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Corn+Soybean Digest

New Farm Bill Update – Part II

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. Last week we had some common questions and answers regarding the new bill. Following are some additional questions and the best available answers regarding the finalization andimplementation of a new farm bill:

Q – What are concerns with extending the current farm bill for one year or longer?
A – The commodity provisions in the current farm bill have been quite popular with farm operators in many parts of the country, and with several commodities. This has led some farm organization leaders and some members of Congress to call for an extension of the current farm bill for one year (2008) or longer. If the Conference Committee has trouble finalizing a new bill, or if the new bill is vetoed by the president, there will likely be a renewed push to extend the current farm bill, with planting season just around the corner. The biggest concern is that delaying the passage of a new farm bill by one year or more could reduce the baseline funding for a new farm bill even more, which could lead to even larger cuts in the commodity title in the future. It would also delay implementation of the new and revised programs contained in the U.S. House and Senate bills. Also, there will be a new president, and new members of Congress in 2009 who would then deal with passage of a new farm bill, which may or may not help the process.

Q – Why is March 15 an important date?
A – Late in 2007, Congress passed a resolution extending funding for the current farm bill through March 15, 2008. If a new bill is not enacted by March 15, it could result in further reductions in the Congressional budget baseline for a new farm bill.

Q – What happens if a new farm bill is not passed, or if the current farm bill is not extended by Congress by the March 15 deadline?
A – In that event, farm policy provisions would revert back to the so-called “permanent farm law” contained in the Agricultural Adjustment Act of 1938, and later refined in the Agricultural Act of 1949. This legislation is suspended each time a new farm bill is passed. If the 1949 Agricultural Act is enacted, there would be no direct payments, counter-cyclical payments (CCPs), marketing loans or loan deficiency payments (LDPs). However, that legislation would establish support prices at 50-90% of parity prices for corn, wheat, cotton and other crops, excluding soybeans and oilseed crops. Parity prices are prices that are adjusted for inflation since 1910-1914. There are provisions for acreage allotments and supply controls for wheat and cotton, but not for corn and other crops. Dairy support prices would be set at 75-90 % of parity prices.

The Congressional Research Service has estimated that the current support prices under the permanent farm law would be $8.32/bu. for wheat and $4.13/bu. for corn, compared to the current target prices of $3.92/bu. for wheat and $2.63/bu. for corn. The dairy support price would be set at $28/cwt. for milk. Permanent farm law is not likely to be enacted due to the very high cost associated with the higher support prices, and the elimination of many very good programs that have evolved over the past several decades. However, the threat of implementation of the permanent farm law does encourage members of Congress and the administration to try to reach an agreement on a new farm bill.

Q – What role does funding for food stamps and nutrition programs play in the farm bill funding problems?
A – Most Congressional Leaders, as well as the Bush administration, feel that food and nutrition programs included in the farm bill are vastly under-funded. The new bill passed by the U.S. House proposed $11.1 billion in extra funding for food stamps, while the Senate bill proposed $5.5 billion in added food stamp funding. The administration proposed an increase of only $600 million in food stamps over the next five years. Funding for food and nutrition programs accounts for about two-thirds of the proposed $286 billion allocated for the new farm bill. By comparison, all of the farm commodity programs would account for only about 12% of all the funds allocated in the new bill. Whatever the final increase in food stamp and nutrition program funding in the new farm bill is, the spending increases must be offset by added revenues or reductions in other programs, such as the commodity title.

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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