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Wednesday, March 05, 2014

USDA’s Budget Proposal: How Will You Be Impacted?


While the Farm Bill was under consideration, the USDA budget was a moving target.  And for part of the three years of Farm Bill debate, the entire farm policy was close to being driven purely by the budget.  In fact, the House of Representatives lopped off 75% of the USDA budget when the food and nutrition programs were shuffled off for separate consideration.  But now, the Farm Bill has been enacted into law and the USDA budget can be calculated.  Many of the program areas have mandatory spending levels, such as food and nutrition, crop insurance, and CCC loans, but other discretionary spending will float from year to year.  For Fiscal 2015, which begins October 1, USDA proposes to spend $146.4 billion, down from$156.6 billion in the current fiscal year and down from $153.9 billion in the last fiscal year.  So what appropriations were proposed for increase and what for decrease?


The Budget Summary, alone, is 127 pages, which provides significant detail about cuts and increases. Secretary Tom Vilsack said, “It supports farmers, ranchers and growers as they achieve net farm income well above the average of the previous decade. Mid-sized farms and livestock producers continue to face challenges as a result of prolonged drought. We are hopeful that implementation of the 2014 Farm Bill, which restores disaster assistance and invests in programs to help beginning, small and socially disadvantaged farmers and ranchers, will provide much-needed stability for producers moving forward.”

1)      Farm and Foreign Agricultural Services.  FSA programs drop from $11.9 billion to $6.1 billion due to lower price support outlays from the Commodity Credit Corporation. The Risk Management Agency, which administers crop insurance, is cut from $9.9 billion to $8.7 billion.  The Foreign Agriculture Service which administers trade promotion programs was cut slightly from $1.83 to $1.77 billion.  And total spending for Farm and Foreign Agricultural Services drops from $23.7 billion to $16.59 billion.

2)      Rural Development has an overall $450 million cutback in spending, $295 million of that comes from cuts in the Rural Utilities Services, leaving Rural Development with $2.5 billion

3)      Food and Nutrition programs.  SNAP and related programs are cut $3.2 billion to $112.2 billion in the proposed budget.  Those funds will likely be targeted by the House in its consideration of USDA spending.

4)      Natural Resources Conservation Service maintains a $4.2 billion funding, similar to the past two years.

5)      Marketing and Regulatory programs, such as APHIS and GIPSA gain about $100 million from the past year.


So how did the USDA so quickly convert the Farm Bill into a budget for the coming fiscal year?  That really did not happen, say the budget authors, “There was not sufficient time for USDA to do a thorough, program by program analysis of all the changes in the 2014 Farm Bill enacted in February. Therefore, the Budget is based on previous assumptions but adjusted at a macro level for farm bill changes to commodity programs. Changes to conservation and foreign assistance programs have been incorporated into their respective areas. The estimates included in the Budget for CCC are subject to change due to the effects of the 2014 Farm Bill.”


The significant reduction in CCC outlays is the result of discontinuation of nearly all direct payments, elimination of the ACRE program, and expectations for a minimal outlay of funds to producers who sign up for the new farm safety net programs, ARC and PLC.  And any funds earned by those who sign up will not be distributed until the next fiscal year.


Cuts in the crop insurance program are based on changes that USDA plans to propose to Congress to cut $1.2 billion from the program; “These proposals include reducing the rate of return for crop insurance companies, reducing premium subsidies to farmers for certain policies, and rescinding the authority to conduct a pilot program for wild salmon. The proposals represent a balanced approach to reducing the cost of the program while maintaining a strong safety net to protect producers from natural disasters and price fluctuations.”



In step with the Congressional mandates the past two years to reduce spending, the proposed USDA budget calls for $10 billion in reductions for the fiscal year that begins in October.  The major line items with reductions include commodity programs, crop insurance, and food and nutrition programs.  The Congress must yet approve the budget and an appropriations bill for the budget to take effect.  In recent years, such actions have come after the start of the new fiscal year, and have been lumped in with other spending programs.

Posted by Stu Ellis on 03/05 at 10:52 PM | Permalink

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