ASA RESPONSES TO USDA FARM BILL FORUM QUESTIONS
From the American Soybean Association

1. How should farm policy be designed to maximize U.S. competitiveness and our country's ability to effectively compete in global markets?

The U.S. is no longer the lowest-cost producer of many basic agricultural commodities, and competitors have moved aggressively to neutralize our advantages in agricultural research, production efficiency, and marketing infrastructure. Land and labor costs in developing exporting countries are less than half of ours, and their governments often manipulate currency exchange rates to enhance competitiveness.

In order to maximize U.S. competitiveness, U.S. farm policy must:

* Provide a safety net of income or price support when incomes or prices fall below target or historical levels, and minimize or avoid making payments when incomes or prices are high. Thus, producers will be protected by a farm program safety net if they are adversely affected by trade barriers, competitor country currency manipulations that affect foreign production and exports, or other market distortions. If incomes or prices are high and are not affected by such distortions, farm program payments are minimized or avoided altogether. The marketing loan is a good example of this kind of counter-cyclical payment program. To the extent permitted under the WTO, the marketing loan should be continued in the 2007 Farm Bill in order to compete effectively in global markets.

* Avoid providing additional income support in the form of direct or fixed payments as they are quickly capitalized into land rents and land values, thus exacerbating U.S. competitiveness problems. Additionally, direct payments tend to increase farm spending since payments are made even when market or income conditions don't warrant the need for such payments.

* Increase Federal investment in agriculture research that increases U.S. agricultural yields and reduces production costs, and dramatically increase Federal funds that might allow producers to band together in new-age coops to move up the value chain.

2. How should farm policy address any unintended consequences and ensure that such consequences do not discourage new farmers and the next generation of farmers from entering production agriculture?

The goal of farm policy should be to provide an equitable farm income safety net while allowing market conditions to determine cropping decisions. The 2002 Farm Bill does not provide this balance, and producers of crops that receive comparatively lower benefits are not fully responding to sharp increases in world demand for these commodities.

In addition, certain farm program benefits, including direct payments, are factored directly into land rents, raising production costs and making it difficult for new producers to enter farming.

3. How should farm policy be designed to effectively and fairly distribute assistance to producers?

One concept that should be explored is to provide safety net assistance to producers of program crops whenever a producer's revenue derived from all program crops is less than a protect a percentage of an individual operation's average revenue derived from farming during a recent period. The WTO allows revenue protection up to 70 percent of income to be included in the Green Box. This level could be negotiated upward to 80 or 85 percent. The balance of income protection could be provided by a limited marketing loan and/or single peril or buy-up coverage under crop insurance.

4. How can farm policy best achieve conservation and environmental goals?

Farm policy should continue and expand on the direction of the 2002 Farm Bill to enhance conservation practices on working lands, including voluntary, incentive-based programs such as the CSP. The CRP should be scaled back, and focused more carefully on environmentally sensitive lands. Consideration should be given to including lands devoted to fruit and vegetable production in any conservation-based program including, if appropriate, the direct payment program.

5. How can Federal rural and farm programs provide effective assistance in rural areas?

Consideration should be given to offering attractive tax incentives to companies that provide rural areas with competitively-priced services that are needed to encourage local economic growth, including health care, education, information technologies, transportation, and job-creating industries.

6. How should agricultural product development, marketing and research-related issues be addressed in the next farm bill?

The U.S. should follow the example of the EU and other countries that provide incentives for domestic production of products that will otherwise be imported. These include high quality specialty food products that U.S. consumers are willing to pay a premium for. These industries should be promoted through market and product research and marketing assistance, and could be specifically targeted through tax incentives.

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