Farm Bureau Federation Issues Farm Bill Alert

November 15, 2011 06:08 AM

via a special arrangement with Informa Economics, Inc.

Memo sent to group's field office

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

The American Farm Bureau Federation has sent the following "URGENT ACTION ******** ***P U B L I C  P O L I C Y  B U L L E T I N*** to its field offices:

Farm Bill Negotiations
The four principals – Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), Senate Agriculture Committee Ranking Member Pat Roberts (R-Kan.), House Agriculture Committee Chairman Frank Lucas (R-Okla.) and House Agriculture Committee Ranking Member Collin Peterson (D-Minn.) – failed to submit their farm bill proposal to the Joint Committee to cut $23 billion from their budgets by the Nov. 1 deadline.  Since the deadline, only the two chairs have been meeting on the commodity title, and have not included either ranking member or their staffs in these discussions.
While the two chairs continue to meet behind closed doors, they are beginning to "leak" some information to members of the House and Senate Agriculture Committees, and even a little information to agriculture organizations.  It is important to reiterate, however, there is nothing in writing, and the following synopsis is simply our best guess at what is currently being debated.
Overall, Farm Bureau continues to hope the four principals can complete the project and put forth a viable alternative for farm policy for the next five years.  If the $23 billion contribution from agriculture is completed and incorporated into the Joint Committee’s recommendation on ways to find up to $1.2 trillion in savings, harmful amendments can be avoided on the House and Senate floor.  By law, the Joint Committee’s proposal is to be considered under an "up or down vote" by the House and Senate with no amendments allowed.  This would protect agriculture from amendments that would transfer funding from commodities to other programs, further lower payment limitations, require additional conservation practices to qualify for crop insurance, etc.
The four principals do not have much time to complete their deliberations.  The law says that all legislative language for items included in the $1.2 trillion package must be submitted to the Congressional Budget Office (CBO) for scoring and that CBO must send the scores back to the Joint Committee by Nov. 21.  While sooner would be better than later, it seems the absolute "drop-dead" date for the principals is this Friday, Nov. 18.  The Joint Committee must then release the document by Nov. 23.
Here is what Farm Bureau believes it "knows" about the current package:

--         The following programs are eliminated – Direct Payments, Average Crop Revenue Election (ACRE) and Supplemental Revenue Assistance Payments (SURE).
--         Crop insurance is maintained at current levels and the program is changed only slightly.  Some cuts may occur due to overlap between crop insurance and the new shallow loss program.  In addition, a few improvements may be made in the program.
--         Marketing loans are continued.
--         The committees still seem intent on replacing Direct Payments with a Shallow Loss Revenue program.  However, they have now recognized that the program does not work well in the South where producers do not buy crop insurance at as high a buy-up level as in the Midwest.  Because of that, the two chairs are looking at using three separate programs in the commodity title.  A Stacked Income Protection Plan (STAX) would be offered to cotton producers only, a shallow loss program would be offered to corn, soybean and wheat producers, and significantly higher target prices would likely be the producer’s choice for rice, peanuts and sorghum.
Farm Bureau has voiced its concerns that it believes Congress should develop a program that works for all commodities rather than one or two or three that only work for a limited number of commodities.  Farm Bureau has also voiced its concerns on the difficulty in ensuring the programs are equitable.  If they are not (and it seems almost impossible), then farmers will quickly determine which program provides the best protection and likely, once again, take their planting signals from the government rather than from the marketplace.  This is a very important concept to relay to your congressional delegation.  It is also overwhelming to imagine a county FSA office having to administer three separate and distinct programs.
--        The first of the three programs is STAX.  It is likely to be offered at a 90 percent shallow loss level rather than a 95 percent level as originally proposed by the National Cotton Council.  At the moment, the intent is to provide STAX without payment limits.  Since Farm Bureau opposes payment limits of any kind and certainly opposes implementing payment limits for a crop insurance-type program, this is good.  However, it is extremely likely payment limits will be imposed on both the shallow loss program and the higher target prices at $125,000 per individual, so there will be inequity in this regard.  Lastly, there remains a question as to whether STAX is WTO legal.  While trade implications have not been important to many in Congress with regards to this farm bill, they are very important to Farm Bureau.  Farm Bureau does not want to implement a program whereby the U.S.  runs the risk of another WTO case similar to the Brazil Cotton Case.  This is also an important concept to share with your delegation.
--        The second of the three programs is shallow losses.  Late last week, the two chairs proposed a "farmer choice" option where all producers (except cotton) could select the shallow loss program at a county level and marketing loans or a much higher target price.  Over the long weekend, the American Soybean Association, the National Corn Growers Association and the National Association of Wheat Growers asked the chairs to not offer higher target prices for their three commodities and to instead provide them only a shallow loss program – but at the farm level rather than a county or crop reporting district level.  Those three groups also communicated that they did not care what was offered to cotton, rice, peanuts or sorghum.  Farm Bureau communicated that it does not support a shallow loss program because it believes it will make it difficult for new farmers to enter into agriculture when so little equity is on the line, and that it believes land values and rental rates are likely to go up due to this proposal.  In addition, Farm Bureau does not support the bottom end of a shallow loss program overlapping the crop insurance program.  As now drafted, the band for shallow losses appears to be 77 to 88 percent.  This means anyone who currently purchases 80 or 85 percent crop insurance coverage can double-dip and receive crop insurance indemnities and shallow loss payouts.  Alternatively, farmers could choose not to buy up and simply take the shallow loss payment.  Farm Bureau has told Congress that neither double-dipping nor sending a signal to farmers not to self-insure, but rather to select a government payment, is troubling.
--        Farm Bureau has also expressed grave concerns about implementing a shallow loss program at the farm level.  Farm Bureau believes a farm level program is expensive, will attract fraud and will be essentially impossible to administer.  The only idea we have heard about implementation is to require farmers to submit their Schedule F’s to USDA.
--         The third of the three programs is a significantly higher target price for rice, peanuts and sorghum.  Farm Bureau has communicated that the prices it has heard are being contemplated are so high that the U.S. would be in danger of exceeding our spending limits for crop-specific subsidies under the WTO.  In addition, producers would likely shift planting from other crops to those with a high target price, if at all possible, simply for the high government safety net.
--         The current counter-cyclical target price program is decoupled from production.  Deficiency payments are made when prices for a crop that has base acres on a farm fall below that crop’s target price.  These payments are made regardless of which crops are actually produced.  The decoupled structure of the program has had a minimal impact on planting decisions.  The higher target prices under consideration are based on planted acres not to exceed total base acres on a farm.  It is recoupled so that deficiency payments are only made when a farmer actually produces the crop for which target prices are offered.  Some members of Congress are adamant about the need to eliminate base acres due to the negative press.  Others are adamant that if Congress recouples and target prices are high, planting decisions will be driven by government programs rather than the marketplace.  The target prices under consideration are presumably based on cost of production.  Farm Bureau has indicated its concern that cost of production varies significantly and this is not a good measure to utilize for setting rates.
--         There will likely be a $1 million Adjusted Gross Income means test included for all commodity payments.
In conclusion, the bill is ugly.  There is a possibility this could be the first farm bill in history (or at least in a very long time) that Farm Bureau will not be able to support.  However, it is important to remember that as ugly as the bill is and work is not completed on it now, then the farm bill will be written next year on the House and Senate floor under open rules.  This means any and all amendments are likely.  At some point, we will have to determine "the lesser of two evils."
States are asked to contact their congressional delegation with emphasis on the members of the House and Senate Agriculture Committees immediately to express our concerns on the issues outlined above.  Time is very short.  Any information or feedback received from those offices should be communicated to Mary Kay Thatcher in order for us to utilize the information to try to change the positions of the two chairs.



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






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