Australian grain farmers to gain from US uncertainty
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Could Australian grain farmers gain from US uncertainty

Australian grain farmers to gain from US uncertainty

A step towards a level playing field for Australian grain farmers may not need to come from initiatives at home, but instead the loss of one to its global competition.

The possibility of subsidised crop insurance has been an attractive point of discussion among some Australian grain farmers for many years. Their US counterparts have been enjoying 62 per cent of their insurance premiums subsidised under the current US Farm Bill.

However, the loss of a wide support base and heightened budgetary pressure could spell complications to the passage of the 2018 US Farm Bill.

Negotiation of the Bill is already underway and is in the context of Donald Trump’s November 2016 victory – being due in large part to farming states voting for Trump and the subsequent possibility of a more favourable regulatory environment for agriculture.

However the need for budget restraint, and Trump calling for large cuts to the US Department of Agriculture (USDA) budget, means negotiation of the 2018 Farm Bill will not be as straightforward as it might have seemed. 

Despite low commodity prices ahead of the negotiation, which may ordinarily support a generous approach to the Farm Bill, it looks like a tough slog for the US farm lobby to maintain or expand the budget for the crop insurance program.

The lead-on effect:
  • Holding out for maintenance or expansion of the crop insurance program risks the current US Farm Bill continuing by default. 
  • Continuity of the current Farm Bill will mean that the supports offered under the Farm Commodities title roll into a new five year period – a period that no longer includes the higher commodity prices of 2013

That leaves crop insurance as the only farm program of any financial consequence to US grain farmers.

An added complication is that only 20 per cent of the total budget outlay under the Bill is actually directed to farm programs.  Of $US 456.1 billion forecast for the current four year Farm Bill, more than $US 364 billion (some 80 per cent) is for the Nutrition title of the Bill. 

US Farm Bill Make Up

The Nutrition title includes food welfare programs that generate support for the Farm Bill that is beyond the farm lobby. There has, however, been the suggestion that the Nutrition title could be syphoned out of the Farm Bill.

What are your thoughts on the future of crop insurance? Let us know in the comments below.