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Money at heart of farm bill debate

In the wake of last year’s devastating hurricanes, Sen. Thad Cochran, R-Miss., chairman of the Senate Appropriations Committee, began putting together an assistance package. Included was an agriculture disaster provision that would have made a direct payment to producers in disaster-declared counties.

“The package started out at about $4 billion,” said Reese Langley, the senior director of government affairs for the USA Rice Federation. “Unfortunately, throughout the legislative process in the fall, Cochran faced opposition from the Bush administration, which didn’t want any type of direct payment. The House Republican leadership was (also) opposed to the overall size and cost of the aid package.”

As the end of December rolled around and final negotiations were taking place, the agriculture part of the aid package had been reduced to less than $1 billion.

“There wasn’t enough money to put together any type of meaningful disaster aid package,” Langley said at the Arkansas Rice Council annual meeting in Brinkley, Ark., on Jan. 24.

Looking ahead, there will certainly be another supplemental spending bill sometime in the spring, probably in March or April. The bill will address two things, said Langley: the cost of the Iraq war and the need to replenish FEMA accounts for money spent on hurricane recovery.

“That will be the next opportunity to address (farmers’) need for disaster aid. Cochran has indicated he’s still supportive of trying to (get such aid). There are several key questions, though. Will there be enough support? And will there be a larger, bipartisan effort not only in the Senate but in the House? Given the current budget situation and the opposition faced last fall, I think (success is) uncertain.”

Current budget situation

Congress spent all of 2005 working to put together a budget reconciliation bill. The process began last February when President Bush submitted his budget proposal calling for $9 billion in cuts to agriculture programs.

At the end of the day, the final package called only for $2.7 billion in cuts. “Of course, that’s still a large amount to take out of agriculture. But the good thing about it, due to the leadership of Congress’ agriculture committees, is it has a very minor impact on the commodity programs.

“The direct payments that have been part of the farm bill — where you’ve been able to get 50 percent in advance and the other half at the end of the year (have changed little). Once the budget reconciliation bill becomes law in 2006, if you request advance payment, you’ll get 40 percent. The remaining 60 percent will be collected at year’s end.”

Looking toward 2007, if the provisions don’t change, “producers’ advance payment can only be up to 22 percent of the direct payment. The other 78 percent will be paid out at the end of the year. So you’re not actually losing money. It’s just that a larger portion will be delayed.”

Langley said almost $1 billion was cut from the conservation programs. Those were true cuts and the hardest hit was the Conservation Security Program (CSP).

Another Grassley bid

During the reconciliation process on the Senate side, Sen. Charles Grassley, R-Iowa, again offered a payment limitation amendment. Grassley wanted the current payment limit of $360,000 decreased to $250,000. On Nov. 3, when the vote was held, his proposal was defeated 46 to 53.

“That’s a pretty big shift from the 2002 vote when Grassley first offered this amendment. On that vote, he won 66 to 31. So, that’s a 22-vote swing in three years. A lot of that can be attributed to the hard work of Arkansas’ senators as well as Sens. Saxby Chambliss, R-Ga, Jim Talent, R-Mo., and Cochran.

“That was a big win for the rice industry and all southern agriculture. It put us on slightly better footing as we move toward the debate on the 2007 farm bill.”

President Bush was to release his 2007 budget proposal on Feb. 6. All indications were he would call for additional cuts for agriculture, “perhaps as severe as last year’s and maybe more so.”

Would Bush again propose payment limitations? In last year’s budget, he included the $250,000 payment limit, noted Langley.

“Our understanding is, as the debate unfolded last year, the White House gave a commitment to (Arkansas Democrat) Sen. Blanche Lincoln that it would avoid this issue until the next farm bill debate. They said they’d save the fight until then. It’ll be interesting to see if (any payment limitations) are included in their next budget proposal.”

A new climate

When the 1996 farm bill was written, the country was emerging from a deficit. When the 2002 farm bill was written, the nation was in a surplus situation.

“That’s what allowed (agriculture-friendly congressmen) to secure additional money to write the 2002 farm bill. They got an additional $73 billion which made the writing of the 2002 bill much easier.”

By 2007, Langley warned, the budget situation will be very different with the country facing a deficit of $350 billion to $400 billion. In such a climate, “it will be impossible to get any additional money for the next farm bill. It will be very hard to even maintain the current level of funding.”

Social Security, Medicare and Medicaid take up the largest percentage of mandatory federal spending. Compared to other entitlements and programs, agriculture spending barely shows up.

“The USDA budget is only 1 percent of the total federal budget. So to say you’ll cut agriculture to balance the budget is misdirected.”

Prepping for a new bill

Last year, in preparation for the 2007 farm bill, the USDA began holding listening sessions across the country. Currently, the agency is compiling the comments received during those sessions.

“They’ll release that document later in the year. (USDA Secretary) Mike Johanns has said he plans to either send Congress actual farm bill language or his principles for how the next bill should look.”

Langley said it’s important to remember that regardless of what tact the Bush administration takes, Congress will write the next farm bill. On that note, “both congressional agriculture committees will begin holding field hearings this year. The House Agriculture Committee set its first two hearings for the first week in February in North Carolina and Alabama.”

At this point, it seems most commodity groups are happy with the current farm bill. “They feel it provides a strong safety net. There are a couple of exceptions to that, though. Fruit and vegetable groups feel they deserve a bigger part of the ag programs and want to be at the table during the coming debate. Some conservation groups also want (more) money.”

Regardless, there will be less money available. Combine that with “more participants, more people wanting a piece of the pie, and it’ll make maintaining current funding levels for the rice industry very difficult.”

Will there be much change in Congress’ make-up after 2006 fall elections?

At this point, “it doesn’t appear there will be much change, at least not in leadership of the two agriculture committees.”

Is there a chance of extending the current farm bill?

“That desire could build momentum as the year moves along. (Depending on how WTO negotiations play out) there could be a chance for an extension, at least for a short time.”

If a WTO final agreement is reached, it will obviously play a large role in how the next farm bill will be structured. It will also play a role in the level of funding in certain programs.

“One of the problems with moving forward with a WTO agreement is the European Union’s unwillingness to open its markets and reduce tariffs. Another issue, key for rice, is how tight restrictions are for food aid.”

Langley said three issues for the rice industry to pay heed to as the WTO negotiations move forward are:

• Any reduction in support that’s considered trade-distorting by other countries must be balanced with “true, meaningful market access.”

• Maintaining a safety net. “Just because we get increased market access, we can’t do completely away with our safety net.”

• The peace clause. “This was a provision in the last trade agreement. It expired in 2002. That allowed Brazil to come forward and challenge the U.S. cotton program. Any agreement must include a renewal of the peace clause to prevent WTO members from challenging others abiding by the agreement.”

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