Policy Positions For The Next Farm Bill

Most farm organizations, commodity groups and other organizations interested in agriculture policy have developed some type of policy position or statement relative to development of a new Farm Bill, or extension of the current Farm Bill. The policy positions of these various groups probably fall into about three or four different categories of proposals, with some special twists or tweaks added for some provisions, for the next Farm Bill. The current Farm Bill (2002-2007) is in place for the 2007 crop year, and expires on Sept. 30, 2007. Following is a summary of the various farm policy positions as they relate to development of the next Farm Bill:

1) Extend the current Farm Bill. Many farm groups, and some members of Congress, are pushing a simple extension of the current Farm Bill for one year or longer, in order to allow more time to develop a new Farm Bill. The argument is that the current safety net features in farm commodity programs for producers are working very well, are well understood by farm operators and are cost-effective for the federal government. Furthermore, the DOHA Round of World Trade Organization (WTO) trade negotiations have stalled-out, and one of the main hang-ups is the level and type of farm commodity subsidies paid to U.S. farmers. Many feel that a Farm Bill extension would allow time for the WTO process to be completed. Then commodity program adjustments could be made in the next Farm Bill that fit the new WTO policies and guidelines.

2) New Farm Bill – same basic commodity programs with some tweaking: Most agriculture producers, and many members of Congress, have a good understanding of the current Direct and Counter-Cyclical Program (DCP) Program, and like the safety-net features of the program, which provides for direct and counter-cyclical payments (CCPs) to producers.

A large majority of farm operators would probably like to see the CCC marketing loan program and potential loan deficiency payments (LDPs) continued; however, some would like to see higher CCC loan rates, and others would like to see more uniformity in the calculation of posted county prices (PCPs). It appears that a large majority of producers, and many members of Congress, would like to maintain the existing safety-net structure of farm program payments, but want to make the payments more WTO compliant, reduce the potential outlay of federal dollar resources, want to better target the payments to producers with the greatest need and want to add some type of ongoing-disaster program. This is a tall order, and could possibly mean reduced CCC commodity loan rates and potential LDPs, reduced CCPs, higher direct payments and stricter payment limits. Adding new commodities as program crops will also get consideration.

3) New Farm Bill – develop revenue-based commodity payments as an alternative. Replace CCP payments, and CCC marketing loans and potential LDPs, with a new revenue-based commodity program that makes payments to producers based on revenue (yield x price) shortfalls, compared to target revenue per acre for a given commodity. This concept would be similar to GRIPcrop insurance policies. This revenue-based idea has been fine-tuned into a new Farm Bill proposal that has been put forward by the National Corn Growers Association.

4) New Farm Bill – eliminate current commodity programs and re-direct funding. Phase out all current CCC marketing loans, LDPs, and DCP direct,and CCP payments, and use the dollar savings to enhance and expand support for crop insurance coverage, to expand conservation programs, to develop new rural development and alternative energy programs, to help fund a farm savings account, and for other new programs.

Bottom Line
Extension of the current Farm Bill is still a possibility, though it looks much less likely than it did several months ago. It appears that both the new Congressional leadership and the Bush administration are committed toward writing a new Farm Bill in 2007; however, it may take some time to work out the policy differences for the next Farm Bill. We must remember that a Farm Bill is much more comprehensive than just commodity programs, conservation programs, and renewable energy. Also, there will be a lot of wrangling as Congress tries to re-configure commodity program payments in a manner that does not economically hurt certain commodities or areas of the country. Things such as the war in Iraq, the federal budget deficit, WTO negotiations, terrorism or a potential pandemic outbreak of avian flu are all wild cards in the development of a new Farm Bill in 2007.

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.