Farm Bill May Give Producers a Policy Option: Pared-back Current Program or Revenue Safety Net

November 3, 2011 02:06 AM
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via a special arrangement with Informa Economics, Inc.

Any move to revenue protection could open up U.S. gov't to big budget exposure

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

The end zone to the latest omnibus farm bill “debate” could be at hand. Farm bill writers, a select few, and some, but not all Ag panel staff, are busy trying to cobble a farmer safety net that would please all regions of the country. But if that criteria is met, the plan may not please enough Super Committee members charged with coming up with at least $1.2 trillion in debt reduction over ten years. Others note that they presume Super Committee members will focus on achieving requisite savings.

The twists and turns of farm policy are nothing new. But this version of the behind-closed-door “debate” is even more so. And it now appears “negotiations” are being handled by just a few. That increases the chance of unintended consequences. Others note there were plenty of hearings and other events leading up to the closed-door sessions. There were also Member-level, farm group, conservation group, and other stakeholder proposals. Thus, they argue, it isn't that they haven't been heard, it is that the process is different in doing so.

Late word from usually reliable contacts is that some farm-state lawmakers are pushing a plan that would allow farmers an option: take some portions of the current system, but with lower or an elimination of direct payments, but higher target prices (just how high they are raised is another key). Some note that if direct payments are eliminated, that alone would constitute major reform. The other option: Producers could sign up for a revised revenue assurance plan that may include so-called shallow-loss protection, although there is high anxiety about potential shallow-loss unintended consequences and this fear could delete this portion of revenue assurance.

When the dust settles on this secretive new farm bill, the key could be budget exposure. That is, in an era where lawmakers from both political parties are trying to come up with lower spending and less budget exposure, depending on the details of a revised revenue assurance program, including the percentage of shallow loss protected and the price guarantee, budget exposure during some of the five years or so of the new farm bill could lead to significantly more income transfer payments than most, including Congressional Budget Office (CBO) analysts, apparently now think. And some budget watchers are already asking about a revenue assurance program for farmers when farm income is at record levels and the average farmer income and even more importantly, average net worth, is above those of the general population.

At least with the current target price approach, even if they are increased, budget planners know the budget exposure. But with a move to revenue assurance, that may not be the case.

Revenue assurance, most observers concur, is the way to go for some commodities, and would be a logical complement to crop insurance protection. But a move toward revenue assurance depends on how the program is structured – and those unknowns have brought some major farm policy surprises before once the details were known and analyzed. Without true vetting of the proposals, due to the behind-closed-door nature of this year's process, some glitches could arise in the years ahead. Again, others note there has been plenty of vetting of the myriad of proposals – both by Ag Committee staff, CBO and a select group of others.

Even if the narrowly discussed farm bill proposal reaches its end zone, what will be the reaction of Super Committee members? Several Republicans on the 12-member debt reduction panel have never voted for a farm bill. Would they vote this time for omnibus farm bill language be wrapped into any Super Committee package, without a chance of amendment on the House or Senate floor?

Should the select farm bill writers get their wish, would including farm bill language in the Super Committee package have enough votes for passage? The key ahead would be where the votes are to approve any debt reduction plan. Farm-state lawmakers voting for the package because they got what they wanted via the farm bill language may find that process leading to just as many if not more lawmakers voting no to the deal and the overall package.

The debate will really begin after details are known, not before.

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






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