At Senate Appropriations Hearing, Secretary of Agriculture Sonny Perdue Discusses White House Budget- Crop Insurance, Research, and Dairy

The Senate Appropriations Subcommittee on Agriculture held a hearing yesterday to discuss the President’s FY2018 budget request and heard testimony from Agriculture Secretary Sonny Perdue.  Recall that late last month, Sec. Perdue discussed the executive branch agricultural budget outline before the House Appropriations Subcommittee on Agriculture.  Recent news articles have documented concerns about the President’s budget proposal, particularly when it comes to crop insurance and the SNAP program (food stamps).  Today’s update highlights three issues that Senators discussed at yesterday’s meeting: Crop insurance, federal agricultural related research, and dairy issues with Canada.

Background

In his prepared statement, Secretary Perdue indicated that, “I am here today to present to you the Administration’s budget for the Department. The President’s Budget for 2018 for USDA programs within this Subcommittee is about $135 billion, of which approximately $122 billion is mandatory funding. The majority of these funds support crop insurance, nutrition assistance programs, farm commodity and trade programs and a number of conservation programs.”

This graphic from CRS shows that agricultural spending is mostly mandatory and mostly related to nutrition.

“For discretionary programs of interest to this Subcommittee, our budget proposes a net budget authority of about $13 billion, approximately $5 billion below the 2017 annualized continuing resolution. The Budget includes mandatory funds to fully support estimated participation levels for Child Nutrition programs and discretionary funds to fully serve the expected participation in the Special Supplemental Nutrition Program for Women, Infants, and Children. It includes the funding needed to meet our responsibility for providing inspection services to the Nation’s meat and poultry establishments.”

Sec. Perdue added that, “As I recently informed the House Agriculture Committee, I am confident in the future of rural America and see opportunities for us to continue to strengthen this outlook and create opportunities for rural America. I look forward to working with this Subcommittee to fulfill the President’s goals and our key responsibilities for the long term benefit of producers and all Americans.”

In a news release yesterday, Subcommittee Chairman John Hoeven (R., N.D.) indicated that, “We should be investing in the future of agriculture and rural America, especially at a time when our producers face low commodity prices and unforeseen weather, like the drought conditions facing ranchers in North Dakota

As Chairman, I will work to fund our priorities, especially maintaining strong crop insurance options and updating our countercyclical safety net to ensure it works for producers.

The news release also noted that, “As work begins on the next Farm Bill, Hoeven encouraged Perdue to build a North, South, Midwest coalition to pass a new farm bill that includes good risk management tools, including strong crop insurance and countercyclical safety net options.”

And Senate Appropriations Committee Chairman Thad Cochran (R., Miss.) stated in a news release yesterday that, “Many people are looking at this year’s budget with hope and despair.  We’re going to go through a thoughtful process to determine appropriate funding levels for agriculture research and programs that support American producers.”

Lawmaker Focus- Crop Insurance

In the discussion portion of yesterday’s hearing, Subcommittee Chairman Hoeven focused his attention on crop insurance and stated that, “Crop insurance has become the number one risk management tool for our producers. It’s just vitally important. Crop insurance has been reduced, in terms of the support, $12-billion between the 2008 farm bill and the last time the administration took action to take funding out of crop insurance support, which was in 2011, so that’s a $12-billion reduction in the support for crop insurance, which is again, as I said, it’s now become our farmers number one risk management tool. Particularly as we look at a drought year, low commodity prices, it is vitally important.

“In the last farm bill, we put specifically in the statute that the administration cannot take money out of the farm bill. That was a very important provision. And I’m going to work very hard to make sure it gets in the next farm bill, because they’ve got to be able to count on it. And so I would just like you to talk for a minute about your commitment to crop insurance. Do you agree that it’s a vitally important risk management tool for our producers and that it needs to be there to help them?

Sec. Perdue pointed out that, “I do think it is a very appropriate part of the farm safety net. I think what you all did in 2014 with the farm bill moving away from direct payments into a robust ARC and PLC payment scheme primarily with crop insurance is certainly more [palatable] to the American public, the American taxpayer, where producers actually are purchasing insurance with the help of the federal government as well for those times where they need it.”

Sec. Perdue also stated that, “We need the crop insurance and I trust that this committee, as well as those committees on the House will see that we are able to right-size our crop insurance budget where it is meaningful.

As I said to Senator Tester, I think every producer in the country would rather have a good crop at a fair price rather than have to call on crop insurance. Unfortunately, all over the country that’s not possible each and every year, and I think this program, based on the geographical differences in weather, is the appropriate program to move forward as a part of the safety net for agricultural production for the food security of the American public.

Sen. Hoeven then stated that, “I think two real keys in the farm bill are going to be making sure that crop insurance support is there, combined with a counter cyclical, ARC and PLC, that work in the way intended…[and]…I started out making the point, in a farm bill that was scored as saving $23-billion, the way it works actually over the next ten it would save more than $100-billion. I think it’s very important people don’t lose track of the fact that that is how it works and that farmers are doing their part in helping with debt and deficit.”

Lawmaker Focus- Research

Appropriations Committee Chairman Cochran asked Sec. Perdue specifically about research allocations in the budget and noted that, “We’ve got a growing demand for food and need for federal government research dollars are provided to help make sure that we’re doing the best things for the crops and that we have thoughtful programs backed up by research from experts throughout many of the college and university systems, but also federal government agencies. So I’m asking you if you think the amount of money provided for in the Department’s research budget is going to be adequate to sustain a level of research to make sure that farmers get the benefit of those efforts.

Sec. Perdue offered this candid response: “I think again, you know that I am a member of the Executive Branch. You’ve acknowledged that I did not have much input in the formulation of this budget.

I would admit to you today that I think research is one of those areas where we may have missed the mark and I believe that we can work toward right-sizing the budget, because research is really the basis of our agricultural productivity today.

Sec. Perdue also noted that, “I’ve been stated publicly and privately, quoted publicly and privately, that I believe if American manufacturing had had the same level of basic research, applied research, and had a delivery system like the extension service, we wouldn’t be talking about the demise of American manufacturing today.”

Lawmaker Focus: Dairy Trade Issues with Canada

A news release yesterday from Sen. Tammy Baldwin (D., Wis.) stated that, “Senator Baldwin has been sounding the alarm since last September about Canada’s trade barriers and how they are harming Wisconsin dairy farms. Senator Baldwin has taken action by calling for a federal investigation into these Canadian trade barriers, seeking input from local Wisconsin farmers, as well as urging Secretary Perdue and President Trump to take immediate action to address this issue and assist Wisconsin dairy farmers.”

At yesterday’s hearing, Sen. Baldwin stated that, “We had a chance to discuss a number of issues that…challenges frankly that face Wisconsin dairy farmers prior to your confirmation, and actually even subsequent to your confirmation. While there were an array of issues that we discussed, I raised, I think heightened concerns, about the changes that our neighbors to the north, Canada, have made in their dairy pricing practices that are disrupting trading between our two countries.

“They are blocking access for U.S. product into Canada. This has had a major impact, as I’ve shared with you, on Wisconsin for the past year and has literally threatened the livelihoods of dozens of Wisconsin farmers. When the President was in Wisconsin recently, he promised that he would convince Canada to change their dairy pricing program. And now that you’ve had a chance to look into this matter as Secretary, and have spoken to your Canadian counterparts, I am very, very eager to hear what the plan is to help Wisconsin dairy farmers suffering from this unfair pricing scheme that Canada has adopted.”

Sec. Perdue indicated that, “We unashamedly addressed this with Minister McCauley, my counterpart in Canada, Monday was a week ago in Toronto. We were there and we had the beginning of bilateral discussions, but dairy was at the forefront of that. We indicated that we believe the Class 7 designation that Canada had just installed was unfair and it had created a glut on the world market that we were not prepared to accept. I told him, and have told everyone, that it is not our intention to get involved in Canadian supply management. They’ve got a different dairy program than we do. That’s their prerogative. It was not included in Canada, but it’s also not fair for them to create another class of milk that allows their producers to overprice, to overproduce on a quota system and then blend the surplus milk off to below world prices on the world market. That affects not only the U.S. but other dairy exporting nations as well.

“That point is very clear out there. I think again, these are exactly the kind of points with Canada and with sugar in Mexico that the President has talked about renegotiating NAFTA, and I can assure you from our perspective those will be at the forefront of the issues that we discuss regarding NAFTA renegotiations.”

Sen. Baldwin responded by saying, “Well Mr. Secretary it sounds like you pursued the issue, pointing out exactly what I would hope. What did you hear in response and what is our plan? Because the farmers that I represent need solutions and they need them really fast.”

Sec. Perdue stated that, “Well, one of the things we heard, and the Canadians have tried to put a Band-Aid on this by offering contracts to those 75 Wisconsin dairy farmers that had lost their contract, we consider that a Band-Aid approach and not a solution approach to that and we pressed them on that. But you have to remember Senator that these negotiations, this was our first date and we weren’t even holding hands yet, so we look forward to…we were very candid discussions and it was my responsibility to lay out the concerns I had. We did that on dairy. We did that on some of the wheat grading issues that we have in the northern plains regarding our wheat being graded as feed grade wheat going in there as well, and then as the wine where in some of their provinces they have U.S. wine back behind the cage, where the Canadian wine is out where the consumers can get it. So there were several issues, but dairy was at the forefront of that.”

Keith Good

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He is well known in agricultural circles for the daily FarmPolicy.com News Summary.