The debate about the future of the US Farm Bill has stepped up a gear over the past two weeks, with President Obama releasing budget proposals that would cut agricultural expenditure, and lawmakers shaping up to support or oppose some of the proposals it contains.

The US Farm Bill, the main piece of legislation that determines the structure of farm subsidies and support programs for the next five year, is due to be renewed during 2012. The debate has been kicked off in earnest (after a false start last year) as a result of President Obama's budget proposals. The budget proposes $32 billion in cuts over ten years, with a reduction in direct subsidy payments to farmers, and a scaling back of the government subsidy provided for crop insurance premiums. This has been opposed by various members of the relevant Agriculture committees in Congress, although is broadly supported by a range of other advocacy groups, and the removal of direct payments also appears to be supported by the American Farm Bureau, the largest farmer lobby group.

The Farm Bill debate will take some deft manoeuvring by US farm groups. It is widely recognised that farmers already receive substantial indirect support from US Government biofuel mandates, which result in biofuel production using more than 40% of total US annual corn production. US Farm incomes have been at all time high levels over recent years, making it hard to justify continued subsidies while the rest of the US is struggling economically. At the same time, lawmakers are going to have to deal with the US Government deficit sooner rather than later, and the Presidential and Congressional elections due at the end of the year also create a charged political atmosphere for the debate.

The nature of current US farm subsidies (which are largely decoupled from farm production) means they have less negative impacts on Australian farmers, except in some markets (such as beef and grains) where US and Australian product is occasionally in direct competition.