Stability and Stimulus in Rural America

January 1, 2008

By: John Thaemert, President, National Association of Wheat Growers

It’s been a rough and tumble week for markets around the world and, in Washington, President Bush and Congressional leaders have finally found something they can agree on-the need for an economic stimulus package.

Those of us in the farm community have been working on a slightly different kind of economic stimulus package for awhile, a law commonly known as the farm bill.

That’s right-the farm bill is a stimulus package.

First off, fully two-thirds of the spending in the “farm” bills passed by the House and Senate is allocated toward nutrition programs like food stamps. These programs don’t pay farmers: they help the poor, including those hit hard by economic downturn, get enough food for their families.

The bills also provide monies for a wide variety of research, conservation, renewable energy and trade programs, all of which employ people and provide greater value to the economy through, for instance, new plant varieties or wildlife habitat or decreased dependence on imported oil and increased agricultural exports.

The commodity title, which many folks erroneously think makes up the majority of farm bill spending, also has a stimulating effect.

In rural America, places where the base of the local economy is agricultural production, people are used to extreme volatility. The weather can be good or bad; prices can be good or bad; disease problems can be good or bad; input costs can be good or bad.

Some agricultural communities like my own have faced depressed economies for many years due to continuous bad weather and an outward migration of people and jobs.

And even now with higher wheat prices, USDA’s estimated breakeven production cost for 2008 exceeds the average estimated wheat price, primarily because of run ups in fuel and fertilizer costs. So while higher prices won’t necessarily translate into higher income, the higher stakes do translate into higher risk.

Through this, the farm bill provides some sense of stability-a safety net-for agricultural producers in good times or bad. By removing some of the variability and uncertainty in farm revenue, good policy for rural areas helps producers get operating credit even in the not-so-good times and stabilizes the base of rural economies, leading to multiplier effects and invigorating the non-farm sectors in rural America.

This kind of stabilization is exactly what the farm bill is for, and is a key reason wheat growers have been steadfast in our support for the direct payment program. That slight injection of firm footing spurs investment in new technologies on the farm and development in rural communities, and allows our producers to continue providing Americans the lowest cost, safest and highest quality food supply in the world, without which our economy would really be in trouble.

Finalizing a new farm bill is the best thing our leaders could do to stimulate economic activity in rural America, and it should surely be feasible to find $5-8 billion for the farm bill if we can find $145 billion for a new stimulus package. The farm bill should be a top priority.

John Thaemert is a wheat producer in Sylvan Grove, Kansas