The economic and political environment for debating and writing the 2007 Farm Bill has changed significantly since the 2002 Bill was enacted. Concerns over WTO compliance, budget, environment, and renewable fuels will have to be weighted against the goals of farm policy in drafting the next farm bill. Farm program justifications have changed over time so policy makers may also consider if the old justifications are still valid.

The potential for substantial changes in the structure of the U.S. farm programs exists as policy makers consider the tradeoffs among WTO commitments, budgetary concerns, and a broader array of interest groups and issues to be encompassed in agricultural policy. The prospect of these pressures moving in opposite directions could make for a lively 2007 Farm Bill debate.

As budgetary concerns increase, policy makers are asking, how would agriculture fair with lower payments? Budget savings can come in the form of reductions in direct payments, countercyclical payments, or loan deficiency payments. The impacts of these different payment reductions are examined as to their effects on producer returns, planted acres, prices, and net farm income.

Many justifications for government involvement in agriculture have been put forward over the past 200 years. As Congress prepares to write a new farm bill, policy analysts need to reexamine the justifications to see if they are still valid or if there are new justifications.