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Lee Egerstrom, St. Paul, column: Ag cuts could hit every American hard

By Lee Egerstrom ST. PAUL -- Here's a Minnesota perspective on Washington's budget battles: The federal farm program, at least, is working as intended. Higher farm commodity prices are making government commodity payments unnecessary by design, h...

By Lee Egerstrom

ST. PAUL -- Here's a Minnesota perspective on Washington's budget battles: The federal farm program, at least, is working as intended.

Higher farm commodity prices are making government commodity payments unnecessary by design, helping ease federal ag spending. Still, some in Washington want deeper U.S. Agriculture Department cuts, calling for as much as 25 percent spending reductions while most government programs look at proposed cuts of about 8 percent.

Remember, federal agriculture spending also pays for critical programs far from the countryside. Such cuts would undermine federal efforts to improve public health, protect the safety of the food supply, stimulate local economies through rural economic development and support environmental and conservation programs.

"We need to take our hits just like everyone else," admits Rep. Collin Peterson, D-Minn., who chaired the House Agriculture Committee when the current farm program was written.

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But "we shouldn't take a disproportionate hit that will cut into the infrastructure of our economy."

The bill Peterson heavily influenced is set to expire in 2012. Therefore, over the next year and a half, food and agriculture interests will engage various ideologues, academics, concerned citizens and others over new legislation, generally called "the farm program."

The farm program actually is a comprehensive mix of programs that touches the lives of all Americans, not just the 1 percent of U.S. population that still derives its livelihood from food production.

In other words, it is both a "safety net" for agriculture and "infrastructure" for our broader economy.

That is what is at stake for Minnesota and other Midwestern farm states as the farm program becomes a key target.

New ideologues in Congress would prefer to shut down food and farm programs entirely. Academics and citizen groups would tweak the federal laws, changing emphasis from current support of agriculture to more economic development assistance for rural America, more food assistance, more renewable energy research and development and more assistance to agriculture development worldwide.

Much is at stake for Minnesota. Agriculture and the food chain are huge and strong sectors of our economy. Whether they stay healthy will depend on nonagricultural influences, such as global economics and energy supplies.

Against this backdrop, the Wall Street Journal recently observed that federal payments to farmers under various programs will fall to $10.6 billion this year, from $24.4 billion in 2005. What have disappeared are the commodity support programs that most critics of the farm program think are still in place.

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Such crop subsidies kick in when corn prices fall below $2.63 a bushel and soybean prices fall below $6 a bushel. Prices for corn have been at or above $6 a bushel in most local Minnesota markets, and soybean prices were well above $13 a bushel.

In other words, the farm support program is working as intended; payments won't be made as long as prices remain above target levels. But the target prices in the program remain as a safety net should one be needed.

One reason farm prices currently are well above target prices is that greater demand for corn has come from the biofuels industry. In Minnesota and elsewhere, farmers have been lead investors and developers of plants that create ethanol markets for corn and related soy-based diesel.

For many Americans, the ethanol program is wrapped up in what is considered the farm program, although they are separate.

What isn't generally appreciated is how the farm program and the ethanol program have worked together in building rural economic infrastructure, Peterson said.

"A lot of people don't like ethanol, including some of our friends in animal agriculture," Peterson said, because demand for corn at the plants raised prices for feed.

But what the plants have done is strengthen local economies, created jobs and kept energy profits at home.

Thus, an infrastructure is in place for locally developed alternative fuels for when new technologies open the way for replacing corn-based ethanol. "We're a long way from when that can happen. But we do have the infrastructure in place -- if we don't shut it down," Peterson said.

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Egerstrom is an economic development fellow with Minnesota 20/20.

Related Topics: AGRICULTURE
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