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USDA, Congress Ponder Health of Rural Economy

posted on September 30, 2005

Republican leaders in Congress are looking for the cash to pay as much as $200 billion for hurricane relief and recovery. For lawmakers looking to reduce the federal budget deficit, that means deeper cuts are in store for unfinished 2006 budgets, including farm programs.

One area where that's already evident is in USDA's renewal this week of the Conservation Reserve Program. In the past, an estimated 35 million acres of land has been idled each year at a cost of nearly $2 billion. Now, USDA says only the most environmentally sensitive ground will qualify for new 10- to 15-year bids.

Throw in higher fuel and fertilizer costs, and farmers and ranchers that drop out of the CRP will be adapting cash flow plans. Even so, USDA officials this week touted the strength of the farm economy before a sometimes skeptical Congress.


USDA, Congress Ponder Health of Rural Economy

In what might be called the first unofficial step of writing the next Farm Bill, a House Agriculture Subcommittee this week held a hearing to assess the overall health of the U.S. farm economy.

As lawmakers and economists attempted to take rural America's pulse, much of the testimony by USDA's top number cruncher was positive.

Keith Collins, Chief Economist, USDA: "As we all know, the U.S. farm economy began a recovery in 2003 that has continued until this year."

Despite the rosy outlook, America's farmers and ranchers deal with a lot of uncertainty these days. Concerns over rising interest rates, the federal budget deficit, contentious trade negotiations, animal diseases and soaring fuel prices, all are casting a cloud over agriculture. Nevertheless, Collins claims net farm income this year should rival last year's record.

Keith Collins, Chief Economist, USDA: "U.S. global income growth and rising agricultural exports helped push net farm income to a record high in 2003, set another record in 2004 and cash income this year is likely to be near last year's record high."

A noticeable rough spot in the economic road can be found at any gas station in America. While fuel prices have declined somewhat from record highs just weeks ago, farmers, motorists and truckers continue to feel the pinch at the pump.

According to the Energy Department, gasoline and diesel prices across America are at least 75 percent higher today than one year ago -- and in some regions, they've virtually doubled.

But the most heated exchange focused on the Bush administration's resumption of Japanese beef imports, despite the fact that Japan's borders remain closed to U.S. beef.

Rep. Earl Pomeroy - D, North Dakota: "The message I'd like you to take back to the U.S. Department of Agriculture is we don't think the way to get into Japan after being unfairly held out for years is to let them sell to us in the meantime. We ought to have a little 'quid pro quo.' here."

Keith Collins, USDA Chief Economist: "It's not much of a 'quid pro quo.' We only import a million dollars of their beef and what we're talking about is the loss of $2.5 billion worth of exports. So I don't know how much of a lever that would be."

Rep. Earl Pomeroy - D, North Dakota: "Well, I'll tell you what..."

Keith Collins, USDA Chief Economist: "I understand your frustration..."

Rep. Earl Pomeroy - D, North Dakota: "...and I think the ranchers I represent would think this too -- Symbolysm, sometimes means a lot."

Tags: agriculture Congress economy government markets news rural USDA