Timely Topics

Posted by: Sarah Drollette on Sep 30, 2011

Deficit and Spending Reductions Could Affect Utah Agriculture

The Greek philosopher Heraclitus said, “The only constant is change.”  Agriculture has always been risky, but those risks have changed over time.  Some risks have decreased due to better technology or management practices.  Others have increased, partly due to changing economic stability, heightened commodity price volatility, or uncertain institutional involvement.   For many years, government programs have been available to help agriculture producers mitigate the risks they face and continue to be successful.  Like risk, government programs are continually changing and evolving, increasing and decreasing, and many of these changes have and will continue to directly affect the agricultural industry.

Reducing the national deficit has become a topic of much discussion among government officials over the past few months.  In the latter part of September, President Obama announced an economic growth and deficit reduction plan entitled “Living Within our Means and Investing in the Future.[i]  As part of a reduction in mandatory programs spending, the Obama Administration proposes to cut spending in the agriculture sector by $33 billion over the next ten years by eliminating direct payments, reducing crop insurance subsidies, and reducing conservation funding.

According to USDA Risk Management Agency data, over 900 crop insurance policies were sold to Utah producers insuring over 155,000 acres for the 2011 crop year.  The total premiums for these policies amounted to over $4 million, but subsidies of nearly $3 million left Utah producers’ cost significantly lower.[ii]  Under the President’s plan, any premium subsidy over 50% would be reduced, contributing to a reduction of the crop insurance program of over $8 billion over the next decade.  According to Farm Service Agency data, advanced direct payments for Utah in 2011 amounted to over $187,000.[iii]  Under the deficit reduction plan, these payments would be eliminated.

While these changes are currently only proposals for change, it is unlikely that the agriculture industry will go unscathed by a finalized deficit reduction plan.  Changes in these government programs will affect today’s farmers and the risk management strategies that will be successful in the future.  In the backdrop of an ever-changing society , it is imperative for farmers to be informed and knowledgeable about changes not only in their own operations, but in agriculture industry as a whole.

Comments

Add new comment
Please answer the question below: