Farmers have a big stake in attempts by congressional conferees to resolve major differences—some technical, some philosophical—over competing versions of a farm bill and produce a new law by yearend.
Budget savings stemming from the farm bill, ranging from $17 to $51 billion, after the impact of sequestration, provide plenty of incentive for Congress to act on a farm bill this year. Rep. Collin Peterson (D-Minn.), the ranking member of the House Agriculture Committee, told AgriTalk radio last week that conferees hope to wrap up their negotiations by Thanksgiving, giving the chambers enough time to pass a bill before the end of the year.
Click the play button below to hear the complete AgriTalk interview with Peterson:
Click the play button below to listen to Pro Farmer analyst Jim Wiesemeyer's reaction to Peterson's remarks:
But conferees clearly have their work cut out for them, given big differences in approaches to food stamps (the Supplemental Nutrition Assistance Program), insurance, conservation compliance, dairy subsidies, and red-meat labeling.
The biggest obstacle, of course, will be in reconciling approaches to food stamp cuts. The Senate-passed bill would trim the program by $3.9 billion over 10 years. The House would cut the program by much more--$39 billion over 10 years.
Heritage Action and other conservative groups, which played a big role in mobilizing opposition last month to bills that would increase the debt ceiling, have called for even bigger cuts. The Obama Administration’s officially opposes cuts in SNAP, a position that it will undoubtedly use as a bargaining tool.
Last week, a benefit increase in the American Recovery and Reinvestment Act expired, reducing payments for a family of four by $36 per month. Investment analysts speculated that the reduction in purchasing power will hurt big retail chains, especially Walmart, which has been silent in lobbying over SNAP. About 14% of Americans are on food stamps.
The House and Senate bills produce much smaller savings in agriculture provisions, largely through the elimination of direct payments to farmers. But they revise and rename existing counter-cyclical price and revenue support programs in different ways.
The Senate bill continues current price-support policy by making payments based on 85% of "historical" plantings. The House bill takes a new approach, paying on 85% of "planted" acres, ostensibly to better-align payments with producer risk.
Both bills in effect authorize farmer payments to cover "shallow losses" not covered by crop insurance. The Senate bill covers losses once a 12% revenue loss is realized. The House bill uses a 15% trigger. (To gain the support of rice and peanut farmers, who opposed the Senate’s 2012 farm bill, the latest version increases target prices for those commodities.)
In the Senate bill, farmers can select payment at either the county or farm level and also take advantage of price supports. The House bill only provides revenue protection at the county level, and the program is not available in conjunction with price supports.
With direct payments gone, both bills increase spending levels for the $9 billion crop insurance program. The Senate-passed version, however, provides means testing. It reduces crop insurance premium subsidies (which averaged 62% in 2012, according to the Government Accounting Office) by 15% for producers with average adjusted gross income greater than $750,000.
Another related issue is whether producers who receive federal farm insurance benefits should be required to comply with government conservation standards. The Senate bill contains such a provision, which is opposed by Rep. Frank Lucas (R-Okla.), chairman of the House Agriculture Committee.
Both farm bills dairy subsidies with a new program that pays participating dairy producers when margins fall below $4 per hundredweight. The Senate bill also subjects participating producers to a separate program that reduces incentives to produce milk when margins are low.
Because the new program has no eligibility constraints, its costs are expected to be up to 3 times higher than continuing 2008 farm bill dairy laws. The Senate program, according to the Food Policy Research Center, would reduce the cost of 2013 farm bill dairy programs by 5% to 30%, compared to standalone margin insurance.
Anther sticking point is changes to the law requiring country-of-origin labeling for red meat. The World Trade Organization has ruled against implementation of the U.S. law that emanated from the last two farm bills. The Obama administration has re-written the rule and resubmitted it to the WTO. But it is opposed by the meat industry.
Lucas, R-Okla., said during the conference meeting last week that he supports changes in country-of-origin labeling law. He wants to avoid the imposition of tariffs by Canada and Mexico.
Click here to read a detailed analysis of the different approaches published by the Congressional Research Service.