New Farm Bill on Quick Hearing Pace

Key issues ahead: Cotton, generic base acres, dairy, ARC

The House next week will hold a general rural economic outlook hearing as part of its work on a new farm bill. The Senate later this month will hold its first field hearing. The farm bill debate has begun with a goal of inking a final bill and passed by Congress by early summer 2018, but no later than September 2018.

Usually the USDA secretary is a witness at the House Ag panel’s first hearing, but Trump nominee Sonny Perdue will not be confirmed in time to appear at the hearing. House Ag Chairman Mike Conaway (R-Texas) said in March and into April, panel subcommittees will hold farm bill-related hearings.

On the Senate side, the Ag Committee will hold its first field hearing Feb. 23 in Manhattan, Kansas. Expect various farm groups to ask for more than the budget baseline can likely deliver.

Cotton, ARC and dairy policy are topics heading the initial focus list for the new farm bill. Let’s take a quick look at those topics.

Cotton: The 2014 Farm Bill proved that the STAX program for cotton did not work and proved to be a very ineffective safety net. Look for cotton policy to return to the Title I area of the farm bill. But that will cost funding. The House is still looking for ways to make cottonseed an eligible safety net crop before the next farm bill. That push is being made at several levels – a request to the Trump administration to do it administratively, something former USDA Secretary Tom Vilsack said lawyers would not approve. Another option is attaching legislative language a must-pass bill as soon as possible. Absent those two options, a likely concerted push by Conaway to make sure cotton returns as a safety net commodity.

Generic bases are set for some major changes either in the short run or via the new farm bill language. The changes, including a possible phase-out and/or significant change in the number of such acres, will be used to help offset the big cost of returning cotton as a safety net crop.

As for the Ag Risk Coverage (ARC) program, latest estimates by the Congressional Budget Office (CBO) clearly show that the ARC is not an effective safety net under continued low-price years. Some ARC proponents want to change the current ARC formula or make other changes to make the “shallow loss payment” program a more effective safety net, including working out kinks that had some producers getting maximum payments while others in adjoining counties got little to no ARC payouts.

PLC proponents want what else, higher reference prices.

Dairy policy will either be tweaked or substantially changed following anemic participation in the Margin Protection Program (MPP) of the 2014 Farm Bill. The American Farm Bureau Federation is putting the final touches on a major dairy policy proposal like how crop insurance programs work, but the final proposal is expected to have a big if not huge price tag. Even tweaking the MPP as many are pushing could come with a price tag that will cause farm bill writers anxiety trying to find adequate funding.

Comments: Farmers, their lobbyists and farm-state lawmakers are all talking about the need for an “adequate” budget baseline to incorporate changes to the current farm bill. The Congressional Budget Office (CBO) recently updated its estimates regarding the farm bill and both proponents and opponents of U.S. farm policy will use the forecasts (some of which were substantially revised for estimates during the 2014 Farm Bill debate).

Comparing the CBO estimates to prior forecasts is not as easy as some think, as CBO used 11 years in their recent analysis whereas the farm bill scoring is over ten years. Still, the vast majority of the 2014 Farm Bill gross savings of around $100 billion came from far less food stamp (SNAP) funding than CBO thought during the initial farm bill debate. Being off by $80 billion is even a big miss for government forecasters. Crop insurance expenditures were also lowered than expected, largely due to a lower loss ratio. That means safety-net costs were higher, largely due to the Ag Risk Coverage (ARC) payouts and to peanut program expenditures.

We will have more perspective on the farm bill budget baseline ahead, as the “aggies” fret that they will not have enough funding to ink an adequate new farm bill – especially with a growing number of forecasters painting a bleak net farm income and commodity price forecast for the next few years.

While lawmakers still can’t make wine out of water, when it comes to finding more funding they have somehow accomplished that task many times in the past. Look for farm-state lawmakers to note the substantial savings of the 2014 Farm Bill above the $23 billion they were told to cut. But fiscal-minded watchers will delve deep into those savings to try to put balance on the topic. Expect that debate to be loud but not so clear.