Farm bill expiration hits dairy farmers first, but congressional inaction will also impact consumers and other agriculture producers

Stateline MIdwest ~ November 2012

The 2008 farm bill officially expired on Sept. 30, a congressional inaction that has left plans for 2013 crop production in limbo while also costing dairy farmers hundreds of thousands of dollars and leaving  consumers with the prospects of much higher milk prices starting next year.

It is also a continuing concern for state lawmakers in the Midwest as they prepare for legislative sessions next year.

“The strength of the farm economy has buffered the state from much of the [national] recession,” Iowa Democratic Sen. Tom Rielly says. “But the lack of a farm bill could throw a wet towel on Iowa’s farm communities, energy companies and rural development efforts. Congress needs to provide rural America with some certainty.”

Even without a new farm bill, many crucial programs can and will continue through the spring.

However, a safety-net program for dairy farmers has already come to an end. It provided payments during times of low milk prices; the payment only amounted to about 10 cents per gallon, but at a time of drought and significant increases in feed and fuel costs, it is the difference between survival and bankruptcy for many farmers.

Thousands of dairy producers are left with no safety net at a time when the farm gate price for milk is not covering expenses; as a result, farm bankruptcies are expected to rise.

Ironically, without a farm bill or an extension by Jan. 1, milk pricing will revert to the 1949 farm bill, which would reset the price of milk to “parity” — the purchasing power of milk in 1914 — thus doubling the farm gate price and raising  the retail price of milk to more than $6 a gallon.

Congressional fight not over subsidies, but food stamps

The failure of the U.S. Congress to pass a new farm bill is not without precedence.

However, for the first time, the controversy is not over farm subsidies, but over how deeply to cut food stamps (the Supplemental Nutrition Assistance Program, or SNAP).  The nutrition provision of the farm bill provides both domestic and international food aid, and it has been included in the farm bill for decades to encourage urban lawmakers to support agriculture legislation.  

“The legislation is more of a food bill than a farm bill,” North Dakota Republican Rep. Mike Brandenburg notes. “Only 16 percent of the farm bill funding actually goes to farmers.”

The entire farm bill amounts to about 2 percent of the federal budget.

In a strongly bipartisan vote, the Senate passed its version of the farm bill in June, cutting $4.5 billion from SNAP and an additional $19.1 billion from agriculture programs through the consolidation of programs and the elimination of direct payments.

In July, the House Agriculture Committee also passed a bipartisan farm bill, cutting $16.5 billion from SNAP and $18.5 billion from agriculture programs.  Four months later, that is how things still stand.  (In a continuing resolution for fiscal year 2013, Congress included an extension for SNAP, so the failure to pass a farm bill is not impacting that program.)

Both chambers agree on the elimination of direct payments, which are not tied to production and which began in the 1996 farm bill (the Freedom to Farm bill) as a way to transition farmers to a free-market system. These payments were supposed to be eliminated within seven years, and their end finally seems near.

While dairy farmers are feeling the pinch now of congressional inaction, and consumers will see a huge increase in milk prices in January, the 1949 permanent law for commodity crops won’t be implemented until the harvest of the first crops in 2013.  And federal crop insurance will continue through at least the spring of 2013 because its authority lies in different legislation.   

Most current commodity programs, in fact, are not in any jeopardy. However, the changes proposed in both the Senate and House versions will require the U.S. Department of Agriculture to develop new rules and application processes. The department will also have to train employees before farmers (and their lenders) begin making next year’s planting decisions.

"The main challenge will be planning for the 2013 crop year,” says Rep. Brandenburg, a farmer. “Uncertainty about the future of crop insurance will impact lending by agriculture bankers.  With the cost of seed and fertilizer, bankers will be leery about providing operating capital when they don’t know what type of safety net will be included in the final bill.”

Meanwhile, 37 conservation, specialty crop, trade and energy programs that received mandatory funding in the 2008 farm bill have ended as of Sept. 30. Existing conservation contracts will be honored. However, there will be no new enrollments in the federal government’s various farm-related conservation programs due to the lack of funding.

All grants, loans and research involved in farmer’s markets, energy programs and block-grant programs for specialty crops have come to a halt as well.  (These newer programs were included in the 2008 farm bill for the first time and, therefore, do not have permanent baseline funds.)

Even some tax provisions have expired, including a tax deduction for conservation and the tariff on imported ethanol.  Also in limbo is the drought-disaster assistance spelled out in the Senate and House Agriculture Committee bills. 

However the current congressional stalemate is resolved, total reductions in farm bill programs will be larger than the automatic budget cuts scheduled to begin under requirements of the Budget Control Act of 2011. 

There are two theories about what happens next. A compromise on a new farm bill is reached by the end of the year, or Congress extends the 2008 farm bill until the summer of 2013 and starts the process of writing a five-year farm bill all over again. 

The Midwest’s farmers and state legislators are watching; its consumers should be too.

 

Article written by Carolyn Orr, who serves as CSG Midwest staff liaison to the Midwestern Legislative Conference Agriculture and Natural Resources Committee. The committee’s co-chairs are North Dakota Sen. Tim Flakoll and South Dakota Sen. Carolyn McGinn.