The New Farm Bill: A Rough Row to Hoe?

Omnibus farm legislation – popularly called the Farm Bill – is on a five-year schedule. Comprehensive bills are drafted and debated by Congress that deal with the full gamut of agriculture, food, and nutrition programs administered by USDA as well as some other federal agencies. The current enactment of the farm bill, the Farm Security and Rural Investment Act of 2002, expires at the end of 2007. Progress is under way to pass a new farm bill before the old one expires, but doubts about the possibility of this happening are growing.Building a farm bill involves the House Committee on Agricultural and the Senate Committee on Agricultural, Nutrition and Forestry drafting their own versions and getting them passed in their respective full chambers. Differences between the House and Senate bills are worked out through a conference committee before the compromise bill is voted on again by both houses. If both houses pass the bill, it moves to the president for his signature or veto.

Only one stage in this process has been completed. The House committee version of farm bill was approved by the full House on July 27 by a vote of 231-191. The close vote is one indicator of something less than smooth sailing ahead. Several provisions were added to the committee bill after it was reported to the full house in order to garner key votes when it came to the floor.

Perhaps the most controversial provision was a method to “offset” anticipated expenditures in excess of baseline spending authority. The House bill would offset by raising taxes on foreign-owned businesses. Secretary of Agriculture Mike Johanns has called this provision one of the bill’s “poison pills,” and President Bush has threatened to veto any farm bill reaching his desk that includes that provision.

Another controversial element of the house bill is its retention of direct payments to crop producers at the same levels as current law. Growers receive a fixed payment per unit of base production regardless of market prices and regardless of whether they actually grow the crop. Critics argue that in light of projected high commodity prices over the next few years, these payments represent excessive largess. The House bill also limits funding for certain conservation programs, in particular the Conservation Security Program (CSP), which makes cost-sharing payments for practices on working lands. Senator Tom Harkin, Chair of the Senate Ag Committee, is a vocal supporter of CSP and has expressed his disappointment with the House action.

In contrast to the House, the Senate has done little in the way of drafting its farm bill. Senate Ag Committee staff have indicated they expect a “chairman’s mark” (initial draft) in mid-September for Committee markup in October. Even if that ambitious time frame holds, passage of a Committee bill by the full Senate is not likely to be a quick and easy process. The Senate will need to deal more seriously than the House with budget restrictions. There will be strong resistance from traditional farm groups to cutting direct payments in order to increase food and nutrition program expenditures and fund new programs such as biomass development. So the Senate will need to find an offset other than raising taxes or risk a presidential veto.

The Senate will have its own ideas on other farm program elements. The House bill half-heartedly supported revenue-based countercyclical payments (CCPs) to crop producers (instead of price-based) by allowing farmers to voluntarily opt for revenue-based payments. Senator Harkin seems more willing embrace mandatory revenue-based CCPs, something proposed and strongly supported by the administration. The Senate could also take a different approach to payment limitations than the House, which did not cap payments to individuals earning less than $1 million in adjusted gross income or to couples earning less than $2 million. Senator Harkin would prefer an absolute farm cap of $250,000 for all payments regardless of income.

Whatever comes out of the Senate must be meshed with the existing House bill in conference. What kind of chore that will be is not clear now, but the conferees will not likely be singing in close harmony. Either chamber could fail to pass the conference committee product, sending the bill back to conference. And the president has made his position on what he will accept in the way of offsets clear.

All of this suggests a new farm bill by year end is doubtful, yielding some uncertainly at planting time in 2008. This is not extraordinary. The 1996 farm bill expired at the end of 2001, and the 2001 farm bill became the 2002 farm bill passed in May. Similarly, the 1995 farm bill was transformed into the 1996 farm bill passed in April.

Ed Jesse, Agricultural and Applied Economics