President Barack Obama sent to Congress his proposed $3.7 trillion budget for fiscal year 2012. The administration estimates that the proposal will result in a $1.1 trillion deficit for FY ’12, compared to an estimated deficit of $1.6 billion for FY 2011. The administration is proposing to freeze non-defense discretionary funds for five years. USDA’s proposed budget is $144 billion, which includes $116 billion in mandatory expenditures and $23.9 billion in discretionary spending. Discretionary spending is reduced by 7% compared to FY ’11. The administration is proposing a reduction in direct payments and tightening eligibility for direct payments and price supports. In addition, the administration proposed lowering the maximum annual direct payment to $30,000 from the current $40,000. The budget also proposes a three-year, phased reduction in annual gross income (AGI) eligibility limits from the current $500,000 of non-farm AGI to $250,000, and the farm AGI limit for eligibility for direct payments would be reduced from the current $750,000 to $500,000. These items were proposed by the administration last year. Other items in the budget include:

  • Food Safety Inspection Service (FSIS) – $1.8 billion, an $8 million reduction from FY ’11. The budget proposes user fees on basic inspection services and repeat inspection due to noncompliance.

  • Packers & Stockyards Act Enforcement – Legislative authority requested to collect a licensing fee on entities regulated under the Packers and Stockyards Act.

  • Animal Disease Traceability Act – Proposes $14.5 million for the Animal Disease Traceability program, which is the new National Animal ID System.
House Republicans Call for Agriculture Program Cuts — The House Republicans proposed continuing resolution (CR) would cut 22.4% or $5.1 billion from agriculture-related programs for the remainder of fiscal year 2011. Thirty-two agricultural groups have written the House of Representatives stating, “This is more than double the 10.3% cut proposed in overall non-defense spending. Given the importance that agriculture plays in America’s food security and economic recovery, it is unclear how such disproportionate cuts are warranted or wise.” Those signing the letter included: American Farm Bureau Federation, American Soybean Association, Farm Credit Council, National Corn Growers Association, National Cotton Council, National Council of Farmer Cooperatives, National Farmers Union, and USA Rice Federation.

Record Agricultural Exports — U.S. agricultural exports reached an all time high of $115.8 billion in 2010. This is $1 billion higher than the previous record in 2008. Exports in bulk commodities grew by 19% to $47.2 billion and consumer-oriented agricultural products increased 15% to $45.4 billion. China became the number one market for U.S. agricultural exports at $17.5 billion, Canada ranked second at $16.9 billion. Soybeans were the largest U.S. agricultural export products at a record $18.6 billion, with China purchasing 58%. According to the U.S. Meat Export Federation, 2010 was the second-best year for pork exports at $4.78 billion; 2010 was the best year on record for U.S. beef exports at $4.08 billion.

Halt E15 — Congressman Jim Sensenbrenner (R-WI) has announced plans to introduce legislation to block the Environmental Protection Agency (EPA) from enacting their recent approval of E15. Sensenbrenner said, “With our economy still struggling, the EPA should also examine the economic impact of increasing the ethanol blend. Ethanol is a driver of corn prices. As increased demand forces corn prices higher, it will negatively affect livestock producers and consumers.” EPA has approved the use of ethanol blends up to 15% for vehicles 2001 model years and newer.

P. Scott Shearer
Vice President
Bockorny Group
Washington, DC