As the 2006 farm policy picture develops, observers see three key issues on the horizon.

According to DTN, “This sets the stage for three farm policy debates next year — one beginning early in the year on proposed budget cuts, a second continuing debate on trade policy that could peak next spring and a third beginning late in the year on replacement farm legislation.”

While Administration federal budget proposals are set to be released next month, recall that last year, President Bush sought to curtail farm spending by $9 billion over five years. Nonetheless, the current budget reconciliation measure that is set to pass Congress contains only $2.7 billion in cuts.

The second two issues, trade policy and the 2007 Farm Bill debate, are more intertwined.

Attention regarding these two issues often focuses on the possibility of moving U.S. domestic farm payments from more trade distorting forms of crop subsidies, to more benign forms of agricultural programs that address agri-environmental issues and rural development.

A recent article published in the Argus Leader (SD) which focused on the future of the Conservation Reserve Program, explained that “International trade negotiations also favor direct-payment programs such as CRP over programs tied to price, such as countercyclical payments. According to World Trade Organization logic, such programs are more likely to distort trade.”

And, the Arkansas Democrat Gazette noted that some have argued that, “at least some of the $15 billion to $20 billion the federal government spends annually on crop subsidies be reallocated to other parts of the rural economy, especially to ‘microbusinesses,’ firms of five or fewer employees.”

Moreover, the article stated that, “And, sooner or later, world trade disputes, where subsidies are taking center stage, will force a reduction in the federal payments.”

Expect to see more debate about shifting farm allocations as the new year progresses.

Keith Good writes The FarmPolicy.com News Summary, an Email newsletter containing a summary of news relating to U.S. farm policy which is published most weekdays. For more information, go to www.FarmPolicy.com.