Farm Bill Limbo

Farm Business Management Update, April 2002

By Jim Pease

The fate of the 2002 Farm Bill is in the hands of the Conference Committee of the House and Senate, which is in recess until the week of April 8. In many ways, the commodity provisions of the House and Senate Bills are not very different. Both Bills project spending of $170 billion in agricultural programs over the next 10 years, although the duration of the Senate Bill is five years versus 10 years for the House Bill. Under both bills, commodity payments for corn, wheat, soybeans, cotton, and other major commodities will average more than $5 billion per year. With respect to Virginia peanut farmers, both bills abolish the long-standing quota program and replace it with one very similar to that of the other commodities. The Senate Bill provides considerably more funds for conservation programs as well as several controversial amendments that may hold up agreement in Conference Committee.

A few items about Farm Bill legislation are more or less easy to agree upon:

• The FAIR Act of 1996 expires in September 2002.
• Persistent over-supply of agricultural commodities and resultant low prices combined with dizzying budget surpluses prior to 2001 provided the opportunity for Congressmen Combest (R., TX) and Stenholm (D., TX) to obtain a House budget resolution to increase farm spending by $73.5 billion.
• The House Agriculture Committee organized sessions to develop a commodity payment-focused Farm Bill, which passed the Republican-controlled House in October 2001. The Senate, controlled by the Democrats, passed its own version in February 2002.
• The uncharacteristic haste to pass new Farm Bill legislation before the old Bill expires is prompted by the failure of 'Freedom to Farm,' so highly touted in the 1995 Farm Bill debate; the availability (in late 2000 and early 2001) of budget surpluses to spend on agriculture; and the 2002 elections, which key players like Harkin (D., IA), the Senate Agriculture Committee Chair, and Combest (R., TX) are determined to win.

The kind of drama that a new Farm Bill creates is hard to beat. As of April Fools' Day, lots of possible plot lines have been written for the script:

The Conference Committee of the House and Senate reaches agreement on the major provisions of the new Farm Bill during the week of April 9 (when Congress returns from Easter break). The resulting Bill is a blend of higher conservation spending from the Senate and lower commodity spending from the House. Staffers work out the details within a couple of weeks, the Senate and House pass the Bill, and it is on Pres. Bush's desk by early May. Everybody declares victory. Sources indicate that this scenario has a likelihood of 50-50. The key Congressional players realizing that farmers have already made their financial and planting commitments for 2002, cannot reach quick agreement anyway on major Bill provisions, and after passing double Agricultural Market Transition Act (AMTA) payments for 2002, put everything else on the back burner through the summer. Sources indicate that this scenario has a likelihood of one in four.

Democrats and Republicans on the Conference Committee go toe-to-toe, refusing to compromise on key elements of their programs. The Senate payment limitation caps are fiercely disputed between representatives of states dominated by large-scale cotton and rice production versus everybody else. The Johnson Amendment banning ownership of livestock by beef and hog packers within 14 days of slaughter becomes a major battleground as 'Prairie Populists' from both parties make their stand for the 'family farm.' Political posturing and infighting continues through Fall 2002 as the issues become fodder for elections. In late September, the FAIR Act expiration looms as the battle rages. Chances of this scenario occurring may be as likely as one in four.

Although the chances of Farm Bill passage this spring are good, neither Congressional alternative provides the potential for solutions to longstanding problems of oversupply, low prices, and decreasing profitability of farming businesses. Payments to farmers have exceeded $20 billion per year over the past three years, now making up 40 percent of net farm income. From 1996-2001, the top 10% of producers (about 250,000 farmers) received more than two-thirds of the $92.2 billion in AMTA, Conservation, and disaster payments paid out by USDA. The 2002 Farm Bill, whenever it is signed into law, is unlikely to solve equity or profitability problems, and will only continue the reliance of large portions of U.S. agriculture on government payments.

Contact the author at peasej@vt.edu

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