Published: January 18, 2008 12:51 pm            

Farm Programs: Many questions surround farm bill finalization

Originally published in the January 11, 2008, print edition.

The next step in getting a new farm bill in place for the 2008 growing season will be for a conference committee to work out the differences in the versions that were passed by the U.S. House in July and by the U.S. Senate in December.

After the conference committee works out the differences, the revised version of the farm bill will be voted on again by both the House and Senate. If it passes both, it will then go to President Bush for his signature, before it becomes law. If the president vetoes the legislation, the bill would go back to Congress for a potential veto override, or for Congress to make revisions, and then have another vote by the House and Senate.

As Congress works to complete the passage of the new farm bill, producers have raised some questions regarding process and provisions in a potential new 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 returns to session Jan. 15, and the U.S. Senate on Jan. 22, so the conference committee is not likely to meet until late January. Assuming there are no major hold-ups in the process, the conference committee should have a revised farm 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 farm bill is passed by Congress, and signed by President Bush, it will likely be an additional four to six weeks before county Farm Service Agency offices are ready to begin farm program sign-up for the 2008 crop year. The new farm bill will likely not be fully implemented until nine to 12 months or longer after the bill is signed into law, in order to allow the U.S. Department of Agriculture time to write the new rules and regulations, and to allow time for the review process.

Q: What happens if President Bush vetoes the farm bill?

A: It will likely extend the timeline of the process for a new farm bill by more than a few days. Most experts feel that a veto override is quite possible in the Senate, but might be quite difficult in the 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.

Q: What are the issues or provisions that could result in a presidential veto?

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 veto.

The primary concern is with tax increases, funding shifts and projected savings that are being proposed to fund new or expanded farm bill provisions. The “pay-as-you-go” legislation adopted 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 to see farm program payments discontinued to any individual or business above a $200,000 “adjusted gross income.” Currently the AGI limit is $2.5 million, and would drop to $1.0 million in the House farm bill , or $750,000 in the Senate farm bill. In addition, the Bush administration is also concerned with increases in target prices and Commodity Credit Corp. loan rates that are proposed for some crops in the new farm bill.

Interestingly, the Bush administration is OK with the proposed increased payment limits for direct payments (from the current $40,000 to $60,000 per individual) that is included in the House farm bill, feeling that direct payments are more “World Trade Organization-friendly” than other types of farm program payments.

Q: Will the lack of a farm bill have much effect of 2008 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 crop acreage of corn, soybeans or wheat for 2008. There are few changes proposed in the commodity program provisions in either the House or Senate versions. The proposed direct payment rates are likely to stay the same as 2007 for corn, soybeans and wheat. It is possible that the entire 2008 direct payment could be delayed until October 2008, with no advance payment. There was a 22-percent advance payment for 2007.

With the current price levels of corn, soybeans and wheat, counter-cyclical payments 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.

Q: Will there be any changes in planting flexibility of fruit and vegetable crops on farm program acres?

A: No changes are proposed in either the House or Senate versions with regards to changing the current restrictions on planted acres of fruit and vegetable acres with farm program enrollment. However, the Senate farm bill would allow some additional flexibility for fruit and vegetable planted acres in Midwestern states for producers who choose to enroll in the proposed new Average Crop Revenue farm program, rather than the current farm programs with traditional direct payments and CCPs.

The Bush administration would like to see all planting restrictions on fruit and vegetable acres removed, to help make the new farm bill more “WTO-friendly.” Again, any changes would likely not be implemented until the 2009 crop year, at the earliest.

Q: What changes are being proposed for Federal Crop Insurance?

A: Most of the changes in crop insurance being proposed will likely not be readily noticeable to most producers. The biggest change may be the timing of when insurance premiums are paid, requiring some payment earlier in the growing season. Currently, all crop insurance premiums on corn and soybeans are paid in the fall.

Also, there are minor reductions in the federal subsidy levels being proposed, which could result in minor premium increases for producers. However, if the ACR farm program option in the Senate farm bill is included in the final farm bill, some have projected a potential decrease in future crop insurance premiums, due to the portion of crop loss that would be covered by the ACR program. No major changes expected for the 2008 crop year.

Q: Will the new farm bill include a provision for “permanent disaster assistance”?

A: The Senate version would authorize a permanent trust fund to have disaster payments available for qualifying producers on an ongoing basis, which would be a supplement to current crop insurance programs. The House version does not contain any language for permanent disaster assistance, and the administration has opposed the addition of this type of program.

Current disaster assistance programs have been passed by Congress on an as-needed basis; however, there has been an ad-hoc disaster program passed by Congress nearly every year that affected producers in some parts of the United States. Some feel that “permanent disaster” may not stay in the final farm bill due to budget issues. If included in the final farm bill, it will likely not be implemented until the 2009 crop year.

Q: What are proposed provisions for sugar producers?

A: Both the House and Senate versions of the farm bill contain provisions to increase the sugar commodity loan rates. Both versions would create a new program that requires the USDA to set up a program to use excess sugar to produce ethanol.

This provision was included in the new farm bill largely in response to the North American Free Trade Agreement provision that removes all restrictions on sugar imports from Mexico, as of the start of this year. The sugar ethanol production proposal should help stabilize variations in future domestic sugar prices that result from more imported sugar into the United States.

Q: Does the new farm bill propose any changes for dairy producers?

A: The current dairy price support program, which supports the farm-level milk price at $9.90 per hundredweight would be continued in both the House and Senate versions. However, there would be some minor changes in the USDA purchase prices of some specific dairy products.

The Milk Income Loss Contract Program through 2012, which compensates dairy producers when monthly milk price falls below a target price of $16.94/cwt. The MILC compensation is currently set at a rate of 34 percent of the difference between the average monthly milk price and the target price for up to 2.4 million pounds of annual milk production (approximately the production of 130 dairy cows).

Q: What about provisions affecting other livestock producers?

A: Both the House and Senate versions would continue implementation of the Country-of-Origin food labeling, recordkeeping and compliance requirements for meat, poultry, seafood and produce. The proposed farm bill would make some modifications in the requirements included in COOL legislation.

There are also changes proposed to make some minor modifications in the state requirements for meat and poultry inspection. The Senate version would prohibit most major livestock processors from owning or controlling livestock more than 14 days prior to slaughter. This provision is not in the House version, and has been somewhat controversial.

Q: Is there a website to get more information and details?

A: The USDA has a farm bill site at www.usda.gov/farmbill.

        

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