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March 2, 2001

Ag Committee kicks off farm hearings

The House Agriculture Committee has opened a series of hearings on the 2002 farm bill with reports from farm economists.

Agriculture Department Chief Economist Keith Collins predicted a fourth straight year of record low commodity prices. He projected that under current programs, net cash farm income in 2001, not including supplemental payments, would be at the lowest level since 1994 and about $4 billion below the average of the 1990s.

Collins warned against increasing price supports, saying that such a move would be "unambiguously trade and production distorting." Instead he proposed a new support system that would tie payments to overall fluctuations in farm income, rather than the prices of individual crops. Collins said this would have minimal impact on farmers' planting decisions because growers would not know how much they would receive until later on in the year.

Dr. Daryll E. Ray, University of Tennessee's professor of agricultural economics and rural sociology, suggested that long-term or chronic issues have molded agriculture's response to the current farm bill and previous farm policy. He also said it was wrong to expect agriculture to "self-correct" when surpluses develop.

Bruce Gardner, professor of agricultural and resource economics at the University of Maryland, offered a two-pronged strategy to assist financially-strapped farmers and to maintain the U.S. position as world leader in agriculture and food production through an industry of independent commercial farms.

American Farm Bureau President Bob Stallman was scheduled to present testimony for the nation's largest farm organization on Feb. 28.

Cattle herds: Are they poised for expansion?

The U.S. cattle herd has been shrinking for five years but recent government data indicate that change is in the air, according to a Kansas State University agricultural economist.

The U.S. Department of Agriculture last month confirmed that cattle producers continued to trim the size of the herd in 2000—to 97.3 million head as of Jan. 1.

That number is down 0.9 percent from a year earlier and is the fifth straight year of declines, said James Mintert, with K-State Research and Extension.

The number was in sharp contrast to the 103.5 million head of cattle recorded on Jan. 1, 1996 when inventories reached their cyclical peak. The data also showed, however, that the number of heifers being held for beef cow replacement was up 2 percent from a year ago.

"This is consistent with the notion that, if feed and forage supplies are adequate, modest herd expansion will get under way later this year," Mintert said.

"Recently, cow slaughter has been above year-ago levels, partly because of low milk prices and tight hay supplies in some parts of the U.S," he continued. "But if weather conditions are normal in much of the U.S. this year, look for both heifer and cow slaughter to decline as we move through 2001 and producers' interest in expansion picks up."

Super-wealthy set targets on estate tax

A group of super-wealthy Americans has called on President Bush and congressional Republicans to rethink their plan to abolish the federal estate tax. The group, which includes William H. Gates—father of Microsoft founder Bill Gates, ice-cream magnate Ben Cohen, George Soros and two Rockefeller fortune heirs, say abolishing the tax would perpetuate wealth to the detriment of the nation's less fortunate.

"Repealing the estate tax," the petition signed by 100 wealthy individuals reads, "would enrich the heirs of America's millionaires and billionaires while hurting families who struggle to make ends meet...would have a devastating impact on public charities...would be bad for our democracy, our economy and our society." The individuals say a fix, not a repeal, is needed to help families pass down farms and small businesses.

An opinion piece in a recent online edition of Time.com says if the political situation surrounding the estate tax gets any hotter, Bush may opt to dump repeal of the death tax in favor of other portions of his tax cut.

"And so the estate tax repeal is looking more and more like the perfect bone for Bush to throw the Democrats when the negotiating gets started in earnest," opines Time.com's Frank Pellegrini. "Despite (Speaker) Denny Hastert's (R-Ill.) impressive PR sell of the cut last year—he had the bill delivered to the White House on a tractor, playing up the family-farmer angle—it remains the most obviously rich-skewed of Bush's cuts. Turning over that paper $236 billion to Democrats for some lower-income cuts—or pulling it from the plan altogether—could speed up negotiations significantly."

No matter the situation, Farm Bureau policy on the death tax remains clear: The organization supports "repeal of federal estate taxes."

Meanwhile, Sens. Chuck Grassley (R-Iowa) and Max Baucus (D-Mont.) have introduced a tax package aimed at taking some economic heat off of farmers and ranchers. The package includes provisions such as Farm and Ranch Risk Management accounts; clarification of the tax treatment of income from cash rental and CRP payments; an increase in the cap on funds for beginning farmers; more favorable tax treatment for farmer cooperatives; and incentives for farmer food donations to food banks and hunger programs.

Notable Quotables

"The tax provides a living for accountants, tax lawyers, financial planners, life insurance salesmen and charitable fundraisers. Loss in federal revenue from repeal does not bother them, because they are interested in maximum avoidance of tax revenue. They worry about repeal wiping away their livelihoods."

Columnist Robert Novak in a recent Chicago Sun-Times, writing about how some "secret" lobbying coalitions comprised of "a little band of people who love the estate tax" have launched "an undercover campaign" and are actually making progress in their efforts to ensure the death tax, at least to some degree, stays in place to ensure job security.