UPDATED - Which Farm Bill is Better: Senate or House?

September 25, 2012 02:25 AM

via a special arrangement with Informa Economics, Inc.

Giving farmers a choice of safety net programs is an easy victor in farm bill debate

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

A new farm bill should not only be an adequate and equitable safety net for farmers, but it must be budget conscious -- that is, not spend more money than need be to help the country get out of its debt morass.

With those farm bill parameters, it's easy to conclude which farm bill version in Congress is the better one: the House plan. For several reasons, including:

-- A more adequate and equitable safety net. The Senate farm bill, frankly, is one of the most regionally tilted farm bills in my over thirty years of watching farm bill sagas The House bill has a logic to it that the Senate lacks -- the logic being to let farmers rather than a select group decide which farm program options are chosen. The House bill includes an option for both revenue and target price (reference price) programs, while Senate kingpins wanted no part of target prices. That may sound okay to some Midwest and northern tier farmers, but no so to others, especially in the South. The House bill includes several revenue-type programs, including a revenue price loss and an add-on program called Supplemental Coverage Option (SCO).

What does the Senate have against giving producers a choice rather than dictating for them? Odd. Very odd. Score one for the House.

-- Budget conscious. Ahh, this is where some current prices for key commodities like corn, soybeans and wheat are giving some budget and farm bill timeline nightmares to some in the Senate and a I-told-you-so attitude on the part of some House Republicans and Democrats. Those pushing the revenue-only Senate plan have always been on a hurry-up schedule and now we know their real reason: reality hurts their cause. That reality: much higher commodity prices than projected in the farm bill baseline by the Congressional Budget Office (CBO). CBO’s March 2012 baseline assumes the price of corn would be just $4.96 this year and fall to $4.54 in 2013. You read those projections right, and of course they are way off. Ditto for soybeans and wheat. The fear is that come March 2013, if a farm bill is not finalized by that juncture, a new and more realistic CBO farm bill baseline will put the Senate-dictated revenue program into budget cost overdrive. That is the reason behind the push in the Senate and by some farm groups taking an odd choice of favoring one bill over another --budget games.

UPDATE: While 2012-crop corn, soybean and wheat prices will certainly be far higher than in CBO’s old baseline, analysts tell me it is unclear 2013-2017 average prices will show a big change. Also, if U.S. 2013 crops (especially corn) have more normal growing conditions next year, prices are likely to fall sharply in 2013/14 from current levels, with carryover approaching 2 billion bushels for corn. 


Also, the revenue proposals use an Olympic average of market prices. That means the 2012/13 prices won’t go into the averages, no matter how high they turn out to be. That of course does not mean there’s no effect on the revenue guarantee, an observer notes, as it means the 2011/12 prices that would otherwise have been thrown out will be included. So there will be some increase in the revenue guarantees and program costs for ARC and RLC, all else equal, but the changes may not be as large as some appear to assume.


Some observers still say the House target/reference price loss option would score less in a new budget baseline due to higher prices.

One should not necessarily count on a new farm bill having to use a new CBO budget baseline -- lawmakers are famous for getting around such constraints, especially if it means more taxpayer money being spent. But when the calendar turns to 2013, something tells me even Washington, D.C., and a growing number in Congress, will finally start getting serious about a host of budget issue, including too much spending. Reason: there is no other choice.

As for some farm groups who publicly have favored the Senate bill over the House version, that strategy has perplexed me ever since that "strategy" was obvious. Why would you want to publicly push for something that both Republican and Democratic leaders of the House Ag Committee do not favor? And remember those concerns cited by rice, peanut and cotton growers over the Senate bill.

-- Some proponents of the Senate farm bill charge the House target prices would distort plantings. That has not been proven by several independent analyses. And, wouldn't a payment-tilted revenue program in the Senate bill not tilt some farmers to grow crops that have very high revenue guarantees at least for a few years?

Another criticism of the House farm bill is that it would not help farmers in years when their crops are poor from weather factors, but prices are high. But again, the House bill offers a producer an option to at least temper any such impact by buying an additional crop insurance policy, called the Supplemental Coverage Option, that both bills would authorize. If producers do not choose this option, then so be it -- at least they had a choice.

Bottom line: It's an easy call -- the House farm bill, while not perfect, is clearly the choice most farmers and all taxpayers should prefer. It's a better and wider safety net for farmers, and it's more budget conscious. Just ask CBO...next year.


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


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