New Farm Bill Looking Like a 2013 Timeline

September 19, 2012 04:22 AM

via a special arrangement with Informa Economics, Inc.

Farm groups don't get their way; fret about growing costs of revenue programs

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

That lobbyists for farm groups have been ineffective in getting their favored farm bill timeline accepted is an understatement. Now the same groups, and the same farm-state lawmakers, are pushing for a "must have" new farm bill completed in a very murky lame-duck session of Congress.

Potential and likely growing budget costs for a new farm bill have been and continue to be the major reason why some groups want a farm bill completed this calendar year, or no later than March 1, 2013. Why March 1? That is around the time a new budget baseline will be issued by the Congressional Budget Office (CBO) and if a farm bill is not completed by that time, some fear the updated baseline will be used to score whatever is in the final bill.

All this makes the length of any 2008 Farm Bill extension key, with most farm groups favoring a limited extension through the end of 2012 or just through early 2013. But a one-year extension is being discussed.

The farm group worries are well founded for several reasons. CBO analysts likely have already underestimated the participation in what could be a very attractive (and expensive from a budget payout standpoint) farm bill option likely to be included in a new measure: the Supplemental Coverage Option (SCO). That program has no payment limitations, and will likely be a favorite of large-acreage producers.

Another reason for higher revenue program spending: higher to much higher commodity prices than CBO analysts assumed. And likely more corn and soybean acres planted than current CBO projections – and not just for this year.

More planted acres for some 2013 crops. For example, calls to a few ag industry analysts signal 2013-crop corn plantings could be around 98 million acres, with wheat acres up around 1.5 million acres, and soybean acres about the same as this year. Cotton acres could see a big decline.

But corn is the big program crop that drives farm program spending. And if those 98 million acres of corn ever get a national average corn yield around 160 bushels per acre, carryover for the 2013/14 marketing year could zoom past 2 billion bushels -- especially with real demand destruction caused by the drought impacting the US animal sector. That could plunge prices from current levels, but make those revenue programs very attractive and cost much more than current indications because any updated CBO calculations would take into account the dramatic run-up in commodity prices following the drought. The payment triggers would be based on a five-year moving average of commodity prices and thus higher bench mark revenue levels especially in the first years of the revenue programs.

Be certain about certainty. So while many farm bill proponents say they want certainty for farmers, the real certainty is they want to use the current CBO baseline and not a more realistic one next spring.

Comments: Veteran Washington contacts signal the more likely case after Nov. 6 elections is that there could be an agreement to extend all expiring tax cuts, increase the debate limit, and some other pending issues for six months – kicking the issue into a new Congress with new players. If so, that means a new farm bill would have to start all over, including introduction, markup, floor consideration, etc. A new Congress doesn't usually start fast, and any such development would likely see the need for a one-year extension of the 2008 Farm Bill – with its own murky issues including what to do about direct payments for the 2013 farm program crops.


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






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