SOMETHING is happening in the US Congress that may have quite profound implications for Australian agriculture.
After a century of handing out vast amounts of taxpayers’ money to farmers, a revolt is occurring. The handouts aren’t about to stop, but it is possible to envisage a future where they might.
At issue is the 2013 Farm Bill, a US$940 billion farm subsidy and food stamp bill that will set farm policy for the next five years and govern US expenditure for ten. A couple of weeks ago the House of Representatives voted 195-234 against the bill, despite it being agreed by Republican and Democratic party negotiators.
In the past, Farm Bills have faced little opposition. Mainly urban Democrats argue they are caring for their constituencies by authorising expenditure on food stamps for welfare recipients. Rural representatives, most of them Republican, believe they are similarly looking after their constituencies by creating a huge, government-funded market for food along with guarantees on commodity prices and subsidised crop insurance.
The losers are the vast majority of taxpayers who foot the bill, along with those arguably more deserving of government assistance who miss out.
The defeat arose because a block of Republicans who want to see the government shrink in size - and balance its budget - voted with a large majority of Democrats who thought the bill spent too little on food stamps.
The latter were also upset at provisions requiring recipients to take a drug test, not be convicted of felony crimes and be subject to work requirements. The price tag for food stamps, incidentally, is a mind-boggling $740 billion and now subsidises one in seven Americans.
The farm support in the bill was also generous.
Farmers would have received subsidies if the price fell to less than 85 per cent of current price support levels, which are historically high. Subsidies to high-income agribusinesses and wealthy "farmers" were maintained.
In recent years the biggest 10pc of farm businesses have received three-quarters of farm subsidies.
Hundreds of millions were earmarked for such indispensables as wood-burning heating systems, sheep and goat herder "marketing" subsidies, price controls on olive oil, and the promotion of "healthy plants". Cheap crop insurance would continue to underwrite farm incomes and it would remain illegal for a dairy producer to negotiate prices directly with a buyer.
The 2008 Farm Bill - worth $640 billion including subsidies for biofuels and nominated by the World Bank as one of three most important contributors to the 2007–2008 world food price crisis - was due to expire last year, but has been extended to 30 September.
Nobody expects the current bill to lapse, as it would mean reversion to 1940s-era price supports including a doubling in milk prices and a 40pc increase in the price of honey, as well as price targets for wheat, rice and cotton far above current market prices.
Sometime before the end of September, therefore, a Farm Bill will pass through Congress.
The question is, will the 'new broom' Republicans who advocate economic responsibility have sufficient influence to wind back industry subsidies? And for that matter, do rural voters care more about out-of-control government spending and debt than they do about farm subsidies?
Various outcomes are possible and it is difficult to know where it will end, particularly from this distance, but it is encouraging that there is now an influential group in Congress willing to tackle farm subsidies as part of reducing the enormous budget deficit.
It would make sense to keep a close watch on US politics for the next few months. From Australia’s perspective, any reduction in support for US farmers is to be welcomed, as are mooted reductions in the EU’s Common Agricultural Policy.
Our farmers are as good as any, but it’s tough when your competitors have a head start.
David Leyonhjelm has been an agribusiness consultant for 25 years. He may be contacted at email@example.com