Dissecting Stabenow's Press Briefing Re: Senate Farm Bill

June 4, 2012 10:58 AM

via a special arrangement with Informa Economics, Inc.

Point, counterpoint

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The following are my comments based on remarks provided today by Senate Ag Chairwoman Debbie Stabenow (D-Mich.) during a briefing today.

Asked if there were 60 votes relative to an expected motion to invoke cloture on the bill, she said "yes," and said the bill could take two to three weeks to complete.

Comments: The Senate – both Democratic and Republicans – have shown they like to spend taxpayer money. Lots of it. In this case, the farm bill would total nearly $1 trillion in spending over ten years. And that is without accounting for any cotton safety net for the 2013 crop, and what some believe to be an understatement of a program – Supplemental Coverage Option/SCO – that could end up being one of the more popular and expensive provisions should the Senate farm bill provisions last.

Shorty. Noting that some have signaled the four and one-half hours it took the panel to markup the bill was the shortest markup in committee on a farm bill that anyone could recall, Stabenow said while she’d like to "repeat" that on the floor, that wouldn’t happen.

Comments: To say that there was inadequate markup "debate" is an understatement.

As for amendments, Stabenow stated, "This is the Senate. I expect we could have a lot of different kinds of amendments." She informed that she has been working through amendments with her Democratic colleagues "and I think we have identified most of the universe." However, they are still waiting to hear from Republicans on amendments, she advised.

"Because it (an amendment in the Senate) does not have to be germane to the legislation, we could see some outliers," Stabenow continued. "But we will address them one at a time. We want to be fair, but we want a bill done."

Comments: Is this setting up the Republicans as trying to thwart the farm bill? We'll see regarding whether there is an agreement or not between the Democratic and Republican leaders on the number and scope of amendments.

Asked about whether she would utilize a broad managers’ amendment to usher through several changes to the bill as was done in committee, Stabenow said while "that is a very efficient way to do things, there has been an objection on the Senate floor to doing so. So we may have a series of amendments that we ask for agreement on." She added they would likely go a managers’ amendment process to identify amendments but would go through them issue by issue and Stabenow expects a number of them would gain unanimous consent.

Comments: Let the process begin.

In opening the call with reporters, Stabenow reiterated her view that this is a "jobs" bill and went through several key highlights of the plan. "This represents the most-significant reform in agriculture policy in decades," she stated, noting the bill saves $23 billion over 10years that are "real cuts."

Comments: The farm bill savings are overstated by the Congressional Budget Office (CBO). Why? There is no safety net program in place for the 2013 crop of upland cotton. Why? Apparently USDA/Risk Management Agency told CBO they could not have the cotton STAX program in place for the 2013 crop. So what will be the safety net for cotton? No direct payments? No target price? And if USDA suddenly comes around and says they can, indeed, implement STAX, it will be mean millions of dollars in extra funding that were not scored as a true cost of the farm bill.

Direct payments gone? Sticking to a similar line she has noted during the farm bill process, Stabenow declared that the era of direct payments "is over" and that the bill will "not pay farmers for crops they don’t grow" and that the package would not "pay farmers when they are already doing well."

Eliminating those direct payments will trim some $15 billion from spending, but Stabenow said they haven’t just taken those dollars and put them toward another program. "It’s not about transferring one subsidy for another," she stressed. "We are moving very simply to something that works when farmers need it. Farmers need risk management, not government payments forever. And we are not guaranteeing a price."

Comments: Let's do the math: Direct payments now total around $4.8 billion per year. That works out to nearly $50 billion over ten years. Stabenow said those direct payments will trim some $15 billion from spending. Where did the rest go? Why a lot of it went to... subsidized farm programs.

As for "not guaranteeing a price," Stabenow again throws the gauntlet down to those commodities and groups who are pushing a reference/target price approach – at least as a farmer option. And this will be part of the coming House farm bill proposal.

Stabenow touted two recent analyses of the bill which she said indicate the Ag Risk Coverage (ARC) program is "fair for all commodities." She pointed to one analysis in particular that showed it would have provided "substantial protection" had it been in place in the late 1990s, the last multi-year downturn in prices as it uses a five-year Olympic average on prices and would have "cushioned and smoothed out" the impact of the market downturn.

Stabenow also noted that the analyses indicated that it would have provided the same level of price protection for commodities -- except for rice "which would have received more support" than they received via the program in place in the late 1990s. "Our goal is not to guarantee the same amount of taxpayer money as was in the last bill," she added.

Comments: Stabenow did not mention Dr. Zulauf's recent paper by name, but if this is one of the two analyses, which is likely, then her comments are wide of the accuracy mark. Simply not true. See this link for more perspective on this topic.

Other reforms in the plan would tighten payment limits and close the "manager’s loophole" where someone who has "not set foot on the farm" could get a payment by claiming to be a farm manager. "Managers have to be on the farm and farming," she added.

Comments: Some veteran farm policy types say they have looked at the Senate's payment cap language and it poses problems, perhaps significant problems, for farmers.

Regarding rice and peanut producer and lawmaker concerns, Stabenow said there have been no changes to the bill relative to those crops or issues. "We had a very good meeting" recently with southern producers on ARC and told them "we are open to ideas," Stabenow said. But the analyses she referenced earlier has been released since that meeting and she believes that will help those commodity groups get behind ARC.

However, Stabenow pledged, "We want to talk about legitimate concerns and differences."

Comments: Legitimate in this case is defined as no target/reference prices like those that will be in the coming House farm bill.

Asked about some analysis which shows that if prices were to turn downward it could raise costs of the bill which could hamper the bill if it were to arrive in the House, Stabenow said, "It is common knowledge there is a different approach in the House. We will work that out in conference."

Comments: House Ag Chairman Frank Lucas (R-Okla.) will chair any farm bill conference. So he may well have the final say on what defines as "legitimate concerns and differences."

Conservative? While she admitted that how long and how deep any price downturn is will affect the program outlay levels, Stabenow said that the Congressional Budget Office (CBO) analysis of the bill looked 10 years out into the future. "Nobody is exactly clairvoyant," he noted, "but they were pretty conservative. They are looking ahead and saying prices don’t stay high over the lifetime of the bill. And over that 10-year period, we will save $15 billion," adding that if "prices fall, farmers are protected."

Comments: What evidence does Sen. Stabenow have as to why she thinks CBO's analysis was "pretty conservative"? Remember, no safety net for cotton for 2013.

Regarding linking crop insurance to conservation compliance, Stabenow said while the bill currently has a provision to remove part of the subsidy for crop insurance if farmers are breaking out native sod areas and putting them into crop production, "we would not link the program overall to conservation compliance."

Comments: With as much spending ahead for crop insurance, this sector will increasingly come under focus – long after Sen. Stabenow is chairwoman. And depending on Nov. 6 elections, that could be quite short.

Regarding nutrition programs, Stabenow pointed out the bill has cuts of $4 billion for those programs but they are cuts that don’t affect benefits to recipients, in particular for the Supplemental Nutrition Assistance Program (SNAP).

Asked about an amendment expected from Sen. Kirsten Gillibrand (D-N.Y.) – the only Democrat to vote against the bill in committee – that would restore the nutrition program cuts by taking it from crop insurance, Stabenow said, "We’ll have to see whether or not she will proceed. We have to take a look and see. We have struck a delicate balance. As with any large piece of legislation, it’s important to keep that balance. To keep that, we will look at every amendment."

Comments: Sounds like Sen. Gillibrand may not offer the amendment in question. We shall see.

Bottom line: The coming Senate farm bill debate could look a lot like Facebook's IPO – hyped selling of the plan, but one that will cost people (in this case taxpayers) a lot of money.

Regarding the Senate farm bill's approach, I and others have noted that Republican Sens. Johanns, Thune, and Grassley all voted for the bill in the Committee. As for target/reference prices, they are not perfect by a long shot. As one astute farm policy observer told me, "If you have a prolonged price drop, the Senate bill will adjust the coverage downward and you've also got a yield component that can offset some of the cost outlays. The House proposal has no such adjustment. If you lock the prices in, they never adjust and you could pay through the nose -- even if you have a bumper crop. In the same respect, you may have no payments if you have a major crop loss, i.e., the drought in KS, TX, and OK last year."


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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