Keith Good: New Farm Bill Drafts, Cotton Farmers Get Transition Payments?
David Rogers reported yesterday at Politico that, “Republicans rolled out their newly drafted House farm bill Friday [full draft, summary] claiming nearly $40 billion in savings over the next decade — much of it from food stamps but also reflecting a major rewrite of commodity programs for producers.
“The release followed on the heels of Senate Democrats unveiling their own farm bill Thursday evening [Title-by-title summary] and sets the stage for back-to-back markups next Tuesday and Wednesday in the Senate and House Agriculture committees.”
Mr. Rogers noted that, “Indeed, given their immense frustration in the last Congress, both House Agriculture Chairman Frank Lucas (R-Okla.) and his Senate counterpart, Chairwoman Debbie Stabenow (D-Mich.) are bent most on getting across the floor and into final negotiations this summer. Each has been willing to make important concessions for this purpose.
“Lucas is again partnered with his ranking Democrat, Minnesota Rep. Collin Peterson, but has tacked to the right by demanding $20.5 billion in savings from food stamps, a nearly 25 percent increase over his nutrition cuts last year. And while doing away with direct cash subsidies to producers, he allows for two years of transition payments for powerful cotton interests important to his party.”
The Politico article pointed out that, “But for most of agriculture, the choice will become two safety net options to complement what’s become the biggest investment for farmers and the government: crop insurance.
“Here Lucas is more willing than the Senate to support traditional price supports. While Stabenow moves in this direction to appease her Southern rice and peanut
“A second revenue loss coverage option is included as well by the House. But this is far less rich than a comparable Agricultural Risk Coverage or ARC program in the Senate bill. And if the two chairs ever get to a final conference, reconciling these two commodity titles will be a major challenge.”
DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) on the release of the House Farm Bill draft and pointed out that, “In commodity programs, the House bill sticks with its shallow-loss program from last year, the Revenue Loss Coverage program (RLC), as well as the committee’s proposed target-price program, the Price Loss Coverage (PLC) program.
“A key difference between the House and Senate versions of the bill involves target prices. The Senate largely keeps the same target prices in the current counter-cyclical program, while the House PLC raises target prices as much as 38% for some crops.
“The way it is structured, a farmer could enroll some crops or whole farms in the PLC and enroll other crops in the RLC. That’s different from the Senate bill, which requires a one-time decision for the whole farm.”
Yesterday’s DTN article added that, “For cotton producers, the House and Senate also both have the Stacked Income Protection Plan (STAX). To appease Brazil in regards to cotton subsidies, the bill does remove a reference price floor for STAX. That is considered a major concession to Brazil. Currently, the U.S. is paying Brazil roughly $140 million annually after losing a World Trade Organization case over U.S. cotton subsidies.
“Cotton farmers also would collect two years of ‘transition’ payments under the bill as they shift from direct payments and USDA implements STAX. Under the provisions, cotton producers would collect a payment equal to 70% of their current direct payments for 2014. In 2015, that would cut back to 60%.”
Mr. Clayton noted that, “Both bills continue to keep the Supplemental Coverage Option in the crop-insurance title of the farm bill. The program allows farmers to buy a county-based average yield insurance that would supplement their individual insurance policy. The House also marries with the Senate by trimming back the premium level that would be paid by taxpayers to 65% of the coverage cost. Last year’s bill set the taxpayer subsidy at 70%.”
And, “The House bill does not include the payment subsidy caps included in the Senate bill, nor does the House bill tighten rules on who is considered an ‘actively-engaged’ farmer,” the DTN article said.
An update yesterday at the National Sustainable Agriculture Coalition blog stated that, “On Thursday, May 9, Representative Jeff Fortenberry (R-NE) introduced the Farm Program Integrity Act of 2013 (H.R. 1932) in the House of Representatives to restore integrity and fiscal responsibility to the commodity program portion of the farm safety net. This bill is identical to a Senate bill (S. 281) introduced earlier this year in the Senate by Senators Chuck Grassley (R-IA) and Tim Johnson (D-SD), and adopted by the Senate last year as part of the new five-year farm bill.
“The Farm Program Integrity Act places a hard cap on farm program payments and closes current loopholes to ensure payments go to working farmers. Due to current program eligibility loopholes, mega-farms and absentee investors can currently receive an unlimited government check through farm commodity programs.”
Also, Bloomberg writer Derek Wallbank reported yesterday that, “Both the House bill and a draft Senate bill, circulated yesterday, would extend sugar price supports. Candy, snack food and beverage companies that oppose the subsidies have started campaigning to keep the provision out of the legislation. Cane-and beet-sugar growers support the program.”
Erik Wasson also reported on the House Farm Bill draft yesterday at The Hill’s On the Money Blog and noted that, “The fact that more cuts are being made to food stamp programs than to producers is likely to spur opposition from Democrats. Anticipating that fight, aides argued Friday that in percentage terms, the cuts to farm programs are deeper than those to food stamps.
“One aide said that farm programs take a 10 percent cut whereas the much larger food stamp program is cut only 2.5 percent.”
Mr. Wasson explained that, “The bill, as expected, ignores an attempt by the Obama administration to change the way international food aid is provided. The administration wants to buy food from local developing country farmers to deliver to the needy, but the House, like the Senate draft, keeps the current system of buying U.S. food and shipping it abroad in place.
“The House ignores the Senate’s attempt to put a $750,000 adjusted gross income cap on farm subsidies and also does not contain a provision to transition egg cages to larger cages favored by animal rights groups.”
In companion news regarding nutrition, Phil Izzo reported yesterday at The Real Time Economics Blog (Wall Street Journal) that, “Food-stamp use rose 2.7% in the U.S. in February from a year earlier, with 15% of the U.S. population receiving benefits. (See an interactive map with data on use since 1990.)
“One of the federal government’s biggest social welfare programs, which expanded when the economy convulsed, isn’t shrinking back alongside the recovery.”
Mr. Izzo noted that, “Mississippi was the state with the largest share of its population relying on food stamps — 22% — though Washington, DC was a bit higher overall at 23%.”
Meanwhile, Ron Hays of the Radio Oklahoma Network spoke yesterday with Chairman Lucas in Lahoma, Okla.; a summary and audio replay of that discussion has been posted at The Oklahoma Farm Report Online.
In part, Mr. Hays noted that, “Senator Debbie Stabenow, chairwoman of the Agriculture Committee has unveiled her version of the 2013 Farm Bill for markup. Stabenow’s bill contains the Agricultural Risk Coverage proposal, but she has also included a target price provision. House Agriculture Committee Chairman Frank Lucas…said Stabenow’s inclusion of those provisions is opening a door for House members.”
Chairman Lucas indicated that, “It looks like in a couple of particular groups like peanuts and rice, she’s attempting to do that. I think that represents a great step forward. It lays the groundwork for compromise, but ultimately we have to address all the commodity groups. And when it comes to giving people an option in addition to ARC, the shallow loss revenue stuff, all commodity groups need to be able to participate…”
On the nutrition issue, Chairman Lucas added that, “I would not be surprised if in the final discussions in the conference committee if that nutrition number is decided with the involvement of the majority leader of the Senate, the Speaker of the House, and the President of the United States because whatever the consensus number is, we’ve got to have the support to move it as part of the overall bill.”
Mr. Hays also pointed out that, “According to rules and customs, Lucas will chair the conference committee that will reconcile the House and Senate versions of the farm bill once passed in both chambers.
A separate update yesterday at The Oklahoma Farm Report Online contained an audio replay of speech Chairman Lucas made yesterday “to a group of farmers gathered for the 2013 Lahoma Wheat Field Day at the OSU Wheat Research Facility just outside Lahoma, Oklahoma.”
A FarmPolicy.com transcript of the presentation made by Chairman Lucas is available here.
Chairman Lucas pointed to some of the political dynamics in Congress: “Literally, when we bring the farm bill to the floor of the United States House next month in June—and I’ve been promised that by leadership—half the members of the 435 person House of Representatives will have never debated, never seen, never voted on a farm bill before, and the last one was in 2008. So think about that. Half of the membership of the whole House has turned over since the last farm bill. And quite literally, 60% of the Ag Committee was not around for the last farm bill in 2008.”
In a reference to the reality of divided government and budget deficits, the Oklahoma Republican noted that, “So there’s not any money, there’s not any experience, and there’s not any consensus. So think about that environment when we begin to put the farm bill together.”
In an observation about the House Ag Committee, Chairman Lucas stated: “But even in the House Agriculture Committee about 40% of the committee is there because of the social nutrition programs. About 40% of the committee is there because, like myself, they’re either directly involved in ag or they have districts that are so focused on ag they know what they’re doing. Now, the other 20% of the committee is probably there because somebody on their steering committee didn’t like them and they put them on the Ag Committee, but that could be any committee…So if that’s our committee, think about when we go to the floor of the United States House.”
More specifically on nutrition issues, Chairman Lucas noted that, “And if you need help, if you meet the requirements, we’re going to help you. But you’re going to have to prove it. We’re going to end the federal government’s advertising of the food stamp program. We’re going to require that you demonstrate you are actually an American when you apply for food stamps, some really amazing little simple things we’re going to force into the system.”
Later in his remarks, Chairman Lucas elaborated on the Renewable Fuel Standard and the economic impact that legislation has had on some aspects of the agricultural economy. These remarks, which included a brief analysis of crop prices, provide additional background into the philosophical underpinnings and rationale for a price based safety net:
“And part of our challenge in the Ag Committee is how to help craft a safety net for everybody else who doesn’t have that guaranteed market demand. I’ll go one step farther and say what happens if we have two perfect weather years in the Midwest and they pile the corn in Main Street Indianapolis, and the pile goes all the way to Main Street Omaha, Nebraska? Now, I’m practical enough to know, and you are, too, even though the various feed grains are not exactly alike nutrition-wise, utilization-wise, they are substitutable in the right circumstances. Even with that huge federal mandate, the market signals and the biggest crop since ’36, if you drive corn prices through the floorboards, what’s it going to do to wheat and barley and everything else? Yes.
“And that’s why we need a choice besides crop revenue, which assumes the good times never stop, because we haven’t had the good times, and we’ve got to have something down here. Avoid a 1982, a 1932. So that’s why choice is so important. We’re going to get there, and we’re going to get the choice. Oh, by the way, renewable fuel is on the books in its present form until 20—I think it’s 2023. You let me write a farm bill that runs ‘til 2023 and life will be good for all of us, but I’ve never had that choice,” the Chairman said.
Meanwhile, an update yesterday from Rep. Rick Crawford (R., Ark.) noted in part that, “The House Agriculture Committee hopes to pass a bill that understands ‘one size fits all’ approach to farm policy simply won’t work. Additionally, our farmers face great uncertainty in crop pricing, if the market is not stable and prices swing too far in one direction many farmers could face going out of business. I will continue to voice the concerns of our farmers and make sure the Farm Bill not only represents the unique needs of Arkansas farmers, but also reflects the diversity of agricultural production across the Nation.”
Jeff Bossert reported yesterday at Illinois Public Media Online (Champaign) that, “The U.S. House Agriculture Committee is expected to start marking up the new Farm Bill on Wednesday. U.S. Rep. Rodney Davis (R-Taylorville) is one of the new members of Congress working on the measure…[C]ongressman Davis said crop insurance works – covering farmers for their losses just as others are insured for their car and home.”
The news update noted that, “Davis said that as the only Illinois Republican on the House Ag Committee, he feels the need to take a statewide view on issues.”
In part, Sen. Heitkamp indicated that, “For us in North Dakota the coupling of crop insurance to conservation compliance is very worrisome.”
A news item posted at the Red River Farm Network Online also indicated that, “South Dakota Representative Kristi Noem says she has not yet decided if she will support tying crop insurance to conservation compliance.”
In more specific news regarding dairy, a column by Su Sybesma this week at the Argus Leader (Sioux Falls, S.D.) Online noted that, “No one ever said farming was easy. But for small South Dakota dairy farmers like me, the past few years have been particularly tough…[B]oth the House and Senate agriculture committees are expected to return to the farm bill in mid-May. It is imperative that they embrace the Dairy Security Act, which repeals most of the current dairy program, and substitutes a modern-day insurance plan that offers support only when margins shrink to specified levels.
“Critics complain that a standby program, designed to prevent serious oversupplies of milk, could put temporary limits on how much milk each farmer can produce. But without those limits, the cost of protecting margins would spiral out of control. That would be totally irresponsible.”
A statement yesterday from Jerry Kozak, President and CEO of the National Milk Producers Federation (NMPF) noted in part that, “The [NMPF] is pleased that the Farm Bill unveiled today by the House Agriculture Committee contains dairy program reform provisions based on the Dairy Security Act (DSA). These are the same provisions that were included in last year’s bill that the committee approved. The DSA updates the badly frayed dairy safety net, and it enjoys strong support among dairy farmers nationwide.”
A news release yesterday from the Dairy Business Association (DBA) stated in part that, “The [DBA] continues their work to oppose the supply management provision called the Dairy Market Stabilization Program (DMSP) outlined in the Dairy Security Act which may be part of the farm bill scheduled to be taken up by the House Committee on Agriculture this month. The DBA was pleased to learn of the bipartisan efforts from numerous members of the Wisconsin Congressional delegation who sent a Letter to the House Committee on Agriculture Chairman Frank Lucas and Ranking Member Collin Peterson this week opposing the DMSP.”
The ICE Dec and Mar contracts gave back 160 and 87 points on the week, respectively, as last week’s inversion between the two contracts gave way to partial carry. Well,