The worst drought in a generation dramatically improves the chances that Congress will pass a farm bill this year that preserves some form of price supports.
The last major farm bill, passed in 2008, expires on Sept. 30. The Senate passed a farm bill three weeks ago, and the House Agriculture Committee passed its version last week. However, a vote in the full House hasn’t been scheduled.
Agriculture Secretary Tom Vilsack in a press conference yesterday put the pressure on Congress to resolve its differences and pass a bill that would give the administration "more tools" to address the deepening drought crisis. The administration has declared drought disasters in one-third of the counties in the country, making them eligible for low-interest loans and other assistance.
A bipartisan group of more than 60 lawmakers in the House have signed a letter urging the House leadership to bring the farm bill to the floor for a vote. The authors, Reps. Kristi Noem (R-S.D.) and Peter Welch (D-Vt.), wrote that the country needs strong policies in place "so that producers can continue to provide an abundant, affordable and safe food supply."
The Senate bill eliminates direct payments to farmers. But the House bill, as passed by the Agriculture Committee, preserves price targets as a safety net. Under the bill that passed the House Agriculture Committee, producers would choose between price supports and a revenue-protection program that would compensate them for modest revenue losses before subsidized crop insurance kicks in.
The House bill creates a voluntary insurance program to pay dairy farmers enough to remain profitable when milk prices drop too low. To get into the program, however, farms would have to produce less milk when prices fall below a certain level in an effort to stop prices from falling further.
Several producer and farm groups praised the House bill for retaining price supports. The National Milk Producers Federation thanked the committee for "badly-needed improvements in our safety net for milk producers." The dairy reforms were modeled after the NMPF’s Foundation for the Future program.
The Oklahoma Wheat Growers Association praised the House for including price protection, which it said would give farmers, in the event of extreme price declines, enough to "hold on and go again."
The Arkansas Rice Federation in a letter to Congress said that the House bill would "provide flexibility and effective assistance when income and market conditions warrant." The Agricultural Council of Arkansas also voiced its support, saying it was pleased the House included a safety net in its bill.
The big question is whether House Speaker John Boehner (R-Ohio), an outspoken critic of dairy subsidies, will bring the bill to the floor. Boehner served on the Agriculture Committee for 16 years and more than once tried to kill the dairy program. He vowed this spring that the farm bill will not include a market stabilization plan for the dairy industry.
Cuts in the federal food stamps program are another factor holding back the bill. The federal government last year spent $78 billion on the Supplemental Nutrition Assistance program, better known as food stamps, according to the Congressional Budget Office. Nearly 45 million recipients, one out of every seven households, received SNAP benefits last year, averaging about $8,800. SNAP benefits averaged about $4.30 per person per day.
The Senate-passed bill would lop $2.3 billion a year off that tab. The House Agriculture bill ups the ante to $3.5 billion annually. In recent days, some House Democrats have publicly criticized the depth of the cuts, which Republicans generally defend as necessary to stem a rising federal budget deficit.
Adding urgency to the situation, Congress is scheduled to go into recess in August.
Sen. Debbie Stabenow (D-Mich.), chair of the Senate Agriculture Committee, released a statement that urged the House to vote swiftly. "With droughts and weather disasters plaguing America’s agriculture economy, failure to pass a farm bill or passing a short-term extension would add even more uncertainty and stress onto American farm families and small businesses," she said in the release.
Both bills leave intact a program that protect sugar producers from foreign competition. They also create a new subsidized insurance program for cotton.
The Senate bill:
- Eliminates direct payment. The bill repeals direct payments, counter-cyclical payments, the average crop revenue election program and supplemental revenue assistance payments by the end of the year, creating $15 billion in savings.
- Ends farm payments to people or companies with an adjusted gross income of more than $750,000. The bill also ensures that payments go to farmers "with an active stake in the farming operation," according to the committee.
- Replaces direct payments with a risk-based coverage program it calls Ag Risk Coverage. The program is designed to complement crop insurance to protect against price and yield losses. Farmers would make a one-time choice between coverage at the individual farm or county level. Payments would only be made when losses actually occur on acreage that’s actually planted. Losses will be calculated from benchmark revenue calculated using an Olympic average of the previous five crop years. Also, those obtaining subsidized crop insurance would have to comply with conservation requirements.
- Reduces by 15 percentage points the share of crop insurance premiums the government pays for farmers with adjusted gross incomes of more than $750,000. The government currently pays an average of 62% of crop insurance premiums.
The House bill:
- Allows producers to choose between two options on a crop-by-crop and farm-by-farm basis. Under either option, producers would only be protected when they suffer a "significant" loss.
- Creates a new risk management tool, Price Loss Coverage, that addresses deep, multiple-year price declines. It uses modern yields and an index of below-cost production to establish a market-oriented, price-based risk management tool for producers.
- Includes the Revenue Loss Coverage similar to what the Senate passed with "key improvements." Namely, producers must experience at least a 15% loss. Also, coverage would be based on countywide losses so that it wouldn’t duplicate, for free, "what farmers should pay for under crop insurance."
- Creates a new voluntary risk management program for dairy producers. Dairy producers would have the option to sign up for the basic margin program, which would subject them to supply controls. The basic margin program provides a base level of 80% of production history when the margin falls below $4 for two consecutive months. "The first 4 million pounds of milk marketed will have a lower premium rate, which will be particularly beneficial to small producers," the Ag Committee reported. "The supply management program will activate when the margin is below $6 for two consecutive months and reduces producers’ payments by 2% to 8% depending on market conditions. The program contains a number of market-based triggers to terminate the program when domestic or international markets demand U.S. products."
- Reauthorizes Supplemental Agricultural Disaster Assistance for livestock producers. The bill reauthorizes Livestock Indemnity Payments, Livestock Forage Disaster Programs and Emergency Assistance for Livestock, among other programs.