Focus on Ag

New Farm Bill Defeated by House of Reps

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After nearly two years of discussions and debate, a new farm bill appeared a bit closer to being enacted into law; however, on June 20, the U.S. House of Representatives voted down the new Farm Bill by a vote of 195-234. Several weeks ago, the new farm bill was passed by the U.S. House Agriculture Committee, with strong bi-partisan support. Ranking Democrat on the U.S. House Ag Committee, MN Seventh District Congressman Collin Peterson maintained his support for the new farm bill, as did fellow-Ag Committee member, MN First District Congressman Tim Walz (D); however, MN Eighth District Congressman Rick Nolan (D), also on the Ag Committee, opposed the new farm bill. Minnesota’s Congressional delegation was split 4-4 on the vote for a new farm bill.

The U.S. Senate passed their version of a new farm bill in mid-June by a wide margin, with very strong bi-partisan support. The Senate version of the legislation is somewhat different than the version of the new farm bill defeated by the U.S. House, with the primary differences in funding for the food and nutrition programs (SNAP). In 2012, the U.S. Senate also passed legislation for a new farm bill, as did the U.S. House Agriculture Committee; however, the legislation was never brought before the entire U.S. House for consideration. As a result, the previous 2008 Farm Bill, which expired in 2012, was extended for one more year through Sept. 30, 2013, which is the current expiration date.

When most people hear of a “farm bill,” they think of the commodity programs and payments that affect crop producers. Some people may be aware that crop insurance and conservation programs are included under the bill, and some are knowledgeable that food stamps are part of the farm bill legislation. However, very few people outside of government officials and policy experts are aware that the farm bill also covers funding for rural fire trucks and ambulances, export promotion, international food aid, forestry programs, ag research at land-grant universities and school lunch programs in public schools. Actually, the last farm bill passed in 2008 had 15 different titles in the legislation that covered a multitude of programs administered by the USDA, which affect many aspects of the U.S. lifestyle.

Much of the focus on the new farm bill debate in Congress has centered on the Supplemental Nutrition Assistance Program (SNAP), which includes the food stamp program, the women, infants and children (WIC) program and the school lunch program. Food stamps were added to the farm bill legislation several decades ago, mainly because the food stamp program is administered through USDA. About 80% of the proposed funding for the new farm bill will go to the SNAP programs. The financial needs in the SNAP program have more than doubled since 2008, due to the economic downturn in the U.S., higher food costs and an easing in eligibility requirements for food stamps. There are also some differences in how various states administer some of the SNAP programs.

One of the biggest differences in the U.S. Senate and U.S. House versions of the new farm bill is in the proposed future funding for SNAP programs. This was also one of the main roadblocks to passing a new farm bill in the U.S. House. The new farm bill passed by the U.S. Senate would cut the spending on SNAP programs by about $400 million per year (0.5%), or $4 billion over ten years; while the U.S. House proposal would cut SNAP funding by about $2 billion per year (3.0%), or approximately $20 billion over 10 years. Interestingly, some U.S. House members opposed the new farm bill because they thought the cuts to SNAP funding went too far, while other members were opposed because they wanted even deeper cuts to future SNAP budget outlays.

About 15% of the funding in the new farm bill is designated for farm commodity programs and crop insurance programs. The farm bill proposals in both the U.S. Senate and U.S. House would eliminate future direct payments to crop producers, which have been available for many farm crops each year since the late 1990s. Eliminating direct payments will save about $5 billion/year in federal spending, some of which will be re-directed to other commodity programs. The direct payments, as well as the current Average Crop Revenue (ACRE) and permanent disaster (SURE) programs, are proposed to be replaced by a new crop risk management program. Farm operators will continue to have payment limits for these program payments, and will likely have maximum adjusted gross income (AGI) levels to maintain payment eligibility. Producers will also likely have an updated target price option in the new farm bill, as well as revised dairy and sugar support programs as part of the commodity title in a farm bill.

The federal crop insurance program has been proposed to remain largely intact with the new farm bill, with some minor adjustments and possible enhancements. Many crop producers rely on revenue-protection crop insurance as the primary risk management tool for the large investment that they have in crop production each year. The importance of crop insurance has been quite evident in the past two years, with the severe drought in many parts of the U.S. in 2012, and the late and prevented corn and soybean planting in parts of the Midwest in 2013.

Crop insurance programs have come under some criticism in recent months, due to the large federal cost for the program and some eligibility requirements. The federal government subsidizes about 62% of the annual cost of crop insurance premiums to producers, with the farm operator paying the balance. The government also subsidizes large crop insurance losses, such as with the 2012 drought. Some would like to see the crop insurance subsidy reduced or eliminated, while others would like it eliminated for high-income farmers, or see limits placed on crop insurance benefits that a producer can receive. For many Midwestern crop producers, the 2012 drought was the first time they have received a significant crop insurance payment in decades. Elimination of the federal crop insurance premium subsidy could make crop insurance quite expensive for some producers, which could add considerable financial risk to their farm operations.

Passage of a new farm bill is very complex, with programs ranging from farm commodities, to food and nutrition, to conservation and forestry programs and many more. Many times, finalizing a farm bill in Congress can be quite controversial, and not necessarily by political party lines. The various farm bill programs become quite geographical, with members of Congress wanting to protect the farm, food, conservation and economic interests of their state or congressional district. The very large federal budget deficit in recent years has added a new element to passage of a large farm bill. The members of Congress, especially in the U.S. House, must now re-group to find a workable compromise for a new farm bill that affects the future of the nation’s farmers and other citizens affected by USDA programs.

 

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 kent.thiesse@minnstarbank.com.

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