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Sunday, August 25, 2013

Decide On A Farm Bill And Get It Over With.


The 2008 Farm Bill, which expired nearly a year ago, and extended through the end of next month, will likely expire again before the Congress resolves the lack of federal farm policy for October 1 and beyond.  Members of Congress are wrapping up their August recess designed to let them meet with constituents, but has agriculture really conveyed the message that a Farm Bill is needed?  They have heard from lobbyists and received mass mailings, but if anything will happen is complete conjecture.


While the House and Senate have both passed 2013 Farm Bills, the differences are substantial.  The major action pending is a meeting of a House-Senate conference committee that will be made up of Agriculture Committee members from each house who will attempt to reach a consensus on a compromise.  However, compromise is something that the current Congress has not achieved.


Contributing to the inaction is House Majority Leader Eric Cantor not yet appointing members to the conference committee, and the House having only 9 legislative days on its September calendar between reconvening September 9th and the Farm Bill expiration on September 30.  The conference committee could have met during August and negotiated legislation to be presented to both houses in September to replace expiring farm policy.


The policy decisions ahead of a conference committee will not be easy, unless one chamber accepts the proposals of the other, but that would be highly unlikely in the current political climate.  According to agricultural economists Carl Zulauf of Ohio State and Gary Schnitkey of the University of Illinois,  the House and Senate versions of the Farm Bill can be compared:

  1. Nutrition programs.  The Senate version proposes to cut $4 billion over 10 years or $400 million per year from the current level of funding.  The House leadership is attempting to gain enough Republican votes to cut $40 billion over 10 years, but currently there is nothing on the table for a vote and the House Farm Bill has no nutrition title, which is 78% of USDA spending.
  2. Permanent law.  Congress has kept a threat to itself for many years in the form of permanent farm law which would re-establish supply-demand agriculture and parity prices that would raise the price of food substantially, forcing Congress to regularly address farm policy issues.  Those permanent laws from the 1930’s and 1940’s are typically amended in each of the succeeding Farm Bills and that is what happened in the Senate this year.  The House voted to eliminate the provisions of permanent agricultural law, replace it with its current version of the Farm Bill, and give it no expiration date, and no guarantee of farm policy returning to the floor of the House for any future debate.
  3. Conservation compliance and crop insurance.  The Senate’s version requires compliance for anyone subscribing to a crop insurance policy which are all listed in the commodity title of the Farm Bill.  The House does not have the requirement, not wanting to connect societal expectations with farm program participation and subsidization of crop insurance.
  4. Subsidy limits on crop insurance.  The Senate cuts the rate of subsidy by 15 percentage points, should the subscriber have an adjusted gross income over $750,000.  However the plan would be delayed for a year to allow economists to study its impact.  The House does not limit crop insurance premium subsidy benefits, again, not considering any societal connection between one’s ability to pay and generate revenue.
  5. Payment limits.  The safety net in the Commodity Title (I) carry $75,000 limits per payment entity, and limits other payments to $50,000 to other program benefits.  Additionally the Senate caps all payments for anyone with a $750,000 adjusted gross income, and the house does the same at $950,000.  The Senate also takes on a more definitive definition of who is engaged in farming.
  6. Direct Payments.  Both the House and Senate versions eliminate the direct payment provisions of the 2008 Farm Bill, but the House gives them two more years to cotton, but the acreage declines.
  7. House Safety net.  The House creates two new programs for income support, giving farmers a choice of the two.  The Price Loss Coverage establishes a system of target prices, and farmers would receive a payment should their commodities not generate revenue in excess of those target prices.  Payment is made on base acres and the target prices are fixed in the legislation and do not fluctuate.  The House offers an alternate program called a Revenue Loss Program, which has gained the reputation of a “shallow loss program.  Users of crop insurance would theoretically insure crops to a 75% level and the House RLC program would offer revenue that would carry any shortfall to 85% of typical revenue, which is based on average crop revenue determined by yield and price.
  8. Senate Safety net. The Senate also offers a pair of revenue support programs.  The Adverse Market Payment is somewhat parallel to the House PLC program and establishes target prices and deficiency payments, but the payments are based on a price that is 55% of a 5-year average price and fluctuates with market prices.  The Senate’s Agriculture Risk Coverage program is similar to the House’s Revenue Loss Program, the “shallow loss” concept.


Most farmers would look at the contents of the Commodity Title and find out what safety net program is offered.Both the House and Senate have a target-price style program and both have a revenue program based on a crop insurance add-on to cover a shallow loss.There are differences in how the program revenue is calculated.The conference committee will also have to address how it perceives society wants to ensure farm survival, based on whether they are large or small and their ability to generate their own revenue.

Posted by Stu Ellis on 08/25 at 11:33 PM | Permalink

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