July 2012 Legislative Report

Farm Bill Focus Shifts to House Agriculture Committee

With the release of their discussion draft of the Federal Agricultural Reform and Risk Management Act (FARRM), House Agriculture Committee Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN) have ensured there will be no shortage of rhetorical fireworks when members return from their traditional Fourth of July recess. 

With the House Agriculture Committee slated to begin marking up the aforementioned discussion draft, the spotlight will shine squarely on members of the committee as they undertake the task of crafting a farm bill that balances the policy concerns of members representing regional commodity interests, nutrition advocates and fiscal conservatives.

According to various sources, the committee mark-up is likely to last for two days, with the timeframe for final passage by the full House predicated on when Mr. Lucas can garner floor time from House leadership.  Although the Republican leadership in the House has not ruled out action on the farm bill, they have indicated they want to devote the bulk of the House’s floor time to job creation and regulatory bills – as well as complete work on the fiscal year (FY) 2013 appropriations bills.

Unlike the Senate-passed farm bill which contains a tick over $23 billion in spending reductions (including $4 billion from nutrition programs), the House bill calls for approximately $35 billion in savings over the next decade – with an estimated $16 billion coming from the Supplemental Nutrition Assistance Program (SNAP).  Additional savings within the House measure would come from the commodity title ($14 billion) and $6 billion from conservation programs.

To make farm bills more palatable to a broader constituency, domestic food programs such as food stamps and food aid have become an integral part of the agriculture budget and now comprise approximately ¾ of farm bill expenditures.  The strength of this coalition is threatened by the need to reduce federal outlays.  Will members of Congress and stakeholders who advocate for domestic food programs be willing to accept reductions to these outlays that are in proportion to those under consideration for program commodities?  In direct contrast to the Senate, which did not tackle the issue in a substantive fashion, the House appears ready to have the debate.

The discussion draft of the House farm bill, as well as the title-by-title summary issued by the House Agriculture Committee, can be accessed by visiting https://rdlassociates.wordpress.com/

Debate Continues Regarding Commodity Payment Mechanisms

A primary sticking point throughout the process has been the payment mechanism for various crops.  Traditionally, farm bill coalitions have based upon regional interests and oriented toward specific commodities.  Southern members of Congress who represent cotton, rice and peanuts would often leverage votes for their commodities of interest with Midwestern and Northern members who represent corn, wheat, and soybeans.  Regional and commodity-based coalitions have undergone additional stress during consideration of the 2012 farm bill and the current fiscal situation holds the potential to fracture this template and may result in a rewritten game plan going forward.

Reductions to commodity payment mechanisms that disproportionately impact cotton and rice have been met by resistance from Southern members of Congress who do not feel that the bill’s crop-insurance and risk-management programs aren’t as helpful to the rice and peanut farmers in their districts.  As such, they continue to work to ensure that these commodities continue to receive support that reflects the production needs of the growers they represent.  Case in point; the Senate farm bill was strongly supported by members from the corn-and soybean heavy Midwest but did not garner the votes of Southern senators.

Both the Senate bill and the House draft eliminate direct payments but there remains disagreement as to how the savings should be reallocated.  The Senate would invest more in crop insurance and establish a new program that would supplement what is already in place.  The Senate bill provides both a county and farm level, with different payment levels for each. The government would pay farmers for their losses when their revenue falls below 89 percent of a benchmark based on five-year average prices and yields.  It is estimated that this approach would cost 2.3 percent less than the last farm bill due to a shift to market-based subsidies, combined with $4 billion in reductions in waste from the food-stamp program and a consolidation of conservation programs.

Conversely, the draft released by the House last week allows for two coverage options; Price Loss Coverage (PLC) and Revenuer Loss Coverage (RLC).  The first payment mechanism is designed to address deep, multiple-year price declines and the second addresses revenue losses.  The latter is based on the county level and would be triggered after a producer experiences at least a 15 percent loss.  Both PLC and RLC would pay on 85 percent of planted acres up to total base but could not exceed the total base.  Producers would make a one-time election for the life of the five-year farm bill on a crop by crop and farm by farm basis.

As reported by Agri-Pulse, the price coverage option works similar to the counter-cyclical program, and is based on a five-month national average market price. Producers also have the option to update their yield, either the maximum of their current counter-cyclical yields or 90 percent of the five-year average yield from 2008-2012. This change will help producers who have invested in biotechnology and seed varieties that have experienced yield gains which are not currently reflected in their yield calculations.

Can the House Replicate the Success of the Senate?

One of the intriguing aspects of the farm bill debate will be the ability of Messrs. Lucas and Peterson to replicate the masterful performance of their Senate counterparts in moving a bill through committee and off the chamber floor.  At this point it appears as though the former will be an easier “lift” than the latter in that the chairman and ranking member have worked with their colleagues on the committee to address any number of concerns and have made it clear that they want the bill to move out of committee in an efficient manner.

Whereas the Senate Agriculture Committee was able to clear the bill out of committee after a short 4 ½ hour markup – and Senate Agriculture Committee Chairman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS) were able to navigate the bill toward a vote on final passage after a mere 2 ½ days of debate on the Senate floor – there is little doubt the House bill will foster strong disagreements along both regional and party lines.

To be fair, the challenges in the House of Representatives are no less daunting than they were in the United States Senate but the dynamics are substantively different as Messrs. Lucas and Peterson strive to strike a delicate balance between moving a bill that can not only clear the House Agriculture Committee but the full House, as well. 

Mr. Lucas will have to walk a fine line between satisfying those members who seek greater deficit reduction without alienating urban Democrats that have typically been relied upon to pass previous farm bill.  As such, he will be balancing the views held by voters that farm bill programs that have evolved over the last few decades may not be consistent with calls by the electorate for fiscal restraint while at the same time facing the political reality that substantive reductions in nutrition spending may cost him essential votes.

Additional Information

Please send questions and comments to:
Dave Ladd, President
RDL & Associates, LLC
e-mail:     daveladd66@gmail.com
LinkedIn: http://www.linkedin.com/pub/dave-ladd/0/b87/11
Twitter:    DaveLadd37
Blog:        https://rdlassociates.wordpress.com/

Copyright © 2012 RDL & Associates, LLC.  All rights reserved.


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