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With Congress in recess, no action taken on farm bill

Sept. 5, 2013 | 0 comments

What to expect from Congress subject of special speaker at Arlington Field Day

This is the first in a series on the farm bill - How the federal government is moving toward a greater emphasis on crop insurance and away from traditional support programs.

Just as it was last year, the five-year farm bill is hanging in legislative limbo.

Both the Senate and House have passed measures, but they are very different.

The House version doesn't include any of the food and nutrition programs that have traditionally been included in farm bills - linking food production with Americans who need help getting enough to eat.

That linkage in the past, argue some farm bill advocates, has also allowed urban lawmakers to see the importance of voting for a five-year farm policy bill. It isn't known how the two bills can be reconciled with such a vast difference on the food program question.

Congress has been on vacation for the month of August and there's only a month left before the extension of the 2008 farm bill expires.

There has been no action to convene a conference committee, which would have to hammer out some kind of accord between the House and Senate versions of the measure.

Paul D. Mitchell, associate professors of Agriculture and Applied Economics at the University of Wisconsin-Madison, talked with a group of farmers and crop consultants about the inability of Congress to get a new farm bill passed. He titled his talk "What to Expect When You're Expecting a Farm Bill."

Mitchell was a special speaker during the Aug. 28 Agronomy Field Day at the UW's Arlington Agricultural Research Station.

"The farm bill boils down to how to support commodity agriculture and how much to cut food stamps," he said.

There's also the likelihood that about one-third of conservation programs will be cut.

"Crop insurance is set to become the foundation of the commodity programs." (See sidebar on page 4.)

As that happens, Mitchell sees greater use of crop insurance as a policy tool for non-risk management purposes. That would include putting conservation compliance in as a requirement for government-subsidized crop insurance.

"They will need non-ag votes to pass a farm bill and including conservation compliance would be a zero-budget way to get urban votes."

Mitchell said 25 percent of Conservation Reserve Program (CRP) contract acres were up in 2012 and more will come out this year and next.

There are 600,000 acres in the CRP program in Wisconsin now, he said, and with limits on that program being considered, there is talk that Wisconsin's CRP acres could drop to 100,000 in a few years.

Three scenarios for a farm bill are possible.

One is that a new farm bill is passed and signed into law in 2013 or 2014. Another possibility is that farm provisions could be included in a fiscal reform/budget package that gets passed.

"Or Congress could pass another extension of the 2008 farm bill and kick the can down the road as it did last year."

That would mean that some reforms - like eliminating direct payments - would fall by the wayside.

Mitchell said commodity prices are expected to trend lower and that could affect how farmers see farm programs.

"Seven-dollar corn has hidden a lot of management problems," said the economist. "Don't count on the government. Take care of your farm business, be good efficient farmers to maintain profits on tighter margins."



LIKELY CHANGES

Likely changes in whatever farm policy package Congress comes up with include 8-10 percent cuts in the $15 billion that is currently spent on farm programs and even more emphasis on crop insurance, he said.

Mitchell noted that the overall federal budget is $3.6 trillion and of that, defense takes up 19 percent or about $700 billion dollars.

The entire U.S. Department of Agriculture budget takes up $100-150 billion or 3-4 percent of the giant budget pie.

Of that entire USDA budget, feeding programs take up 74 percent; 13 percent cover the commodity programs; 7 percent covers the Conservation Reserve Program and Forestry.

From the portion of the USDA's budget that covers farm and commodity programs, crop insurance subsidies take up about $8 billion and traditional farm programs use $7 billion - that includes things like direct and counter-cyclical payments, the Average Crop Revenue Election (ACRE), Loan Deficiency Payments (LDP) and marketing assistance loans.

Politics has been a driving factor in farm debates probably as long as there have been farm bills.

Mitchell showed a number of maps depicting where certain government payments have been most utilized.

Direct payments have been very popular in the southern Mississippi River Valley, he noted and generally in the South, where rice, cotton and peanut farmers benefited.

The highest counter-cyclical payments have been in the South, as well, though in the case of some of the more "traditional" farm programs, payments haven't been made to farmers in several years, he said.

Of these traditional farm programs, Wisconsin has benefited most from the Milk Income Loss Contract (MILC), as have milk producing regions in New York, Pennsylvania and California.

In 2009, when milk prices tanked, these areas benefited from MILC payments.

Mitchell said that as recently as 2000 the average U.S. farmer and the average Wisconsin farmer derived 40 percent of their income from government payments. By last year that had dropped to less than 5 percent in Wisconsin.

The direct payment program dominates commodity support spending in the South, where it's very popular, he said.

In both the Senate and House farm bills that have been passed - and which now hang in legislative limbo - the direct payment program has been eliminated. Lawmakers favor a greater emphasis on crop insurance.

One of the reasons they like the insurance approach is that in 2012, Congress didn't feel called upon to enact ad hoc disaster bills to help farmers - even with the worst drought in 50 years taking hold across most of the country.

"Crop insurance took care of the problem," Mitchell said.

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