November 29, 2005

 

US corn farmers may get US$9.7 billion in subsidy

 

 

US corn farmers may collect US$9.7 billion for the 2005-06 crop year, up US$7.5 billion from two years ago and rivalling annual US federal payments for cotton, the Des Moines Register reported Sunday.

 

The sum, calculated by office of the USDA chief economist Keith Collins, is up US$2.2 billion from last year's US corn subsidy payments and roughly equal to the annual budget for the entire Department of the Interior, the paper said.

 

The US$9.7-billion figure is about twice what the US federal government spends on cancer research through the National Cancer Institute and nearly triples the annual budget for all of the USDA's conservation payments, the paper added.

 

Iowa is traditionally one of the top two US corn-producing states. The 2005-06 US corn marketing year runs form Sep 1 through Aug 31.

 

Of the US$9.7 billion in total corn subsidies that farmers may receive this year, only US$2 billion comes from the fixed annual payments guaranteed to farmers who sign up for the federal farm programme, according to the paper.

 

The remaining US$7.7 billion is calculated to come from counter-cyclical payments and loan deficiency payments that are linked to market prices, all as set out in the 2002 US farm bill.

 

US corn farmers are estimated to have harvested an 11-billion bushel crop this fall, depressing US corn prices and triggering these payments.

 

Between 2002 and 2004, farmers received an average of 16 cents in subsidies for every dollar of corn that was harvested, while cotton farmers received 56 cents in subsidies for every dollar of that crop, the newspaper said.

 

With the 2005-06 US corn crop worth an estimated US$19 billion, farmers will receive about 50 cents per dollar in subsidies, the article noted.

 

In fact, the corn market price has dropped so low in Iowa that loan deficiency payments in that state reached 51 cents per bushel earlier this month, the highest rate in at least six years and up from last year's 20-30 cents per bushel, the paper noted.

 

The USDA has been soliciting this year comments in public meetings ahead of the rewriting of the US farm bill into 2007. In general, these forums have shown US farmers are very happy with the 2002 US farm bill.

 

However, early this year, President George W Bush had proposed to limit how much of a farmer's harvest could be subsidised.

 

Under the current law, US farmers are paid for every bushel of corn they produce; the administration's proposal would have capped the payment at the farm's historical yield, the Des Moines Register article noted.

 

The administration's proposal was rejected by Congress.

 

"Had the cap been in effect in 2004, corn growers would have lost 45 percent of their loan deficiency payments," the paper noted. "In Iowa, that would have cost growers about US$200 million."

 

Foreign countries are also critical of US farm payments, with key WTO members currently in intensive talks on the politically sensitive question of reducing farm support programmes.

 

US corn farmers are expected to shift corn acreage in 2006-07 to a crop that needs less fertiliser--namely soybeans or wheat--as high natural gas prices have caused fertiliser costs to rise.