President Obama released his budget proposal for fiscal 2013 this week. The president’s proposals are rarely adopted and the chances are even more remote in this election year. But some of the changes in farm programs recommended by the president will be discussed as the new farm bill is developed.
The president’s budget calls for elimination of direct payments, an idea that has gained wide acceptance in Congress over the last several months. But the proposed cuts to crop insurance are controversial. The president’s plan would reduce the government subsidy by 2 percentage points on policies with a subsidy that exceeds 50 percent and would reduce insurance companies’ returns on investment from 14 percent to 12 percent.
The cap on the CRP would be lowered to 30 million acres. (The Senate does not plan to develop its own budget for fiscal 2013 this year.)
Here are a few highlights from USDA’s annual 10-year baseline forecast released this week: The assumptions behind them are discussed on page one. It’s a very lengthy document and we’ll have more details in next week’s FOCUS report.
But for now, here are a few things that jumped out:
- Corn acreage hits 94 million acres in 2012, but then eases back to stabilize near 90 million through 2021.
- China becomes the world’s largest corn buyer, importing 18 million metric tons by 2021/22.
- U.S. wheat acreage falls to 51 million acres as our share of world markets shrinks.
- Soybean exports continue to rise, but we lose market share to South America.
- Net cash farm income falls $24 billion below 2011’s record level of $98 billion by 2014, then works back to $97 billion by 2021.
Many people in agriculture are getting worried about the future of estate taxes.
Currently there is a $5 million per person estate tax exemption with estates above that taxed at 35 percent. If Congress does not take action, the exemption falls to $1 million and the tax rate jumps to 55 percent at the beginning of 2013. President Obama’s budget calls for a $3.5 million per person exemption and a tax rate of 45 percent. With the recent gains in land values, the estate tax exemption could be a very important factor in the transfer of farms and ranches from generation to generation.
Congress reached an agreement that will extend the current payroll-tax cut through the end of the year, continue long term unemployment benefits and prevent step reductions in Medicare payments to doctors. The 2-month extension of those programs was set to expire at the end of February and Congress takes a week-long break next week.