The mid-term elections brought significant changes, but how will they impact agriculture?

We asked the nation's top farm policy analysts to give us their take on future farm policy in a markedly more conservative Capitol Hill – in 250 words or less. Here's what they told us:

History repeats itself

Otto Doering

We are seeing a replay of the politics and events of the 1996 Farm Bill. First, farm and commodity groups will work to capture the budget baseline, which is now becoming a standard practice. In 1996, with high commodity prices, farm groups swung to support direct payments and give up traditional price based cyclical payments when it became clear that countercyclical payments would not be forthcoming.

The subsequent decline in crop prices led to “emergency” direct payments and then to the return of countercyclical payments in the 2000 farm bill. Since 2000, farmers have had fixed direct payments and countercyclical price protection (plus subsidized crop insurance).

Representative Collin Peterson, Democratic chair of the House Ag Committee, was beginning an effort to scale back direct payments – possibly strengthening countercyclical payments which are easier to justify.

It is ironic that budget-cutting Republicans, who will take over the House, apparently will protect direct payments and the resulting continuing expenditure on agricultural commodity programs even when prices are high – instead of reforming programs and shifting away from direct payments.

Agricultural programs will be more expensive under the promised Republican budget-cutting that citizens voted for November 3.

The future of U.S. farm policy is, unfortunately, a continuation of high commodity subsidy levels that get capitalized into land values and are increasingly hard to justify to the public.
--Otto Doering, agricultural economist, Purdue University

Plenty of debate, little change

Some of the factors that will influence the next farm bill are easy to identify, such as the need to reduce budget deficits, the economic climate, and the differing philosophies and priorities of the new agriculture committee leadership after the November elections.

There are also several not so transparent factors. Whether the newly elected Congress along with the holdovers really understand why, for more than 70 years, the United States has provided a safety net for agricultural producers along with programs to encourage conservation, feed the needy, and many other causes that have been deemed worthwhile by their predecessors. And, more importantly, whether these same members will fight to maintain these key farm bill programs in a period of tighter budgets.

So what happens in the next farm bill? I expect a really tough debate and a wide range of proposals but at the end of the day, not much change from the previous bill. There will be many tough choices that the committees will have to make but in the end, it is easy to imagine cuts to direct payments and tighter payment limits that achieve some savings on paper but this does not appear to be the time for a major overhaul. My sense is that the new Congress will have a desire to get a bill passed so they can move on to other higher profile issues that may affect the 2012 elections.
--Joe L. Outlaw, co-director, Agricultural and Food Policy Center Texas A&M University

Market environment matters

The future of U.S. farm policy will be determined by individuals making difficult decisions about how to balance competing concerns in a challenging environment.

Efforts to reduce the deficit are likely to take center stage in the new Congress. If the past is any guide, farm program spending is likely to receive attention in budget debates far out of proportion to its small share of the federal budget. Crop insurance and the direct payment program are the two largest ticket items in the current mix of farm programs, so they are likely to receive close scrutiny.

Another lesson from past farm policy debates is that the market environment matters. Policy makers may write different policies if they think current high crop prices are likely to persist than if they are worried about a market collapse. The 1996 and 2002 farm bill debates differed for lots of reasons, but differences in actual and expected market conditions were critical.

Finally, it is important to remember that farm policy is not just a result of impersonal forces, but is the result of real people making hard decisions. Election outcomes help determine who is at the table and who is driving the process. Some of the most important choices about U.S. farm policy will not be made in the House and Senate Agriculture committees or by the Secretary of Agriculture, but by the President, Congressional leaders and the currently unknown suburban representative who may cast a deciding vote on the House floor.
--Pat Westhoff, director, University of Missouri's Food and Agricultural Policy Research Institute

Finding cuts in the baseline

Carl Zulauf

The 2008 Farm Bill was marked by innovation, especially in the nutrition, conservation, and farm program titles. History suggests the next farm bill will consolidate the innovations. Also, no groundswell currently appears to exist for changing the mix of farm bill programs. Thus, a likely option appears to be a close to status quo 2012 Farm Bill.

But, national concern is building over the budget deficit. Budget deficits usually impact farm bill programs through the budget reconciliation process, which provides instructions for cutting programs. Due to the weak economy, it is not clear when reconciliation will occur.

Moreover, the 2008 Farm Bill has 37 programs with no baseline. They are spread across various farm bill titles. The two largest are SURE and the Wetland Reserve Program. Money will need to be found to fund at least some of these programs, and other worthy needs will undoubtedly arise. The likely funding source is the current baseline.

For production agriculture, direct payments and crop insurance are the two major baseline funds. Both have substantial support, but I think at some point debate will likely focus on reducing direct payments and farmer subsidies for crop insurance.

My personal recommendation is to impose a farm loss requirement to receive payments from any farm program. It saves significant dollars and addresses the fairness issue of farmers receiving payments when farm revenue is high. My personal recommendation for crop insurance is to reconfigure subsidies to favor whole farm insurance, which reduces costs by reducing insurance payments.
--Carl Zulauf, agricultural economist, Ohio State University

Revenue insurance can eliminate safety net overlaps

Robert Thompson

It is no longer credible to make the case for commodity support programs based on low farm family income. Farm family income and wealth exceed those of the average American family.

It is hard to justify the current mish-mash of overlapping "safety net" programs: LDPs, counter-cyclical payments, direct payments, disaster payments, and the subsidy to crop insurance. If the federal government is to provide a safety net, some form of federally subsidized whole farm revenue insurance would be easier to defend.

With the heavy dependence of American agriculture on exports, nothing should be done in the farm bill that compromises our international competitiveness. Commodity support programs need to be consistent with the current and likely future rules of international trade. The current round of trade negotiations, which should be completed during the life of the 2012 farm bill, will likely reduce the caps on trade-distorting forms of support for individual commodities and ban export subsidies. Since no constraints are anticipated on generic forms of agricultural support not linked to current production or market prices of individual commodities, this would be a preferable direction to move.
--Robert Thompson, senior fellow, Chicago Council on Global Affairs

Swap nutrition spending for commodity programs

Will the 2012 Farm Bill resemble the 2008 bill? Probably, despite changed party leadership in Congress since then, because farm bills are almost always bipartisan (the 2008 Farm Bill was passed by a wide margin of 3 to 1 in the House and 6 to 1 in the Senate, even after President Bush had vetoed it as “wasteful.”)

The 2008 Farm Bill also proved Congress is willing to fund commodity programs even when Federal budget deficits are large, and even when farm income is high (in 2008 farm income in the United States was 40% above the average of the previous 10 years).

The 2008 Farm Bill was veto-proof in part because it included expanded federal nutrition programs that are important to urban members of Congress, such as the Food Stamp program (now called SNAP). In fact, roughly 70% of farm bill spending today goes to nutrition programs, and only 15% to commodity crop programs.

The agriculture committees know better than to uncouple the farm bill from Food Stamps, since today’s commodity programs by themselves would not command majority support. But in 2012 the farm lobby might be tempted to slow the growth in Food Stamp spending to free up some budget baseline funds for commodity programs. This would be hard to justify on social equity grounds, since the nutrition programs are effectively targeted to low-income Americans, while the commodity programs most definitely are not. But that doesn’t mean it won’t happen.
--Robert Paarlberg, professor at Wellesley College and associate, Weatherhead Center for International Affairs, Harvard University

Farm bloc remains force in Congress

The new farm bill will be driven by a deficit-addicted Congress desperately trying to sober up at the expense of a prospering farm economy. Despite these portents of less support for farmers, it is well to remember that the best predictor of future behavior is past behavior.

The farm bloc remains parochial, bipartisan, and intact, hence Republican gains in the new Congress will not make much difference for farm policy. The new farm bill will retain basic features of past bills.

What changes are expected in the new farm bill? The media ranging from the Washington Post and New York Times on the left to the Wall Street Journal and The Economist on the right are almost united in opposing farm commodity programs. Thus farm program supporters, seeking support among the general public, will go along with allocating even more than the current 75% of the federal “agriculture” budget to food and nutrition programs.

In a generally prospering farm economy, instability rather than the level of income becomes the main concern of farmers. Direct payments that continue going to farmers even in a robust farming economy are especially difficult to justify. Midwest producers but not Southern producers seem willing to shift direct payment funds to ACRE and crop insurance features addressing farming risks.

The pressing need for farm output to supply the strong demand for food, fiber, and biofuels will restrain Congress from imposing tough environmental measures such as restrictions on fertilizer practices and antibiotic use. Policymakers are likely to turn a deaf ear to dairy farmers looking for supply controls.
--Luther Tweeten, professor of agricultural marketing trade and policy, Ohio State University