Posted by: Phillip Fraas
May 11, 2007
Topic: REPORTS ON FARM BILL STATUS--First Half of 2007

It increasingly looks as if budget constraints will become one of the major factors dictating the shape of the 2007  farm bill.

Congress is expected to finalize the budget and spending caps for fiscal year 2008 and the four succeeding years within the next few weeks (or less). However, so far, there have been no indications that new money will be made available in the budget for the farm bill. If so, the writers of the farm bill will be faced with a cruel calculus of having to take money from some existing programs if they want to beef up spending in others.

On the one side, here are some of the things Congress wants new money for, each of which could cost in the billions over the five or six-year term of the 2007 farm bill:

• a permanent disaster assistance program.
• development of alternative energy production, including ethanol and other renewable fuels.
• soil and water conservation.
• specialty crop benefits: increased research and market development efforts; more nutrition program purchases of fruits and vegetables etc.

On the other side, here are some programs that might be vulnerable to being cut:

• direct support payments to farmers. These cost more than $5 billion a year on average, and the chairmen of both the Senate and House Agriculture Committees have let it be known that they are not supporters of direct payments (in contrast to countercyclical payments and loan deficiency payments, the other two mainstays of the farm income support that is the heart of the farm bill).
• crop insurance (currently, USDA subsidizes crop insurance to farmers to the tune of over $5 billion a year). USDA's farm bill proposal recommends taking about $250 million a year on average out of the program; and there have been critical news reports and a congressional oversight hearing questioning waste in the program. On the other hand, farm-state members of Congress tend to be strong supporters of crop insurance, and will try to protect the program against any effort to gut it.

Beyond these two items, nothing comes to mind immediately among current programs as a likely source of money for new farm bill spending. 

Then's there is a new wild card: MILC. Those initials stand for Milk Income Loss Contract, and the MILC program makes direct payments to dairy farmers when milk prices are low. Currently, the MILC program is slated to expire on August 31 of this year. Because it runs out prior to the expiration of the 2002 farm bill (which for dairy is September 30, 2007), the MILC program is not included in the spending baseline for the new farm bill. So, as things stand now, if MILC is to be included in the new farm bill as many in the dairy industry want, it will likely mean over $1 billion in new spending.

Some in Congress worried about the budgetary problems with a MILC extension are now making a major push to get the program into the farm bill baseline by extending it for one month--to September 30--at a relatively minor cost of $31 million. Such a proposal was included in the Iraq/disaster assistance spending bill the President recently vetoed and in the new disaster assistance spending bill the House passed yesterday. The problem is that the White House already is on record as objecting to the disaster legislation and, specifically, to the short extension of MILC to squeeze it into the baseline. If MILC doesn't make it into the baseline, there will be one more big ticket spending item that money would have to be found for.

It seems. then, that the nearer we are getting to action on the farm bill, the budget constraints are making the decision-making for members of Congress more difficult. And, as the limitations on funds become more clearcut, it will become correspondingly tougher for the proponents of the programs that need new money to plead their cases to the legislators.

NOTE: It looks as if the first farm bill mark-ups will begin in the House the week of May 20. At this time, though, the chairmen's marks still have not been released.

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