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Farm program payments expected to decline 12.7 percent in 2011

WILLMAR -- With so much focus on reducing government expenditures in an effort to rein in the national debt, federal farm program payments have been and will continue to be examined for potential cuts, especially with Congress about to begin the process of rewriting the next farm bill.

But one must remember that farm program payments originate from a number of programs authorized by the 2008 farm bill, and that the amount of dollars provided by each program can vary from year to year, depending largely on weather and economic conditions.

For many of our nation's agricultural producers, the last several years have been very good years, both in terms of crop production and economic conditions.

According to the U.S. Department of Agriculture, net farm income is forecast to reach $94.7 billion in 2011, up $15.7 billion or 19.8 percent from the 2010 forecast. The 2011 forecast is the second highest inflation-adjusted net farm income value of the past 35 years.

The recent profitability in farming is further evidenced by the fact that in the last 30 years, the top five earnings years all have occurred since 2004.

Meanwhile, the combination of good crops and a strong agricultural economy seems to be further fueling the debate regarding the need for some farm programs, or lawmakers' resolve to at least reduce the amount of dollars allocated for some programs. However, recent evidence would also indicate that farm program payments are already being reduced, largely due to last year's better-than-average crops, favorable weather conditions and a strong agricultural economy.

According to USDA officials, total government payments paid directly to producers are expected to total $10.6 billion in 2011, a 12.7 percent decline from the $12.2 billion paid out in 2010. The USDA has also provided further comparisons of the dollars issued under the various farm programs.

One of the farm program payments being closely scrutinized are the direct payments issued under the Direct and Counter-cyclical Payment program and the Average Crop Revenue Election program.

Because the direct payments rates are set by the 2008 farm program, without regard to the number of acres planted or current crop price levels, they are sometimes referred to as a "guaranteed" payment.

Direct payments are expected to total $4.65 billion in 2011. That would be down 5.7 percent relative to the 5-year average due to producers enrolling in the Average Crop Revenue Election program.

Authorized by the 2008 farm bill, the Average Crop Revenue Election program provides producers with added revenue protection in exchange for a 20 percent reduction in their annual direct payments.

With respect to program payments based on market price levels, USDA expects that strong commodity prices will persist through 2011. Therefore, the Average Crop Revenue Election protection payments are expected to decline by 95 percent, from $430 million in 2010, to $20 million in 2011.

In addition, no counter-cyclical payments are anticipated, and producers are expected to receive only $20 million in marketing loan benefits -- which includes loan deficiency payments, marketing loan gains and certificate gain exchanges. This payout projection represents a 95 percent decrease from 2010 levels.

The Milk Income Loss Contract Program compensates dairy producers when domestic milk prices fall below a specified level. Due to fluctuating prices, USDA is estimating that $200 million in payments will be issued to dairy producers in 2011.

Initially implemented in 2005, the Tobacco Transition Payment Program provides annual payments over a 10-year period to eligible tobacco quota holders and tobacco producers. Payments for this program are expected to continue their downward trend, with payments projected to total $780 million in 2011.

Conservation program payments will likely total $3.03 billion in 2011. This amount reflects program participation levels being brought up closer to the funding levels authorized by the 2008 farm bill. This amount includes all of the conservation programs administered by USDA's Farm Service Agency and the Natural Resources Conservation Service.

Ad hoc and emergency disaster program payments are expected to total $1.9 billion in 2011, a 31 percent decrease from 2010 levels. Of the $1.9 billion, USDA is estimating that approximately $994 million will be issued to producers under the Supplemental Revenue Assistance Payment Program.

USDA funds wetlands initiative in Red River Valley

Officials from USDA have announced that up to $10 million will be made available to eligible landowners in Minnesota, North Dakota and South Dakota under the Wetlands Reserve Program. The primary purpose of this special initiative is to reduce flooding by restoring wetlands in the Red River Valley watershed, which experiences moderate to severe flooding annually.

This additional funding will allow the three states to accept new program applications and purchase more easements.

Administered by USDA's Natural Resources Conservation Service, the Wetlands Reserve Program is the federal government's largest wetlands restoration program. It provides voluntary technical and financial assistance to private landowners who agree to restore, protect and enhance wetlands that have been degraded or converted to agricultural uses.

More than 80 percent of the restorable wetlands in the Red River Valley are privately owned.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.