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New Farm Bill Update

Written by: Kent Thiesse

The current Farm Bill expired on September 30, 2012, and some programs will be discontinued without a new Farm Bill, or an extension of the current Farm Bill. In late April, 2012, the U.S. Senate passed their version of the next Farm Bill, which was followed by the U.S. House Agriculture Committee passing a Farm Bill out of Committee during the Summer months. However, the U.S. House failed to take up the Farm Bill on the House floor prior to the Congressional recess before the 2012 Election.

 

Now, the question becomes not only whether or not the House will take up the Farm Bill during the so-called “lame-duck” session before the end of 2012, but will the next Farm Bill be part of the legislation to avoid the so-called “fiscal cliff”.  Once the House passes a Farm Bill, it will then need to go back to a U.S. Senate/House conference committee to work out differences in the two bills before a Farm Bill would be ready for a final vote by both the Senate and the House. If approved by both bodies of Congress, the new Farm Bill would then require President Obama’s signature, before it becomes law. Linking the Farm Bill to any “fiscal cliff” legislation could streamline this process.

 

Another alternative may be a one year extension of the current Farm Bill for 2013 to allow continuation of various USDA programs governed by the Farm Bill legislation. This would also maintain funding of programs that may be discontinued without a new Farm Bill, or an extension of the current Farm Bill. This would allow time for Congress to work out differences between the U.S. Senate and U.S. House versions of the Farm Bill. It would also allow USDA time to implement the various provisions in the new Farm Bill, as both the Senate and House versions of the legislation contain considerable changes from the current Farm Bill.

 

Failure by Congress to enact a new Farm Bill or to extend the current Farm Bill by January 1, 2013, could result in the 1949 Farm Act, or so-called “permanent farm law” to be enacted. This would put into effect price supports for crops and dairy that would be based on “parity pricing”, at levels that are well above today’s price levels. It would also eliminate many USDA programs that have been enacted since 1949, including conservation programs, crop insurance provisions, rural development programs, along with food and nutrition programs. There is no support in Congress or by the Administration to allow Farm Bill policy or USDA programs to revert back to 1949 levels, so this is not likely to occur.

 

The current Farm Bill expired on September 30, 2012; however, some programs are maintained under a continuing resolution, while others are discontinued. For example funding for Federal food and nutrition (SNAP) programs, which make up over 75 percent of Farm Bill spending, are continued under a “continuing resolution”, which will maintain current spending guidelines until a new Farm Bill is approved. Similarly, annual rental payments for existing Conservation Reserve Program (CRP) contracts will continue to be made; however, no new CRP contracts may be added. Funding for the popular FSA “Farm Storage Facility Loan” (FSFL) program would also be maintained, allowing FSA offices to continue taking FSFL applications for 2013.

 

Direct payments will not be continued for 2013, unless the current Farm Bill is extended and funding is authorized for 2013. Payments under the Milk Income Loss Contract (MILC) program were discontinued after September 30, 2012, which is a major issue to dairy producers that are suffering large financial losses due to the 2012 drought. Dairy producers should continue to document qualifying income losses, as it is likely that MILC payments could be made retroactive to October 1, 2012, once a final agreement is reached by Congress. Also, there are no provisions for disaster payments under the SURE program or livestock assistance programs for 2012, even though the 2012 drought was one of the worst in U.S. history.  There are many other USDA programs for conservation, rural development, and export enhancement that will be discontinued without a new Farm Bill, or an extension of the current Farm Bill.

 

Both the version of the new Farm Bill passed by the U.S. Senate and the version passed by the House Ag Committee called for some major changes in the risk management (“safety net”) portions of Farm Bill. Both versions of the new Farm Bill would result in some major savings to Federal budget over the next five years (2013-2017), which is why Congress could tie the passing of a new Farm Bill into a possible legislative compromise on the so-called “fiscal cliff”, which was discussed earlier. The U.S. House Farm Bill would result in estimated savings of approximately $35 billion over the next five years, while the U.S. Senate Farm Bill would save about $23 billion over the next five years. The differences in budget savings comes from reductions proposed by the U.S. House Ag Committee in the Supplemental Nutrition Assistance Program (SNAP), which includes the food stamp program. The reductions to the SNAP program have been major point of contention on passing a new Farm Bill.

 

It will likely be difficult for Congress to complete a new Farm Bill by the end of the “lame-duck” Congressional session in December, 2012, especially given the amount of time that will be necessary to address tax and spending issues associated with the Federal “fiscal cliff”. The more likely scenario is that the current Farm Bill will be extended into 2013, allowing existing farm programs and other USDA programs to continue at current levels. Congress would then finalize a new Farm Bill during the 2013 Congressional session. However, do not be surprised if a Farm Bill extension is linked to the “fiscal cliff” budget agreement, which could result in the elimination or reduction of direct payments for 2013, and contain other future farm program budget parameters. The final details of the farm commodity portion of the new Farm Bill would then be completed after January 1, 2013.

 

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Note --- For additional information contact Kent Thiesse, Farm Management Analyst and

              Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960) ; 

              E-mail --- kent.thiesse@minnstarbank.com)  Web Site --- http://www.minnstarbank.com/