farming the mailbox

303 Pages·2010·2.36 MB·English

by  Jeannette Cowan

FARMING THE MAILBOX:

U.S. FEDERAL AND STATE
SUBSIDIES TO AGRICULTURE

STUDY PREPARED FOR

DAIRY FARMERS OF CANADA

by

Grey, Clark, Shih and Associates, Limited
Ottawa, Ontario, Canada

November 14, 2010

This document is the Property of Dairy Farmers of Canada
© Grey, Clark, Shih and Associates, Limited (2010)
U.S. AGRICULTURAL SUBSIDIES STUDY

CONTENTS LIST
INTRODUCTION AND SUMMARY....................................................................................1

PART I – U.S. FEDERAL GOVERNMENT PROGRAMS

I. Overview – Part I – Federal Subsidies.........................................................................33
A. U.S. Federal Support to Dairy Farmers...........................................................44
B. Analysis of U.S. Federal Government Support...............................................47
1. Total Value of U.S. Federal Government Support in 2009.................47
2. Direct and Indirect Support..................................................................53
3. Subsidies, Support and Tariffs.............................................................54
C. U.S. Federal Agricultural Support Programs...................................................58
1. Programs that Directly Support Dairy Production...............................58
Milk Income Loss Contract Payments...........................................59
Dairy Indemnity Payment Program...............................................59
Dairy Export Incentive Program (DEIP).......................................59
Milk Market Orders Assessment Fund..........................................60
Dairy Product Price Support Program...........................................60
2. Domestic Support Programs................................................................60
3. Export Subsidy Programs....................................................................62
4. De Facto and Article 9.1(c) Export Subsidies.....................................63
5. Domestic and International Food Aid..................................................71
6. Irrigation Programs..............................................................................71
D. Conclusions......................................................................................................72
E. Summary of Program Benefits.........................................................................75

II. Domestic Support.........................................................................................................80
A. Farm Loan and Grant Programs...................................................82
A.1 Farm Operating and Ownership Loans.........................................83
A.2 Emergency Disaster Loans...........................................................90
A.3 State Mediation Grants.................................................................92
B. Commodity Programs...................................................................94
C. Direct Producer Payments / D. Counter-Cyclical Payments.......96
E. Average Crop Election Payments (ACRE)................................106
F. Non-Recourse Marketing Assistance Loans and Loan
Deficiency Payments..................................................................107
G. Price Support Marketing Assistance Loans and
Related Stabilization Programs..................................................113
H. Disaster Payments.......................................................................115
I. Milk Income Loss Contract Payments (MILC)..........................116
J. Noninsured Assistance Payments...............................................118
K. Farm Storage and Sugar Storage Facility Loans........................120
L. Dairy Indemnity Payment Program............................................123
M. Dairy Price Support Program.....................................................126
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III. Export Subsidies........................................................................................................126
A. Foreign Agricultural Service......................................................126
B. Export Credit Guarantee Programs.............................................128
C. Facilities Financing Guarantees..................................................133
D. Market Access Program..............................................................136
E. Foreign Market Development (Cooperator) Program................139
F. Emerging Market Program.........................................................142
G. Quality Samples Program...........................................................147
H. Dairy Export Incentive Program (DEIP)....................................149
I. Trade Adjustment Assistance for Farmers.................................152

IV. International Food Assistance....................................................................................155
A. Public Law 480 (P.L. 480)..........................................................157
B. Bill Emerson Humanitarian Trust...............................................160
C. Food for Progress........................................................................162
D. McGovern-Dole International Food for Education
and Child Nutrition Program....................................................165
E. Section 416(b) Donations...........................................................167

V. Agricultural Marketing Services................................................................................169
A. Marketing Services.....................................................................170
B. Payments to States......................................................................172
C. Section 32 Funds (Funds for Strengthening Markets,
Income and Supply)..................................................................174
D. Perishable Agricultural Commodities Act..................................176
E. Commodity Grading Services....................................................178
F. Milk Market Orders Assessment Fund.......................................180

VI. Conservation Programs..............................................................................................182
A. Conservation Reserve Program (CRP)......................................184
B. Emergency Conservation Program............................................186
C. Environmental Quality Incentives Program...............................188
D. Conservation Operations............................................................190
E. Conservation Reserve Program Technical Assistance ..............192
F. Agricultural Management Assistance........................................193
G. Conservation Security Program.................................................195
H. Farm and Ranch Lands Protection Program..............................197
I. Grassland Reserve Program (GRP)...........................................200
J. Resource Conservation and Development.................................202
K. Wildlife Habitat Incentives Program.........................................204
L. Watershed and Flood Prevention Operations............................206
M. Watershed Rehabilitation Program............................................208
N. Wetlands Reserve Program........................................................210

VII. Crop Insurance...........................................................................................................212
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VIII. Rural Development....................................................................................................223
A. Rural Business – Cooperative Service........................................227
A.1 Business and Industry (B&I) Loan Guarantees..........................227
A.2 Rural Housing Service................................................................229
A.3 Rural Utilities Service................................................................231

IX. Animal and Plant Health Inspection Services............................................................233
A. Agricultural Quarantine Inspection Fees....................................235
B. Plant and Animal Health Monitoring.........................................237
C. Pest and Disease Management Programs...................................239
D. Animal Care................................................................................241
E. Scientific and Technical Services...............................................243

X. Food Safety and Inspection........................................................................................245
A. Federal Food Safety and Inspection...........................................247
B. State Food Safety and Inspection...............................................249
C. International Food Safety and Inspection...................................251
D. Codex Alimentarius Commission...............................................253

XI. Food and Nutrition Services......................................................................................255
A. Supplemental Nutrition Assistance Program (SNAP)................256
B. Child Nutrition Programs...........................................................258
C. Special Supplemental Food Program for Women,
Infants, and Children (WIC).....................................................260
D. Commodity Assistance Program................................................262

XII. Grain Inspection, Packers and Stockyard Administration (GIPSA)..........................264

XIII. Forest Service ............................................................................................................266
A. Forest and Rangeland Research..................................................267
B. State and Private Forestry...........................................................269
C. Land Acquisition........................................................................271

XIV. Research, Education and Economics.........................................................................273
A. Agricultural Research Service....................................................274
B. National Institute of Food and Agriculture.................................276
C. Economic Research Service.......................................................278
D. National Agricultural Statistics Service.....................................280

XV. Irrigation Infrastructure..............................................................................................282

XVI. Biomass Energy Tax Incentives.................................................................................286

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© Grey, Clark, Shih and Associates, Limited (2010)
PART II – STATE GOVERNMENT PROGRAMS

Overview – Part II – State Subsidies ....................................................................................291

State by State Analysis

1. ALABAMA.............................................................................................................297
2. ALASKA.................................................................................................................298
3. ARIZONA................................................................................................................303
4. ARKANSAS............................................................................................................305
5. CALIFORNIA.........................................................................................................308
6. COLORADO...........................................................................................................318
7. CONNECTICUT.....................................................................................................321
8. DELAWARE...........................................................................................................332
9. FLORIDA................................................................................................................335
10. GEORGIA................................................................................................................339
11. HAWAII...................................................................................................................343
12. IDAHO.....................................................................................................................349
13. ILLINOIS.................................................................................................................358
14. INDIANA.................................................................................................................362
15. IOWA.......................................................................................................................368
16. KANSAS..................................................................................................................375
17. KENTUCKY............................................................................................................379
18. LOUISIANA............................................................................................................383
19. MAINE.....................................................................................................................387
20. MARYLAND...........................................................................................................394
21. MASSACHUSETTS................................................................................................397
22. MICHIGAN.............................................................................................................404
23. MINNESOTA..........................................................................................................406
24. MISSISSIPPI...........................................................................................................417
25. MISSOURI...............................................................................................................420
26. MONTANA.............................................................................................................427
27. NEBRASKA............................................................................................................431
28. NEVADA.................................................................................................................434
29. NEW HAMPSHIRE................................................................................................436
30. NEW JERSEY.........................................................................................................439
31. NEW MEXICO........................................................................................................444
32. NEW YORK............................................................................................................446
33. NORTH CAROLINA..............................................................................................450
34. NORTH DAKOTA..................................................................................................452
35. OHIO........................................................................................................................456
36. OKLAHOMA..........................................................................................................460
37. OREGON.................................................................................................................463
38. PENNSYLVANIA...................................................................................................464
39. RHODE ISLAND....................................................................................................472
40. SOUTH CAROLINA...............................................................................................474
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41. SOUTH DAKOTA..................................................................................................476
42. TENNESSEE...........................................................................................................482
43. TEXAS.....................................................................................................................484
44. UTAH.......................................................................................................................487
45. VERMONT..............................................................................................................491
46. VIRGINIA...............................................................................................................495
47. WASHINGTON.......................................................................................................497
48. WEST VIRGINIA....................................................................................................500
49. WISCONSIN...........................................................................................................503
50. WYOMING.............................................................................................................512
51. IRRIGATION SUBSIDIES.....................................................................................514

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© Grey, Clark, Shih and Associates, Limited (2010)
PART I

‘I want to write a Farm Bill that’s good for Agriculture. If someone wants to sue
us, we’ve got a lot of lawyers in Washington.’ 1
Representative Collin C. Peterson,
Chair of the Agriculture Committee
of the U.S. House of Representatives

INTRODUCTION AND SUMMARY

Grey, Clark, Shih and Associates, Limited (GCS) was retained by the Dairy Farmers of Canada
(DFC) to quantify and analyze, from publicly available information, all support provided to U.S.
agriculture and dairy producers by federal, state and local governments.

This study updates and expands upon the previous studies of support to U.S. agriculture prepared
by GCS in 1990, 1998, 2003 and 2005.2 We have reviewed all government support provided
directly and indirectly to the full range of agricultural production and processing in the USA,
from inputs at the farm or ranch level to the point of sale to retailers. We have also addressed the
US$28 billion in support provided to agriculture through the ARRA (American Recovery and
Reinvestment Act of 2009) which according to USDA supported US$52 billion in expenditures.3
However, while the complete range of direct and indirect measures was reviewed, not all benefits
flowing from state and federal programs were included in our calculations of benefits, either
because we did not have adequate information to estimate particular program benefits or because
we considered the benefits to be too removed from dairy farming.

1 “Farm Bill divides lawmakers, President Bush”, Associated Press, by Libby Quaid, January 14, 2007
2 In 1990, GCS prepared a study entitled Subsidies to the Dairy Farming and Processing Industries in the
USA. In this study, GCS identified and quantified all subsidies and benefits available to dairy farmers and
processors in the U.S. states at the federal, state and local government level from inputs utilized in milk production
to point of sale to the retailer. In 1998, GCS prepared a follow-up 1998 study also entitled Subsidies to the Dairy
Farming and Processing Industries in the USA. In this study, GCS updated the information set out in the 1990
study, in the context of the 1996 Farm Bill and revised programs. The 2003 report was entitled WTO Consistency of
U.S. and New Zealand Agricultural Practices and the 2005 report was entitled U.S. Federal and State Agricultural
Support.
3 Overview of USDA Recovery Act Funds, http://www.usda.gov/wps/portal/usda/arrapie?navid=USDA_ARRA_OVEW
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PART I
Total Value of U.S. support for Dairy Production

The Dairy Farmers of Canada asked GCS to calculate the value of total direct and indirect
U.S. support to dairy producers per hectolitre of milk produced in the United States. We
have made separate calculations in Parts I and II of the report and provided aggregate
estimates in the summary section. In previous reports GCS calculated the total value of
U.S. support to dairy per hundredweight of milk produced. For comparison purposes, the
total value of U.S. support to the dairy sector in 2009 has been calculated per hectolitre and
per hundredweight (cwt).

The support provided to U.S. agriculture and to dairy production is comprised of direct support
and indirect support. Indirect support includes support to U.S. dairy production through
infrastructure, services, and general program benefits including export credits, nutrition, food aid
and loan and granted loan programs. In addition, the very substantial benefits to feed grain
production and to livestock producers also benefit dairy cattle and dairy production.

We have applied a similar methodology to that we used in the 1998 study to determine the
benefits to U.S. dairy producers. Unless otherwise stated, quantified benefits have been
allocated to dairy in the same proportion that dairy represents in the total value of U.S. farm
production. In the 1998 study, 1997 program budgets were multiplied by 10.32% (0.1032),
dairy’s percentage of total agricultural receipts. For 2009, we used 10.7%. Because precise data
on actual benefits to dairy is not available, this methodology may overstate or understate actual
benefits to dairy, but it appears to be a reasonable method.

The USDA Economic Research Service reported the total value of cash receipts from the sale of
all U.S. dairy production in 2009 as $31.5 billion and the total value of cash receipts from the
sale of all U.S. agricultural commodities as $290.5 billion.4 Based on these figures, we have
determined that U.S. dairy represents approximately 10.7% of total U.S. agricultural production.

4 Economic Research Service (ERS): http://www.ers.usda.gov/briefing/farmincome/data/cr_t3.htm;
October 27, 2004
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PART I
However, the simple average may understate benefit to dairy. While here were some attempts to
remedy the situation in the 2008 Farm Bill, nearly 50% of U.S. agricultural production (i.e.,
fruits, vegetables and nuts) have not benefited in any significant way from USDA support.
Indeed, in California more than 44% of federal crop subsidies went to cotton and rice growers
despite representing only 3% of the state’s total agricultural output in 2008, according to a report
from the Environmental Working Group.5 Therefore, our methodology likely understates the
benefits to dairy.

We estimate that the total value of U.S. Federal support for U.S. dairy in 2009 to be the sum of
the total value of support provided under dairy specific programs less the value of selected
programs that offer no direct or indirect support to U.S. dairy production plus 10.7% of the total
of the remaining USDA program level expenditures for 2009 plus 10.7% of total budgetary
resources available for water management programs of the Department of Interior, Bureau of
Reclamation.

We did not estimate the price/income support benefits under any programs. This understates
benefits to U.S. agriculture and to dairy producers but we do not have precise data on such
supports.

We estimate that the total benefit to U.S. dairy production provided through U.S. Federal, State
and local programs in FY 2009 was US$12.00 per cwt or $31.11 CAD6 per hl. Total value of
U.S. Federal Government subsidies and support to agriculture is the aggregate of the USDA
Program Levels, irrigation infrastructure support and undeclared below market price/cost water
and the biomass energy incentive.

Since our last study, support in Canadian dollars per hl7 through U.S. Federal and State subsidies
have increased from $25.90CAD per hectolitre in FY 2003 following the 2002 Farm Bill8 to
$31.11CAD9 in 2009 under the 2008 Farm Bill.10

5 “Farm Subsidies in California: Skewed Priorities and Gross Inequities”, Kari Hamerschlag
6 Unless otherwise indicted all values are in U.S. dollars.
7 Using the Bank of Canada average exchange rate for 2003 (1.40146175)
8 Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
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PART I

Summary of U.S. Subsidies to Dairy
(2009)

Per cwt Per hl
US$ CAD$ US$ CAD$
Federal 10.56 12.06 23.97 27.37
State/Local 1.44 1.65 3.27 3.74
Total 12.00 13.70 27.24 31.11

These values were calculated as follows:

• In 2009, the estimated total value of USDA programs was US$180,829,000,000. The
allocation to dairy products $19,348,703,000 or $10.23 cwt. To this must be added for
the biomass program and for dairy’s share for irrigation infrastructure support from
the Department of the Interior budget.11
• The value of support to irrigation infrastructure provided by the Department of the
Interior was $1,798,000,000 of which $192,386,000 was allocated to dairy. This is
equivalent to $ 0.1015 per cwt.
• The value of Biomass subsides was US$4,770,000,000 of which US$510,390,000, or
$0.27 per cwt was allocated to dairy production.
• State and local government support, including irrigation water subsidies is
US$24,756,226,716 of which US$2,719,850,228 was allocated to dairy. This
represents US$ 1.44 per cwt

In 2009, total U.S. production of milk was 189,370,000,000 lbs.12 or 1,893,700,000 cwt. The
support values were divided by this volume to develop per cwt values. The per cwt values were
converted to per hectolitre (hl) by multiplying by 2.27.

We employed a conservative methodology to determine the total value of federal support to be
allocated to dairy production in 2009.

9 Using the Bank of Canada average exchange rate for 2009 (1.1420)
10 The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill)
11 FY 2011 Budget Summary, U.S. Department of Agriculture, pg 137
12 Using the Bank of Canada average exchange rate for 2009 (1.1420)
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© Grey, Clark, Shih and Associates, Limited (2010)