Monday, May 28, 2012
Keith Good Farm Policy: Farm Bill Savings $23.6B – Cotton Promised Own Insurance Program
By Keith Good
Farm Bill: Projected Costs, Timing, and Substantive Issues
David Rogers reported on Friday at Politico that, “New cost estimates Friday from the Congressional Budget Office predict that the Senate farm bill will save an estimated $23.6 billion over the next 10-years, about three-quarters of which would come from a net reduction in subsidies for major commodities.
“Beneath the surface, the 20-page report confirms a huge shift of resources toward new government-backed crop insurance options that would help farmers cover the deductibles they now pay. But even allowing for this investment, the Senate bill would save about $17 billion from what are generally seen as traditional support programs.
“A second wave of cuts from nutrition and conservation programs would save an additional $10.1 billion, about half of which would go to deficit reduction and half to pay for smaller energy, agricultural research, and specialty crop initiatives.”
Mr. Rogers noted that, “The $23.6 billion total is less than the White House and House Republicans have demanded in their own budgets. But the Senate bill stands out for this Congress as one example of a bipartisan effort to achieve real savings prior to the November elections and the threat of automatic spending cuts in January.
“Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) has repeatedly promised to meet the $23 billion target, and with CBO’s blessing in hand, she could have some added momentum on the Senate floor next month.”
The Politico article stated that, “The resulting savings [from eliminating the current system of direct cash payments], about $44.6 billion over 10 years, would be combined with another $6 billion achieved by also ending several smaller programs, including countercyclical and disaster assistance.
“From this pot of $50.6 billion in savings, the Senate bill then reallocates about $33.6 billion to new revenue and crop insurance options, the largest of which — the Agriculture Risk Coverage plan — would cover a narrow band of potential losses but be financed entirely by the government.”
“Cotton is promised its own insurance program, costing another $3.2 billion. But Southern peanut and rice producers, which haven’t enjoyed the same high prices as corn, for example, feel left out in the cold under ARC. Stabenow has tried to bridge this gap by assigning specific reference prices to each of these commodities. But no agreement has been reached and the regional divide remains a sore point going to the Senate floor,” the article said.
DTN Ag Policy Editor Chris Clayton reported on Friday that, “The lion’s share of net savings, $19.8 billion, comes from an overhaul of commodity programs. Ending direct payments, the counter-cyclical program and Average Crop Revenue Election program, or ACRE, would save $50.2 billion over 10 years. They would largely be replaced with the Agriculture Risk Coverage program that would cost $28.5 billion over 10 years, CBO projects. Other commodity programs, including disaster aid, account for about $2 billion in costs.
“The House Agriculture Committee is expected to propose a different set of commodity programs that would include some form of target-price provisions for at least some crops. That will shift the way the House comes up with its farm-program costs and projected savings in the legislation.
“The Agricultural Risk Coverage program, which has a $50,000 payment cap, would become the primary commodity safety net under the Senate version of the bill for crop farmers, other than cotton. ARC would have two options for producers: a county coverage that protects up to 80% of projected revenues, and an individual farm policy that protect up to 65% of projected revenue. ARC would require at least an 11% loss before producers could collect. Moreover, because of the payment cap and ARC’s structure, the Senate shifts a heavier burden of the farm safety net to insurance programs.”
Mr. Clayton indicated that, “In nutrition, the farm bill makes changes to the way people can become eligible for Supplemental Nutrition Assistance Program benefits, also known as the food-stamp program. The bill saves $4.5 billion over 10 years in SNAP costs by ensuring people who qualify for low-income heating assistance are not automatically approved for SNAP.”
Meanwhile, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Lobbyists are girding for a slew of battles on the farm bill, which will hit the Senate floor in early June.”
The Hill update stated that, “Lobbyists expect numerous amendments on the floor aimed at reducing farm subsidy spending through payment limitations and means testing. It is not yet clear if an open amendment process will be allowed or if a consent agreement can be reached to limit changes.
“Southern senators are also still dissatisfied with the bill because rice and peanut subsidies are cut too deeply in their view, and talks with Agriculture Chairwoman Debbie Stabenow (D-Mich.) have not yielded results yet.
“‘We have no agreement,’ Sen. Saxby Chambliss (R-Ga.), a member of the Agriculture panel, told The Hill.”
Mr. Wasson added that, “Stabenow this week said she has the 60 votes she needs to get it through the Senate.
“However, the House summer floor schedule released by Majority Leader Eric Cantor (R-Va.) on Friday does not mention the farm bill.”
Yesterday’s update also noted that, “A target price supporter discounted the idea that Tea Party House members would rebel against the notion of government set prices.
“‘It never comes up with them,’ one said.
“Key members of the freshman class are seen as allies.
“Reps. Martha Roby (R-Ala), Austin Scott (R-Ga.). Steve Southerland (R-Fla.), Steven Fincher (R-Tenn.), Renee Ellmers (R-N.C.), Alan Nunnelee (R-Miss.), Steve Palazzo (R-Miss.), Rick Crawford (R-Ark.) and Robert Hurt (R-Va.) are seen as in the peanut camp.”
Also on the issue of Farm Bill legislative timing, David Grant reported on Friday at the Christian Science Monitor Online that, “When Congress returns from the Memorial Day holiday the House and Senate will have about two months before their annual August recess, a moment widely seen as a legislative point of no return given the pressures of presidential politics this election year and the gridlocked situation on Capitol Hill.”
The article explained that, “According to a memo sent to House legislators by majority leader Eric Cantor (R) and floor remarks from Senate majority leader Harry Reid (D), the two chambers will not be legislating in step over the next several weeks.
“Mr. Reid said the Senate will take up issues including a farm bill, small business tax relief, cybersecurity, and pay fairness for women.”
“The House, on the other hand, will be chiefly concerned with moving bills that fund several of the government’s major functions, including veterans affairs and intelligence and perhaps a handful of others like energy and water or homeland security,” the article said.
An update posted on Saturday at the National Sustainable Agriculture Coalition Blog noted that, “Without House floor consideration in July, there would be very little hope of having a final bill by the September 30 deadline. If it becomes clear the House will not take up the bill then, the normally routine but likely very difficult process this time around of extending the current farm bill for a few months or a year will have to begin this summer, and that effort, too, would need to be successfully concluded by September 30.”
Daniel Looker reported on Friday at Agriculture.com that, “Senator Tom Harkin (D-IA) past chairman of the Senate Agriculture Committee, said Friday that a June vote on the Senate version of a farm bill is likely, along with some amendments that could affect how the bill deals with crop insurance subsidies, which now total about $9 billion annually to both farmers and crop insurers.
“Harkin said the upcoming vote was confirmed by Senator Debbie Stabenow (D-MI), who currently heads the committee.
“‘I talked to Senator Stabenow yesterday and it looks like we will be on the floor mid-June with the farm bill,’ Harkin told Agriculture.com. A date has not been set yet, he said.”
Mr. Looker added that, “Harkin also said that he expects to see amendments that would tie conservation compliance to eligibility for crop insurance. Those who favor linking compliance to insurance argue that it should be a requirement now that crop insurance has become the largest USDA program for producers.
“‘I tend to agree with that,’ Harkin said.”
Meanwhile, Ryan Howard reported on Friday at the Fergus Falls Journal (Minn.) Online that, “Though he’s seeking input from farmers around western Minnesota, U.S. Rep. Collin Peterson said he believes that when the nation’s farm bill is reauthorized, emphasis should be placed on surviving the hard times, not just profiting off the good times.
“‘Should the farm program be about maximizing your profit, or should it be about making sure the farm program is going to get you through if everything goes to hell?’ he asked Thursday morning at a meeting in Fergus Falls. ‘I believe in the latter more than the former.’”
Tom Cherveny reported on Saturday at the West Central Tribune (Willmar, Minn.) Online that, “U.S. Rep. Collin Peterson is optimistic that Congress will pass a new farm bill before its August recess, but a debate with important consequences for his district looms in the weeks ahead.”
The article noted that, “As elsewhere in the district, he heard support for the approach that he and most House members favor. It would allow farmers to opt for either target price or revenue protection.”
Mr. Cherveny added that, “The Senate version is appealing to those who believe commodity prices will remain high. ‘I’ve been around long enough to know better than that,’ said Peterson. He believes a floor is important to protect against the financial crisis that farmers would face were commodity prices to stay below production costs for two or more years in a row.
“He told his audience that the Freedom to Farm bill of 1996 was built on expectations of strong commodity prices. Congress spent three times as much bailing out agriculture as it saved with Freedom to Farm when commodity prices took a multi-year tumble.
“It won’t work that way this time around, he warned. ‘If we screw this up, there is no money to bail anybody out. We are broke. We don’t dare screw this up,’ he said of the farm bill.”
In other developments, Bill Tomson reported on Friday at The Wall Street Journal Online that, “More farmers than expected applied to put their land in a government program that pays the farmers not to plant crops and not all of the acres could be accommodated, the Department of Agriculture said Friday.
“The USDA accepted 3.9 million new acres into the Conservation Reserve Program in the latest sign-up period and turned away 600,000 acres.
“Interest in the program was so high, a USDA spokesman said, the agency extended the time period to allow farmers to get their applications filed.”
Egg Production Legislation
Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “Sen. Dianne Feinstein (D-Calif.) and a half dozen other senators have proposed legislation setting a uniform national standard for the treatment of egg-laying hens, which wouldensure egg producers aren’t blocked from selling across state lines due to differing state standards.
“Feinstein said on Thursday that six states already have their own standards, and 18 others could put their own rules in place soon, which could cause problems in the years ahead. She said beginning in 2015, for example, eggs produced in Iowa and Indiana will not be able to ship to California because they will not meet California’s standards.
“‘Different standards in Michigan and Ohio will take effect later, further adding to the patchwork of regulations,’ she said. ‘As states with disparate standards continue to protect their own egg producers by banning the sale of eggs from States with lower or no standards, a complicated web of state laws will impair interstate commerce.’”
The article pointed out that, “Feinstein said her bill, S. 3239, would codify an agreement between the United Egg Producers and the Humane Society on how egg-laying hens should be treated and how eggs should be labeled.
“‘The United Egg Producers and the Humane Society of the United States worked for over a year to reach this compromise, and I believe it is one that strikes a very fair balance,’ she said. ‘Producers must enlarge cages for egg-laying hens and allow space for the birds to engage in natural behaviors such as nesting and perching.’”
Stuart Pfeifer reported yesterday at the Los Angeles Times Online that, “[In California] Proposition 2, passed by a wide margin in 2008, requires chicken farmers to give their egg-laying birds enough room to stand and spread their wings.
“Although farmers have until 2015 to implement the changes, JS West is one of the few to have already installed new cages in an attempt to comply with the law. The Central Valley company, which helped bankroll the campaign against Proposition 2, says it has spent more than $7 million for two barns filled with the new 4-by-12-foot cages, each holding 60 birds.”
The article noted that, “Like most egg ranches, JS West initially opposed the measure.
“‘That was our livelihood that was being threatened, and we fought it to the end,’ [Jill] Benson said. ‘When we lost, we saw that California voters were asking for something different. We listened to what that vote said and tried to find a solution.’
“That solution may now be going national. In a rare alliance, the Humane Society of the United States and egg ranchers have joined forces to lobby for federal legislation that would set national standards for egg ranches similar to those implemented at JS West.”
Mr. Pfeifer indicated that, “‘No question about it: Proposition 2 was a major wake-up call to the entire U.S. egg industry,’ said Chad Gregory, senior vice president of United Egg Producers, a trade organization that represents most of the nation’s egg farmers.
“He and others believe the Humane Society support is crucial, since the group was one of the primary supporters of Proposition 2.
“‘The Humane Society could go into a state and say, ‘You either work with us legislatively or we’re going to do a ballot initiative in your state,’’ Gregory said.”
The L.A. Times article added that, “In addition to providing birds with nearly twice as much living space, the cages include accessories intended to mimic conditions chickens would encounter in the wild. There are steel perches that replicate branches and boxes that provide private, dark areas for the birds to lay eggs.
“The floor of each cage is slanted so that eggs gently roll onto conveyor belts, which haul the eggs into a processing room where they’re washed, dried and mechanically inserted into cartons.
“‘The hens seem to prefer it,’ Benson said. ‘They have lower mortality and they produce better.’”
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