took years to build the relationships that supported the affected trade in agricultural products, and the disruption will not end with the announcement of a new agreement. The impact will most likely affect U.S. farm exports for years to come.
All of these and other reductions are coming during a period of reduced farm income, the very time when adequate farm programs are most needed by farmers.