UPDATE - House Releases Draft Farm Bill Plan

May 10, 2013 05:12 AM

via a special arrangement with Informa Economics, Inc.

Changes include more budget savings, cotton program changes, and SCO tweak

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


The official markup date and time for the proposed House farm bill was released today by the House Ag committee. Markup action will begin at 10 am ET on May 15.


A summary of the legislation can be found here

The text of the bill can be found here.

The House Ag Committee today released their farm bill draft for their tentative May 15 markup session.

There are shifts in their package compared to the version the panel approved in 2012 and the focus moving forward will be on how the package differs from the draft bill unveiled by the Senate Ag Committee Thursday.

The biggest difference between the two bills is on the Supplemental Nutrition Assistance Program (SNAP). The Senate saves $4 billion and the House bill saves $20 billion via food stamp funding cuts. The Senate bill raises the minimum amount required to trigger a standard utility allowance that is used to calculate SNAP monthly benefits. The Senate bill puts the threshold at $10; the House bill moves that to $20.

Overall the Senate bill saves $23 billion over ten years, while the House plan shows budget savings of around $40 billion,  with $6 billion of that coming from sequestration cuts, $14 billion in combined Title I and crop insurance program savings, $20 billion in food stamp savings and around $6 billion in conservation savings. The CBO will say the House bill saves $34 billion due to the $6 billion in sequestration cuts. 

The House farm bill draft includes some key changes for the cotton program, with a scaled-based direct payment program for 2014 and 2015 (70 percent of base payment factor for 2014 crop; 60 percent for 2015 -- cotton direct payment rate would be 6.667 cents per lb), to give USDA's Risk Management Agency (RMA) time to implement the new STAX program. Of note, the House cotton program language will no longer have a reference price, in a bow to Brazil's previous challenge of prior US cotton policy.

Other highlights:

Dairy: It includes the concept from Rep. Collin Peterson (D-Minn.) for voluntary supply management, but there are expected to be several committee and House floor amendments that would seek to take out that portion of the language for dairy policy.

Target prices: They remain at the same levels proposed in House farm bill last year, which are higher for rice and peanuts than the Senate, and considerably higher than the levels in the Senate for other crops.

Direct payments: Other than for cotton, they would be eliminated (see above for cotton details).

Price Loss Coverage: Payments under the plan would be based on planted acres, but they cannot exceed the base acres on the farm for a covered commodity. This is contrary to what some other media have reported.

Comments: The Senate will eventually have to boost its savings level and some key ARC provisions may change again later in the farm bill process.

Another important development that few have pointed out is that in the Senate bill, producers would NOT have to choose between the Adverse Market Payment (AMP) target-price-based payment and the Ag Risk Coverage -- the same acres could qualify for both programs.

In the Senate bill, ARC moves to using a full market year price as opposed to the mid-season (5-month) price that was used in the 2012 version of the bill. This saved from $3 billion to $4 billion in the Senate bill. However, the House bill maintains the 5-month price calculation for both ARC and PLC, but payments like the Senate are paid in October. Farmers under the House bill would at least know the payment calculation in advance of the payment, and could thus tell their banker for enterprise planning.

A quick analysis shows that under the Senate bill, 80 percent to 90 percent of Title 1 (safety net) spending is for the ARC,
which some observers say shows the Senate bill is not balanced and is skewed toward Midwest and northern-belt states, rather than the House farm bill which provides a more balance, and producer option approach between RLC and PLC.

Also, sources signal that Sen. John Thune (R-S.D.) during the May 14 Senate Ag Committee markup will offer an amendment to do away with target prices – perhaps for crops other than rice and peanuts


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



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