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Farm bill junkies have plenty to ponder over August recess

If the “devil is in the details,” farmers and their organizations will be doing a lot of boning up on the House-passed Farm, Nutrition and Bioenergy Act of 2007 while Congress takes its August recess.

With Washington observers speculating the Senate Committee on Agriculture, Nutrition and Forestry may adopt more provisions of the House farm bill than they might have expected, the fine print in the latter is taking on added significance.

“Most of agriculture could support the House farm bill,” says American Farm Bureau President Bob Stallman, a farmer from Texas. “We would like to see the Senate farm bill as close to the House bill as possible. We think the House-passed bill will have a broad base of support.”

Stallman said the results are “always better when the agricultural community is together, and, at the end of the day, everyone came together on this farm bill and on some of the amendments that were presented, such as the Kind amendment.” (The latter, the Farm and Food Policy Reform Amendment, fell about 100 votes short of passage.)

Most farmers have read about the House-passed bill's highlights: Provides $1.6 billion for fruits and vegetable industry for the first time; implements mandatory country-of-origin-labeling; increases funding for conservation programs; and reduces the adjusted gross income farm program eligibility limit to $1 million while eliminating the three-entity rule.

But the legislation includes numerous other changes in commodity programs that should keep the most avid farm policy junkie busy between now and when Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, begins marking up his farm bill in September.

For openers, the House bill makes no changes in direct payment rates — a move that had been mentioned by some leaders, including Harkin — other than to eliminate advanced payments in the 2012 crop year.

It does modify target prices, increasing wheat by 23 cents per bushel over the 2002 farm bill; barley, 49 cents; oats, 6 cents; soybeans, 20 cents; and other oilseeds, 1.4 cents. The target price for cotton would decline 2.4 cents per pound from the 2002 farm bill's 72.4 cents.

The bill retains price-based counter-cyclical payments through the 2012 crop year and gives producers a one-time option of enrolling in a new revenue counter-cyclical payment program. The House bill uses a national revenue level rather than the county level proposed by the National Corn Growers Association.

No advance payments would be made in the 2011 crop year and final payments would be delayed until a new fiscal year for some commodities in the 2008-10 crop years, according to an analysis of the new farm bill by the Congressional Research Service.

Loan rates would also be raised for several crops, including wheat, up 19 cents to $2.94; barley, up 10 cents to $1.95; oats, up 6 cents to $1.39; and minor oilseeds, up 1.4 cents to 10.7 cents. The cotton loan rates would remain the same as in the 2002 farm bill despite a USDA-proposed reduction in the average upland cotton rate from 52 cents to 45.7 cents per pound.

The House bill does include a provision sought by the National Cotton Council that would change the calculation of the cotton repayment rate or adjusted world price from Northern Europe to a Far East market price. It also creates an economic adjustment assistance program of 4 cents per pound to help domestic upland cotton users build and modernize facilities and equipment.

In the 2002 farm bill, Congress placed a $360,000 combined cap on direct payments, counter-cyclical payments and marketing loan gains or loan deficiency payments. The $360,000 came from allowing producers and their spouses to have separate payment limits while participating in up to three farming entities.

Farmers could also report up to $2.5 million in adjusted gross income on their tax return — more if 75 percent of their income was from farming — and remain eligible for farm program payments.

The House bill reduces the adjusted gross income limit to $1 million with no exceptions and to $500,000 unless more than 67 percent of the AGI is from farming. It also eliminates the three-entity rule and requires direct attribution of payments to a natural person (a single social security number).

But it also raises the limits on direct payments from $40,000 to $60,000 and eliminates the 2002 farm bill's $75,000 limit on marketing loan gains. With the $65,000 limit on counter-cyclical payments, the result is a $250,000 limit on direct and counter-cyclical payments after spouse doubling and removing the limits on marketing loans.

Commodity certificates, which could be used to redeem crops from the Commodity Credit Corp. loan, will no longer be issued since no limit would be placed on marketing loan gains or loan deficiency payments.

The House bill also sets an overall fiscal year payment limit of $60,000 for any single conservation program and $125,000 for all conservation programs except for the Wetlands Reserve Program, the Farm and Ranchland Protection Program and the Grassland Reserve Program.

Despite reports they might be removed as a trade-off for the $1.6 billion in first-time funding for fruits and vegetable producers, the House bill retains the restrictions on planting fruit and vegetable crops on program crop acres.

In recent days, USDA officials have become more critical of the House-passed bill's sugar provisions, which include a 3 percent increase in the loan rates for sugar and a guarantee of a minimum 85 percent market share for the domestic production sector.

Current law requires the Commodity Credit Corp. to make nonrecourse loans to processors at specified loan rates. This, in turn, helps support the prices received by sugar cane and sugar beet producers. USDA must operate the sugar program at no cost to the government by limiting the amount of sugar that processors can sell under marketing allotments and restricting imports under quotas.

The House bill prescribes or tightens USDA administration of sugar import quotas to prevent other countries from dumping low cost sugar in the domestic market and mandates the use of surplus sugar or that equal to the amount that imports exceed U.S. food demand for ethanol production.

USDA officials have balked at the changes, indicating the loan rate alteration contributed to Secretary Mike Johanns' decision to recommend that President Bush veto a farm bill containing the House-passed provisions.

The increase in the sugar loan rate is particularly troublesome, Mark Keenum, undersecretary of agriculture for farm and foreign agricultural services, told members of the American Sugar Alliance at its annual meeting in Napa, Calif. “The veto threat is very real.”

But Minnesota Sen. Norm Coleman, a Republican, said he would try to persuade administration officials to support the House farm bill when he spoke by telephone to the Sugar Alliance annual meeting.

“The president is simply very wrong when he's talking of vetoing this farm bill,” said Coleman. “Overall, I think it's very hard to argue against the House farm bill. The Senate version may not be all that different.”

The House-passed bill makes a number of changes in other farm bill titles. Among those:

  • Modifies or expands the Environmental Quality Incentives Program funding, priorities and activities, including increased services for fruit and vegetable and organic producers. The new budget authority for EQIP would total $1.9 billion over five years.
  • Replaces the Conservation Security Program's three-tiered structure with annual stewardship enhancement payments. The House also prohibited additional CSP sign-ups until 2012, a move that has incurred the wrath of Harkin, the principal author of the program.
  • Extends the Conservation Reserve Program and includes a new provision allowing retired landowners to modify contracts if they transfer land to beginning or socially disadvantaged farmers or ranchers.
  • Renews or expands enrollment in the Wetland Reserve Program. Increases WRP's enrollment ceiling and modifies USDA appraisal process. The new budget authority for WRP would be $1.9 billion over five years.
  • Creates an Open Fields Program that creates incentives for public access to private land for hunting and fishing.
  • Creates new pilot conservation program for four-year crop rotation for peanuts.
  • Extends the Market Access Program, Foreign Market Development Program, Emerging Markets Program and the Export Enhancement Program through 2012. The bill makes organic agricultural commodities eligible for market access program promotions and increases MAP funding from $200 million in fiscal 2007 to $225 million annually from fiscal 2008 through fiscal 2012.
  • Renames the Food Stamp Program the Secure Supplemental Nutrition Assistance Program.
  • Increases lending limits per farmer under the Farm Service Agency loan programs from $200,000 to $300,000 for direct farm ownership loans and from $200,000 to $300,000 for direct operating loans.
  • Creates a special loan guarantee program for soil and water conservation and protection projects that gives priority to qualified beginning farmers or ranchers, socially disadvantaged farmers or ranchers and producers who use the loans to build conservation structures or establish conservation practices.
  • It does not create a new category for general “agribusiness” loans, limited renewable energy projects nor increase the population cutoff for rural housing loans to 6,000 residents as in the House-reported bill. The latter was removed through floor amendment.
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