OSU
Extension, Darke County
2013 Farm Bill Update
by: Carl Zulauf, Professor, Ohio State
University, and Gary Schnitkey, Professor, University of Illinois at
Urbana-Champaign
Overview:
Both the U.S. Senate and U.S. House of Representatives have passed farm
bills.
As expected, differences exist. Some are notable. This post briefly
reviews the
current farm bill situation and looks at possible paths forward. It
examines
the farm bill situation from three perspectives: politics, process, and
content.
History:
The 2008 Farm bill expired on September 30, 2012. During 2012, the
Senate
passed a new farm bill. The House of Representative Agriculture
Committee
passed a bill, but the House did not debate it. Instead, Congress
extended for
one year 2008 farm bill provisions that had baseline spending.
Thirty-seven
programs had no baseline, including agricultural disaster assistance,
the
Wetland Reserve and Grassland Reserve Programs plus three other
conservation
programs, eight energy programs, and seven programs related to
horticulture and
organic agriculture. Thus, these 37 programs are not continued. The
direct
payment, target price, and ACRE programs had baseline and are
continued;
however, the budget sequester act led to a 8.5% reduction in direct
payments
and 5.1% reduction in payments by all other programs administered by
the Farm
Service Agency.
On
June 10, 2013, the U.S. Senate passed the
Agriculture Reform, Food and Jobs Act of 2013 by a vote of 66-27.
Voting for
the Bill were 46 Democrats, 18 Republicans, and 2 Independents. On July
11,
2013, the U.S. House passed the Federal Agriculture Reform and Risk
Management
Act by a vote of 216 to 208. All 196 Democrats voted against the bill.
The
House had rejected an earlier version of the bill, 195 to 234. Key
differences
between the accepted and rejected versions are that the version which
passed
(1) did not contain a food assistance title and (2) replaced permanent
farm
bill law for farm support programs with the 2013 House farm support
programs.
Politics:
Recent farm bill debates generally have not been particularly partisan.
Key
differences were usually more along regional than political party
lines. The
2013 House farm bill is partisan. While it is easy to point to the
debate over
the food assistance title as a partisan issue, a deeper partisan issue
is at
play: federal spending. Generally, more liberal Democrats favor
increased
spending while conservative Republicans favor lower spending.
Exacerbating this
division is the slow growth of the U.S. economy, which means slow
growth in
government revenue. When considering the current farm bill situation,
it is
important to note that most legislation is now partisan, especially if
it
involves spending. It is also worth remembering that partisanship
marked the
debate during the 1950s and 1960s over high, fixed parity support
prices vs.
market-oriented, lower parity support prices and the associated debate
over
mandatory supply controls. As a general rule, Democrats favored high,
fixed
parity support prices while Republicans favored market-oriented, lower
parity
support prices. This debate did not begin to end until the Food and
Agriculture
Act of 1965 was enacted, foreshadowing that the market-oriented, lower
price
support position would emerge.
Process:
While the lack of a food assistance title in the House farm bill has
garnered
considerable attention, food assistance has been tied to the farm bill
more
recently than historically (see
http://www.fns.usda.gov/snap/rules/Legislation/about.htm).
The Food Stamp program was initiated by legislation outside a
farm bill, the Food Stamp and farm support programs have been extended
for
different periods of time by the same farm bill, and major changes in
the Food
Stamp program have occurred outside the farm bill. Moreover, even if
its
authorization expires, Congress can continue the Supplemental Nutrition
Assistance Program (SNAP – previously called the Food Stamp program),
by appropriating
money for it. Thus, both history and the current situation suggest it
is
possible to write a farm bill without a food assistance title, although
farm
bills since the 1970s have included food assistance. Hence, from the
perspective of process, like any difference between House and Senate
bills, a
Conference Committee will be impaneled to try to bridge the difference.
Key
date for passing a farm bill is not
September 30, 2013, but December 31, 2013. The farm bill was extended
for the
2013 crop year, meaning current crop programs continue until a crop’s
2013 crop
year ends. For example, the corn and soybean 2013 crop year ends August
31,
2014. December 31, 2013 is critical because the current U.S. dairy
price
support program ends on this date. The dairy price support program
would then
revert to permanent law provisions. Permanent law provisions are
primarily in
the Agriculture Adjustment Act of 1938 and Agricultural Act of 1949.
Under
permanent law, the dairy support price is likely to exceed $35 per 100
pounds
(cwt.), compared with a $9.90/cwt. support price in the 2008 farm bill
and a
May 2013 all-milk market price of $19.70/cwt. Congress demonstrated in
its
1-year extension of the 2008 farm bill that it will not allow the dairy
support
price to revert to permanent law. For more details on the 1-year
extension of
the 2008 farm bill and permanent law, see Congressional Research
Service
Report, “Expiration and Extension of the 2008 Farm Bill,” by Jim Monke,
Megan
Stubbs, and Randy Alison Aussenberg, January 15, 2013 (http://nationalaglawcenter.org/assets/crs/R42442.pdf).
Content
Differences:
Besides the food assistance title, major differences in the 2013 House
and
Senate farm bills include:
(1)
replacement of permanent legislation — The
House Bill replaces the 1938 and 1949 farm legislation with the farm
commodity
title in the 2013 House farm bill. Thus, the House farm bill proposes
that the
House farm commodity support programs would exist forever until
Congress
decided to reconsider them. The Senate continues permanent legislation.
Its
commodity title is an amendment to the permanent laws and expires at a
specified date in the future. For example, commodity programs for field
crops expire
after the 2018 crop year. Thus, the Senate farm bill requires that
commodity
programs be reconsidered. Reverting to permanent law has been an
impetus for
continuing dialogue on the farm safety net. The House version reduces
and
perhaps negates the need to pass farm safety net legislation in the
future,
thus likely making it harder to change the farm safety net.
(2)
type of multiple-year program —
Multiple-year assistance in the Senate bill centers on a revenue
program, whose
guarantees can drop and increase over time. In contrast, the House bill
contains a more traditional fixed target price program. Generally, the
House
Bill makes larger payments to rice and peanuts than does the Senate
Bill.
(3)
type of dairy program — the Senate bill
contains a supply management program; the House bill does not contain a
supply
management program.
These
differences involve important
philosophical questions: how often should Congress debate the farm
safety net
and how market oriented should farm safety net programs be. In
addition,
concern exists among southern crop producers that the distribution of
payments
from crop insurance differs notably for peanuts and rice from the
distribution
of direct payments and target price deficiency payments.
The
broader point is that, even if the food
assistance title was not an issue, it is not clear that a Conference
Committee
can bridge the differences that exist on farm safety net programs.
For
a more detailed discussion of some of these
issues, see the May 9, 2013 farmdoc post titled, “Payments by U.S. Farm
Safety
Net Program: Differences by Crop,” by Carl Zulauf and Gary Schnitkey,
available
here; the May 23, 2013 farmdoc post titled, “Comparison of Approaches
to Price
Supports for the 2013 Farm Bill,” by Nick Paulson, available here; and
the June
7, 2013 farmdoc post titled, “Market Distortion and Farm Program
Design: A Case
Examination of the Proposed Farm Price Support Programs,” by Carl
Zulauf,
available here.
Summary
Observations:
Many paths forward exist, with these four likely spanning the possible
outcomes:
(1)
The Conference Committee reaches an
agreement that is enacted into law.
(2)
The Conference Committee does not reach
agreement and the current 2008 farm bill extension is extended for
another
year. As an aside, a 2-year extension could occur if Congress wants to
avoid a
farm bill debate in a Congressional election year.
(3)
The Conference Committee does not reach
agreement and the 2008 farm bill is extended again but in a different
version.
For example, some observers have discussed reducing direct payments if
another
extension occurs.
(4)
The Conference Committee does not reach
agreement and permanent law is repealed, ending farm commodity support
programs. This outcome seems unlikely but we do not think its
probability is
zero. Should this outcome occur, the farm safety net becomes the
insurance
program, meaning multiple-year losses would not be covered by the farm
safety
net.
The
interplay of politics, process, and content
will determine in part which of these paths or if an entirely different
path is
taken. Senate leadership and President Obama have both indicated they
will not
accept a farm bill without a food assistance title. A farm bill with a
food
assistance title would require a very different coalition in the House
than the
coalition that passed its farm bill. Specifically, the support of a
large
number of Democrats would be needed. Is such a coalition attainable?
Weather
and price/revenue trends matter in a
farm bill, if for no other reason, than farm program payments are based
on
production, price, and revenue. A decline in price/revenue will
increase the
budget baseline of the ACRE program and the target price programs in
the 2008
farm bill. On the one hand, this consideration could enhance the
likelihood of
another extension since a higher budget baseline for a 2014 farm bill
increases
the ability to address legislative concerns. On the other hand, farm
groups may
wish to lock in the higher target prices of the 2013 House farm bill.
Groups
concerned with Federal spending will not favor this outcome.
The
latter paragraph highlights one of the key
divisions at play in this farm bill debate: the desire on the part of
those
concerned with the level of federal spending vs. traditional farm bill
supporters.
What makes this division even more interesting is that many members of
Congress
who are most concerned about federal spending are representatives from
rural
America, an area that traditionally has backed the farm safety net.
Thus, which
of these divisions win out could well go a long way to deciding how the
2013
farm bill debate is resolved.
The
preceding discussion has noted that there
is no necessary reason for a farm bill to contain a food assistance
title.
However, not including a food assistance title in a 2013 Farm bill
could
potentially alter the dynamics of future farm bill debates.
Conventional wisdom
is that farm safety net programs are easier to enact when the farm bill
includes a food assistance title because more constituencies have a
stake in
the bill. Thus, an important decision that all farm safety net
supporters will
need to consider is the strategic, long term consequences of having or
not
having a food assistance title in a 2013 farm bill.
A
parallel discussion exists for inclusion of
the revision to the 1938 and 1949 permanent laws. Revision to permanent
law
means that farm commodity programs will need to be considered in the
future.
Thus, it acts as a catalyst for the entire farm bill. Many actors that
support
the farm bill have interest other than commodity programs. In addition,
knowing
that the farm bill will be reconsidered in the future probably
encourages
compromise since policy actors know that the possibility exist that
their
concerns will be revisited in the not-too-distant future. Thus, an
important
decision that all farm safety net supporters will need to consider is
the
strategic, long term consequences of having the ability to modify farm
safety
net programs at a known time in the future and the value that this
known revision
date has to bringing policy actors with other concerns into the farm
bill
portfolio.
As
mentioned in earlier farmdoc posts, the U.S.
is currently engaged in a debate about the safety net provided to
Americans, a
debate that commenced with the extension of medical care to all
Americans. It
looks like the farm bill will be the next major confrontation in this
broader
debate. The outcome is uncertain but may have importance beyond
traditional
farm bill concerns.
For
more detailed information, visit the Darke
County OSU Extension web site at www.darke.osu.edu,
the OSU Extension Darke County Facebook page or contact Sam
Custer, at 937.548.5215.
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