Content ID


Farm bill deadline looms

Farm bill negotiations are underway among the leaders of the House-Senate farm bill conference committee, but the group's self-imposed deadline of Thanksgiving to wrap up tough issues, including Title I on commodity programs, is looking doubtful.

"We feel like there's still kind of an impasse on whether to adopt either the House or Senate version of Title I," American Soybean Association president Danny Murphy told Wednesday.

Late Tuesday, his group, along with the National Corn Growers Association and the U.S. Canola Association, released a compromise proposal aimed at breaking a disagreement over the way a target price program would pay farmers.

The House version of a farm bill has a "price loss coverage" program that would make payments to growers on their planted acres of covered commodities when prices fall below a "reference price"--$3.70 a bushel for corn. The Senate's version of that program makes "adverse market payments" on base acres previously planted to commodity program crops. And for most crops, it uses reference prices of 55% of a five-year national market price that excludes the high and the low years.

To an outsider, these might seem like arcane differences, but deciding to use base acres or planted acres reflects contrasting philosophies over the role of government in agriculture.

The corn and soybean groups, and key Midwestern members of the Senate Ag committee, argue that the relatively high "reference prices" in the House bill, combined with using planted acres, will lead to farmers planting crops for government payments, not market prices.

"The government would almost be dictating what's planted instead of the market, which would result in continued oversupply," Murphy said. The USDA role in the marketplace was strong until the 1996 farm bill, when some payments were decoupled from crop acres.

"I think farmers really embraced freedom to farm in 1996," Murphy said. "The free market system, that's what the United States is based on and our economy is based on, and we'd like to see that in our farm programs."

ASA and the Corn Growers have been strong advocates of shifting to a revenue-based program that is similar to crop insurance, except that the benchmark for payments is more than one year. In essence, it offers farmers a few years to adjust to changing markets.

To break the impasse over acres, ASA is promoting something that falls between making payments on a fixed number of "base acres" and on planted acres.

Wednesday, ASA and the other two commodity groups made public a letter they sent Tuesday to the four Ag Committee leaders.

"In the interest of finding common ground on this issue, we offer a compromise that would allow us all to move forward," the letter says. "We propose using the average of planted acres during the five years previous to the current year as the payment base for both the revenue and the price programs. The average would move forward, adding and dropping a year every year, in order to remain as current as possible without including the current year, which would serve as a deterrent to building base."

Not all groups are enthusiastic about shifting to a revenue-based program (even though the final farm bill may give farmers a choice between a revenue or target price program).

"We remain strongly supportive of a program that provides price protection during extended periods of low prices, especially since the vast majority of crop insurance policies are revenue based and consequently will be deeply inadequate during such extended low-price periods," National Farmers Union president Roger Johnson told in an email message Wednesday.

And Johnson seemed slightly more optimistic about the negotiations.

"I think the negotiations have actually been going pretty well. As you might imagine, there is a fair amount of tension in different places right now. We are doing all we can to try to be helpful to the negotiators. The proposal put forward from NCGA and ASA is one of several ideas the principals have been considering for some time. As you can imagine, all of these various ideas are being modeled and analyzed in terms of effect--both intended and unintended."

Mary Kay Thatcher, who lobbies for the American Farm Bureau Federation, said Farm Bureau didn't take a position on the idea of using a long-term average of planted acres.

"It appears it's already pretty dead," she told Wednesday, referring to the negotiations among conference committee leaders. "I think that both sides are looking for a halfway point between planted and base, but I'm not sure there is one."

Like Johnson, Thatcher is optimistic that some progress is being made on the farm bill.

"The fact that we aren't hearing leaks is a really good thing because when you're not getting your way, you leak it to the press," she said.

Some members of the Senate Agriculture Committee are going public with their objections. Earlier this week Senator Chuck Grassley (R-IA), who isn't on the conference committee, said that a target price program would set farm policy back by decades. And yesterday Senator Mike Johanns (R-NE), a former Agriculture Secretary on the Ag Committee (but not the conference committee, either) wrote the Ag Committee leaders to oppose the House version of a target price program.

"If the conferees adopt market-distorting policy, such as recoupling target prices to planted acres, sadly an extension of the current farm bill would be preferable," Johanns said.

Johanns reminded the committee leaders that "In the early 1980s, historically high commodity prices led Congress to pass a farm bill with increased target prices. At the time, it was not projected to be very expensive because these target prices were mostly below projected prices. But a short time later, the economy experienced a number of factors that caused prices to collapse. Very quickly, that farm bill's price tag skyrocketed…"

The current situation is similar, Johanns said. The House proposal doesn't look expensive because the Congressional Budget Office is projecting relatively high commodity prices over the life of the next farm bill. "But as we have seen in recent months, there is no guarantee that will last," Johanns wrote. "With the EPA potentially scaling back the Renewable Fuel Standard and growth in Chinese demand slowing, among other factors, we could see a time of low prices again in agriculture. In fact, we have already seen corn prices fall nearly 40% in the last year."

Johanns and groups like the Soybean Association also believe that the House target price program could be challenged by other nations through the World Trade Organization as price distorting. Brazil has already won a case against the U.S. cotton program, resulting in $147 million in annual payments from the U.S. to the Brazilian government.

Calculating target price payments is hardly the only thing delaying a new farm bill.

The big issue that remains is food stamp spending, and Soybean Association President Murphy said he hasn't heard much about it for almost 10 days. Thatcher lists that obstacle, along with others such as mandatory country of origin labeling and whether or not conservation compliance should be tied to crop insurance.

The Senate Farm Bill is divided into 12 sections, or titles. The House version has 11, with the nutrition title passed as a separate bill. Murphy said staff members from both the House and Senate ag committees have been working on trying to resolve differences in each title from both bills, but Murphy believes that in each one, there is at least one issue that can't be resolved at the staff level. Members of the conference committee or its leadership will have to reach a compromise.

One congressional staffer familiar with conference committee work agreed that differences remain in each title.

"I would say that's about right," he said. "That doesn't mean every issue is unresolvable."

He also agreed that the end of farm bill negotiations doesn't seem close.

"Apparently there's still not much real movement in resolving these things," he said.

Read more about

Talk in Marketing