Farm Bill Uncertain

February 26, 2012 06:15 PM
Farm Bill Uncertain

If it’s to pass this year, progress must come before August recess

This year’s farm bill, thanks to it being an elec-tion year and there being little spirit in Con-
gress for compromise, is as uncertain as any, said a panel of speakers at the Top Produ-cer Seminar in Chicago last month.

Michael Dykes, vice president of federal government affairs for Monsanto Company, believes getting a farm bill passed this year will be difficult. For one thing, Congress is facing a very short session of fewer than 100 days.

And with "open" rules in the House of Representatives that do not limit the number of amendments that can be offered by any member, the debate could go on for some time. "It’s not at all clear that what you have coming out of the House ag committee will be the bill you get coming out the other end of the House debate," Dykes said.

Bonus Content

More coverage of the 2012 farm bill

"I’m not optimistic we will have a farm bill this year, but I hope I’m wrong," added Wayne Myers, director of farm program services for Kennedy and Coe. "A farm bill would allow you to do your business planning. In any event, you still need to work your strategic plan for your farm, and, if there is a farm bill, work to maximize benefits."

But a new farm bill is a possibility, because Congress will want to show it can pass legislation prior to the November elections, said Jim Wiesemeyer, senior vice president of policy and trade issues for Informa Economics. And because of the dismal federal budget outlook in 2013, getting the farm bill done could mean fewer cuts now rather than later.

"I believe a farm bill could get done. If it does, look for the Senate to have its markup completed by Memorial Day and the House to complete its debate by the July 4th recess," Wiesemeyer said.
If this happens, he said, Congress could wrap up the action after the Nov. 6 elections. But if it misses those deadlines, the 2012 farm bill could very well become the 2013 farm bill.

The three speakers were in agreement that any farm bill, whether it comes this year or next, will be defined by the federal budget deficit. Most analysts predict that Congress will try to shave $23 billion from the farm bill’s previous baseline, with some saying that could be pushed to $33 billion.

As a result, direct payments for most commodities are history. In their place, look for ag risk coverage in the form of revenue assurance. In addition, that risk coverage will be on actual planted acres, not a farm’s base acreage.

In the dairy sector, the National Milk Producers Federation is asking for a gross margin insurance program and moving away from dairy price supports and direct payments. "It looks like they will get it if the farm bill passes," Wiesemeyer said.

Myers noted that the adjusted gross income test for farmers to receive payments was already ratcheted down from $1.25 million ($750,000 of adjusted gross farm income and $500,000 of off-farm income) to $1 million this year. There will likely be an effort from the House floor, led by Tea Party members, to lower that to $250,000 in the new farm bill. If that happens, it could save
$2.3 billion but prevent 20% to 25% of farmers from receiving benefits.

Monsanto’s Dykes believes that ethanol mandates will also be debated. Currently, ethanol consumes 5 billion bushels of the 12-billion-bushel corn crop. "We will see the mandates come under attack, but I think they will prevail," Dykes said.

What’s in it for dairy?

Although the House and Senate have not released the dairy provisions of the 2012 farm bill from last year’s supercommittee deliberations, some new or changed provisions have leaked out. Most believe this will be the framework going forward:

  • Federal Order reforms have been left for another day. Originally, the Foundation for the Future plan called for the elimination of cheese make allowances and a price survey of proprietary cheese plants to establish the cheese price to plug into Federal Order price formulas. Both of those ideas have reportedly been dropped.
  • Only those producers who sign up for margin protection insurance will be required to participate in the market stabilization program if it is triggered. Those signing up for base margin protection insurance will have 80% of their annual milk marketings covered by the plan at no charge. The first 4 million pounds of annual milk production will also reportedly be charged a lower rate for additional, supplemental coverage up to 90% of annual milk marketings.
  • Producers reportedly will be able to sign up annually. Originally, producers would have had just one chance at the beginning of the program to sign up for supplemental margin protection.
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