Stage Set For Farm Bill Conference
Posted by: Phillip Fraas
December 21, 2007

The Senate completed its work on the 2007 farm bill last Friday, setting the stage for joint House-Senate conference committee meetings early next year to resolve differences between the Senate legislation and the farm bill passed by the House last July.

The so-called "conference" is an important part of the legislative process for any bill; and when a conference committee is considering a large and complicated proposal such as the farm bill, it has the added opportunity to ignore much of the Senate and House bills and draft with a third version that isn't necessarily anchored in either the House or Senate bill. And, it is that third version that counts, because that is one that Congress casts its final vote on and that the President signs or vetoes. 

Of course, here the conference bill (referred to as the "conference report") undoubtedly will include a lot that is common to both the House and Senate-passed bills--a continuation of the current farm support loan and payment mechanisms; the introduction of revenue-based counter-cyclical payments; expanded support of alternative energy production; new programs for the fruit and vegetable industries; and so on.

Beyond that, the circumstances under which the conference does its work will be different that those that applied when the House and Senate agriculture committees began their consideration of the farm bill earlier this year; and those changed circumstances could dictate some major changes to the new farm bill.

Primarily, I am referring to the budget stalemate that has arisen between Congress and the Administration on the farm bill. Both the Senate and House bills would increase spending for existing farm bill programs (the majority of which, by the way, goes for nutrition assistance to low-income Americans, not to farmers) and add new programs, especially ones to facilitate the development of alternative, biomass energy production, and both bills include provisions to increase tax revenues to pay for the added spending.

 The problem is that the Administration is strongly opposed to the revenue-raisers. Just this Wednesday, Acting Secretary of Agriculture Chuck Conner, in a speech before a commodity group in Washington, stated that because of the revenue enhancers and because neither the Senate or House bill has enough farm program reforms "the President's senior advisers . . . are recommending that he veto the farm bill as it now stands coming out of th House and Senate."

While the veto threat is real and it is hard to envision how a compromise is possible on spending since the Administration adamantly opposes any revenue-raising measures, what has taken place over the past few days on other spending legislation--the omnibus appropriations bill and energy bill, both of which passed and the President approved--suggests that a solution to this knotty problem might yet be possible.

What happened with those other bills is that the Administration gave some on added spending as long as Congress didn't include tax increases to pay for the new outlays. In turn, Congress dropped its insistence on "pay-go," that is, making sure that any legislation that increases spending has offsetting spending cuts in other programs or revenue enhancements to keep the legislation budget-neutral.

And, keep in mind that the Administration's own farm bill proposal would have increased farm bill spending by about $5 billion over ten years and did not include tax increases to pay for the increases. 

If the Administration accepts some increased spending without revenue raising and Congress doens't insist on applying "pay-go" to the bill, then it becomes simply a matter of hard bargaining on how much of an increase and to what programs are the increases allotted to.

Another new factor that the farm bill conference will have to consider is the enactment of the energy bill. That legislation included an increase in the renewable fuel standards, and authorized other initiatives to spur biomass fuel production. The conferees will have to review what the energy bill already has done, and tailor the farm bill energy title to compliment that legislation.

Finally, there is the intangible of the rapid rise in commodity prices recently. $4.40 corn, $10 wheat, and $12 soybeans at a time when production is not being decimated by natural disasters such as drought should give the Administration some ammunition in arguing for farm program reform that would cut back on Federal benefits. Of course, the counter-arguments can be made that high prices for commodities are being accompanied by high prices for inputs such as fuel and that commodity prices can turn south very quickly if world supplies expand. Nonetheless, with farmers enjoying market prices they haven't seen for 30 years and thus being much less dependent on government programs to cover their costs, the Administration will make hammer on the point that now is the time to enact program reforms that reduce spending.

In sum, look for the conference committee possibly to craft a farm bill that is a second generation to the House and Senate-passed versions--farm bill 2.0. Merry Christmas and happy holidays!    

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FARM BILL UPDATE: Senate Moving Quickly On Farm Bill, Could Finish Soon
Posted by: Phillip Fraas
December 13, 2007

After weeks of deadlock between Democrats and Republicans on the terms for the floor debate of the farm bill, agreement was reached last Friday on a plan for handling the bill and floor debate began in earnest this Monday. Since then, the Senate has worked its way through most of the proposed amendments to the committee-reported farm bill, and it now appears that the Senate is close to voting on final passage.

What has transpired this week is that the floor manager of the farm bill, Tom Harkin, Chairman of the Agriculture Committee, has worked out compromises on literally scores of amendments (there were close to 300 amendments being discussed at one time) and the legislative language for those compromises is being assembled into a giant manager's amendment that will be offered for unanimous consent approval just before the final vote in tbe Senate on passage of the bill. Amendments that couldn't be resolved amicably have been debated and voted on over the course of this week.

So far, the votes have gone in favor of the Agriculture Committee, that is, the Senate has rejected just about every proposal to change the language of the committee-reported bill. That includes the Lautenberg-Lugar substitute that would have replaced current farm payment programs with revenue insurance, the Dorgan-Grassley proposal to tighten payment limitation rules, and the Klobuchar amendment to reduce to $750,000 the adjusted gross income (AGI) limit on eligibility to participate in farm payment programs.

What likely will happen after the Senate finishes with the farm bill is that staff of the House and Senate agriculture committees, over the course of the next three to four weeks, will work jointly to develop conference committee documents that spell out the differences between the two versions of the legislation and then informal discussions on resolving conflicts between the two bills will commence. 

Formal convening of the conference committee can be expected as early as the third week in January, and the conferees will push to work through the differences quickly so the farm bill can be in place for the planting of the 2008 crops.

In general terms, it appears that the House and Senate have fairly similar bills so that, if it were left up to the two bodies by themselves, the conference would not be difficult. However, the legislation won't become law unless the President signs it, and right now his Administration is adamantly opposed to the revenue-raising measures included in both bills to pay for increased spending on such programs as renewable energy development, nutrition assistance, and soil and water conservation. Further, the Administration strongly believes that the AGI eligibility limit must be reduced more than either version of the bill now does. In fact, today, Acting Secretary of Agriculture Chuck Conner issued a statement decrying the Senate's rejection of the Klobuchar amendment to tighten the AGI limit. 

For right now, however, everyone interested in getting a new farm bill will breathe a small sigh of relief once the Senate concludes debate, in recognition that another big step will have been taken toward final passage.   

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FARM BILL UPDATE: The Senate Deadlock Might Be Broken
Posted by: Phillip Fraas
December 06, 2007

I've seen one report this evening that the deadlock between the Senate Democrats and Republicans on the rules for conducting the floor debate on the farm bill has been broken, and debate will start tomorrow.

I am traveling tomorrow, but will try to get more information over the next couple of days on what the prospects are for the farm bill in the Senate if tonight's report is true and get another update out as soon as practicable.

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FARM BILL UPDATE: Senate Deadlocked On The Farm Bill, Might Not Finish Work On It This Year
Posted by: Phillip Fraas
December 06, 2007

CURRENT SITUATION: Although interested senators and staff have been pushing hard over the past couple of weeks to reach an agreement on the number and scope of amendments that could be offered when the Senate brings up the farm bill again (the Democrats want to restrict amendments, the Republicans want a wide open debate), they have not been successful.

In an implicit recognition of the seriousness of the deadlock, Senate Majority Leader Reid yesterday filed a second cloture petition, which if approved by a three-fifths vote would defeat Republican insistence on the right to offer nongermane amendments to the farm bill, such as the alternative minimum tax (AMT) fix, and thus clear the way for speedy passage of the bill. 

The first cloture attempt last month failed when the Democrats got only four of the nine Republicans they need to invoke cloture; and there are no indications that they have picked up any new Republican votes since then. Yet, time is rapidly running out. Because the Senate has a lot of other unfinished business to dispose of before it leaves town for the holidays some ten or so days from now, it would not be surprising if Majority Leader Reid simply pulls the farm bill from the floor for the rest of the year if he doesn't get cloture tomorrow.

WHAT HAPPENS THEN? If the Senate fails to act on the farm bill this year, the first consequence will be that Congress likely will add to the omnibus appropriations bill it intends to pass next week provisions to extend current farm bill programs that are close to expiring, such as the dairy price support program. For how long Congress might extend current programs is hard to predict. One suggestion I recently heard was that the extensions might run through the end of March 2008, just enough time for Congress to complete work on the farm bill if they turn to it as soon as they return in 2008.

In that regard, Congress typically doesn't meet much in January--in fact, it has been reported that it won't even convene the 2008 session until January 15--so work on the farm bill might not start up again until late January at the earliest.

Further, the key members of the Senate leadership and the agriculture committee will have to continue working over the holidays to find a way to reach an agreement that will break this impasse preventing a vote on the legislation. Until that happens, then the farm bill will remain dead in the water even after Congress convenes in January.

However, an important point to keep in mind is that the current hold-up in the Senate has very little to do with the merits of the farm bill. It appears that the farm bill just happens to be a convenient vehicle for a test of wills between the Democrats and Republicans over control of the Senate's legislative agenda. Once that issue is disposed of, there is every reason to expect that the debate on the farm bill will move forward without delay. That would mean that Congress could put the new law in place before spring planting in the midwest.

If that happens, then the trials and tribulations the legislation is going through now will quickly be forgotten. Of course, the key word in the last sentence was "If." There is no certainty as to the path the farm bill will take in coming weeks and months. All we can do is hang on for the ride.

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FARM BILL UPDATE: Senate Reported Near Breakthrough On Floor Debate Deadlock
Posted by: Phillip Fraas
November 28, 2007

The word circulating in recent days (based on information from Senate agriculture committee staff) is that the Democrats and Republicans are near an agreement to facilitate the Senate floor debate and a final vote on the Senate farm bill in December.

It is reported that the potential agreement would set up rules governing the farm bill floor debate to allow about 5 Democratic amendments and 10 Republican amendments. The list of authorized amendments could include perhaps a couple of non-germane proposals (that is, amendments not related to the farm and food policy provisions reported by the Senate agriculture committee), such as an amendment to deal with the alternative minimum tax issue or one on renewable fuel standards.

In addition, no doubt, there will be a large manager's amendment to be propounded by agriculture committee Chairman Tom Harkin after clearance with the ranking committee Republican, Saxby Chamblis, consisting of  non-controversial amendments and technical corrections to the committee draft. The manager's amendment would require, and most likely get, unanimous consent approval.

If this agreement comes to pass, then the Senate likely will take up and pass the farm bill next week or the following week.

The course of the farm bill after that would not be as clear.

After Senate debate, the House and Senate agriculture committees have joint responsibility for taking the next step toward final passage of the legislation: convening a House-Senate conference committee to resolve the differences between their two versions of the farm bill. And, with pressure from farm groups and others already being put on Congress to pass the farm bill as soon as practicable, the staff work drafting the conference documents (which spell out the specific differences between the two bills) and exploring ways to resolve the easiest, least controversial differences likely would begin in earnest as soon as the Senate completed its work on the bill.

But, given the size of the two bills, and the substantial differences between them as they stand now, I wouldn't expect the conference to farmally commence and negotiations on the tough issues to begin until Congress returned from its Christmas recess in January.  

Beyond that, it is impossible at this time to predict when all the differences between the House and the Senate, and between Congress and the Bush Administration, over the farm bill would be resolved under this scenario. A ballpark guess might be anywhere from three weeks to two months after Congress returns from the Christmas recess. What is known now is that need for action will increase dramatically the farther we get into 2008 and the closer we get to the planting season for 2008 crops. 

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FARM BILL UPDATE: Farm Bill Stalled; Several Scenarios For What Happens To The Legislation
Posted by: Phillip Fraas
November 19, 2007

Last Friday, November 16, the Senate Democratic leadership sought to break the deadlock with Republicans over the procedure for Senate floor consideration of the 2007 farm bill by scheduling a cloture vote on the matter. (A minority of the Senate can prevent action on a matter by launching into extended debate on the floor. Cloture, if approved, cuts off that debate and thus allows the Senate to move forward on the matter.) The Democrats needed 60 votes to invoke cloture on the farm bill debate, but only got 55. Soon thereafter, Congress recessed for the Thanksgiving holiday, and will not return until the week of December 3.

Until either the two sides reach an agreement on the procedure to handle the farm bill floor debate, or the Democrats pick up five more Republican votes for cloture, the farm bill will remain stalled. With so little time left in the year, the burning question is what happens next?

BACKGROUND: First of all, it should be noted that, to a great extent, the deadlock in the Senate is not about the farm bill itself. Rather, it is a manifestation of a larger political battle between Senate Democrats and Republicans over the legislative agenda for this Congress. Once the current brouhaha over farm bill debate procedure is resolved, the movement toward enactment of the farm bill could resume in earnest with prospects good for final passage. While there are serious differences between the House and Senate, and between the Administration and both houses, over farm policy, no one is seriously talking about not getting a farm bill if there is time to work through differences.

Second, it also should be noted that, when Congress returns in early December, it effectively will only have about three weeks to wrap up pending business before it adjourns for the year. It would be a herculean task for the House and Senate agriculture committees to complete work on the farm bill in that short period of time, even if the Senate deadlock is broken and the Senate passes the farm bill within a couple days after Congress returns from its Thanksgiving break.  

SOME LIKELY SCENARIOS: Three scenarios come to mind as possible outcomes given the current situation: (1) The deadlock is broken quickly and the agriculture committees work day and night to complete the farm bill, if not by Christmas eve, by some time in January. (2) The deadlock gets broken before adjournment in late December, and the farm bill is enacted very early next Spring. (3) The Senate gives up on breaking the deadlock or some other hold-up ensues, and Congress passes a two-year extension of the current farm bill, putting off the writing of a new farm bill until after the 2008 presidential election.

The first scenario would be the preferred option for those who have worked hard to craft what is in the Senate and House farm bills (both of which run over a thousand pages, and contain hundreds of legislative proposals) or who strongly support law changes proposed by one or the other bill. In this regard, one should keep in mind that just about every key player on farm policy, from the President on down, has expressed a keen interest in getting a new farm bill written.  The commitment, the motivation, and the momentum are there if the procedural roadblocks are cleared. 

The second scenario, however, might be the more likely result, simply because of the lack of time to get the rest of the farm bill process completed in the next four to eight weeks.

There is a recent precedent for this scenario--the 1996 farm bill. The farm bill it replaced, the 1990 farm bill, was effective only through the end of 1995. However, neither house of Congress was able to pass the bill until February of 2006. The House and Senate met in conference on the legislation in March, resolved their differences, and voted to send the bill to the President on March 28. The President signed the bill into law on April 4, 2006, just as many farmers were preparing their fields for spring crops, and after some farmers in the South already had planted.

The third scenario would please farmers and others who are satisfied with current farm programs, and could be necessary, even if the current Senate deadlock is broken, if the House and Senate can't resolve their differences over such contentious issues as the payment limitation, or Congress can't resolve its differences with the Administration on the amount of new spending in the farm bill and how to pay for it. This result, however, would mark the first time in recent memory that Congress did not draft a new farm bill when the old one expired.

Which scenario becomes a reality, or whether a fourthscenario emerges, will depend a lot on what happens on the Senate floor the week of December 3. That in turn will depend a lot on what goes on behind the scenes this week and next at the Senate leadership level and at the agriculture committee level as the House and Senate committee chairmen, Ranking Republicans, and their staffs make what is bound to be an intense effort to push the farm bill forward.     

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FARM BILL UPDATE: Senate Floor Debate Bogs Down And The Administration Threatens Veto
Posted by: Phillip Fraas
November 11, 2007

Senate floor debate on the 2007 farm bill got derailed shortly after the bill was brought up for consideration last week. On Monday, November 5, there were a couple of hours of opening statements on the legislation, to set the stage for debate on specific amendments beginning the following day. But, it quickly became apparent early on Tuesday, November 6, that the majority Democrats had not reached an agreement with the minority Republicans on the ground rules for the amendment process. 

Senate rules governing floor debate of legislation are very flexible, so the leadership usually seeks a unanimous consent agreement limiting debate . Here, Majority Leader Reid had been looking for agreement by Republicans that nongermane amendments (that is, amendments that go beyond the specific topics covered in the farm bill, as drafted by the Agriculture Committee) would not be allowed during the floor debate, as well as an accord on a specific list of amendments that could be offered. It seems the Republicans were heading in just the opposite direction--they were interested in a wide-ranging debate covering a lot of topics and involving more amendments than the Democrats were interested in.

As of the end of the week, the stalemate had not been broken. While there was some further discussion of the farm bill on the floor, no amendments were allowed to be debated and the legislative process effectively  ground to a halt.

No doubt, the two sides have spent this weekend trying to hash out their differences; and if those talks succeed, the Senate could turn back to the farm bill early this week and wrap up consideration of the measure before it leaves for Thanksgiving recess on Friday.

If we continue through this week without any progress, however, the whole farm bill process threatens to unravel. As mentioned, Congress will be out next week for Thanksgiving travel, which leaves just four more weeks in this session of Congress before final adjournment some time around December 21. That is very little time for the Senate to complete its work and then for the House-Senate conference committee to resolve the hundreds, if not thousands, of differences between the two bodies on the farm bill. Pressure will only grow day by day for some emergency action to extend current farm bill programs temporarily to give Congress additional time next spring to complete work in drafting the new farm bill.   

Also on last Monday, Acting Secretary of Agriculture Chuck Conner announced that the President's senior advisors would recommend that the President veto the Senate farm bill, if it were sent to him for his signature in its current form. The reasons for the veto threat were spelled out in a seven-page Statement of Administration Policy issued on Tuesday. The Statement can be found at the Office of Management and Budget web site, www.omb.gov.  

The gravamen of the Administration's objections to the Senate farm bill is that it increases spending and pays for it by tax law changes that increase tax revenues and accounting maneuvers that the Administration considers questionable, and that it doesn't go far enough in reforming current programs.

While the diferences between the Administration and Congress on how much reform to have in this farm bill likely could be resolved amicably, their differences on increased spending and how to pay for it are much more difficult to bridge. At this point, it is hard to see how that dispute can be resolved without one side or the other backing down.

Thus, by the end of last week, things were looking grim for the new farm bill. But, as Yogi Berra was reputed to have said, "it ain't over until it's over," and we're not at that concluding point yet. Stay tuned

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FARM BILL UPDATE: Senate Floor Debate Begins Tomorrow
Posted by: Phillip Fraas
November 04, 2007

On Friday, November 2, the Senate Agriculture Committee reported its farm bill to the Senate and the leadership announced that floor consideration of the legislation will begin at 3PM tomorrow, Monday, November 5. The schedule, as announced so far, is for debate only on  Monday, meaning no votes will be taken on amendments. Debate likely will continue throughout the week until all amendments are disposed of (unless some emergency arises that requires the leadership to pull the farm bill off the floor so the Senate can address the emergency).

Usually in the Senate, proposed amendments are introduced and printed in the Congressional Record, which allows people to get an advance sense of what the floor debate will focus on. However, in this case, none have yet been introduced, probably due to the fact that the committee bill wasn't filed until later on Friday, and staff hadn't had the chance to draft amendments tailored to it before the Congressional Record closed on Friday. Look for the proposed amendments to surface in Monday's Congressional Record and the debate on amendments to begin in earnest on Tuesday and continuing Wednesday and possibly Thursday.

The floor manager of the bill will be Agriculture Committee chairman, Tom Harkin of Iowa, and he will work with the Senate leadership over the course of the coming week in scheduling the debate on amendments. Typically in Senate farm bill debates, there will be vigorous debate on a handful of amendments, while perhaps dozens others will be agreed to by voice vote or wrapped into a omnibus manager's amendment that too will be approved by voice vote.

RIght now, the most intense debate can be expected (and the heaviest lobbying probabably is being done) on (1) a Grassley amendment to tighten limitations on eligiblity for, and amounts of, payments farmers receive under the farm income support programs; and (2) the Lugar-Lautenberg alternative farm bill that would make major reforms in the shape of the farm support programs, pushing them toward revenue insurance programs and reducing costs considerably.

The vote on the former is hard to predict; the Senate in the past has shown a stronger interest than the House of Representatives in tightening payment limitations. As to the latter, it probably doesn't have the votes--not that it wouldn't be an attractive option to many in the Senate, but legislators are not inclined to drastically switch farm policy directions unless there is an absolute need to do so, as when the markets are under severe stress or farmers appear at risk of going under. And, right now, prices are good and farmers are doing well under current programs.

More on the status of amendments in a couple days.

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FARM BILL UPDATE: Senate Ag. Committee Completes Its Work, Floor Debate Scheduled for Week of Nov. 5
Posted by: Phillip Fraas
October 27, 2007

After weeks of delay waiting for the budget situation to get clarified, the Senate Committeee on Agiculture, Nutrition, and Forestry two days ago approved a farm bill proposal put forward by Committee Chairman Tom Harkin of Iowa, Committee Ranking Republican Saxby Chambliss of Georgia, and Budget Committee Chairman Kent Conrad of North Dakota. Their proposal survived the committee mark-up process relatively unscathed, and now the bill heads to the Senate floor. Majority Leader Reid on Friday said that he would provide floor time for the farm bill debate during the week of November 5.

COMMITTEE ACTION: Earlier this month, the Senate Committee on Finance took action to provide funding for at least some farm bill programs, giving Agriculture Chairman Harkin enough flexibility to put together a farm bill proposal with Chambliss and Conrad that could attract enough votes to clear committee. That proposal is briefly summarized in my last blog posting of October 19.

The Harkin-Chambliss-Conrad plan sailed through committee mark-up this week with just nine amendments made to it; and only one amendment, offered by Senator Pat Roberts of Kansas, substantially changed the legislation. The Roberts amendment addressed what, for now, is the most controversial part of the bill--a new counter-cyclical payment option for grains, oilseeds, and cotton producers referred to as the Average Crop Revenue (ACR) program. The amendment restricts the scope of the new ACR program in a way that on the one hand will please the crop insurance industry, which is fearful that ACR program might cut substantially into its multi-peril crop insurance business (ACR and crop insurance aim to do essentially the same thing--protect farmers from unforeseen revenue losses), but on the other hand will distress supporters of ACR including the corn growers because the amendment makes ACR less attractive to farmers.

The battle over ACR and, more generally, revenue-based counter-cyclical payments will continue as the bill advances through Congress; and it is difficult to predict at this point what the final bill will look like in this regard. It is very likely, though, that some revenue-based program will be in the bill and, along with payment limitation reform, increased benefits for fruit and vegetable growers, the alternative energy package, among others, will be what distinguishes this farm bill from current law.

Further, although most of the farm bill debate so far has focused on farm price and income protection programs, it is worth keeping in mind that the farm bill likely will end up major changes in other food regulatory laws not traditionally considered as part of the farm bill but that have as much or more direct impact on consumers. The House started it by including new provisions requiring country-of-origin labeling of meat, and the Senate committee-reported bill adds to that new authority for state meat inspection programs and a prohibition on packer ownership of livestock.

FLOOR DEBATE: The heat during the Senate floor debate won't be generated by whether the bill passes--that is almost a given--but by one or more proposed amendments. Look for extended and passionate debate over amendments to tighten up payment limitations, the Lugar-Lautenberg substitute farm bill that would make more radical reforms to farm programs than the committee bill, and a Chambliss proposal to extend the authority of the cooperative Farm Credit System to finance alternative energy projects and rural housing (which the commercial banking industry is adamantly opposed to).

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FARM BILL UPDATE--Senate Agriculture Committee Close To Mark-Up Amid Controversy Over New Protection Plan
Posted by: Phillip Fraas
October 19, 2007

This week, the Senate Agriculture Committee edged closer to mark-up of the 2007 farm bill when it was announced that Chairman of the Committee, Senator Tom Harkin of Iowa; Ranking Republican, Senator Saxby Chambliss of Georgia; and Committee member and Chairman of the Senate Budget Committee, Kent Conrad of North Dakota, had reached agreement in principle on the outlines of the farm bill package the Committee will take to the Senate floor. Reports are that Harkin is ready to convene the Committee next Wednesday, the 24th, to consider the package. However, within the last couple of days, a controversy over a key element of the plan--optional revenue-based counter-cyclical payments--has threatened to derail mark-up.

THE AGREEMENT: The Harkin-Chambliss-Conrad plan would keep the three all-important commodity support programs--marketing loans, counter-cyclical payments, and direct payments--in place with some adjustments in loan and payment rates. And, it would tighten up the payment limitation rules in a manner similar to the way the House-passed farm bill did.

Also similarly to the House-passed bill, it would boost spending for nutrition programs by over $4 billion thourgh 2012 and increase support for renewable energy development. It differs substantially from the House version in that it would include the new Agricultural Disaster Relief Trust Fund approved last week by the Senate Committee on Finance and provide substantial new funding for the Conservation Security Program, which is strongly supported by Chairman Harkin.

Generally, this package and the House bill appear to be close enough in overall concepts that, should the package pass the Senate, getting the the House and Senate to resolve their differences in conference isn't too daunting a prospect.

THE CONTROVERSY: One part of the Harkin-Chambliss-Conrad plan would provide farmers that option to enroll in a new revenue-based counter-cyclical payment program that is similar to a program proposed in farm legislation earlier introduced by Senators Durbin of Illinois and Brown of Ohio.

The current counter-cyclical payment program is price-based, that is, it pays grain, oilseeds, and cotton farmers if market prices fall below the target price for each protected commodity and are calculated for each farm based on assigned yields and acreages.

This payment program has been subject to criticism. As USDA explained in its farm bill proposal: "By failing to take into account actual production per acre, current counter-cyclical payments tend to under-compensate producers when [actual] yields decline and over-compensate producers when yields increase." Thus, during the debate on this farm bill, there has been a lot of interest inswitching to a revenue-based counter-cyclical program, under which payments are made when revenue per acre falls below a target revenue amount. Per-acre revenue, it is argued, will more fairly compensate farmers during times of weak prices or weak yields. USDA proposed a revenue-based plan and the House included such a plan as an option for farmers in its version of the farm bill.

The particular revenue-based plan in the Harkin-Chambliss-Conrad package is called Average Crop Revenue Insurance and would be available as an option starting in 2010. It would provide farmers with payments if  average per-acre revenue at the state evel falls below the target revenue figure. But, if the farmer took this option, (1) the farmer would have to forego use of non-recourse marketing loans (under which the farmer can get a loan on harvested crops and forfeit the collateral without repaying the loan if market prices are below the loan amount), and (2) the farmer's direct payment rate would be a flat $15 per acre. The Congressional Budget Office has estimated that the plan would reduce farm bill spending by up to $3.5 billion. A reduction that substantial suggests that many farmers would find the option attractive and take it. And, those savings will allow increased spending in other areas of the farm bill needed to get the bill passed. 

The American Farm Bureau Federation, the National Association of Wheat Growers (NAWG), and the crop insurance industry, however, have come out in strong opposition to the plan. The Farm Bureau is concerned about the marketing loan and direct payment changes, NAWG has expressed concern about it getting us into World Trade Organization (WTO) problems, and the crop insurance industry appears to worry that it will reduce crop insurance purchases.

The Senate Agriculture Committee is very close to finally moving the farm bill forward (which the entire agricultural industry is pushing hard for in order to get the bill to the President before the end of the year), so I don't sense that these objections to the revenue-based payment plan are deal-killers. Yet, since the objectors are key farm bill players, their concerns must be dealt with--and before next week's mark-up if at all possible. Thus, it is likely committee staff will be spending a long weekend working through the objections and crafting changes to the plan to address the concerns.      

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FARM BILL UPDATE: Senate Finance Acts On Farm Bill Funding; Senate Agriculture Committee To Meet Next Week
Posted by: Phillip Fraas
October 15, 2007

[This posting is just a small modification of the posting I issued earlier today, to correct several typographical errors.] 

Since my last posting in late September, the Senate took a big step forward toward passing the 2007 farm bill when its Finance Commitee, on October 4, approved legislation to provide funding for parts of the farm bill package. The Senate is poised to advance the bill even further next week when the Committee on Agriculture meets to debate the main parts of the farm legislation.

I'll have more to say later this week about the upcoming Agriculture Committee session, expected to convene on October 23. Right now, let's look at the Finance Committee bill.

BACKGROUND: As was the case in the House of Representatives when it worked on the farm bill this summer, the Senate would like to add funds for farm bill programs beyond the current budget "base line" (which limits farm bill spending to the amount that it would take to fund the current farm bill, passed in 2002 and set to expire at the end of this year, if it were just extended).

The House leadership dealt with the problem by prevailing on the Ways and Means Commitee to make changes in the tax laws to add around $7 billion (I haven't seen the final budget numbers) to allow the Agriculture Committee to add new funding for nutrition and alternative energy programs.

The Senate Committee on Finance has the same jurisdiction over tax and other revenue-raising laws as House Ways and Means, and Sen. Tom Harkin (Dem.-Iowa), Chairman of the Agriculture Committee, has been looking to Finance to take similar action to provide him additional funds for farm bill add-ons or program redesigns.

On October 4, Senate Finance did propose changes in tax laws to raise close to $15 billion over a 10-year period, but unlike in the House, it also earmarked the savings for the farm bill programs it wanted, rather than just make the funds available to the Agriculture Committee. Still, it also proposed tax credits for certain existing rural land conservation mesures that are expected to free upwards to $3 billion for the Agriculture Committee to spend on its own new priorities.

SUMMARY OF MAJOR FINANCE COMMITTEE PROVISIONS: The Finance Committee bill, entitled the "Heartland, Habitat, Harvest, and Horticulture Act" (the "4-H Act"), is a major piece of farm legislation in its own right. Anyone interested in disaster payments, alternative energy programs, conservation, farm tax planning, or rural development is encouraged to review the details of the 4-H Act by going to the Finance Commitee website, www.Finance.Senate.gov and clicking on the button in the far left column labeled "Legislation."

Among the major provisions of the 4-H Act are the following:

--Establishment of an Agricultural Disaster Relief Trust Fund of $5 billion, to be used to cover "shallow" crop losses not large enough for crop insurance to provide assistance.

--Allow participants in the Conservation Reserve Program (CRP), a farm bill program, to take a tax credit in lieu of the cash payment under the program they now are entitled to. It is estimated that enough CRP participants will take the tax credit that outlays for CRP cash payments will be reduced by $3 billion or more, with the savings available for other farm bill spending.

--The Finance Committee summary of the bill lists 16 different major alternative energy provisions. The two largest, by amount of money involved, are (1) creation of a new production tax credit of 67 cents per gallon for cellulosic alcohol (this would be in addition to the existing ethanol tax credit), which would cost $1.08 billion over ten years; and (2) reduction of the existing ethanol tax credit (which is now 51 cents a gallon) by 5 cents beginning in the first year in which 7.5 billion gallons of ethanol are produced, which would increase tax revenues by $854 million over five years.

--Expansion of beginning farmer eligibility for low-interest loans funded with so-called "Aggie Bonds," which are tax-exempt bonds issued by state and local governments. The maximum loan amount will be increased from $250,000 to $450,000.

--The big revenue-raiser will be the provision writing into the Internal Revenue Code the current case law on the "economic substance" doctrine that holds that tax deductions are only permitted on transactions that change the taxpayer's economic position in a meaningful way and that are entered into for a substantial non-federal tax purpose. It is estimated that this provision will increase tax revenue by $10 billion over ten years.

WHY THE HOUSE AND SENATE DIFFER ON THE FINANCE/WAYS AND MEANS PART OF THE LEGISLATION: The Senate Finance Committee not only developed tax proposals to provide more money for the farm bill, but it effectively wrote some of the farm bill with its provisions on disaster payments, conservation, alternative energy, and rural development--in a way that House Ways and Means didn't attempt.

Why this is so reflects both the differing natures of the two bodies and the backgrounds of the Finance and Ways and Means chairmen. The House, a large and some times fractious group, tends to operate from the top down, and there is little legislative overlap among the committees. This year, the House leadership allocated the drafting of farm bill policy to the Agriculture Committee and raising needed additional funds for the bill to Ways and Means and expected the the committees to stick to their assignments, which is what happened. And, no doubt making it easier for Ways and Means to avoid the temptation of drafting its own farm bill policy provisions is the fact that the district of its chairman, Rep. Charles Rangel (Dem.-NY), is smack in the middle of New York City where farm policy is not of great interest to constituents.

On the Senate side, there is a lot of overlap among committees. Eight of the 20 members of the Agriculture Committee also serve on the Finance Committee. And, the Senate operates more by consensus than does the House. While the House adheres to many rigid rules in its operation, allowing the leadership that controls the rules to call the shots, it is said that the only rule in the Senate is that it has no rules. Thus, Chairman of the Finance Committee, Sen. Max Baucus (Dem.-Mont.), who has a deep interest in farm policy because his state is entirely rural in nature, felt empowered to draft the 4-H Act with its wide-ranging farm policy provisions.

SOME THOUGHTS ON WHAT HAPPENS TO THE FINANCE COMMITTEE PROVISIONS LATER ON: For the time being, Chairman Harkin of the Agriculture Committee can do little but accept the Finance Committee proposals on disaster payments, conservation, and other farm bill policy provisions.

However, during the Senate floor debate, it is likely that the Agriculture Committee's farm bill proposals will be linked together with the Finance Committee's 4-H Act, and the two will pass as a single farm bill. That means that when the Senate and House meet in conference to resolve differences between their two versions of the farm bill, there will be one chairman representing the Senate interests on both the Agriculture and Finance provisions, and that will be Agriculture Committee Chairman Harkin. While no doubt Finance Chairman Baucus will also sit on the conference committee, Harkin will hold the gavel. Thus, Harkin will finally will have an opportunity to reshape the Finance Committee provisions to more closely conform to his vision of what the farm bill should look like.

Of course, much of what is in the 4-H Act likely is both totally acceptable to Harkin and other members of the Agriculture Committee and non-controversial to the wider Senate as a whole. One major provision, however, that might come under scrutiny during the Senate floor debate and conference is the disaster assistance trust fund. This measure best fits the needs of farmers and ranchers in the high plains who are especially vulnerable to climate extremes like severe droughts and freezes. Because of the trust fund's cost--$5 billion--it could be that members of Congress with different farm bill priorities will push hard to shift some of that spending to programs that benefit a wider cross-section of the country.  

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FARM BILL UPDATE: Senate Deadlocked; Time Starting To Become Critical
Posted by: Phillip Fraas
September 29, 2007

The latest reports are that the Senate agricultural leadship is deadlocked on the terms of the new farm bill. If the Senate Agriculture Committee mark-up gets postponed until mid-October or later, time will become an increasingly important part of the farm bill dynamic. Farm bills rarely are easy to craft or enacted earlier than scheduled; this one looks like it won't be an exception to those rules.

THE SENATE SNARL: It appears that Agriculture Committee Chairman Tom Harkin at this point hasn't found a way to fund the farm bill initiatives he would like to propose. His primary initiative--something he will want to be known as a champion of--is the strengthening of USDA's working lands conservation programs, especially the Conservation Security Program. To accomplish that, it is understood that he would need about $4 billion in new funds over and above the farm bill baseline.

The likely ways he could find the needed funds seem to be blocked right now. One such way would be to impose on the Senate Finance Committee to make changes in Federal tax policy or revenue laws (such as customs receipts, user fees, and so on) to raise the needed money. But, the Finance Committee has already released its farm bill proposal, which, while it will raise additional money for a permanent disaster assistance program, doesn't put further funds at the Agriculture Committee's disposal.

The other way is for the Agriculture Committee to transfer money that otherwise would be spent on farm program direct payments to the conservation programs. The five-year baseline for direct payments is around $26 billion, and there is talk that Harkin would like to cut that by 12% or so, freeing up about $3 billion for conservation. The trouble is, some farm groups strongly oppose cutting direct payments (USDA actually proposed increasing them); and right now, Chairman Harkin doesn't have the votes in Committee for this action.

Because the farm bill funding issues haven't been worked out, Chairman Harkin hasn't convened a meeting of his committee to mark up the farm bill. Until just late this week, rumors were that the mark-up would happen this coming week. Based on latest word from the committee, however, it appears more likely that won't happen. Then, on October 5, the Senate goes into recess for a week, so that means that the earliest the Agriculture Committee can get to the farm bill is mid-October. 

No one is happy that the process is slowing down, but until the budget issue gets resolved or more drastic action is taken by the Senate leadership, the farm bill remains in limbo. 

JUST LOOK AT YOUR CALENDAR: Assuming that the earliest the Senate Agriculture Committee can get to mark-up is in mid to late October, time will begin severely pressuring congressional farm bill negotiators. The farm bill is a huge bill with literally hundreds of sections; so after mark-up is completed, staff will need some time to prepare the legislation for floor debate. Then, the Senate leadership will have to find time in the already tight floor schedule for November to schedule debate on the legislation. 

After the Senate passes the farm bill, staff will need additional time to carefully compare it to the House-passed version and draft a statement of the differences between the two versions of the bill for the use of the House-Senate conference that will be convened to settle those differences.

I wouldn't be surprised that, under the scenario I have sketched out, the conference committee doesn't convene until the first or second week of December. That just leaves a few weeks for this part of the farm bill process to play out. If so, expect very late nights and increasingly short tempers. And, the pressure will mount for the negotiators to take the easiest way out and back away from major changes in programs and other controversial measures.

ON A MORE POSITIVE NOTE . . . : As the Senate farm bill has evolved over the past couple of months, it is looking more and more like the House version. That should greatly facilitate the work of the House-Senate conferees. Also, the congressional leadership and the Bush Administration both continue to send strong signals that they will do what is necessary to get a new farm bill this year. So, once the Senate budget battle is over, the process should pick up speed quickly.

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FARM BILL UPDATE: Senator Baucus Offers Added Farm Program Funding And Support
Posted by: Phillip Fraas
September 17, 2007

On September 11, Sen. Max Baucus (Dem.-Montana), Chairman of the Senate Committee on Finance (the tax-writing committee), unveiled an agricultural assistance package that effectively will complement and supplement the work the Senate Committee on Agriculture is doing on the farm bill.

BACKGROUND ON THE BUDGET PROBLEM: A serious problem both the Senate and House agriculture committees have faced since they began work crafting the new farm bill earlier this year is finding additional money beyond the 2002 farm bill base line to fully fund the 2007 farm bill they would like to see put in place.

If the House and Senate agriculture committtees were just interested in extending the 2002 farm bill, they wouldn't have these budget problems because Congress has authorized for the new farm bill an amount of money equal to that needed to keep 2002 farm bill programs going (i.e., the baseline). However, they perceive their charge in drafting the new farm bill to be to update its provisions to reflect changes in the farm landscape since 2002. As a result, they see the need to change or strengthen some existing programs, beef up funding for others, and authorize new programs, many of which actions will require new spending beyond the baseline and almost none of which will reduce spending. The result: a desperate search for money is an integral part of the 2007 farm bill process.  

THIS YEAR'S APPROACH--BRING IN THE TAX COMMITTEES EARLY IN THE PROCESS: What has happened so far this year is a change from the recent past in the way the farm bills are funded. In previous years, the farm bill and budget processes moved on separate but parallel paths. The agriculture committees would draft the substantive farm policy provisions they believed should be included in the bill without budget strictures dominating the process (of course, they always kept looking over their shoulders at the budget process as they did their drafting). During the course of the year that the farm bill was being drafted, Congress would also be working on budget reconciliation measures needed to to keep Federal spending deficits in check, and would give the agriculture committees instructions to reduce farm bill spending as part of that budget reconciliation process. Then, the agriculture committees would revisit the farm bill and trim it as needed to meet the budget reduction instructions they had been given 

This time, the budget and farm bill processes effectively have merged, with the funding issue to be taken care of at the same time the farm bill is passed. In the House, the agriculture committee drafted farm bill provisions that stayed within the budget baseline. By doing so, the committee had to forego some policy options they otherwise would have approved, put others on hold, and cut yet other spending to pay for new policy proposals. Then, just before the farm bill went to the House floor for debate, the House leadership prevailed on the Ways and Means Committee to find dollars in revenue offsets (that is, legislative measures that would increase government tax payments) that could be used for much of the new spending in the farm bill the Agriculture Committee would have approved but couldn't because of the budget. The Ways and Means measures, along with the desired increases in spending, were tacked onto the farm bill during the floor debate.

In the Senate, as reflected in Sen. Baucus's announcement, the Committee on Finance similarly looks to put itself in the middle of the farm bill process by finding added money for farm programs.

THE BAUCUS PROPOSAL:  Sen. Baucus says that his package will take some of the budget pressure off the Agriculture Committee as it drafts the farm bill. by eliminating the need for Agriculture action on the programs covered by it. He says he will seek action by the Finance Committee very soon; and likely his committee will act in tandem with the Agriculture Committee as it marks  up the farm bill.

Here is a summary of the major provisions of his package:

--Establishment of a permanent agricultural disaster assistance trust fund, paid for by changes in laws under the Finance Committee's jurisdiction (such as the tax laws).

--Authority for farmers who currently receive cash payments for participation in soil and water conservation programs to choose instead to receive tax credits.   

--Creation of a new category of tax credit bonds for rural development projects.

--Creation of tax incentives for alternative energy and to encourage farmers to grow alternative crops used to produce bio-fuels (these could be handled seperately as part of the omnibus energy bill working its way through Congress now).

I haven't seen any estimates on the price tag of this package, but it likely will be in the billions.

TWO DIFFERENT APPROACHES: What House Ways and Means did is just go out and raise additional funds through revenue-enhancement measures not tied to farm policy, and turn the money over to the Agriculture Committee for use in the farm bill. What Sen. Baucus proposes to do is to fund farm policy initiatives that will have the effect of reducing the need for new spending in the farm bill, but keep jurisdiction over these initiatives at the Finance Committee. It remains to be seen if Sen. Tom Harkin, Chairman of the Senate Committee on Agriculture, will be satisfied with this approach. So far, indications are that he won't. Thus, as in the House, at the end of the day it likely will take action by the body's leadership to get the farm bill over its budget hump.  

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FARM BILL UPDATE: An Early September Perspective
Posted by: Phillip Fraas
September 10, 2007

Congress has returned to Washington following its August recess, and work will soon resume on the drafting the 2007 farm bill. Senator Tom Harkin, Chairman of the Senate Committee on Agriculture, is expected to come out with his farm bill proposal within the next few days. Then, he likely will schedule committee mark-up of the proposal soon thereafter. Next, reports have it that the Senate leadership is prepared to take the farm bill to the floor as soon as the committee completes its work. And, once that is done, the House and Senate will convene a conference committee to resolve the differences between their versions of the farm bill. A lot to get done this fall, but that is the goal.

At this point, when these key steps in the farm bill process are ready to start unfolding, it might be a good time of consider a few of the subsidiary aspects of the process.

THE ADMINISTRATION'S ROLE IN THE DEBATE:  Congress typically doesn't give a lot of consideration of Administration farm bill proposals, perferring to draft the bill themselves. That cerrtainly has been the case this time around. But, that does not mean that the Administration is shut out of the congressional farm bill process. Traditionally, the Administration has had a seat at the table at Senate-House conferences on the farm bill, making these sessions three-way negotiations to an extent. This is because Congress needs the President's signature to have its farm bill become law; and, if a President opposed to key provisions vetoes the bill, Congress would be hard put to round up the two-thirds majority needed to override the veto.

In this farm bill debate, Secretary of Agriculture Mike Johanns has already, even before conference, staked out an activist role. In this effort, he is being ably assisted by Deputy Secretary Chuck Conner, who has gone through enough farm bills (either when he was a congressional staffer, White House official, or lobbyist) to know how the process works and how to maximize the Administration's influence.

Substantively, Secretary Johanns already has threatened veto recommendations on the revenue-raising measure attached to the House farm bill, and on any efforts to increase price support loan rates. On these issues, and on others the Administration has strong positions about, such as payment limitation reform, expect the Administration to be directly involved in the final decision making.

LIKELIHOOD OF A FARM BILL EXTENSION: As this year has unfolded, there have been repeated calls for Congress to avoid divisive disputes on difficult issues--such as finding money to fund all the programs or the specific terms of the farm and income support programs (loans, direct payments, and counter-cyclical payments)--by extending the current farm bill for at least a year.

A straight extension certainly is an option Congress will have at its disposal throughout the remainder of this farm bill debate. However, as Congress moves past one after the other benchmark in the legislative process, and as the congressional leadership and Administration continue to reiterate their commitment to seeing the job through to the end, one senses that the straight extension option is getting pushing farther and farther into the background.

Of course, if the Senate Agriculture Committee doesn't get a bill reported fairly soon, the calls for an extension will increase and grow louder.

WHERE ARE THE VOTES IN SENATE AG? The real farm bill action in recent weeks has been behind the scenes at the Senate Agriculture Committee, as Chairman Harkin fine-tunes his chairman's mark to pick up the 10 votes that with his vote will give him a majority in the committee. In the mean time, it seems that an alternative has surfaced that is closer to the House-passed bill than the Harkin proposal. Harkin's proposal is understood to differ from the House bill by imposing tougher payment limitations reforms and shifting price and income support spending levels among commodities. Rice and cotton producers prefer the House version; so, not surprisingly the alternative appears to have the support of Senate Ag Committee members Chambliss, Lincoln, Cochran, and Graham. Further, it is likely that they are being joined by several other committee members. If so, that still doesn't constitute a majority of the committee, but it makes for an exciting horse race as to who will get to 11 votes first.

If Chairman Harkin succeeds in corralling a majority in the Committee, look for him to move to mark-up and floor debate as soon as possible. If the other side captures the majority or there is an effective deadlock in the committee, it is hard to tell what happens next. On the one hand, the Senate leadership wouldn't be inclined to force one of its committee chairman to move legislation he doesn't support, but on the other hand they want to see some action on the farm bill very soon. At this point, anything is possible. Stay tuned.   

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REVENUE-BASED COUNTER-CYCLICAL PAYMENTS: A POSSIBLE NEW ELEMENT OF FARM BILL POLICY
Posted by: Phillip Fraas
August 27, 2007

During the course of this year's farm bill debate, there has been considerable discussion of revenue-based counter-cyclical payments (CCPs). The concept is new and--since it increasingly looks as if Congress might include some form of these revenue-based payments in the farm bill it finally approved--it might be this farm bill's main contribution to the evolution of Federal farm policy.  

BACKGROUND ON THE ELEMENTS OF THE FARM BILL "SAFETY NET" AND THE PERCEIVED FLAW IN CURRENT CCP'S: The current Federal "safety net" for row crop commodities (primarily grains, oil seeds, and cotton), which takes up the bulk of farm policy spending under the farm bill, has three elements.

First, there are direct payments, which are made to all participating farmers regardless of what and how much they produce. At one time, they were referred to as "decoupled payments," because they aren't tied to production.

Then, there are marketing assistance loans and loan deficiency payments. Farmers take out loans at a set rate per unit of production (commonly designated in bushels), using their harvested crops as collateral; but if market prices fall below the loan repayment rate, the farmer only has to repay the loan at that lower market price. Loan deficiency payments short-cut the process and allow the farmer, in lieu of taking out a loan, to take a payment that represents the difference between the market price and loan rate.

Then, there are counter-cyclical payments, similar to the marketing assistance loans in that payments are triggered if market prices are low. The CCP rate or "target price," paid on each unit of production is somewhat higher than the marketing assistance loan rate and traditionally has been tied to the cost of production. If the higher of the market price or the loan repayment rate is below the target price, the participating farmer receives a payment on the difference between the market/loan price and the target price for each unit of covered production, determined by multiplying covered acreage times the farm's per-acre payment yield. Payment yields do not change from year to year to reflect actual production figures, but are static, based on yields set in the early 1980s.

USDA and others have argued that the current CCP program has a structural flaw related to the simple economic facts that, in years when production is low, prices typically rise and CCPs are not triggered and, conversely, prices fall when production is good and CCPs are triggered. What that means is that, for example, in a drought year when many farmers are wiped out, production goes down and prices go up, either reducing the CCP payment rate or eliminating CCPs entirely. Yet, the farmer whose crop was wiped out by the drought needs safety net payments even more so than in a year when his or her production was normal. On the other hand, in a non-drought year when production is so fruitful that the extra supplies depress market prices, CCPs are paid, even for the farmer who has perhaps his or her best yield ever and doesn't really need the government assistance. 

WHAT IS BEING PROPOSED AND THE OUTLOOK: To remedy this perceived inequity in current policy, USDA earlier this year proposed redesigning the CCP program to protect farmers from declines in revenue (which, it argues, is the real harm farmers should be protected from), not declines in commodity prices. Thus, USDA recommended that, under the new farm bill to be enacted this year, CCPs be made only when actual national revenue per acre for the commodity involved is less that the national target revenue per acre. On both sides of the calculation, revenue per acre would be calculated by multiplying price (either market/loan price or target price) times yield.

Several farm groups have endorsed the concept of revenue-based CCPs and the House of Representatives included in the farm bill it passed on July 26 a provision to give farmers the right to elect revenue-based CCPs instead of traditional commodity price-based CCPs. More recently, reports are that Senator Tom Harkin, Chairman of the Senate Committee on Agriculture,  is considering the USDA approach of making all CCP payments revenue-based. However, it also is reported that some commodity groups oppose revenue-based CCPs because they would result in less money to their farmers.

Nonetheless, there is a fair chance the Senate farm bill will contain either optional revenue-based CCPs similar to the House provisions, or mandatory revenue-based CCPs. If so, the odds are great that the final farm package sent to the President for his signature later this year or next will have one form or the other of this new concept in farm policy. Then, it will be "field-tested" by farmers over the next few years, and if it is well-received, it likely will become a feature of future farm bills.

Thus does farm policy slowly evolve from one farm bill to the next, with outmoded programs being discarded and new ones that work better put in place.  

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Some Thoughts On The Timing Of Congressional Consideration Of The Farm Bill
Posted by: Phillip Fraas
August 20, 2007

The current farm bill covers the 2002 through 2007 crops, so the new farm bill being considered by Congress now should be passed before the end of this year. Farmers in the southern areas of the country begin serious field work on the 2008 crops in January or February and are entitled to know what the terms of the new farm programs are before they do so.

Congress can meet this end-of-the-year deadline, but it has a lot of work ahead of it and its recent track record for recent farm bills isn't encouraging. Nonetheless, if the money can be found to adequately fund the legislation and the Bush Administration's concerns can be assuaged, a farm bill before Christmas is very possible.

WHERE IT IS NOW: Congress is roughly one-third of the way through the second half of the farm bill process. The first half of the process was the conduct of hearings to receive testimony and gather information on what should and should not go into the new farm bill. That work effectively concluded in early spring of this year.

The second half of the process is the actual drafting of the bill, and there are three main parts to that: House consideration, Senate consideration, and conference meetings to resolve differences between the House and Senate versions of the bill.

The first third is done--the House passed its farm bill on July 27.

As to the middle third of the drafting process--Senate consideration--likely, the Senate Committee on Agriculture, Nutrition, and Forestry would already be moving to get the legislation ready for floor action, but Congress left on August 5th for an extended recess, putting off until September the next chance the Senate has to act on the farm bill. 

Current reports are that Senator Tom Harkin (Dem.-Iowa), Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, will table his "chairman's mark" (which sets out the details of what he proposes to go into the new farm legislation) during the first or second week of September. Then, later in September or in October, his committee is expected to meet to consider amendments to, and vote on, the chairman's bill.

Once the Committee finishes its work, the bill heads to the Senate floor for consideration. At this time, it is unknown when the Senate leadership will schedule it for floor debate. Unless the Senate bill hits a major snag, however, it is reasonable to think that the Senate would complete work on the farm bill later in October.

That would give Congress a good six or seven weeks to complete the last third of the drafting process--conference consideration. Whenever the House and Senate pass legislation and there are differences in what they pass (which is unquestionably what will happen with the farm bill), the two bodies appoint a joint conference committee to resolve their differences. If the conference committee can work out a compromise on the House-Senate differences, it drafts a third version of the bill incorporating those compromises, which Congress debates and votes on. Once the conference report is agreed to by both bodies, the legislation then is sent to the President for his signature. 

CONGRESS'S TRACK RECORD ON PREVIOUS FARM BILLS: Since 1977, Congress has drafted six farm bills: the 1977, 1981, 1985, 1990, 1996, and 2002 farm bills. With the first four, Congress completed its work and the legislation became law before the previous farm bill expired. The earliest enactment was in 1977, when the President signed it on September 29, 1977, effective for the 1978 through 1981 crops. The latest was in 1981, when the farm bill didn't become law until December 23, 1981, to cover the 1982 through 1985 crops. 

In contrast, the last two farm bills were not finished on time. The 1996 farm bill didn't become law until April 4 of that year, even though the previous farm bill had expired with the completion of the 1995 crop year. Similarly, there was extended debate over the 2002 farm bill, and it wasn't signed until May 13 of that year, effective for the 2002 through 2007 crops. In both cases, farmers were substantially inconvenienced having to go through spring planting not knowing for sure what the terms of the new farm legislation would be; but, in both cases, at least the law was in place well before harvest.

There hasn't been a structural change in the way Congress handles the farm bills to explain the 1996 and 2002 delays; the roadblocks leading to the delayed passage of those two farm bills related to issues that are not present in 2007 or in years before 1996. So, there is no reason to expect a similar delay this time around. In fact, based on where things stand now, this farm bill is on a flight path much closer to those of the four timely farm bills.

WHAT COULD PUSH THINGS INTO 2008: Given, however, that there will be just ten or eleven weeks for Congress to complete work on the farm bill after its returns in September, it wouldn't take much of a delay to push things into 2008. And, once legislation is pushed into a new year, typically it isn't until March or April that Congress gets back to it, as January and February typically are taken up with organizing for the new session of Congress.

What could cause a delay to push the farm bill debate into 2008? First and foremost, funding. Both the House and the Senate agriculture committees are seeking money to pay for new priorities while using existing funding to continue the current programs, which farmers are content with and want extended. However, both the Administration and Congress are committed to reducing deficit spending, and it is unclear where the money will come from to pay for the farm bill add-ons the committees are insisting on. The House proposed to raise the money by taxing earnings of foreign-based businesses, but the Administration has threatened a veto of the House bill, largely based on its concerns about that provision. And, reports are that the Senate has not yet found attractive alternative sources for the needed new funds.

The Administration threat of a veto also could force the farm bill process to a halt this year. Whatever farm bill the House and Senate come up with probably will not have the votes sufficient to override a veto by the President, so Congress has to accommodate enough of the Administration's concerns to remove that threat. Yet, finding a way to bridge any differences between the Administration and Congress that surface (and one already has surfaced as to new farm bill funding) could run out the clock for this year. 

IS AN EXTENSION OF THE CURRENT FARM BILL POSSIBLE? Yes. If Congress is deeply bogged down and not close to an agreement on a new farm bill at the end of the year, the calls for just extending the current farm bill will grow louder. If farmers generally are pleased with the current farm programs, a straight extension becomes an attractive alternative in that it avoids the funding issues and likely the veto threat as well.

However, it is worth reviewing the six previous farm bills, including the 1996 and 2002 bills. Even when Congress didn't get them done on time, it didn't opt for a simple extension. Based on Congress's track record, then, it might not be appropriate yet to throw a straight extension into the mix of alternatives.

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Farm Bill Update: COOL Is In, NAIS Is Not
Posted by: Phillip Fraas
August 08, 2007

Two government programs relating to animal agriculture have been the subject of discussion recently in connection with the drafting of the 2007 farm bill: country-of-origin labeling ("COOL") and the national animal identification system ("NAIS"). Break-through amendments to the COOL law were included in the version of the farm bill passed by the House of Representatives on July 27, and I have gotten several inquiries about whether NAIS provisions will be included in the farm bill.

NAIS NOT IN THE FARM BILL: USDA's national animal identification system, in operation as a voluntary program for several years now, is designed to facilitate rapid and effective animal disease traceback. It has three components: premises registration, animal identification, and tracing. Over 406,000 premises have been registered to date. 

While NAIS has been the subject of debate in agriculture, the House-passed farm bill did not include any provision dealing with the matter. The Senate won't draft its version of the farm bill until September or October, and we don't know yet whether it will include a NAIS provision.  

It is worth noting that the Government Accountability Office (GAO) recently released an audit of the NAIS program identifying several issues of concern and suggesting that implementation of the program needs improvement, but made no recommendations for legislation on the program. You can review the GAO report by going to www.gao.gov/cgi-bin/getrpt?GAO-07-592.

COOL IS IN THE FARM BILL: The 2002 farm bill included a provision requiring retailers other than restaurants to label meat, fish, perishable commodities, and peanuts by country of origin. This turned out to be controversial, especially for meat products, so that the requirements were never implemented. However, just before the farm bill was taken up by the House of Representatives last month, a compromise was reached by the warring parties on the issue, and the compromise was included in the House-passed bill. If the compromise holds together, the same language likely will be added to the Senate version as well and COOL finally will be implemented.

The labeling rules under the compromise include the following:

--Beef, lamb, pork, and goat meat can be labeled by a retailer as exclusively having a U.S. origin only if the animal from which it is derived in fact is exclusively born, raised, and slaughtered in the United States or was present in the U.S. on or before January 1, 2008.

If an animal is born, raised, or slaughtered in the U.S. but not exclusively so, the retailer can designate the origin of meat from the animal as all of the countries in which the animal was born, raised, or slaughtered.

---If an animal is brought into the United States for immediate slaughter, the retailer must designate the origin of meat from the animal as the country of import and the United States.

--For meat from all other animals (that is, not born, raised, or slaughtered in the U.S.), the retailer must designate a country other than the U.S. as country of origin.

--For ground beef, pork, and lamb, the country of origin notice must include a list of all countries of origin or a list of all reasonably possible countries of origin. 

--The rules governing fish, perishable agricultural commodities, and peanuts remain essentially the same as under current law. A U.S. country-of-origin designation can be given only if the fish is hatched and raised (if farm-raised), harvested, and processed in the U.S., or if the perishable commodity or peanut is produced in the U.S. The House farm bill, however, will allow the labeling of U.S. perishable commodities by state, region, or locality.

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Farm Bill Update: The House of Representatives Passes Its Version of the Farm Bill
Posted by: Phillip Fraas
July 30, 2007

Last Friday, July 27, the House of Representatives passed the 2007 farm bill by a vote of 231 yeas to 191 nays. The closeness of the vote reflected Republican unhappiness with the tax increase/closure of a tax loophole added to the bill by the House leadership to fund new farm bill programs and priorities.

The farm bill now goes to the Senate for its consideration; and recent reports have it that the Chairman of the Senate Committee on Agriculture, Tom Harkin (D.-Iowa), will draft his "chairman's mark" over the August recess and schedule committee mark-up of the farm legislation in early to mid-September. If things unfold under that scenario, the full Senate could take up bill in late September or early October, and the House and Senate would then meet to resolve their differences on the bill later in October. 

HOUSE COMMITTEE BILL GOT THROUGH FLOOR DEBATE MOSTLY UNSCATHED: While House Republicans strongly opposed final passage of the farm bill because of the tax provision, during the floor debate on the legislation, they joined Democrats on handily defeating most amendments that would have done any damage to the substance of the bill drafted by the agriculture committee. An amendment offered by Cong. Ron Kind (D.-Wisc.), which would have substantially revised the farm and commodity support provisions that are the heart of any farm bill, went down by a vote of 309 to 117.  More narrowly focused amendments to cut back on loan deficiency payments, sugar program benefits, cotton direct payments, and crop insurance administrative subsidies also failed by substantial margins.

LAST-MINUTE ADD-ONS TO THE COMMITTEE BILL HELPED ITS CHANCES: After the agriculture committee reported the farm bill to the full House on July 24, several provisions were added that strengthened the bill's appeal to members who might not have been inclined to support it otherwise. The insertion into the bill of the above-mentioned revenue-raising measure made it possible to increase spending on nutrition programs by $4 billion and biomass energy programs by $2.5 billion. Close to $1 billion in crop insurance spending was switched to additional nutrition program funding. And, a break-through compromise to implement country-of-origin labeling (COOL) for meat and poultry products was reached at the last minute and tacked onto the bill, as was a proposal to enable African-American farmers to seek damages for USDA discrimination, a measure strongly supported by the Congressional Black Caucus.

HOW THE HOUSE BILL WILL FARE IN THE SENATE: It is hard to predict at this point how much of the House farm bill that the Senate will accept when it considers the legislation. In general, the sentiment in the Senate agriculture committee seems to be much the same as was evident in the House agriculture committee--farmers are relatively happy with existing farm programs and policies, and so there is no momentum for a drastic rewrite of current programs.  

Senate Chairman Harkin, however, has already thrown down the gauntlet on conservation. He long has been a champion of soil and water conservation programs, and is especially supportive of the Conservation Security Program (CSP), a USDA "working lands" conservation program. The House bill limited funding for the CSP, and Harkin commented late last week that, "most notably, the House bill did serious damage to conservation."  One can expect the Senate agriculture committee to consider a substantially different approach than the House on conservation.

Also, the Republican opposition to the House bill's revenue-raiser seems to run deep, and it is extremely doubtful that there are the votes in the House or the Senate to overcome the veto threat that already has surfaced because of it. Thus, the Senate can be expected to look for an entirely different approach to fund new farm bill spending.  At this point, however, I have not heard of any alternative funding approach that has surfaced. A good alternative will be hard to find.

Thus, it can fairly be said that, while the House agriculture committee had a very difficult job in getting a consensus on a farm bill that could garner a majority in the urban-dominated House, the Senate agriculture committee will have an equally difficult job patching together a winning coalition on farm policy and solving the knotty funding problem in that body. In short, the farm bill process remains a challenge, but the challenge has moved to new venue.

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Farm Bill Update: The House Committee on Agriculture's Farm Bill
Posted by: Phillip Fraas
July 23, 2007

Last Thursday, July 19, the House Committee on Agriculture successfully completed a three-day mark-up of the 2007 farm bill by ordering the draft legislation reported to the full House of Representatives for its consideration this week.  The House committee bill is massive--790 pages--and comprehensive--it covers farm price and income support, soil and water conservation, alternative energy development, nutrition programs, agricultural trade, farm credit, research and extension, forestry, rural development, horticulture, organic agriculture, crop insurance, food labeling, and meat and poultry inspection.

The bill's chances on the House floor look reasonably good (considering that the body is dominated by congressmen from urban districts) because it has the blessings of the House leadership and support from farm state Republicans. And, it sweetens the pot for members who might otherwise oppose it, by providing extra money for nutrition programs, the fruit and vegetable industries, and an alternative energy initiative.

In the past, however, there have been some very close House votes on key elements of the farm programs, and there is no reason to expect the floor debate this week to be any different. There remain a number of House members who would like to see deeper cuts in the farm programs or more of a shake-up in how those programs operate; and on the floor they will have an opportunity to take their shots at the committee-reported bill.

Following are comments on just a few of the more significant aspects of the committee's farm bill:

--The extra money for nutrition programs and alternative energy development will not come from sources directly available to the Committee on Agriculture. Rather, the nutrition funds ($4 billion) are to be raised by the Committee on Ways and Means through changes in the tax code or decreases in spending under its jurisdiction, and the energy money ($2.5 billion) is to be derived from energy-related tax measures approved by the House earlier this year. It appears that, at some point during the House floor debate, thelegislation needed to pay for the new nutrition and alternative energy spending will be "married" to the agriculture committee's farm bill. This is a delicate maneuver, and until it is actually done, no doubt the Agriculture Committee will be keeping its fingers crossed.  

--The bill includes reforms to the "payment limitation" rules that put caps on how much farmers can receive in direct support payments. The committee's proposals are scored as saving $522 million over ten years. Among the major proposed reforms, the "three entity" rule (under which an indvidual can share in payments in up to three entities in which he or she has an ownership interest) would be repealed, and the "AGI limit" would be lowered from $2,500,000 to $1,000,000. AGI stands for adjusted gross income, and under the committee's proposal, a farmer with an AGI of over $1,000,000 could not receive any farm program payments. While the committee's reforms don't go as far as USDA's payment limitation recommendations, they are substantial enough to enable the committee to argue against further payment limitation changes that might cause farm groups to withdraw their support of the legislation. And, if the farm bill becomes law with just these changes intact, it could lead to a rash of restructurings by farms bumping up against the new caps.

--The bill will give farmers the option to receive revenue-based countercyclical payments. These payments are now made when farm prices are low, and are intended to make up the difference between low market prices and a higher target price set at a level more closely aligned with the cost of production. Many, including USDA, have recommended the shift to revenue-based payments, which would be made when farm income is low, the argument being that those payments would better meet the needs of farmers hard-pressed financially by market reverses. The committee bill's proposal takes a first step in the direction of this new approach.

--The committee's bill, while not short-changing conservation programs, doesn't provide full funding for all conservation programs. Also, congressmen from peanut-producing areas have expressed concern about the peanut provisions in the bill. Conservation is one of the highest priorities of the Democratic Chairman of the Senate Committee on Agriculture, Tom Harkin of Iowa; and the ranking Republican on the Senate committee, Saxby Chambliss, comes from one of the largest peanut-producing states. Thus, it might be expected that the Senate Agriculture Committee will be looking very closely at these particular provisions of the bill should the House pass it this week and send it to the Senate in the form reported by the committee.    

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FARM BILL UPDATE: Some Observations While The Agriculture Committees Are In The Midst Of Crafting A Farm Bill
Posted by: Phillip Fraas
July 16, 2007

Since at least early June, the Senate and House Committees on Agriculture have been hard at work trying to develop a farm bill that (1) meets perceived needs, based on the record created by many hours of verbal testimony and reams of written testimony, and on the advice received in numerous meetings with lobbyists; (2) is adqauately funded; and (3) will get the votes needed for passage. Not an easy job, and the committees are still far from completing their work. While they wrestle with their task, a few observations might be in order.

--The farther along the committees get in the process, it becomes increasingly clear that finding new money to fund new priorities (such as bioenergy development, increased funding for conservation and nutrition programs, and a permanent disaster assistance program) will be very difficult. Thus, there is an increased inclination at the committee level to stick with existing programs. There is money for them--it's in the budget baseline assigned to the committees--and farmers generally seem satisfied with existing programs.

--That doesn't mean that bold new proposals for farm policy reform are dead. Once the committees complete their work on the farm bill and it heads to the floor for debate, proponents of substantial reform get another chance to argue their case to a perhaps more receptive general membership of both bodies. Not being tied so closely to parochial farm interests, non-agriculture committee congressmen approach the farm bill debate with an open mind. So, expect the drumbeat for reform to increase after the farm bill leaves the committee and nears the time for floor debate.

--It increasingly looks as if the Senate Committee on Agriculture will not vote on the farm bill before the August recess, which starts in just three weeks; while the House Agriculture Committee is scheduled to vote on the legislation this week, and take the bill to the floor next week. Some think that it will be problematic to have a House-passed farm bill sit around for months while the Senate continues to the debate the matter. I am not sure that is the case. In 1990 and again in 2002, the House passed its bill several months prior to the Senate acting, and I don't recall that the gap in timing in itself had any significant effect in the ultimate product that came out of the House-Senate conference on the bill.

--Even though the House has scheduled mark-up and floor debate doesn't mean that it will happen. In the last few days, there has been some speculation that the House might delay until September too. 

--On some specific items: More and more, it looks like the committees will look at reducing crop insurance program spending to find additional money for new priorities, rather than significant cuts to direct payments. Still no signs that the payment limitation issue has been resolved. So far, the House Agriculture Committee has not made any proposal, and Chairmen Peterson might wait until floor debate to unveil proposals to toughen the payment limitation rules.

--Last Friday, USDA sent a letter to Chairman Peterson detailing strong objections to the draft House farm bill. Clearly, USDA sees little of value in the House Agricultrue Committee approach; so, while it is too early for a veto threat to be unsheathed, it can't be discounted entirely.      

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