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Farm Bill drama ahead
This year, the farm bill debate has been behind the scenes, as members of congressional agriculture committees wrestle with food stamp spending and regional differences over commodity programs. Farm groups expect the Senate Agriculture Committee to meet next week to finalize a new bill that will be similar to last year's except for the commodity title. Leaders of the House Agriculture Committee expect to mark up their bill on May 15.
One holdup is that the Congressional Budget Office (CBO), which projects the estimated costs of farm bill programs over 10 years, hasn't quite finished its latest score, Mary Kay Thatcher of the American Farm Bureau Federation told Agriculture.com Wednesday.
"Both sides are waiting for scores as of this morning," said Thatcher, who is the group's senior director of congressional relations.
The details may remain fuzzy, but there is no doubt that Congress will have to cut more from USDA programs this year. The farm bill passed last year by the Senate had a projected savings of $23 billion. That shrank to $13 billion when the CBO released a score of farm bill spending last March, due in part to higher crop prices.
The Senate ag committee aims for the same $23 billion in reduced federal spending over a decade this time around, so that means it has to come up with about $10 billion in added cuts.
One Senate staffer told Agriculture.com that he believes the committee will give more teeth to about $4 billion in cuts to nutrition spending in the farm bill, leaving another $6 billion in additional cutbacks. "It's most likely to come out of the commodity title," he said.
And the commodity title is getting crowded. As it did last year, the Senate will eliminate direct payments. A public CBO score of last year's farm bill savings released in March shows that cutting direct payments will eliminate $44.5 billion in spending over a decade, more than enough to meet the Senate target of cutting $23 billion. But last year the Senate used some of that money for a new shallow-loss revenue program, called Agriculture Risk Coverage (ARC) and another shallow-loss program to be delivered by crop insurers, the Supplemental Coverage Option (SCO).
Both programs will likely be in the draft of a new bill that the Senate may consider next week. ARC will be smaller, partly because CBO says it would cost $3.8 billon more over 10 years due to higher crop prices, and because the Senate ag committee is likely to include a target price program. It eliminated the old target price program, the counter-cyclical program, in last year's farm bill. This year, the new ranking minority member of the committee, Senator Thad Cochran (R-MS) is fighting for inclusion of a target price program that benefits rice and peanut farmers more than the ARC program would.
"The reality is that savings have to be found, and some of that has to come from ARC," said Sam Willett, senior director of public policy for the National Corn Growers Association in Washington.
That could be done in two ways, he said, by modifying the band of coverage, which in last year's farm bill was between 79% and 89% of revenue, or by changing the payment acres. Last year ARC would have paid on 65% of a covered crop's planted acres for farm level coverage and 80% of acres for county-level coverage. Or some kind of combination of a smaller band of coverage and reduced acres could be used.
"Our goal is to have a program that delivers meaningful assistance when most needed," Willett said.
Because ARC uses a five-year Olympic average of revenue (throwing out the high and low years), potential payments under the program fall more slowly than payments for revenue losses under crop insurance.
"ARC deals with circumstances producers will face and probably will deal with down the road, and that's a multiyear decline in prices," Willett said. The protection offered by the target price program under the old farm bill's counter-cyclical program is so low that "it's basically meaningless," he said.
What little agreement has existed among farm groups on the commodity title is eroding. Last month, the American Soybean Association announced that it was withdrawing previous support for ARC because of its higher cost and the need for more savings from the farm bill. It threw its weight behind an updated counter-cyclical program (CCP) and the supplemental coverage option.
Willett said many members of ASA still like the concept of a shallow loss revenue program and that both groups oppose tying a new CCP or target price program to planted acres. "It would work against planting flexibility," he said.
National Farmers Union wouldn't mind seeing money from the ARC program used to improve a target price program, said its president, Roger Johnson.
"We want long-term price protection, and we want some sort of disaster coverage," Johnson said.
Johnson isn't surprised that the commodity title of the farm bill is a sticking point this year, one that Senate Agriculture Committee member Charles Grassley (R-IA) told reporters Tuesday is the main thing holding up progress on the committee's bill.
Johnson said that proposals for raising target prices (which the House bill did last year) and for the ARC program will have to be smaller this year.
"We were saying, 'Take this deal,' last year. The cuts would be deeper this year. There's no way around this," he said.
NFU and some in other farm groups are concerned about the risks producers face if we go into a long period of very low prices, when fixed payments under a target price program might offer more support.
Carl Zulauf, an Ohio State University economist who analyzes farm policy and who has helped design earlier revenue programs for farm legislation, sees differing philosophies as one of the reasons the 2012 farm bill failed to get passed in Congress. Instead, the 2008 law was extended, continuing direct payments and not making the reforms touted in the Senate and House bills.
Zulauf admits he was surprised the 2012 bill failed and the existing farm law was extended. But, looking back, it reminds him of changes in farm policy that were debated in the 1950s and 1960s, when current policy was just extended.
Today, the debate between a revenue-based program that moves with the market and one involving fixed target prices is philosophical, not just about spending levels, Zulauf said. And farmers' philosophies about the two approaches depend on the region they live in and the commodities they grow.
If differences are over spending, members of Congress can split the difference, he said. When differences are philosophical, there may not be a middle ground.
"It's hard to split the difference on philosophy," said Zulauf, who along with economist Gary Schnitkey of the University of Illinois, this week published a critique of the strengths and weaknesses of the commodity programs being debated in Washington.
Other parts of the Senate farm bill are expected to be much like last year's version. Conservation programs, already cut and streamlined last year, aren't expected to change much, one senate staffer said.
But some conservation groups, including American Farmland Trust, are worried.
"We are concerned that additional cuts to conservation could be on the table," said Jeremy Peters, the group's director of federal policy. AFT hopes to hold the line on conservation cuts in the farm bill, especially since congressional appropriations committees tend to take money from those programs when writing annual spending bills. Farmers who have applied for popular conservation programs are already on waiting lists.
"A lot of the programs are oversubscribed by two to three times annual funding," Peters said.
Senate Agriculture Committee Chairwoman Debbie Stabenow met with farm groups this week to share some of her plans for the farm bill, Farm Bureau's Thatcher said. Stabenow plans to keep changes to crop insurance made with amendments during final passage of the Senate's bill, including one advanced by Senator Tom Coburn (R-OK) that reduces insurance premium subsidies for farmers with adjusted gross income above $750,000.
"Stabenow has already said that and crop insurance (conservation) compliance will be in the bill," Thatcher said.
Some ag lobbyists are skeptical that a farm bill will be passed this year as well. One is Ferd Hoefner with the National Sustainable Agriculture Coalition, which supports many conservation programs as well as programs to help beginning farmers and ones that encourage local food production.
"We're sort of in that perfect storm where the White House doesn't care about the farm bill and [House Speaker] Boehner hates the farm bill," Hoefner told Agriculture.com.
Although Agriculture Secretary Tom Vilsack spent a year stumping for a 2012 farm bill, when Congress faced the "fiscal cliff" at the end of December, the Obama administration seemed to ignore Democratic ag leaders and allowed Senate Minority Leader Mitch McConnell to put together a farm bill extension. And Boehner disliked a new dairy provision in the farm bill, referring to it as a "Soviet-style" program. Boehner and the House leadership never allowed its ag committee's 2012 bill to come up for a vote.
Some 37 USDA programs without funding died when the old law was extended, including one for beginning farmers that supports education and mentoring.
Just last week, Senator Tom Harkin (D-IA) and Representative Tim Walz (D-MN) introduced bipartisan bills called the Beginning Farmer and Rancher Opportunity Act of 2013. They provide for education and help ensure access to credit and crop insurance. But such legislation is unlikely to pass by itself and would need to be rolled into a comprehensive farm bill.
One reason for Hoefner's pessimism is that both the House and Senate agriculture committees have bills that are further apart than they were last year on spending. House Agriculture Committee Chairman Frank Lucas (R-OK) last week was quoted saying that he intends to trim the same amount of money from the farm bill as proposed by the Obama Administration -- $38 billion, which is more than the $35 billion the House would have saved with his committee's bill in 2012.
The House ag committee chairman's approach to savings differs from Obama's. It includes $20 billion from nutrition programs. That's a bigger cut than last year, and one that will be unpopular with the Democratic leadership in the House and urban Democrats on the ag committee, Hoefner predicts. Also, it's certain to be bigger than any nutrition savings from the Senate.
"I just don't see any scenario of it passing this year because they're at such different starting points," Hoefner said of the two ag committees.
On the calendar, at least, the two committees have similar starting points. The Senate's ag committee is shooting for committee debate and votes next week, but disagreements over its commodity title could push it back, closer to or even behind the May 15 start that House ag committee leaders are aiming for. Yet, Senate Majority Leader Harry Reid (D-NV) has said that he wants a farm bill vote in May.