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Corn+Soybean Digest

New Farm Bill Update

As Congress works to complete the passage of a new farm bill, producers have raised some questions regarding process and provisions in a potential new farm bill, and what effect it might have on their farming operations in 2008. Following are some common questions and best available answers regarding the finalization and implementation of a new farm bill:

Q – What is the likely timeline for finalization of a new farm bill?
A – The U.S. House and the U.S. Senate have returned to session, so the Conference Committee on the new farm bill should begin meeting very soon. Assuming there are no major hold-ups in the process, the Conference Committee should have a revised bill ready to be voted on in the House and Senate by late February, with the new farm bill potentially being signed into law by early March. Once the new bill is passed by Congress and signed by President Bush, it will likely be an additional 4-6 weeks before county Farm Service Agency (FSA) offices are ready to begin farm program sign-up for the 2008 crop year. The new bill will likely not be fully implemented until 9-12 months, or longer, after the new farm bill is signed into law, in order to allow USDA time to right the new regulations and to allow time for the review process.

Q – What happens if President Bush vetoes the new farm bill?
A – If President Bush vetoes the farm bill, it will likely extend the timeline of the process for a new farm bill by several weeks. Most experts feel that a veto override is quite possible in the U.S. Senate, but might be quite difficult in the U.S. House. If the potential veto is not overridden by both the House and Senate, it would then have to go back through the process of developing another revised version of the farm bill that is acceptable to the Bush Administration. If this occurs, there will likely be measures introduced in Congress to extend the current farm bill for the 2008 crop year, and possibly beyond.

Q – What are the issues or provisions that could result in a presidential veto of the new farm bill?
A – There are three primary sections of the new House and Senate farm bill that the administration has major concerns with that could result in a potential veto by President Bush. The primary concerns are with tax increases, funding shifts and projected savings that are being proposed in the new bill to fund new or expanded farm bill provisions. The pay-as-you-go legislation adapted by Congress to address the federal budget deficit requires Congress to offset any potential spending increases on federal programs with either budget reductions in other programs or enhanced revenues through tax increases and other sources. The Bush Administration would also like farm program payments discontinued to any individual or business that has a $200,000 adjusted gross income(AGI). Currently, the AGI limit is $2.5 million, and would drop to $1 million in the House farm bill or $750,000 in the Senate bill. In addition, the Bush Administration is concerned with increases in target prices and CCC loan rates that are proposed for some crops in the new bill, including wheat and soybeans. Interestingly, the Bush Administration is OK with the proposed increases payment limits for direct payments (from the current $40,000 to $60,000/individual) that is included in the House version, feeling that direct payments are more WTO friendly than other types of farm program payments.

Q – Will the lack of a farm bill have much effect of 2008 spring planting decisions for corn, soybean and wheat producers?
A – The lack of a new farm bill being signed should not have much impact on the acreage of corn, soybeans or wheat for 2008. There are very few changes proposed in the commodity program provisions in either the House or Senate versions of the new bill. The direct payment rates in both the House and Senate versions are proposed to stay the same as 2007 for corn, soybeans and wheat. However, it is possible that 2008 direct payment rates could be reduced to meet some of the farm bill budget targets mentioned earlier. It is possible that the entire 2008 direct payment could be delayed until October 2008, with no advance payment. There was a 22% advance payment for 2007. With the current price levels of corn, soybeans and wheat, counter-cyclical payments (CCPs) are not likely to be a factor for the 2008 crop year. Any option for revenue-based CCPs would not likely be implemented until the 2009 crop year, at the earliest.

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]

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